Short Sale Story!

Katie Hawkes brings the news.... for more information please contact her at 858.922.2226 or khawkes@prusd.com or http://www.katiesells.com/ ... Katie is always available to answer your questions!

We dealt with a new short sale issue this week that I thought I would share with you.  In this deal, we represented both buyer and seller and the seller had retained a Short Sale Negotiator (“SSN”) to handle the transaction.  The short sale, with B of A as the first lien holder, was approved and the approval letter provided that the second could receive a “maximum” of $3,000.  The approval letter also had the following language:  “Any additional fees that were not approved on September 6, 2011 will not be covered by Bank of America, N.A. and become the sole responsibility of the agent, the buyer or the seller to pay at closing.”  Based on that language, the SSN told our agent that he needed to credit over $50,000 to the second lien holder at close of escrow.  Both the SSN and escrow officer claimed that this language meant that an agreement to pay more to the second was allowed if it was made after September 6 and was not to be “covered” by B of A.  As a result, escrow prepared a new commission instruction memorializing the credit and asked us to sign it.

As you can imagine, we do not agree with the SSN’s interpretation of the above clause and refused to sign the escrow instruction.  The approval letter specifically says that the “maximum allowed to the Jr. Lien Holder…” was $3,000.  Whatever the term, “additional fees” means in the clause quoted above, it does not mean that you can ignore the “maximum” language and pay the junior lien holder whatever you want.  If any more money is to be paid to any other lien holder, it has to be approved by the first.  The language cited by the SSN and escrow, is not enough.  So please do not let anyone pressure you in to accepting this position.  It is just the latest way people have come up with to avoid the limitations of the short sale process.  As much as we want to close deals, we cannot succumb to this type of temptation.  We are closing deals every day, and doing so the right.  Let’s continue to do so.

KATIE HAWKES... BRINGS THE MORTGAGE RATE NEWS...

KATIE HAWKES ALWAYS BRINGS THE NEWS.... CALL HER TODAY...858.952.2226 OR KHAWKES@PRUSD.COM ... YOU CAN ALSO SURF OUR SITE FOR HOMES http://www.katiesells.com/

Mortgage rates backed off their historic lows over the past two weeks. Despite the Feds self proclaimed goal to lower rates, they inched up generally around 0.375%. These are still unbelievably low when you look at the long term historic trends.  If you have been around for any length of time and have owned a home, I’m relatively positive that you have seen rates in the 8 – 12% range. Rates are as low as they were in the 1950s! The cost of home ownership has never been lower coming from highly depressed home values coupled with extremely low mortgage rates. It’s clear that there is a tremendous buying opportunity now, but the big question in the back of everyone’s mind is – “Will I qualify for a loan?”

When the financial crisis hit, most banks became very strict with their qualification process. It almost seemed like they did not want to make any loans at all. The good news is that the financial institutions have emerged from the recession stronger and ready to lend. Credit is available but banks are very nervous because the economy is still week. Unemployment leads the way for this weakness.

Mortgage lenders want to  make loans now, but lending standards remain tight and you must be prepared to fully document your income and assets. There are a few specialty lenders that don’t sell their loans to the secondary market and are a little more creative in documenting income, but their rates are not quite as good.  Fannie Mae, Freddie Mac, and the Federal Housing Administration continue to dominate the mortgage market, setting the standard for the loans that lenders make and sell to investors. As a result, the lenders strive to dot every i and cross every t when the approve you.

Some more good news did happened this past week as it looks like there will be a return of the former “high balance” conforming loan limits for high cost areas which includes San Diego County. This limit was reduced from $697,500 to $546,250 in San Diego County the end of September. This impacts many, many borrowers as rates above this limit are considered jumbo loans and the rates suffer. Another possible boon to those who want to refinance but could not due to lack of equity is pending approval. The Federal Housing Finance Agency, with Fannie Mae and Freddie Mac (the enterprises), announced a series of changes to the Home Affordable Refinance Program (HARP) in an effort to attract more eligible borrowers who could benefit from refinancing. The new program enhancements address several other key aspects of HARP including:

·         Eliminating certain risk-based fees for borrowers who refinance into shorter-term mortgages and lowering fees for other borrowers;

·         Removing the current 125 percent LTV ceiling for fixed-rate mortgages backed by Fannie Mae and Freddie Mac;

·         Waiving certain representations and warranties that lenders commit to in making loans owned or guaranteed by Fannie Mae and Freddie Mac;

·         Eliminating the need for a new property appraisal where there is a reliable AVM (automated valuation model) estimate provided by the Enterprises; and

·         Extending the end date for HARP until Dec. 31, 2013 for loans originally sold to the Enterprises on or before May 31, 2009.

The Enterprises plan to issue guidance with operational details about the HARP changes to mortgage lenders and servicers by November 15. Since industry participation in HARP is not mandatory, implementation schedules will vary as individual lenders, mortgage insurers and other market participants modify their processes.

The Federal Housing Finance Agency regulates Fannie Mae, Freddie Mac and the 12 Federal Home Loan Banks. These government-sponsored enterprises provide more than $5.7 trillion in funding for the U.S. mortgage markets and financial institutions.