Urban Life

Short Sale, Bankruptcy, Walk Away. What should I do with my home?

2010-02-08T15:14:50-07:00

I received a copy of this article from my friend Lisa Capes at Chicago Title. It is written by two Phoenix area attorneys who practice real estate and bankruptcy law. I thought the information was both topical and thoughtful. I called Stuart and we had a nice chat about the issues homeowners face today. Below, and with permission, we are posting their article. If you have questions, please contact Stuart or Robert. Their contact info is at the bottom of this post.

House Underwater? Possible Courses of Action
by Stuart Pack and Robert Nagle

Many homeowners today are faced with the situation where their homes are worth less than what they owe on their mortgages. In fact, the issue has reached the national media, with the New York Times and National Public Radio both presenting articles on this issue this week alone.

This article briefly explores some options a broker or attorney can discuss with a homeowner who is considering the sale of their home.

There are 4 viable alternatives for homeowners to consider: the first is to continue to make the monthly mortgage payments. This is what most homeowners do. For numerous reasons and regardless of whether the payment can be afforded, homeowners feel obligated to repay their loans, even though it may not be in their financial interest to do so.

The second alternative is loan renegotiation. Many homeowners who have requested their lender to renegotiate their loan have discovered that their lending institution is reluctant to modify the terms of the loan and when their lender is even willing discuss a renegotiation, numerous hurdles must be overcome before the loan can be renegotiated. It is generally rare for a lender to agree to actually forgive any of the principal of the loan.

The third option is to find a buyer for the home and negotiate a "short sale". As with asking a lender to renegotiate a loan, many homeowners find the short sale process to be extremely frustrating, time consuming and ultimately an unsuccessful endeavor. This is not to say that a successful short sale is impossible, but it is frequently a difficult process.

Last and newest is the "Strategic Default." More and more homeowners are electing to walk away (i.e., intentionally default) from their mortgages and let their lender foreclose. These homeowners have reached the conclusion that the financial reasons to walk away outweigh the reasons to continue to make the monthly payments to the lender. There are several viable reasons to consider a Strategic Default.

Arizona has long established "anti-deficiency" laws with respect to home loans. What is a deficiency? A deficiency is the difference between the principal balance due on a home loan and the amount that the lender receives at a foreclosure sale. Thus, if the loan balance is $500,000 and the lender receives $200,000 at the foreclosure sale, there is a deficiency of $300,000. "Anti-deficiency" laws are generally intended to protect homeowners from the lender collecting the difference. In fact, lenders making loans in Arizona are aware of the inherent risk to them of the anti-deficiency laws, and typically price their loans accordingly.

There are many criteria used to qualify under Arizona's anti-deficiency statutes. Each situation is unique and upon review, an attorney who specializes in real estate transactions can determine whether the property would qualify.

Finally, a Strategic Default may not have as great an impact on your credit score as the lending community would have you believe. Many commentators think that a borrower's credit scores will take the same hit (e.g., 200 to 300 points, depending on overall credit conditions) through a short sale or foreclosure, and both remain on a person's credit report for seven years (bankruptcies remain for 10 years).

Being informed about the options available to a homeowner will help establish your credibility as not only the right person to assist with a potential home sale but also as an advocate for the best interests of the homeowner.

These are complicated issues that should be discussed with competent counsel familiar with real estate law and bankruptcy law. For more information, please contact Stuart Pack or Robert Nagle at (602) 595-6951 or email them at stuart.pack@naglelaw.com or robert.nagle@naglelaw.com.

First Friday in Downtown Phoenix, February 5th Was Fun

2010-02-07T00:19:51-07:00

Hope those who could, did make it to First Friday in downtown Phoenix last night. I almost missed it but things worked out.

My night started at Alta, the Mark-Taylor loft apartments on 4th. Jane Fendelman was doing a CD signing for her hypno-therapy CD's. She is always fun to hang out with... never dull for sure. Catherine Dermody, the GM at Alta, made sure everyone had pizza enough to make the belly happy. (Check back for a full post on Alta, it is a happy place.)

Got to meet Emily Jackson Bates, a massage therapist and yoga instructor at YogaDenPhx next door to Alta. She was offering free chair massages and was very sweet. I'm sure YogaDen will be the topic of a future post when I visit and find my inner downward dog.

My friend Claudia B. joined in the fun and we took off for a view of Roosevelt Row. It was crazy busy. Lots of art, food and PEOPLE. Great to see downtown with so many happy bodies having fun.

The crowds were pretty thick so we headed off to Grand Ave. I think Roosevelt Row was holding most of the people as Grand was pretty quite. We hit Sapna Cafe, Fractal and ended up hanging out with Kate from Modern Cat. I've heard of Kate from her blog and had never met her. We had a great talk about Blogs, SEO, page views and all those bloggy topics people who blog like. Kate's friend Bogi Lateiner of 180 Auto fame was there too. Did you know she is a certified master mechanic... I was impressed. Before we left a friend of Kate's brought her a birthday cake adorned with kitties of course.

The night ended at Paisley Violin. Got a table on the back patio and listened to Anjonette sing and play guitar. Tried to get a coffee and snack but gave up after 20 minutes or so of waiting. I love the place but getting service on the patio when it's busy and I'm tired is a bad combination.

Hope to see you downtown next month when First Friday happens once more.

Gene Urban
The Urban Team at Realty Executives
602-234-5777

What Is Homepath Financing and What are Home path Loans

2010-02-05T16:38:00-07:00

Homepath is a FNMA, Fannie Mae, loan product for properties that FNMA has foreclosed on and have qualified for special financing. So what makes it so special? Well there are a few things:

No mortgage insurance: This is the insurance that is required by a lender if you stop making payments.
No appraisal: This is a house by house rule but they do waive the appraisal on properties.
Low down payment: 5% in the Phoenix market, depending on your market that could be higher or lower.
15 to 30 year fixed mortgage at competitive rates.
Protection for first time home buyers:

What is First Look for Fannie Mae Homes?

First Look is designed to provide owner occupants and buyers using public funds a “first look” at Fannie Mae homes. Under First Look, Fannie Mae will only consider offers from owner occupants and buyers using public funds during the first 15 days a property is listed in the local multiple listing service (MLS). If the property is still for sale on the 16th day, investor offers may be submitted and will be considered

I saved the best for last! FNMA is having a sale and here are the details:

Special Offers:

Fannie Mae is offering a 3.5% incentive* for buyers who purchase and close on a Fannie Mae-owned home between January 28 and April 30, 2010. Buyers purchasing properties listed on this site that are closed within this period may receive up to 3.5% of the final sales price for:

Closing costs.
The purchase of new Whirlpool® appliances by Fannie Mae.
A mix of closing costs and appliances, at the buyer’s discretion, up to the maximum 3.5%.

*** Lenders may impose their own limitations on the use of the 3.5% incentive, so buyers should consult their particular lender for guidance.

To be eligible for this incentive:

Offers must be accepted after January 28, 2010
Property sales must close escrow before May 1, 2010
Buyers must be owner-occupants, investors are excluded.

Who Can Provide a HomePath Loan?

FNMA has limited the number of mortgage companies to just a few of hundreds of lenders. If you would like to find one in your area, here is a link to the “find a HomePath Lender” site. Below you will find contact information on an Arizona lender who can help you in our fine State.

If you would like to search Fannie Mae’s inventory of HomePath authorized homes we’ve made it easy. Just use this link to our home search site.

If you are looking to buy a home there is an unprecedented level of first time home buyer incentives.

________________________________

We want to thank our lender buddy, Ron Hall, for providing this HomePath information. You can reach Ron at 623-293-6970 with your mortgage questions or on his web site: http://www.bncnationalbank.com/scottsdale/rhall.

Have a great weekend…

Gene Urban
The Urban Team at Realty Executives
602-234-5777

What is the Difference Between a Family Room and Living Room

2010-02-03T12:20:56-07:00

I got an email asking the question: Which room is considered the family room and which is the living room? I thought that was a great question worth its own post.

I called our good friend and amazing interior designer, Milt Diriwachter, to get a pro's take on the subject. He says the family room is the most connected room to the kitchen and outdoors, while the living room is traditionally more formal in nature.

Milt went on to say the most important thing is that the rooms have the function you need for your lifestyle. Massive gamers may want one room dedicated to such play, while people who love to read would want to create a warm quite space to kick back and drift away in a book. Milt believes the naming rules mean very little while the usability and function of each area is paramount.

What I got out of our conversation is that historically, specific rooms had a purpose. The family room was where the household gathered to play and talk while the living room was for more formal gatherings and often adult verses child oriented. However, today's family should toss out the out-dated rule book and use the various rooms to best suit their needs and lifestyle.

Best to you...

Gene Urban
The Urban Team at Realty Executives
602-234-5777

Milt Diriwachter Contact Info
Statement's Interior
statements1@cox.net
602-943-1765 (office)
480-695-6582 (cell)

Can You Sell or Buy a Home With A Tax Lien, Maybe Yes

2010-01-29T15:14:22-07:00

Our mortgage friend, Ron Hall, with BNC Mortgage has provided another good post for our readers here at Urban Life. Today's topic is the dreaded IRS Tax lien on a home. Much thanks to Ron for this info and be sure and contact him if you have any questions. He can be reached at 623-293-6970 or rhall@bncnationalbank.com

Many home buyers and real estate professionals find out they are dealing with a tax lien and assume that this buyer is done and move on to the next client.

I am here to tell you that is a HUGE mistake. In FHA lending the rule of thumb is that if the collection can affect title it has to be paid off, well that’s a guideline not a rule.

A couple of things come into play that most people are not aware of: First, is there a payment arrangement? In this case can you show that you have set up a payment plan with the IRS and have made those payments in a timely manner? The gold standard here is 12 months of canceled checks as proof. If the answer to that is yes the second and very little known tool is… Will the IRS subordinate the lien to the mortgage? We’ll most of the time that answer is YES. Think about it for a minute, you owe the tax guy some money, you want to buy a home, so you ask the IRS to subordinate the lien so that you can accumulate an asset that they can collect against in the future if you default. Is there really a downside for them?

Hope this information is helpful and we wish you a great and prosperous February as we reach the end of the first month of 2010.

Gene Urban
The Urban Team at Realty Executives
602-234-5777

This information is deemed reliable but not guaranteed.

44 Monroe in Downtown Phoenix Faces Foreclosure

2010-01-22T11:32:59-07:00

It doesn't come as too much of a surprise that 44 Monroe in downtown Phoenix has been given a notice of trustee sale. To me, the project was simply one of those... too much too late. If you've been reading Urban Life for a while you may have caught our post just before the project was completed voicing our concerns.

I am not sure why a developer thought the downtown region would support a project where the low end units were more expensive than many project's higher priced ones. Besides purchase price, the HOA fees were more than some people's mortgage. Add in a completion date over two years past the top of the market and you have a problem Houston.

According to an article on AZ Central, only 14 of the 196 units have been sold leaving a whopping 182 unsold properties in the development. Ooops.

The trustees, Jennings, Strouss & Salmon, have scheduled the sale of the 182 unsold units on April 14th. Who knows, maybe the new owners will be able to shift the development's price point to a level that matches the income of the region and fill this puppy with happy homeowners who will love 44 Monroe's great location, stellar views and fine amenities.

Gene Urban
The Urban Team at Realty Executives
602-234-5777

Prior Articles About 44 Monroe on Urban Life:

RL Brown Predicts Up Swing in Phoenix Housing Market

2010-01-20T14:22:38-07:00

I just got done listening to long-time Phoenix housing guru R.L. Brown give his predictions for the Greater Phoenix housing market.

On one level he predicted a rise in the new-build market beginning in 2011 and showing good strength by 2013. On another level he said this would only happen if Government got off its partisan rear-end and started leading the country into realistic and sustainable job growth.

Brown's Predictions included:

Price will be the driver for home sales, not location.
Consumers are looking for larger lots and space.
The condo market will suffer with the exception of the central corridor, parts of Scottsdale and Tempe.
Consumers will be buying more conservative homes that are affordable over the long term verses large expensive homes.
Homes in the $250,000--$400,000 range should see the greatest demand in the next 3 years.

Brown says the people (you & I) must demand our elected officials start doing their intended job... effectively managing the concerns of the nation, states and cities. He says it is essential we let politicians know we are serious about change and tired of lobbyists, in-fighting and partisanship rule decision making.

Perhaps yesterday's Mass election results are the start of a wake-up call our elected officials are about to get on many levels.

My personal take on his talk was that the real estate market will show significant strength when consumer confidence and job creation see upward change.

Best to you,

Gene Urban
The Urban Team at Realty Executives
602-234-5777

HUD Makes Buying and Selling Flip Homes Easier

2010-01-19T13:26:46-07:00

Out friend and senior mortgage consultant, Ron Hall, passed on the following article about the changes in HUD policy on flipping homes.

In the past, an investor would have to wait a minimum of 90 days before selling a home they bought to flip. The new rules will make life a bit easier for all.

If you have specific questions drop Ron Hall an email or call him at 623-293-6970...he is a darn savvy mortgage guy. Here is the article:

WASHINGTON - In an effort to stabilize home values and improve conditions in communities where foreclosure activity is high, HUD Secretary Shaun Donovan today announced a temporary policy that will expand access to FHA mortgage insurance and allow for the quick resale of foreclosed properties. The announcement is part of the Obama administration commitment to addressing foreclosure. Just yesterday, Secretary Donovan announced $2 billion in Neighborhood Stabilization Program grants to local communities and nonprofit housing developers to combat the effects of vacant and abandoned homes.

"As a result of the tightened credit market, FHA-insured mortgage financing is often the only means of financing available to potential home-buyers," said Donovan. "FHA has an unprecedented opportunity to fulfill its mission by helping many home-buyers find affordable housing while contributing to neighborhood stabilization."

With certain exceptions, FHA currently prohibits insuring a mortgage on a home owned by the seller for less than 90 days. This temporary waiver will give FHA borrowers access to a broader array of recently foreclosed properties.

"This change in policy is temporary and will have very strict conditions and guidelines to assure that predatory practices are not allowed," Donovan said.

In today's market, FHA research finds that acquiring, rehabilitating and the reselling these properties to prospective homeowners often takes less than 90 days. Prohibiting the use of FHA mortgage insurance for a subsequent resale within 90 days of acquisition adversely impacts the willingness of sellers to allow contracts from potential FHA buyers because they must consider holding costs and the risk of vandalism associated with allowing a property to sit vacant over a 90-day period of time.

The policy change will permit buyers to use FHA-insured financing to purchase HUD-owned properties, bank-owned properties, or properties resold through private sales. This will allow homes to resell as quickly as possible, helping to stabilize real estate prices and to revitalize neighborhoods and communities.

"FHA borrowers, because of the restrictions we are now lifting, have often been shut out from buying affordable properties," said FHA Commissioner David H. Stevens. "This action will enable our borrowers, especially first-time buyers, to take advantage of this opportunity."

The waiver will take effect on February 1, 2010 and is effective for one year, unless otherwise extended or withdrawn by the FHA Commissioner. To protect FHA borrowers against predatory practices of "flipping" where properties are quickly resold at inflated prices to unsuspecting borrowers, this waiver is limited to those sales meeting the following general conditions:

All transactions must be arms-length, with no identity of interest between the buyer and seller or other parties participating in the sales transaction.

In cases in which the sales price of the property is 20 percent or more above the seller's acquisition cost, the waiver will only apply if the lender meets specific conditions.

The waiver is limited to forward mortgages, and does not apply to the Home Equity Conversion Mortgage (HECM) for purchase program.

Specific conditions and other details of this new temporary policy are in the text of the waiver, available on HUD's website.

Have a great day,

Gene Urban
The Urban Team at Realty Executives
602-234-5777

FHA Loans and Non-Permited Rooms and Additions

2010-01-15T13:12:00-07:00

As we have mentioned in the past, FHA loan requirements have gotten tougher these days. One of the changes is when you are considering buying or selling a home with non-permitted rooms or additions. Our friend Jenna Hirth with PMAC Lending in California has provided us a little insight into the changes that can affect a real estate transaction where un-permitted work was performed.

Good Old Days- Up until a year ago if a property transaction had unpermitted additions or improvements we use to have the appraiser verify that the work was done in a “workmanlike manner” and give it no value on the appraisal report.

Reality with Current Market – Lenders and investors now are much more strict about properties with unpermitted areas. If the unpermitted area has any electrical, plumbing or heating that may pose a potential health and safety issue after the transaction closes, they will want the those items capped or removed. If there is lighting they would need to remove the fixtures and cap the electrical and if there was a sink added they would want removed and plumbing capped off. Once these corrections are made the appraiser would go back and inspect.

Of course when possible they can always try to get the improvement permitted. This is all about health and safety and marketability when the loans are sold and insured. If you come across a property with permit issues like these discussed, it would be a good idea to check with the city to see if and how long it would take to get a permit and if that won’t work contact the potential lender to confirm exactly what will be required for the loan approval.

Financing Option – Many lenders offer the FHA 203K Rehab loan that would allow a borrower to finance needed repairs and improvements that could also include items needed to obtain final permits.

Best to you in 2010,

Gene Urban
The Urban Team at Realty Executives
602-234-5777

Streamlined and Easier Short Sales Are Coming Soon

2010-01-14T16:50:50-07:00

We’ve been getting a lot of emails asking about the streamlined short sale guidelines put out by the Treasury Department in late November 2009. Thus, we thought we’d talk about it a bit today.

The new guidelines are part of the Home Affordable Foreclosure Alternatives Program also know as HAFA… government types love long names so they can use acronyms.

The program is pretty complex with 43 pages of guidelines/forms and does not apply to loans backed by Fannie Mae or Freddie Mac. We are told they will be putting forth their own version of the guidelines. We find this strange since we were told by HUD last October the guidelines were for Fannie and Freddie backed loans.

The basic elements of the streamlined process includes:

Complements HAMP by providing a viable alternative for borrowers (the current homeowners) who are HAMP eligible but nevertheless unable to keep their home.

Uses borrower financial and hardship information already collected in connection with consideration of a loan modification. We wonder how they plan on distributing the info from one department to another effectively. We will probably have our clients re-submit documents only because we know it will be faster and more likely to work.

Allows borrowers to receive pre-approved short sales terms before listing the property (including the minimum acceptable net proceeds). This is a huge step forward. In the past, agents have been guessing what the bank’s appraiser will provide as market value 4-6 months from the time the home is put on the market.

Prohibits the servicers from requiring a reduction in the real estate commission agreed upon in the listing agreement (up to 6 percent). We appreciate this a lot. It's tough working hard for 4-6 months and have some banker tell you they are reducing your commission by 30%-50%.

Requires borrowers to be fully released from future liability for the first mortgage debt (no cash contribution, promissory note, or deficiency judgment is allowed). This is huge for home sellers. Many do not have the cash to contribute and the threat of signing a promissory note is very scary… especially if your deficiency is in the 10's of thousands of dollars or more.

Uses standard processes, documents, and timeframes/deadlines. Right now every bank has their own forms, rules, timelines and such. Standardizing the process will be a great benefit. Plus, if there are two mortgage companies, the forms, rules and documents will all be the same. What a concept!

Provides financial incentives: $1,500 for borrower relocation assistance; $1,000 for servicers to cover administrative and processing costs; and up to $1,000 for investors for allowing a total of up to $3,000 in short sale proceeds to be distributed to subordinate lien holders (on a one-for-three matching basis). This too is good. Financial incentives are what will help the lenders/investors be more proactive in responding favorably to short sales.

The changes are scheduled to go into effect on April 5, 2010, yet some loan servicing companies will likely move more quickly than that. We hear Bank of America is testing an expedited short sale process as we speak.

We hope this has been of help. Please visit our dedicated short sale site for more information about short sales in the Greater Phoenix market… www.Short-Sale-Phoenix.com.

Gene Urban
The Urban Team at Realty Executives
602-234-5777