Written By: Kristin Duff

If you have recently pondered selling your home, you must know at this point that there have been many foreclosures and short sales in your area. These homes, priced aggressively, have a direct effect on your homes market value. When selling a home, the asking price is based on comparable homes in the area, to include recent short sales and foreclosures. Your house is not necessarily worth more just because you can continue to make your payments. As rediculous as this sounds, it’s a hard, sad truth that needs to be realized. The under cut prices of today’s market make it hard for anyone able to make their mortgage payments to sell their homes due to the deflation of the market. Homeowners with a $300,000 loan on their property are looking at selling for far less than their loan ammounts and are finding themselves upside down in this market. Unfortunatly, these bank owned homes have become a staple in the market and they are very competatively priced.They are your competition and you have to price your house for sale in accordance with the current market value for your community. Pricing is a very important part of trying to sell yuor home and if you do wish to sell in this economy, you will find it difficult to sell your home if the price you are asking is too steep in comparison to the other homes for sale in your community.

Written By: Kristin Duff

Many homeowners are discovering the hard way that though the idea of a loan modification seems like a miracle, it’s simply a band-aid. What I mean when I say band-aid is that it’ll cover the abraision temporarily, making the burn go down and helping to ease the pain, until you have to rip the sucker off, pulling the wound open once again. Most of the time, a loan modifiaction request can be a lenghty process during which the homeowner has to undergo the scruteny of the bank holding the loan. The bank requires proof that you, as the homeowner, are under duress and are unable to make your payments. The banks take their time reviewing their documents, causing some hownowners to fall behind even further, or worse, the bank requests a temporary payment, usually three months worth while the bank evaluates the homeowners ability to make payments then says they dont have enough information and they need another temporary payment of similar value. Then, the bank offers you a deal, with a length of time at a lower fixed interest rate. At this point, you’re thinking “i can make that kind of payment”, but the tricky part is lookiing beyond the now factor. As a homeowner seeking a loan modification you need to ask yourself “does this new loan modification actually fix my situation or when the length of time allowed for this fixed interest rate is up, am I going to end up making my situation worse?” In some instances the loan modification documents can even narrow your field of options, eliminating your chances to put your home on the maket via short sale, during which your home is sold at current market value and the rest of your mortgage debt can be forgiven. If you are considering applying for or accepting your banks offer for a loan modification, please take the time to seek advice from a Certified Distressed Property Expert or a trusted lender outside of your bank’s authority to ensure that you aren’t just “covering up” your wounds to deal with them at a later point in time. Falling behind on your payments during this economic crisis is nothing to be ashamed of as long as you seek the proper help to alleviate the situation.

Written By: Kristin Duff

We’ve all seen today’s adds about the housing market. As listing agents become more desperate for buyers, they have come up with colorful ways to say “it’s really not as bad as it looks!” but the question on all of our minds begging to be asked is “is it really worth my time and effort?” some listing agents have taken it too far and their creative verbiage, meant to strike curiosity in the viewers, has become an outright lie. There is a difference between a home needing a little TLC and a home needing extensive repairs. Some Realtors have even gone so far as posting old pictures of their listings in which the house was in a better condition. THIS IS A LIE! And it is blatantly unacceptable. Let looks at a particularly popular phrase “A diamond in the rough”. A diamond in the rough folks, is a lump of coal. Phrases which truthfully display a mental picture of a property for the buyer while optimistically trying to display the positive aspect of the property can be a very good opportunity for those who naturally can’t see the potential, but when does pointing out the ups outweigh the need to disclose the downs? The right answer? Never. But the honest answer is that it’s happening everyday to more people than can possibly be ethical. The sad truth is that a lot of potential buyers are looking for a deal and they are finding that some of the neglected, abandoned bank owned properties on the market are way beyond the normal person’s ability to fix. The cost of renovations could very easily exceed the price of the “steal of a deal” home they had hoped to purchase. This is not to say that all agents have been using creative verbiage to sell houses that were beyond the capability of the buyer to fix, or that all bank owned properties aren’t worth the trouble of trying to fix, but the predicament that some of these buyers have been put into still exists. Let’s be honest with our buyers. If a bulldozer would be a mercy killing then saying “needs a little TLC” is an understatement.  Let’s call it for what it is …Land value only.

What is a Certified Distressed Property Expert

Written by Noel Padilla

http://activerain.com/np1000

Before we can define what a Certified Distressed Property Expert is, we need to define what a distressed property is. A property can become distressed for a variety of reasons but the most common is a foreclosure. Any situation that has caused a property owner to have difficulty making mortgage payments or even selling the property is said to be in a distressed state. Basically any property which has foreclosure looming.

Now that we have defined a distressed property, what is a Certified Distressed Property Expert (CDPE)? This is not only a designation earned by a licensed Realtor but it is also an acronym that signals to the public that the person displaying it has gone through extensive training to successfully mitigate a foreclosure. This can be done by negotiating mortgage terms, helping to negotiate a refinance or the most likely-help sell the property.

Sometimes these properties have lost significant value either by physical damage, changes in the zoning, lack of curb appeal or host of other factors one of which occurring today is market conditions. If the value of the property drops below what one could sell the property for then the property is said to be short and any sale would be considered a “Short Sale“, which has become very common lately. Negotiating a short sale is where a CDPE really shines.

These transactions are extensively time consuming and tedious. They require diligent follow-up, tons of paperwork and detailed analysis. Not to mention all the work that goes into drafting market reports and gathering all the information to convince the bank to accept a sales amount that will net them less. Not an easy task. Some of these sales can take anywhere from 3 to 12 months to close, depending on the complexity of the transaction.

All this is done in addition to the normal marketing efforts required to sell the property. You can see why less than 1% of Realtors nationwide have the training and knowledge to successfully negotiate a short sale. I am one of those in the less than 1% that has dedicated my time, effort and finances to educate myself in this sector of the market.

In March of 2008 50% of all homes sold were in some sort of distressed state…….Half! If you have a distressed property you can’t chance your home sale on someone who doesn’t have the tools to get things done. This market is going to be here for sometime. Experts predict 2 to 3 years, I predict closer to 10 years which began in 2006 so we are 2 years in to the 10 year cycle.

Buyers are not immune to the phenomenon. They are getting great deals on these distressed properties but guess what, if they are dealing with someone who doesn’t know the mechanics of a short sale, the deal will fall apart after waiting months. It is equally important to buyers and sellers of distressed property to use a person who can get these transactions to the closing table.

Thank you Noel Padilla for allowing me to post this on my webpage.

Written By: Kristin Duff

A Certified Distressed Property Expert® (CDPE) is a real estate professional with specific understanding of the complex issues confronting the real estate industry. Through comprehensive training and experience, CDPEs are able to provide solutions for homeowners facing hardships in today’s market.

The prospect of foreclosure can be financially and emotionally devastating, and often homeowners proceed without guidance of any kind. The developers of the CDPE Designation believe that in almost all cases, the best course of action for a homeowner in distress is to speak with a well-informed, licensed real estate professional. They have the tools needed to help homeowners find the best solution for their situation.

While enduring financial difficulties is challenging for any family, the process of finding a qualified real estate professional should not be. Selecting an agent with the CDPE Designation ensures you are dealing with a professional trained to address your specific needs. For more information, contact a CDPE in your area.

CDPEs don’t merely assist in selling properties, they serve and help save their clients in need.                     

http://www.cdpe.com/what-is-a-cdpe.html

The Fine Line between Good Negotiating and Bluffing

Written By: Kristin Duff

In the past, claiming to have multiple offers on a property was a realistic claim in the real estate market, but after the market crashed, this was a sad dream of what used to be. As the market starts picking back up, however, it is becoming more prevalent again. Now, the problem with this is that some realtors are using this fact to their bargaining advantage, bluffing to try to get more from the buyer. Unfortunately, this tactic sometimes drives prospective buyers away leaving the house vacant longer with the seller accruing more debt, or it prevents the seller from moving on to their new home. Another “game” currently being played in the real estate market is the game of submitting offers that don’t go through. This damages both the buyer and the seller. First of all, submitting offers that the buyer isn’t committed to takes the house off the active market for others to buy. Now, having multiple offers on a property is probable if the house is priced well and in good condition, but once an offer is accepted, all other offers go into standby mode and the house is basically taken off the market until the offer fails. Some agents are known for telling their buyers it’s ok to write up an offer if you aren’t really sure you want the house.the problem in this is that most other realtors don’t like to work with them because they have “earned” their bad reputation.  The only way to prevent this is to research well before you commit yourself to a realtor. If your realtor has been in the “game” for a substantial period of time, then he/she should have plenty of knowledge as far as how each other “player” plays the game. Not to mention the fact that most experienced realtors have numerous contacts and one of them has most likely worked with any prospective realtor in the area. Weather your realtor is accepting offers on your behalf as a seller or negotiating your offer as a buyer, you are placing your trust 100% in your realtor to do what’s best for you.  If you do not have a good standing relationship with your realtor with a good open dialogue can you really be sure that they aren’t “gambling away” your money?

Article written by Kristin Duff

Financially challenged property owners have become a huge target for scam artists and loan modifications can be especially risky. If your Realtor doesn’t have the proper training to assist you, you may find that, in some cases, the advice given isn’t up to par. It is legal for a Realtor to give you advice about loan modification, Short Sales, and Foreclosure, but as the number of people seeking this advice grows, the active number of real estate agents able and willing to give this advice becomes sparring. Loan Modification Assistance is a very risky business for any licensed real estate agent or broker, simply because it has not been a part of the realtors job description until now, and even now it only applies to those certified to take on the responsibility. Most agents and brokers are not trained or skilled in loan modification and giving advice on the topic may violate the scope of their license. The structure of a loan and the servicing required to complete a loan modification is very detailed and has to be very precise. Before the Real Estate Market crashed due to the economic crisis in our country, in order to seek advice about loan modification, one would have to speak directly to a loan officer. With so many people losing their homes, most realtors have had to pick up at least a few hardship cases. The opportunities for these people to keep their homes or at least reduce their home debts have multiplied. Given that fact, some agents have become comfortable giving loan modification advice. Without the proper training on this avenue, this can be a very dangerous situation for the homeowner. A vast majority of agents have to send a prospective home buyer to a loan officer for a simple price range pre-qualification. The scary thing is that some of those same agents have become omfortable with giving homeowners in mortgage distress loan modification advice. In the Realtors Code of Ethics it specifically states that “REALTORS^® shall not undertake to provide specialized professional services concerning a type of property or service that is outside their field of competence.” Given this factor, make sure that the person you seek advice from on loan modification is certified to give this advice. A Certified Distressed Property Expert is guaranteed to know more about the subject than an average real estate agent.

If you have any questions or concerns regarding your ability to keep your house during this economic crisis, please feel free to contact Pearl Ahlquist at (916) 708-3851. She is a Certified Distressed Property Expert.

In our continuing efforts to keep you up-to-date on the latest developments on the Stimulus Package and how it will affect homeowners, we are now providing you the highlights of the latest guidelines on loan modifications.  There are actually more details than we are providing in this edition of “Success Tips” but these provide the basic components to help determine if a distressed homeowner is eligible.  This is a Governmental trial program and will be reevaluated in 90 days. 

The trial loan modifications consistent with these guidelines may be offered to homeowners as of March 4, 2009 and may be considered for acceptance into the Home Affordable Modification Program with other conditions upon completion of the trial period.  These guidelines, however, do not constitute a contract offer binding on the Department of the Treasury.

PROGRAM ELEMENTS DESCRIBED IN GUIDELINES:

Monthly Payment Reduction Cost Share:  The Treasury will partner with the financial institutions to reduce the homeowners’ monthly mortgage payments.  The lender will have to first reduce payments on mortgages to no greater than a 38%.

Front-End Debt-to-Income (DTI) ratio.  The Treasury will match further reductions in monthly payments dollar-for-dollar with the lender/investor, down to a 31% Front-End DTI ratio for the borrower.

Servicer Incentive and Pay for Success Fees:  Servicers will receive an up-front Servicer Incentive Payment of $1,000 for each eligible modification meeting guidelines established under this initiative. Servicers will also receive Pay for Success Payments for as long as the borrower stays in the program, with further incentives up to $1,000 each year for up to three years.  Similar incentives will be paid for Hope for Homeowner refinances which should motivate lenders who have been reluctant to participate in this program before now.

Borrower Pay-for-Performance Success Payments: Borrowers are eligible to receive a Pay-for-Performance Success Payment that goes straight towards reducing the principal balance on the mortgage loan as long as the borrower is current on his or her monthly payments.  Borrowers can receive up to $1,000 for Pay-for-Performance Success Payments each year for up to five years.

Current Borrower One-Time Bonus Incentive: One-time bonus incentive payments of $1,500 to lender/investors and $500 to servicers will be provided for modifications made while a borrower is still current on mortgage payments.  The servicer will be required to maintain records and documentation evidencing that the Trial Period payment arrangements were agreed to while the borrower was less than 30 days delinquent.  The servicer must comply with any express pooling and servicing contractual restrictions for modifying current loans.

Program Payment Conditions:  No payments under the program to the lender/investor, servicer, or borrower will be made unless and until the servicer has entered into the program agreements with the Treasury’s financial agent.  Servicers must enter into the program agreements with the Treasury’s financial agent no later than December 31, 2009.

ELIGIBILITY REQUIREMENTS:

Pooling and Servicing Agreements: The program guidelines reflect usual and customary industry standards for mortgage loan modifications contained in typical servicing agreements, including pooling and servicing agreements (PSA’s) governing private label securitizations.  Participating servicers are required to consider all eligible loans under the program guidelines unless prohibited by the rules of the applicable PSA and/or other investor servicing agreements.  Particular servicers are required to use reasonable efforts to remove any prohibitions and obtain waivers or approvals from all necessary parties.

Origination Date of Loan Subject to Modification:  The mortgage to be modified must have been originated on or before January 1, 2009.

Program Expiration:  New borrowers will be accepted until December 31, 2012.  Program payments will be made for up to five years after the date of entry into a Home Affordable Modification.  Monitoring will continue through the life of the program.

Qualification Terms:

• The home must be owner-occupied, single family 1-4 unit property including condominium, cooperative and manufactured home affixed to a foundation and treated as real property under state law.
• The home must be a PRIMARY RESIDENCE verified with tax returns, credit reports, and other documentation such as a utility bill.
• The property may NOT be investor-owned.
• The home may not be vacant or condemned.
• Borrowers in bankruptcy are not automatically eliminated from consideration for a modification.
• Borrowers in active litigation regarding the mortgage loan can qualify for a modification without waiving their legal rights.
• First lien loans must have an unpaid principal balance (prior to capitalization of arrearages) equal to or less than $729,750 for one unit, $934,200 for two units, $1,129,250 for three units and $1,403,400 for four units.

In Foreclosure Process:  Any foreclosure action will be temporarily suspended during the trial period, or while the borrowers are considered for alternative foreclosure prevention options.  In the event that the Home Affordable Modification or alternative foreclosure prevention options fail, the foreclosure may be resumed.

Current Loan-to-Value (LTV) Ratio:  There is no maximum or minimum LTV ratio for eligibility purposes.

Loan Type Exclusions: Loans can only be modified under the Home Affordable Modification program once and only once.

Subordinate Financing: Subordinate liens are not included in the Front-End DTI calculation, but they are included in the back-end DTI Calculation.

Solicitation to Borrowers/Incoming Inquiries: Service Providers should follow any existing express contractual restrictions with respect to solicitation of borrowers for modifications.

UNDERWRITING ANALYSIS:

Front-End DTI Target: Front-End DTI is the ratio of PITIA to Monthly Gross Income.  PITIA is defined as principal, interest, taxes, insurance (including homeowners insurance and flood & hazard insurance) and Homeowner Association Fees.  Any monthly mortgage insurance premiums are excluded from the PITIA calculation.  The Front-End DTI target is 31%.  The Standard Waterfall step that results in a Front-End closest to 31% without going below 31% will satisfy the Front-End DTI target.  There is no restriction on reducing Front-End DTI below 31%, however any portion of the reduction below 31% will not be covered by the Payment Reduction Cost Share.

Property Value: The service provider may use, at its discretion, either one of the government sponsored enterprises (GSE’s) automated valuation model (AVM) provided that the AVM renders a reliable confidence score or a Broker Price Opinion (BPO).  The consensus is that in most cases the servicers will be utilizing BPO’s most often.  With whatever pricing model that the servicer uses in the modification, the valuation may not be more than 60 days old.

Income and Asset Validation:  The borrower’s income will be verified by requiring a signed Form 4506-T (Request for Transcript of Tax Return) and obtaining the most recent tax return on file for each borrower on the note.  For wage earners, the two most recent pay stubs for each wage earner on the note will also be required.  For self-employed borrowers or for non-wage income, the borrower’s income will be verified by obtaining other third-party documents that provide reasonably reliable evidence of income.  Borrowers must also represent and warrant that they do not have sufficient liquid assets to make their monthly mortgage payments.  The Hardship (SAD) letter will be very important here.

Monthly Gross Income:  The borrower’s Monthly Gross Income is the amount before any payroll deductions includes wages and salaries, overtime pay, commissions, fees, tips, bonuses, housing allowances, other compensation for personal services, Social Security payments, including Social Security received by adults on behalf of minors or by minors intended for their own support, annuities, insurance policies, retirement funds, pensions, disability or death benefits, unemployment benefits, rental income and other income.  Monthly net income can be used for preliminary screening and qualification.  If used, the servicer will need to multiply net income by 1.25 to get an estimate of the Monthly Gross Income.

Back-End DTI:  The Back-End DTI is the ratio of the borrower’s total monthly debt payments (such as Front-End PITIA, any mortgage insurance premiums, payments on all installment debts, monthly payments on subordinate liens on the property, spousal/child-support payments, car lease payments, aggregate negative net rental income from all investment properties owned, and monthly mortgage payments for second homes) to the borrower’s Monthly Gross Income.  The servicer must validate monthly installment, revolving debt and secondary mortgage debt by pulling a credit report for each borrower or a joint report for a married couple.  The servicer must also consider information obtained from the borrower orally or in writing concerning incremental monthly obligations.

Borrowers who otherwise qualify for a modification under this program, but who would have a post-modification Back-End DTI greater than or equal to 55%, will be provided with a letter stating that they are required to work with a HUD-approved counselor and the modification will not take effect until they provide a signed statement indicating that they will obtain counseling.

Reasonably Foreseeable/Imminent Default: Every potentially eligible borrower who calls or writes to their service provider in reference to a modification must be screened for hardship.  This screen must ascertain whether the borrower has had a change in circumstances that causes financial hardship, or is facing a recent or imminent increase in the payment that is likely to create a financial hardship (Payment Shock).  If the borrower reports a material change in circumstances, the sevicer must ask about current income and assets, and current expenses as well as the specific circumstances relating to the claimed financial hardship.  Each of these elements must be verified through documentation.  Again the Hardship (Sad) Letter will be very critical in this process.

If the servicer determines that a non-defaulted borrower facing a financial hardship is in Imminent Default and will be unable to make his or her mortgage payments in the immediate future, the servicer must apply the NPV Test (Net Present Value).

A standard NPV Test will be required on each loan that is in Imminent Default or is at least 60 days delinquent under the MBA (Mortgage Bankers Association) delinquency calculation.  This NPV Test will compare the net present value (NPV) of the cash flows expected from the modification to the net present value of the cash flows expected in the absence of modification.  If the NPV of the modification scenario is greater, the NPV result is deemed positive.  If the NPV Test result is negative and Home Affordable Modification is not pursued, the lender/investor must seek other foreclosure prevention alternatives, including alternative modification programs, deed-in-lieu of sales and short sales programs.

COMMENTS & CONCLUSIONS:

There is much more information available on this program which you can find by going on www.hud.gov.  What you can conclude is that this program has placed a much greater emphasis on such instruments as a Broker Price Opinion and the Hardship (SAD) Letter.  This has also placed a greater emphasis on your role as a Consultant to your client. 

Good Luck & please let us know how we can help you.

The biggest stock market engine of all, of course, is the economy which has not been winning any medals of late. In fact, nearly all the leading indicators are still slipping. Housing prices, for example, dropped 19% in the first quarter, and jobs are continuing to disappear. There is a long and dismal list of negatives.

On the other hand, most indices are sliding less quickly than they did a few weeks ago. Optimists see the not-so-bad numbers as proof that the recession is finally coming to an end.

We are inclined to agree with the optimists, but we think a recovery will probably be more modest than they expect. A few problems are headed our way that will probably keep the rebound party from getting too lively.

The first hurdle is a commercial real estate crunch that seems likely to hit later this year. In several cities, a few skyscrapers that were once humming with activity have lost so many tenants their owners can’t make the payments. As is true when Ma and Pa Kettle get behind a few months, the former high rollers are also getting the boot. There is so much vacant commercial space available, this market won’t turn around anytime soon.

Many once bustling shopping malls are also in trouble. When Joe and Sally MidAmerica got their pink slips, they had a revelation: spend less money. What a concept. The result is lean times for retailers – especially those that sell overpriced glitter goods instead of affordable necessities. One bright spot is consumer confidence is rising.

As job losses rise, growing numbers of American homeowners with once solid credit are falling behind on their mortgages, amplifying a wave of foreclosures.

In the latest phase of the nation’s real estate disaster, the locus of trouble has shifted from subprime loans — those extended to home buyers with troubled credit — to the far more numerous prime loans issued to those with decent financial histories.

With many economists anticipating that the unemployment rate will rise into the double digits from its current 8.9 percent, foreclosures are expected to accelerate. That could exacerbate bank losses, adding pressure to the financial system and the broader economy.

“We’re about to have a big problem,” said Morris A. Davis, a real estate expert at the University of Wisconsin. “Foreclosures were bad last year? It’s going to get worse.”

Economists refer to the current surge of foreclosures as the third wave, distinct from the initial spike when speculators gave up property because of plunging real estate prices, and the secondary shock, when borrowers’ introductory interest rates expired and were reset higher.

“We’re right in the middle of this third wave, and it’s intensifying,” said Mark Zandi, chief economist at Moody’s Economy.com. “That loss of jobs and loss of overtime hours and being forced from a full-time to part-time job is resulting in defaults. They’re coast to coast.”

Those sliding into foreclosure today are more likely to be modest borrowers whose loans fit their income than the consumers of exotically lenient mortgages that formerly typified the crisis.

Economy.com expects that 60 percent of the mortgage defaults this year will be set off primarily by unemployment, up from 29 percent last year.

Real Estate Slideshows from CNBC.com