Under the HOPE for Homeowners Program, 400,000 distressed homeowners can pay off their troubled mortgages and replace them with more affordable, FHA-insured loans. To qualify, a borrower’s monthly payment on existing mortgage loans must be over 31% of his or her income as of March 1, 2008 (hence demonstrating the borrower’s inability to afford the original loans). The original loans must have been originated before 2008, and secured by the borrower’s principal residence (as well as only residence). Also to qualify, the borrower must satisfy FHA underwriting requirements for the new FHA-insured refinance loan.
    

 The FHA refinance will be a fixed rate loan up to $550,400 for at least 30 years, and will include charges for FHA insurance premiums. The maximum loan-to-value ratio of the FHA refinance is 90% of the appraised value. If the refinance proceeds are insufficient to pay off the existing liens, the refinance will not go through unless the original lenders voluntarily agree to accept a short payoff as payment in full. Rules will be established to allow, among other things, equity sharing for the original junior lienholders.
    

 Upon obtaining the FHA refinance, the borrower must share with the FHA at least 50% of any equity realized through a subsequent sale or refinance. The FHA’s share in equity will be based on a sliding scale of 100% of any equity realized within the first year of the FHA loan, 90% the second year, and so on, but not less than 50%. The HOPE for Homeowners Program shall be in effect from October 1, 2008 to September 30, 2011.

This article was sent to me today and I wanted to bring it to your attention. I have had a few experiences with Short Sales this last year and many of these points ring true. If your interested in learning more about the short sale market or would like to get a list of short sale homes sent to you please give me a call.

Washington Post Article Launched: 07/06/2008 12:11:28 AM PDT

By Elizabeth Razzi

Here’s what’s really happening with short sales: All too often, they fall short of the finish line.

A short sale means a sale that falls short of the amount owed on the mortgage. They happen only when the seller can’t come up with the cash to pay off the difference. Most important, though, is that they can happen only when the lender agrees to accept the shrunken payoff. Desperate sellers pursue them to avoid a foreclosure, which would be even more damaging to their credit history. Buyers pursue them in hope of snagging a home at a deep discount. Before you waste your time, and possibly your money, on a short sale that stands little chance of getting the bank’s approval, gather some intelligence about the sellers, their financial situation and the real estate agent they have hired. You will save a lot of frustration by focusing only on deals the bank is willing to make. Lenders aren’t in the business of accepting less than they are owed, and their paperwork machinery isn’t even set up to work that way efficiently. Their approval of a short sale is always slow in coming — if it ever comes at all. You need to find out if the bank even has a clue that the seller is trying for such a deal. Too often, sellers and their agents are calling a listing a “short sale” or saying that “offers are subject to third-party review” without even having talked with the lender. They plan to get a live fish on the hook before they try to tempt the lender. Do you want to be that fish?

It’s important to distinguish between “upside-down” sellers and short sales. If sellers are upside-down on their loan, owing more than the home is worth, they are still expected to make monthly payments. Even if they would like to move, most upside-down owners are stuck until prices recover enough to make a sale profitable.

If an upside-down owner must sell, even at the reduced price, he’s expected to take money out of savings, cash in the 401(k), borrow from the in-laws or otherwise pay off the mortgage. But what happens when the homeowner simply cannot come up with the cash? At this point, the homeowner’s pain becomes the lender’s problem. The lender’s options are either to agree to a short sale and forgive the unpaid debt, or to foreclose on the home and resell it. Remember, the lender gets to make that choice, not the seller.

There are lots of things that can derail a short sale. For example, although lenders lose a lot of money when they foreclose, the payout from private mortgage insurance could reduce that loss enough to make the lender choose foreclosure. Lenders holding second mortgages, such as home-equity lines of credit, can also kill the sale. Second-mortgage lenders are supposed to be at the back of the line to collect loan payoffs, but they can nix a proposed short sale if they don’t think they’re getting enough out of it.

Frank Borges LLosa, who owns the Frankly Realty brokerage in Arlington, Va., has analyzed multiple-listing service data for Northern Virginia, and estimates that of every 20 short-sale listings that draw a contract from a buyer, only one actually makes it to closing. “I call them fake listings,” he said. If you try to buy a home through a short sale, be prepared for the deal to fall apart. Don’t spend money on appraisals or inspections until you have received some sort of commitment from the bank. You certainly don’t want to give notice to your landlord too early. And keep looking for other, easier deals, just in case.

Mediation

    Dictionary: 

   Explanation: 

Mediation is a non-binding (not lawful) process in which Parties that are in  a dispute meet with a neutral mediator.  The mediator is selected by the parties.  A mediator is a specialist in the field of your dispute, or you can choose a mediator who is a specialist in dispute resolution, or you can choose a mediator who is both an expert in the subject matter of the dispute and an expert dispute resolver.  If the Parties cannot agree on a mediator, the Superior Court shall appoint a mediator. The mediator will try to work out a mutually acceptable resolution. The mediator does not impose a settlement on the Parties. The mediator may conduct more than one session and mediation fees shall be paid equally by participating Parties. Matters excluded from arbitration (Para. 12(b)) are also excluded from mediation. 

Arbitration  

Dictionary: 

Explanation: 

Arbitration is a private dispute resolution process in which Parties (by themselves or through their attorneys) submit disputes to a neutral arbitrator who is charged with rendering a fair and impartial decision as to all issues presented.  The arbitrator will be a retired Superior Court judge or a licensed California attorney with at least 5 years real estate experience. If the Parties cannot agree on an arbitrator, the Superior Court shall appoint the arbitratorWhen arbitration is selected, the Parties give up their rights to trial by judge or jury and to full and formal court process.  Rules of evidence and procedure are less rigid than in trial court.Arbitration fees are typically on an hourly basis. The decision of the arbitrator is final and binding on all Parties to the arbitration agreement The arbitrator can award compensatory damages, punitive damages, and/or order specific performance, injunctive relief and declaratory relief. No trial or other court process is available to re-try the case or to appeal the merits of the arbitrator’s ruling. This means that even when a party claims the arbitrator made a clearly wrong decision, based on a misunderstanding of fact or of law or an unwillingness to follow the law, that decision nevertheless remains final and unappealable. Only in cases of actual fraud in the arbitration process, corruption, bias, lack of due process or jurisdiction, or arbitrator’s computation error, can an award be vacated or modified. The Parties are advised to confer with legal counsel for advice before committing to binding arbitration.  

Exclusions from arbitration include: unlawful detainer (The act of retaining possession of property without legal right.), foreclosure-related actions and matters within Small Claims Court jurisdiction.

As most all you might already know, Congress recently passed, and President Bush signed, a $168 billion Economic Stimulus Package. Included in the package is an increase to the standard government-sponsored enterprises (GSE’s) and Federal Housing Administration (FHA) maximum loan limits. However, due to the extensive product, pricing, and delivery implications of the legislation (within Fannie Mae, Freddie Mac and the FHA), the increased loan limits will likely not be available for at least sixty days. I will be sure to post any changes as they happen. Specific details of the Stimulus Package are not yet finalized; however, below you will find an overview of the requested changes:

Overview GSE/FHA loan limit increases are temporary and will be terminated on December 31, 2008.

GSE/FHA loan limits will increase to the lesser of (a) 125% of the area median home price or (b) $729,750. The increased loan limits will be available only in high-cost areas (such as ours) – these “high-cost areas” will be defined by HUD in the next thirty days. Early indications are that only a few metropolitan statistical areas (MSAs) will be impacted – the majority of which will be located in California, South Florida, Washington D.C. and New York City.

1. The US Department of Housing and Urban Development (HUD) must define which high cost areas or MSAs will be eligible for the increased loan limits (this is expected to happen within the next thirty days).

2. Fannie Mae and Freddie Mac must determine and communicate what products will be eligible for delivery under the increased loan limits, clearly define the underwriting guidelines that must be followed and compute how these loans will be priced. Additionally, Fannie Mae and Freddie Mac will have to determine how lenders will deliver these conforming-plus loans.

3. Lenders will have to work to build new products and implement all systems and guideline changes to ensure a seamless transition. Once it is determined how the legislation will be applied and have clear guidance from Fannie Mae and Freddie Mac, Lenders will have to implement these changes in a timley fashion.