The Mortgage Debt Forgiveness Act is currently set to expire at the end of 2012.Â Congress will be returning soon to take care of 'unfinished business'.Â One of the issues on their agenda is extendiing this Act.Â If they do NOT extend the act, homeowners in distress who short sell their homes will be required to pay income taxes on the forgiven debt.Â On a home that is $100,000 underwater, if the homeowner's tax rate is 20%, that translates to a $20,000 tax liability, if their tax rate is 30% it becomes $30,000.Â This is not an unusual scenario for middle and lower class homeowners in many areas of the country.
Personally, I don't see how on earth you can classify forgiven debt as income, but let's not go there.Â The fact is if this act is NOT extended it will be the equivalent of kicking a person when he's down. It will be devastating.Â These folks are suffering financially, if they were not they would be paying their mortgage and staying in their homes.Â Believe me, the negative consequences of short selling, including the destruction of their credit rating which leads to increases in car insurance, auto loan rates, credit card rates and even the potential for being turned down for a job due to a bad credit report, are bad enough without adding a huge tax burden to boot.
Please join the me and the National Association of Realtors in urging congress to extend the Act.Â You can use the link below to send a letter to your congress people encouraging them to extend the act.Â And, if you can find the time, I would encourage you to call their offices as well.
I thank you and your fellow citizens in distress thank you in advance for your time.
Did you know that if you work in Morristown New Jersey you might qualify for $5000 to help you buy a home in Morristown as well?Â Â
Did you know that with the New Jersey Smart Start Program you could receive $3000 in down payment assistance?
Did you know there are special mortgage programs for civil servants such as nurses, EMTs, teachers, police officers, fire fighters and municipal employees?
Do you know your credit score?Â Do you know how that figures into your ability to purchase a home?Â Do you know what other criteria the bank will use to determine whether you qualify for a mortgage?
Do you know the process for buying a home?Â How a home inspection works and what to look for when issues come up during a home inspection?
Do you know the role of an attorney in closing a real estate transaction?Â
All these quesetions and more will be answered Wednesday evening at 7:30 pm at the offices of Keller Williams Metropolitan Realty 55 Madison Avenue, Morristown NJ 07960.Â Please Join Us!Â The first 10 people to RSVP will receive a free copy of Gary Keller's book "Your First Home".Â RSVP to firstname.lastname@example.org
.Â See you there!
Much as the media may want you to believe it, a short sale, foreclosure, or bankruptcy will not negatively affect your ability to buy another home forever, or even for a very, very long time.Â In fact, I have it on good authority that the current waiting periods are these:
- anywhere from zero to three years after a short sale, depending on the circumstances surrounding the short sale.
- a minimum of two years after the discharge of a bankruptcy;
- a minimum of three years after a foreclosure;
By far the easiest mortgage to obtain will be an FHA loan.Â Here is what you will need:
1) 3.5 percent down payment, based on the purchase price of the home (e.g., $7,000 on a $200,000 home), or a gift of that same amount;
2) 3 percent to 6 percent of the purchase price, on top of the down payment, for closing costs, or a credit from the seller of the same amount; and
3) 640 FICO credit score â€” the middle score of those generated by the three credit bureaus (some banks will lend to borrowers with middle scores lower than 640, but will require more than the minimum down payment).
You will also need to document your income, assets and job history by providing at a minimum, current paycheck stubs, two monthsâ€™ bank statements and two years of W-2 forms or tax returns.
If you are struggling with your mortgage payments, be sure to explore all your options, make sure you get the facts about the affect it will have on your credit score and your ability to obtain credit and/or buy another home in the future.Â The outlook may not be as bleak as you have been lead to believe.Â Call me for a free, confidential consultation.
Starting January 1, 2011, consumers who have applied for a loan will get more information about how their credit report or credit score can impact a lender's decision to grant credit and the terms under which credit is offered.Â The Federal Reserve and the Federal Trade Commission now require lenders to provide new information to consumers under certain conditions.
Depending on the circumstances, you may receive a notice with information about your credit report or credit score. There are several types of notices:
Credit Score Notice. In some cases, shortly after you apply for credit, you will get a notice that states your credit score and information about how your credit score compares to other consumers' scores. A lender would provide this "credit score notice" to all credit applicants, whether you apply for a mortgage, auto loan, or another type of credit. This notice would be provided regardless of the terms of credit offered to you. Â Â
Risk-Based Pricing Notice. Not all lenders provide a credit score notice to all credit applicants. Instead, you may receive a â€œriskâ€™based pricing notice" from your lender. You would only receive this type of notice if you are offered credit on terms that are less favorable than the terms offered to other consumers because of information in your credit report. For example, you may receive this type of notice if you have negative information in your credit report and you are offered a loan with an annual percentage rate (APR) that is higher than the APR offered to other consumers who apply for that loan..
Account Review Notice. If your APR on an existing credit account is increased based on a review of your credit report, you may receive an â€œaccount review noticeâ€.Â Â If there has been a change in your report since you initially applied for the card, the issuer may increase your APR. Under these circumstances, you would receive this notice providing you with the credit report information that resulted in the APR increase.
These new notices may provide your actual credit score, free of charge, where previously consumers had to pay a fee to get their score.Â Consumers can then check the accuracy of the information in their credit report and dispute any information that is believed to be incorrect. All of the notices provide information on how to obtain a free credit report. Â
If you receive one of these notices, review the notice, make sure you understand how the price you pay for credit may be impacted by your credit report and score and ask the lender to explain anything that is not clear.Â Next, obtain a copy of your credit report and go over it carefully, highlighting any information you believe to be inaccurate.Â Finally, dispute any incorrect or inaccurate information.Â You will need to obtain reports from all 3 major credit reporting agencies and dispute all three.Â
If you need further guidance or assistance, feel free to contact me.Â If I canâ€™t help, I can put you in touch with people who can. Â I can be reached by email at email@example.com.
Federal Reserve Guide to Credit Scores and Credit Reports:http://www.federalreserve.gov/creditreports/default.htm
If you have been patient and long suffering enough to negotiate a loan modification with your bank, and are in your trial period awaiting a final, permanent modification of your loan, there is a vital last step you MUST take in order to avoid 'falling out' of the modification.Â Send all of your trial period mortgage payments to the bank in some manner that allows you to prove they were received by the bank!Â Â If you use the USPS you can get proof of delivery,Â not a full certified letter, just proof of delivery, for around $2.00.Â It will be the best $2.00 you ever spent.
I am working with a lovely couple who were in the final stages of loan modification.Â They had a new payment negotiated and were making their 'trial period' payments in full and on time every month.Â Then, last month, the bank lost the check.Â But, of course, as with every other aspect of this financial crisis, the bank's position is, "we do not make mistakes".Â The bank is now refusing to accept another payment as it would be considered late, and is refusing to go forward with the loan modification.Â The couple has been advised, by the bank, that their home must be sold as a short sale.Â Never mind that the bank stands to lose about $50,000 for their short sightedness.Â
When I met this family I said, "Look, far be it from me to turn away business, but you were so close.Â Let's first see if we can resurrect the modification."Â We talked to some government agencies, and to a lawyer, but when it was explained how difficult, if not impossible, it would be to reinstate the loan mod, the homeowners said they were just exhausted.Â They decided to sell the home and we are now in the process of doing just that, and finding them a place to rent.Â
Lesson learned.Â If you are trying to get your loan modified, you must anticipate everything that could possibly go wrong and take proactive measures to protect yourself because the bank is NOT going to help you or listen to reason.Â Spend the extra $2.00 and get proof of delivery.
So many homeowners are trying to get assistance from their lender so they can stay in their home.Â There is a whole new vocabulary for homeowners, Realtors and loss mitigation specialists these days.Â It is vitally important to know exactly what the various terms mean prior to making any agreement with your bank.Â I have met too many homeowners who thought they were agreeing to a loan modification when in fact what they agreed to was a forebearance and there is a world of difference between the two.
Forbearance is the term used to define an agreement whereby the lender agrees to stop collecting mortgage payments or to collect reduced mortgage payments for a relatively short period of time, perhaps six months to a year, because the borrower is experiencing a temporary hardship.Â Loss of a job, or illness might be the sort of hardship in which the bank would offer forbearance.Â However, at the end of the agreed period of time, all the missed payments, as well as interest and penalties, are added back into the loan and the mortgage payments go back up, perhaps even exceeding the original mortgage payment, in order that the borrower can not just begin making their regular mortgage payments again, but also repay whatever amount accrued during the forbearance period within a second relatively short period of six months to a year.
All tooÂ many times I have seen homeowners who thought they had negotiated a permanent modification of their loan onlyÂ learn too late that their reduced payment is going up drastically.Â And now, because the bank considers the forbearance to be a modification, although not a permanent one, of the loan, the homeowner no longer qualifies for a permanent loan modification and they are, once again, faced with the real possibility of losing their home to foreclosure or being forced to short sell the home.
If you are seeking a modification of your mortgage, be very careful.Â Read everything carefully, even if it has been prepared and negotiated by a third party such as a HFA approved loss mitigation specialist, a private loss mitigation specialist, or an attorney.Â Make sure you understand all the terminology thoroughly,Â And if I can be of assistance, please do not hesitate to contact me!Â I have the knowledge and resources you will need to make an educated and informed decision.
A Loan or Mortgage Modification is an agreement between a homeowner and the bank that holds their mortgage.Â It is a vehicle by which a homeowner who is experiencing financial difficulty due to a legitimate hardship can restructure the loan and stay in their home under certain circumstances.Â Every homeowner in distress would like a mortgage modification, but is it the right to thing for you?Â The answer is, it depends.Â There are some questions that must be answered and some requirements that must be met.
In order to qualify for a mortgage modification, a homeowner must meet certain qualifications.Â First, they must have a legitimate hardship that is causing the homeowner to be unable to afford their current mortgage payment.Â Some legitimate hardships include a death of a spouse, loss of a job, illness in the family and predatory lending practices.Â Second, the homeowner must be able to afford a new, lower mortgage payment.Â
The payment can be made lower by reducing the interest rate, reducing the principal, though that is extremely rare, or both, on either a permanent or a temporary basis.Â Homeowners will have to prove to the bank every claim they make, including their hardship, inability to pay the current payment, current income, current expenses, savings that could be used to bring the loan current, and ability to pay the new, lower, restructured payment.Â You will be asked to complete a financial worksheet outlining all current household income and expenses.Â You can include any and all income, including Grandma's Social Security payments if she lives with you, child support payments if appropriate, even "off the books" pay you receive as long as it can be documented.Â You will be asked to produce tax returns, current pay stubs, bank statements, both checking and savings, any other savings account statements, IRAs, 401Ks, etc. and proof of residency.Â If you meet all the banks debt to income ratios, you will be a candidate for loan modification.
And, you will have a very good idea of your financial situation.Â You may qualify for a loan modification and, nevertheless, at the end of the analysis, decide this is not the option you care to exericise.Â Perhaps it will just leave you with too muich debt and not enough income at the end of the week.Â Perhaps the process is just too arduous and stressful for you.Â Or perhaps you will decide that, even with a lower payment, you just cannot afford to stay in your current home.
Either way you will have narrowed your options.Â You will have all the facts and you will feel good about your decision, whatever that decision may be.
For more information, or for help analyzing your situation and options, call me.Â I have the resources you need to make an educated choice and plan of action.Â I can help!