My New Blog

As promised the US Dept of Treasury provided details on its life preserver program for mortgages.  The guidelines address two programs for struggling homeowners: a Refinance program and a Modification program.  No word yet on the previously mentioned/threatened provision which would allow bankruptcy judges the power to modify those loans--but DC will offer more on that later.  For now, its two options: refinance or modify.

Refinance.  This is for Freddie or Fannie owned loans only.  You can contact your servicer (whomever you send your mortgage payment to each month) to find out if you have a Freddie of Fannie loan.  If so, refinance may be available up to 105% of your home's value. Borrowers have until 2010 to apply.  If you do not have a Freddie or Fannie loan, this is not an option for you. For many California homeowners, this program will not be viable option because the previous limits for conforming loans will mean you do not have a Freddie or Fannie loan.   

Modify.  This is a much more complicated program and I will post a pdf document with the guidelines on my website.  Overly simplified (and assuming I read it right) if the lender will reduce your loan to as low as 38% of your gross monthly income (38% debt to income ratio), they are paid $1K per loan modified.  If they further reduce the loan to a ratio of as low as 31%, then the lender is reimbursed by the program for up to 1/2 of the cost (of reducing from 38 to 31%).  The modification is for up to 5 years or until the loan is paid off.  The borrower is paid up to $1,000 in principal forgiveness each year that they are current in the program, up to 5 years.  The lender is paid up to $1,000 per year for up to 3 years for continued success. 

How do they get your payment down?  First by interest rate reduction (with a floor/limit interest rate of 2%) during those 5 years.  If that doesn't reduce your payment to get you in that 38% window, then they can extend the term to 40 years.  If that doesn't get you to the target, the lender can forebear principal (means you don't pay interest on it and you do not owe it until the loan is matured or you sell the property.  Its not forgiving the principal, its forebearing it until a later time).

To be eligible, your loan balance can not be greater than $729,750 for a single family residence, the home MUST be your primary residence and you must live there.  Borrowers must provide access to their most recent tax returns and two most recent pay stubs and must sign an affidavit of hardship based on a change in the borrowers circumstances (loss of income, high interest rate loan, etc).  The program is only available for loans made before 1/1/2009.

That's it for now.  If you have any real estate questions, do not hesitate to call or email. 

 Melinda johnsonlaw@sbcglobal.net (714) 863-5485

In addition to the federal tax benefits of up to $8,000 currently offered to first time home buyers, there is a new incentive in town.  Today California Association of Realtors announced a new program for first time home buyers who may be concerned about an unstable job market.  This program provides mortgage protection in the event of a homeowner's subsequent job loss.  The program pays up to $1500 of the homeowner's mortgage per month, for up to six months, following job loss.  In order to be eligible, the homeowner must be an employee--its not available for the self employed or military personnel. The program applies to first time home buyers who enter in to escrow on or after April 2, 2009 and participants must submit an application. For more info visit the California Association of Realtors website at  www.car.org/aboutus/hafmainpage.

Happy home shopping! 

If you have any questions about this program or any other real estate related questions, please do not hesitate to ask.  Melinda

Most people I talk to believe foreclosures are the better bargain. The truth is, you may get a good deal on any transaction (foreclosure, short sale or traditional sale). It simply depends on the situation. If Mr. & Mrs. Homeowner just got offered a job out of town and are eager to move, you may get the best deal on a traditional sale. If the bank is overloaded with properties in a particular area, you may get the best deal on a short sale—with the bank fearful of taking on one more property in that area.

So have I wimped out on the question? Not at all. Given the general rule (you can get a great deal on any transaction), in my experience you are most likely to get the best deal on a short sale. If you can muster the patience (3 – 5 months is not atypical) you just might secure an excellent deal both in terms of pricing, information and risk. So while foreclosures may be reputed to be the best deals, short sales may be where the basement bargains really exist.

While foreclosures have their advantages (quick answer, sure thing), short sales have their advantages, too. Often short sales have a seller who is still around and can tell you the history of the property. You will be told if the bathroom flooded last spring or if the neighbor is a nuisance. In a foreclosure, the previous homeowner has the left the property and you have limited information. Less information (less disclosures) means you take on a bit more risk with a foreclosure.

So my advice? Consider all types of sales. Know the risks associated with foreclosures, the extended time involved in short sales and the benefits of a traditional sale and then shop for the best deal you can get!

If you have any real estate questions, please do not hesitate to call or email me.

Melinda (714) 863-5485 / johnsonlaw@sbcglobal.net