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Ellie Kravets' Blog

By Ellie Kravets, Realtor, ABR | Agent in San Francisco, CA
  • Fannie, Freddie to Allow Walkaways in Some Cases

    Posted Under: Market Conditions in San Francisco, Financing in San Francisco, Foreclosure in San Francisco  |  February 1, 2013 8:01 PM  |  465 views  |  No comments

    Underwater borrowers who have stayed current with their mortgage payments now may be able to give up their properties and get their debts erased, according to new guidelines issued by mortgage giants Fannie Mae and Freddie Mac.

    Non-delinquent borrowers who have Fannie and Freddie-backed loans and who can document a hardship, such as an illness, job change, or other situation that requires they must move can apply for a deed-in-lieu transaction. Eligible borrowers also must have a 55 percent debt-to-income ratio. Servicers will be required to confirm that the property has been left in good condition.

    Borrowers who are eligible will have the debt remaining between the property’s value and size of mortgage erased.

    “The goal is to make sure people who have suffered a hardship have the appropriate options to prevent foreclosure,” says Andrew Wilson, spokesman for Fannie Mae.

    Borrowers may still be required some repayment, however, if the borrower has the means to do so. “Home owners applying for deed-in-lieu transactions may be asked to make cash contributions of up to 20 percent of their financial reserves, excluding retirement accounts,” Bloomberg reports about the guidelines. “Or, they may be asked to sign a promissory note for future no-interest repayments. The amount and terms can be negotiated.”

    Fannie and Freddie’s new eligibility for deed-in-lieu of transactions has been met with some criticism, particularly at a time with the government-sponsored enterprises are still underwater themselves from steep losses the last few years. The GSE’s have, to date, required $190 billion of taxpayer money since 2008.

    “It’s an extraordinarily generous approach for companies still in debt to American taxpayers,” Phillip Swagel, a professor at the University of Maryland’s School of Public Policy, told Bloomberg. “We’re giving people an incentive to walk away, right when the housing market is starting to right itself.”

    But some argue that past programs tended to penalize borrowers on the brink of foreclosure who kept making their payments, says Julia Gordon, director of housing finance and policy at the Center for American Progress. Mortgage servicers in some cases were even advising borrowers to stop making their mortgage payment so that they could qualify for more assistance.

    “Fannie and Freddie are finally recognizing that some people are stuck in their homes,” Gordon told Bloomberg. “There are a lot of families who need to move who can’t do it if they’re going to have debt hanging over their heads. There’s no winner when someone is forced to default on their mortgage -- not the investor, not the home owner, and certainly not the neighborhood.”

    Source: “Fannie To Allow Walkaways by On-Time Borrowers: Mortgages,” Bloomberg (Jan. 28, 2013)

  • Buying A Fixer-Upper Home For Your First Home

    Posted Under: Market Conditions in San Francisco, Home Buying in San Francisco, Foreclosure in San Francisco  |  January 4, 2013 11:47 AM  |  377 views  |  No comments
    For many people who have been sitting on the fence waiting and wondering if the housing market is rebounding, the signs are showing an improved chance to get into real estate while prices and loan rates are still low.

    However, many of the homes on the market need some work and some need a lot of care. How do you know what to look for in a fixer-upper? If you're a first-time home buyer, purchasing a fixer-upper can be a good option because the price will be lower. But fixer-upper homes come with flaws and some can be huge.

    Why a fixer-upper? In some areas, the housing market is very low on inventory, especially new and/or homes in top shape. Foreclosures and short sales, though, can offer better prices if you can deal with the home's maintenance needs.

    Many first-time home buyers don't take into consideration the extra expenses needed to maintain a home. They carefully calculate the mortgage, downpayment, homeowners' association dues, property taxes, and other hard costs but they neglect to factor in the everyday repairs and maintenance for the property. Things like a new water heater, stove, microwave, central heating/air conditioning systems, washer/dryer and dishwasher repairs and even plumbing and roof repairs. These items might be new or relatively new when you move in but, in the not-too-distant future, they'll need repairing or replacing. When they do, the added costs can put a strain on homeowners' monthly budget.

    With this in mind, buying a fixer-upper for your first home can be a great way to get into the real estate market at a good price. However, it's essential that you completely understand the home's necessary repairs before you buy. Things to consider include how much you'll save by buying a fixer-upper versus what you'll need to spend to make it livable, how old the home is, who will do the repairs, and how much patience you have for this project.

    Real estate is also always about location for obvious reasons. You can have a fabulous home in a horrible location and then later nobody wants it. Or you can have an okay or fixer-upper home in an ideal location, and suddenly it's worth millions - easier to fix up a home than it is to change the entire surrounding location. So, when shopping for a fixer-upper, be very careful to survey the neighborhood and make sure it's in a location that is worth spending your time and money to fix it up.

    You need to carefully study the cost and savings by buying a fixer-upper. People buy these types of home to save money but if you end up under-estimating the home's cost to renovate it, you'll be either short on cash or very upset. Get a home inspection to ensure you understand the basic repairs and maintenance needs. If there are problems with the home, make sure you consult with experts to give you an idea about how much the repairs will likely cost. Also, be sure to consider the age of the home. If a home is very old, it can certainly have some charm t but it also can have a lot of nightmare issues that aren't always easy to spot. This can be things like plumbing or electric wiring issues, lack of insulation, structural or foundation problems... the list goes on. You don't have to steer clear of an older home but do your homework before you buy.

    Part of doing your homework is finding an expert team to help with the repairs. If you're a handyman, that's fine, but there will likely be times when you'll need to turn to other experts for help and advice. Start gathering these resource contacts now before you buy so that you can have them available to look at the fixer-upper homes you're considering buying.
    Finally, be short on expecting super fast progress and long on patience. Remodeling and even just making minor repairs can take longer than you think. Don't get impatient. Remember you chose a fixer-upper to save money. Taking the time to properly care for it will ensure that you have a comfortable home.

    by Phoebe Chongchua

  • FHA OKs 2-Year Extension to ‘Anti-Flipping’ Waiver

    Posted Under: Home Buying in San Francisco, Home Selling in San Francisco, Foreclosure in San Francisco  |  December 4, 2012 7:39 PM  |  884 views  |  2 comments

    The Federal Housing Administration is extending its 90-day “anti-flipping” waiver through 2014—which could bode well for single-family investors, rehabbers, and buyers seeking low down payment financing, Inman News reports.

    The waiver allows buyers to purchase homes that have already been sold in less than 90 days.

    The purpose of the two-year extension to the waiver is to increase “the availability of affordable homes for first-time and other purchasers, helping stabilize real estate prizes as well as neighborhoods and communities where foreclosure activity has been high,” says Carol J. Galante, acting FHA commissioner about the extension.

    In 2003, FHA issued an anti-flipping waiver to stop a high number of home flipping, which was being blamed on inflating home values. The FHA rule prevented FHA-backed loans from being used to purchase homes that had been owned by a seller for less than 90 days. In 2010, the U.S. Department of Housing and Urban Development decided to reconsider that 90-day limit when foreclosures started to cause blight in neighborhoods and put downward pressure on property values.

    The latest two-year extension to the waiver includes several requirements, such as the property can’t have a pattern of previous flips during the 12 months before the transaction. Also, if the property being resold is more than 20 percent higher than what the seller paid for it, the seller must produce documentation showing renovations and repairs made to justify the sales price. Inspections are required when price jumps are higher than 20 percent too.
    Source: “FHA Says Flip Away -- Within Limits,” Inman News (Dec. 3, 2012)

  • Nondelinquent Borrowers Soon to Be Eligible for Short Sales

    Posted Under: Home Selling in San Francisco, Foreclosure in San Francisco, Credit Score in San Francisco  |  October 24, 2012 7:12 PM  |  560 views  |  No comments

    Mortgage giants Fannie Mae and Freddie Mac have issued new rules, which will take effect Nov. 1, that will allow short sales for underwater borrowers who have never missed a mortgage payment. Previously, Fannie and Freddie allowed only home owners who had missed payments to qualify for a short sale.

    Eligible borrowers under the new rules will need to show a hardship to qualify for a short sale, however. Hardships may include unemployment or a death of a spouse.

    Inman News points out one potential flaw to the new rule, however: The nondelinquent home owners who undergo a short sale will likely take just as big a hit to their credit score than if they had missed loan payments and gone into a foreclosure.

    “Under current national credit reporting practices, those nondelinquent borrowers are likely to be treated the same for credit scoring purposes as severely delinquent owners who go to foreclosure after months of nonpayment, or who simply toss back the house keys and walk away in strategic defaults,” writes Ken Harney for Inman News.

    Credit agencies use no special coding to indicate that a short sale was without delinquency. Therefore, home owners could see their credit scores drop 150 points or more after the short sale.

    However, officials at the Federal Housing Finance Agency, which oversees Fannie and Freddie, told Inman News they are “in discussions with the credit industry” to explore ways to fix the credit score
    problem for those who haven’t missed a payment but undergo a short sale.

    Source: “Damage to Credit Scores Could Trip Up New Fannie, Freddie Short Sale Program,” Inman News (Oct. 23, 2012)

  • $26 Billion Deal Could Offer Relief to Home Owners

    Posted Under: Market Conditions in San Francisco, Financing in San Francisco, Foreclosure in San Francisco  |  February 9, 2012 12:30 PM  |  623 views  |  No comments

    After months of tense negotiations, the nation’s five largest banks and state and government officials have agreed to a $26 billion settlement aimed at holding banks accountable for the mishandling of some foreclosures. 

    The settlement is expected to help 1 million home owners, by having lenders reduce their mortgage debt or refinance into lower mortgage rates to reduce costs of their monthly payments. Also, about 750,000 people who lost their homes to foreclosure from September 2008 to the end of 2011 are expected to receive checks for about $2,000. The aid from the settlement will be distributed over the next three years, The New York Times reports. 

    “I wouldn’t say it’s a panacea for the housing industry but it is good for the banks to get this behind them,” Jason Goldberg, an analyst with Barclays, told The New York Times about the settlement.

    Details of the settlement still need to be finalized, including how many states will participate. Also, federal officials say the final figure could move upwards to $39 billion. Mortgages owned by Fannie Mae and Freddie Mac will not be part of the deal. 

    The banks involved in the settlement are Bank of America, JPMorgan Chase, Wells Fargo, Citigroup, and Ally Financial. 

    Source: “States Negotiate $26 Billion Deal for Home Owners,” The New York Times (Feb. 8, 2012)

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