Information on the Obama administration’s foreclosure-avoidance program

Members of the Committee on Financial Services...
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Recently the House Financial Services Committee took a look at the performance of the Obama administration’s foreclosure-avoidance program in early October; here is what came out of that hearing and it doesn’t look good: 

1)      HAMP – designated to help as many as 4 million troubled homeowners modify the terms of their mortgage and obtain more affordable payments.  The program has resulted in approximately 800,000 permanent modifications and 106,000 trial modifications still ongoing, according to Darius Kingsley, deputy chief of Treasury’s Homeownership Preservation office.  These figures are far less than the original target.

2)      Emergency Homeowner’s Loan Program – The Dodd-Frank financial reform law authorized $1 billion to provide bridge loans of up to $50,000 for homeowners who had experienced sudden drops in income because of employment or medical problems.  As of Sept. 28, it has resulted in 12,000 completed transactions and is expected to use just $400-$500 million of the authorized $1 billion, according to acting FHA commissioner Carol Galante.  The 12,000 funded cases were all that HUD could manage to approve out of 100,000 applications.

3)      FHA Refinance Program, aka “Short Refi” This was designed to help as many as 1.5 million underwater owners refinance into affordable FHA loans, and was funded by $8 billion originally set aside for HAMP.  As of the end of September, FHA and the program’s 27 participating lenders had completed just 334 refinancings according to the agency.

4)      HARP – The administrations signature program for homeowners who have lost equity because of declining home prices but who nonetheless have stayed current on their payments.  Only borrowers with loan-to-value ratios above 80 percent and no higher than 125 percent are eligible.  Originally projected to help between 4-5 million homeowners, as of August it had resulted in 838,000 refinancings.

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Six steps to installing a vinyl bathroom floor

1)      Clean the floor:  sweep, vacuum, then wipe down with an ammonia solution to remove grease.

2)      Make a template:  some people use 15 pound roofing felt that comes in three foot rolls.  Measure the width of the room and cut the paper a little long.  Lay the first sheet on the floor and set it in place with tape.  Carefully trip the paper with a sharp utility knife so that matches the contours of the walls and the toilet.  Add another sheet and tape the second sheet to the first.  Repeat until the template is complete and carefully remove it from the floor.

3)      Cut the vinyl:  a six foot wide sheet should provide an almost seamless floor in a small bathroom.  Roll the vinyl out on a floor and tape the template to the vinyl.  Pay attention to the patter to make sure it aligns properly.  Cut the vinyl with a sharp utility knife.  Cut a little wider than the template, as it is easy to trim.  Make a cut behind the toilet to allow placement.

4)      Position the vinyl on the floor:  Once it is in place, roll half of it back and trowel vinyl adhesive on the floor.  Make sure to apply a uniform coat of glue.  Gently roll the sheet onto the adhesive smoothing it with your hands as it lies down.  Use a J-Roller to smooth the surface.  Next, lift the remaining half of the flooring, trowel on the adhesive, smooth and roll.

5)      Trim the edges:  Use the utility knife and go slowly.  Use a metal straightedge where the floor meetings straight wall runs.  Smooth the edges as you go.  You will need to free-hand it around the toilet.

6)      Caulk:  Apply caulk around the edges and around the toilet.

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Credit Scoring to Change!

CoreLogic and Fair Isaac Corp known as FICO, recently announced a collaboration that will result in a separate score that will be available to mortgage lenders and incorporates information that will include payday loans, evictions and child support payments.  In the future, information on the status of utility, rent and cell phone payments may also be included. 

Separately, last month, the Experian, Equifax and TransUnion, began providing estimates of consumer income as a credit report option.  And, earlier this year, Experian began including data on on-time rental payments in its reporting. 

This new information could either help some potential homeowner’s to obtain a loan or could be detrimental to those who are on the board of qualifying for a loan. 

The CoreLogic – FICO partnership won’t result in a credit score that will rule out a borrower for a mortgage backed by Fannie Mae, Freddie Mac or the FHA, which together own or guarantee at least 90 percent of the mortgages being written.    That’s because the Experian, Equifax and TransUnion “tri-merge” report required for such a loan does not rely on CoreLogic data.  But it could mean either more or fewer mortgage fees or a higher or lower interest rate charged by lenders that in today’s cautionary lending environment have heartily adopted risk-based pricing.

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Prepare Yourself when Buying a Bank Owned Home

If you are in the market to purchase a new home and it happens to be a Bank Owned Property/Real Estate Owned, here are a few tips to help you with your purchase.

1)  Be prepared to be pre-approved by the bank‘s own representative.  The bank wants to make sure that they feel you can qualify for the loan as well as your own lender.  You are not obligated to use the bank’s lender, they just want to be assured that there won’t be any approval issues down the road.  The market is moving quick lately, so this is not something you should put off.  Be proactive and ask your Realtor who you need to get pre-approval from.  Usually there is only one lender and they usually do the approvals in the order they were requested. 

2)  Make sure to get a whole house inspection by a licensed home inspector.  If any issues show up in the HVAC, make sure to contact a reputable heating and air conditioning company to inspect.

3)  For added reassurance pay for a pest inspection to make sure you can live with any necessary repairs in the future.

4)   Your Realtor can order a roof  inspection (usually free of charge) from a reputable Roofer so that you have a report on the overall condition of the roof.

5)  Ask for a Home Warranty from the Bank when writing your offer.   Even if the Bank will not pay, I would recommend purchasing it for at least a year since no one knows the history of the home.

There are many unknowns when purchasing a bank owned property so make sure to do any and all inspections necessary to help make you aware of the overall condition of the home.  

Banks do not know the history of the home; therefore, it is up to you to investigate the home before purchasing.

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Homeownership Purchasing Hurdles

We.Are.Homeowners.
Image by MightyBoyBrian via Flickr

Harris Interactive, a market research firm’s bi-annual survey on purchasing a home found the following from a recent online survey

Among renters, 59% said they aspired to own a home, but of those, 51% said saving enough for a down payment was their biggest obstacle. 

Those in the 18-34 age group cited the following concerns:   62% saving down payment, 36% qualifying for a mortgage, 34% having poor credit, 31% in ability to pay off existing debt, 29% not having a stable job and 13% declining home values.  

Both the 18-34 and over 55+ age groups expressed preferences that indicate they prefer to live in urban centers:  The younger group preferred short commutes to work and the older group preferred the proximity to restaurants and shops. 

The majority, 70% of respondents said owing a home is part of their American dream.  This attitude toward homeownership rose with age, from 65% of 18-34 year olds to 76% of those 55 +. 

Among current homeowners, 80% said they plan to buy another home in the future and 57% said owning a home is among the best long term investments.

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Rid home of mildew culprits

Mildew, a form of mold is often seen as black, white or greenish growth on siding, drywall, roofing and other areas.  

Mildew likes organic materials like drywall, wood, paper, wallpaper paste, cotton, linen, leather, wool to name a few.  In addition to food, it will grow best in moist and warm areas with lack of air circulation or light. 

One of the most common areas is the bathroom.  Usually the only thing needed here is the installation of a ventilation fan.  Make sure it is ducted to the outside and not just into the attic.  You should use the fan during and after taking a bath or shower.  If you find your family can’t seem to remember to turn the fan on, you might think about having it wired to the light switch.  If you use the fan regularly, it should remove the moisture and circulate the air.  If you find this isn’t enough to combat moisture then you may have moisture generated from somewhere else.  Hidden moisture problems include, leaking valves or supply pipes, loose and/or leaking drain lines, bad wax rings below the toilet, and water around the tub or shower from excessive splash. 

Other areas inside the home include closets, behind beds & other furniture (especially those placed against an exterior wall, combined with high humidity).  Silica gel can help in closets, as well as making sure your clothes are not densely packed in the closet.  Also, moving furniture away from the wall so air can circulate helps alleviate mildew

Outside the home you may see mildew on the siding and roof shingles.  If you have widespread areas of mildew this may indicate a larger moisture problem, one that can usually be traced back to lack of ventilation.  Cut back trees, shrubbery or other landscaping that is overgrown that can be the cause of some problems, as well as adjusting your sprinklers not to hit the side of the house. 

If you think you have hidden moisture you should contact a contractor who has a moisture meter and specializes in water damage restoration.

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Stage your Home to Portray a Lifestyle that Prospective Buyers Can Relate and Aspire To:

Home Staging 97
Image by Perfectino Coatings via Flickr

Get Rid of Clutter 

Depersonalize 

Clean, Clean, Clean 

Update Old and Deteriorating Spaces 

Define Spaces 

Fill Empty Rooms 

Lighten Up Spaces 

Open up Indoor Walkways 

Clean out Closets and leave them one-third empty 

Curb and hallway appeal really count 

Be model-ready 

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Tips to Downsize Your Lifestyle

Start with your closet.  Everyone has too many clothes.

Make a commitment to refuse to get more stuff.  It will take a while to reduce your belongings and it’s going to take a few months of refusing to get new things before you change your habits. 

Most people around you will not be doing this and may react negatively or defensively.  Whatever you do Stick to It! 

From “Overstuffed” workshop – Nicole Lynskey:

Assess the impact your clutter has on you.  Think of the size of your home, how much you spend on new stuff, the energy put into acquiring, maintaining and storing your stuff and the time you spending searching for things. 

Get in touch with what you really long for in life.  Do you really want to work part time?  Would changing your purchase habits or moving into a smaller space make these things possible for you?

Start with small areas.  The more you declutter the more momentum you will get and the more you will notice things you don’t really need. 

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Tips to Keep in Mind if You’re Thinking about becoming a Real Estate Investor

What is Real Estate Investing?
A tangible, cash-generating asset and appreciates in value.  Real estate investment has proven to be a powerful method of accumulating wealth over time and investors are getting a return on their investment in three ways, cash flow, return on taxes and appreciation. 

What are the benefits?
The main benefit is the profit that you can make if you handle your investment correctly.  Rental property provides a source of income, but other than that, investment properties qualify for numerous tax deductions which may include cost of building maintenance and repairs and interest paid on loans related to the property.

Are you looking to Rent or Flip?
If you choose to hold and rent it, take into consideration the responsibility it takes to be a landlord.  You will need a lease agreement specifying what you will be responsible for maintaining, fixing, etc. and the rent, date of payment and length from the tenant.  It can turn into a very profitable venture if you make sure you are well versed in property management.  While you can self-manage, it may be wise to outsource this to a local experienced property management company.

If you choose to flip you must take into account any and all property updates and repairs that need to be made.  Flipping a home can be considered less of a responsibility than becoming a landlord, but keep in mind that someone will be living in the home you are flipping and you want to make sure they will find it worth their money to purchase.  Keep in mind that flipping may not be the wise choice in a down housing market. 

How are your Finances
The better your credit, the more likely you will be able to get a decent loan.  It is also important to have a cash reserve left over to put towards unexpected vacancies, maintenance and repairs.  Typically lenders require 20% down on an investor loan.

Additional considerations:
Location, Location, Location – make sure it is in an area where you can attract tenants.  Selling a home in a great location usually means a shorter hold time and likely a greater return.

Timeline and budget.  Having a reasonable, realistic timeline and budget for repairs will prepare you for success and stick to the guidelines you set.

Do not Over Improve!  This is not your personal residence.  Only make improvements that will either make it more attractive to sell/rent.

 As a seasoned Investor myself, please feel free to contact me to help you decide if you want to become a Real Estate Investor.

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US Treasury puts performance of 10 largest HAMP servicers on display

The U.S. Treasury has releases its regular monthly report card on the Home Affordable Modification Program (HAMP).  This time is an assessment of how the 10 larges HAMP servicers are performing. 

Substantial Improvement was given to Bank of America, Ocwen Loan Servicing, Wells Fargo and JP Morgan Chase.  Of those four, three – Bank of America, JPMorgan Chase and Wells Fargo – Treasury is withholding all future financial incentives until they make specific improvements.  Should they fail to correct identified problems in a “reasonable time”, it may permanently reduce their financial incentives.  As problems are remedied, incentive payments will resume.  

Moderate Improvement was given to the remaining six servicers – American Home Mortgage Servicing, CitiMortgage, GMAC Mortgage, Litton Loan Servicing, OneWest, and Select Portfolio Servicing.  These firms could have incentives withheld in the future if they fail to make certain improvements. 

All withholdings apply only to incentives owed to servicers for their participation in the federal program.  Incentives slated to go to homeowners or investors will still be paid through the servicer. 

No servicer has been identified as needing only Minor Improvement. 

Servicers are paid $1,000 for every permanent modification made under HAMP.  “Pay for Success” incentives are then awarded to servicers annually for three years as long as the borrower stays current.  HAMP participation is voluntary and Treasury doesn’t have the authority to impose fines like a regulator could, they’re using the tools they have to push servicers to take remedial actions when they are not in compliance with program guidelines. 

According to the report, there are currently 608,000 permanent HAMP modifications in active status.  Servicers converted 29,000 trial modifications to permanent during the month of April and started another 29,000 trial plans during the month.  The average length of the trial period has been 3.5 months and 70% of those have been converted to permanent modifications. 

The median payment reduction amount permanent modifications is 37%, or more than $500 a month, and they say re-defaults have been “lower than anyone expected.” 

Excerpts from this article from DSnews.com by Carrie Bay 6/9/11

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