Will Mortgage Servicers Become the Country’s Landlords?

Foreclosures have skyrocketed over the past two years and even more are predicted in the coming year. Not only are massive foreclosures tragic for the individual families losing their homes, but they are also responsible for major lender losses, resulting in the current mortgage credit crunch. They have caused dramatically dropping house prices, and increased crime and problems for neighborhoods where foreclosures are rampant. Banks, consumer advocate groups, and the government have been searching for ways to stem the tide of these destructive defaults.

Enter the Deeds For Lease (D4L) program from government-controlled mortgage financier Fannie Mae. With this initiative, Fannie Mae would essentially become the landlord for seriously struggling homeowners. It is designed to “minimize family displacement, deterioration of neighborhoods caused by vandalism and theft to vacant homes, and the effect these have on families, communities and home price stabilization.” Here’s how it works:

A homeowner with a Fannie Mae-backed mortgage facing foreclosure must contact their servicer to see if they qualify. If the homeowner does not qualify for any other home loan

help, like mortgage modification or a short sale, then he/she may be eligible for the program. These homeowners must also be able to afford rent at the current market price. At that point the borrower turns over the home’s deed to the bank, the bank forgives the loan, and the borrower is allowed to rent the same home back from the bank for up to 12 months. During that time the renter will be expected to figure out other living arrangements so that the bank can then sell off the house.

Will other banks follow suit in order to stop losing money on foreclosures? Not likely, according to a recent online Time article. It quoted Cheryl Lang, CEO of Integrated Mortgage Solutions, as saying the main problem lies in the legality of the program. “Once a lender takes possession, if there’s a mold issue or Chinese drywall, whatever the problem is with that house, whether or not the lender is aware of it, that’s a liability.”

Many of the nation’s largest lenders, including Citigroup and JPMorgan Chase, have meager interest in converting homes into rentals. “We’re in the lending business,” says Chase spokesman Tom Kelly. “We’re not really equipped to be landlords.” Lenders are sitting on nearly half a million repossessed houses nationwide, but getting rid of them quickly, even if that means taking a hit on price, seems to be the preferred response. A recent presentation by the head of Chase’s retail-financial-services division showed that the company’s servicing portfolio went from having about 52,000 repossessed homes in September 2008 to only some 30,000 in September 2009. Over that period, the average price at which the firm sold houses from that stock dropped from $175,000 to $150,000.

Now, none of that means rent-backs won’t eventually take off. There are plenty of examples in recent past of housing policies starting at the federal housing agencies and later expanding industry-wide thanks to strong-arming from some combination of the Obama administration and Congress. Loan modifications are the quintessential example. Perhaps one more relevant bit here is the law that was passed earlier this year requiring banks that repossess houses to honor the terms of existing leases (i.e. to not immediately kick out any existing renters). Fannie Mae already had such a policy in place. Over the summer, an Assistant Secretary of the Treasury Department told a Senate panel that the administration was considering rent-backs, but the idea hasn’t gained traction since then.

After all, the big administration push has been loan modifications. Earlier this week, Treasury reported that through October more than 650,000 homeowners have received trial modifications under the government’s “Making Home Affordable” plan. How long lasting that help will be, though, is a different question. As of Sept. 1, only 1,711 borrowers had successfully completed the trial phase and received permanent changes to their loan terms, according to a report by the Congressional Oversight Panel.

If loan modifications aren’t the long-term success the administration is banking on, people will wind up losing their homes to foreclosure anyway, and the number of repossessed properties owned by banks will again rise. According to foreclosure tracker RealtyTrac, the number of foreclosure notices nationwide has been ticking down the past three months, but the number of notices is still running about 19 percent higher than last year. Considering high unemployment and how many people still owe more on their mortgages than their houses are worth, there might be a chance yet for attention to turn to the idea of renting houses back to former owners.

Members of the military who find themselves in a short-sale situation now have a new tool via the Homeowners Assistance Program (HAP) through the Department of Defense (DoD).

Congress expanded HAP when they passed the American Recovery and Reinvestment Act of 2009; and now nearly every military personnel involved in a short sale can get financial help through HAP if they find themselves upside down when they must sell because of a mandatory permanent transfer.

The HAP website (http://hap.usace.army.mil) contains several brochures for military personnel and for real estate professionals to help understand the expanded guidelines for those using the program.

Authorized under Section 1013 of the Demonstration Cities and Metropolitan Development Act of 1966, HAP is a law that is managed by the U.S. Army Corps of Engineers “to assist eligible homeowners who face financial loss when selling their primary residence homes in areas where real estate values have declined because of a base closure or realignment announcement.” The American Recovery and Reinvestment Act expands the legislation temporarily for DoD employees caught up in the mortgage crisis. Those who can apply for assistance include:

• service members and DOD employees who are wounded, injured or become ill when deployed;
• surviving spouses of service members or DOD employees killed or died of wounds while deployed;
• service members and civilian employees assigned to BRAC 05 organizations; and
• service members required to permanently relocate during the home mortgage crisis.

The assistance is limited to employees who were reassigned within about a 5-and-a-half year period between 2006 and 2012 and the house being considered must have been the applicant’s primary residence. Some of the criteria for eligibility include:

1. Permanent reassignment requires move of more than 50 miles.
2. Reassignment ordered between 1 February 2006 and 30 September 2012.
3. Property purchased (or contract to purchase signed) before 1 July 2006.
4. Property was the primary residence of the owner
5. Owner has not previously received these benefit payments.

An online brochure, which can be printed via a PDF file, is available here.

This next paragraph is very important for purchasers of houses where the HAP program is being used.

The execution of this program requires the assignment of the contract to the Department of Defense, via the U.S. Army Corps of Engineers. In essence, the seller conveys the house over to the USACE and then the purchaser buys the house from the USACE all at the same time at the same settlement or escrow table. Your state laws may require a few differences, but this is how it’s executed on the ground level.

Many Realtor contracts contain paragraphs that will not allow the assignment of a contract, so military sellers using HAP may need to strike this paragraph to allow the contract to go through without any hiccups.

An “assigned” contract is one where one party in a sales contract can assign their interests over to a third party before settlement. It would say something like: “this contract is between ‘Mr. and Mrs. Seller’ and ‘Mr. and Mrs. Buyer and/or assigns.'”

With this language, it allows Mr. and Mrs. Buyer to slip in Mr. and Mrs. Buyer-2 at some point in the performance of the contract. It’s legal, and is usually used via a pre-foreclosure contract where one party is finding houses for sale and selling them to a secondary buyer once they get the terms of the contract in place.

Thus, in the use of the DoD’s HAP program, the purchaser needs to understand that at the end of their contract, before they go to settlement, the seller will no longer be Mr. and Mrs. Seller, but the U.S. Army Corps of Engineers.

Written by M. Anthony Carr
December 28, 2009

Charles D’Alessandro

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Brooklyn Real Estate Blog Navigating Short Sales: What to Do When the Sale Price Leaves You Short

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If you’re thinking of selling your Brooklyn home, and you expect that the total amount you owe on your mortgage will be greater than the selling price of your home, you may be facing a short sale. A short sale is one where the net proceeds from the sale won’t cover your total mortgage obligation and closing costs, and you don’t have other sources of money to cover the deficiency. A short sale is different from a foreclosure, which is when your lender takes title of your home through a lengthy legal process and then sells it.

1. Consider loan modification first. If you are thinking of selling your home because of financial difficulties and you anticipate a short sale, first contact your lender to see if it has any programs to help you stay in your home. Your lender may agree to a modification such as:

· Refinancing your loan at a lower interest rate

· Providing a different payment plan to help you get caught up

· Providing a forbearance period if your situation is temporary

When a loan modification still isn’t enough to relieve your financial problems, a short sale could be your best option if

· Your property is worth less than the total mortgage you owe on it.

· You have a financial hardship, such as a job loss or major medical bills.

· You have contacted your lender and it is willing to entertain a short sale.

2. Hire a qualified team. The first step to a short sale is to hire a qualified real estate professional* and a real estate attorney who specialize in short sales. Interview at least three candidates for each and look for prior short-sale experience. Short sales have proliferated only in the last few years, so it may be hard to find practitioners who have closed a lot of short sales. You want to work with those who demonstrate a thorough working knowledge of the short-sale process and who won’t try to take advantage of your situation or pressure you to do something that isn’t in your best interest.

A qualified real estate professional can:

· Provide you with a comparative market analysis (CMA) or broker price opinion (BPO).

· Help you set an appropriate listing price for your home, market the home, and get it sold.

· Put special language in the MLS that indicates your home is a short sale and that lender approval is needed (all MLSs permit, and some now require, that the short-sale status be disclosed to potential buyers).

· Ease the process of working with your lender or lenders.

· Negotiate the contract with the buyers.

· Help you put together the short-sale package to send to your lender (or lenders, if you have more than one mortgage) for approval. You can’t sell your home without your lender and any other lien holders agreeing to the sale and releasing the lien so that the buyers can get clear title.

3. Begin gathering documentation before any offers come in. Your lender will give you a list of documents it requires to consider a short sale. The short-sale “package” that accompanies any offer typically must include

· A hardship letter detailing your financial situation and why you need the short sale

· A copy of the purchase contract and listing agreement

· Proof of your income and assets

· Copies of your federal income tax returns for the past two years

4. Prepare buyers for a lengthy waiting period. Even if you’re well organized and have all the documents in place, be prepared for a long process. Waiting for your lender’s review of the short-sale package can take several weeks to months. Some experts say:

· If you have only one mortgage, the review can take about two months.

· With a first and second mortgage with the same lender, the review can take about three months.

· With two or more mortgages with different lenders, it can take four months or longer.

When the bank does respond, it can approve the short sale, make a counteroffer, or deny the short sale. The last two actions can lengthen the process or put you back at square one. (Your real estate attorney and real estate professional, with your authorization, can work your lender’s loss mitigation department on your behalf to prepare the proper documentation and speed the process along.)

5. Don’t expect a short sale to solve your financial problems. Even if your lender does approve the short sale, it may not be the end of all your financial woes. Here are some things to keep in mind:

· You may be asked by your lender to sign a promissory note agreeing to pay back the amount of your loan not paid off by the short sale. If your financial hardship is permanent and you can’t pay back the balance, talk with your real estate attorney about your options.

· Any amount of your mortgage that is forgiven by your lender is typically considered income, and you may have to pay taxes on that amount. Under a temporary measure passed in 2007, the Mortgage Forgiveness Debt Relief Act and Debt Cancellation Act, homeowners can exclude debt forgiveness on their federal tax returns from income for loans discharged in calendar years 2007 through 2012. Be sure to consult your real estate attorney and your accountant to see whether you qualify.

· Having a portion of your debt forgiven may have an adverse effect on your credit score. However, a short sale will impact your credit score less than foreclosure and bankruptcy.

Note: This article provides general information only. Information is not provided as advice for a specific matter. Laws vary from state to state. For advice on a specific matter, consult your attorney or CPA.

Charles D’Alessandro
Fillmore Real Estate
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Brooklyn Real Estate Blog Freddie sees mortgage rates hitting 6% in 2010

Freddie sees mortgage rates hitting 6% in 2010

The average rate on a 30-year, fixed-rate mortgage rose to 5.05 percent this week after hitting an all-time low earlier this month. (Tim Rue/bloomberg News) Enlarge Photo 10 Comments  |  View All » Your browser’s settings may be preventing you from commenting on and viewing comments about this item. See instructions for fixing the problem. Discussion Policy CLOSE Comments that include profanity or personal attacks or other inappropriate comments or material will be removed from the site. Additionally, entries that are unsigned or contain “signatures” by someone other than the actual author will be removed. Finally, we will take steps to block users who violate any of our posting standards, terms of use or privacy policies or any other policies governing this site. Please review the full rules governing commentaries and discussions. You are fully responsible for the content that you post. Who’s Blogging » Links to this article

By Dina ElBoghdady

Washington Post Staff Writer
Saturday, December 26, 2009

After hitting an all-time low in early December, the average rate on a 30-year, fixed-rate mortgage rose to 5.05 percent this week and could climb to 6 percent by the end of 2010, if not sooner, according to giant mortgage financier Freddie Mac.

The results are noteworthy because rates have not topped 5 percent since the last week of October, when they reached 5.03 percent, based on the results of this closely watched survey, which polls lenders during the first three days of every week.

Many firms regularly track interest rates and come up with slightly different numbers because they survey different lenders at different times of the day or week. But several have reported the upward trend in recent weeks. They attribute it in part to the effects of the holiday season, when demand for buying and refinancing homes dies down and financial markets coast through the end of the year.

“However, this is also a glimpse of what we’re going to see in 2010,” said Greg McBride, a senior financial analyst at Bankrate.com, a personal finance Web site.

The key catalyst for interest rates going forward will be the end of a Federal Reserve program that buys a sizable chunk of mortgage-backed securities issued by firms such as Fannie Mae and Freddie Mac. That program succeeded in immediately pushing mortgage rates well below the 6 percent mark when it was announced last year.

But the Fed has committed to winding down the program by March. The central bank is betting that by gradually tapering its purchases, private buyers of mortgage-backed securities, who have largely been absent from the market, will return and rates won’t rise much.

But Amy Crews Cutts, deputy chief economist at Freddie Mac, said interest rates are bound to rise to 6 percent by the end of 2010 because private buyers will demand a higher rate of return on the securities than the Fed did. Lenders may have to raise the rates they charge to consumers in order to make that happen.

“Extraordinary resources have been put into keeping the rates down and supporting the mortgage markets and it’s hard to imagine that the rates can go much lower than they are,” Crews Cutts said. “Anything we get at or below 5 percent is a gift at this point.”

This week’s Freddie Mac survey found that the 5.05 percent average on 30-year fixed-rate loans (with an average 0.7 point) was up from 4.94 percent the previous week but down from 5.14 percent at the same time last year. The all-time weekly low since the firm started tracking the numbers in 1971 was in the first week of December, when rates fell to 4.71 percent.

Many borrowers have not been able to secure the best rates because they lack the stellar credit scores and hefty down payments that many lenders now demand. Some who have tried to refinance have not been able to qualify because their home prices have plummeted to the point where they now owe more on their mortgages than their homes are worth.

But anyone who can secure a loan should not wait much longer, especially if they are looking to refinance, McBride said. Homeowners are more sensitive to interest rates when they refinance than when they buy a home.

“The difference between 5 percent and 5.5 percent could mean the difference between refinancing or not,” he said.

But the interest rate is less critical to people who want to buy a home, McBride said. In that case, price and affordability should trump interest rates.

The general rule of thumb is that your monthly mortgage payment (property taxes and insurance included) should not exceed 28 percent of gross pay. All your loans combined — mortgage, car, credit card, student debt — should not exceed 36 percent.

“Yes, a higher mortgage rate would steal some buying power, but it doesn’t price buyers out of the market entirely because 6 percent is still pretty low,” McBride said. “If you can’t afford the house with rates at 6 percent, you can’t afford the house.”

Charles D’Alessandro
Fillmore Real Estate
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Brooklyn Real Estate Blog Freddie sees mortgage rates hitting 6% in 2010

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Those with Brooklyn homes for sale are buckling down for the long haul, but exactly how long will that be? I spent a little bit of time roaming the Internet to get the general “feel” from people on the housing market. It turns out that the answer all depends on who you ask…

Housing Predictor

Housing Predictor.com says, yes, the housing market appears to be making a rebound. However, that rebound, says economist, John Hines, is a false front. The government is pushing the rise in sales to make the housing markets look good and increase buyer confidence. Will the market ever get back on track? According to Hines, if Congress can get the lending pipeline going again, we might finally see a bottom around the third quarter of next year.

The Ledger

According to an article at The Ledger, Stephen Blank of the Urban Land Institute isn’t at all optimistic. Blank says there’s no quick fix, and that 2010 will be sobering. While the housing market is being helped by various factors, the foreclosure rate probably isn’t going to drop and lenders aren’t lending. Blank worries that financing may be lacking, even for those wanting to buy. He doesn’t see the market doing much for another year.

CBS Money Watch

The best article I’ve come across so far, however, was written back in June at CBS MoneyWatch. The article says give the market at least seven years to recover. The author doesn’t just quote doom and gloom, however. She has some great points for people with Brooklyn homes for sale. I highly recommend the read, but here is the quote that stuck firmly in my mind:

“If you are a seller, get realistic about what you can get for your house. With so little upside in the foreseeable future, you may be better off to sell, even at a loss, since you can probably get back into a similar house at a lower price and very low interest rates.”

It’s a buyer’s market; the supply of empty homes is much higher than the demand for them. If you have one of the Brooklyn homes for sale and it’s not selling, you may need to change your mindset a little. In this buyer’s market, sellers may just have to bite the bullet.

Ready to buy or sell?  I can help.  Give me a call today at (718) 253-9600 ext.206 or email me at [email protected].

Charles D’Alessandro
Fillmore Real Estate
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Brooklyn Real Estate Blog Keep Your Brooklyn Home Clean the Green Way

Lots of people think about ways to save the environment in a physical manner such as changing light bulbs from incandescent to florescent and recycling, but many drop the ball when it comes to cleaning their Brooklyn home. Keeping your home clean in a way that is healthy to you, your family, and the environment just takes a little extra thought and soon becomes second nature.

Danger, Danger

Get rid of any products under your sink, in your bathroom, or your cleaning closet that have danger cautions.  If they are bad for you, they are probably bad for the environment too, and why have such hazardous materials in your Brooklyn home?

Labels that have cautions such as poison, hazard, and danger on them are not only bad to have around small children, the toxins leak into the air when you use them causing health problems for your family. They also leech into the environment when you use them and are hazardous for the environment.

Re-usable and Natural

Buy mop heads and sponges made from natural materials that are bio-degradable and replenishable. Check for recycled materials labels on paper towels, toilet paper, and other disposable objects so that you know those products are making the best use of production materials.

Conserve

Use as little water as possible when doing dishes by turning off the faucet while you are washing and only using running water when you are ready to rinse. Don’t just think about conservation when cleaning your home. Turn off the faucet while you are brushing your teeth as well for extra savings. Remove your shoes or put a rug by the entry doors of your home to help cut down the need to wash floors.

Bring in the Green

Bring nature into your Brooklyn home in the form of hanging and potted plants. Plants clean the air around you and take in harmful carbon dioxide in the air.

Want top buy a clean, green home?  Let me help.  Contact Charles D’Alessandro of Fillmore Real Estate at (718)253-9600 ext.206 or email me at [email protected].

Charles D’Alessandro
Fillmore Real Estate
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Brooklyn Real Estate Blog Keep Your Brooklyn Home Clean the Green Way

It’s in the news and has been for several months now; financial institutions may be holding back their inventory of Brooklyn foreclosures and national foreclosures.  Why on earth would they do that?

For those of you who are wondering what would cause lenders to hold back on listing Brooklyn foreclosures, here’s a little information that might enlighten:

• April 2009, the San Francisco Chronicle published a news article about the state of foreclosed homes. In the article, Rick Sharga, vice president of RealtyTrac said, “We believe there are in the neighborhood of 600,000 properties nationwide that banks have repossessed but not put on the market.” With an already glutted market, imagine what would happen to real estate if those 600,000 foreclosed properties flooded the market further.

• October 2009, CNN Money.com stated in an article, “Despite concerted government-led and lender-supported efforts to prevent foreclosures, the number of filings hit a record high in the third quarter, according to a report issued Thursday.” According to the report, one in every 136 homes – a staggering 937,840 homes – were in foreclosure.

• Financial institutions know that the foreclosures could cause a severe drop in the average price of housing. Should prices fall farther, faster, lenders would not be able to recoup their losses.

• Some may be holding a few properties back for a “rainy day” – for when the prices start to rise again.

Even though lending institutions are holding back on some of their inventory of Brooklyn foreclosures, there are still some great deals to be found.

If you’d like to find a great deal on a foreclosed home in Brooklyn, I can help. Call me now at 718 253-9600 or email me at [email protected] for more information.

Charles D’Alessandro
Fillmore Real Estate
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Brooklyn Real Estate Blog Keep Your Brooklyn Home Clean the Green Way

Oh, the dreaded/happy DOM question. “How long has this house been up for sale?” If it’s your Brooklyn home for sale we’re talking about, you’re probably wondering about the split “dreaded/happy” bit. For that matter, whether you’re a buyer or a seller, you’re probably asking, “what the heck is ‘DOM’?”

Days On Market

“DOM” is the shortened industry term for Days on Market, used by the multiple listing services (MLS). It’s exactly what it sounds like: the number of days your [city] home for sale has been on the market. This metric covers the time it actually goes on sale to the time the deal is closed.

Why Is DOM Important?

Remember the “dreaded/happy” part at the beginning of this article? As a buyer’s agent, I might gleefully answer, “Fifty days.” I say “gleefully”, because a house that has sat on the market for a long time is a good thing for my client. The seller is probably more eager to sell than a month before, and is most likely willing to work a deal. An eager seller makes a happy buyer in most cases.

On the other hand, as a seller’s agent, I might not be so happy about it, and for the same reason. My seller is now an eager seller. I want to get the best deal for my client, but I know the buyer has the upper hand. It is then up to me to help my client get the home sold without giving away the barn, the pool, the tool shed and the tools.

Already, you may be beginning to understand how the Days on Market metric can affect the sale of your home.

The problem with the DOM metric is that it causes buyers and agents to build false assumptions. If a home has been on the market for an above-average length of time, we start to wonder, “What’s the matter with that listing?” Even though I know there are other reasons for a home to go static and not sell, many people automatically think there’s something wrong.

Although you can’t force a house to sell, you do have control over some of the reasons for an extended DOM metric:

• The home may be overpriced – Nothing is wrong with the property itself; it’s just priced too high.

• Testing the market – Although it’s a big mistake and agents will tell you so, some sellers test the market by throwing a high price on a home they don’t care if they sell – just to see if somebody is foolish enough to take it.

• Sticking to your guns – Often, sellers get fixed on a price and won’t budge, come hell or high water. They figure they can wait around until the market can meet their price, not the other way around.

• Renovations – Sometimes, a home will go on the market in the middle of renovations. The sellers aren’t ready to let the home be seen, so it just sits there.

• Availability – A growing problem is the lack of access to a [city] home for sale. Sadly, agents and FSBOs alike seem to be unavailable when a buyer wants to view the home. Obviously, no viewing means no sale.

Don’t let your DOM get high because of simple mistakes. If you’re serious about selling your home, remember the five reasons above and make sure you aren’t doing them.

If you’re ready to sell your Brooklyn home with a professional who understands how to keep the DOM to a minimum, give me Charles D’Alessandro of Fillmore Real Estate a call today at (718) 253-9600 ext 206 or email me at [email protected].

Shopping for a home isn’t always so easy. After you go to a lender to learn how mush of a mortgage you qualify for then research the neighborhood and maybe school district you would like to live in.Now it’s time to find a Realtor to show you houses

Charles D’Alessandro
Fillmore Real Estate
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Brooklyn Real Estate Blog Keep Your Brooklyn Home Clean the Green Way

Charles D'Alessandro

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