8 Ways to Lose a Home to Foreclosure

No matter how many good intentions potential homeowners have, it is possible that they can set themselves up to lose a home to foreclosure. After all, good intentions are not guarantees. It’s important to avoid each of the following scenarios if homeowners intend to keep their homes out of foreclosure. This is an active process, not just wishful thinking. Therefore, potential homeowners should be preparing the stage for successful homeownership and not just waiting for it to happen. The following points touch upon some of the many ways that homeowners lose their homes to foreclosure.



Selection of a Real Estate Agent
The selection of a real estate agent is critical. Prospective homeowners need to select an agent who has the time and energy to give them while searching for a home. Inexperienced agents who are just getting started might work harder to find you a home and get a sale. Busy agents might not have enough time to show you what you want to see. On the other hand, established real estate agents will be aware of many details that newer agents might not. If you already understand or have access to information about buying a home, go with the agent who can give you his undivided attention and who is willing to find the answers to your questions.

Failing to Familiarize the Details
It is important no matter what the purchase price of the home is to fully understand every detail surrounding the purchase. If you are a first-time home buyer, then ask lots of questions. It’s important to talk to other homeowners among family and friends and pick up some pointers for the purchase. Ask the real estate agent pertinent questions about each of the properties that you are considering. Find out how much the utilities are and where the closest stores, schools, and garages are. Realize that in addition to the monthly payment due to the mortgage, there will be an allotment for property taxes and homeowner’s insurance.

Not Checking Out the Neighborhood
All too often, prospective home buyers only look at the neighborhood surrounding the house on their way to look at the home. It is important to drive around the neighborhood in order to see what it is like. Take a drive at different times of the day and night in order to get a clear picture as to the potential crime element, the number of homes on the market, and potential changes in the neighborhood that could lower the value of the home once you purchase it. Look for the signs that will tell you whether or not the neighborhood is a stable and safe one.


Not Having the Home Inspected
In order to avoid excessive repairs once you move in, you should hire a home inspector and have the house thoroughly gone over. A qualified home inspector will be able to see problems that most prospective homeowners don’t readily see. While minor problems won’t be a reason to worry, major problems should be of concern. In many cases, the prospective seller might be enticed into lowering the purchase price in order to allow the homeowner to use the savings for repairs. Some of these repairs might be requires by law prior to the sale of the home. In fact, if the home does not meet up to the building code for the area, the new homeowner could be assessed certain costly fees until it does meet up to code.


Avoiding Traditional Mortgages
Nontraditional mortgages tend to get homeowners into financial trouble when they don’t fully understand the terms. Home buyers would do best to review the terms that apply to mortgages in order to get a better idea of what is available. All too often, nontraditional mortgages such as interest only, balloon, and ARMs are offered as a way to find lower monthly payments. However, it might be more prudent to obtain a traditional fixed rate mortgage that provides a steady monthly mortgage payment with no surprises.


Not Purchasing an Affordable Home
While it might be tempting to purchase the largest, most extravagant house on the block, it isn’t a wise idea. Larger homes are not only more expensive to purchase, but also, they are more expensive to maintain. Plus, the property taxes will be higher on such properties. Prospective homeowners should purchase a home that fits their needs. They can always trade up later should these needs change any. If a prospective homeowner purchase an extravagant home, eventually the cost of owning it is going to catch up to their finances and plunge them straight into debt and on the path to foreclosure.

Not Reserving Money for Emergencies
Avoid placing all of your savings as the down payment on the home. If you do so, you won’t have any flexible funds for those emergencies that are bound to crop up. Even if you obtain a home inspection, you are more likely than not going to find something that needs a bit of repair. While it is important to place a large sum of money down on the home in order to decrease the size of the mortgage that you have to take out, you should reserve some cash. Not reserving any funds for emergencies is one of the quickest ways to start amassing debt that erodes your financial security and places you at risk for a foreclosure proceeding.

Not Staying Out of Debt
Staying out of debt once you purchase the home is critical to keeping it out of foreclosure. Resist the urge to replace the carpeting, paneling, etc all at one time. In fact, avoid using the credit card at all unless it is for necessities. Not staying out of debt will only make it harder to meet those monthly mortgage payments and the rising cost of living. This isn’t to say that the homeowner cannot replace certain things about the home, just to do so in moderation. Debt free could mean foreclosure free.


http://articlet.com/article4656.html

Housing MarketTo Dip Again Mid Spring 2010

In an article written by CNBC Real Estate Reporter Diana Olick, Predictions 2010: Real Estate, it is predicted that the residential housing market will dip again in mid-2010 before settling into a recover in the back half of the year.This is a result of the end of government programs that have been artificially keeping the housing (home buyer tax credit and Fed’s Fannie Freddie Mortgage Purchase Program) market afloat and will result in a slowdown in demand right at the height of the spring season. Foreclosures will also be on the rise and push more inventories onto the market, putting additional downward pressure on home prices.

It is also a general consensus by those in the industry that inventory will be a lot higher than the original speculation. What we call shadow inventory should be seen not just as homes the banks are holding on to or that are still in the foreclosure process, but homes where borrowers have stopped making payments and have not heard from the banks.

This will also be the end of historic lows on the 30-year fixed. It is noted that unless the government decides to extend its Fannie-Freddie purchase program or do something else to juice the credit markets, mortgage rates will rise steadily, probably leveling off somewhere around 6 percent.

http://www.cnbc.com/id/34110130/Predictions_2010_Real_Estate 

A dark “Jot Cloud” is silently hovering above many unsuspecting homeowners

A dark “Jot Cloud” is silently hovering above many unsuspecting homeowners who are defaulting on their mortgages today, which could come back to haunt them years from now to discover they still owe thousands of dollars on their short sale or foreclosed home, and a collection agency is coming after them to make it happen! What does this mean?


In the background, lenders have been quietly selling second mortgages and home equity lines left unpaid after foreclosures and short sales. According to Sylvia Alayon, a vice president with New York-based Consumer Mortgage Audit Center, “The only relief a consumer will have is entering into a debt negotiation plan or filing for bankruptcy.” The firm provides mortgage analysis to lenders, advocacy groups and attorneys.


If any of you have experienced being hounded by a credit collection agency, you know how they play the game. The buyers: collection agencies, which in many states have years to make a claim. If they win court judgments, these collectors could have years to pursue borrowers with repayment plans, and even garnish their wages. This practice by the mortgage industry certainly suggests an ominous, looming echo of today’s real estate meltdown. This will renew financial stress on tens of thousands of local consumers and could dampen economic recovery as debt collectors seek at least partial repayment of millions of dollars in unpaid home loans.


There will be a lot of unhappy people when this situation hits. As is known, history always repeats itself and so this is nothing new as this happened in the 90s. Just when you think you have done everything you can to do the right thing and eventually get back on your feet, your making money, and the economy has rebounded and is good, they hit you with the ax.
Alayon said most people are so stressed out and exhausted by trying to save their homes today that they are unaware that they could face another hit later. And many who are losing their homes don’t get the advice necessary to prevent future fallout, say nonprofit loan counselors.


Tens of thousands of people in California have this hanging over their heads and don’t even know it according to Scot Thomson, principal at for-profit Mortgage Resolution Services in Carmichael, CA. He fears a new wave of bankruptcies might flatten people just starting to recover from losing their homes.


An entire industry is gearing up to buy their debt at deep discounts and collect what they can, Alayons aid. “It is a big business and investors are coming out of the woodwork. It’s a very lucrative business,” she said. Real estate insiders and financial players know it as “scratch and dent.”


Homeowners should seek advice and nonprofit counselors can help. Although real estate agents who are certified with the SFR endorsement for short sale and foreclosure resource, they are not equipped to handle the repercussions. Realtors are set up to make the sale and deal with all the contract legalities within the real estate sales industry. However, it is their duty to inform their clients of the possible repercussions that could have an impact on their clients, years down the road so they can take the necessary steps to contact the professionals in the field of consumer credit that can assist them.


Today the government is already moving to limit potential damage to millions of home owners who are now struggling with home loans. The new Obama short sale program aims to prevent banks that hold second-lien loans from pursuing collections from homeowners after the short sale. This program goes into effect April 5, 2010 and works as follows: Sellers will receive notice that their servicer has steered part of the sales proceeds to secondary lien holders “in exchange for release and full satisfaction of their liens.” This release applies only to short sales done through the administration’s Home Affordable Foreclosure Alternatives program.


As a Realtor, and a short sale and Foreclosure resource (SFR), I know that nothing in life is free. If you make a contractual agreement, somewhere, sometime down the line, there will be a settlement agreement and meeting of the minds. So I suggest that you explore all your options and protect yourself early on and be prepared for the consequences that will follow from the decision you make today. Get legal counsel at the beginning signs of financial troubles that will affect you for years to come. Contact a non-profit debt counseling service and an attorney for free advice at the onset.

Excerpts based on article distributed by McClatchy-Tribune Information Services. The Sacramento Bee (CA)

HOMEOWERS, Credit Scores Can Drop in Loan Modification Program

If you are a homeowner and making your payments on time but are on the verge of default, and if you are considering the Obama’s administration’s loan modification program you need to know that enrolling in the program can reduce your credit score as much as 100 points.  Why is this important? It will make it harder for you to get a loan and can present a problem when applying for a new job.

The question has been asked by many as to why should people’s credit be hurt even worse when they are trying to do the right thing? This is what is making homeowners around the county angry when a program that is supposedly designed to help, carries such a penalty.

However, foreclosure is worse on your credit than the loan modification, as a homeowner’s credit can be lowered as much as 150 points or more on a scale of 300 to 850 and is far more severe in a foreclosure situation, which tatters your credit for years. This is due to the results of many months of missed payments and the foreclosure itself.

 If a home owner enrolls in the Obama administrations $75 billion “Making Home Affordable” program, you will enter a trial period in which you make at least three payments.  During this time your credit score will take a dive during the trial phase.  This occurs when the mortgage company notifies the three credit bureaus – Experian, Equifax, and TransUnion. If you fell behind prior to this on your loan, the damage was already done.

If you as a homeowner are having financial troubles but managing to pay your bills, a request for a loan modification is the first sign of difficulty. This results in a sharp drop in your credit score and the credit rating industry defends their reasoning saying that people who sign up for the loan modification would not be asking for help unless they were having severe money troubles and noted that they wouldn’t be going into the program if they were not in a financial bind and as a result, other lenders need to be made aware of that.

Since the Obama loan modification program was launched last year, 170,000 homeowners had completed the process as of February, 2010. Hundreds of thousands more are still in limbo. The consequences of the program have been plagued with problems and disappointing results and the credit score issues are a problematic consequence of the program.

Now here is another twist to the already tangled mess. The impact is far worse for borrowers who enroll in the Obama program and are then ruled ineligible. The other side of the coin is, if homeowners manage to get accepted into the Obama program and have their loans permanently modified, lenders update the credit bureaus. The new status neither hurts nor helps the borrower’s credit score.

It takes time to see credit scores increase. “The best way to build credit back is to continue to pay bills as agreed, to use credit wisely,” said Tom Quinn, vice president of scoring solutions at Fair Issac Corp., which designed the well-known FICO score system. “As time goes on, the score gradually increases.”

So be prepared to take a hit on your credit score and prepare for the change. Continue with your payments and eventually your credit score will start to repair itself as creditors report your payments to the credit bureau agencies.  As with everything in the mix, it took a period of time to get where you are now from various circumstances that put you behind with paying your bills on time and it will take time to rebuild.

Based on article written by Alan Zibel, AP Real Estate Writer, On Friday March 19, 2010, 11:25 am EDT

New Guidelines Home Affordable Foreclosure Alternatives Program (HAFA),

Home Affordable Modification Program: Overview

The Home Affordable Modification Program is designed to help as many as 3 to 4 million financially struggling homeowners avoid foreclosure by modifying loans to a level that is affordable for borrowers now and sustainable over the long term. The program provides clear and consistent loan modification guidelines that the entire mortgage industry can use.

Borrower eligibility is based on meeting specific criteria To qualify under the new guidelines:

* The property must be the homeowner’s principal residence.
* The homeowner is delinquent on the mortgage or default looks likely. Homeowner is insolvent.
* The loan was made before Jan. 1 this year and is less than $729,750
* The borrowers’ total monthly mortgage payment exceeds 31 percent of their before-tax income.

After determining a borrower's eligibility, a servicer will take a series of steps to adjust the monthly mortgage payment to 31% of a borrower's total pretax monthly income:

• First, reduce the interest rate to as low as 2%,
• Next, if necessary, extend the loan term to 40 years,
• Finally, if necessary, forbear (defer) a portion of the principal until the loan is paid off and waive interest on the deferred amount.

Note: Servicers may elect to forgive principal under HAMP on a stand alone basis or before any modification step in order to achieve the target monthly mortgage payment.

If you have further questions or need any of the following documentation: 

• Request for Modification and Affidavit (RMA)
• Hardship Affidavit
• Trial Period Plan Notice
• IRS 4506T-EZ
• IRS 4506T

This information can be found on https://www.hmpadmin.com/portal/programs/hamp.html

Attorney answers Short Sale Questions

This is an excellent link that explains about the HAFA and short sale program going into effect April 5th.

http://www.hafaprogram.com/?gclid=CJHhvPr8wKACFQ8bawodcmDFaAN

Utah fights Feds Over Land

This is a must read http://connect2utah.com/content/fulltext/?cid=80221

THE KEY TO YOUR NEW HOME...

On February 26th, 2010, the Salt Lake Board of REALTORS® reports that the sales of existing homes and condominiums climbed 16% in January. Comparing homes and condos sold in January of 2009 of 444 to 514 homes and condos sold in January 2010. This also reflects the fourth consecutive month of increasing sales on a year-over-year basis.

Bill Heiner, President of the Salt Lake Board of Realtors® stated that “Since October we have seen double-digit percent increases in sales in Salt Lake County.” Heiner also went on to say that that “the federal tax credit and falling home prices have helped to restore affordability to the market.” According to the SLB of Realtor’s sales report, the median price of all homes sold in January dropped to $213,550, down 7 percent compared to a median price of $230,500 in January of 2009.

There are still a great number of existing homes and condos for sale in Salt Lake County, about 7,300, based on sales trends over the past three months, the board says those listings represent a 2.45 months’ supply of inventory. The median number of days o the market for homes that sold in January was 78 days, down from the 96-days a year earlier. So things are definitely looking up and are good here in Utah.

Home Buyers Tax Credit

The Extended Home Buyers Tax Credit offers current homeowners and first-time home buyers alike an incredible tax-saving opportunity when they buy a home through April 30, 2010. First time buyers, who haven't owned a primary residence in the past three years, are eligible for a tax credit of 10 percent of a home's purchase price, up to a maximum of $8,000. Current homeowners are also eligible for a tax credit of their own. Homeowners who have lived in their primary residence for 5 consecutive years of the past 8 are eligible for a tax credit of 10% of a home's purchase price, up to maximum of $6,500.

The following conditions apply:

• The tax credit is only awarded on homes purchased for $800,000, or less
• Full tax credit is available to buyers earning up to $125,000 a year, or $225,000 for married couples filing jointly
• Partial tax credit is available to buyers earning between $125,000 to $145,000, or for married couples earning between $225,000 to $245,000.
• Under the rules, as long as a written binding purchase contract is in effect on April 30, 2010, the buyer has until July 1, 2010 to close.

The tax credit is a dollar-for-dollar reduction in the buyers tax liability, and does not have to be paid back as long as the buyer remains in their home for three years or more. This is a once-in-a-lifetime offer to have Uncle Sam help you buy a house. Don't let this opportunity pass you by!

First Time Home Buyers 8K is going to pass you buy if you don't get out and buy a home now!

Whoohoo! had another offer accepted today and this client is so happy and jumping for joy in being a first time home buyer and will make the deadline for the 8K tax incentive.  Three days from start to finish! Come one those of you sitting on fence, time is very short - 52 days left as of today to be under contract!  Let's get you qualified and find you a home. This opportunity will not come around again.

The Clock is Ticking.

 
           

Home Equity Values to Drop another 3-5% in 2010

According to the Salt Lake Board Executive Committee article sent to Realtors in Utah, it is noted that “More Americans and Utahns are finding they owe more on their mortgages than what their homes are worth,” according to a new report by First American CoreLogic.

The article goes on to say that in Utah 21.1 percent of all residential mortgages are now considered in a negative equity position as compared to 24% of all U.S. residential properties.

It seems that the negativity continues to be heaviest in five states: Nevada (70%); Arizona (51%); Florida (48%); Michigan (39%); and California (35%).

All of this negativity across the nation is a direct result of the pre-foreclosure activity, according to this report. “Once negative equity exceeds 25%, or the mortgage balance is $70,000 higher than the current property values, owners begin to default with the same propensity as investors.”

If you are thinking about selling your home it is very important that the listing price right. In Utah and according to a report commissioned by the Salt Lake Board, home prices in Salt Lake County will continue to fall another 3-5 percent this year.