Real Estate Information Archive

In an effort to try to ease the housing market crisis, a new government program was implemented earlier this year to try to help homeowners. The Housing Affordable Foreclosure Alternatives Program(HAFA) is aimed at speeding up and streamlining the short sale process. 

For homeowners who are eligible, they can avoid foreclosure by performing a Short Sale or by giving the property back to the lender which is also known as a Deed-in-Lieu of foreclosure.

Eligible homeowners also can receive other benefits such as relocation assistance and protection from collection actions by their lenders. Below are some other benefits and highlights of this program:

• Borrowers receive $3,000 for relocation assistance.
• Lenders must allow the opportunity for the borrower to attempt a Short Sale or accept a Deed-in-Lieu of foreclosure before following through with a foreclosure.
• Borrowers are fully released from future liability for the first mortgage debt – lenders cannot ask for a cash contribution, promissory note, or deficiency judgment to complete a short sale or DIL.  Additionally, junior lien holders (i.e. 2nd mortgages) who participate in the HAFA incentives must also release borrowers from future liability. 
• Provides an alternative to HAMP eligible homeowners (borrowers) who cannot make mortgage payments to keep their home.  
• Utilizes information on the borrower’s finances and hardship already collected by the lender under HAMP. 
• Standardizes forms, procedures, and timelines to speed up the short sale process. 
• Provides borrowers with pre-approved short sale price before they list the property for sale. 
• Mandates that the borrower (homeowner) be released from any further financial obligations once the sale is completed. 
• Provides financial incentive for the lender to complete the short sale process.

The requirements that homeowners must meet to be eligible for the HAMP modification program are listed below:

• The property is the borrower’s principal residence.
• The first mortgage originated before January 1, 2009.
• The mortgage is delinquent or default is reasonably foreseeable.
• The mortgage’s unpaid principal balance is no more than $729,750 (higher limits for 2 to 4 unit dwellings).
• The borrower’s total monthly mortgage payment exceeds 31% of their gross income.
• The mortgage also needs to be serviced by a lender who is participating in the HAMP program (the majority of lenders are).

There are currently millions of home loans that are in default throughout the US.  Lenders are often just holding these properties, because they know that they cannot foreclose on these properties and recoup any losses.  The financial incentives offered through the HAFA program may entice these lenders to offer more properties for a short sale, placing more homes on the market, and ultimately driving down prices even further.

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More than five million homeowners now owe more than their homes or worth or are at risk for foreclosure because they can no longer afford their mortgage payments. In March of 2009, the Obama administration introduced a major housing relief effort, starting with the Home Affordable Modification Program (HAMP).

The first part of HAMP involved a loan modification program, which was designed to help homeowners modify their existing loans in order to get monthly payments that would help them stay in their homes and avoid foreclosure. Since the program launched last year, more than 300,000 modifications have been processed and are active.  Loan servicers saw a decline in permanent modifications in May 2010 from (47,000 from 68,000 in April 2010). The $75 billion HAMP will expire in 2012.

In March of this year, the Treasury Department introduced another program for troubled homeowners - Home Affordable Foreclosure Alternatives (HAFA). This program which took effect April 5, 2010, was also designed to keep homeowners from being forced into foreclosure – by standardizing and expediting the short sale process, along with a $3,000 incentive. Under HAFA, once the lender has agreed to the short sale and forgiven the balance, it cannot go after the deficiency judgment and harass the borrowers. 

A major benefit of this new plan is that the lenders have to respond to the homeowners’ written requests for the short sale within ten days. One of the largest detriments to any short sale is the long and cumbersome process from initiation to close. HAFA creates a platform for standardization of short sale and deed in lieu of foreclosure forms and criteria.

The Treasury Department continues to make revisions to the program, even though it has only been in place for a few months. But because of the large amount of requirement revisions to paperwork that is intended to provide a new standardization, many lenders are even more wary to jump on board and begin training workers. This program will close on December 31, 2012.

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If you are ready to buy the perfect home and have everything lined up – except the down payment, what are your options? How can you complete the sale if you don’t have extra cash?  Minimum down payment requirements vary by lender, mortgage program, loan amount, borrower income and credit rating. A good yardstick is roughly 20%, but you can find different ways to help you meet down payment requirements, including buyer assistance programs -  also called down payment assistance programs.

Assistance programs and grants can help you avoid robbing your savings or 401K or borrowing the money elsewhere to come up with a cash down payment. Some of the most common buyer assistance programs are for first time home buyers, but other assistance programs are available as well. How do they work? Below are some key requirements of standard programs. 

• Home buyers must qualify for a loan that allows gift funds from a charitable organization
• Limits may apply to the price of the home
• Funds can be used for the down payment and for closing costs
• Gift funds can be used for new or existing homes

Any number of charitable organizations provide buyer assistance, including Grant America, Nehemiah and American Family Funds. Many other buyer assistance organizations are available, so do some homework and talk to your tax preparer and mortgage lender about options.

Talk to your lender about available programs in your market. Your lender can help you structure the down payment assistance to be compatible with their underwriting guidelines and offer advice on program advantages for your type of loan.

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Summer is officially underway and the 4th of July is just around the corner! The Inland Empire area is host to many exciting and fun events for everyone. Make your plans now to enjoy Independence day and the wonderful days of Summer. Below are some things happening around our area..Have a Happy 4th of July!

Chino Hills Old-Fashioned Fourth of July Picnic- Starts 10:30 am and goes till 3:00 pm. At the Big League Dreams Sports Park

Claremont 4th of July Celebration-Gates open 6:30 pm, show starts 9:00 pm. At the Pomona College Strehle Track

Corona 4th of July Events- Parade starts 10:00 am on Main Street, Festival starts 4:00 pm Santana Park, Fireworks start shortly after the formal program at 8:15 pm.

Crestline - Jamboree Days Festival-in down town Crestline! Celebrating 103 Years of Mountain Living! Street Faire: 9:00 am - 6:00 pm Parade Starts: 10:00 am Live Music & Vendors! For more information: 338-2706

Fontana - Red, White, and Cruise- At the AutoClub Speedway, begins at 2 pm and will feature live entertainment from country star Jimmy Wayne and American Idol Winner, Taylor Hicks.  The event will also include live entertainment, Children’s Fun Zone, Patriotic Zone, Women’s Zone, Men’s Zone, Spectacular Fireworks Show and Parade, and a Car Cruise and Show. 

Lake Arrowhead Fireworks! July 4th starting at 9:00 pm For more information please call: The Arrowhead Lake Association: 337-2595

Palm Desert Concert and 4th of July Celebration- Festival starts at 7:30pm and Fireworks start at 9:00pm with synchronized music broadcast

Palm Springs Power of 4th of July- Gates open at 5:00 pm, Game starts at 6:05 pm, Fireworks at 9:15 pm. At the Palm Springs Stadium

Pomona Fairplex Kaboom- Monster Truck and Big Air Freestyle Motocross at 8:00 pm, Fireworks Spectacular at 9:15 pm.

Rancho Cucamonga Fireworks Celebration- Park opens at 5:00 pm, Entertainment at 6:00 pm, Fireworks at 9:00 pm. At the Rancho Cucamonga Epicenter

Redlands Community 4th of July Celebration - Picnic at 10:00 am, Entertainment at 11:00 am, Parade at 4:00 pm, Live show at 7:00 pm, Fireworks at approximately 9:00 pm. At University of Redlands

Riverside 4th of July at Community College- Gates open 6:00 pm, Fireworks at 9:00 pm. At the Riverside Sports Complex. A Free, Family-oriented Event at White Park in Downtown Riverside Saturday, July 4th 7:00 PM –9:00 PM

Temecula 4th of July Parade and Fireworks Show- Old Town Temecula, 2:00-9:00 pm

Victorville Prepares for 4th of July Spectacular - Live entertainment includes performances from Polynesian dancers, Happy Havoc, and the Joe Campbell Band. The fireworks begin at 9 P.M., so come prepared for the show of the season!

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A recent proposal introduced into the Senate that was co-authored by Senate Majority Leader Harry M. Reid (D-Nev.)would allow those eligible for the tax credit longer time to close on a home. The measure was offered as an amendment to H.R. 4213, a tax extension bill now in the Senate.

The deadline would be extended to Sept. 30, 2010, more time for lenders process the influx of applications.

The tax credit is $8,000 for some first-time buyers and $6,500 for current homeowners who meet certain requirements.  Home buyers must have signed a contract by April 30 and close on the their transactions by June 30.

The National Association of Realtors indicated that because of the surge in loan volume and delays related to home appraisals and short sales, many buyers will not be able to make the June 30th deadline.

The industry credits the tax credit, designed to help revive the housing market, with helping juice sales during the start of the critical spring selling season. The measure was offered as an amendment to H.R. 4213, a tax extension bill now in the Senate.

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We are living in difficult times, the recession is effecting people from all walks of life.  Unfortunately, the unemployment rate is steadily on the rise and has an astounding effect on the real estate market.  Thousands of people are on the verge of losing their home due to a loss of vital income.

Foreclosure is an ugly word that lenders hate to speak upon.  It is also a word that borrowers hate to hear.  It is a time consuming process that can be financially costly for both parties.  No one wins when it comes to foreclosing on a home.  There are a countless amount of cases involving foreclosures that have ruined the lives of thousands of people.

Here are three disadvantages a homeowner faces when it comes to a foreclosure:

• Dealing With Intrusive And Rude Parties. This is a terrible situation that can subject the homeowner to dealing with intrusive and rude people who are not sympathetic to their tragedy.
• Ruined Credit. The total amount that is defaulted on the loan will be reported on the former homeowner's credit report.  This could prevent him or her from buying another home for several years!
• No Financial Compensation. The former owner of the home will not receive anything in return for the equity they accumulated over a period of time.

Fortunately, a new concept has arisen within recent times.  The term "short sale" has breathed new life into the market.  Short sales is a solid option to foreclosure, it alleviates financial and emotional strain for all involved.

Now with the Home Affordable Foreclosure Alternatives (HAFA) Program offers homeowners, their mortgage servicers, and investors an incentive for completing a short sale or deed-in-lieu of foreclosure. 

Under the program, a homeowner can receive $3,000 to help with relocation costs.

Mortgage servicers and investors write their own guidelines under the Federal requirements to determine how to implement the program. For more information about your options, you should contact your mortgage servicer.

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On April 12, 2010, SB 401, the Conformity Act of 2010 was enacted. It allows taxpayers who had all or part of the loan balance on their principal residence forgiven by their lender to exclude the forgiven debt from California gross income.

 The new law applies to discharges of qualified principal residence indebtedness on or after January 1, 2009, and before January 1, 2013. California law conforms, with modifications, to federal mortgage forgiveness debt relief for discharges that occurred in tax years 2007 through December 31, 2012. The amount of qualifying indebtedness is less than the federal amount and California imposes a state-only limitation on the total amount of relief excluded from gross income.

The following summarizes the differences between the federal and California provisions. Federal provision applies to discharges occurring in 2007 through 2012, and:

• Limits the amount of qualified principal residence indebtedness to $2,000,000 for taxpayers who file as married filing jointly, single, head of household, or widow/widower, and to $1,000,000 for taxpayers who file as married filing separately.
• Does not limit the debt relief amount; it only limits the indebtedness amount used to calculate the debt relief amount.

The Mortgage Debt Relief Act of 2007 generally allows homeowners to exclude income from the discharge of debt on their principal residence. Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure, qualifies for the relief. In addition, there are not any 1099-C tax consequences for state & federal.

This provision applies to debt forgiven in calendar years 2007 through 2012. Up to $2 million of forgiven debt is eligible for this exclusion ($1 million if married filing separately). The exclusion does not apply if the discharge is due to services performed for the lender or any other reason not directly related to a decline in the home’s value or the taxpayer’s financial condition.

More information, including detailed examples can be found in Publication 4681, Canceled Debts, Foreclosures, Repossessions, and Abandonments on the IRS website.

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As a homeowner there may be circumstances that come up where you need additional funds to remodel or make repairs to your home, or you might need some money to cover an emergency expense. A home equity loan is a great way to access the equity in your home and provide you with the extra funds you may need. Another benefit that many homeowners don't know, is that there are also some tax benefits in doing so as well.

There are two basic types of home equity loans.  One type is a traditional loan where you borrow the whole amount of the loan, then pay it back with specified monthly payments over a specified term.  The second type is a Home Equity Line of Credit (HELOC) where you obtain a fixed line of credit based on the equity of your house.   Typically with this type of loan you only pay interest on the amount that you borrow, and your monthly payments may vary also.

The interest is deducible up to the purchase price of the house plus any improvements.  Many people mistakenly think that all real estate related interest is deductible.  Several years ago the held true but tax reform has since been passed. However, for most people the tax deductions are still substantial, but you may want to consult a tax professional to determine how much you can deduct in your specific case.

However, even if the interest is not deductible, the savings associated with the lower interest rates charged on a home equity loan, will still be beneficial to pay off other higher interest credit cards or other loans.

It is important however to do the math and be responsible when considering these types of loans. Many homeowners found themselves in trouble when they borrowed against the equity in their home and then when housing values declined, they owed more than the house was worth.

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Every lender will have slightly different policies or rules about who qualifies for a short sale. Below are some typical requirements that need to be met to qualify for a short sale.

•The Home's Market Value Has Dropped. 
Comparable sales must substantiate that the home is worth less than the unpaid balance due the lender. Prepayment penalties can be included in this balance.

•The Mortgage is in or Near Default Status.
Today's lenders now understand that many factors contribute to a potential default,especially in today's market. They are willing to look at options to avoid any future losses. 

• There Are No Assets. The seller will need to prove that they have no assets that can be used to pay the lender the difference. Lenders typically ask for financial statements, income tax returns and other financial documents to support the sellers claim.

•The Seller Qualifies For A Hardship.
The seller must submit a letter of hardship that explains why they cannot pay the difference due upon sale. Typically this letter will include why they has or will stop making the monthly payments.

It is important to keep in mind what constitutes a hardship. Below are some typical situations that are typically considered hardships.

1.Unemployment
2.Divorce
3.Medical emergency / sudden illness
4.Bankruptcy
5.Death

If these requirements are met, most lenders will agree to a short sale. With a short sale, both sellers and lenders do not stand to gain any profit from this transaction and most short sales are completed during the pre-foreclosure stage in order for the lender to avoid incurring further foreclosure costs.

Foreclosures and short sales are on the rise in this difficult real estate market. But all of these changes can leave neighbors wondering, “What about the value of my home?” Owners of surrounding homes are concerned that a foreclosure might affect the market value of their home.

It is important to know that appraisals include comparable sales, plus foreclosures. Property appraisals are based on three approaches:

•Cost approach. This is the value to build the home, plus the value of the land.

•Income approach. This is rarely used for single family homes and is used to compare multiple units, based on capitalization rates.

•Market value approach. This type of appraisal compares the subject property to three comparable sales in the neighborhood.

If two comparable sales are regular transactions and one is a foreclosure or short sale, will the appraiser use that distressed sale as a comparable property?  These are considered sales at market value, offered for sale by a willing seller and purchased by an able and willing buyer, with neither party under duress. Banks and mortgage companies are currently being very conservative in their lending practices, including the amount of money they are willing to lend on a property. They look very closely at the appraised value given a property, sometimes asking for a second appraisal in order to feel comfortable about the value given. And, they require that all sales in the area be included in the determination of value.

The good news is that after experiencing a large inventory of unsold homes many areas are beginning to see prices are beginning to rise. Buyers are taking advantage of the large variety of affordable homes, government tax breaks, and low interest rates and we are starting to see some stabilizing of home prices.