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Some Background on VA, (Veterans Administration) Loans?

March 11th, 2013 | Posted by Dick Thackston in Buying Tips | Mortgage News | Real Estate News | Real Estate Training - (0 Comments)

600px-US-DeptOfVeteransAffairs-Seal-LargeI thought it would be worthwhile for both the general public and service members to share some background information on VA Loans at this time. Many of our returning service members as well as members of the General Public are often not fully aware of how this excellent program works. I have edited a portion of my New Hampshire 40 Hour pre-Licensing Course here to help everybody have a little more information about the program.

The VA is authorized to insure loans for eligible veterans. Like the FHA the VA does not normally lend money, rather it guarantees loans made by VA approved lenders. Eligible veterans may purchase: multi-family homes up to four units, new condos or construction of condos, new or used mobile homes and lots for mobile homes, finance the construction of a new home on its own land, or the eligible veteran may also refinance existing loans.

To be eligible for VA financing the subject property must be owner occupied, the Veteran Borrower must have had 180 days of active military service and have received an Honorable Discharge from the service.

There are a few special characteristics of VA financing that are specifically built into the program to protect VA borrowers as well as the VA. Here are the big ones: The subject property must be appraised by a VA approved appraiser and meet special VA Loan specifications. Loan Specifications for a VA loan include: It can be from any regular lending institution that has been approved by the VA. Maximum loan is based on fair market value as determined by the VA appraisal or MCRV, (Maximum Certificate of Reasonable Value). The VA guarantees top 25% – eliminating PMI; no down payment is required: closing costs may not be financed with the exception of the VA Funding Fee, however there is no limit on seller contributions to the VA Buyer’s closing cost expenses. Should purchase price exceed appraised value, the difference must be paid in cash by the VA Buyer, the seller can decrease their price to match the VA appraisal or the VA buyer can withdraw from the contract without penalty from the seller. VA Loans have a maximum term of thirty years; no secondary financing is allowed on VA loans and there can be no pre-payment penalty on VA Loans. Co-borrowers on VA Loans must be married to the veteran or be Veterans themselves. (The VA does not recognize same sex marriages regardless of State Statues.) The Veteran must supply their Certificate of Eligibility – DD214.

By Dick Thackston CRB, ABR, ABRM, BrokerNH, MA & VT

A Brief History of VA (Veterans Administration) Loans

The original Servicemen’s Readjustment Act, passed by the United States Congress in 1944, extended a wide variety of benefits to eligible veterans. The loan guarantee program of the Veterans Administration has been especially important to veterans. Under the law, as amended, the Veterans Administration is authorized to guarantee or insure home, farm, and business loans made to veterans by lending institutions. Over the history of the program, 18 million VA Home Loans have been insured by the government. The VA can make direct loans in certain areas for the purpose of purchasing or constructing a home or farm residence, or for repair, alteration, or improvement of the dwelling. The terms and requirements of VA farm and business loans have not induced private lenders to make such loans in volume during recent years.

The Veterans Housing Act of 1970 removed all termination dates for applying for VA-guaranteed housing loans. This 1970 amendment also provided for VA-guaranteed loans on mobile homes.

More recently, the Veterans Housing Benefits Improvement Act of 1978 expanded and increased the benefits for millions of American veterans

Despite a great deal of confusion and misunderstanding, the federal government generally doesn’t make direct loans under the act. The government simply guarantees loans made by ordinary mortgage lenders (descriptions of which appear in subsequent sections) after veterans make their own arrangements for the loans through normal financial circles. The Veterans Administration then appraises the property in question and, if satisfied with the risk involved, guarantees the lender against loss of principal if the buyer defaults.

In association with the VA’s program, the Service members’ Civil Relief Act protects service members from financial woes on their home loan that may occur as a result of active duty commitments, freezing their interest rates at 6%.

What is the VA and what do they do?

A VA loan is a mortgage loan in the United States guaranteed by the U.S. Department of Veterans Affairs. The loan may be issued by qualified lenders.

The VA loan was designed to offer long-term financing to American veterans or their surviving spouses (provided they do not remarry). The basic intention of the VA direct home loan program is to supply home financing to eligible veterans in areas where private financing is not generally available and to help veterans purchase properties with no down payment. Eligible areas are designated by the VA as housing credit shortage areas and are generally rural areas and small cities and towns not near metropolitan or commuting areas of large cities.

The VA loan allows veterans 100% financing without private mortgage insurance or 20% second mortgage. A VA funding fee of 0 to 3.3% of the loan amount is paid to the VA and is allowed to be financed. In a purchase, veterans may borrow up to 100% of the sales price or reasonable value of the home, whichever is less. Since there is no monthly PMI more of the mortgage payment goes directly towards qualifying for the loan amount, allowing for larger loans with the same payment. In a refinance, veterans may borrow up to 90% of reasonable value, where allowed by state laws.

VA loans allow veterans to qualify for loans amounts larger than traditional Fannie Mae/Freddie Mac conforming loans. VA will insure a mortgage where the monthly payment of the loan is up to 41% of the gross monthly income vs. 28% for a conforming loan assuming the veteran has no monthly bills.

As of January 1, 2006, the maximum VA loan amount with no down payment is $417,000 and can be as high as $625,500 in certain high cost areas. VA also allows the seller to pay all of the veteran’s closing cost.

http://en.wikipedia.org/wiki/VA_loan

 

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What’s up With Fannie Mae? (Federal National Mortgage Corporation)

February 1st, 2013 | Posted by Dick Thackston in Mortgage News | News | Real Estate News - (0 Comments)

I had the opportunity to hear former Presidents Bill Clinton and George W. Bush speak at the annual Five Star REO Conference in Texas late last summer. (REO is an acronym for Real Estate Owned which is what foreclosures and bank owned properties are technically called.) Both Presidents Bush and Clinton spoke about the importance of housing to our economy and to the American way of life. Clinton spoke in relatively more detail about the future of Fannie Mae. He indicated that while the exact future of Fannie Mae is by no means clear, the service that it provides to both lenders and the economy in providing liquidity to home mortgage lenders is crucial to maintaining a vibrant and relatively free housing market in the United States.

In the last several years there has been much criticism of Fannie Mae, (and its sister company Freddie Mac),  for having provided too much liquidity to lenders – under pressure from Congress – and the liability it has created for the United States Government. There can be little question that Fannie Mae worked as planned and backed the entire United States housing market, and as bad as things have been the last several years in housing, the situation would have been much worse had Fannie Mae not existed.

In the fall of 2008 the United States Treasury placed both Fannie Mae and Freddie Mac under conservatorship and liquidated the Preferred Stockholder’s equity position. The majority of Preferred Stockholders were banks and pension funds, thus spreading the damage. Common stock in both Fannie Mae and Freddie Mac remained listed and traded on the New York Stock Exchange until mid 2010 when the stocks were delisted. Both stocks continue to be traded over the counter but have lost substantial value. Conservatorship does not mean the Treasury owns Fannie Mae or Freddie Mac, ownership is still vested in the common stock shareholders, however conservatorship does mean that the common stock shareholders have lost all control over the operations of these institutions; a situation that will remain until such time as the conservator, the United States Treasury, determines the best course of action to take with these institutions. At this time the ultimate status of Fannie Mae is indeterminate. Congress has considered a number of actions to take but has not reached any agreement and has no legislation pending to resolve Fannie Mae or Freddie Mac’s future. Fannie Mae and Freddie Mac remain ill-liquid and under government conservatorship at this time, bankruptcy, revocation of charter and or break-up into smaller entities have all been considered.

 

By Dick Thackston CRB, ABR, ABRM,BrokerNH, MA & VT

About Fannie Mae

Fannie Mae is a government-sponsored enterprise (GSE) chartered by Congress with a mission to provide liquidity, stability and affordability to the U.S.housing and mortgage markets.

Fannie Mae operates in the U.S.secondary mortgage market. Rather than making home loans directly to consumers, we work with mortgage bankers, brokers and other primary mortgage market partners to help ensure they have funds to lend to home buyers at affordable rates. We fund our mortgage investments primarily by issuing debt securities in the domestic and international capital markets.

Fannie Mae was established as a federal agency in 1938, and was chartered by Congress in 1968 as a private shareholder-owned company. On September 6, 2008, Director James Lockhart of the Federal Housing Finance Agency (FHFA) appointed FHFA as conservator of Fannie Mae. In September 2008, we also entered into an agreement with the U.S. Department of Treasury that was most recently amended in December 2009. Under the agreement, Treasury will provide us with capital as needed to correct any net worth deficiencies that we record in any quarter through 2012. The agreement is intended to ensure that we are able to continue providing liquidity and stability to the housing and mortgage markets.

Fannie Mae has three lines of business – Single-Family, Multifamily and Capital Markets – that provide services and products to lenders and a broad range of housing partners. Together, these businesses contribute to the company’s chartered mission to increase the amount of funds available in order to make homeownership and rental housing more available and affordable.

 

Early History
The FHA Administrator chartered Fannie Mae on February 10, 1938. The impetus for creation of Fannie Mae was twofold: the national commitment to housing and the inability or unwillingness of private lenders to ensure a reliable supply of mortgage credit throughout the country. The primary purpose of Fannie Mae was to purchase, hold, or sell FHA-insured mortgage loans that had been originated by private lenders. After World War II, Fannie Mae’s authority was expanded to include VA-guaranteed home mortgages.

1954 Charter Act
The Charter Act of 1954 provided the basic framework under which Fannie Mae operates today but did not remove it from direct federal control. The act removed government backing for borrowings used to fund Fannie Mae’s secondary market operations. It stipulated that Fannie Mae be exempt from all local taxes except property taxes, and provided for the Federal Reserve Banks to perform various services for Fannie Mae. The 1954 Charter Act also defined the path by which Fannie Mae’s secondary market operations would be transferred to the private sector: proceeds from gradual sales of common stock were to be used to retire Treasury-owned preferred stock in Fannie Mae.

1968 Charter Act
The 1968 Charter Act split Fannie Mae into two parts: Ginnie Mae and a reconstituted Fannie Mae. Ginnie Mae would continue as a federal agency and be responsible for the then-existing special assistance programs, and Fannie Mae would be transformed into a “government-sponsored private corporation” responsible for the self-supporting secondary market operations. The reconstituted Fannie Mae was to be stockholder-owned and managed. Fannie Mae retired the last of its government stock on September 30, 1968, and transformation to a government-sponsored private corporation was completed in 1970.

The 1968 Act provided the authority to issue Mortgage-Backed Securities (MBS).

The Act also established a regulatory structure to ensure Fannie Mae’s adherence to its public purpose. It provided for continuing HUD oversight of Fannie Mae, granting “general regulatory power … to insure that the purposes of this Title are accomplished.”

Emergency Home Finance Act of 1970
The Emergency Home Finance Act of 1970 created Freddie Mac and authorized it to create a secondary market for conventional mortgages. Parallel authority and limitations to deal in conventional mortgages were given to Fannie Mae.

To alleviate credit concerns raised by acquisition of conventional mortgages (that lack federal backing), several eligibility restrictions and/or risk sharing requirements were imposed on the mortgages Fannie Mae could buy.

The new law also required the HUD Secretary to provide prior approval of Fannie Mae’s “purchase” or “dealing in” conventional mortgages (later interpreted by HUD regulations in 1995 to require specific approval of new and different conventional “programs”).

Secondary Mortgage Market Enhancement Act of 1984
The Secondary Mortgage Market Enhancement Act of 1984 (“SMMEA”) clarified and modified several of HUD’s regulatory powers over Fannie Mae. It required HUD to respond within 45 days to any request for new program approval made by Fannie Mae under the Charter Act (with a 15-day extension permitted) and authorized Fannie Mae to purchase and deal in subordinate lien mortgages.

Financial Institutions Reform, Recovery, and Enforcement Act of 1989
The Financial Institutions Reform, Recovery, and Enforcement Act (“FIRREA”) of 1989 made regulation of Fannie Mae and Freddie Mac consistent. Until 1989, Freddie Mac was owned by the Federal Home Loan Bank System and its member thrifts and governed by the Federal Home Loan Bank Board (later reorganized into the Office of Thrift Supervision). FIRREA severed Freddie Mac’s ties to the Federal Home Loan Bank System, created an 18-member board of directors to run Freddie Mac, and subjected it to HUD oversight.

Also, the GAO and Treasury were instructed to conduct studies of Fannie Mae, Freddie Mac, and the Federal Home Loan Banks. These studies laid the foundation for comprehensive regulatory modernization for both Fannie Mae and Freddie Mac in 1992.

The Federal Housing Enterprises Financial Safety and Soundness Act of 1992
The Federal Housing Enterprises Financial Safety and Soundness Act (“FHEFSSA”) of 1992 modernized the regulatory oversight of Fannie Mae and Freddie Mac. It created the Office of Federal Housing Enterprise Oversight (“OFHEO”) as a new regulatory office within HUD with the responsibility to “ensure that Fannie Mae and Freddie Mac are adequately capitalized and operating safely.” OFHEO is funded by assessments on Fannie Mae and Freddie Mac and is authorized to act without HUD oversight on a range of regulatory issues enumerated in the statute. FHEFSSA established risk-based and minimum capital standards for Fannie Mae and Freddie Mac. And, it established HUD-imposed housing goals for financing of affordable housing and housing in central cities and other rural and underserved areas.

The Housing and Economic Recovery Act of 2008
The Housing and Economic Recovery Act of 2008 (‘HERA’) strengthened governmental oversight of Fannie Mae and Freddie Mac. It established the Federal Housing Finance Agency (FHFA), which replaced OFHEO and HUD as Fannie Mae’s safety and soundness and mission regulator. Among other things, FHFA has broad authority to require Fannie Mae to hold capital above statutory minimum levels, regulate the size and content of our portfolio, and approve new mortgage products.

 

http://www.fanniemae.com/about/index.html

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Different Housing Needs for Different Generations

June 14th, 2012 | Posted by Dick Thackston in Mortgage News | News | Real Estate News - (0 Comments)

I see America changing every day when I talk to home buyers. American’s expectations about housing are switching rapidly from the “American Dream” of Mom, Dad, kids and a house in the suburbs, not as much because of the financial decay of the last three years, but rather because the current generation of Home Buyers, the so called “GenY”, has moved away from the highly conformist expectations of their grandparents – the “Baby Boomers” – to a highly diverse, multicultural, multidimensional society.

The Baby Boomers experience, viewed as a cultural event or milestone, has had more impact on American society, real estate and home ownership than any other event in American society since the Civil War. Boomers were raised with these expectations and typically only owned three or four homes in their lives – this is the generation that had mortgage burning parties when they paid off their homes and built a pool.

The Gen X’ers, the children and grandchildren of the Baby Boomers, never fully adopted the lifestyle of their elders. This is the generation that came of age in the boom years of the 80’s and 90’s. This generation used credit cards, car loans and mortgages like no generation before. This is the generation the treated their homes as Piggy Banks and expecting to buy low and sell high on every home they would ever own and they expected to own a lot of them too! Gen X’ers as a group expected to stay in multiple homes for short periods – three to four years max – disposable lifestyles. Their generation is much smaller then the “Baby Boomers” as a group but has had a disproportionate impact on the housing market. While these Gen X’ers have had an immediate short term negative effect on housing and the American Economy as a whole, the effect on real estate will be short term because this is a small generation. The dramatically different “Generation Y”, aka “The Microwave Generation”, influence is already being felt on the real estate market and the economy as a whole.

“Generation Y” is much larger than the Gen X’ers and has a completely different agenda. Financially, socially and educationally, Gen Y is dramatically different than either of the two prior generations of Americans. Gen Y is much more likely to have an IRA or a 401K than either of the earlier generations and at a much earlier stage in life: Baby Boomers expected a pension, Social Security and the equity in their home to carry them through retirement; the Gen X’ers expected to flip houses to infinity and beyond with minimal reserves and limited funding of retirement accounts.

“Generation Y’s” effect on housing will be as dramatic as that of the post World War II baby Boomers or greater. The Y’s are happy to not own a home any time soon if at all. It’s more important to the Y’s to have flexibility and cash. This is a generation that has student loans like no other before but that’s because as a group they view education not as just as important but imperative to their lives. Lifestyle choices such as access to services, an elegant downtown – clubs and shopping – is more important than owning a home. Y’s as a group are looking for housing that meets those criterion rather than a quarter acre lot and a three bedroom house.

Sure, Generation Y’s expect to own homes, but it is not an urgent first order of business as it was for their parent and grandparents. Generation Y’s perspective on real estate ownership is colored by their willingness to rent. (Sixty plus per cent of renters want to own their own home someday according to a recent survey by PulteCorp.) The Y’s interest in savings is reflected in the much higher contribution rates to IRA’s and 401K’s than either of the prior generations combined with their much higher student loans and need for “a lifestyle” that is more cosmopolitan and focused on convenience than the Generations of “Boomers” and “X’s” that came before them.

By Dick Thackston CRB, ABR, ABRM

Broker NH, MA & VT

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ServiceLink and PartnerFirst recently announced a renewal of their agreement in providing solutions for the nation’s housing crisis.

March 21st, 2012 | Posted by Dick Thackston in Uncategorized - (0 Comments)

CORONA, Calif., March 12, 2012 /PRNewswire via COMTEX/ — PartnerFirst is pleased to announce the renewal of its contract with ServiceLink as its nationwide short sale agent network. Through this alliance, now entering its third year, thousands of distressed homeowners can use PartnerFirst agents to resolve their mortgage problems.

PartnerFirst powers the ServiceLink Short Sale Agent Network which connects distressed homeowners with qualified real estate professionals. Through its education platform, including the Pre-foreclosure Specialist Certification (PSC), PartnerFirst educates agents to help distressed homeowners.

Regarding the ongoing alliance with PartnerFirst, Leo Esposito, ServiceLink’s Senior Vice President of Loss Mitigation and Asset Disposition, said, “ServiceLink is pleased with the agent education services and the quality of agents provided by PartnerFirst to power the ServiceLink Short Sale Agent Network. This marks the third year that the two firms will be working together to achieve solutions for the nation’s housing crisis.”

ServiceLink, the national lender platform of Fidelity National Financial, has managed over $10 billion in short sale transactions, working with five of the nation’s top ten lenders. With its experience in working with lenders, investors, mortgage insurers, and junior lien holders, ServiceLink has the flexibility to provide efficient solutions and expeditious closings.

The short sale alternative preserves neighborhood values, minimizes loan loss severities for investors, and provides a dignified resolution for distressed borrowers.

For more information, or to sign up as a ServiceLink short sale agent, visit: http://www.servicelinkfnf.com/downloads/ShortSaleAgentPackage.pdf .

SOURCE PartnerFirst

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Im From the Government and Im Here to Help! (Not a shot.)

February 27th, 2012 | Posted by Dick Thackston in Mortgage News | News | Real Estate News - (0 Comments)

Ronald Regan made the now famous statement about thirty years ago that the phrase “I’m from the government and I’m here to help”, was a phrase that Americans everywhere have learned to fear. The current mortgage/housing/financial crisis has only reinforced that view for many of us that have had to deal with the destruction of the American dream since this economic debacle began in 2005.

It is clear to me from my day to day dealings with home owners and former homeowners that the government most assuredly is not “here to help”. A big part of my business has become handling cash for keys for banks. Cash for Keys or Relocation Assistance Programs run by lenders to help the occupants of foreclosed properties find a new home and move. The programs are for the most part well run and helpful to the occupants. I do about two or three of these a week. Here’s the way the government “help” becomes tragic: almost everyone of the people I talk to has applied for assistance under the HAMP or HAFA programs offered by the government; almost no one has benefited from these programs; almost all the people I’ve spoken with in the course of doing Relocation Assistance for lenders would have been better off had they never heard of these programs and several have been the victims of outright fraud.

Example: I spoke with a local family last week that has lived in their home for about nine years. They never refinanced, they never took out a home equity line of credit. They have three small children two under the age of five. Over the last nine years they have worked on their home fixed it up as they went along. Early last year the husband lost his job in construction, so he took a job that didn’t pay as well at a fast food place and the wife went to work part time and they burned up some savings but kept their house payments current – they need a place to live, right? They struggled along and they called their mortgage company; their mortgage company told them to apply for the HAMP program. They didn’t understand what it was so they went on the internet and found an attorney that advertised he would help them negotiate the process. They sent their full mortgage payments to him; he was to get the loan modified; after the fourth mortgage payment was taken out of their account sent them an e-mail and said there’s nothing else he can do; house went to foreclosure. Fundamental problem is the creation of false hope by the HAMP program which a reasonable person will see is non-workable so they hire someone who must be “smarter” than them to set it up, unfortunately he was just a crook.

Example: I spoke with a couple in their early sixties; they’ve lived in their home for 31 years; they raised their kids and ran their business from their home all that time. They got behind on their mortgage when their small business started to fail in mid 2007. They struggled to keep things afloat and did. They contacted their mortgage company to see if anything could be done after meeting with local REALTORS about selling their home; they were surprised at first to find that they owed more than their home was now worth and that there was “no way” they could sell their home without having a substantial deficiency due to the bank. They became aware of the HAMP program and decided they would try the program. They were told that they no longer “qualified” for the amount of the mortgage they had and in order to complete the program would have to bring money to pay down the loan amount. Seriously?

By Dick Thackston CRB, ABR, ABRM

Broker NH, MA & VT

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Reality or Fear Based View of Real Estate in the US The Choice is Yours.

January 26th, 2012 | Posted by Dick Thackston in Buying Tips | Mortgage News | News | Real Estate News - (0 Comments)

Prior to 2007-2008 most of the American public and most mortgage lenders believed, and often would state in conversation, “real estate never goes down!” Since that time frame buyers and sellers have gone to the other extreme and now the common wisdom is “real estate will never go back up.”

Well never is a long time. Both perspectives are wrong.

For the last several years we have been pummeled for a seemingly continuous stream of negative events: tidal wave and earthquake in Japan, un-employment over 10%, European Debit crisis looms as Greece nears default on its debt, (The last one just kills me: the entire GDP of Greece in 2010 – $310 Billion +/- – is approximately the same as the State of Maryland in 2010 – $300 Billion +/-. Do we actually believe if the State of Maryland defaulted there would be a worldwide financial crisis?), and each of the events has run a shock wave through people’s emotions which does affect their willingness to make the long term commitment to home ownership. It’s not reality! Fear sells newspapers, magazines and broadcasts. Fear does not ever produce the best results or good decisions.

Truth be told, the down turn in housing started in the third quarter of 2005. In June of 2005 the Fed bumped rates up in order to stimulate “a soft landing in housing” the curves between housing units sold and housing prices began to diverge at that point with house prices continuing to increase for another two years, while units of sales began to decline at an ever increasing rate. By the time the reality hit it was already too late. That being said, let’s look at the sunnier side of the situation. All of this is clearly tracked by something called the Housing Affordability Index published by the National Association of REALTORS.

The Housing Affordability Index has two basic components: average mortgage rates and average house prices which is then compared to the average household income. The higher the number, the easier it is for people to buy homes, and the lower the number, the harder it is for people to own homes. The number is designed to indicate how affordable the median home is to the median income family in the United States. An index of 100 means that the median income household has exactly enough income to afford the median income home; when the index is greater than 100 then the median household has more than they need to purchase the median home and when it’s below 100 then they don’t have enough. (When I started selling homes in Pasadena, Maryland in 1982, the Housing Affordability Index was well below 100 due to very high interest rates, in the 13-15% range). Today due to all the price declines and interest rates being at historic lows, the Housing Affordability Index has soared to a record high number well over 100.

So what’s the point? The point is that a balanced perspective and a positive outlook on life are the key to making good decisions in housing as well as in other areas of ones life. Scientific studies have shown, (See Dr. David Lykken’s work), that your happiness set point is about 50% genetic and the rest is up to you. There can be little or no doubt that the homes that are being purchased today at historically low interest rates and the lowest prices in a decade or more will fuel the American economic powerhouse in a few years – so be positive, keep your perspective and never say “never”.

By Dick Thackston CRB, ABR, ABRM

Broker NH, MA & VT

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Is Mortgage Lending Getting More Consumer Friendly in 2012?

January 12th, 2012 | Posted by Dick Thackston in Mortgage News | News | Real Estate News - (0 Comments)

By Dick Thackston

I continue to read about mortgage credit terms such as Credit Scores, Down Payment Requirements, and so forth being eased on home purchases. Federal Reserve Senior Loan Officer Survey still reports historically tight standards. Part of the problem from what I’ve seen, is values coming in low on appraisals after the buyer and seller have come to terms, which in my opinion, reflects tightened appraisal standards. (Appraisers don’t want to be held responsible for over valuing properties – as they have been in the past – even though local market conditions support values.) It’s odd because in my experience appraisers who “know local areas” almost always have a clear sense of what is going on in a market; the biggest problem is large un-named government backed lenders that bring appraisers in from 200 miles away that often do not have a sense of the nuances for local markets that even underwriters can pick up from a desk 2000 miles away. Ultimately, sloppy work is sloppy work and it creates a drag on the entire process.

If home prices are stabilizing, as many people feel they are, this will actually be a bigger problem because house prices will no longer “always be lower than last month” and buyers will be bidding up prices which won’t be adequately reflected in comparable sales from a few months earlier. Low appraisals serve to drive prices down and create a self fulfilling cycle of ever lower prices. If appraisers are better able to justify the sellers price this may in fact be a key to breaking the cycle of pain in real estate we have seen.

Lenders have clearly been working to slow the pace of REO properties coming on the market; to be sure there are plenty of lender owned homes available and they still represent the majority of sales in all market despite everyone’s desire to deny the fact; this decline in the speed at which REO properties are coming on the market is likely to be a big part of stabilization. Once there is any perception of stabilization in the market it seems likely to me that many buyers will “pile into the market” and then be confronted with the challenges of getting a new loan – back to the appraisal and underwriting issues. The entire process is likely to be painful but rewarding for those with the constitution to push through: sellers and buyers both.

Re-financing has gone nuts by all reports from our friends in the lending business with home mortgage rates at historical, probably lifetime lows, loan officers actually have trouble keeping up with the volume of business they are processing. The good news here too is that a much lower percentage of these home mortgage re-finances are taking cash out unlike the past re-financing booms, this time the home mortgage re-finances seem to be more focused on actually reducing cash flow burdens on households, where as in the last fifteen years the home mortgage re-finance booms have been more focused on stripping homes of their equity to finance current consumption.

Mortgage lending in 2012 is probably less consumer friendly than in most of the last twenty years in the sense of underwriting standards and appraisal issues, however loans are being made and the process is sufficiently painful so that borrowers seem to really be paying attention to their reasons for going through the process and is getting done in a way that will lead to a healthier housing market in the foreseeable future.

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Up to Four Million Foreclosures to be Reviewed by Government!

November 3rd, 2011 | Posted by Dick Thackston in Mortgage News | News | Real Estate News - (0 Comments)

By Dick Thackston CRB, ABRM, ABR

The Office of the Comptroller of the Currency has begun sending out letters to borrowers who have faced foreclosure since 2009. It is estimated that approximately four million borrowers foreclosures may have been mishandled between January 1, 2009 and December 31, 2010. Federal regulators and most of the nation’s largest home mortgage servicers announced earlier this week.

Cases will be reviewed by Federal Regulators as a result of an agreement established in April of this year in which the nation’s fourteen top mortgage servicers agreed with regulators to hire independent consultants to evaluate foreclosure processes and determine if borrowers had experienced financial injury as a result of errors or abuses by servicers. It will be up to the independent consultants to evaluate cases and determine compensation if any due to borrowers.

The Comptroller of the Currency as well as the Federal Reserve will be sending mails between now and the end of the year to notify potential victims of their rights. A mass media campaign is planned as well to direct borrowers to the website www.IndependentForeclosureReview.com or the toll free number 888.952.9105. All requests for review must be submitted by April 30, 2012.

The mortgage servicers and the government agreed that the servicers would pay all the expenses associated of setting up the program. Under government supervision they have hired eight independent consultants that have designed the program to be at no cost to the borrowers. The consultants have set up the website and call center noted above. The program is designed to encourage borrowers from all lenders to use one portal and there is uniform branding and product design to be clearer in the public mind than a number of different sites would be to the public.

There are several basic patterns that the consultants will be looking at to determine wrongdoing and these include miscalculation of fees, a foreclosure that happened while a borrower was under bankruptcy court protection and the most common one in my experience a foreclosure that was done while a borrower was waiting for a response on a loan modification.

This program is a direct result of last year’s robo signing scandal and the investigations that followed. About a year ago it came to public light that many mortgage servicers were cutting corners on due process when foreclosing on properties and either not properly executing documents or simply faking documents to expedite the large number of foreclosures they had on their hands.

This program is a good solution to an unfortunate situation. Objectively, most of these borrowers were in fact behind and many if not most were ready and willingly left their properties to begin over, however that does justify short cutting the legal protection of property rights built into our system of property ownership over the last thousand years from Common Law to Current Law.

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Short Sale Success Stories

October 19th, 2011 | Posted by Dick Thackston in Buying Tips | Mortgage News | News | Real Estate News | Selling Tips - (0 Comments)

By Dick Thackston CRB, ABRM, ABR

Since the down turn started in the third quarter of 2005, (yes that’s right it’s actually been over six years if your benchmark is real estate brokerage), and the economic seizures started happening almost daily after November 2008, I’ve actually had some excellent experiences helping sellers and lenders work out a short sale.

Initially mortgage lenders were less likely to work out a short sale for a number of reasons: they didn’t believe the property was upside down, mortgage insurance would cover their losses if it went to foreclosure and/or they were simply too overwhelmed with the volume of business collapse that they couldn’t function efficiently and make decisions.

In 2007 I began the process of helping people work out a Short Sales on their homes if they were over mortgaged. One of the most successful short sales I’ve done was a house inKeene,New Hampshire. The owner had purchased the home about twenty years before he called me. He had tried selling the home himself and tried a Virtual Real Estate brokerage from outside the area with no local support. All the time he tried this, his home was sinking in value.

Why, one might wonder, if he had owned this home for over twenty years would he owe more than he paid? Well, actually what he had done was borrow money incrementally over the years to put his children through collage and purchase each of them cars when they graduated. He literally used his home as a savings account.

The biggest hurdle in the transaction was the owner, he just couldn’t believe that his home would be worth the loan balances plus and additional ten thousand dollars so that he could start his life over again someplace else. Once I was able to get him to understand that the value just wasn’t there, and he agreed to price the house to the market comparable prices in his neighborhood at the time, we got some OK sales traffic and ultimately an offer. I presented the offer to both the owner and his lender. I obtained the owners detailed financial information and the bank agreed to accept the short sale. Little or no emotion, very rational, and very efficient successful transaction.

The entire transaction from day of listing to day of closing the short sale, including negotiating with lender, was about five months or one hundred fifty days to closing.

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How I got Started Doing Short Sales.

October 17th, 2011 | Posted by Dick Thackston in Buying Tips | Real Estate News | Selling Tips - (0 Comments)

By Dick Thackston CRB, ABRM, ABR

Short Sale Success Story:

Short sales have become a major part of my companys business.

In 2007 I realized that more and more of the owners I interviewed during listing appointments were helplessly under water on the loan on their home.

During the Savings & Loan crisis of the late 80s and early 90s I first experienced short sales. Back then, it was mostly small business owners who had second business loans against their home and as the economy slowed, their businesses slowed or failed, and the bank came after their houses. This is where I learned to do short sales. Up until then, personally, I had never even imagined not being able to sell a house and not clear the loan balances and I had been in the business over ten years at that point.

So I learned to negotiate with lenders to help them understand Fair Market Value and accept the reality of the situation – not the ideal for anyone, but half a loaf is better than none.

So when I started to see homeowners under water again four years ago I felt it would be important to start trying to negotiate short sales – again. Unfortunately both home owners and lenders were still stubbornly unrealistic about the situation at that time. Many of the homeowners I initially advised to consider a short sale ultimately lost the property singing the “I need, I own, I won’t” chorus regardless of market realities, or they spent valuable months and years following the market down. Needlessly doing needless damage to their credit by loosing their home to foreclosure, most had they followed my initial advice would have in fact walked away from a sales with some money, less than they had expected but some money – far better than a short sale or total loss through foreclosure.

Some of the short sales I initially proposed to banks wound up going to foreclosure as well. Costing the lender $50,000 to $100,000 in equity that could have preserved for their company, however banks had a problem too because many had just done refinances or made new loans they would say something like “we have an appraisal that is only six months old” not recognizing how quickly the market was changing in those days. What a tragedy! What a tragedy for all parties!

So now Short Sales are commonly accepted as better than foreclosure and few, if any, lenders are waiting for the market to recover. The biggest issue with Short Sales remains sellers that are too slow to take action. I got a call today from a seller that is schedule for foreclosure sale in ten days. He turned down a short sale about a year and a half ago and now he wants to try and find a buyer and complete a short sale negotiation in ten days? Not going to happen. I suggested that he simply needs to plan on the foreclosure and arrange to move out of the house. Banks at this point are far more realistic than sellers and far more prone to look realistically upon a short sale and work on it realistically. Bank of America and Citibank have made tremendous improvements in their systems for handling short sales. In both cases they have gotten to be the best in the business to deal with, when a few years ago I really don’t think they allocated any serious resources to the Short Sale process.

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