Things must turning around …

One of the things I find great about Bend is the ability to enjoy a truly fine morning of powder skiing and the ability to be back in the office by noon. Today we had one of the few truly deep snow experiences of this ski season. It was one of those Pacific Northwest storm days with piles of deep snow drifted everywhere. For those who know where to go the snow was deep, deep enough for true face shots!! Not quite the type that suffocates you with mouthfuls of fine powdery snow but the type that would cover your goggles and blind your path for a short time.


Could this be the end to the El Nino cycle? Could things be turning around? An omen from above? It has been said in the El Nino years the snow producing weather pattern does not return until the spring season. I say bring on the daffodils, the Easter Bunny and bucket loads of powder. It is never too late to have a great powder season.

Could this be a step in the right direction….

Bank of America announced a new program that will forgive up to 30% of the principal for those owing more than 120% of the value of their home. The program is slated to start this May is in response to a settlement reached with the commonwealth of Massachusetts regarding the type of loan modifications Bank of America could make on their Countrywide portfolio. And it may be a preemptive move to the Washington State suit that Bank of America is not doing enough to modify underwater loans.


While principal reduction has been practiced sparingly on a case to case basis by other large lenders, the Bank of America program will be more wide spread, yet focused to one group of its client base. Applying to only borrowers who have loans generated by Countrywide Financial will be eligible. Of those borrowers only the riskiest loans will be considered. You know the breed; option adjustable-rate, subprime and prime loans with a low initial fixed rate then annual increases. Bank representatives say there are approximately 45,000 loans in the portfolio that qualify. The average reduction will be in the $62,000 range.

Other qualifications are similar to those for a standard loan modification, you also must have missed at least two consecutive payments and be able to demonstrate that you are in financial hardship. Ones loan must have a balance of 120% of the estimated home value.

Once you qualify the program will reduce the principal balance and place the determined amount in an interest free account. For every five year period that you make your payments the bank will forgive a little more of the principal balance until the balance has reached the 100% loan to value ratio. To protect Bank of Americas interests should the homes price recover in the fourth or fifth year to the loan balance the forgiveness to the interest free account would stop and would have to be paid off when the home is sold or the home is refinanced.

Now before you run out and call your Bank of America representative you should know that it will be Bank of America that will reach out to you should you qualify for this program. While this is not ideal it could be a step in the right direction in providing relief that makes sense.

Time to get off the Fence, Sunset is coming….

The April 30 deadline for selecting a home and having it under contract is just weeks away. The National Association of Realtors has been in extensive discussions with Congress to gain an additional extension of the tax credit. Today the association announced that it is not likely to occur. The tax credit deadline combined with this week’s news that funding for the USDA Rural Housing Programs will run dry at about the same time and the Federal Reserve will no longer buy Fannie Mae and Freddie Mac mortgage backed securities signal it’s time to get off the fence and buy one of today’s bargains.


For many the tax credit program when combined with the USDA program can make all the difference in the world. Waiting for the perfect property or for the bottom of the market might prevent many from realizing their homeownership dream. For the rest of us fence sitting can prove equally damaging. Waiting, waiting, waiting, and then bam next thing you know it interest rates have risen and you can afford less house than before. By waiting you may have a slightly better price on the house but that added interest has moved you just out of the range of affordability.

If you are waiting on the fence do not fall prey, programs will be ending and interest rates will be rising. The programs have been fantastic, prices and interest rates are at historic lows, do not miss out the party is about to end.

Help is coming for distressed property owners…

Are you one of the legions who for a myriad of reasons need to sell your home and have found that your equity has evaporated? Has your lender sent a notice letting you know that foreclosure may be in your future? Have you explored your options and determined that a short sale is your best avenue of retreat? Have you dreaded the long drawn out and uncertain process of the short sale? Help could be right around the corner, that is if your loans are backed by Fannie Mae or Freddie Mac and your lender is one of those who have volunteered for the program.


The federal government’s Home Affordable Foreclosure Alternative program (or HAFA) is set to start providing relief to qualifying homeowners starting April 5 running through December 31, 2012. HAFA establishes short sale rules and incentivizes borrowers and lenders to work together to avoid foreclosure. The new guidelines will have the borrowers receiving preapproved short sale terms from their lenders before they put the home on the market. The predefined steps will make the process easier to understand for all involved in the sale.

The first step is to determine your loan is backed by either Fannie or Freddie. This can be done by going to http://loanlookup.fanniemae.com/loanlookup/ or https://ww3.freddiemac.com/corporate/. If you have a loan back by either you can then apply for a home loan modification through the Home Affordable Modification Program (HAMP) http://www.makinghomeaffordable.gov/. If you are backed and you do not qualify for a home loan modification or you have started the loan modification process and have missed a payment during the trial modification period you will qualify for the HAFA program.

A few more stumbling blocks include:

• That you are delinquent or you will be defaulting in the near future,

• You can demonstrate that you have a hardship,

• The home is your principal residence,

• Your mortgage was originated before January 1, 2009,

• Your monthly housing payments exceed 31% of your gross income,

With the new HAFA rules, if you do not qualify for a home loan modification your lenders will have to offer you a short sale within thirty days. You the borrower will then have fourteen days to respond to the lenders short sale agreement.

Once an offer to purchase has been made you and your broker will have three days to submit the offer to the lender along with the buyers’ mortgage pre-approval letter. Should there be any other liens on the property you will need to include the status of negotiations with those lien holders. Once all has been submitted the lender will have ten days to approve or deny the offer.

One of the great benefits of the program is the requirement that the lenders release you from any further obligation to repay the difference between the balance of the loan and the sale amount. The ability of the lenders to pursue deficiency judgments has been a black cloud over many a short sale. Lenders (or the collection agencies that they sell the bad debt to) have the ability to pursue a deficiency judgment for up to ten years and in some cases up to twenty years. They can do this because in a short sale the terms of the loan have been modified and the foreclosure process is avoided. No foreclosure means no protect by state foreclosure statues (a discussion for another time).

To get more lenders on board HAFA provides incentives for second mortgages lien holders, up to $3000. While this may not seem like much when tens of thousands may be owed on a note it is far better than the big goose egg they would have received previously. Not forgetting the role that loan servicers play in moving the short sale process along HAFA offers them up to $1000. HAFA also offers the mortgage investors who agree to share the short sale proceeds with the second lien holder up to $1000. And last but not least HAFA provides up to $1500 to assist the homeowner in relocating.

If sounds like a good fix for you and you would like help in navigating this process, call or email me. I would love to provide you with some relief.

Will your lender be seeking a deficiency judgment against you ….

The other day I was interviewing with a prospective client about their distressed property and the options available to them. After researching their options on the internet they were confused about whether a lender has the right to pursue a deficiency judgment against them if they were to short sell their home. Not wanting to go through the ordeal of selling their home only to have the unresolved debt stall their fresh start they asked for my take on the subject.


The first recommendation was that they seek professional counsel from a qualified real estate attorney and CPA. I then shared some of the research that the Oregon Realtors legal hotline had recently provided its members. The hotline offered that currently in Oregon since the short sale of a property is a voluntary modification of terms of the loan agreement, the new agreement can contain any terms the parties agree to. In a voluntary modification like a short sale the deficiency is the unpaid balance of the note. A note holder can sue in court for the unpaid balance of the note unless the maker of the note bargains for and gets “full satisfaction” of the note. Should the borrower get only the note holders verbal agreement to waive their lien and not foreclose that would leave the borrower exposed for the unpaid balance.

To get “full satisfaction” the borrower needs to ask for it!! Otherwise the lender is allowed to waive their lien on the property, forego foreclosure and continue to hold the note as an unsecured debt. Since the note is no longer secured by the property and has become a personal debt, the lender is no longer bound by the foreclosure laws of Oregon. The lender is now free to pursue a judicial judgment for the unsecured debt. In Oregon the statue of limitations for pursuing a judgment is ten years, with the possibility of an extension for another ten years. Just when you thought you would be rebuilding your credit in the next two to four years this dog could be following you around for the next ten years if you do not ask for and receive in writing “full satisfaction” to your lien.

You like the home but wish it had newer kitchen, larger bedrooms or a newer roof….

You have been searching and have found a property you really like but it needs a little love or maybe the rooms are too small and you want to expand them to make it the home you desire. Since 1978 HUD has provide a program design specifically for the buyer who is has found a home they like but needs some immediate attention. The program is designed to help provide a loan package for you to purchase and rehabilitate a home that has been completed for at least one year. The beauty of the program is that it rolls both the purchase price and renovation costs into one loan with a down payment as low as 3.5%.


There are two versions of this program available 203(k) and the 203(k) streamline. Both offer a loan to value rate maximum of 96.5% on the purchase and 110% on the renovation. The streamline program offers fewer restrictions, in this program there is no minimum renovation expense but it does have a capped at $35,000. All properties must be appraised prior to the loan and a value must be determined for the work to be performed. All work done must start within thirty days of closing and be completed within six months of closing. If you can keep your costs down to $15,000 no inspection of the completed work is required.

There are limits to the scope of work that can performed, slab granite counter tops won’t make the grade but a new roof, new appliances, upgrades to heating/cooling systems, flooring, new windows and much more are acceptable.

Ask your mortgage broker to explain the full benefits of how this program can benefit you! If your broker is unfamiliar with the program contact me and I would be glad refer you to a mortgage specialist who is familiar with all aspects of this great program.

Up Coming Dates to Consider

Larry Wallace over at True North Mortgage sent out an email this morning highlighting some important dates some important dates for homebuyers.

March 31st: The Fed is scheduled to stop subsidizing home loan interest rates.
It is entirely possible that they will extend the subsidy, should they choose not to extend look for higher interest rates and higher monthly payments.

April 30th: Tax credit for purchasing a home. The home has to be “in contract”, (i.e. accept offer to purchase) or lose the credit.

June 31st: Tax credit for home purchase must close escrow or lose the credit.

Spring/Summer: FHA mortgage insurance will become more expensive. The effective date is still pending.

Spring/Summer: FHA to reduce allowed seller paid closing costs from 6% to 3%. This will mean the buyer needs to provide more cash at closing. The effective date is still pending.

Missing these dates will make a home purchase much more expensive, it could even leave priced out of buying a home!!

You can contact Larry at larryw@bendbroadband.com or at his office 541-323-8783