Sell your house for more than it is worth.

It seems like it has been an eternity since I last blogged. I sincerely apologize, but there are times when every project needs attention at the same time. I have been so busy making sure that my business goals are on target, that it becomes difficult to do everything on my list every day. I want to let you know that if like me on Facebook, You will get information on a more regular basis, so if you are tired of waiting for the full blog, be sure to check out my Facebook entries which are short, but much more up-to-the-minute about what I am doing. I did try to write a blog while driving down the expressway at 70 miles an hour. I thought that this was the main purpose of the “cruise control” button. The kind police officer explained to me that the law against texting also applies to writing blogs while you drive. I also discovered that if you get into an accident, like hitting the median, the air bag pops at such a tremendous force that the keyboard stuck to my face. I have one button still on my face, the “delete”, which I think would have been gone already, but my wife, upon hearing about my accident, keeps pushing it every chance she gets, but I am still here!

Seriously though, I wanted to blog so that if you are in need of help, you will know what to expect when you sell your property to investors like me. There are many different strategies that investors use, so I am just going to tell you about mine. I regularly buy houses for more than they are worth. This means that a seller can escape a bad situation, without having to do a “short sale” and the many hassles associated with foreclosure or other types of sales that the company decides to try. The recession has shown us that banks, in general, do not care about their customers. The number of foreclosures has grown astronomically and millions of people, expecting to have their home for the rest of their lives, have now lost, or are about to lose the most precious financial asset they expected to have for the rest of their lives. Fortunately, as I have written before there are some avenues that have been created to offer help. I am a private investor, so I am here to let you leave with your dignity intact.

So you make the decision to sell me your property and you are unsure of what to expect, since it is very different from traditional methods. The benefits to you are:

  • It is very quick
  • You can be relieved of many of your responsibilities (and be able to sleep again)
  • It is possible that you may get some financial benefits

In a “short sale”, since the bank gets less money than is owed to them, they are unwilling to allow you to receive any profit or benefit.

The situation could not be more embarrassing for you. The moment of realization that you have lost your property is devastating. Banks want the money that is owed to them or the property, so it is rare that you can find a loan officer who cares about anything but the bottom line. When I step in as an investor, you must understand that unless you win the lottery or have inherited enough money to pay what is owed, your property, in any case, is gone. You will need to prepare yourself emotionally that you will give up control of the property, which may take some time to come to grips with your situation. Whether it is myself or a bank, you will no longer own the home and do not get to make the decisions about the sale or the mortgage.

So let’s talk about the differences

The other things that are particularly different are:

 

  • The down payment
  • The closing
  • Possession
  • Payout
  • The future relationship with the buyer

The cause for these differences really centers on what expectation each party has from the other. In an ordinary sale you would expect the buyer to enter the closing with a down payment and a secured loan from a bank. The closing of the transaction would occur at a Title Company and they would take possession immediately while the escrowed money from the bank and the down payment pays off your mortgage company completely. You can move on and never interact with the buyer again, in most cases.

In the investor transaction there might not be a down payment. Your mortgage will not be paid off completely so there is no need for the ordinary escrow closing. Possession is then negotiated between the investor and the seller.

The investor, in this case, will take over your loan payment for you. It gives me the opportunity to buy the house for the value of the loan, even if the loan is higher than the value of the house.

There will be no traditional down payment, because I, the investor, will not get any value for the money I would have to pay. You, however, will get the value for what would have been your equity if you were able to live in your house and make regular payments. Occasionally, there may be things an investor will do for you such as paying your moving expenses, or if necessary, paying the legal fees for you to declare bankruptcy. If the rental income from the house will justify it, the investor may offer you a participation in the profits. This is rare, but it can be a point to negotiate.

The bottom line is that you get rid of a big headache and the investor takes it over! You may have contact with the investor later, particularly if your bank has already begun a foreclosure proceeding. Sometimes you will need to call the investor regarding a bill that was routed the wrong way or maybe some general business regarding the property. It is not an adversarial relationship, and if you need to make a call you can generally get the investor right away instead of listening to boring records and constantly being switched from one person to the other.

I am guessing that you have figured out that I was not being serious about the car accident. It would be nice if some people came with a delete button, but I am not an inventor so I will stick with what I know, Real Estate Investing. This business allows me to assist families in trouble and I can help to take away some of the financial responsibilities that weigh so heavily on all our minds as the country struggles to pull itself out of a recession.

Home Affordable Modification Program (HAMP) 2012 Update

The good news for homeowners is that the home affordable modification program or HAMP as it is called has been extended through 2013.

HAMP is a program offered by the government beginning in 2009 with the economic recovery act. While compliance by the bank is optional, HAMP allows homeowners to apply for modification to their loans and get the payment reduced down to 31 percent of their gross monthly income. There’s an application process that begins at the lender when you will need to provide them all of your income documentation as if you are applying for new loan. They’re going to evaluate this information to see if you qualify by the standards of the investor. They’re not required to talk you about the program assistance however, they receive incentives from the government for modifying those loans. These may include extra money to cover the reduced amount of principle and there are also incentives for the borrower to make regular payments. If you make regular payments after the modification you also get some money back to give you some incentive to continue paying for loan and create equity in the process

Here’s a little bit about how it works:

As long as you have a job and you’re still struggling to make your mortgage payments you maybe eligible for HAMP. It allows for you to lower your mortgage payment down to 31 percent of your verified monthly gross income. Gross income is the amount of money you make before taxes are taken out. This means, if you have a $50,000 a year salary and your take home income is $1500 dollars every 2 weeks, your gross income is still $50,000 even though your paycheck is smaller.

For example: If your monthly mortgage payment is $1,650, and your income is $50,000 per year, that payment currently equals 39.6% of your income. HAMP will lower your payment down to 31 percent of that gross income or $1,291and your savings is $359 per month.

President Obama has announced changes to the program and intends to be even more aggressive with elements of the program. Mortgage lenders got the information in February but the new information for homeowners won’t be available until June, so you can check out the government website at http://www.makinghomeaffordable.gov then. For now:

You may be eligible for HAMP if you meet all of the following criteria:

1. You occupy the house as your primary residence.
2. You obtained your mortgage on or before January 1, 2009.
3. You have a mortgage payment that is more than 31 percent of your monthly gross (pre-tax) income.
4. You owe up to $729,750 on your home.
5. You have a financial hardship and are either delinquent or in danger of falling behind.
6. You have sufficient, documented income to support the modified payment.
7. You must not have been convicted within the last 10 years of felony larceny, theft, fraud or forgery, money laundering or tax evasion, in connection with a mortgage or real estate transaction.

One great thing about the HAMP modification is that the government considers entire payment including your tax escrow and your insurance escrow and homeowners association fees to calculate what your final monthly payment needs to be to reach the goal of 31 percent. This gives you an even better chance saving money in the program.

Republican Gains May Mean Homeowner Losses.

I am back again as I promised! I wanted to alert you to an issue that I am very concerned about. I am afraid that the new Republican congress will be so friendly to banks that more homeowners than ever before will lose their homes.
Two weeks ago, we in the industry were worried about a bill that made it quietly through congress to the President’s desk that would have allowed banks to use all the bogus signature validations (robo signing)they had as proof in foreclosure cases. Homeowners would be affected because banks would be able to lie about signatures and authorizations but still use these as evidence in court.
This would have turned around many laws that protect you against predatory practices from lenders now. It would also have changed the burden of proof over to the defendant foreclosure victim. These laws now are commonly known by the terms, Real Estate Settlement Procedures Act (RESPA) and the Truth in Lending Act of 1968 (TILA). There are also other more obscure federal laws and state laws that would be subverted by this.
While each of the political parties share responsibility for this act, it is the Republican Party that is generally more business friendly. They also have successfully been stopping any legislation that they didn’t like. We have seen over the last two years, whenever a single Republican Senator doesn’t like a bill, they stop it cold. This is an indication that ALL Republican Senators agree and since the bill’s sponsor was a Republican Representative, we may presume that this is a Republican idea.
Regardless of what side of the aisle you walk, I urge you to contact your elected officials and tell them what you think about this issue.  If you want a lot more information on buying and selling, you can leave a reply or look me up on Facebook and become a fan.  You may also contact me via my website http://www.ehousetraders.com

Banks have their backs against the wall

Okay real estate fans! I think this is it. I’m finally back writing my blog. I realize it’s been a long time in coming but I finally placed you on my schedule at 9:45 AM every morning. Okay, now it’s 9:58 AM and I spent the last 13 minutes thinking of a good excuse to tell you why I haven’t been writing the blog all this time. Unfortunately there’s no time for my excuse because I got to be finished by nine o’clock, so I’ll make this quick.
Right now the banks have got their backs against the wall. They’ve already admitted that they haven’t got the first idea as to who owns the loan. Nevertheless, they’re marching into court to sue for foreclosure without correct or proper information. If you or your attorney will merely question them on the right facts, they will be unable to document their rights to sue you.
Don’t forget this; never forget this, only the owner of the loan has the right to recover money from you. If you can’t work it out with your bank. There still may be hope for you. Here’s a big tip: look for a lawyer who will fight! There are many lawyers who will only try and work out a short sale for your property. This provides you with no advantage. If you want to stay in the house as long as possible, you need a lawyer who will fight to keep you in there as long as possible. And if you want to keep the property you need a lawyer will fight to win and not to delay. Check back here often, and I’ll be updating. I’m also going back to article writing, so you can look for me in new articles there.
There’s a lot going on in real estate right now! If you don’t take advantage of it now you will miss it! If you are in a buying mode right now, this may be the best market you’re going to see again in your lifetime. If you want a lot more information on buying and selling, you will can look me up on Facebook and become a fan or contact me via my website http://www.ehousetraders.com

You May Need a Lot of Help to Get the Balance on Your Mortgage Reduced

The change that caught the news media’s attention was the one that talked about principal write downs on mortgages. The revision simply said mortgage companies would write down the balance of a mortgage for people facing foreclosure in those instances where the balance of the mortgage was far greater than the value of the home.

Since the start of this foreclosure crisis in our country, the value of homes has dropped. This drop has been substantial. I believe that the value nationwide has dropped about 20%. In California, Florida and some other areas values may have dropped 50% or more.

Many people owe far more on their mortgages than their homes are worth. In these situations some people facing foreclosure are not motivated to try to save their homes. They feel that they will never be able to recover what they pay for their home. So they walk away and let their mortgage company foreclose.

Members of congress and various consumer advocacy groups in the past saw the problem here. They lobbied to have judges in bankruptcy cases be allowed to lower the balance of the mortgage to what the home was worth. The lobbyists for the mortgage industry are very powerful. Each time this proposal had been made, the lobbyists were successful in getting it defeated.

In the revisions to the Making Home Affordable Program announced March 26 the Obama Administration dealt with this. They announced that mortgage companies would have to consider writing down the principal balance for certain people who have applied for loan modifications. This is supposed to be done if the balance owed on a mortgage is greater than 115% of the current value of the home.

Say the value of a home is $100,000. The amount currently owed is $130,000. The mortgage company is being urged to reduce the balance on the loan to $115,000.

The mortgage company would run a New Present Value Test. As long as that indicated it was worthwhile to reduce the balance of the loan, the company is supposed to do so.

The mortgage company would initially put the amount to be reduced into a separate forbearance account. As long as the person remains current on their loan payments, the mortgage company will forgive the amount reduced in 3 equal payments over 3 years.

Let’s look at our example above. The mortgage company would reduce the amount owed by $15,000 from $130,000 to $115,000. As long as the payments were made on time, the mortgage company would forgive $5,000 a year. The entire $15,000 would be forgiven at the end of the third year.

As you can see, this form of principal reduction is greater than the one that members of congress and consumer advocacy groups had proposed in the past. This covers all people facing foreclosure who applied for loan modifications not only those who filed for bankruptcy.

An Incentive for Mortgage Companies to Write Down Loan Balances

The Obama Administration is giving mortgage companies an incentive to do this. They will pay them $.15 on the dollar for the amount that a mortgage company reduces a mortgage by if the balance is from 115% to 140% of the value of the home. If the balance of the mortgage is greater than 140% of the value of the home, they will pay the mortgage company $.10 on the dollar for the amount reduced.

If the balance of the loan is less than 115% of the value of the home, The Obama Administration is giving the mortgage company an added incentive. They will pay them $.21 on the dollar for the amount reduced.

Going back to our example, the loan balance of $130,000 is 130% of the value of the home ($100,000). The amount that the balance is reduced is $15,000. So the mortgage company would be paid $2,250 (15,000 X $.15).

Sounds great, doesn’t it. If you are facing foreclosure and are in this position,

Don’t Get Your Hopes Up

Certain problems are going to arise. These have not been addressed by the Obama Administration.

The first is that this is voluntary for the mortgage companies. What happens if some elect not to do this?

The second is that there is no time limit for the mortgage companies to put this in place. Are the mortgage companies going to delay implementing this? Will we see the same type of delays that have plagued the Making Home Affordable Program from the start?

The third is that the mortgage company or investor will contact those people who are eligible for this. Do you know who the investor on your mortgage is? Not many people do. By the way, the mortgage company to whom you are sending your monthly payments is normally not the investor.

How will your mortgage company or investor determine who actually qualifies for this? Will anyone monitor them to make sure this is done fairly? What if some mortgage companies do this quickly and others drag their feet?

Fourth – What happens in those instances where there are two loans? It looks like the administration assumed that most people who have a first and second loan got these through the same mortgage company. So the balance on the second loan will be reduced first. If the remaining balance is still over 115%, the balance on the first loan is reduced.

The guidelines indicate that a mortgage company that has to reduce the balance on a second lien to bring the total down to 115% will be paid $.06 on the dollar for the amount reduced. This payment will only be made if the person had not made a payment on that second loan in more than 6 months.

Let’s look at the example we have been using. The balance on both loans totals $130,000. The balance on the first mortgage is $109,000. The balance on the second is $21,000. The value of the home again is $100,000.

115% of $100,000 is $115,000. The balance on the second loan would be reduced to $6,000. The balance of $109,000 on the first loan would remain unchanged.

If there was a different mortgage company for the second loan, they are being asked to forgive $15,000 of their loan. For that the government may pay them $900 ($15,000X$.06). They will get that only if the person facing foreclosure has not made a payment on that loan in the last 6 months.

So the mortgage company here can possibly get $900 at most while in those instances there is only one loan, the mortgage company there would get $2,250 regardless of when the last payment on that loan was made.

Is There Anything Wrong With This Picture?

It sure looks like the mortgage company handling the second loan is getting the shaft. Do you think that most mortgage companies on these second loans are going to willingly participate in this program?

Current estimates are that in about 50% of the cases where people are facing foreclosure first and second loans exist. It is not clear on how many of these two different mortgage companies are involved. Chances are the percentage is high.

One Other Big Challenge Exists . . .

. . . for mortgage companies when it comes to reducing the principal balances on loans. If they start doing this for people facing foreclosure, won’t the people who have made their loan payments on time and are not facing foreclosure complain? Won’t they demand that the balance on their loans be reduced if the value on of their homes has dropped?

Many people facing foreclosure who are expecting the principal balances on their mortgages to be reduced are in for a rude awakening if it does not occur.

What steps can you take if you are in this position?

I suggest that you get in touch with your mortgage company. Tell them that you heard about the revisions that were made at the end of March to the Making Home Affordable Program. Let them know that you believe the balance on your mortgage is greater than 115% of what your home is worth. Ask them what you have to do to be considered for a reduction in the balance of your mortgage.

If you have a first and second mortgage and these are handled by 2 different mortgage companies, call both companies. Explain the situation to them. Ask them for consideration.

Expect the people you talk to tell you that they are not going to reduce the principal balances on any mortgages. Get the name and phone number of the person to who you talk. Make a note of what they tell you. Then call or write your congressman and let them know your situation and what you were told. Ask for their help.

If you are being represented by a lawyer or a housing counselor, discuss this with them. See what they will do.

By the way here is another reason I recommend that anyone facing foreclosure get a lawyer or counselor to represent them. Anyone who represents themselves most likely not won’t follow through on things like this. In the long run they will lose out because they did not.

Always remember that your mortgage company does not have your best interests at heart. Make sure that you know as much about the foreclosure process and the steps you can take to save your home as you can. My EBook has quite a bit of information which I believe that you would find very helpful. Please check it out. You can get more information on it by clicking Stop Foreclosure.

Much Success,

Mark Elkins