Chicago Relocation
 

Are Loan Modifications Working?

February 13, 2013

Filed Under
Credit,housing recovery
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John D’Ambrogio

With federal loan modifications in place for homeowners who are in danger of foreclosure as well as for homeowners who are current on their mortgages but unable to refinance or get ahead of what they owe due to declining property values, many real estate and financial experts are taking a hard look at whether these programs are working. While there are still some difficulties to work out, loan modification remains a solid benefit to people who need help with their mortgages. Many borrowers have taken advantage of federal programs such as HAMP (Home Affordable Modification Program), and taken the initiative to work directly with their banks and lenders to modify or reset their mortgages. The process is not simple, but the end result is often satisfaction for both the homeowner and the lender.

One problem with home modifications that can easily be rectified is communication. Many homeowners who feel frustrated with their mortgages don’t even realize they can qualify for a modification. If they are behind on their mortgage payments, they are probably avoiding phone calls from the lender instead of reaching out to find a solution. Once they are willing to pick up the phone and discuss the options, many homeowners realize there is help available, and a foreclosure or a strategic default is not always necessary. Another communication problem might be that homeowners who are faithfully making mortgage payments but worrying about the value of their investment might not realize that they could be eligible for help too. A short term financial hardship does not have to mean an end to home ownership. Talking to the bank is the first step in exploring modification prospects.

There is still a lot of negative equity in the housing market. Even with a loan modification, continuing to pay on your mortgage might seem like an exercise in futility. However, smart homeowners are watching the real estate market slowly tick upwards. We might not be in the throes of a full and sudden recovery, but the home values and prices are trending up, and interest rates remain at a historically low level. Therefore, getting a reasonable loan modification and sticking with your mortgage is a good investment, even if you are still a little upside down on your mortgage. In five or 10 years, experts predict the real estate market will be completely recovered, and your home will once again be one of the best investments you can make.

Without the federal HAMP program, there would be over half a million more foreclosed homes in the nation than there are now. This number cannot be ignored. While the federal government might have wanted to reach more people, the fact that so many homeowners have benefitted is good news. As people continue to seek help from their lenders, the number of secure homeowners will continue to increase, placing them in good financial standing as the market continues to expand and repair itself. The loan modification programs available now might not be perfect, but they are helping a substantial group of people, and keep families in their homes and fiscally solvent.

 

This post was written for Chicago Relocation by Stephen K. Hachey. Stephen is a Tampa real estate attorney specializing in loan modifications, short sales, foreclosures and much more.  He is also the owner of his own practice, the Law Offices of Stephen Hachey, PA.

 
 
 

Don’t despair – People still WANT to buy your home

July 20, 2011

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John D’Ambrogio

….The economy may just cause a little bit of a delay!

 

Bankrate.com commissioned a study that showed despite all the bad media coverage out there about homeownership, mortgages etc., most  of us still think buying a home is a smart investment (thank goodness).

 

So the good news:

· Nine out of ten of us still feel a home is a great investment that will grow in the future

 

And the bad:

· Half of us worry about not being to afford our homes, or worse yet we are worried about LOSING our home

 

 

Says Julie Bandy, editor in chief for Bankrate.com: “These results provide an interesting illustration of the public’s mindset in a difficult economy.”

 

It is refreshing to know that hope springs eternal!

 

 

 
 
 

Financial Institutions and the Mortgage Crisis

April 1, 2011

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A word from our intern Seun Olatoye-Ojo:

The recent admission by several financial institutions that errors were made with mortgages – hence foreclosure of homes – has been quite disturbing. It’s good enough that these companies have admitted to the wrongdoing but did they really have a choice or were they caught red-handed? Recently, Sheila Blair of the FDIC made a case for a fair compensation of customers who lost their homes as well as those who have been overpaying for years due to these errors. A few questions have agitated my mind. First, is an act a mistake when you are caught or when you discover it on your own? Also, when is compensation deemed adequate? These are two questions that are certainly open for debate; you decide.

 JP Morgan Chase & Co admitted it had overcharged over 4000 members of the US Military and foreclosed a few homes in the process. This happened only after a lawsuit had been pursued by one of the affected service members. The bank has apologized but how do you quantify several months of trauma of foreclosure and collections in monetary terms? Is it just enough to return homes and overpayments and assume it is all square? I find myself providing more questions than answers to my previous questions but many foreclosure victims ask these questions too.

From a different perspective, the industry wide ripple effect of these actions cannot be ignored. Put more succinctly, it’s contagious. On the one hand, new home buyers are very hesitant to buy due to the news making rounds as per foreclosures and bank errors; on the other hand, high unemployment rate has further compounded an already complex problem. Conversely, there has been some improvement in these two critical areas even though they have not been as significant as we all hope for. We used to think irrational exuberance drove the stock market but these days “rational exuberance” is sort of driving the housing market. The least that the banks can do is restore some kind of confidence in the mortgage industry by cutting down – or even totally eradicating – mistakes. This can add some momentum to a kick-started industry currently experiencing the lowest growth rate in decades.

 
 
 

How should I own my luxury investment property?

December 13, 2010

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I own real estate investment property.  The property is held in an LLC.  So I don’t actually own the property – I own the company that owns the property.  When investing in Chicago luxury real estate  or any real estate - is this the best way to go?  Some experts say yes;  A Limited Liability Company (LLC) is formed to shield the owner from liability, or to provide asset protection. 

Advocates of LLCs claim you own nothing but control everything; based on the concept of forming a company solely with the purpose of owning your property.  The partners take shares of the company and manage the day to day affairs.  At tax time you prepare taxes for the company, and depending on your state and the type of LLC, you will receive a profit or loss which will then be reported on your state and federal income tax.  Those who disagree suggest that simply having enough insurance should insulate the owner from any potential out of pocket expenses associated with liability. 

There are, however, many more considerations.  For an LLC to mortgage a property, there is generally a higher rate than if an individual mortgages the property (and then puts it into an LLC).  The problem isn’t getting a loan as much as it is the rate you’ll be charged.  Even at these historic lows, every penny counts!

DISCLAIMER – Before making a purchase and before deciding what type of ownership in which to hold property, please consult a lawyer and accountant. 

 
 
 

As read in Business Week – If you don’t buy a house now…

December 13, 2009

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….You’re stupid or broke!  Strong words, but thank you Marc Roth for exposing the emporer’s new clothes on this one!  Your humble author definitely has plans to buy at least some more investment property in 2010 and take advantage of these all time lows and historically low rates (although I’ve got a nagging vacancy in Chicago’s Tri Taylor neighborhood, if anyone is looking for a rental bargain!).

But back to Mr. Roth’s succinct appraisal – “Maybe you’re a Trappist monk and have forsworn all earthly possessions. Or whatever. But if you want to buy a house, now is the time, and if you don’t act soon, you will regret it. Here’s why: historically low interest rates.”  He goes on to address a number of other issues that can apply to buying real estate in Chicago or just about anywhere else in the country.

Yes the nay-sayers will remind you that it’s very hard to get the best mortgage rate without fantastic credit, or that nasty little extras like property taxes have not gone down, or that 10.3 of us seem to unemployed – but that’s not “big picture” thinking.  If you have the means, this is an opportunity that won’t come again for many years.  So for those on the sidelines – Carpe Diem!

Read the fantstic article here.

 

 
 
 

It’s official, tax credit is extended and enhanced!

November 6, 2009

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BREAKING NEWS from RIS MEDIA:   Obama Signs Homebuyer Tax Credit Extension

According to RIS MEDIA: President Barack Obama approved the first-time homebuyer tax credit extension which will extend the tax credit until April 30, 2010!!!!!!!!!! A great day for Chicago real estate.

 

 
 
 

A Closer Look at the Real Estate Settlement Procedures Act

September 15, 2009

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Here’s some fantastic insight on some of the changes coming to RESPA, by my Rubloff colleague Ross Nemzin.  Ross can be reached at rnemzin@rubloff.com 

Another of the new federal requirements that will impact every mortgage operation in the country is the Real Estate Settlement Procedures Act (RESPA). RESPA is an HUD consumer protection law that was created in 1974 to help consumers become better purchasers of settlement services and to decrease the puffed up costs of real estate transactions due to kickbacks between lenders, realtors, construction companies, and title insurance companies. It also requires that lenders provide borrowers with a good faith estimate (GFE) for all the costs of a loan. RESPA reform has been going on since 1992 and at last a final rule for the act was recently created with a compliance date of January 1, 2010.

The final rule promotes RESPA’s functions by requiring more timely and useful disclosures about mortgage settlement costs and protecting borrowers from paying inflated settlement costs. According to the Federal Register, RESPA will do this by – Improving and standardizing the GFE form; guaranteeing that the first page of the GFE is understandable; allowing borrowers to ID a particular loan and make comparisons easier; providing more accurate estimates of settlement costs on the GFE; helping to more accurately compare the GFE with the HUD-1.   

       

 

It is important to note that the costs outlined on the GFE are only estimates. The HUD-1 Settlement Statement is a list of the actual fees charged to the borrower and can be reviewed by the borrower one day before settlement. The borrower should request to see the HUD-1 and should question any charge that is not understood.

After much consideration, the proposed changes to the definition of “required use” have been withdrawn from the final rule of RESPA. These changes would have eliminated incentives or discounts to borrowers that use affiliated settlement service providers.

It seems as though RESPA’s final rule is very beneficial to the homebuyer, yet only time will tell.  However, anyone relocating into or out of Chicago should certainly take note….

 
 
 

Home Ownership Equity Protection Act (HOEPA)

August 17, 2009

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James Waller, shared some comments on HOEPA– Home Ownership Equity Protection Act.  James is currently pursuing a real estate degree at DePaul University in Chicago IL.  He can be reached at jwaller@rubloff.com .  As always, it’s best to stay informed by using a strong, secure mortgage lender.

 

On July 14, 2008 the Board of Governors for the Federal Reserve released new rules under the Truth in Lending Act (T.I.L.A.) Regulation-Z. This law helps to protect consumers from deceptive practices made by lenders towards mortgages and home equity loans. If the lender does not supply the obligatory disclosures or terminates the loan in less than three days, then the borrower has the right to take legal action and may be able to receive compensation for damages, legal fees and get the loan reinstated. H.O.E.P.A. is applied to all lenders and not just federally –regulated banks. 

 
The guidelines illustrate how we are shielded by creating a new category of “higher-priced mortgage loans.” It is defined as closed-end consumer credit transactions secured by the consumer’s principal dwelling. The Annual Percentage Rate (APR) on the loan will exceed the rate on a Treasury security with a comparable maturity by 3%. This shall include purchase loans, refinancing of loans, and home equity loans. Yet, this will exclude loans for vacation properties, open-end home-equity plans, reverse mortgages, or construction-only loans.

 
 Furthermore, this legislation implements early consumer disclosures for closed end mortgages secured by a principal dwelling. Certain prohibitions include acts or practices for subprime mortgage loans and loans that meet HOEPA’s cost triggers. Additional acts or practices for closed-end credit transactions attained by a consumer’s principal residence. Also, misleading advertising practices in relation to closed-end mortgages.

 
 
 

A More Detailed Look at the Home Valuation Code of Conduct

July 2, 2009

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 My colleague here at Rubloff, Ross Nemzin, has shared his thoughts on the upcoming HVCC – One of four major changes coming to the relocation financing world in the next few months.  Ross, who is earning a degree in real estate while working at Rubloff, can be reached at rnemzin@rubloff.com  

As described in an earlier post, a number of new federal requirements in the housing industry will be enacted within the next few months.  One of those requirements, the Home Valuation Code of Conduct, has already been formally implemented.  In a broad sense, the HVCC is designed to ensure and improve the independence and accuracy of appraisals and provide increased protections for homebuyers, investors, and the housing market.  The HVCC has nine sections that each deal with a specific part of the new act.

 

The first section of the HVCC establishes controls and safeguards to ensure appraiser independence.  The main point is that all appraisers must be licensed or certified by the state in which the property to be appraised is located.  The other major aspect of section one is that nobody shall influence any part of the appraisal process in any way.  Section two requires lenders to provide customers with a copy of their appraisal or property valuation report no less than three days prior to the closing of the loan.  The customer does have the right to waive this requirement.

 

The third section of the HVCC involves appraiser engagement and selection.  Specifically, the lender must select, retain, and provide for payment of all compensation to the appraiser.  The third section forbids any influence in the selection of an appraiser for a particular assignment, including any communication that may have an impact on valuation.  Finally, any employee in charge of selecting appraisers must be trained, qualified, and completely independent of the loan production staff and process.

 

The next two sections focus further on the independence of appraisers.  The fourth section prevents improper influences on appraisers by describing specific instances in which an appraisal report cannot be used due to its impartiality.  Section five creates the Independent Valuation Protection Institute (as approved by the parties) which compels the lender to provide information to appraisers and borrowers regarding the availability of the Institute’s services, including a telephone hotline and email address and the publication and promotion of the best practices for independent valuation. 

 

The sixth section requires lenders to test the quality of appraisals and provide Fannie Mae or Freddie Mac with any irregular results.  In section seven, a lender is required to alert the applicable State office to any known violation of laws or unethical conduct by an appraiser or appraisal company.  Section eight forces a lender to certify that the appraisal report was acquired in compliance with the HVCC and lays out punishments for violations.  The ninth and final section deals with the scope of the HVCC and its affect on property valuation prior to its enactment.

 

So, what does all this legal jargon actually mean?  Well, first of all, Freddie and Fannie will only purchase loans that were appraised in compliance with the new Code.  In addition, many lenders are up in arms about the independent selection of appraisers, citing the fact that the HVCC has resulted in appraisers performing appraisals in areas they are not familiar with, the forced use of appraisers with less experience, and much lower appraisals.  Appraisers unfamiliar with an area are more likely to undervalue a home, which can destroy a deal if a seller is unwilling to list the home for that low of a price.  Further, there is an increased cost for the appraisal because the appraisal fee is now split between the appraiser and the appraisal management company.  The HVCC has greatly altered many aspects of a real estate transaction, often with overwhelming effects.

 

 
 
 

How will “mass foreclosure” affect credit rankings?

May 20, 2009

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The almighty credit score, the 740 hurdle, the mysterious FICO…..is it going give a wink and a nod to the millions of foreclosure customers coming into the credit market.

Short sales, deeds in lieu of foreclosure, and “proper” foreclosures are affecting Americans all over the country.  While it may not be part of YOUR FICO score it will impact the pool of clients who may want to buy your relocation home in Chicago .

Is “foreclosure” still the scarlet F that it used to be?  I don’t think so, not since people started bragging about bucking the system and declaring bankruptcy.  While it still makes them less of a candidate for the most competitive loan around, they can still get loans nonetheless.    The huge stigma just isn’t there anymore.  So how does that reflect on those of us (gentle reader included, perhaps) who don’t have a foreclosure on their FICO?    We have to admit that a foreclosure five, or seven, years ago carried a much bigger stigma than it does today.  We simply have too many foreclosed properties to throw those owners out “with the bathwater” as it were.

Experts and pundits alike seem to concur – FICO scores will have to be adjusted to take into account the huge amount of bad loans that have flooded our nation.  We simply HAVE to figure out a way to realistically lend to these people if we want them to continue to contribute to the US financial system.

Then again, as they say “a nod is as good as a wink to a blind horse”