GSE loan mods, refinancings rise in November

As of November 2009, Fannie Mae and Freddie Mac implemented more than 405,000 trial and permanent loan modifications under the Home Affordable Modification Program (HAMP), according to a third quarter Federal Housing Finance Agency’s (FHFA) report. The agency also refinanced 4 million loans. The report details the actions each enterprise has taken to prevent foreclosures and help homeowners remain in their homes.



According to the report, as of Nov. 30:

• Fannie and Freddie had implemented 405,700 HAMP active trial and permanent loan modifications.

• Foreclosure starts on loans owned or guaranteed by the GSEs declined 15 percent in the third quarter.

• Loan modifications, excluding HAMP trial loan modifications, increased 14 percent compared with the second quarter.

• Nearly half of loan modifications completed in the third quarter, excluding HAMP trial modifications, resulted in borrowers’ payments decreasing by more than 20 percent.

• Short sales and deeds in lieu increased by 39 percent during the third quarter.

• Loans 60 or more days delinquent increased nearly 20 percent during the third quarter to 1.6 million.

Why don't banks want to modify mortgages with principal reductions?

Basically, lenders get to write-off loans from their balance sheet to their income statement when they allow a short sale or foreclosure. This results in a loss which can be offset against other income, resulting in a tax savings for the lender.

When lenders agree to reduce principal, they still have to carry the loan on their balance sheet at the original value, plus get a smaller payment. The teenie bitty incentive payment (around $1,000) to allow modification is a small drop in the bucket. Thus, there is absolutely no tax incentive to allow principal reductions.

When lenders agree to reduce the interest rate, they typically add any reduction back to principal (remember negative amortization?) and can actuall INCREASE the asset shown on the balance sheet.

Unless the tax treatment is equalized, don't look for voluntary principal reductions.

Which low cost remodel projects are still paying off?

According to the annual Realtor.com Cost vs. Value Report, the following 10 small projects pack a large return on investment:

1. Tidy up kitchen cabinets - add organizing trays, bright liner paper
2. Add or replace tile
3. Add a breakfast bar
4. Install granite tile instead of slab
5. Freshen up a bathroom
6. Freshen up a basement (definitely more relative back East)
7. Look for extra spaces to enclose and make a new room
8. Recondition kitchen cabinet fronts
9. Replace light fixtures
10. Tech up the garage with a remote touchpad entry system

Email us to request a pdf file detailing these great, low cost ideas.

Click here for a link to the Realtor.com article.

Mortgage Protection from C.A.R. and HAF

A message from the California Association of REALTORS® and the Housing Affordability Fund.

What is the Mortgage Protection Program? Through the California Association of REALTORS® (C.A.R.) Housing Affordability Fund Mortgage Protection Program, first-time home buyers who lose their jobs due to layoffs may be eligible to receive $1,500 per month, for up to six months, to help make their mortgage payments. A qualified co-buyer also can participate in the program, and receive a monthly benefit of $750 per month for up to six months. Program benefits also include coverage for accidental disability and a $10,000 death benefit.

How do I qualify? To qualify for the Mortgage Protection Program, applicants must:*- Be a first-time home buyer – someone who has not owned a home in the last three years- Open escrow April 2, 2009, or later, and close on or before December 31, 2009- Use a California REALTOR® in the transaction- Purchase the property in California- Be a W-2 employee (cannot be self-employed)

How do I apply? If you are interested in applying, you may request an application for the Mortgage Protection Program from your REALTOR®.

*For more information, including application requirements and possible restrictions, please visit:www.car.org/aboutus/hafmainpage/carhafmortgageprotection/

How much of my remodel cost will I get back?

Every year the National Association of Realtors publishes a report from the remodeling magazines that estimate the cost vs. value of common remodel projects. Remember, this is an estimate and not a scientific study.

It's very interesting to see what percentage of your investment is likely to be returned in different parts of the country.

Here is a link to the report for 2008.

http://www.realtor.org/rmohome_and_design/articles/2008/0812_costvsvalue_2008

New brochure explaining requirements of San Francisco’s energy and water conservation laws issues

The City of San Francisco has finally issued a revised "informational brochure" to provide buyers with notice of the requirements of San Francisco’s energy and water conservation laws, as amended. Click here for the brochure.

Governor Signs SB94 Prohibiting Advance Fees for Loan Modifications

No Advance Fee for Loan Modifications:
This new law, which went into effect on October 11, 2009 (and expires January 1, 2013), prohibits any person, including licensed real estate brokers and attorneys who negotiate, attempt to negotiate, arrange, attempt to arrange, or otherwise offer to perform a mortgage loan modification or other form of mortgage loan forbearance for a fee or other compensation paid by the borrower related to mortgages and deeds of trust secured by residential real property containing one to four dwelling units to do any of the following:

• Claim, demand, charge, collect, or receive any compensation until after the licensee has fully performed each and every service the licensee contracted to perform or represented that he/she/it would perform.
• Take any wage assignment, any lien of any type on real or personal property, or any other security to secure the payment of compensation.
• Take any power of attorney from the borrower for any purpose.

No Dividing Services into Phases to Avoid Advance Fee Law:
The new language in California Business & Professions Code Section 10026 that defines "Advance Fee" has been modified to clarify that services may not be divided into phases to avoid the new law: "Neither an advance fee nor the services to be performed shall be separated or divided into components for the purpose of avoiding the application of this section."

Lenders and Loan Servicers Are Exempt from Advance Fee Law:
This law further provides that these provisions do not apply to actions taken by a person who offers loan modification or other loan forbearance services for a loan owned or serviced by that person, including, but not limited to, collecting principal, interest, or other charges under the terms of a loan, before the loan is modified, including charges to establish a new payment schedule for a non-delinquent loan.

Fees Already Collected Prior to October 11th Not Affected:
Loan modification agreements entered into and advance fees already collected on or before October 11, 2009 are not affected. Any advance fees collected after October 11, 2009 must be fully refunded to the clients. Even if the DRE issued a "no objection" letter, licensees may no longer collect advance fees despite executed loan modification agreement.