Reno Sparks Real Estate Today

June 15th Is Short Sale Day

Fannie Mae and Freddie Mac, the nation's two largest mortgagebackers, will implement their new short sale guidelines on June 15. The changes require mortgage servicers to make a decision within 30 days of receiving a short sale offer. They also must consider requests for pre-approved short sales within that same timeframe.  If the lender needs more than 30 days, it must give borrowers weekly status updates and a decision within 60 days of the initial application. This extension gives lenders more time to determine the value of the property or to get the approval of a mortgage insurer.  The moves are aimed at streamlining the short sale process, which often takes months to complete. Faster response times could help thousands of homeowners. Short sale transactions can get so complicated that many prospective buyers won't even consider making an offer on a short sale property. And many of those who bid often walk away from the offer because lenders take so long to make a decision.  "Short sales are more complex than routine home sales since they may involve multiple parties and long-distance negotiating," said Tracy Mooney, a Freddie Mac senior vice president. The new rules "are intended to help make the decision process more transparent and timely."

Banks have also caught on to the benefit of approving short sales. Foreclosures take more time for the bank to recoup their money, and it costs upwards of $50,000 to process a foreclosure. But in the wake of the robosigning scandal, banks are more apt to help and even encourage a homeowner to pursue via a short sale. In addition to the benefits of the bank, the homeowner comes out much better in the long run.  Along with a new home, their credit has been salvaged to a respectable level as opposed to letting a home go due to foreclosure. With a foreclosure it can take up to seven years for your credit to show signs of improvement.

 

Home Owner Insurance - Things To Consider

If you’re thinking about buying a home don’t forget to consider insurance. Would-be buyers often get pre-approved for mortgages, research school districts, and look at numerous houses before finding the “perfect” home for them. Often however, they don’t consider the insurance implications of buying a specific house. Insurance is not a one-time expense. If you have a mortgage it’s likely you will pay for insurance for the life of the mortgage, so keep insurance issues at the forefront of home-buying decisions.

The following factors will typically impact the price and perhaps the availability of insurance for the home:

Do some investigation

• Quality and location of the fire department
• Proximity to the coastline or floodplain and risk of flooding
• History of earthquakes
• Age of the home
• Condition of the roof
• Whether or not the home is well-built and up to code
• Swimming pool or other special features

Before you make an offer

• Get a CLUE — It’s important to learn about prior claims on the house — not that a prior claim is necessarily a barrier to securing insurance. In fact, sometimes it may be good news — for example, the roof was damaged by a wind storm and replaced with a new one. Ask the current owner for a copy of the insurance loss history report, such as a Comprehensive Loss Underwriting Exchange (C.L.U.E.) report from ChoicePoint, or an A-PLUS report from ISO, a source of information about property/casualty insurance. A record of insurance claims on the house can provide answers to two important questions:
  • Have there been any past problems in the home?
  • If damage occurred, was it properly repaired?
  
  Note: If the home has been claim free for 5 years there will not be a loss history report on the home.

• Get the house inspected — The inspector should:
  • Check the general condition of the home.
  • Look for water damage, termites and other types of infestation.
  • Check the electrical system, water heater and septic tank, if there is one.
  • Show you where potential problems might develop.
  • Make certain that past problems have been properly repaired.
  • Suggest upgrades or replacements that may be needed.

 

Nevada In The Red - Opportunity?

Now we (Reno/Sparks/Nevada residents) can look at the information below in one of 2 ways.

1. As we all know the market is bad, lots of foreclosures, prices down. When is the market ever going to turn around? There is no way I am going to buy a house in this market.  We are in for another terrible year.

OR

1. The market is down so much further than most markets, which means there is opportunity everywhere. There is a saying that comes to mind, “Buy low sell high.” Well the market is low. We are seeing prices at levels we haven’t seen since the early 90’s in many cases.  Add to that record low interest rates and it’s hard to argue that you shouldn’t buy. 

 

Update On Home Affordable Modification Program HAMP

Below is an update to the Home Affordable Modification Program, better known as HAMP. One of the interesting additions is the eligibility of investor owned homes.  Also write downs (reductions in loan amounts) are given a bigger priority. 

All of this sounds really good but the problem is this is a volantary program. Lenders don't have to comply. There is a lot of money in servicing loans, processing foreclosures, and related services.  

The Obama administration has announced changes to its flagship foreclosure prevention initiative – the Home Affordable Modification Program (HAMP). Among the changes, borrowers who are struggling because of debt beyond their mortgage will be eligible for a secondary evaluation with more flexible debt-to-income criteria, and eligibility will be extended to investor-owned homes that are used as rental properties. The administration is also giving principal reductions a bigger role within the program, tripling incentives for investors that agree to write down an underwater borrower’s principal balance and offering these same incentives to the nation’s two biggest mortgage investors – Fannie Mae and Freddie Mac.

Stay tuned.........

From The Desk Of Captain Obvious

I read this story about Fed chief Ben Bernanke taking a stand on the foreclosure crisis and I had to share it. 

Say what you want about the federal reserve and their actions over the last decade. It would be hard to argue their actions have been anything but a complete disaster. 

Fed - foreclosure is not the best solution

More than four years into the housing crisis, and after millions of Americans have lost their homes, Federal Reserve Chairman Ben Bernanke is finally taking a stand.  Bernanke sent a Federal Reserve paper to the leaders of the House of Representative's Committee on Financial Services arguing that relying heavily on foreclosures to deal with mortgage borrowers that can't meet their obligations is "costly and inefficient" for the housing market because they can lead to deteriorating homes and weigh on the property values in the surrounding community.  Instead, the paper encourages lenders to "aggressively" pursue loan modifications and for servicers to be given more incentives to seek alternatives to foreclosure. Foreclosures "can result in 'deadweight losses,' or costs that do not benefit anyone, including the neglect and deterioration of properties that often sit vacant for months (or even years) and the associated negative effects on neighborhoods," the paper said. "These deadweight losses compound the losses that households and creditors already
bear and can result in further downward pressure on house prices."

The paper mirrors findings from regional Fed banks indicating that foreclosures can be detrimental to more Americans than just those who are losing their homes. Properties that are occupied, but in foreclosure, drive down the surrounding property values twice as much as vacant properties, an October study from the Cleveland Federal Reserve found.  And with millions of foreclosed properties already in the pipeline, the foreclosure process is already taking longer than in recent memory -- a situation that may only be exacerbated if lenders don't take the Fed's advice. The average foreclosure process now takes 674 days, almost triple the time necessary in 2007.

You can read more here. 

Let me translate for you. This is the fed saying. We have lowered interest rates, bailed out banks, pumped countless extra dollars into the economy, hurry up and clean up our mess. 

Just for fun, here are a few more stellar quotes on housing from Captain Bernanke. 

(July, 2005) "We’ve never had a decline in house prices on a nationwide basis. So, what I think what is more likely is that house prices will slow, maybe stabilize, might slow consumption spending a bit. I don’t think it’s gonna drive the economy too far from its full employment path, though."

(October 20, 2005) "House prices have risen by nearly 25 percent over the past two years. Although speculative activity has increased in some areas, at a national level these price increases largely reflect strong economic fundamentals."

(February 15, 2006) "Housing markets are cooling a bit. Our expectation is that the decline in activity or the slowing in activity will be moderate, that house prices will probably continue to rise."

(February 15, 2007) "Despite the ongoing adjustments in the housing sector, overall economic prospects for households remain good. Household finances appear generally solid, and delinquency rates on most types of consumer loans and residential mortgages remain low."

(March 28, 2007) "At this juncture, however, the impact on the broader economy and financial markets of the problems in the subprime market seems likely to be contained. In particular, mortgages to prime borrowers and fixed-rate mortgages to all classes of borrowers continue to perform well, with low rates of delinquency."

(May 17, 2007) "All that said, given the fundamental factors in place that should support the demand for housing, we believe the effect of the troubles in the subprime sector on the broader housing market will likely be limited, and we do not expect significant spillovers from the subprime market to the rest of the economy or to the financial system.  The vast majority of mortgages, including even subprime mortgages, continue to perform well.  Past gains in house prices have left most homeowners with significant amounts of home equity, and growth in jobs and incomes should help keep the financial obligations of most households manageable."

 

 

Need A Down Payment? IRA Might Be The Answer

Homes are more affordable today than almost any other time in recent history. Prices are dirt cheap, lower than replacement cost in most cases. Meaning you can’t buy the materials and build a house for what you can buy one for today. Interest rates are at all time lows, and there are “deals” everywhere.

Many people can qualify for a mortgage but are struggling to come up with a good-sized down payment. With the much stricter loan qualification standards in effect today compared to times past, borrowers are often required to put down at least 20 percent of the purchase price to obtain a home loan.

Fortunately, first-time homebuyers who have IRAs (individual retirement accounts) may have more money available for a down payment than they realize. Ordinarily, the money in an IRA can't be withdrawn before age 59.5 without incurring a 10 percent income tax penalty.

However, there is a special exemption for first-time homebuyers. They can withdraw up to $10,000 in IRA funds to purchase a first home without paying the penalty. A married couple can each withdraw $10,000, giving a total of $20,000.

Whenever money is withdrawn from a traditional IRA, it must be reported as income and regular income tax paid on it. This applies to withdrawals for buying a first home. However, this rule does not apply to Roth IRAs. 

Like traditional IRAs, Roth IRAs are tax deferred. Unlike traditional IRAs, however, contributions to Roth IRAs are not tax deductible. Instead, withdrawals are tax free after age 59.5.

Are taxes due on the withdrawal?

So long as the Roth IRA has been in existence for at least five years, withdrawals up to $10,000 for a first-time home purchase are completely tax free -- neither income tax nor a penalty tax need be paid.However, if the Roth IRA is less than 5 years old, income taxes may have to be paid on the withdrawal, but no penalty tax.

Who is a first-time homebuyer? 

The good news is that a person can qualify as a first-time homebuyer for these purposes even if he or she has owned homes in the past. For IRA purposes, you're a first-time homebuyer so long as you, or your spouse, did own a principal residence at any time during the previous two years.

The two years are measured from the time the new home is acquired. This is the date a binding sales contract is signed or building or rebuilding has begun.

What can the money be used for?

The IRA withdrawal can be used to help pay for any costs involved in buying, building, or rebuilding a home. It may also be used for reasonable settlement, financing, or other closing costs.

Moreover, the money can be given to a child, grandchild, parent, or other ancestor to buy a first home so long as that individual qualifies under the rules.

The money must be used to pay these costs within 120 days after it is withdrawn from the IRA account. If the home purchase is canceled or delayed, no taxes will be due so long as the money is put back into the account within 120 days of its withdrawal.

Personal circumstances vary greatly. As always, you should seek advise from qualified professionals before making any financial decisions.

 

 

Insurance Tips For Caughlin Fire Victims -

Here is a good video for what to do if you had damge to your home in the fires. 

 

Relief For Underwater Homeowners Current On Payments

First off the program only applies to borrowers whose loans are held by Fannie Mae and Freddie Mac. The good news is Fannie and Freddie hold a huge number of loans in the Reno Sparks area.  You can look up Fannie Loans here http://www.fanniemae.com/loanlookup/ and Freddie Loans here www.freddiemac.com/mymortgage The loans must have been sold to one of the two corporations prior to April 1, 2009. After that, though, the rules have been relaxed considerably.

The old HARP was limited to borrowers whose homes were worth no less than 125% of what they owe on their mortgages. Now, beginning Dec. 1, that restriction has been removed, so there is no ceiling whatsoever, at least for loans with traditional 30-year fixed-rate mortgages and even less common 15-year fixed loans.

For everyone else, there are still ceilings on the loan-to-value ratio. For fixed-rate loans with a term greater than 30 years, the maximum LTV is 105%. Ditto for adjustable-rate mortgages with initial fixed-rate periods of five or more years or ARMs with terms longer than 30 years.

 

Beyond that, you can’t have been late with your house payment at any time during the previous six months and late no more than once in the previous seven to 12 months. Also, to be eligible, borrowers must benefit in the form of lower monthly mortgage payments or a more “stable” loan product, such as moving from an adjustable-rate mortgage to one with fixed payments. But if your payment increases by more than 20%, you must re-qualify for the new loan under the following rules: You must have a credit score of at least 620 and your debt-to-income ratio cannot exceed 45%. Also, lenders are required to verify your income and assets.

Another important change: The standard waiting period has been removed for borrowers who declared bankruptcy or have a foreclosure blotting their credit records.

Zillow.com has a great HARP eligibility tool you might want to check out. You can try it here http://www.zillow.com/mortgage-calculator/harp-eligibility/

 

 

Reno Sparks Lands On Top 10 List

No it’s not Dave Letterman’s nightly list.  There are some lists you just don’t want to end up on.  The list Reno Sparks finds itself on, falls into that category.  Foreclosure web site RealtyTrac recently published a list of “Top 10 Short Sale Markets” and Reno Sparks landed right in the middle at number 5.

Here’s the write up.

5) RENO-SPARKS,  NV 

About 60 percent of homeowners in Reno owe more on their house than the house is worth; making the short sale market in Reno huge.

Pre-foreclosure sales alone accounted for nearly 30 percent of all sales in the second quarter  of 2011, according to RealtyTrac. Buyers paid only $156,664 on average for a Reno  short sale (less than it costs to build a new house), and the 702 short sales  in Reno during the second quarter represented a 50 percent increase from the previous quarter. 

Full article here

On the upside every short sale means one less foreclosure on the market.  

 

Underwater Homeowners May Get Relief With New Harp

A little more than a week ago, President Obama announced an expansion of the HARP (Home Affordable Refinance Program) which would eliminate the current maximum LTV of 125%. This means you could be up to 25% upside down on your mortgage.  The program is being looked at as a way to reward those homeowners who have been good payers of their mortgages but, because of declining home values, they could not take advantage of today’s lower interest rates.

While the actual details on the program will not be released until next month, here’s some of the details being talked about.

• It will only pertain to loans currently being serviced by Fannie Mae or Freddie Mac
• Because of the removal of the LTV cap, appraisals may not be required
• With the only qualifying criteria announced being that the last six payments be on time, it is possible that income documentation may be streamlined and credit scores might be more forgiving
• Fees allegedly will be reduced
• Incentives may be offered to people who shorten their repayment time
• It also sounds that the banks may be given some incentive by not holding them liable for the underwater portion of the new loan (a major incentive for sure).

The government is already on the hook for these loans thru Freddie and Fannie. By lowering the payments (by offering lower rates), they will likely help these loans to continue to perform and make it less likely for the underwater homeowner to walk away.

This is great news for the Reno Sparks area where estimated show nearly 60% of mortgage are "under water."

Stay tuned; as soon as more concrete details become available we will pass them on.