The Mesquite Nevada Real Estate Blog

In October of 2008, HUD rolled out their reverse mortgage product and in March of 2009, they perfected it.  With rates expected to rise and the tax credit setto expire, many real estate professionals are looking for new and under-served markets to reach out to.  Since HUD has perfected their reverse mortgage, the Home Equity Conversion Mortgage (HECM) and the market for US residents 62 or older is expected to nearly double between now and 2050, perhaps now is their time.

A reverse mortgage is a loan where home equity is converted into a lump sum payment or series of payments to the homeowner or a combination of the two.  There no requirement for payment until all borrowers no longer live in the home but the borrower must keep the home in good repair, taxes current, insurance current and (if applicable) association dues current while they do.  The benefits of purchasing with a reverse mortgage are as follows:

• seniors can preserve their savings
• seniors who can't qualify for a forward mortgage due to income or credit often can qualify for a reverse mortgage
• seniors can own their home for as long as they are alive, keep taxes current, keep insurance current and live in the home as their primary residence without needing to make a payment
• seniors can enjoy financial security and independence (as this is a non-recourse loan)
• seniors won't have to worry about passing on a mortgage debt to an heir

To qualify for a FHA HECM, one must be 62 years of age or older, occupy the property as your principal residence, not be delinquent on any federal debt and participate in a consumer information session given by an approved HECM counselor.  At closing, HECM borrowers must make a down payment which will be applied to satisfy the difference between the HECM principal limit and the sale price for the property, plus any HECM loan related fees that are not financed into the loan, minus the amount of the earnest deposit. 

SAMPLE TRANSACTION FOR A BUYER BORN IN 1938:

Purchase Price                                                       $300,000.00

Available Principal Limit                                      $178,546.06

Closing Costs                                                          $11,672.50

Cash Required at Closing                                    $133,126.44

They are very strict about where this down payment comes from.  It can be from such things as verified savings, retirement funds and proceeds from the sale of real estate but it may not be from any of the following:

• FHA prohibits seller contributions (also known as "seller concessions"), the use of loan discount points, interest rate buy downs, closing cost down payment assistance, builder incentives, gifts or personal property given by the seller or any other party involved in the transaction.  This includes customary charges that are normally paid on behalf of the borrower by the seller.
• Subordinate liens
• Bridge loans
• Gap financing
• Cash withdrawals from credit cards
• Personal loans
• Seller financing
• Gift funds

For seniors, buying a home is a HUGE move when done correctly.  It involves careful coordination between financial planners, a CPA, a good Realtor and a good loan officer.  Consideration as to whether a reverse mortgage should be involved or shouldn't be involved should always be evaluated as an option.

-Charles Dailey

The Obama Administration has announced new U.S. Department of the Treasury guidelines to enable servicers to begin modifications of eligible mortgages under the Administration's Homeowner Affordability and Stability Plan.

The release of detailed requirements for the "Making Home Affordable" program facilitates implementation of the critical provisions that will help bring relief to responsible homeowners struggling to make their mortgage payments, while preventing neighborhoods and communities from suffering the negative effects of foreclosure such as lower property values, increased crime and higher taxes.

You can see the complete Home Affordable Loan Modification Program Guidlines here.

Here are the highlights of the loan modification program:

• Mortgages for single-family properties that are worth more than $729,750 are excluded from the provisions of this bill. For two families the amount is $934,200. For three families the amount is $1,129,250 and for four families the amount is $1,403,400.

• Interest rates can be lowered to a minimum of 2 percent and then if necessary, the term of the loan can be extended to a maximum of 40 years.

• The home must be a primary residence and verified as such with a tax return, credit report, and other documentation such as a utility bill. The home may not be investor-owned property.

• The home may not be vacant or condemned.

• Borrowers must provide their most recent tax return and two pay stubs, as well as an "affidavit of financial hardship" to be qualified.

• Borrowers in bankruptcy are not automatically eliminated from consideration for a modification in this program.

• Borrowers in active litigation regarding the mortgage loan can qualify for a modification without waiving their legal rights.

• Borrowers are only allowed to have their loans modified once, and the program only applies for loans made on Jan. 1, 2009 or earlier.

• Eligibility is restricted to loans originated on or before January 1, 2009.

• Incentives are provided to extinguish second liens on loans modified under the program.

• Homeowners are eligible for up to $1,000 of principal reduction payments each year for up to five years.

• Separately, up to 5 million borrowers who have mortgages held by government controlled mortgage finance giants Fannie Mae and Freddie Mac should be eligible to refinance through June 2010.

This loan modification home affordability program should stem the tide for quite a few folks who would otherwise end up in foreclosure.

I applaud the fact that the government has finally started to take some meaningful action. This new bill comes on the heels of the 1st time buyers incentive program.

While these are great steps to get the nations housing back on track, there are some that are so far in over their head that even a loan modification is not going to help.

There are still options available that can be taken to avoid foreclosure. A short sale is one of the means that may allow you to sell your home and get rid of your debt.

See these articles for further details:

Foreclosure avoiding it through a short sale

Short sales and deed in lieu of foreclosure

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About the Author: The above Real Estate information on making home affordable loan modification program was provided by Bill Gassett, a Nationally recognized leader in his field. Bill can be reached via email at billgassett@remaxexec.com or by phone at 508-435-5356. 

Have a home to sell in Metrowest Mass? I have a passion for Real Estate and love to share my marketing expertise! 

For Metrowest Massachusetts Real Estate and homes see Metrowest MA Real Estate. Want to have MLS access to beat other buyers to your dream home? Sign up with no obligation at my MLS Property Finder Site.

I service the following towns in Metrowest Massachusetts: Hopkinton, Milford, Upton, Southboro, Westboro, Ashland, Holliston, Mendon, Hopedale, Medway, Grafton, Northbridge, Uxbridge, Franklin, Douglas, and Framingham MA.

Click here to view Bill Gassett's Real Estate profile.

 

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Will There Be a $15,000 Tax Credit For Homebuyers?

A new amendment to the economic stimulus package working it's way through congress was unanimously approved on February 4th. The amendment proposed by U.S. Senator Johnny Isakson, R-Ga. would increase the current "tax credit" of $7,500 to $15,000.

The amendment would provide a direct tax credit of 10% of the purchase price up to a maximum of $15,000 for the purchase of a home. The property purchased must be used as a primary residence. The credit would allow taxpayers to claim the credit on their 2008 tax return. Under the amendment the tax credit would have to be repaid if the home is sold within two years of the purchase. Purchases would have to be made within one year of the legislations enactment. The tax credit will not be limited just to first time homebuyers.

The legislation would sunset the current $7,500 housing tax credit.

"It is time to fix America's problem, not throw money at the symptoms. It is time to fix housing first. It is rare that we have a road map to success in times of difficulty, but this country has once before realized a housing crisis every bit as bad as the one we have today and economic troubles every bit as dangerous," Isakson said. "We have a pervasive housing problem, and we have a historical precedent that works. I am proud this Senate has joined together, learned from history and repeated a method that worked by adopting this amendment."

To view the press release: Senate Unanimously Approved Isakson Amendment to Stimulate Housing Market.

This amendment could have positive effect on real estate sales in 2009. I will continue to monitor the progress of the legislation and keep you posted on it's progress.

Call me with any questions you have concerning the current market.

The Media can be misleading.

Yeah I know, no surprise there!

But let's talk about HR 3221, H.R. 3221 or if you want to call it by it's really long name, the Housing and Economic Recovery Act of 2008

It was signed into law Monday July 28th, 2008. It was reported all over the world. it's the talk of the town. I've been interviewed on radio shows, quoted in articles and blogs. Ok, now what?

Just about nothing. We're waiting.
There's quite a few facets included in the bill that still need to be hashed out. Here's a quick peek at just some of the facts.

 

The $7,500 Tax Credit

It's a tax credit (not a rebate). It's for purchases made between April 9, 2008 and July 1, 2009. It's essentially an interest free loan for 5 years that has to be paid back.

Down Payment Assistance Programs

HR 3221 wipes out the ability for down payment assistance on an FHA loan starting October 1, 2008. Think you have till then? Think again. The Lenders are already not allowing DPA on the loans they are accepting.

Skin in the game

FHA used to finance up to 97%. That meant that the buyer had to pony up the other 3%. As of October 1st, under the new rules, the borrower will have to 3.5%.

Reserve Requirements for Second Homes

Thinking about buying a second home? Vacation home? How about Rental Property. It's a great time to find bargains. How much liquid reserves do you have in the bank? There wasn't a minimum reserve requirement before. Now there is.

Have less than 30 % equity in the second home? You'll need to prove you also have 6 months worth of PITI reserves for both properties in the bank (liquid). Yeah I said SIX months! Have more than 30%? You'll just need to prove you have two months reserves.

Capital Gains Exclusion

Are you good at percentages? Remember when you were entitled to $250,000/$500,000 of tax-free gains from the sale of a home if filing separately/jointly provided you lived in the residence for at least 2 of the preceding 5 calendar years? Not any more.

Now that exclusion is calculated by taking the capital gains on the sale of the home and multiplying it by a ratio (percentage) of how long you lived in the home and how long you owned the home.

Loan Limits Increased!

Nope. Matter of fact, depending on where you live, FHA, Fannie and Freddie Conforming Jumbo loans will decrease.

The Mandatory Refinance at 90% of Present Value

I saved the best for last. First of all it's not mandatory. It's actually voluntary on the lenders part. Should a lender decide this is in their best interest, they'll still hold the note. They'll reduce the size of that note to 90% of the present value and that's what FHA will be on the hook for. Then again, nothing here is in concrete. The details still have to be hammered out by HUD. Until that happens, nothing really has changed.

So there you go. You know know more about HR 3221 than the next guy at the water cooler.

What should you do if you think any of these changes will involve you in the future? Contact your trusted mortgage professional today.

 

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