Monday, December 28, 2009

What is Going on with Short Sales?

I get questions from consumers every week about issues with short sales. I ran across the following blog post and was really set back by it. I had no idea!

I thought it was important enough to ask the owner of the blog for his permission to reprint it here. He gave it, so enjoy.

A Short Sale Story You Wont Believe!
Does our Government really want to clean up this mess?

This just in

Basically, IndyMac Bank (now OneWest Bank), is holding clients hostage, demanding a promissory notes, or they will proceed to foreclosure. For the life of me, I couldn't figure out why they were doing this. What advantage could there possibly be for them to proceed to foreclosure?

Yesterday, I figured it out. You see, IndyMac was taken over by the FDIC and sold to OneWest Bank in March/2009. Guess who the investors are behind OneWest? George Soros, Michael Dell, Steve Mnuchin (former Goldman Sachs executive), and John Paulson (hedge-fund billionaire).

Now, listen to the deal they got from the FDIC..

Basically, they purchased all current residential mortgages at 70% of par value (70% of the outstanding loan amounts). They purchased all current HELOCS at 58% of Par Value!!!

Next, in order to "sweeten the pot", the FDIC stepped in and guaranteed the following: For any residential mortgages where OneWest experiences a loss, the FDIC will step in and cover anywhere from 80%-95% of the loss. The loss is calculated using the ORIGINAL LOAN BALANCE, not the amount that OneWest paid for the loan. Let's use my clients situation as an example:

If the Loan Amount is $478,000, plus 6 months of missed payments, for a grand total of $485,200. OneWest pays $334,600 for the loan. We have an all cash offer of $241,000, net to OneWest. So, let's do the math, shall we?

The net loss, according to the FDIC formula is the ORIGINAL LOAN AMOUNT minus the amount of the offer. In this case, $485,200-$241,000, or $244,200. Next, the FDIC, according to their Loss Share Agreement, writes a check to OneWest for 80% of the so-called "net loss". So, in this case, OneWest gets a check from Uncle Sam for $195,360 (.80 X $244,200).

Add the $195,360 to the sales price of $241,000, and you get a grand total of $436,360. Remember, OneWest paid $334,600 for the loan. So, OneWest puts $101,760 in their pocket, thanks to the FDIC. Folks, that is over $100k of our hard-earned tax dollars!

So, you ask.Why does this program hurt short sales? Because, our brilliant government offers this SAME PROGRAM FOR FORECLOSURES! The only difference is, the government picks up 80% of the tab on all of the extra costs associated with a foreclosure (BPO's, upkeep, utilities/maintenance, legal fees, etc.)

So, If I'm OneWest, why would I want to waste my time negotiating through a Short Sale, when I can make the same amount of money (if not more) by just letting it go to foreclosure? And we wonder why nobody can get a Loan Modification? Why would OneWest approve a loan modification for this guy, when they can foreclose and make over $100k? And, to add injury to insult, they have held this loan for 6 months! Not a bad ROI, huh?

What infuriates me the most is that in my particular case mentioned above, they have the guts to hold my client hostage for a $75k promissory note, after they are already making more than $100k on the sale!!! This is his primary residence, 1st Position loan, and OneWest has NO RECOURSE! Imagine if they could make $100k, then get a deficiency judgement! Talk about making some big bucks!

Can you say "GREED"?

The scary thing is that over 50 banks have Shared Loss Agreements in place with the FDIC. Some of them include: Bank of America (go figure), CitiMortgage, Wells Fargo, etc.

This entire agreement between the FDIC and OneWest can be found on the FDIC website. It's all there, for the world to see! They have it all layed out. All of the formulas, worksheets, etc.

Now, it's up to us to bring it to the attention of our elected officials and the media. Enough is Enough!

Wait, it gets better.The FDIC just announced that it needs to start borrowing money from the U.S. Treasury in order to replenish it's deposit insurance fund (the same fund being used to pay all of these banks in the Loss Share Agreements). Go Figure! -

Reprinted story from Frank Bernardo-October 21, 2009
Joseph M. Moore
More2Lend Financial
Phone: 800-310-7577
Fax: 800-647-8777

To view the story on his blog follow this link: Short Sale Story

Sunday, November 8, 2009

HR3548 Home Buyer Tax Credit

This is Great news for the housing market. HR3548, the extension of the first time home buyer's tax credit was passed in both the House and the Senate. The Senate passed it 98 to 0 and the House passed it 403 to 12.

The income limits are $125,000 for single applicants and $225,000 for joint applicants. The maximum purchase price is $800,000.

My advice to you is this. If you are contemplating about taking advantage of this tax credit, ... Don't sit on the fence. Do it Now, or at least start by the first of the year. There is a time limit.

You must have a contract by 4/30/10 and your loan must close by 7/1/10. This is not much time. It take two to three Months to close a loan in today's market.

There are only three options for a "no down payment" or 100% LTV loan: FHA, VA, and USDA Rural Development Guaranteed or Direct Mortgage. These organizations are overwhelmed by the shear number of applications because they are the only 100% loans on the market right now.

These organizations are way understaffed and there is no option to hire. This is the Government, and there is no budget to hire more people.

Buyers and Sellers should be aware of this and make sure their contract reflects two to three months to close the loan. This is not a joke.

So, take advantage of HR3548 but start now, don't wait.

Good Luck.

Wednesday, July 22, 2009

USDA Rural Development Guaranteed Program

The USDA Guaranteed loan program has clarified a guideline that has long been left to individual interpretation. RD Instruction 1980-D restricts applicants from owning more than one or ... multiple homes.

This guideline has been an issue for a long time. Most of the guidelines for this loan are the same as or derived from FHA Guidelines. So why has there always been a disconnect? As with any company, the regulations are thick and always changing, and employees are not trained. So, one office will allow ownership of another home and a different office will not.

RD AN No. 4454 has just addressed this. The Answer is:

Loan applicants are limited to retaining ownership in one dwelling other than the one associated with the loan request. To retain ownership of the dwelling and meet this eligibility requirement, the retained dwelling must be outside of the applicants local commuting area OR not be structurally sound, functionally adequate.

Manufactured homes that are not anchored on a permanent foundation are not considered structually sound and functionally adequate.

I hope this helps to clarify and or define the issue. You probably know more now than the underwriter. Refer them to the AN number above.

Good Luck.

Saturday, April 11, 2009

First Time Home Buyer Tax Credit

This 2009 home buyer tax credit is really a great thing but there is a time limit so you should act on it as soon as possible. Many people don't understand the requirements so I have summarized them below. The first time homebuyer tax credit is $8,000 so you should sit up and pay attention.

Time Frame:
For your first-time home buyer purchase to qualify for the $8,000 Tax Credit you must purchase and close the loan on your new home between January 1st 2009 and December 1st 2009.

Home Owner Eligibility:
All United States Citizens may participate if they pay federal taxes, and are first time home buyers. A first time homebuyer is an individual that has not owned a home in three years.

Types of Homes:
The main factor is that your purchased home is your primary residence. It can be a condo or town house or single family, new or used.

If you sell your new home within three years you will have to repay the first time home buyer tax credit. That is the only repayment provision.

This tax credit is cash in hand. By that I mean that it is refundable so to speak. If you owe $2,000 in taxes you pay them nothing and you will receive $6,000 back from the government. Or, ... if the government owes you $2000 you will receive $10,000. (2,000 + 8,000)

There are income limits and the details can get a little confusing. To put it simply, if you are single, your adjusted income cannot exceed $75,000. $75,000 - 95,000 you can still get a partial credit.

If you are married, filing jointly the max adjusted income is $150,000. $150,000 - $170,000 you can get a partial credit.

As a first time home buyer you can take your tax credit on your 2008 0r 2009 tax filing.

It's all good so go out and buy that new home!