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Daniel Choi's Blog

By Daniel Choi | Agent in Los Angeles, CA
  • More Deals are facing difficulties despite emerging sign of recovery.

    Posted Under: Market Conditions, Home Buying, Financing  |  March 30, 2012 6:41 AM  |  208 views  |  No comments

    The nation’s housing: More deals hit a roadblock

    By Ken Harney

    WASHINGTON — What’s behind the unusually high rate of contract cancellations and settlement delays in the real estate market? With signs of recovery emerging in many parts of the country, shouldn’t deals be zipping along with minimal complications?

    Apparently not. Nearly one-third of realty agents in a new national survey reported experiencing contract cancellations — purchases crumbling before going to closing — in February. That’s up dramatically from a similar poll 12 months earlier, when just 9 percent of agents reported cancellations. Another 18 percent reported delays in scheduled closings in the latest study, which involved approximately 3,000 agents surveyed by the National Association of Realtors.

    The high reported cancellation rate (31 percent) doesn’t mean that nearly one of every three of all signed contracts is falling apart, according to the association, but rather that more than triple the number of agents and their clients are running into deal-endangering problems compared with 2011. If you are a potential buyer or seller in an otherwise improving marketplace, you need to be aware of the issues that are hampering sales, and be prepared in advance to deal with some of the most prominent.

    Tops on the list:

    Appraisals below contract. You may assume the true market value of a house is what a seller and buyer agree to in a binding contract, but it’s not. The appraiser hired by the bank may come up with a different opinion of value — significantly below what was agreed between the parties — and this is occurring with far greater frequency today than in previous years. Part of the problem is the excessive use of price-depressed foreclosure sales chosen as “comparables” to value non-distressed houses under pending contracts. But some appraisers are inexperienced, unfamiliar with local pricing trends, and go far beyond their normal duties.

    For example, Risa Bell, an agent for national broker Redfin in Boston, recently represented purchasers of a bank-owned property being sold “as is.” An appraiser for the lender not only detailed a long list of needed repairs to the house, but said the deal could only proceed if the prospective buyers spent thousands of dollars fixing up the house before — not after — closing. Along the way, frozen pipes in the unheated house broke and a contractor hired to do repairs filed a mechanic’s lien requiring payment before the title could be transferred. All of this combined to kill the financing and torpedo the closing, but the buyers ultimately were approved by a second lender using a different appraiser, who made no such demands for repairs in advance.

    Ultraconservative underwriting and documentation requirements. It’s no longer just towering credit score minimums, hefty down payments and mind-bending paperwork submissions that get mortgage applicants turned down. “It’s a lot of other stuff, too,” said Melissa Zavala, broker and owner of Broadpoint Properties in Escondido, Calif. Increasingly she’s been running into regulatory hoops and restrictive underwriting rules at FHA, Fannie Mae and Freddie Mac that knock signed contracts off the tracks or at least delay them for months.

    For instance, FHA’s toughened rules on condominium associations — limits on the percentage of existing residents in the entire project who are delinquent on their condo dues, plus controversial requirements for “recertifications” of condominium developments that many condo boards find costly and burdensome in terms of legal liability — are rendering individual units in those communities difficult to get financed, no matter how well qualified the purchasers. Little-publicized recent changes in FHA rules on loan applicants who have outstanding collection accounts buried away in their credit files “can force you to take three to four months to clean up” through mandatory repayment plans, Zavala said in an interview. By that point the contract may well have gone bust.

    Poor service by lender staff. Agents in the survey identified “lack of customer service” and “generally bad attitudes” as contributing factors to delays and some contract failures. But Zavala said realty agents themselves need to be on the ball when loan processing deadlines begin to slip or communication breaks down with lenders. “Agents can be part of the problems” — and the solutions — when it comes to moving the financing along, she said.

    Bottom line: If you seriously want to go to closing on a house you’re buying or selling, make sure you know all the key rules and requirements up front, then stay on top of the lending, escrow, title and real estate professionals assigned to your transaction.

    And don’t give up if your deal runs into complications. There are more of them out there than usual.

    Ÿ Write to Ken Harney at P.O. Box 15281, Chevy Chase, MD 20815, or via email at kenharney@earthlink.net.

    © 2012, Washington Post Writers Group

  • HARP Refi changes to reach more underwater borrowers

    The Federal Housing Finance Agency announced new changes to the Home Affordable Refinance Program that should help millions of underwater Fannie Mae and Freddie Mac mortgage borrowers refinance into a more affordable rate. Only borrowers who are current on their mortgage bills are eligible.

    The basic eligibility requirements for an enhanced HARP loan are as follows:

    • Existing mortgage loan must be owned or guaranteed by Fannie Mae or Freddie Mac.  To check whether a borrower has a Fannie Mae or Freddie Mac loan, go to http://www.makinghomeaffordable.gov/get-assistance/loan-look-up/Pages/default.aspx.
    • Existing mortgage loan must have been sold to Fannie Mae or Freddie Mac before June 1, 2009.
    • Existing mortgage loan cannot have been refinanced under HARP previously (except for Fannie Mae loans refinanced between March and May 2009).
    • Current loan-to-value (LTV) ratio must be more than 80%.
    • Existing mortgage loan must be current, with no late payments in the past six months, and no more than one late payment in the past 12 months.

    More information is available from FHFA at http://www.fhfa.gov/webfiles/22721/HARP_release_102411_Final.pdf.

     

  • Waiting Periods after Foreclosure/BK/Short sale to obtain new loans

    Posted Under: Home Buying in Los Angeles County, Financing in Los Angeles County, Foreclosure in Los Angeles County  |  September 21, 2011 10:37 AM  |  253 views  |  No comments

    Quick Guide for Waiting Periods

    This guide will provide you with the required wait times information for new loans after concluding short sales, foreclosures, and bankruptcies.

    Conventional Loans:

    * Chapter 7 BK - 4 year waiting period from the discharge/dismissal date.
    *Chapter 13 BK - 2 year waiting period from the discharge date or 4 years from the dismissal date.
    *Multiple bankruptcies - If there are multiple bankruptcies within a 7 year period, the waiting period is 5 years from the most recent discharge/dismissal date.
    *Foreclosure - 7 year waiting period from the completion date.
    *Deed-In-Lieu /Short sale - Minimum 2 year waiting period.


    FHA/VA LOANS:

    *Chapter 7 BK - 2 year waiting period from the discharge/dismissal date.
    *Chapter 13 BK - 1 year and the court must grant permission to the borrower to enter into a mortgage
      transaction. Document that the borrower's current situation is not likely to recur.
    * Foreclosure/Short sale/DIL - 3 year waiting period.
    * VA Loans Only - 2 year waiting period for Foreclosures.

    Please remember that banks will require higher LTV ratio when making a new loan after completing the waiting time.  For example, Fannie Mae requires 80 % LTV after 2 year wait time.
 
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