Real Estate Information Archive

Understandably, homeowners who apply for a loan modification tend to get a little antsy and perhaps even annoyed when they apply for a loan modification and then fail to hear anything for several weeks, especially if they continue to receive late payment notices and nasty phone calls from collection agencies.

Many homeowners wonder, “How long will it be before I hear anything?” and “What should I do while I’m waiting.” This article should help answer those very pressing questions.

How long will it take?

The loan modification process typically takes 30 to 90 days, depending mostly on your lender and your ability to efficiently work through the process with your attorney or other loan modification representative.

Note: The loan modification timeline is not set in stone. The more complex your situation or the greater the degree of concessions needed from the investor, the longer the process takes. Borrowers with a lot of collateral issues can see their loans take longer than what has become the typical 30- to 90-day timeframe.

A professional can often reduce the amount of time required by processing your paperwork efficiently, presenting your application exactly the way the lender wants it, and knowing from past experience what the lender is able and typically willing to agree to. Although each borrower’s situation is unique, knowing the measures the lender is willing to take for similarly situated borrowers can be a real time saver.

Whether you are dealing directly with your lender or through a loan modification specialist, ask several questions up front:

How long is the process likely to take? Find out the best- and worst-case scenarios and then count out the days and mark them on your calendar.

When can I expect to hear something about my case? Mark this date on your calendar.

If I don’t hear anything by the specified date, whom should I contact? Get the person’s name, employee identification number (if available), phone number, and any extension you need to dial to reach the person directly.

What should I do while I’m waiting?

Playing the waiting game can be agonizing, particularly when you have no idea of whether your application will be accepted or rejected or what the lender will offer in terms of a workout. It feels like your future hangs in the balance, and you remain in the dark. Knowing the standard timeline for processing a loan modification can certainly help relieve some anxiety. In addition, you can continue to make progress on your own by doing the following:

If you hired a loan modification specialist to represent you, do not speak with your lender or lender’s representative. Refer all matters to the professional who is representing you. Anything you say to the lender could confuse things or compromise your representative’s ability to negotiate the best deal on your behalf.

Log all phone calls and correspondence between you and your lender or representative. Write down the number you called, the person you talked with, what the person said, and what you said - not word for word, just jot down the key points.

Keep track of important dates. If you do not hear something back on the date promised, call the next day to find out what’s going on. Lenders almost never call you back with updates. If you hired a third party representative, they will (or should) keep you posted, but the lender simply doesn’t have the time to make follow up phone calls. If you’re dealing with your lender directly, you’ll have to be the one making the calls. Mark your calendar and schedule periodic update phone calls. Consistent follow up is paramount to a successful modification.

Explore other options. If the lender denies your request for a loan modification or presents an offer that you cannot accept, you will need a plan B (and maybe a plan C and a plan D). In addition, other options may be better for you than a loan modification. Consult a real estate agent about listing your Home for sale. Talk to a mortgage broker or loan officer about refinancing. Speak with a bankruptcy attorney to find out whether filing bankruptcy would be a better choice.

Don’t be surprised if you continue to receive delinquency notices or late payment phone calls. Lenders rarely put a stop on the foreclosure process until a workout solution is fully in place. You should ask your lender if your attempts to negotiate a solution will stop or at least postpone other collection actions. If they do not, you should find out what that means for you. If the lender is able to foreclose in 30 days and a workout takes 60 days, there’s a slight timeline problem. Push to have all default and foreclosure actions put on hold while your workout attempts are underway.

When your fate is in someone else’s hands, 30 to 90 days can seem like an eternity. By doing your part to keep the process on track, remain informed, and explore other options, you not only improve your chances of achieving a positive outcome, but you can also reduce the stress that commonly accompanies the waiting process.

To get a market report on your homes value in the Washtenaw County area Click Here
For information on new home listings Click Here

In our current Buyer’s market, the type of Home that is selling has shifted from the traditional profile of the past 20 years. It is therefore important to understand where your home fits into the overall market activity. Although traditional owner occupied homes make up a majority of the current homes available for sale, the majority of the homes being sold are bank owned or financial hardship related sales. This puts downward pressure on values and causes pricing to take a more significant roll in marketing. As a traditional seller, in order to stand out in a crowded field, (made even smaller by the Buyer’s focus on bank owned) flexibility on pricing, terms, Lease vs. sale, or lease to own becomes imperative.

Click here for an interesting graphic showing these changes.

A crash course in why it happened, how it's strangling the nation's finances and how it might work itself out.
 
1. It all began with cheap money. To prop up ailing economies early in this decade, central banks in the U.S. and Japan kept interest rates unusually low, which encouraged
speculation. In the U.S., the Federal Reserve lowered the federal funds rate -- the rate that
banks charge each other for overnight loans and a barometer for the cost of borrowing
money on a short-term basis -- from 6.5% in 2000 to 1% by mid 2003. Cheap money
quickly ignited a sharp rise in Home values in virtually every corner of the country.

2. Financial magicians made subprime loans golden. Banks and mortgage companies fed speculation in home prices by offering cheap credit to all comers, including those who would not normally qualify. What to do with these subprime loans? Package them with thousands of high-grade loans to sell to investors. To make the subprime loans attractive, underwriters bought insurance policies guaranteeing that the loans would be repaid. With insurance on the loans, credit-rating agencies stamped such paper as triple-A-rated debt.

3. The global economy became infected with poisoned debt. The loans came to investors as collateralized-debt obligations, or CDOs. A CDO is a huge package of loans sold in assorted segments -- known as tranches -- with varying interest rates and levels of risk. Buried inside the least-risky tranches were those subprime mortgages masquerading as trip e-A-rated debt because of their insurance policies. Companies that wrote the insurance policies on these mortgages assumed that default levels would be minuscule.

4. So much for those assumptions. Home prices tipped downward, setting off a chain reaction. All bubbles eventually burst. The Fed began raising short-term interest rates in 2003, eventually boosting the federal funds rate to 5.25% by the summer of 2006. As a result, adjustable-rate mortgages (particularly the subprime variety) began to reset at far higher interest rates, and in July 2006 the rise in home prices abruptly stopped. In fact, home values began a descent that continues to this day, in many communities averaging a loss of 15% to 30%. As borrowers realized their homes were worth less than the amount they owed on their mortgages, the default rate shot up.

 

5. Rating agencies lowered their assessment of those supposedly triple-A subprime loans to junk levels. The investment and commercial banks, pension funds, and other institutions that had bought the supposedly safe, triple-A-rated CDO tranches woke up to find their investments tainted by those poisonous subprime loans, which began to default at alarming rates. Holders of these CDOs found it all but impossible to know what they were really worth. And when they tried to sell them, there were few buyers -- the  beginning of a seize-up of U.S. debt markets.

6. A wave of write-downs on the value of those loan packages commenced. Financial accounting standards require banks and investment companies to "mark to market" the value of their assets each day. If it's impossible to value a security because there is no market for it, too bad -- make a smart guess. Starting in
2007, one financial institution after another announced a series of quarterly write-downs of hard-to-value and unsalable CDOs that turned into a financial tidal wave.

7. Financial institutions were revealed as vastly undercapitalized. As the quality of their debt portfolios deteriorated, investment banks wrote off billions of dollars of bad assets each quarter, causing their reserves to shrivel. Commercial banks are leveraged with perhaps ten times as much in assets as capital. But some investment banks leveraged themselves more than 30 to 1, to the point that should anything go seriously wrong with those assets, their businesses could fail. The same held true of Fannie Mae and Freddie Mac, which own or guarantee more than $5 trillion in mortgage debt.

8. A cloud of suspicion and distrust enveloped financial markets. Surprised by these developments, investors large and small realized that stocks of supposedly stable financial institutions were in fact ticking time bombs and began selling their shares. Banks, which routinely lend each other money overnight, curtailed those loans because they began to lose faith in the value of the collateral the borrowing banks were offering.

9. The gathering storm set off a sickening wave of failures. One of the first banks to fail was California's IndyMac, which was a leader in subprime lending. Countrywide, the biggest mortgage lender, sold itself to Bank of America to avoid insolvency. This spring, Bear Stearns, the most overextended of the investment banks, failed, and the government arranged a forced marriage with JPMorgan Chase. Then in September, to avert a collapse of Fannie Mae and Freddie Mac, the government seized control of them by putting them in a conservatorship that made Uncle Sam the explicit guarantor of mortgages they  owned or insured.

10. Lending of all sorts started to freeze up. First to coagulate, last winter, was the market for auction-rate securities. These are long-term debt securities whose interest rates are regularly reset, so that they behave more like short-term notes. With no buyers, investors in these notes were stuck. By September, even overnight loans among banks had dried up. And despite hundreds of billions of dollars in cash that central banks around the world pumped into banks' coffers, few banks put that money to work for fear it would be
needed to shore up their own finances. Recently, investors began withdrawing tens of billions of dollars from supposedly supersafe money-market funds, which invest in, among other things, short-term corporate debt.

11. And government could not steady the boat. Nothing that Washington tried -- lowering interest rates, flooding the economy with gazillions of dollars to keep the financial community afloat, rescuing Fannie Mae and Freddie Mac -- instilled confidence in financial institutions. When Lehman Brothers Holdings declared bankruptcy on September 15, fellow investment bank Merrill Lynch sold itself to Bank of America to avoid being next to topple. That was followed by the government's rushed takeover of American International Group, the world's largest insurer, whose forays into insuring the repayment of billions of dollars in debt had drained its capital. Then the last two independent investment banks, Goldman Sachs and Morgan Stanley, found their own survival cast into doubt by plunging share prices.

 

12. Word of a rescue plan to take bad assets off the hands of financial companies is encouraging investors. The Bush administration's proposal, being crafted with congressional leaders, would create a federal agency to take hundreds of billions of dollars in "bad assets" off the balance sheets of financial institutions, for a price. Eventually, those assets that recover their value would be sold back into public markets. Conceivably, the ultimate cost to the government of this plan may not be that great. Word of this plan fueled huge rallies in the U.S. stock market on September 18 and 19.

13. Also helpful: Stable home prices are on the horizon. Throughout 2008, the year-over-year decline in home sales has been slowing, indicating that activity in the housing market could soon pick up. Meanwhile, the inventory of unsold homes has almost quit growing, and the months' supply of unsold homes is one-third of what it was at the start of the year. This matters, because only when prices stabilize will the wave of foreclosures crest and the extent of bad debt poisoning the balance sheets of financial institutions be known.

14. But the economy will suffer aftershocks for years. That's because banks have already lost $1 trillion to bad debt during this crisis, and some experts expect the losses to end up being twice that amount. Less capital means less money to lend and far stricter limits on credit to borrowers. Years could pass before banks can rebuild their capital to the levels that existed before this crisis. The shocks already felt could cause the economy to fall into recession; it's too soon to tell.

15. Don't lose hope. A financial panic causes people to lose their ability to reason. But just because a panic can end in utter economic disaster doesn't mean that it will. Just as banker J. Pierpont Morgan could quell the Panic of 1907 by walking onto the floor of the New York Stock Exchange and Buying bank stocks, so too could decisive government action contain the Panic of 2008. You may not know the outcome of this drama for weeks or months to come. Until you do, I’m guessing the best course of action might be ... to do nothing.

Or you might consider investing in Real Estate.  You already know that value has reached bottom so its a good time to buy.  AND no matter what, you still have something more than worthless paper should any of these companies we have invested in go belly up.  Stop by this link to get started with quick inventory search just to see whats out there for investment or new home.

There is a little know law that exempts a seller from having to pay the normal transfer tax (approx $8.50 per 1K of sale price) at closing if your tax assessment is less at the time of sale than when you purchased the property.

MCL 207.526 (t) provides an exemption from State Transfer Tax for the following written instruments:
A written instrument conveying an interest in homestead property for which a homestead exemption is claimed under either the school code of 1976, Act No. 451 of the Public Acts of 1976, being sections 380.1 to 380.1852 of the Michigan Compiled Laws or the state education tax act, Act No. 331 of the Public Acts of 1993, being sections 211.901 to 211.906 of the Michigan Complied Laws, if the state equalized valuation of that homestead property is equal to or lesser than the state equalized valuation on the date of purchase or on the date of acquisition by the seller or transferor for the same interest in property. If after an exemption is claimed under this subsection, the sale or transfer of homestead property is found by the treasurer to be a value other than the true cash value, then a penalty equal to 20% of the tax shall be assessed in addition to the tax due under this act to the seller or transferor.

Attorney General Mike Cox issued an important opinion this week clarifying the proper application of an obscure exemption contained in the Michigan Transfer Tax Act. The opinion, arising out of a request from Representative Martin Griffin (D-Jackson), should afford certain Home sellers immediate financial relief as Michigan’s real estate market continues its road to recovery.

Exemption “t”, as designated in the Michigan Transfer Tax Act, sets forth that a seller may seek an exemption from paying the state transfer tax if the following criteria are met:

With property values and corresponding SEV declining due to the struggling economy, home owners and real estate agents first took notice of the exemption’s possible applicability under the state transfer tax. However, absent an official interpretation, there was little awareness of its proper application.

The opinion from the Attorney General uses examples to show how the application would apply. One example illustrating application provides:

If the SEV of the principle residence when acquired in 2006 is $74,000.00 and the SEV when transferred in 2008 is $72,000.00 then criteria one and two above are satisfied. You can establish the true cash value by doubling the SEV at the time of transfer. In this case the true cash value is $144,000. If the sale price in 2008 is $140,000.00 then the sale does not exceed its true cash value. All three criteria are satisfied and the exemption would apply.

The Attorney General’s opinion provides immediate relief to home sellers already faced with the reality of declining value on their single greatest asset. The opinion also provides a uniform reading of the exemption that is necessary to provide consistent application among the various Registers of Deeds across the state as they are already receiving filings for the exemption.

Sellers should be cautioned that a request for the exemption that fails to meet all three criteria could bring a penalty equal to 20% of the tax assessed in addition to the tax due. Additionally, no similar exemption exists in the County Real Estate Transfer Tax Act.

Many consumers with nontraditional and other new types of mortgages with lower initial payments are now facing significant increases in their monthly payments — called "payment shock."

The brochure download below explains the types of mortgages that are placing families at risk, provides suggestions for getting help by talking to a Tom Stachler with Real Estate One and reputable counseling persons or organizations, and urges borrowers to work with experts and their lender as soon as possible. The brochure lists some of the ways lenders may be willing to help borrowers avoid foreclosure.

Produced jointly by NAR, the Center for Responsible Lending, and NeighborWorks^® America, this 5-panel brochure allows us to help consumers take early action to protect their homes whenever possible.

Need Help with determining your Property Value?  Click on this link to get a valuation report on your property emailed to you containing sold and active (comps) property pricing, marketing tips and more.

Download Learn How to Avoid Foreclosure and Keep Your Home (PDF: 1.7MB

Download brochure text (PDF: 71KB)

WASHINGTON (AP) -- Homeowners threatened with foreclosure would in some instances get a 30-day reprieve under an initiative the Bush administration announced Tuesday.

Dubbed "Project Lifeline," the program will be available to people who have taken out all types of mortgages, not just the high-cost subprime loans that have been the focus of previous relief efforts.

The program was put together by six of the nation's largest financial institutions, which service almost 50 percent of the nation's mortgages.

These lenders say they will contact homeowners who are 90 or more days overdue on their monthly mortgage payments. The homeowners will be given the opportunity to put the foreclosure process on pause for 30 days while the lenders try to work out a way to make the mortgage more affordable to homeowners.

"Project Lifeline is a valuable response, literally a lifeline, for people on the brink of the final steps in foreclosure," Housing and Urban Development Secretary Alphonso Jackson said at a joint news conference with Treasury Secretary Henry Paulson.

He said the goal was to provide a temporary pause in the foreclosure process "long enough to find a way out" by letting homeowners and lenders negotiate a more affordable mortgage.

Paulson said the new effort was just one of a number of approaches the administration was pursuing with the mortgage industry to deal with the country's worst housing slump in more than two decades.

In December, President Bush announced a deal brokered with the mortgage industry that will freeze certain subprime loans -- those offered to borrowers with weak credit histories -- for five years if the borrowers cannot afford the higher monthly payments as those mortgages reset after being at lower introductory rates.

"As our economy works through this difficult period, we will look for additional opportunities to try to avoid preventable foreclosures," Paulson said. "However, none of these efforts are a silver bullet that will undo the excesses of the past years, nor are they designed to bail out real estate speculators or those who committed fraud during the mortgage process."

In coming days, lenders will begin sending letters to homeowners who might qualify for the new program. Homeowners won't qualify if they have entered bankruptcy, if they already have a foreclosure date within 30 days, or if the Home loan was taken out to cover an investment property or a vacation home.

The Mortgage Bankers Association reported that at least 1.3 million home mortgage loans were either seriously delinquent or in foreclosure at the end of the July-September quarter.

Private economists are forecasting that the number of foreclosures could soar to 1 million this year and next, about double the 2007 rate.

Officials did not have an estimate of how many people might be helped by the new "Project Lifeline" program.

Senate Banking Committee Chairman Christopher Dodd, D-Conn., said the finance industry and the administration were falling further and further behind in dealing with the growing crisis.

"This plan, while a step in the right direction, will not stem the tide of the millions of foreclosures we are facing in the coming months," Dodd said in a statement. His committee will hold a hearing on the housing crisis on Thursday with testimony from Paulson and Federal Reserve Chairman Ben Bernanke.

The six participating banks are Bank of America Corp., Citigroup Inc. Countrywide Financial Corp., J.P. Morgan Chase and Co., Washington Mutual Inc. and Wells Fargo & Co.

They are all members of the Hope Now Alliance, an industry group that is trying to coordinate a response to the mortgage crisis. Officials urged homeowners to call the group's toll free hot line number at 1-888-995-HOPE for assistance.

AP Business Writer Marcy Gordon contributed to this report.

The Department of Housing and Urban Development and the Federal Housing Administration (FHA) announce new sales incentives on HUD Homes being bought as primary residences in Michigan.

 

     1.) $100 Down Payment!

            Purchase a HUD Home with FHA-insured financing and put ONLY $100 down!

     2.) Sales Allowance!

            Purchasers using FHA financing will receive $2,500 at closing to use on repairs, closing costs, or to lower their mortgage amount.  Not using FHA financing? You will still receive $1,000 to assist in paying closing costs!

     3.) Available Statewide!

            This offer does not have restricted areas!  All homes, in Michigan, being purchased as Owner Occupied homes are eligible for these special incentives!

 

**Benefits of FHA Financing**

            Flexible Underwriting.

            No minimum credit scores.

            Competitive, often lower, interest rates.

            Government Insured.

H.R. 3648 – Public Law 110-142  Signed December 20, 2007

 

Summary:  There have been some changes affecting Home tax credits for persons either involved in a short sale or foreclosure and also for persons who have lost a spouse.  Generally, individuals who are relieved of their obligation to pay some portion of a mortgage debt on a principal residence between January 1, 2007 and December 31, 2009 will not be required to pay income tax on any amount that is forgiven.

 

Background:  A fundamental principle of the income tax is that a taxpayer must recognize income and pay tax any time a debt of the taxpayer is forgiven or discharged.  Exceptions are provided in several circumstances, including bankruptcy, insolvency (as defined by state law) and for some investment real estate.  Until this new rule was enacted, however, no exception applied to any amount debt forgiven on a mortgage for a taxpayer’s principal residence. Thus, until now, when some portion of a mortgage debt was forgiven, that amount has been treated as taxable income and the borrower has been taxed at ordinary income rates on the forgiven amount, even though there is no cash.

 

The newly-enacted relief for mortgage debt forgiveness is Congress’s response to the problems generated by the subprime crisis, short sales, rising foreclosure rates and price corrections in some markets.  Thus, when a lender forgives some portion of a borrower’s mortgage debt in a short sale, a foreclosure, a workout with the lender or some similar circumstance, the borrower will not be required to recognize income or pay tax on the forgiven amount. This relief applies to debts forgiven between January 1, 2007 and December 31, 2009.

 

Provisions: General

 

-          No income limitation: All borrowers receive the relief, no matter what their income.

-          Dollar limitation: No more than $2 millions of mortgage debt is eligible for the exclusion ($1 million of debt for a married filing separately return).

-          Relief applies only to an individual’s principal residence.

-          The forgiven mortgage debt must have been secured by that residence.

-          No relief is available for cash-outs, whether the cash-out takes the form of a refinanced first mortgage, second mortgage, home equity line of credit or similar arrangement.

-          Eligible debt is what is called “acquisition indebtedness.”  This is debt used to acquire, construct or rehabilitate a residence.

- Refinanced debt qualifies, so long as the debt does not exceed the original amount of the debt. (Same rule as Mortgage Interest Deduction)

- Home equity debt (or second mortgages) qualifies if the funds were used to improve the home.  (Borrower must have adequate records, as under current law.)

- See cash-outs, above. No amount of a cash out may be treated as acquisition debt.

 

Additional Information:

 

Refinanced Mortgages:  The relief does apply to refinanced debt in some circumstances.  The rules seek to assure that any debt eligible for the relief is directly related to the acquisition or improvement (such as rehabilitation, expansion, renovation, reconstruction) of the principal residence.  Debt used for furnishings (i.e., any movable property) in the home is not eligible for the relief.  When the proceeds of any refinanced debt is used for any purpose other than acquisition or improvement, those proceeds are not eligible for the relief.

 

Principal Residence:  A principal residence is defined in the same manner as the rules that apply to the capital gains exclusion on the sale of a principal residence.  An individual may not have more than one principal residence at any given time.

 

Second Homes:  As a general matter, the relief does not apply to any debt forgiveness on any mortgage for any second home of the taxpayer.  However, if a taxpayer uses a residence (other than his principal residence) solely as an income producing rental property, already existing relief provisions might apply, depending on the taxpayer’s situation.  If the second home property was acquired as a speculative investment (such as for resale rather than rental), relief provisions are unlikely to be available.

 

In all events an individual who is in a short sale, foreclosure, workout or similar situation on a residence (including condos) other than his principal residence should consult a tax adviser to determine what, if any, relief provisions might be available.

 

Other Provisions in H.R. 3648

 

Mortgage Insurance Premiums:  The deduction for mortgage insurance premiums is extended through tax year 2010. Income limitations on the deduction will continue to apply.

 

Surviving Spouses/$500,000 Exclusion:  In some circumstances, a surviving spouse is denied eligibility for the full $500,000 exclusion on the sale of his/her principal residence. This most frequently occurs when the residence is not held in joint ownership at the time the spouse who is not on the title dies.  In that case, the deceased spouse had no ownership interest, so there is no basis step-up on that half of the property. The surviving spouse is thus eligible only for an exclusion of $250,000. (Had the home been sold during the deceased spouse’s lifetime, the full $500,000 exclusion would have applied, so long as they filed a joint return.)

 

Challenges for the surviving spouse are compounded when this circumstance occurs late in the year. The surviving spouse is often unable to sell the property within the same year that the spouse died. This legislation provides that a surviving spouse may claim the full $500,000 exclusion not only in the year of the deceased spouse’s death, but also during the two years after the spouse’s death.

 

Second Homes Converted to Principal Residence:  The original house-passed version of this legislation included a provision that would have limited the application of the $250,000/$500,000 exclusion when a second home is converted to a principal residence and later sold. This change was not included in the final legislation that the President signed. 

 

 

Seller Concessions:

Percentage of purchase price towards allowable costs (percentage depends on program and downpayment, see chart below).

 

In addition to concessions, sellers can pay for the following:

1. Seller can waive tax pro­-rations from the buyer on the purchase agreement.

2. Disburse Use and Occupancy fee's (if any) to Buyer at clos­ing.

3. Pre-­pay association fee directly to the association. By giving the buyer a paid receipt allows this cost to remain off the final HUD.

Conventional
Down Payment	Allowable Concession
0 - ­10%	3%
11 - ­24%	6%
25% or more	9%
FHA and Non­-Conforming
Down Payment	Allowable Concession
3%	6% for costs/3% for down­payment (through 3/31-­2008)
VA
Down Payment	Allowable Concession
0%	6%
Investment Properties
Down Payment	Allowable Concession
All down payments	2%