As I announced last week, I’m pitching in to help Tim & Eric with the volume of the mortgage business right now (Tim’s my husband).  Tim is the branch manager for Alternative Mortgage, so I guess that makes him my BOSS!  (don’t tell him that I’ve realized that…it will be our little secret!)  Can you spell I-N-S-U-B-O-R-D-I-N-A-T-I-O-N?

Anyways…

Don’t forget, as of October 1st the seller funded downpayment programs like Nehemia and Ameridream will be GONE!  Several lenders have already announced that they will not close them anymore effective now.  They are afraid that if they close them now, they may have problems getting them insured by FHA. 

IF YOU HAVE BUYERS UNDER THIS PROGRAM…GET THEM A HOUSE AND GET THEM CLOSED NOW, DO NOT LET THEM SIT ON THE FENCE AND LOSE THEIR CHANCE (and your commission!)

On a different note, Tim just got signed up with a lender that is allowing seller held second mortgages  again!  This means that if your buyer doesn’t have  their downpayment money, the seller can hold a 2nd mortgage and get the house sold!  This is a perfect situation when the seller is willing to take 5-15% less than asking  price, this way they get full asking price AND a little monthly income from it! (remember, most houses right now sell for about 92% of asking price, so instead of discounting, your seller can get paid!)  We are approved to close loans in every part of Florida.

If you’d like some help setting up a transaction like this, or just running a scenario by us, call  407-831-2277 or email Tim@TimTolbert.com

Here are several articles that I’ve located discussing the new foreclosure law…most are written by attorneys and how they may not take cases any more that relate to a homeowner in foreclosure, including filing bankruptcys for them!

WOW!  Did any of the lawmakers that voted for this ever even read it?  I’ll keep you posted as I get new info!

Click Here for Article #1

Click Here for Article #2

Click Here for Article #3

Click Here for Article #4

Those articles are all from the eyes of the attorneys, but did you notice in one of them it says that the ORIGINAL text of the bill excluded attorneys, real estate brokers, and mortgage brokers, but that those exclusions were STRICKEN from the final version?

Here’s a whole ‘nother player that’s scared about the ramifications of this new law…Title Companies!  First American has already circulated a memo to their companies that there may be risk involved for the title company handling the closing of any property involved in foreclosure!

Wow!  If the attorney’s won’t represent them, and the title companies won’t close them, and the Realtors won’t list them, and the mortgage companies won’t refinance them, and the investors won’t buy them… I guess there’s no such thing as selling your house once the foreclosure is started!

Now, I don’t think it will really come to that extreme…I’m sure the attorneys are already working on pushing through a “fix” to the law, but stay tuned…it may only cover THEIR tails, not ours!

On June 11th, HUD released Mortgagee Letter 2008-16 which changes the mortgage insurance premium costs for borrowers. It addresses a few other things too, such as refinances, but today I’m going to cover purchase transactions for you.

The new policies go into effect on Monday July 14th. If your buyer has a property under contract and their lender orders the FHA Case Number prior to the 14th, they will be locked in at the old terms (unless they change properties… case numbers go with the house).

Currently, buyers pay 1.5% of the loan amount in what’s called the Up Front Mortgage Insurance Premium (UFMIP) which can be paid in cash or rolled into the loan, as well as what’s called Monthly MIP that is calculated by taking the loan amount times .5% (1/2 of a percent) which gives you the annual rate. Just divide by 12 to get the monthly premium payment. (Ex: $200,000 x .5% = $1,000 annually divided by 12 = $83.33/month)

Under the new guidelines, the borrower will pay different premium rates based on 2 risk factors:

Credit Score:

-No Score / Non-traditional
-300-499 (minimum 10% down)
-500-559
-560-599
-600-639
-640-679
-680-850

Down Payment / LTV (Loan to Value):
Less than 90% LTV (10% or more down)

-UFMIP Ranges from 1.25%-1.75%
-Monthly MIP is .5%
90.01-95% LTV (5-9.99%)
-UFMIP Ranges from 1.25-2.0%
-Monthly MIP is .5%
95.01+ LTV (Less than 5% down, remember, most buyers use 3%)
-UFMIP Ranges from 1.25-2.25% (the highest, 2.25%, can be reduced to 2.0 with housing counseling)
-Monthly MIP is .55%

As you can see, for the majority of your borrowers, both the UFMIP and the monthly will go higher. Another major change is that borrowers with less than a 500 credit score will now only qualify for FHA financing if they put down at least 10%.

But don’t freak out about these increases… on a $200,000 loan, the raise from .5% to .55% will only change your client’s payment by $8.33 per month.

These changes will help to bring FHA into the current market and ensure that the program will be around for many years to come… something we all will appreciate going forward as FHA loans continue to be the loan of choice for today’s borrowers (it’s estimated that 65% of all loans closed in 2008 will be FHA insured!)

WARNING!!! Some of these numbers are about to floor you, so please make sure you’re sitting down.

I’ve tried and tried to show the positive side of everything that’s happening in our market, but when you see numbers like this it’s a little tough. The only positive side of this is if you are specializing in the Pre-Foreclosure or REO niche you will be jumping for JOY at these numbers, mainly because your niche is showing NO signs of slowing down anytime over the next few years. Here they are, in all their glory:

All stats are through the First quarter of this year (January, February, March) in FLORIDA

Number of houses already taken back by the bank this year (will be on the market soon with Realtors as REO’s) 18,055

Number of new foreclosure filings (LP’s) so far: 118,301
Percentage of all Florida households filed on in 1st quarter: 1.87%
If you multiply that by 4 (quarters) we are on track to be 7.48% of the whole state by the end of the year! Yes, 7 and a 1/2% of ALL Florida households will be filed on this year!

Here’s the top 10 (worst) counties:

#1 Osceola: 3,127 filings, 5.13% of households, on track for 20.52% for the year, that’s 1 out of every 4.87 households will be filed on this year! The “on track” is if the rate of foreclosures stays exactly the same for the rest of the year, if it increases or reduces the rate later this year, these numbers will be off.

#2 Lee: 7,981 filings, 4.23%, on track for 16.92% or 1 out of every 5.91 households
#3 Flagler: 882 filings, 4.14%, on track for 16.56% or 1 out of every 6.04 households
#4 St Lucie: 2,799 filings, 3.64% on track for 14.56% or 1 out of every 6.87 households
#5 Walton: 454 filings, 2.74% on track for 10.96% or 1 out of every 9.12 households
#6 Broward: 16,872 filings, 2.58% on track for 10.32% or 1 out of every 9.69 households
#7 Dade: 19,720 filings, 2.54% on track for 10.16% or 1 out of every 9.84 households
#8 Pasco: 3,685 filings, 2.50% on track for 10.00% or 1 out of every 10 households
#9 Hernando: 1,272 filings, 2.29% on track for 9.16% or 1 out of every 10.92 households
#10 Orange: 7,671 filings, 2.28% on track for 9.12% or 1 out of every 10.96 households

Did #1 shock you? 20% of the whole county will be in foreclosure this year?!?! Holy Cow!

This is a topic that I hear over and over every time I’m meeting with agents and investors, and it is a big misconception that the tax law changed and ALL short sales don’t have to pay taxes. That is absolutely NOT true! I have reprinted this article (with a little more in-depth explanation for you, so even if you already read it, please take a minute to read it again) and I will probably re-print it every quarter until we’re out of this mess! Please feel free to forward it to the other agents in your office, title companies, mortgage companies, everyone that you feel might benefit!

On December 20th, Bush signed into law a measure that will change the tax effects for a homeowner in foreclosure. These are critical changes that may change your client’s outlook on a deal (in fact…maybe you lost a deal last year because of this tax burden…it may not be too late to call that client back and revive the deal!)

In a nutshell: If a homeowner who was in foreclosure worked out a short sale agreement with their lender, the amount of debt that the lender “wrote off” is considered as ordinary income to the seller. That means if you negotiated a $50,000 reduction in the payoff to help get the property sold, that seller would have to claim that $50,000 as taxable income on their tax returns (resulting in a potential tax bill between $7,500 and $17,500). Some sellers decided NOT to sell on a short sale for this very reason…but that’s where this new law comes in!

It makes that “income” from written off debt NOT TAXABLE to the seller under certain circumstances! Here’s some key points:

- Only applies to their principal residence, not 2nd home/vacation/rentals/speculation. So many of our clients that are in an upside-down situation on non-owner occupied properties may still owe income tax.

- Effective for debts discharged between Jan 1, 2007 and Dec. 31, 2009

- It applies to debt for acquisition, construction, or substantial improvement to the property. This means that if someone had refinanced and taken cash out or paid debts off, then the forgiven debt WILL be taxable. Think about it…they DID get cash out of the property that they never paid taxes on…..now they will have to.

- Forgiveness is limited to $2,000,000 (I think we’re OK there!)

- The amount of forgiven debt will be reduced from the sellers basis in the house. Most sellers will still be able to sell with no capital gains bill as long as they’ve lived in the house for at least 2 years, but people in their homes less than 2 years may still have a surprise! And for investment properties, they will either pay long or short term capital gains based on how long they held the investment.

Cool Part of the Law #2: Another thing that was in this new law that you will probably like…an extension of the tax deductibility of Private Mortgage Insurance (you know, that monthly bill your clients pay when they don’t put down 20% on a home mortgage!). This extension is good through Dec 31, 2010, and again is only applied to acquisition mortgages on a “qualified residence.”

Cool Part of the Law #3: And one last part that might apply to your clients…if a client’s spouse dies, they now have 2 years from the date of the death to sell that home and take the full $500,000 exclusion for a couple in a primary residence. After that time, they will only be entitled to the single person’s $250,000 exclusion on the gain they received from the sale. It used to be only in the year of the death, which would be difficult if they passed away towards the end of the year.

Please remember, I am NOT an accountant, and I am not giving you or your clients legal or accounting advice, and neither should you! Anytime you have a client that asks you about the tax ramifications of ANY deal, refer them back to their CPA or attorney for advice.

I know, the headline had you reminiscing back to a wonderful 2006 in Florida football, where the Gators chomped those annoying Buckeyes…but let me get back on track…

Today I’m not talking about anything nearly as pleasant…

As reported by Fannie Mae in June 2007 and by the Mortgage Asset Research Institute in May 2007, Florida led the nation in mortgage fraud rates this past year. Within Florida, South Florida has the highest rate of mortgage fraud in the state.

Being #1 in mortgage fraud is NOT a title we should brag about!

A few years ago, Georgia held this distinction, until they got serious and cracked down…now Florida has taken over their title, and it’s going to get WAY worse before it gets better. In my experience for every one of these organized fraud rings they bust, there are hundreds of brokers, real estate agents, buyers, and sellers that are either knowingly or unknowingly committing fraud every day, just not in the multi-million dollar scale that makes the headlines.

When times are tight (like now), people may be tempted to “fudge” the rules a little bit, but please believe me when I tell you…it’s not worth it! As of October 1, 2007, mortgage fraud is a 3rd degree felony for ALL parties involved! That not only means fines, but it also means Jail Time!

I’ve always believed (and run my business) on the theory that one deal is NOT worth the risk, and if it can’t be done the right way, then maybe that buyer doesn’t really belong in that house.

Please, think twice about it before you cross that line…I don’t want to hear about YOU on the six o’clock news…here’s a warning from the FBI, please take it seriously…

“The mortgage lending and housing market have a considerable overall effect on the nation’s economy and combating mortgage fraud will remain a top priority for the FBI,” said Jonathan I. Solomon, special agent in charge of the FBI’s Miami office.