Eminent Domain Could Help Underwater Homeowners

Article provided by Brenda Mayer of Cozy Cabins Realty.

San Bernardino county has formed the Joint Powers Authority (JPA) to research the idea to use eminent domain to help underwater homeowners.  The proposal was formed during talks with private investment firm,  Mortgage Resolution Partners (MRP), earlier this year.  The fact that SB County officials and MRP held several meetings prior to formal public meetings is in question of possible violations of the Brown Act.

The proposed plan would have SB County become a client of MRP and with the county's use of eminent domain, underwater properties would have their mortgages condemned and a new mortgage issued to the homeowner.  The mortgage company would be given "fair market value" for the condemned mortgage.  Government secured mortgages would not qualify for the program, only mortgages that are held by private investors would be considered.  The largest group of privately held mortgages are higher end loans where in many cases, the investor has been unwilling to assist a underwater homeowner with a principal reduction.  Only homeowners that are current on their loan payments would be considered.

On Friday, July 13th, the JPA was officially formed to research the viability of the project and has been given the power to act on this project by the County Board of Supervisors.  County chief executive Greg Devereaux was appointed as Chairperson of the JPA with directors Fontana City Manager Ken Hunt, Ontario City Manager Chris Hughes, county Redevelopment Director Dena Fuentes and Ontario's housing and neighborhood development director, Brent Schultz.  

The meeting at the San Bernardino County Government Center was filled with concerned community members including many real estate professionals.  Timothy Cameron, managing director of the Securities Industry and Financial Markets Association's asset manager's group, told the committee that the residents of the region would find it harder to get loans and investors would suffer losses.  He also said such a move would invite costly litigation.  

Our own association voiced concern to the committee questioning the use of eminent domain action for a private purpose when the description of eminent domain in the California code specifically states this action is to be used for projects to benefit the public.  We also addressed the concern that if eminent domain is abused in this way that lenders would be less willing to invest in property in the San Bernardino county out of fear that their investment would be condemned.  Also, with the use of this process, the homeowner's binding contract with their lender will have been violated.  There is nothing to stop the lender from issuing a 1099 to the homeowner for the financial difference that is given to the lender through the eminent domain process and the balance of the note.  The homeowner could be responsible for thousands in federal and state taxes as the 1099 translates to earned income.

Privately, many in our industry are worried that if this proposal is passed, then the boundary lines surrounding the use of eminent domain would continue to blur.  The next meeting of the SB County Joint Powers Authority is scheduled for August 16th. 

Warren Buffet on Buying a Home...

Warren Buffett quoted on CNBC February 27, 2012

BUFFETT: “Well, if I knew where I was going to want to live the next five or 10 years I would buy a home and I'd finance it with a 30-year mortgage, and it's a terrific deal. And if I, literally, if I was an investor that was a handy type, which I'm not, and I could buy a couple of them at distressed prices and find renters, I think that's— and again take a 30-year mortgage, it's a leveraged way of owning a very cheap asset now and I think that's probably as an attractive an investment as you can make now.”

    

Make $$ in 2010 - Your Home

This excerpt was taken from CNN Money:
Following three years of declining home prices, the end of the nationwide housing slump may be in sight. Home sales consistently have been rising, the surplus of houses is shrinking, and most economists believe home values nationwide will hit bottom in the second half of 2010, but not before declining an additional five
to 10 percent. That's good news for homeowners hoping to sell or rebuild lost equity.

KEEP THIS IN MIND
- Mortgage rates currently are below 5 percent, and should remain low for the next few months, partially due to the Federal Reserve's ongoing purchase of mortgage-backed securities. However, if the economy quickly turns around and inflation fears resurface, rates could rise to as high as 6.5%, slowing demand and pushing down home values.

- According to one analyst, the market will remain tilted in favor of buyers over the next year, but that power gradually will be reduced as conditions in the housing market continue to improve.

- Buyers hoping to purchase or invest in a lower-priced, entry-level home should expect some competition from investors and other buyers. To remain competitive, buyers are advised to put down as much cash as possible, as many investors are offering to make all-cash deals. Another factor to keep in mind is that offers below listing price often are outbid by others.

- Some home sellers are postponing listing their homes until the market recovers. However, timing the market is difficult, so homeowners thinking of selling should carefully weigh their options. Congress recently expanded the federal tax credit to include some existing homeowners, but they must close before June 30, 2010 to qualify. Although existing homeowners are not required to sell their current home to qualify for the credit, those who plan to rent out their current residences should be aware that many lenders require borrowers to show they are financially capable of paying two mortgages, or show rental income for at least six months.

Read the full story here:
http://money.cnn.com/2009/11/09/pf/Make_money_home.moneymag/index.htm

How to Buy Short Sales & How to Avoid Foreclosure ~ FREE Seminar

Free Seminar on Tuesday, October 27th from 6:30pm-8pm.

Lee Ann Canaday with the Canaday Group is a Certified Distressed Property Expert (CDPE). The Canaday Group has a short sale department and has successfully closed numerous short sales. Short sales allow a homeowner with a legitimate hardship to sell their property for less than the balance of their mortgages and avoid foreclosure. At our seminar we will explain the short sale process, how to obtain financing, how to avoid foreclosure and we will present short sales currently on the market.

Location:
UCI University Club
801 E. Peltason
Irvine, CA 92697
*Food & beverages provided
Any questions, please call 949.249.2424

Future Loans with a Successful Short Sale vs. Foreclosure

Homeowner consequences of a successful short sale vs. foreclosure and how it relates to your future loans.

Future Fannie Mae Loan - Primary Residence
Foreclosure-A homeowner who loses a home to Foreclosure is ineligible for a Fannie Mae backed mortgage for a period of 5 years.
Successful Short Sale-A homeowner who successfully negotiates and closes a short sale will be eligible for a Fannie Mae backed mortgage after only 2 years.

Future Fannie Mae Loan - Non Primary
Foreclosure-An Investor who allows a property to go to Foreclosure is ineligible for a Fannie Mae backed investment mortgage for a period of 7 years.
Successful Short Sale-An investor who successfully negotiates and closes a short sale will be eligible for a Fannie Mae backed investment mortgage after only 2 years.

Future Loan with any Mortgage Company
Foreclosure-On any future 1003 application, a prospective borrower will have to answer YES to question C in Section VIII of the standard 1003 that asks "Have you had property foreclosed upon or given title or deed in lieu thereof in the last 7 years?" this will affect future rates.
Successful Short Sale-There is no similar declaration or question regarding a short sale.

What's in the Foreclosure Prevention Plan?

The Obama administration released (yesterday) its long-awaited plan to stem foreclosures. It's organized into three categories:

1. Help for homeowners making their payments but at risk of default and foreclosure. Homeowners with a Fannie Mae or Freddie Mac loan would be eligible to refinance as long as their mortgage doesn't exceed 105 percent of the home's current market value. Currently owners need to have at least 20 percent equity. Potential impact: 4-5 million households.

2. Help for homeowners already in default and in need of loan modification. For lenders that voluntarily agree to lower a borrower's payment so that it makes up no more than 38 percent of the borrower's income, the government would share the cost of lowering the mortgage burden to 31 percent of income. Incentives to lenders to participate include a $1,000 payment. Borrowers can receive up to $1,000 as an incentive to stay current on their new mortgage. Still in the works is a proposed provision that would allow bankruptcy judges to require loan modification (known as a cramdown) as part of a household's restructuring. That provision requires legislation by Congress. Estimated potential impact: 3-4 million households.

3. Doubled resources to Fannie Mae and Freddie Mac. To encourage investors to buy the secondary market companies' mortgage-backed securities, the government explicitly backstops them to up to $400 billion, twice the current amount.

The plan does not provide help to investors or to homeowners who are in trouble with a second home, nor does it apply to homeowners whose mortgage is part of a private-label mortgage security that is not backed by Fannie Mae or Freddie Mac.

"The administration's proposed plan, combined with provisions like the $8,000 first-time home buyer tax credit in the just-enacted American Recovery and Reinvestment Act, will help minimize foreclosures, shrink housing inventory, stabilize home values, and move the country closer to an economic recovery," says NAR President Charles McMillan.

Attend our Avoid Foreclosure Seminar, March 11th 7pm at the Tijeras Creek Golf Club in Rancho Santa Margarita.

Credit Tips...part 2

A few more credit tips for you!

3. The Age of Your Credit History -
The score is looking to see if you have a lengthy history of managing your credit obligations. The age of your credit history is determined by the "date opened" on the oldest account listed on your credit report. The older your credit report, the more points you will earn in this category. You should never try and get old, good accounts removed from your credit reports. You want the history!

4. New Credit/Inquiries
When you apply for credit you are giving the lender permission to pull your credit reports and credit scores. Each time this happens, your credit report will reflect what's called an "inquiry." To perform well in this category, you should really only apply for credit when you need it.

5. Credit Mix
You should have a nice diverse list of different types of accounts in your credit report. This includes mortgages, auto loans, installment loans, credit cards, etc.

That pretty much covers the factors that are used in determining your credit scores. Let's do a quick recap:
1. How you pay your bills - on time is good, late is bad
2. How much you owe your creditors
3. How long you've had credit - the longer the better
4. How often you apply for credit - apply only when you really need it
5. Account mix - diversity is good
If you can stick by these five key principles, you should be
well on your way to healthy credit and credit scores.