In a short sale, a lender agrees to accept less than the amount owed on a  property and release its lien.

Under the new guidelines, which take effect June 15, servicers have 30 days  to review and respond to short sale offers or requests. If they need more than  30 days, they must provide the borrower weekly updates and a final response  within 60 days.

If the borrower is requesting a short sale under the government’s Home  Affordable Foreclosure  Alternative program, the clock starts ticking when the borrower submits a  completed borrower response package requesting consideration of a short sale.

Specific timelines

The servicer has 30 days – or 60 days with weekly updates – to review the  request and tell the borrower whether a short sale is approved and if so at what  price, according to Freddie Mac spokesman Brad German.

The borrower then has to market the property. The new guidelines specify how  long the borrower and servicer have to submit and respond to offers and  counteroffers. This process could take many more weeks.

If the short sale is not under the government program, the clock starts  ticking when the borrower submits a short sale offer from a potential buyer and  a completed borrower response package.

If the servicer makes a counteroffer, the borrower has five business days to  respond and the servicer must then respond within 10 business days of receiving  the borrower’s response.

A new transparency

Fannie Mae’s previous guidelines “required servicers to evaluate and complete  short sales, but did not require specific timelines. These new guidelines are  meant to expedite the short sale process and make it more transparent,” Fannie  spokesman Andrew Wilson says.

With the average short sale nationwide taking about six months to complete,  real estate agents are happy to see the new timetable but wonder if it’s  realistic.

“It’s a lovely aspiration,” says Colleen Badagliacco, a broker with Altera  Real Estate in San Jose. She says it might be achievable if the borrower has  only one loan on the property.

But in many cases, borrowers have second mortgages, tax or homeowners’  association liens, or mortgage insurance  on the property, which make short sales difficult and time consuming to  negotiate.

‘Short’ isn’t quick

“Practically speaking, it’s hard for any parties to follow exact timelines  because short sales just don’t work on timelines,” says Shanna Welsh, an  attorney and Realtor in San Diego.

Fannie’s Wilson says that issues such as second mortgages or tax  liens “can be resolved within 60 days if servicers are proactive about  identifying and resolving potential issues early on.”

It’s not clear what will happen to servicers that miss the 60-day  deadline.

“That is still being worked through. At a minimum, their performance will be  evaluated by us against their timeline. Their performance can have an impact on  their ability to continue  to service (Freddie Mac) mortgages,” German says.

Incentives available

Wilson says banks servicing Fannie loans  “are eligible for incentives for completing foreclosure prevention actions and  can face compensatory fees if they fail to contact borrowers or fail to pursue  foreclosure prevention. In addition, we evaluate servicers under our STAR  (Servicer Total Achievement and Rewards) Program.

“If servicers fail to follow our short sale, guidelines then their STAR  rating could be affected.”

Realtors point out that the new guidelines don’t apply to loans that are not  backed by Fannie and Freddie.

“The problem is there is no one roadmap for all short sales. This is  something the industry has been asking for for two years. Now maybe we have  Fannie and Freddie on the same page but … what the homeowner or buyer would  benefit from is a consistent set of rules,” Badagliacco says.

Short sale bill

A bill in California that would prevent a servicer from recording a notice of  foreclosure sale after approving a short sale in writing passed the Assembly  Banking and Finance Committee 10-0 Monday and is heading to the Assembly  Judiciary Committee for further consideration.

AB1745, sponsored by Norma Torres, D-Pomona (Los Angeles County), would not  prevent a servicer from foreclosing on a home after it had approved a short  sale.

The servicer could withdraw approval of a short sale if the circumstances on  which the sale was approved changed and proceed with a foreclosure sale.

But the servicer would have to give the borrower three days’ notice before  withdrawing the short-sale approval and explain why it was revoked.

“The goal is to not discourage short sales. If you tell a lender, once you  approve a short sale you can never withdraw your approval,” no lender would ever  agree to one, says Stan Wieg, a lobbyist with the California Association of  Realtors, which is backing the bill.

But giving homeowners three days’ notice gives them a chance to go back to  the servicer and “try to talk them out of the disapproval.”

Kathleen Pender, San Francisco Chronicle

American Banker first reported the development Friday. A spokesperson confirmed the delay.

“FHFA continues to work on its principal forgiveness analysis and is in discussions with the Department of Treasury. A final determination on the Treasury proposal for triple investor incentives for (Home Affordable Modification Program) Principal Reduction Alternative is being deferred until we conclude these activities,” the spokesperson said.

The Treasury expanded HAMP in January in an effort to boost principal write-downs. Preliminary study results from the FHFA earlier in the month showed the higher incentives could save Fannie and Freddie up to $1.7 billion.

But FHFA Acting Director Edward DeMarco said such a program could only be limited to roughly 700,000 loans. Taxpayers subsidizing the GSEs for the reductions would still lose $2.1 billion. Only a small percentage of borrowers still current on their loan would have to strategically default to offset any savings to Fannie and Freddie, according to the study.

Policy analysts and insiders are split on what the FHFA may ultimately do.

“DeMarco went to great lengths to detail operational difficulties in implementing this program,” said Isaac Boltansky, an analyst at Compass Point. “In our view, this delay is likely due to increased scrutiny of the full analysis by the Treasury Department in advance of its release and continued pressure from administration officials.”

DeMarco has long favored principal forbearance to reduce monthly payments for borrowers instead of writing off the principal entirely. In his speech earlier in the month, he said it could be considered as comparable shared appreciation program.

Ed Mills, an analyst at FBR Capital Markets, said there is some desire in Washington to strike a balance that would avoid a wide principal reduction program but allow servicers to use it where it makes sense. The problem is, it will take time.

“One of the concerns is the FHFA is doing this analysis on a very macro level. There are clearly times where forgiveness can work on a loan-by-loan basis, but it’s a tougher call if you did it across the board,” Mills said. “This is complicated analysis. It’s difficult to know all the factors.”

jprior@housingwire.com

@JonAPrior

Making sense of the story

Consumers can lose valuable time to these dishonest players – not to mention money. The nonprofit Lawyers Committee for Civil Rights Under Law estimates that homeowners nationwide who reported scams to its database have lost more than $60 million in the last two years alone.
There are many credible law firms around to help homeowners. But some businesses might be promoting themselves as providers of legal services, they might have only one lawyer on retainer, as a way around F.T.C. rules that allow only lawyers to collect upfront fees on mortgage aid.
Such firms, and people posting as lawyers, are fueling a 60 percent jump in complaints about mortgage scams this year, according to a report by the homeownership Preservation Foundation, which helps distressed homeowners.
When speaking with a lawyer, consumers might ask about the lawyer’s track record, including documentation of successes via media reports or signed court documents awarding borrowers money or relief.
Consumers should beware of promises. According to the Homeownership Preservation Foundation, “legitimate lawyers don’t make guarantees, just like doctors don’t.”
There are plenty of free services available at nonprofit groups certified by the Dept. of Housing and Urban Development.

More Information   The New York Times

Making sense of the story
•During the refinancing process, homeowners may find that actively looking to leave their current job may impact how the bank views giving them a mortgage. The search will raise a question mark about their future employment and their ability to pay the mortgage.
•In addition to checking employment at the start of the application process, many lenders will verify such information as late as the last 72 hours before mortgage closing. If they learn a borrower is starting a new job in the very near future, the mortgage can be delayed or even derailed. And borrowers who withhold such information could be committing income fraud. Other lenders, however, say they make loans based on a moment-in-time snapshot of a borrower’s finances.
•An advantage to refinancing first is that the borrowers are freeing up additional cash flow by reducing their monthly payment.
•All that said, however, there are advantages to refinancing later, especially for those who might have to relocate when they change jobs.
•A person may get a new job with more income, which may help him or her qualify for a larger mortgage, or even better terms.

Read the full story  The New York Tomes

Making sense of the story
•Although more than 4 million homes have been lost to foreclosure in the six years since the housing market began its descent, it’s a reality that the former owners will have to contend with the repercussions of foreclosures and/or short sales. However, the passage of time makes all the difference.
•The mortgage-lending guidelines followed by the majority of banks prohibit lenders from making loans to people with foreclosure or short sale in their credit history, often for years.
•Still, some homeowners who were foreclosed upon when the market first started to skid are now looking to buy another home and are getting approved for new loans.
•The likelihood of a borrower with a real-estate related blemish on their credit history being approved for a new loan depends on several factors, but largely on whether the borrower had a foreclosure or a short sale.
•Generally, borrowers who have a foreclosure in their credit history can expect to wait between two to seven years before a lender will even accept their loan application. The waiting periods stem from guidelines most banks must follow in order to sell their loans to purchasers such as Fannie Mae and Freddie Mac.
•If a buyer with a past foreclosure is seeking a government-backed mortgage, the waiting period can vary before they can qualify. The Federal Housing Administration, which insures roughly 30 percent of new loans, requires former homeowners to wait three years from the date of their foreclosure before they can qualify for a loan guaranteed by the agency.

Read the full story  MercuryNews.com

Although the actual settlement has not yet been released, the attorney general has stated that other financial benefits for California include $849 million for refinancing 28,000 borrowers who are underwater but current on their payments; $279 million restitution for 140,000 homeowners who were foreclosed upon between 2008 and 2011; $1.1 billion for unemployed homeowners, transitional assistance, and repairing blight; $3.5 billion to extinguish unpaid loans that remain after foreclosure for 32,000 homeowners; and $430 million to the state attorney general’s office for costs and fees. As part of a California guarantee, if the lenders fail to reduce principal balances by a minimum of $12 billion, they will be required to pay fines up to $800 million to the state.

The loans involved in this settlement are those owned or serviced by Bank of America, JPMorgan Chase, Wells Fargo, Citigroup, and Ally Financial Inc. The settlement releases the five named lenders from certain federal and state claims pertaining to robo-signing and other foreclosure misconduct by the lenders. It does not affect any individual’s rights to bring legal action against a lender. It also does not apply to the majority of mortgage loans, which are those owned by Fannie Mae or Freddie Mac.

This mortgage settlement does not change any homeowner’s existing financial relationship with a settling lender. It does not relieve homeowners from any obligation. It does not require a settling lender to stop any foreclosure.

Homeowners seeking relief under the settlement agreement should contact their loan servicer or a HUD-approved housing counselor. More information including detailed FAQs is also available from the California Attorney General’s website, or visit the National Mortgage Settlement website.

Realegal® is published by the CALIFORNIA ASSOCIATION OF REALTORS®, a trade association representing more than 175,000 REALTORS® statewide.

* Beyond the obvious threat of foreclosure, falling behind on a mortgage can be costly: Lenders charge late fees as well as legal and administrative costs, and the borrower’s credit score will suffer. Experts say the sooner a delinquent borrower deals with the situation, the better the chances are of making a full economic recovery.

* Borrowers who are determined to stay in their home but cannot immediately make back payments need to start by contacting their lender or a credit counselor to discussavailable options. Among them are devising a repayment plan, modifying the loan, doing a short sale, and adding what is owed back into the mortgage balance.

* The first step borrowers should take is to assess their financial situation by looking at the amount of money brought in each month versus what is spent. Many credit and housing counselors have worksheets on their websites to help with this.

* Next, borrowers should collect pay stubs, documentation on other income, two years’ worth of tax returns, two months of saving and checking account statements, and mortgage records. If the borrower has experienced a hardship, such as a layoff, adivorce, or an illness, they should gather evidence of that, such as unemploymentinsurance receipts, medical bills, a copy of a doctor’s letter to their employer, or a divorce decree.

* Finally, borrowers should talk to their lender, servicer, or an adviser. The federal Dept. of Housing and Urban Development certifies counseling agencies that provide free advice and assistance, and has a list of them on its website. Counselors can offeralternatives and prepare a budget to see if the homeowner can afford to stay in the house.

* Before agreeing to a repayment schedule, it is important homeowners understand how their lender treats partial payments. Some credit partial payments toward the balance immediately, while others hold the money in a “suspend account” until the full amount is received. Some will return the check to the borrower, and some will stop accepting payments after the mortgage is seriously delinquent.

The New York Times   Read the full story

]]> http://carrollsells.com/featured-article/getting-back-in-the-black.htm/feed 0 http://carrollsells.com/featured-article/a-reprieve-for-unemployed-borrowers.htm http://carrollsells.com/featured-article/a-reprieve-for-unemployed-borrowers.htm#comments Fri, 27 Jan 2012 02:20:52 +0000 Carroll http://carrollmceachern.com/?p=562 Read More]]> Fannie Mae and Freddie Mac recently extended their foreclosure forbearance programs to give
short-term aid to unemployed homeowners, but housing counselors warn that these borrowers
will need to look at longer-term solutions.
Making sense of the story
*  In a forbearance program, a lender agrees not to foreclose on a property and gives the borrower several months’ grace from or reduction in monthly mortgage payments. The programs work best for temporary setbacks, like job loss, health problems, or natural disasters.
*  There are drawbacks to the forbearances though. The most-significant drawback is a larger total debt from the smaller payments. The unpaid balance continues to increase during this time.
*  The new temporary mortgage payment is often set to 31 percent of the household
income; in some cases lenders agree to accept no payments. Fannie Mae’s extended
unemployment program, first offered in the fall of 2010, limits any nonpayment or other forbearance plans to one year, with the second six months requiring approval by both Fannie Mae and the lender.
*  However, even with the program in place, the lender could still report a mortgage as delinquent, which could adversely affect the borrower’s credit score.
*  Because some agreements add onerous term and conditions, homeowners should also consult with a housing counselor certified by the Dept. of Housing and Urban Develpment.
Read the full story The New York Times

Making sense of the story

The rates quoted are averages drawn from a variety of financial institutions, and lenders use varied approaches to set them. Consumers who want to try for the lowest rates available need to consider basic factors, such as credit score, points, property type, down payment, and length of the loan.

Credit score: The ideal borrower has a FICO score of 740 or higher, which puts the individual in the best place for pricing.

Points: The lowest rates usually are decreased by paying a fee called a point, or 1 percent of the loan amount. Borrowers may buy points in order to get the best rates at many banks. Points might make sense depending on the borrower’s financial situation and how long they expect to stay in the home.

Property type: Borrowers planning to buy a duplex or a four-unit build likely will have a higher interest rate. Condominiums also may have a rate premium rate, especially if they are newer or the down payment is less than 25 percent. Lenders also may charge more if the borrower is not planning to live in the home.

Down payment: Borrowers who put down at least 25 percent are more likely to obtain the best interest rates. Lenders offer different breaks on rates if equity in the property is higher, so borrowers should ask what is available.

Length of loan: Borrowers who are likely to move in a few years may want to look into an adjustable-rate loan with a low interest rate fixed for a few years, and adjusted afterword.
Read the full story  The New York Times