Loans/Financing/Credit

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2013 Mortgage Debt Forgiveness Extension

This Springfield short sale was one of my listings.  It and all short sales will benefit from the recent extension of the Mortgage Forgiveness Act of 2007.

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Short sales are some of the best values on the market in 2013.

Eugene Springfield short sellers got some relief from our Government ‘s avoidance of the fiscal cliff.  Until recently, when banks forgive mortgage debt, it is a taxable event.  Not so with the Mortgage Debt Relief Act of 2007; which was just extended through the end of 2013 by House Bill HR 8, the Taxpayer Relief Act of 2012.  (Section 202, page 25 of 154).

Short sales in Eugene Springfield are increasingly common these days.  They occur when the sales price of a house is less, or short of, the amount of the loan.  While more complicated than a traditional sale, they can be a good option if you need to sell and owe more than the house is worth.

Of course, complicated tax issues should be discussed with an accountant.  If you have short sale questions on Eugene or Springfield real estate, please feel free to contact me.

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A Mess of Mortgage Paperwork

The amount of foreclosed homes is one thing still weighing down the economy. And many are stuck on the market because banks can’t find the ownership documents.

Why? Turns out Wall Street cut corners when creating mortgage-backed investments—and didn’t want old fashioned paperwork in the way. And now when banks want to evict people they are finding that the legal documents behind mortgages aren’t there.

Even worse, it seems that banks—in order to cover their tracks—hired companies to recreate missing mortgage assignments and provide the legally required signatures of bank vice presidents and notaries.

Now to avoid foreclosures, desperate homeowners are countersuing banks over the document disaster—leaving houses unsold indefinitely and stalling the recovery.

Many foreclosed banks are still stuck on the market because of lost ownership documents.

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HUD Tightens Loan Standards

In Eugene, as in the rest of the nation, lending standards for HUD insured loans—an increasingly popular option for home buyers—are becoming stricter.  The following changes are scheduled or planned to occur this year:

  • Increased mortgage insurance premium—beginning mid-April, the rate will be 2.25%, up from 1.75%

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  • Increased down-payment (10% vs. 3.5%) for borrowers with a FICO less than 580

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  • Reduction of seller concessions from 3% from 6%

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These changes will make it harder for some borrowers to get loans, and will soften demand, somewhat, for house purchases.  However, at least the changes aren’t too drastic.

 

HUD loans are a bright spot in a thorny lending environment.

 

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Loans for Borrowers with 500 Credit Scores?

If the Great Recession has damaged your credit score like so many of us, getting a home mortgage has been nearly impossible.  But—Wells Fargo recently changed their policies to allow people with credit scores as low as 500 to get loans or home mortgages.

Although—to minimize risk—they’re requiring a higher down payment for those of us who are credit-challenged.

Will the other three big lenders (US Bank, Chase and Bank of America) follow suit?  While it’s too early to tell—my guess is yes.

 

Loosening credit: 1 down and 3 to go

 

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Home Affordable Modification Program (HAMP)

According to a recent WSJ article, most mortgage modifications don’t work.  Less than 2% of the projected allotment of $75 billion for the HAMP program has actually been spent to help homeowners avoid foreclosure.

Nationwide, 6.7 million homes were lost to foreclosure or short sale in the decade ending in 2010.  Half again as many are projected to meet the same fate in the next 3 years.  If projections are accurate, that should keep it a buyer’s market through 2013.

The number of distressed properties in Eugene and Springfield isn’t exactly known—but they are common and I do a lot of them.  Rejection from the HAMP program was about 3 of every 4 participants in the western states, including Oregon.  If mortgage modification doesn’t work, a short sale may be a good option for you.

Most mortgage modificatins don't work.

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Mortgage Rates Move Higher As Treasury Yields Increase

Treasury yields have been climbing higher since fall 2010.  As a result, mortgage rates have been moving higher as well—and have topped 5% for the first time in months.   Mortgage rates move in tandem with Treasury yields; specifically 30-year mortgages track 10-year bonds. While rates are currently still near historic lows and very affordable, they are predicted to go up in 2011, perhaps to 6%.

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Banks: Credit Restrictions Too High

Banks agree with Realtors that credit is too tight.  In a recent National Association of Realtors podcast, NAR President Ron Phipps discussed his recent meetings with Citibank.  Folks who should be able to get mortgages aren’t getting mortgages…the pendulum has swung too far. 

Things will loosen up again–but no one is sure how soon.

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Foreclosed properties selling for less

Though the present real estate market may look fairly abysmal, there are still some great deals out there for buyers. On average foreclosed properties sold for 34% less, with short sales averaging around 15% less. While these are national trends, they still demonstrate how much houses are discounted once they have been foreclosed upon. While many of these properties are discounted because they are in bad shape, it is still possible to find heavily discounted homes that are in great condition. There is no shortage of supply either, in Lane County 30% of all sales were foreclosures, and national foreclosure rates have jumped 2,500% in the past four years.

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Foreclosures remain high in lane county

According to a new study, foreclosure and short sale’s remain high in Lane County. Nearly a third of all recent home sales in Lane County were either short sales or foreclosures. The majority of these foreclosures are occurring because of loss of income, which has equally affected both the rich and poor. Because houses that are foreclosed upon or short sold sell for about 15% less than other houses, the entire market has become depressed. The situation here is similar to that of the rest of the nation, as a whole, with around 31% of sales in the US being foreclosed or short sold.

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Home loan interest rates drop again

Good news for those looking to refinance, the national average for interest on 30-year fixed loans has sunk to just 4.69 percent. These are the lowest interest rates that have been seen on home loans for around 50 years. While these rates are great for home buyers or those looking to refinance, they could be worse for those trying to save through savings accounts and CDs, as interest rates on these have fallen as well. In all, around 291,000 homeowners have refinanced as of March.