Category Archives: short sale

Making Sense of Loan Modifications

Losing one’s home is a gut-wrenching experience. It’s something no one should have to go through. Now, sadly, many, many people are having to do just that. In many cases, however, there is another answer.

The Home Affordable Modification Program, or HAMP.

Part of the Federal Government’s economic stimulus plan, HAMP is an option that has yet to pick up a head of steam. It’s possible that it hasn’t gotten the necessary publicity, which is a shame, because keeping homeowners in their homes is vital not just to their well-being, but to the well-being of our economy.

Here’s how HAMP works:

Not a refinance, which replaces your loan with a brand-new mortgage, a loan modification happens when your lender reworks the terms of your existing loan. Generally speaking, this lowers payments and makes the home more affordable for you. Often, the lower payments are the result of a lower interest rate, an extension in the loan term, a reduction in principal, or any combination thereof.

If your home is your primary residence and the balance of your first mortgage is less than $729,750, then you may qualify for the program. Additionally, you’ll have to demonstrate that you’re facing hardships that are affecting your ability to make payments on your mortgage. From there, your lender will ask for documentation about your income, bank statements, as well as other financial data. You’ll also be asked to complete a Hardship Affidavit, in which you’ll describe extenuating circumstances with which you’re dealing.

“I’m doing just fine with my mortgage payments. Why is this important for me?”

Why? I’ll tell you why. The prospect of tens of thousands (yes, that many) homes suddenly appearing on the market is a pretty gruesome specter for our economy. Part of the problem of “shadow inventory” that we mentioned several weeks ago – a tidal wave of foreclosed homes entering the marketplace – would be a crushing blow to a real estate market that is only just showing signs of recovery.

Also, unoccupied homes are blights on communities. Too many can splinter a neighborhood, driving down everyone’s property values — not just those that are empty. And make no mistake: this isn’t just a problem of lower-income communities. No. Foreclosure is just as much of a problem in higher-end neighborhoods.

As Bloomberg reported late December – Homeowners with mortgages of more than $1 million are defaulting at almost twice the U.S. rate. This brings the rate of default for these considerable loans up to a skyrocketing level of 12 percent as of September, compared with 6.3 percent on loans less than $250,000 and 7.4 percent on all U.S. mortgages. This is quite a jump from the year prior where the rate for default on the $1 million dollar plus mortgages as only 4.7 percent.

So, take a look at HAMP. HAMP is offering distressed homeowners a second chance. A chance to keep a roof over their family’s head. A chance to keep the sense of pride instilled by owning your own home.

It’s not a cure-all. But it’s a place to start.

By Gino Blefari
President and CEO
Intero Real Estate Services

Mission: Distressed Properties

By Gino Blefari
President & CEO
Intero Real Estate Services, Inc.

No one can deny the economic challenges we face as a country. They are the most challenging we have seen in generations. This environment demands more from brokers and Realtors than ever before; especially when dealing with those caught up in the epidemic of distressed and foreclosed properties.

Planning. Organization. Training. Execution. Leadership.

Let’s take a lesson from our own military, the Marines. Their reputation as hardened fighters is well documented. Their success stems from their organization and the precise training that enables the unit to understand and execute the mission of the unit leader. Their order consists of these five elements:

  • Situation
  • Mission
  • Execution
  • Administration
  • Command and Communication

Simple. Direct. Concise. Effective. And I believe this order can be implemented in real estate and guide us through and out of this current market situation. I’ll break it down as follows:

Situation – This is the background to your problem or the events leading up to where we are now. We have been facing incredible pressures and fluctuations in the housing market for over 24 months. Starting with the stricter lending requirements and plummeting home values during the sub-prime mortgage crisis that started in 2007. Two years into this foreclosure crisis we see unemployment, the traditional driver for foreclosures, come into play. While the focus has been primarily on Wall Street and the individual homeowner we recognize the tremendous pressures that have been placed on the individual agent and brokerages.

Mission – This is what we do about it. As I assess this new environment, it becomes painfully apparent that in order to respond to the needs of a distressed marketplace, we had to first and foremost ensure that our own company did not become distressed.

Secondly, we recognize that for our neighbors and prospective clients the immediate goal is saving their home. Granted, this appears counter-intuitive to our core mission of selling homes, but the underlying situation called for this. As Realtors, our mission is to get up to speed quickly, briefed on issues and expand our network of strategic business partners like never before. Therefore it became our mission to train our agents to do just that.

Execution – This describes how our mission is to be achieved. In a distressed market like the one we face today, the solutions we offer and the unique obstacles associated with delivering those solutions are changing rapidly. That is why we have created a department that specifically addressed the problems, opportunities and solutions in the distressed markets. We provide internal loss mitigation training through our Short Sales Division. We also encourage our agents to become Certified Default Resolution Specialists, to better connect and guide distressed homeowners through all of the options available to them. In addition, we are reaching out to servicers, local government agencies, non-profits and to the community to work collaboratively to address the issues and to help jumpstart neighborhood stabilization.

Administration –
This regards the resources required to accomplish your mission.  A brokerage’s most important resource is its agents and empowering them was the most important thing we could administer.  Everyone is working frantically to create new processes, new technologies, new laws to help homeowners, but they are all fruitless if there is not a trusted source to help the homeowners engage in the process. This is where our agents come into play. Servicers are overwhelmed by the number of defaults and homeowners not able to make contact with their servicer, thus never realizing they have options to avoid foreclosure, who better to address and administer to their problems than the Realtor.

Command and Communication – Who’s in charge? Who do you report to? How do you communicate with each other?

With all other forms of loss mitigation, making initial borrower contact is still the key. The fact remains that in a great number of foreclosures, estimates are between 50-60% of all REO properties, there was never any contact between the homeowner and the servicer. Obtaining accurate borrower and property data is challenging to say the least. There are many moving parts and players, which can easily lead to loss of communication.

At Intero, it is the individual agent that remains the most viable solution to engage the distressed market and affect the greatest change in the housing recovery in the years to come.

Semper Fi

The challenges we face are daunting. The road is neither short nor straightforward. It is littered with obstacles, both old and new. But it is the road we must travel in our chosen profession and the road we choose to improve for the well being of the communities we serve.

Take inspiration from my Dad, a decorated WWII Veteran awarded with two Purple Hearts, and the Bronze Star of valor (just to name a few,) quoted often, “Courage is not the absence of fear, it is forging ahead in spite of it.”

4 Reasons to Buy

Lately there has been a lot of discussion about the $729,750 loan limits being extended through 2010. And, many are excited that the tax credit for home buyers has been extended and expanded to include buyers who have owned their current homes for at least five years.

Even with those two incentives in place, there are some would-be-home-buyers that are still sitting on the fence. Here are two additional data points that may help move you into action:

  • Today the 10 year Treasury yield is at 3.2%. This indicator corresponds to mortgage rates – typically when it’s down, mortgage rates are down. Throughout this year rates have remained at historical lows; the average 10 Year Treasury yield for the last 12 months was 3.17%. However, the average yield over the last 10 years was 4.50%. In fact, from April 1953 to December 2008 the average annual yield for the 10 year Treasury was 6.36%. The highest rate during that 55 year period was 15.32%; the lowest rate was 2.29%. The high was attained in September of 1981. The low was achieved in April of 1954. Translation: Evidence shows the 10 year Treasury yield and conforming mortgage rates are at historic lows; it’s unlikely they’ll continue in this range throughout 2010. How often does a 55 year interest rate low occur? About every 55 years!
  • According to the National Association of Realtors®, last month showed another big gain in existing-home sales and inventories continue to decline. Translation: the competition is getting tougher.

Please contact us if we can answer any specific questions or if you’d like to discuss buying or selling strategies.

Mortgage Forgiveness Debt Relief Act of 2007

Mortgage Forgiveness Debt Relief Act of 2007

Debt ForgivenessPresident Bush recently signed into law a new measure giving tax breaks to homeowners who have mortgage debt forgiven. Under preexisting law, the debt forgiven by a lender, such as for short sales and refinances, was generally taxable to the borrower as debt discharge income. With the passage of the Mortgage Forgiveness Debt Relief Act of 2007, a taxpayer does not have to pay federal income tax on debt forgiven for a loan secured by a qualified principal residence.

This tax break applies to debts discharged from January 1, 2007 to December 31, 2009. Qualified principal residence indebtedness is debt incurred in acquiring, constructing, or substantially improving the residence (up to $2 million for refinances).

For purposes of calculating capital gains, any debts discharged excluded from income under the new law must be subtracted from the basis of the taxpayer’s principal residence (but not below zero). However, taxpayers may generally exclude from capital gains income up to $250,000 (or $500,000 for married couples filing jointly) for properties owned and used as their principal residence for at least two of the last five years.

Click here for the full copy of the Mortgage Forgiveness Debt Relief Act of 2007 .

The preceding is for informational purposes, and is not to be considered tax advice. The SV Home Team, specializing in real estate sales in Santa Clara County, and specifically in Sunnyvale, California, is simply trying to disseminate information we hear that might be beneficial for the public at large. We are not accountants, and we always advise verifying this and any information which can have tax ramifications with your tax advisor.

What is a Short Sale? Can You Help Me?

Hey Gary! Hey Robert! Can you help me do a short sale?

Short Sale Real Estate in SunnyvaleCan you help me do a short sale in Sunnyvale? You bet we can; in fact, we’ve been certified as experts! A short sale occurs when the sale price of home will be insufficient to pay off the loans on the property (this is also known as being “upside down”). In a short sale, we negotiate with the lender, on the seller’s behalf, asking them to accept less than the full amount owed to them.

Why would a lender consider it? To save time and money.

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Let’s say the seller has lost his job, and can no longer make the payments on his loan, or his adjustable rate loan has adjusted upward and he can’t afford the higher payment. For instance, we’ll ask the lender to accept $50,000 less than the amount owed in order to allow a sale to go through. If the alternative is for the lender to foreclose, and we can show them it will likely cost $100,000 or more to do it, many times they’ll consider it, and we can prevent a “foreclosure” from being stamped on the seller’s credit report. If you know of anyone who might need our help on this, please have them give us a call or send an email!