HOMEOWNERS CUT BACK ON REMODELING

Homeowner spending on home improvements will continue to trend downward into the first half of 2010, according to a recent Leading Indicator of Remodeling Activity report issued by Harvard
University's Joint Center for Housing Studies.

The study forecasts annual decline in remodeling activity to hover at approximately 11% for the next several quarters.  While there are some positive developments in the industry, such as low financing costs for home improvement projects and rising home sales in some markets, the study finds that the overall outlook going into 2010 remains bleak due to weak home prices and decreased cost recovery for some types of remodeling projects.

BEING SUED BY YOUR LENDER

Some Arizona homeowners who have walked away from their homes have found themselves as defendants in lawsuits filed by one of their lenders.  These unfortunate borrowers wonder how that could have happened since Arizona has Anti-Deficiency Statutes.  Such lawsuits revolve around a type of loan called an 80/20 loan where one or two different lenders would lend the borrower an 80% first loan which would be secured by the residence.  The remaining 20% of purchase price was also financed & secured by the home in a second lien position.  The lenders that made these type of loans to borrowers were basically financing 100% of the purchase price of the home.  

When real estate values declined, homeowners stopped making loan payments and began walking away from their homes.  As one would expect, without payment, the holders of the first mortgage foreclosed on the homes.  Holders of the second loans were left with none or a small fraction of their 20% loan being repaid due to the declining value.  These lenders began filling lawsuits against the borrowers for the full amount of the second loan.  SURPRISE! SURPRISE!

While these homeowners should otherwise be protected from the deficiency lawsuits, their 20% second loans may not be the type that fit within the "Arizona Anti-Deficiency" laws...such as home equity loans that are made for some other purpose than to purchase a home.  Seeking legal advice to determine whether or not the lender has a valid claim against the borrower/homeowner is a MUST as many lenders are unaware of Arizona's "Anti-Deficiency" statutes.

WHY DO LENDERS CHARGE POINTS?

Whenever governmental regulation, state usury laws and/or competitive practices prohibit the lender from charging a rate of interest which would make the real estate loan competitive with other fields of investments, the lender must seek some other method of increasing the yield for their investors.  By charging "points" (a percentage of the loan amount being borrowed), the lender can bring the real estate loan up to those other investments.

Are Points Called by Different Names?  Yes.   Commitment Fee, Discount Fee, Warehousing Fee, Funding Fee

Do the Number of Points Charged Fluctuate?  Yes.  If rates on mortgage loans are lower than other investments (such as stocks, bonds, etc.) then funds will be drawn away from mortgage market.  Also when there is heavy demand upon the money market because of business needs, military requirements or other government borrowing, the result is that money for home mortgages becomes scarce and more expensive.  When this occurs, more "points" (a percentage of the amount being borrowed) can be charged.  Points balance the market.  Points are not set by government regulation but by each lender individually.

FOR MORE INFORMATION CONTACT ME AT MY I Sell AZ Sunshine website.

Bankruptcy Won't Necessarily Save Your Commerical Property

A Chapter 11 bankruptcy may buy some time for commercial property owners facing a loan foreclosure, but it may not be the best option for those who are hoping to hang on to their property.

Why not? Chapter 11 was designed to help businesses continue to operate but not necessarily to protect the interests of the borrower.  A bankruptcy affords little protection for a property held as a single asset in a special purpose entity.  Also, continual attorney and advisory fees during a bankruptcy can impose an additional financial burden that may outweigh any benefit from the reorganization plan.

Best option is try to do all that you can to arrive at a workout option with your lender. Remember that there needs to be some justifiable reasons for the lender to consider giving concessions.

Try working with the lender in second place to reach an agreement with the first lien holder.  This strategy is very useful when the property's value has fallen below the amount of the first lien and a workout provides a better option for the secondary lender to be repaid.

Most lenders don't want to foreclose. A workout that lets owners and lenders ride out the downturn is often the best option for all parties.

NEED MORE INFO CONTACT ME AT MY I Sell AZ Sunshine website.

FLIP THIS HOUSE? MAYBE NOT?

FNMA, FHMLC, and the banks such as Wells, Chase, etc. continue to warn lenders to apply extra scrutiny on transactions where the seller has owned the home less than 90 days.  It is possible that they may soon adopt a 90 day rule similar to FHA's rules, but in the mean time, Bell Mortgage in Phoenix Arizona is continuing to process these transactions on a case by case basis.  They still have two investors who will accept these loans, and there are currently two mortgage insurance companies who will insure them up to 90% LTV, provided the borrowers have strong files with solid home appraisals.

 

Here are some areas of concern:

 

1)  The seller must have clear title to the property when they sign the purchase contract.  All liens must be paid off.  Short sale middlemen do not have clear title. 

 

2)  The title company must supply the lender with a 24 month chain of title.  We may need to obtain copies of the Trustee Deed in order to determine who is actually on title.

 

3)  Multiple ownership changes in a short period of time (other than between financial institutions and their agents) can be a cause of concern.

 

4)  Large changes in value with little or no improvement to the property may trigger additional scrutiny of the loan file.

 

5)  Sales that are not arms length (sale to a relative) may cause the transaction to be denied.

 

Courtesy of Jay Starks, Bell Mortgage, Phoenix, Arizona