FHA Condo Approval Process–Guideline Changes and How They Affect Your Purchase

Developers of condo projects and existing condo owners who want to get approved for FHA financing will be facing a challenge after October 1st 2009! Interestingly enough, we are already starting to see the effects of these changes. The details are outlined in the Mortgagee Letter 2009-19 that was issued on June 12th by HUD. In this latest Mortgagee Letter, FHA is announcing dramatic changes to their Condo Approval Process and the elimination of the Spot Approval Process. While these changes reduce the documentation and requirements for Full Condo Approval, it will place more work and responsibility on the lenders. So what will it take to get FHA approval?

Here are the more important questions:
1. Are you thinking of selling your condo in the next 90 days?
2. Does my unit and or building qualify according to the new guidelines?
3. If my property doesn’t qualify, do I still have time to sell and close with a FHA Spot Loan?

If these questions are raising concerns for your personal situation, call me immediately for a personal and confidential conversation. My private and direct line is 201-427-1032. We are here to help you!

Guidelines:
The Lender will have 2 options:

• HUD Review and Approval Process (HRAP)
• Direct Endorsement Lender Review and Approval Process (DELRAP), outlined in this Mortgagee Letter. This option is only available to lenders who have unconditional Direct Endorsement authority and staff with knowledge and expertise in reviewing and approving condominium projects.

The processing options stated above will be applicable to condominium developments that are:

• Proposed/Under Construction

• Existing Construction

• Conversions

Certain types of projects will be ineligible. They are:

• Condominium Hotel or “Condotels”

• Timeshares or segmented ownership projects

• Houseboat projects

• Multi-dwelling unit condominiums [i.e. more than one dwelling per condominium unit]

• All projects not deemed to be used primarily as residential

One very negative aspect of these new guidelines is the elimination of the “Spot Loan Approval” process. According to HUD, “The DELRAP and HRAP processes have been streamlined to allow for uncomplicated condominium project approvals eliminating the need to approve units on a “spot loan” basis.” But this new approval process may add a significant amount of time to approving a condo project compared to the current quick “Spot Approval” process. Current loans in process may be in jeopardy because lenders may be worried they may not be able to sell “spot approved” loans back to FHA if they don’t get them submitted soon enough.

I am sure there will be a number of real estate professionals (are you listening NAR?) who will challenge the elimination of the Spot Loan Approval process that has given quick and needed financing options to quality condos on a case-by-case basis.

Tax Credit for Homebuyers Could Expand

Businesses and lawmakers hope to expand the first-time home buyer tax credit.
The first-time home buyer tax credit, which provides first-time buyers with $8000 in tax credits, is set to expire on December 1, 2009. The tax incentive was created as part of the economic stimulus package in an effort to help boost the faltering real estate market with the provision that eligibility runs from January 1, 2009 to December 1, 2009. However, lawmakers and businesses are lobbying to extend the expiration date and expand on the incentives as well.

According to the National Association of Realtors (NAR), 40% of current home purchases are from first-time buyers. Many factors, such as the first-time home buyer tax credit, low mortgage interest rates and declining property values, are contributing to the recent record braking numbers for first-time home buyers. While some are certain that these tax credits will be expanded in an effort to help boost the wavering real estate market, it comes with the price of reducing taxes during a time when the national budget deficit is skyrocketing.

Current Legislative Efforts
Already legislation is being presented in both the Senate and the House in an effort to expand home buyer tax credits. Senator Johnny Isakson (R-GA) proposed a senate bill that would expand the tax credit from $8000 to $15,000 for all home buyers. In the House of Representatives, Rep. Kenny Marchant (R-TX) introduced a bill that would expand the expiration date of the first-time home buyer tax credit from December 1, 2009 to the new date of June 2010. This bill also calls for the expansion of the tax credit to all home buyers not just those that are purchasing for the first-time. Additionally, the bill would also provide $3000 credit to any one who is refinancing. Representative Bernice Johnson (D-TX), also introduced a bill in the House which would extend the expiration date through 2010 and expand the credit to any home buyer.

According to Lawrence Yun, chief economist at the NAR, “It would go a long way toward inducing trade-up buyers into the market.” Trade-up buyers have yet to come back to the market, which is the hope of the purposed legislation.

Between existing and purposed tax incentives, low mortgage rates and home prices, this could become a buyer’s paradise and finding the right real estate help is essential. Please contact Sean T Shallis at The Shallis Group for a personal consultation on your buying or selling needs at 201-427-1032.

(source: usatoday.com)

Getting a Property to Sell

Why a Home Won’t Sell and What Can Be Done
With the current economic climate impacting the real estate market, getting a home to sell can be an overwhelming task. Foreclosures are at an all time high leaving buyers with plenty of choices and amazing deals to be had. There are certain factors to consider if your property has been sitting on the market for a lengthy period of time. First and foremost it is important to set an appropriate and attractive price. This is perhaps the primary reason for turning off perspective buyers. With the help of an experienced real estate agent, a competitive selling price can be determined based on similar home sales in the neighborhood.

Another factor to consider is the condition of the property such as its curb appeal, cleanliness and show room appearance. Not only is a home competing against others of its kind in the neighborhood, it is also competing against new builds with incredible move-in incentives. Quick fixes can be relatively inexpensive. However, the key is to make sure your money is being spent in the right place. With the help of your real estate agent, they can direct you on what changes would make the most impact with a buyer such as new fixtures, fresh paint or updated appliances.

Marketing
Marketing also becomes more important than ever in a “buyer’s market” where competition is tough and exposure can make a tremendous impact. With current marketing trends it is important to utilize multiple marketing mediums such as listing tours, open houses, newspaper and possible TV ads. Another important marketing strategy is the utilization of the internet through real estate listing websites. The National Association of Realtors estimates that over one-third of home buyers search for property on the internet.

Quick Fixes
There are plenty of minor improvements that can be done to a home that will have a tremendous impact on the buyer. Packing up clutter and creating a more generic look to the house will help the buyers envision the homes potential in meeting their needs. Having a spotless house is also a priority in getting it sold more quickly. Carpets are impeccably cleaned, walls need a fresh coat of paint and pet odors must be eliminated. Staging a room has also become a growing trend in helping a home sell more quickly. Furniture can be used to highlight certain features of a room or it can be detracting. There are professionals available that can assist in designing a home to sell.

Ultimately, finding the right real estate professional can be a key factor in the length of time a house sits on the market. For a personal and confidential consultation on what can be done with your property, please contact Sean T Shallis of The Shallis Group at 201-988-1393.

New Incentives Help Homeowners with Short-Sales

Streamlining the Short Sale Process
The Making Home Affordable Program is offering up new help today for homeowners facing foreclosure according to the U.S. Treasury and the U.S. Department of Housing and Urban Development (HUD). This program was created by the Obama administration in hopes of offering financially destitute homeowners a loan modification option in order to save their home from foreclosure.

The Short Sale Option
When a loan modification is no longer an option, homeowners look to short sales as a way to salvage their credit for the future. The short sale of a home is possible when the property sells for less than the amount owed on the loan. However, in order to make a short sale possible, the mortgage lender must agree to discount the balance of the home loan due to the financial hardship of the borrower. You’ll need a professional real estate broker/agent who is specifically trained on how to perform short sales, because your broker/agent will be negotiating a “short payoff” on your mortgage with the lender. According to U.S. Treasury Secretary Timothy Geithner, the short sale option provides a “quick private sale or voluntary transfer of property, which will save homeowners money and protect their financial future.”

List of New Incentives and Process:

• Borrowers (Homeowners). Borrowers/homeowners qualify under the FAP if they meet minimum eligibility requirements for the Home Affordable Modification program but don’t qualify for a modification or do not successfully complete the three month trial period. Before proceeding with a foreclosure, servicers must determine if a short sale is appropriate. Incentives.
• Incentives include: (1) $1,000 for servicers for successful completion of a short sale or deed-in-lieu of foreclosure; (2) $1,500 for borrowers/homeowners to help with relocation expenses; and (3) up to $1,000 toward the cost of paying junior lien holders to release their liens (one dollar from the government for every $2 paid by the investors to the second lien holders).
• Standardized Documents. The program will include streamlined and standardized documents, including a Short Sale Agreement and an Offer Acceptance Letter. The goal is to minimize complexity and increase use of the short sale option.
• Property Valuation by Appraisal or BPO. Servicers will independently establish both property value and minimum acceptable net return, in accordance with investor requirements. The price may be determined based on an appraisal or one or more broker price opinions (BPOs), issued no more than 120 days before the date of the short sale agreement.
• Timeline. In the Short Sale Agreement, servicers must give borrowers/homeowners at least 90 days to market and sell the property, or up to one year, depending on market conditions. Property must be listed with a licensed real estate professional with experience in the neighborhood. No foreclosure may take place during the marketing period (at least 90 days) specified in the Short Sale Agreement.
• Commissions. The Short Sale Agreement must specify the reasonable and customary real estate commissions and costs that may be deducted from the sales price. The servicer must agree not to negotiate a lower commission after an offer has been received.
• No Borrower Fees. Servicers may not charge fees to borrowers/homeowners for participating in the FAP.
• Program Expiration. The program is in effect through 2012.
• Deed-in-Lieu of Foreclosure Option. Servicers have the option to require the borrower/homeowner to agree to deed the property to the servicer in exchange for a release from the debt if the property does not sell within the time allowed in the Short Sale Agreement (plus any extensions).
The complete document can be viewed at realtor.org.

Not exactly sure what to do in your personal situation?

(source: realtor.org press release)

Foreclosure Rescue Scams

• Signing Documents Under False Pretense: Scam artists get homeowners to believe that they are signing new loan documents in order to bring your loan current. However, the document actually relinquishes the deed of the title to the scam artist as part of the “rescue” loan.

• Rent to Buy Back: Many desperate homeowners fall for the rent-to-buy-back tactic which is when the title to the house is signed over on the premise that the homeowner may still live there and pay rent with an option to buy back in the future. The scam artist has now acquired any equity in the home and can raise the rent to the point that is no longer affordable. The previous homeowner, now renter, can be evicted for the inability to pay the rent.

Residential Short Sales

What is a short sale and is it for me?

Defining a Short Sale
With the current economic climate and housing market bust many homeowners are wondering if a short sale on their property is a way out of a possible foreclosure. As of May 2009 the latest number of foreclosures in the US has risen to 12%, most of which are taking place in the southwest. These figures are leaving many homeowners to consider the possibility of a short sale on their property. The short sale of a home is possible when the property sells for less than the amount owed on the loan. However, in order to make a short sale possible, the mortgage lender must agree to discount the balance of the home loan due to the financial hardship of the borrower. The negotiation of the new loan balance usually takes place between the borrower and the loan modification or workout department of the bank or lender.

Pros and Cons of a Short Sale
Usually when a homeowner comes to the point of considering a short sale, it is because he has already defaulted on the loan due to the inability to meet the monthly mortgage payments. A short sale can be advantageous to the homeowner and lender alike. The homeowner has a way out from underneath his mortgage obligation without foreclosure or bankruptcy and the lender receives the money loaned on the property except at a reduced rate. Although lenders have agreed to settle for a lesser loan amount, they are able to claim the loss on their taxes and use it as a tax write off. On the downside, the borrower must claim the difference between the original loan and the discounted loan as earned income and be responsible for the taxes owed on the amount. Homeowners should discuss the impact of a short sale with a tax consultant before making a final decision.

Purchasing a Short Sale
Due to the nature of a short sale, the obvious advantage to this kind of purchase is the reduced price of the property. Some buyers may find a 10% price reduction as compared to similar properties in the neighborhood. However, the final sale price of the property will not be left for the owners to decide. The prospective purchaser of a short sale home must have the approval of the current homeowner’s lender in order for the sale to take place.

Find out about Short Sale opportunities in New Jersey
Sean T Shallis and The Shallis Group are considered one of the Nations leading Short Sales experts. Call Sean immediately for a personal and confidential conversation. My direct line is 201-427-1032.

More Reasons to Buy vs Rent!

Homeownership has many advantages, including tax benefits and the ability to build equity. And now, current market conditions make purchasing a home an even more attractive option than ever before.

In fact, a report earlier this week showed that the National Association of Realtors Housing Affordability Index rose in April to the second highest monthly reading on record. That means homes are more affordable now than at almost any other time. What’s more, the limited-time $8,000 first-time buyer tax credit,which expires December 1st, makes purchasing a home an even better deal.

Those considering a move from renter to homeowner should keep these factors in mind:

• Length of ownership: How long do you plan to own your new home? Because of the costs associated with a home purchase, buying now could be a great choice if you plan to own the home for at least five years.

• Cost: How much should you spend? Contact a mortgage professional to find out your price range, and then crunch the numbers so you don’t buy a home that is more than you can afford.

• Quality of life: In addition to greater median wealth compared to renters with comparable incomes, research shows that homeowners have better physical and psychological health, as well as higher life satisfaction and self esteem.
• Find out more from the National Association of Realtors.

If your asking yourself questions like:

• Is now really the right time to buy?
• Are we at the bottom?
• Are rates going up or down over the next 12-15 months?

Call me immediately for your personal and confidential evaluation today! My direct number is 201-427-1032.

Do you really want to say, “we could’ve… should’ve…or never did buy into the greatest real estate economy ever?”

Mortgage Rate News: rates jump for week ending June 4th

Mortgage rates suddenly skyrocket for weekending June 4^th. This comes after months of record breaking low interest rates.

The recent results of Freddie Mac’s Primary Mortgage Market survey, shows that the 30-year fixed-rate mortgage (FRM) for the week of June 4^th averaged 5.29 percent with 0.7 point.

Not since December 18, 2008 when rates reached an average of 5.19 percent has the 30-year FRM reached this high. This new rate average is an increase of 37 basis points over the previous week, which had an average of 4.91 percent with 0.7 point.

The 15-year FRM increased 25 basis points from the previous week to average 4.79 percent. Fees and points were unchanged at 0.7. The 15-year was last at these levels during the week ended February 12 when the average was 4.81 percent.

Also on the rise, although not as dramatically was the five-year Treasury-indexed hybrid adjustable-rate mortgage or ARM. The average last week was up .03 percent to 4.85 percent with 0.6 point. Not to be left out, the one-year ARM jumped 0.12 percent from 4.69 to 4.81 percent with fees and points remaining at 0.6 point.

More on the $8000 Tax Credit for FHA Buyers

“FHA-approved lenders received the go-ahead to develop bridge-loan products that enable first-time buyers to use the benefits of the federal tax credit upfront, according to eagerly awaited guidance from the U.S. Department of Housing and Urban Development on so-called home buyer tax credit loans that was released today.”

Under the guidance, FHA-approved lenders can develop bridge loans that home buyers can use to help cover their closing costs, buy down their interest rate, or put down more than the minimum 3.5 percent.

The loans can’t be used to cover the minimum 3.5 percent, senior HUD officials told reporters on a conference call Friday morning.

Favorable Market Conditions

Reasons for the Improvement
The National Association of Realtors (NAR) just released the latest housing market figures, which shows pending home sales up for the third month in a row. This possible trend could be attributed to the first-time homebuyer tax credit that gives up to $8000 in tax credits between January 1, 2009 and December 1, 2009. Another large factor influencing the real estate market is the fact that mortgage interest rates are still at an all time low.


Why NAR Believes These Numbers Will Increase
NAR chief economist Lawrence Yun states, “Housing affordability conditions have been at historic highs, but now the $8000 first-time buyer tax credit is beginning to impact the market. Since first-time buyers must finalize their purchase by November 30 to get the credit, we expect greater activity in the months ahead, and that should spark more sales by repeat buyers.” NAR President Charles McMillan also adds, “Just last week, HUD announced that qualifying buyers can use the tax credit for closing costs on FHA loans, to buy down the interest rate or make a larger down payment.” This is a great help to homebuyers that qualify for mortgage loans but come up short on cash.


Pending Home Sales and Affordability Index
In the Northeast, the Pending Home Sales Index rose 32.6% in April as compared to the national average increase of 6.7%. Existing home sales are also on the rise with a 2.9% increase for April nationwide and an 11.6% increase for the Northeast region. The majority of this increased activity primarily lies in the lower range of home prices with mid-priced homes showing some signs of improvement as well. Also setting record figures is the Housing Affordability Index, which analyzes the relationship between home prices, mortgage rates and various income levels. In April, the Housing Affordability Index showed the second highest results on record. Hopefully these conditions will remain long enough for the housing market to return to steady ground.


In the last 10 days, Sean T. Shallis and his group representing Weichert Realtors have successfully negotiated three properties for sale in Hoboken and Jersey City. We are committed to busting the real estate myths in today’s news “Properties aren’t selling…No one is buying!” We are presently marketing numerous properties that will qualify for FHA and or VA financing. Call us immediately at 201-427-1032 to find out how to capitalize on the greatest real estate market in decades!

(source for statistics: NAR)

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