Friday, August 29, 2008
Thursday, August 28, 2008
When you a buyer does a short sale to assist them in the sell of their home, it will show up on their credit, even if the investor agrees to accept the balance as paid in full. When the seller of that home attempts to purchase their next home and completes the loan application form, there is a question "Have you ever had title or deed transferred in lieu of foreclosure". The correct answer would be "Yes". NOW is when there is the issue ...lenders DO view a short sale (or any mortgage 120 days or more past due, for that matter) the same as a foreclosure. Start the clock ticking, cause now we have to wait three or four years (depending on the loan program) to get them approved for the new loan.
Few sellers are actually told this!
However, it would seem that SOME sellers did understand this upfront. So, they acquired a new home before letting the existing home go into default or positioning themselves for a possible short sale. They "leased" out the current home so they weren't hit with two payments and could qualify for the loan on the new home. And when the "lease" would fall through, the seller would then quit making the monthly payment on the initial home not caring about the impact on their credit.
So now guess what? The guidelines have changed on accepting a lease agreement to offset the current mortgage payment.... and it's not pretty! We no longer can accept just a signed lease agreement, but we now also have to document the deposit AND the property must have 30% equity in the existing home!!! (This new rule does not apply to government loans.)
So I ask you, how many today have 30% equity in a home they are thinking about renting? But the better question is who with 30% equity would let it go into foreclosure?
Friday, August 22, 2008
Thursday, August 21, 2008
There is a lot of conversation going back and forth as to whether this is a good thing, or not a good thing. You be the judge. And to help you with that, check out this link from Realty Resource that gives charts and samples of the credit based on income and the repayment schedule:
Wednesday, August 20, 2008
So, I'm going to try and break this down into bite-sized tidbits as it affects our business daily.
The first BIG issue to prepare for is the increase of the minimum FHA down payment. As of October 1, 2008 the required down payment will go to 3.5%. (Previously the minimum investment was 3 per cent; 2.25% could be down payment and .75% in closing costs.)
This ties in directly with another big change regarding down payments: DOWN PAYMENT ASSISTANCE PROGRAMS. As of October 1, 2008 any seller assisted DPA program is no longer acceptable. The specific dates as it relates to DPA programs:
- Loan must be final approved (including the FHA case number assignment) by September 30th.
- The loan must CLOSE by October 31st.
(For more information on the actions taken since October 2007 with DPA, check out: http://activerain.com/blogsview/255218/Down-Payment-Assistant-Programs.)
This is not to be confused with most bond programs. In Colorado we are particulary fond of the CHFA's MRB First Step w/a CHFA 2nd program (http://www.chfainfo.com/). Even though the FHA down payment will be increased from a total of 3% to 3.5% of sales price, this CHFA program will stay at 3% (off total loan amount) at this time. HOWEVER, keep in mind that CHFA requires a minimum of $1,000 of the borrowers' own funds be invested in the property, it may not be a big change anyway (depending on whether the seller has agreed to pay all other closing costs and prepaids).
Stay tuned for more to come on HERA and the effect on our business day to day...