My New Blog

The new Obama stimulus bill is now law, and one feature of interest to all those considering buying their first home (you are a first time homebuyer in Oregon if this is your first home in 3 years), is the new tax credit for first time homebuyers.

In the stimulus package is a bonus for those of you considering buying a home right now - or anytime in 2009.  There is an $8000 tax credit!!  Actually the law reads that the tax credit is the lesser of 10%  of the purchase price of the home, or $8000 maximum credit.  Here in Oregon, I think you'll be very hard pressed to find a home for sale for less than $80,000, so I think virtually everyone will qualify for the full $8000 credit.  This credit is yours to keep providing you stay in the home for at least 3 years.  That's it!!  If you move prior to 3 years, you do have to pay it back. 

What a gift to those of you who have been waiting for something special, and with rates as low as they are right now!!!! 

Please call if you have questions or concerns, but for more specific information about how the credit will affect your next tax return, you should consult with your tax advisor.

Have a wonderful day.

Shelby

In the last 2 months, we have seen mortgage rates drop to as low as 4.75%, for those of you who qualify for best rates.  But this low rate has been very short lived, both times, and reversed within a matter of hours.  Today, best rates stand at 5% and higher.  FHA rates dropped to as low as 5%, but are much higher today as well.  Rates are no longer moving in conjunction with the stock market (stock market is down, rates are down...) but seem to almost have a mind of their own.  We do foresee continued volatility for the upcoming months, at least until some level of stabilization in the economy is reached. 

 The details on the mortgage rescue program are scheduled to be released on March 4th.  Following are excerpts from a Question/Answer Session that followed the announcement yesterday:

What we do know is that anyone who does qualify for a conventional type of refinance transaction will NOT be eligible under the Mortgage rescue program.  This program is only for those who need federal assistance. 

 Please read this - it will very likely surprise many of you -

President Obama has signed the stimulus bill today.  While this should be positive news, Wall Street is acting like we have all just been shot in the foot.  Apparently the overall consensus is that this will not work quickly enough, that not enough of the stimulus package is going to job creation, and that not enough jobs will be created to keep up with the rate jobs are being lost.  The end result is the DOW closed down almost 300 points, and we are heading for stock market lows last seen in November 2008. 

 This should be good news for mortgage rates, and as of this morning, rates are slightly better.  I would have thought we would have seen rates significantly better with the "flight to safety" being seen in precious metals and treasury bonds markets.  The yield on the 10 year treasury bond is down from Friday approximately 20 points.  Apparently investors are not also aggressively purchasing mortgage bonds.

We are expecting an announcement tomorrow on the Presidents plan to help homeowners facing imminent foreclosure.  It is important to note here that this announcement will help those who are already delinquent on their loan payments.  Those who are still current but in trouble might expect to see some assistance at a later time, but that is not the focus of the announcement tomorrow (according to what we are being told at this time.)

 The Feds and Treasury Department are sending audit teams to the larger banks looking for more federal dollars, in an effort to determine the value of the toxic assets, and to run the "stress test" to determine the banks solvency.  In the meantime, banks worldwide are experiencing the effects of this economic slowdown too.  China has passed a $600 billion dollar stimulus plan, as has much of Europe.  Does anyone besides me wonder where are these billions - trillions of dollars are coming from??

 Updates to the loan modification program:   Loan modifications are now taking 4-8 months for completion.  However, on the postive side, one of our partners has successfully closed modifications for over 1000 homeowners needing help with their payments over the last year.  This is 95% of those who have applied for help, which is a fantastic success rate.  (We do not have details on the success rate for the other group of attorneys we are working with yet, but will release those numbers as soon as they are available). 

 Due to the economic downturn, loan modifications are definitely on the rise, and banks are swamped with requests.  This is the reason for the increase in time to complete the process.  While you are free to shop around for a company to handle your modificaton, please be careful out there.  There are, as yet, no regulations for these companies that are sprouting up everywhere.  In fact, according to news on CNBC recently, some of these companies are being run by the same people who ran sub-prime mortgage companies.  Please draw your own conclusions about how confident that makes you feel. 

 Please read the following, and click on the link to hear more about homeowners success with obtaining loan modifications on their own. 

One of the primary inconsistencies about mortgage modifications is the vast ifference between what banks are saying they are doing to help homeowners, and what banks are actually doing. A member of the United States Congress, Maxine Waters (D- CA), recently shed some light on this issue on ABC’s "Nightline." On national television, Representative Waters attempted to make a simple phone call to a bank "help line." The bank claimed that, as part of its program to "help" homeowners, it made sure it was staffed sufficiently to ensure "short hold-times" for homeowners who called in. Interested in her results?

 http://abcnews.go.com/Video/playerIndex?id=6704983

Here is a question I hear frequently - so let's discuss.....

What is the difference between a foreclosure, deed in lieu of foreclosure, short sale, and a loan modification. What effects will each have on my credit score? And what else do I need to know about each?

First, I'd like to put your minds at ease and let you know that, as of today, Oregon and Washington are non-recourse states. This means that when you get a mortgage, the only thing that can be taken from you is your property. The lender cannot attach your wages, or put a lien on other property to get back their losses. A more common term you might hear is that Oregon and Washington are "walk away states."

Foreclosure - the borrower stops making loan payments, or stops paying property taxes, and the lender takes back your property and throws you out. This is not an overnight process. From start to finish, it could take as long as a year before you need to find other housing.

Deed in Lieu of Foreclosure - This usually occurs when you cannot afford to make the payments and have become very delinquent. The lender may offer you a deed in lieu of foreclosure because it is "neater and quicker" for the lender. You sign your property over to the lender, and in exchange, your debt is usually forgiven, and you are required to move out quickly. If it is a rental property with a tenant in place, the lender becomes the landlord. The lender will offer the deed in lieu to save themselves the legal expense AND the time required to go through the full foreclosure process. You will find yourself looking for other housing much more quickly.

Short Sale - We are seeing a LOT of these lately, as property values have dropped below what many people owe. A Short sale happens when you want or need to sell your home, but all offers are for less than you owe. You (probably with the assistance of a realtor or attorney) negotiate with the lender to let you sell the property for less than your mortgage, and the lender agrees to "reconvey" title to the new owner. The lender is forced to write off the difference.

Loan Modification - You work with the lender (or work through an attorney or other negotiating party) to modify some of the terms of your existing loan. This usually happens when the terms of the loan have created a financial hardship for the borrowers, but the intent is to keep the property for the foreseeable future. We will usually see a reduction in rate, and occasionally we will also see the outstanding balance reduced. Please note here that loan modifications through the lender, while usually less costly, are also usually temporary, and are not very good deals for the borrower. They are designed to be short term solutions to a problem. If you have missed one or two loan payments, you will likely hear from you lender with an offer to modify your loan. You do not have to work with an attorney to get your loan modified, but you should definitely look into this option before you sign any paperwork. I hate to admit this, but attorneys do have leverage the rest of us do not have, and this includes working with lenders on loan modifications.

While Oregon and Washington are non-recourse states - as of today, and the lenders are stuck with their financial losses in all above cases. the effects on your credit, and potential tax ramifications can differ from case to case.

With a foreclosure, deed in lieu of foreclosure, and a short sale, the damage to your credit is very significant. Credit scores can drop 200-300 points with a foreclosure, slightly less with a deed in lieu of foreclosure, and less again with a short sale. A short sale will be reported on your credit report as "paid/Settled" meaning that the lender settled for less than was owed. This is never a PLUS for you. (A short sale will hurt your credit quite a bit if you have been late in making payments prior to the short sale.) A Loan modification should not affect your credit score, at this time. However, most lenders will report the modification to the credit bureaus, and this notation will appear on your credit report. Again, **as of today, all 4 transactions will continue to be reported for up to 10 years on your credit report.

**I have to say "as of today" because the credit bureaus frequently change how they report, and the scoring formulas, so how this will all play out in the future is uncertain at this time.

There can be tax ramifications with the first 3 processes. Technically, since Oregon and Washington are non-recourse states, there should be no tax ramifications. But I'm not a CPA - so you should consult with your tax advisor for more advice than this email can provide. In addition, many of the rules and laws pertain specifically to your primary home, but NOT to investment property. If you are getting ready to short sell, or walk away from an investment property, it is critical that you consult with an attorney AND a tax advisor, to find out what this action could cost you legally, and financially.

I hope this answered some of the many questions I have received, but if you're still confused, as always, please call.

This weekend we celebrate the 150th anniversary of Oregon's statehood AND of course, Valentines Day.

Enjoy your weekends everyone.

Best regards,

The great news today is that best rates are still down, solidly below 5% for those of you with good credit.

However, as is always the case, when rates drop, refinance transactions increase, so processing time with the lenders gets very long. Most lenders today are reporting underwriting time of 7-10 days after a complete file is received. Remember, if you are thinking about refinancing your home, 30 days may not be long enough to get a loan closed. Since 30 days is the average lock time (to lock the rate you want), it is always best to get a completed loan file in to me as soon as you think about refinancing. That way, I can get your loan approval, and any additional documentation in to the lender, with the freedom to lock your best rate when I see it.

So what happens if we see the rate you want, and I don't have a loan application from you yet? Some lenders will let me lock anyway, but do require a complete loan package in to them within 7 business days, or they cancel the lock. (A complete loan file is hard to get together that quickly, because it includes, not only your application and signed disclosures, etc that I send you, but also a preliminary title policy from a Title Company, and a completed appraisal. When the lenders get busy, everyone gets busy. If your loan does not close on or before that 30th day, with most lenders you will have to extend the lock and this can be quite expensive. Most lenders charge .25% for a 7-15 day extension. (To put that into plain language, that is a cost of $250 per $100,000 of your loan amount, in additional closing fees you will have to pay.

Rates move in conjunction with the 10 year Treasury bond, and the mortgage backed security bonds.  When the investors are happy, the stock market is booming, the yields on bonds go up, and mortgage rates go up too.  Several months ago, when the average mortgage rates were in the low 6% range, the yield on the 10 year treasury was in the high 3% range.  Today the yield was down between 2.7% - 2.8%.  This is why rates are down right now.  If investors start moving funds out of bonds and back into stocks, we are likely to see rates go up again. 

So, why do we keep hearing that magic 4.5% mortgage rate?  Everyone wants to see that magic 4.5% rate.  Everyone includes investors, the public, politicians - even the banks and lenders.  When and if the rates drop that low, it is expected that there will be a flurry of house buying, and this will help our economy.  But - hang onto your hats, we still don't know if we will ever see that magic number.  We are close though. 

It appears that the Stimulus package is going to be passed by both houses of Congress. The House and Senate have agreed on the amount and terms of the Stimulus, so all that's left is the vote, and Obama's signature. One feature that was changed, which can affect some of you is that the credit to purchase a house has been reduced from $15,000 to $8,000. Still, that's a very nice tax credit, for buying a house.  If we can couple that tax credit with a 4.5% rate!!!???!!!   Keep your eyes and ears open.  I'll let you know as soon as I know. 

Best regards

Shelby

If you are a first time home buyer, this is a FANTASTIC time to be thinking about home ownership.  Prices are low and rates are at 20 year lows.  Yes, there is a lot of talk on the media that prices are likely to drop more, and rates could go lower too, but that talk is speculation.  Prices could drop more, rates could drop more too.  The reverse is also true.  At some point, the housing market will stabilize.  Housing prices will stop dropping and rates definitely will go up. 

I have watched so many people talk about a purchase or a refinance transaction in the past, and talk themselves OUT of making that purchase or refinance while they wait for circumstances to change.  In the meantime, they continue paying on much higher rate mortgages, and literally giving money to the banks that they could be putting in their own pockets.  Is this you? 

In weighing whether or not to "go for it" now, you should be considering your long range plans, rather than current or "expected" market conditions.  If you plans are long term, and rates and terms are comfortable for you now, do you really want to gamble on what rates, terms, and prices might be in 6 months? 

A word of warning though.  If you are currently a home owner, and want to move to a smaller or bigger house AND keep your current home as a rental, you might have to be able to show that your income is enough to carry both houses (without rental income to offset your current house payment.)  In some cases, you can use rental income, but not always.  Please call for more information if this is of interest to you. 

As always, I'm here to help with questions or concerns.

Please feel free to call at any time.

Warm regards

Shelby