mortgage Archives - The Phoenix Real Estate Guy

Harp 2.0: Why a Short Sale May Be Your Best Bet

June 1, 2012 By shane hollenback

Harp 2.0 is getting a lot of buzz. As a matter of fact, it’s getting so much more buzz than the original HARP program, that both the industry masses AND the general public are buying into the hype that it is going to “save our housing”.

Look, I’m a mortgage lender in Arizona. I earn a living, for my family, by originating home loans. I don’t make money by turning away possible mortgage loan business. But, with HARP (in any flavor) I’m not at all convinced that this is the solution for the large amount of underwater homeowners. There are a few points that continue to come to mind when I consider HARP as a solution to an underwater homeowner.

Without a principal reduction, what is the true benefit to a lower rate? This, of course, depends on the severity of negative equity. In my state of Arizona, it is still not uncommon for a homeowner to be $200,000 upside down. With a conservative outlook on appreciation, it could still take many years to break even. What happens if you have a life changing event 2, 3, or even 5 years, after a HARP refinance, that forces you to sell your house? You’re still upside down. By a lot, likely.
In my experiences and interactions, I see many people that want to keep their home. …but not at the cost of sanity and stress.
In addition to the above, a large majority of homeowners want to lose the feeling of this financial monkey on their back. If the debt isn’t lowered, to near market value. Then a lower rate with a HARP refinance just means a lower to slightly lower payment on a house that you are still upside down in.
If people are faced with these tough choices of refinancing a negative debt, or getting rid of the property, the common desire of any of the outcomes is the fastest possibility of buying again.

In many cases, HARP isn’t the solution. It’s the band-aid.

This morning I was reading through the plethora of industry email that shows up while I’m sleeping. One of the very few emails I look forward to are from my friend Rob Chrisman. He does industry commentary, on a huge level, and today he inspired this post. There is already talk of HARP 3. We haven’t even got to see a success/failure rate of HARP 2.0, and original HARP was a total bust. Now 3.0? Here’s an excerpt:

“Remember HARP 3? I received this note yesterday from New Jersey: “If it is truly the objective of government to protect the masses and offer a fair and balanced unwinding of the mortgage situation, HARP 3 is necessary. At some point, whether it’s a HARP 3, 4 or 5, the basic economics are going to dictate that the ability to refinance into a lower interest rate should be afforded to all Americans. I don’t know if it needs to be a 28th Amendment, but since Congress can’t remember how to build a budget I’d rather not consider the war over a new Amendment. The Real Estate sector accounts almost 19% of the US Economy. Considering how beaten down our economy has been in recent years perhaps something radical is required. HARP 3 needs to be a unified refinance program. Perhaps the FHA or Fannie/Freddie is not the solution, as has been rumored, but the US Government owns another source of funding: the USDA. Since USDA is exempt from many state laws it’s foreclose process is simpler, thus making it more attractive in the MBS markets – and no MIP, simple and complete.“

A great question and observation. Not a lot of faith in HARP as it currently stands.

The way I see it, is that HARP makes sense for a person who isn’t heavily upside down. Upside down enough to not even think about getting rid of the property, because a rebound is close. Or, a person that is at a point of their life that their home is undoubtedly where they are staying. They wouldn’t ever consider getting rid of the property, but they want to take advantage of the lower rate environment. Statistics show that these people are rare.

The other options to get out of an underwater property are basically a foreclosure or Deed in Lieu of Foreclosure (both fairly fast and straightforward) or a short sale. Each of those options have their own pros and cons. And *disclaimer*, I highly recommend you consulting with an attorney to discuss your specifics.

With a foreclosure, generally speaking, you are exercising your agreement with your lender. Your agreement essentially says, “you pay you keep, you don’t pay we take”. In a simple form thats the agreement. You stop paying, they take the property back. Contract fulfilled.

From a lender’s perspective, we look at how long after a foreclosure can you buy again. This seems pretty cut and dry, but what has happened to many people, is that the bank took their sweet time at pulling the property out of the homeowner’s (you) name. Sometimes a delay in years. The problem is that you are really at the mercy of when your bank decides to pull that property out of your name. Just part of the foreclosure fun. Why is this a problem? Because when you are looking at the timeline after a foreclosure to buy again, the clock starts when the property is transferred out of your name. Ouch. This isn’t to say that all banks delay, but it is something that happens frequently and you really don’t have control over it.

Enter the short-sale. A short sale is different than a foreclosure in that you are actually selling your property to a buyer, and the bank is just taking a less-than-full-payment amount to call it good. This means that you aren’t exactly exercising a part of the original contract, you’re actually re-negotiating the terms of the original contract. It gets negotiated just like any other contract negotiation. But here’s what a short sale does for you: It guarantees the property getting transferred out of your name. Why? Because you’re selling the property to a new person and the ownership will transfer with sale. This means your clock to buy again starts the day you close on the sale of your home. This certainly gives a homeowner looking for a solution and a strategy to homeownership a much more certain game plan.

In the past few years, I have generally been negative to short sales. This is because every short sale can go different. It’s a renegotiation of a contract, and if handled by an inexperienced person, it could end badly for the homeowner. But, the one element of a short sale mentioned above has completely changed my feelings towards short sales.

YOU MUST talk to a professional about your specific circumstances, and if you decide that a short sale is in your best interest… YOU MUST connect with a REALTOR that is highly proficient in the process of a short sale.

I’d be willing to bet that you could even find one of those guys somewhere inside these pages.

Don’t ask me, I’m just a lender.

If HARP seems good for you, let me know.

FHA Streamline Refinance: This is a big deal…

February 9, 2012 By Jay Thompson

Dan Green, a mortgage originator with Waterstone Mortage and author of the fabulous blog, The Mortgage Reports, wrote a terrific (and truly important) piece, FHA Streamline Refinance Changes : Banks To Stop Verifying Income, Job, And Credit.

Go. Read it.

In a nutshell, if you have an FHA mortgage, you can refinance it.

Even if you are underwater (owe more on your mortgage than the house is worth. A likely scenario in the Phoenix area).

Even if you have lousy credit (though you can not have had any late mortgage payments in the last 12 months).

No job, income or credit score verifications are done. No appraisal is conducted.

Almost sounds too good to be true.

Almost sounds like exact type of financing that got us into this mess to start with…

But, like Dan says, it’s the FHA that is on the hook for these refi’s:

Remember : The key idea here is that the FHA doesn’t actually make loans to homeowners. Rather, it insures the banks that make loans to homeowners. In this way, once a homeowners has his mortgage in the FHA’s “system”, so to speak, the FHA is on the hook for that loan no matter what its rate or loan size.

This is why FHA homeowners are not allowed to increase their loan balances with an FHA Streamline Refinance. Raising the loan size would raise the FHA’s exposure to default.

This is why the FHA Streamline Refinance skips job, income and credit verifications. It really doesn’t matter if someone lost their job; or has a 500 FICO — the FHA is still on the hook for that loan.

It’s in the FHA’s best interest to put all FHA-backed homeowners into the lowest mortgage rates possible because with lower payments, in theory, come fewer defaults, which means fewer claims.

Is Your Mortgage an FHA Loan?

Check your loan papers. Call your lender. If you’ve been turned down in the past for an FHA streamline refinance, or never tried to get one because of your credit or your home value, try again. The doors appear to be wide open.

Go. Read Dan’s post. Call him, or your lender of choice.

Photo Credit: ~~Stolen~~ Borrowed from Dan, with permission.

Historical Mortgage Rate Chart: 30 Year Fixed Interest Loan

December 19, 2011 By Jay Thompson

For whatever reason, people always seem to find these mortgage rate trend charts fascinating.

Click here for a free real-time mortgage rate quote.

Here is the historical mortgage rate trend chart for 30 year fix and flip loans from April 1971 through November 2011.

Data is supplied by FreddieMac. Excel wizardry by yours truly. You are welcome to use this chart, all I ask is that you keep the credit box on the chart and link back here.

When I first published charts like this back in 2006, people left comments saying there was NO WAY the interest rates would stay where they were.

And they were right. Rates have dropped a full point since then. Though really they were wrong, because everyone expected them to rise, not continue to fall. Some even prognosticated that there was “impending doom” for mortgage rates.

Moral of that story?

No one can predict mortgage rates with any real accuracy.

One thing is evident though. Right now mortgage rates are at all-time lows (or at least at their lowest since 1971, I can’t find any earlier data). November 2011 marked the first time 30 year rates dipped below 4% (to 3.99%. Hey, it’s under 4%…). And Bloomberg reported a few days ago that rates were at 3.94 percent. This means that this could be a great time to take out jumbo home loans if you’re planning to invest in real estate.

Will they drop lower? Maybe, maybe not. But let’s face it, at 4% they can’t really go much lower. Or so one would think.

Will they rise? Maybe, maybe not. Sooner or later, sure they’ll rise. When and to what extent? Your guess is as good as mine.

You may do your own research and review more charts if you’re in search of a mortgage broker for your next home purchase.

Should you refinance? Depends on many factors. Contact your mortgage loan officer.

Click here for a free real-time mortgage rate quote.

I’ll attempt to update historical mortgage rate trend charts for other mortgage products (15 year fixed, 1 and 5 year Adjustable Rate Mortgages) over the next couple of weeks. Attempt mind you, no promises!

Until then, enjoy this chart, and be thankful you didn’t get a mortgage in October 1981, when rates peaked at 18.45%…

Help for Underwater Homeowners in Arizona. New HARP / Making Home Affordable Rules

October 25, 2011 By Jay Thompson

HARP – the Home Affordable Refinance Program – is undergoing some much needed revisions to its eligibility criteria. Previously the program allowed some homeowners to refinance their existing mortgages up to 125% of the home’s value.

For example, let’s say you owe $200,000 on your mortgage. Due to the dramatic drop in home values across the Valley (generally), your home is now worth $140,000 (sadly, this is not unreasonable within the Phoenix market). Under the old HARP guidelines, the most you could refinance for would have been 125% of that $140K home value — that would be $175,000 (140K * 1.25 = 175K).

But you owe $200K, so a refi for $175K does you absolutely no good.

Enter the new guidelines. The 125% loan-to-value (LTV) limit has been lifted. Gone. Over. There is no LTV restriction under the new HARP guidelines.

This bodes well for Arizona homeowners.

I am not a lender. I’m a real estate broker.

I can answer some questions on the new HARP / Making Home Affordable program, but the person you really need to be talking to is a lender / loan officer.

Dan Green, a noted and highly regarded loan officer, has written the definitive article on the new HARP / Making Home Affordable eligibility requirements. Read that post. It is written in simple to understand terms, not the seemingly foreign language many lenders and real estate people toss about. It’s important to understand the program, and Dan explains it very well.

Keep in mind, not everyone will be eligible for a HARP refinance. But under the new guidelines, many more just may be able to refi that seriously underwater home…

Underwater on your mortgage in Phoenix? You need legal advice, not Realtor advice.

August 4, 2011 By Jay Thompson

Owe more on your Phoenix home that it is worth? Welcome to the Underwater Club. It’s not a pleasant club to belong to, despite its massive size.

If you bought a home, or refinanced an existing home, anytime circa 2005 and beyond you are quite likely a member of the Underwater Club. And you’ve got to be wondering what your options are. Foreclosure, short sale, loan modification, trustee sale, default, walking away, deed in lieu, foreclosure abatement ” all are big buzz words of late. The first thing you can do is get assistance from Mortgage Advisor Liverpool.

And they are complicated buzz words, fraught with legal, tax and credit implications.

I can’t tell you how many people that are underwater on their mortgage (or mortgages) have asked us questions like, “What should we do?”, “Should we stop making our mortgage payments?”, “Can the lender or IRS come after us if we short sell, or default, or mail in the keys?”

You don’t have to look far on the internet to see that Arizona is an “anti-deficiency state” ”“ ie: lenders can’t come after you for the balance of your mortgage.

Not so fast folks. Yes, there is some anti-deficiency protection in Arizona. Keyword some. There is NOT blanket anti-deficiency protection for all types of mortgages, or homes, or actions you may take surrounding your underwater status. Every situation is different.

BE VERY CAREFUL. Do the wrong thing, or do the right thing the wrong way and you may find a process server knocking on your door.

If you talk to a real estate agent and they tell you things like, “Don’t worry, you are protected” or “Arizona is an anti-deficiency state” or “you need to stop making your mortgage payments” you need to run, not walk, away.

Real estate agents are neither licensed nor trained to make such bold sweeping statements.

You need legal advice

I can not stress this enough. YOU NEED LEGAL ADVICE and with very rare exceptions, real estate agents aren’t trained or licensed to give legal advice.

Enter Kevin Hardin. Kevin is a Specialized Mortgage Paralegal and Director of the Mortgage Mediation Group.

Kevin is wicked smart. He’s done time (so to speak) in the mortgage industry and is a Certified Mortgage Banker, a Certified Mortgage Consultant, and a Certified Mortgage Planning Specialist. All that in addition to being a JD candidate at Concord University School of Law.

Kevin knows his stuff. Top to bottom, inside and out.

He’s also a heck of a good guy and can cook up some amazing bar-b-que (he has a smoker as big as a SUV).

I can attest from personal experience that a consultation with Kevin is well worth the $150 consultation fee. Honestly, he could charge ten times that and it would still be the best money an underwater home owner in Phoenix could spend.

If you are underwater on your Phoenix area home and need to discuss your options, Kevin Hardin is your man.

Here is Kevin’s contact info:

Kevin W. Hardin

Director, Mortgage Mediation Group

4250 North Drinkwater Blvd, Suite 320

Scottsdale, AZ 85251

888-909-1030 Phone
480-467-3107 Fax

http://www.MortgageMediationGroup.com

“There are 40 Million consumers with errors in their credit reports. Are you or someone you know one of these consumers? If so, contact me today. We can help you remove those errors and possibly receive a $1,000 or more because of that error…at no charge to you. We are a national law firm on a mission to eradicate credit reporting errors through a unique no cost service to consumers.”

@KWHardin
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Full Disclosure: I receive absolutely zero compensation in any form what-so-ever from Kevin Hardin or Thomson Law for writing this article, if you consult with Kevin, or secure any service Thomson Law offers. Kevin didn’t even ask me to write this. Yes, Kevin is a friend, but I have consulted personally with Kevin on my mortgage situation and fully endorse his expertise in the mortgage arena. My only “compensation” for writing this is in knowing I am passing on a valuable resource for the underwater Phoenix homeowner.

Updated 8/6/2011: A couple of attorney’s, one former and one currently practicing, have correctly pointed out that a paralegal cannot provide ‘legal advice”. Using those words was bad writing on my part. Kevin Hardin is imminently qualified to discuss mortgage and financial issues. He can not, and does not, provide legal advice. I liken talking to paralegals to seeing a Nurse Practitioner, a Physicians Assistant, or a Chiropractor. They aren’t MD’s, but they are trained professionals that can discuss and treat you. Rest assured that if you need an attorney, Kevin can and will direct you to one.