Real Estate Information Archive

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%

A short sale in real estate occurs when the outstanding obligations (loans) against a property are greater than what the property can be sold for.

 

Step One

Verify the value of your property.  If you are selling the property through a real estate broker, your broker will provide you with an estimate of market value.  If you are selling the property yourself, do your own market analysis of the area and your property.

 

Step Two

Add up all the costs of selling your property.  If you are using the services of a real estate broker, the broker will provide an estimate of closing costs.  If you are selling the property on your own, call a local title company or real estate attorney and ask, as a seller, what the closing costs will be.

 

Step Three

Determine the amount owed against the property.  This will be the total of all loans against the property.

 

Step Four

Do the calculations.  Subtract the total amount owed against the property from the estimated proceeds of the sale.  On a short sale, this will be a negative number.

 

Step Five

Contact the lender or lenders.  Talk to someone in the customer service department and tell them the situation.  They may direct you to a specific department.  Talk to a supervisor or manager if possible; this person will have more authority.

 

Step Six

Ask the lender what its procedures are for a short sale.  Some lenders are willing to work with you by reducing the amount owed or making other arrangements.  Others will look to the agents involved (if any) or anyone who’s making money off the transaction to see if they can make concessions to make the transaction happen.  Still other lenders will tell you, the debt is your responsibility, one way or another.

 

Step Seven

Sell the property.  Select a real estate broker to assist in marketing your Home.

 

Tips

Closing costs will include title and escrow fees (if the seller is responsible for any portion of them, which will depend on your county), attorney fees, a portion of unpaid property taxes, re-conveyance fees, notary fees, delivery fees, documentary fees and/or transfer fees.  Remember that the amount on your monthly loan statement does not include interest.  Interest is accrued until the date a loan is paid off, so you may have as much as 30 days of interest on top of the balance owing, and you’ll need to include this interest in the total payoff amount.

 

Warnings

If a property is sold under a short sale, the lender may require the buyer to make up the difference, either through a personal obligation or collection.  The IRS often gets involved with short sales, because they are seen as a relief of debt and may be treated as income.  Check with your accountant.

Click here to get a price on your home .  Or if you are looking for property that might be a foreclosure or otherise.

What type of property qualifies for a short sale?

 

• Banks may consider a short sale for various reasons
• A Home in any location, size, style and condition may be considered

 

Normal steps to start the short sale process.

 

• The property must be in distress and have a sales offer in writing
• Discuss the potential short sale option with the homeowner
• The homeowner must sign an authorization to release form.
• You must have a signed sales contract for an amount less than what will cover all of the sellers’ costs
• Contact the Loss Mitigation department at the bank

 

Fax your offer along with the following to the bank.

 

• Include a cover letter explaining why the offer is less than full price, the sales contract, justifying comps for the area and pictures, if you have them.
• A net sheet or closing statement (a sheet that shows the bank exactly how much they will net after closing costs, taxes, etc are paid)
• A hardship letter from the homeowner that mentions the dreaded word….bankruptcy
• Estimate a cost of repairs using retail repair prices that the normal homeowner would pay for these items

 

What happens to the homeowner’s credit?

 

• Keep in mind that the agreed upon price is payment in full.  However, the homeowners may still owe the difference between the mortgage balance and the discounted amount via a deficiency judgment.
• If granted, this judgment will affect the homeowners and their credit report just as any other judgment.  You must get the bank to agree to accept payment in full without pursuit of any deficiency judgment.
• In addition, the difference between the mortgage balance and the short sale may be declared as income on your income tax returns by means of a 1099.
• Homeowners should speak with their accountant for advice.

 

What other options are available?

 

• Since Fannie Mae and Freddie Mac have additional programs to assist sub prime borrowers, many lenders are more willing to offer loan modification options.  This option can extend the term of the loan, add on delinquent payments to the loan principal, and/or reduce the interest rate to make the loan more manageable for the homeowner.
• Also, there may be an option to utilize a repayment plan that requires homeowners to increase their monthly payments until the loan is current.  Check with the mortgage lender and a real estate consultant who specializes in short sales.  It may be possible to refinance an adjustable rate loan with a Federal Housing Authority (FHA) or Conventional Fixed Loan.  Noe that lenders will not postpone a foreclosure just because a property is listed, although they may delay the process, if you have a reasonable offer in the works.
• The idea candidate for a short sale is still making loan payments and has a credit rating worth preserving.  Otherwise, it may not be worth going through the complicate process.

 

What are the seller’s options if a short sale is rejected by the lender?

 

• There are a variety of reasons a bank will reject a short sale – from too low a price to too many files on the loss mitigator’s desk.  You can look for another buyer or even try resubmitting the same contract.
• A short sale might be rejected if the loan is less than a year old.  In this case, the loan servicer that bought the loan may require the original lender to buy it back.

 

What financial liability will the sellers incur as a result of the short sale?

 

• Many lenders ask sellers to sign a promissory note for all or part of the difference between the proceeds of the short sale and the debt obligation as a condition to a short sale.  In such cases, the note gives lenders the right to sue a seller and attach other assets if the note is not paid when due.
• According to many professionals, it’s important to understand this difference if you work in a non-recourse state which may not allow the lender to pursue a deficiency judgment against a seller for any deficiencies after a property is foreclosed.  Seek the advice of an attorney and your lender to determine what financial obligations exist for both parties involved within your state.

 

Are there tax liabilities as a result of a short sale?

 

• Seek the advice of a tax expert.  The IRS requires lender to submit a Form 1099 stating the forgiven amount.  Sellers who meet the Internal Revenue Service definition of insolvency (either bankruptcy or with debts exceeding assets) may not have to pay taxes on the forgiven amount.
• The U.S. house of Representatives has introduced the Mortgage Cancellation Tax Relief Act (H.R. 1876), which would eliminate taxes on any debt forgiven on a principal residence through either short sale or foreclosure.
• Ask an accountant or attorney to provide more information on this bill.

 

Are For Sale By Owners qualified for Short Sales?

 

• Homes that qualify for short sales are identified primarily by word of mouth.  However, we have agents that specialize in short sale counseling which happens prior to filing bankruptcy.
• For Sale by Owners are another source since many homeowners look for ways to cut their costs when selling their property.  Their concern may not be warranted because many FSBO’s don’t realize that the bank covers the commission.
• With many more adjustable rate mortgages ready to reset to higher loan amounts in the next couple of years, short sales represent a growing sector of the market.

Click here to get a price on your home .  Or if you are looking for property that might be a foreclosure or otherise.

Legitimate businesses generally don’t advertise on utility poles or on temporary signs along the side of the road.  Be wary of anyone who calls or stops by your Home with an offer too good to be true.  Predatory buyers or scam artists may pretend to help you.  What they really want is your property.  A potential predatory buyer/lender:

 

• seeks you out to “solve” your financial problems
• pressures you to make a quick decision
• demands large up-front fees
• tells you not to contact your current lender or bank
• tells you not to contact a lawyer
• asks you to sign papers without giving you a chance to read them
• asks you to sign papers with blank spaces
• asks you to sign a deed
• offers to file bankruptcy for you

 

Legal Services of South Central Michigan

Click here for More Info on Predatory Lendors

 

Green Path Debt Solutions

1-800-630-7410

Stop by Tom Stachler's web site or call us should you need further assistance. Or you can Click Here to get an email report providing you with a valuation of your property.

Click here to get a price on your home .  Or if you are looking for property that might be a foreclosure or otherise.

There are different options available to you when you no longer have enough income in the household to support the mortgage and all other bills.  These options assist with preventing the foreclosure, but do not mean keeping the Home.

 

Short Sale

 

The mortgage company allows the homeowner to sell the home for less than what is owed on it.  This option can be utilized before the Sheriff’s Sale.  Prior arrangements need to be made with the mortgage company before the official sale of the home.

 

Deed-in-Lieu

 

The mortgage company allows you to give back the deed to the home in exchange for “forgiveness” of the debt.  This must be done before the Sheriff’s Sale.  The mortgage company may require you to have the home listed on the market for a period of time before considering this option.

 

Sale of Home

 

List the home for sale.  This can be done before or after the Sheriff’s Sale.  However, to prevent the foreclosure from going on your record, the sale must be completed before the Sheriff’s Sale date.

 

During this time, the best thing for you to do is to stay in contact with the mortgage company.  This is important to prevent the foreclosure of your home, if at all possible.  Unfortunately, it may not mean keeping your home, but will allow you to “spare” your credit, so that you may purchase a home in the future when your situation improves.

 

You have up until the date of a Sheriff’s Sale to “work out” arrangements with your mortgage company.  So, if you can re-establish sufficient income before that date, then options that involve keeping your home become available to you.

Click here to get a price on your home .  Or if you are looking for property that might be a foreclosure or otherise.