First of all, is this legislation a direct challenge to MERS? (the Mortgage Electronic Registration System). An explanation of that system follows below and has been copied directly from their web-site:

MERS is an innovative process that simplifies the way mortgage ownership and servicing rights are originated, sold and tracked. Created by the real estate finance industry, MERS eliminates the need to prepare and record assignments when trading residential and commercial mortgage loans.

Simply put, MERS allows banks and investors to exchange mortgages without the typical title and escrow work we’re all familiar with when we buy, sell or refinance our homes. While your home may have stayed with you all these years, your mortgage has likely changed hands many times. This system has served the banks well for many years. However, at this point bankers are clearly lacking in confidence when it comes to risking a felony offense.

Secondly, this will no doubt have an affect on housing inventory in Nevada. At some point in the near future the inventory of available bank owned homes will drop dramatically. Short sale home sellers may delay their plans. Why rush to sell short if the lender isn’t going to rush to foreclose? I’m very concerned that this will create a false sense of demand in the market. Prices may rise due to scarcity but there’s no doubt reality will roar into the market someday soon.

Last but not least, why would any bank want to lend in Nevada? Let’s think about this… High unemployment, declining home values, state mandated foreclosure mediation and now this. Seriously, I’m no big fan of the banks but common sense would seem to dictate that Nevada is not a great place for banks to do mortgage business. Home financing is already tough in our market. No doubt this will only make things tougher in the long run.

Let’s hope our legislators do a little more homework before they pas the next round of laws intended to protect us all.

From the bank’s perspective, the homeowners who are delinquent have the most immediate need to receive their assistance.   In addition, if you are able to continue making your payments they may request a cash contribution or promissory note from you at the closing of the short sale in order to approve the short sale.   Your lender will consider your entire financial situation when making this determination. 

There is an exception.  If you have an FHA loan on your home and you want to do a short sale you will be required to be 31 or more days delinquent at the closingof the short sale.  You do not have to be delinquent at the time you apply to the FHA Pre-Foreclosure Sale Program. 

Working with an knowlegable short sale listing agent is key.

Digging yourself out of a mortgage mess.

Since what is owed to the bank is almost always more than what the property is worth, very few Trustees’ Sales result in a successful closing. If the Trustee’s Sale is unsuccessful the property reverts to the bank or loan servicer and is now considered REO, or “real estate owned” property.

The bank now owns the property and the mortgage loan no longer exists. The bank will handle the eviction, if necessary, and may do some repairs. They will typically negotiate with the IRS and local municipalities for removal of tax/municipal liens and they normally pay off any homeowner’s association dues. As a purchaser of an REO property, the buyer will typically receive “clear title” and the opportunity to thoroughly inspect the property. These are the properties buyers will typically see on MLS.

A bank owned property might not be a great bargain. Do your homework before making an offer. Make sure that the price you’re offering is comparable to similar homes in the neighborhood. Consider the costs of renovation. Last but not least, consider your loan type and down payment amount. Loans with high “loan to value” (small down payment) generally require that the home be in good condition.

 A well informed real estate agent, representing the buyer exclusively is invaluable in such a transaction. There are many pitfalls and complications that can be avoided with such representation.

In Sparks/Spanish Springs since January 1, 2009 here is how buyers purchased their homes:

• Cash 17.04%
• Conventional Loans 34.92%
• FHA 41.99%
• VA 5.19%
• Miscellaneous .41%
• Owner Financing .41

As you can see the majority of buyers are using FHA financing as this type of loan only requires 3.5% down payment.  Many buyers are also still using conventional financing if they have larger amounts of down payment funds and want to avoid private mortgage insurance. 

The number of cash buyers in the market is on the rise, up from 10.3% to 17.04% over the same time last year.  This could indicate that there are investors getting back into the market because of the lower market prices.

VA financing is really the only 100% financing that is still available to eligible buyers at this time. 

And as you can see it is very rare that owners are financing the sale of a property.

If you have questions about whether or not you qualify for a mortgage you can contact me and I can refer you to several local lenders who would be happy to help.

FHA appraisers are required to include a Market Conditions Addendum stating whether the market is declining or stable etc.  Appraisers must now include comps that only go back 90 days.  They used to go back 6 months.  Typically appraisals are done with sold comparables, but now FHA appraisals need to include 2 active or pending sales as well.  This is due to the fact that in some cases active listings are priced below the recently closed comparables. 

In addition, appraisers will have to adjust active listings to reflect the list-to-sales price ratios of comparable sales.  FHA is also looking for the appraiser to include the pricing history of comparables, showing price reductions.  If there are known or reported seller concession (closing costs etc.) the appraiser needs to note that.

Lastly, the appraiser will have to calculate the Absorption Rate on the subject property.  This shows the number of months of active inventory given the rate of sale in that neighborhood. 

Based on this, my recommendation to buyers would be to make sure that you buyer’s agent is preparing a current market analysis on all properties you are considering writing an offer on, going back no more than 90 days.  Have your agent calculate the absorption rate as well.  Your purchase could be delayed if your offer is over the appraised value of the home.

Can we pay our mortgage?

The Making Home Affordable Plan is part of President Obama’s plan and is projected to help up to 9 million families restructure or refinance their mortgages to avoid foreclosure. 

2 of the Key Components:

1. Refinancing for up to 5 million families unable to refi because of falling home values.
2. $75 billion in incentives to loan servicers to provide loan modifications for an additional 4 million home owners.

Only conforming loans owned or securizited by Fannie Mae and Freddie Mac, this would include most conventional loans.  FHA and VA loans are currently not part of this program as they are being modified under other programs. 

How do you know if your loan if owned by Fannie or Freddie?  You can use the following numbers/websites to verify.

Fannie Mae:  1-800-7Fannie or www.fanniemae.com/homeaffordable

Freddie Mac:  1-800-Freddie or  www.freddiemac.com/avoidforeclosure

Criteria For Refinance

1. Property must be owner occupied.
2. Borrower must have sufficient income to support the new mortgage debt.
3. First mortgage cannot exceed 105% of the current market value of the property. (For example, if the property is worth $200,000, the borrower must owe $210,000 or less. 
4. If there is a second the borrower may still qualify if the first does not exceed the 105% and the second lien holders agree to subordinate to the new first mortgage.
5. No cash outs are allowed.
6. Borrowers cannot be delinquent on their mortgage.

Modification Criteria

1. Owner occupant in a one to four unit property.
2. Unpaid principal balance for one unit property cannot exceed $729,750 (higher for mulitiple units.)
3. Loan was taken out before January 1, 2009
4. A mortgage payment (including taxes, insurance, and HOA dues) that is more than 31% of the borrower’s gross monthly income.
5. Borrower must have experienced a significant change in income or expenses to the point where the current mortgage is no longer affordable.

These plans will not help borrowers who CAN make their payments but whose current property value is now less than what they owe.  The plan is to help those that are having problems making their payments in order to help them avoid foreclosures and therefore stabilize housing prices with less foreclosed properties.

If you would like more information on these programs please call me or visit www.financialstability.gov

And now? Be prepared for your interview with your mortgage professional with your income and asset documentation such as pay stubs, W-2s, bank statements and tax returns. As part of the extremely well capitalized Wells Fargo Family, Pinnacle Mortgage has not experienced the problems many other lenders have. Our sound underwriting guidelines mean that we have the money to lend whether you are looking for a conventional, jumbo, FHA or VA loan. Interest rates are great right now and this is without a doubt the best time to buy in Northern Nevada for the last several years.

Our goal is always to get you the best possible financing available. If you’re a first time buyer, you may find that your total mortgage payment is less than the rent you’re currently paying! If you’re thinking of moving up to that dream home, remember that although your current home may be worth less now than it was, your move-up home will also be less and that difference will be a greater amount than what you will be giving up. If you’re an investor, you may actually be able to find a home with a positive cash flow right from the start. Don’t miss out on the opportunities that are available in a buyer’s market!

I’ve met with many veterans who have been told not to try to get a VA loan for various reasons, and they are amazed when I tell them they should! Be sure that you are talking with a mortgage professional who can do VA loans – not all lenders can – and that your consultant is familiar with VA loans. If you’re buying new construction, there are some additional restrictions, so be sure the builder is willing to comply with the VA guidelines. Your real estate professional also needs to be aware that you are in application for a VA loan, for the veteran is not allowed to pay for certain closing costs and this must be negotiated with the contract to purchase.

If you have been in the Reserves, you can still qualify for a VA loan if you have served a certain number of years, so be sure to ask. Bring your DD-214 with you, along with your income and asset documentation, to the interview with your home mortgage consultant, because she will need a copy in order to get your Certificate of Eligibility from the VA. You do not need excellent credit to get a VA loan, and you can only have one VA loan at a time. A VA loan is one of the best ways to buy a home when you have less than 20% down, so be sure to find out if you qualify.