My client lives in a house that is no longer worth what she paid for it. Like  many Americans, she bought her home when the market was high, her family has grown and she needs a larger house. She is able to make her payments but her house is worth less so if she did sell she would be facing a short sale. Her credit for 3 years would be affected, so she would be unable to buy now.

We have discussed all sorts of methods and choices. Once choice is that she has a relative who has a small mortgage on her home with alot of equity. If that relative sold her home and they moved to a new home together then they would be able to purchase. That would still mean doing a short sale on her current home or choosing to rent it out.

You may have guessed it! Yes, that other person is her elderly mother! We discussed them finding a larger home for all of them. That got me to thinking, what about all of those people in similar circumstances with NO RELATIVES that could help like this?

Households are changing and many families now tend to live together for extended periods. Also, as the population ages, caring for senior family members has become an issue in many households, and nursing homes are not always the answer. If you’re one of the many adults considering having their elderly parents or other family members move in with them, consider the value of in-law apartments.

 For many families, a successful living arrangement depends on being able to provide separate, private living space for the parent or adult child, and in-law apartments do just that. Buying a home already furnished with a separate apartment may not be feasible for you, but that doesn’t mean an in-law apartment is out of reach.

 Whether converting existing space or adding on to your new home, a good bank or mortgage company can help.

 If you are looking to purchase a new home, a bank can help you to finance both the purchase of your home and all your renovations with just one loan.

Wells Fargo Bank Web Site says the advantage of their loan is:

• More Money — the amount of money you are permitted to borrow for the purchase and renovations is based on the increased value of the home after improvements are made.

• Lower Monthly Payments — your renovation costs are spread throughout the entire term of the loan – so your monthly payments may be lower than other financing options.

• Tax Deductibility — the interest on the cost of your improvements, included in your mortgage, may be tax deductible.*

• Speed — start making improvements immediately after closing. No need to wait for that modern kitchen or new roof. And, no need to pass up a house that’s in the ideal location but needs improvement.

• Simplicity — One application, one set of fees and closing costs, one closing to attend and one payment each month.

If you already own a home, the Refinance and Renovate^SM Loan may be the right option for you. This loan can help you to simultaneously refinance your mortgage, possibly obtain a lower monthly mortgage payment and get the money you need to renovate – all in one transaction.

The Refinance & Renovate^SM Loan offers:

• More Money for Improvements — the amount of money you can borrow is based on the increased value of your home after improvements are made

• Lower Monthly Payments — the interest rate on a Refinance and Renovate Loan will typically be lower than the combined interest you would pay on a first mortgage plus a home improvement loan

• Tax Deductibility — Financing your improvements into one mortgage may provide a greater deduction than some home equity loans. Credit card debt and many other bank loans are not deductible at all.*

• Speed — start making improvements immediately after closing

• Simplicity — One application, one set of fees and closing costs, one closing to attend and one payment each month

If you need a referral to a Wells Fargo representative, please let me know. I have a wonderful contact with whom I have done business for many years….

Zoning and Insurance
While in-law apartments are a great choice for many families, there are still some issues you should consider before making a decision. Make sure you check the zoning ordinances in your community. In some areas, adding an in-law apartment to a single family home can change its property category to a duplex, especially if there is a separate entrance. Also, check with your insurance company to see if any extra home insurance may be required.

There are some one story homes both 2 and 3 bedroom either about 960 square feet of living space or just close to 1060. The exact number would be found at the tax assessor’s office.

There are both 3 and 4 bedroom townhomes here also. The 4 bedrooms have one bedroom downstairs with a 3/4 bath. They range in living space of 1466 square feet  – 1500 + .

Association dues are about $205-$210 per different homeowners. There is a clubhouse, children’s playground area, association pool. This complex is close to bus lines,  shopping, the Disneyland Resort,  and FREEWAYS.

Do you want to own your own condo or house at a low price, low payment and still be able to be financially secure?

I remember many years ago when we bought our first house; sold it at a profit 8 years later, bought up again, and again. Made some profit for sure; isn’t that what we were supposed to do?

My husband and I also continued to buy “stuff”, because with a bigger house, you need to buy more things to fill it. It also meant buying two cars, commuting to work, etc. Many of us only realize after we buy the big house and the closets of clothing and toys that we have too much stuff and too many financial obligations. Unwinding ourselves from the financial burdens of a big house payment or car lease can be difficult, especially in this economy.

Therefore I have been noticing some changes not only in my family and friends but clients as well who want to downsize. How does one do that?

Make small changes little by little, not all at once. Do not discard all everything at once.

Think about what you want, not what you think you’re supposed to want.  Do not care about the Joneses. We used to want to be like the Joneses, and that only got many of us into debt.  Live below your means because you want to.

Save your money. Even if you earn little interest, at least you saved it.

Depend on spending as little as possible weekly so it is considered a fixed expense. The rest is yours to do whatever you want to do with it – save in savings account, and so on.

You will have less debt, perhaps live in a smaller home or condo and have less obligations. No doubt, you will be happier!

The first loan was approved by the lender, and in this approval the seller is receiving $3000 towards relocation costs when the sale is finalized; in California we say when it closes escrow. So, I then proceed to get approval of this sale from both 2nd and third lien holders.

Unfortunately both 1st  land 2nd liens or lenders have to approve and agree on the terms and the dollar amounts. In this case, the credit union is not allowing the seller to receive any funds at all. If they do not agree, this property will go to foreclosure, and the second loan will receive NO MONEY at all. Neither will the HOA.

I take my work very seriously and I am very honest with all involved – my seller, the buyer, other agents, all lenders. We need to prevent another property from becoming distressed, run down condition, vandalized.  By offering the sellers financial aid in selling, they are maintaining the homes until the buyer takes possession. This particular home is being very well maintained by the seller and due to the regulations or rules of this credit union, it will go to foreclosure.

I think that is a pity.

Again, that is just MY opinion! What do you think?

More specifically, I have been reading and participating in the blog entitled “Bank of America Short Sales”. I found this web site quite by accident. One day I decided to google “Bank of America” help……

Google found many articles for me and this is the best one yet. Basically, anyone with a question can post their issue and any other broker can log in and post a reply. It has given me valuable phone numbers to the office of

the President of Bank of America and more. It has helped me in working on my own short sale assignments  / listings. If you are a home owner and are aware of the difficulties your agent / broker may be facing, just

have her/him go to this site. There is lots of help there. Agents from across the country are more than willing to help each other. Good luck!

Goldman, a household investment banking giant, had a $240/share stock price in Dec 2008 when Lehman and Bear Stearns started the downslide in the market. Now, at $145/share, the company has lost billions of value for their stockholders and clients. What makes it worse is that their top executives told Congress that they are not responsible for their clients’ decisions.

So, amidst this telltale story of Wall Street greed, you may have missed the small press release that Fannie Mae sent out.

Basically, Fannie Mae said it will tighten lending standards on adjustable-rate mortgages and “interest-only” loans that helped fuel the housing bubble and have led to a disproportionate share of losses for the mortgage-finance giant.

The changes, which will take effect in September, will require lenders to qualify borrowers based on whether or not they can afford potentially higher payments once adjustable-rate loans reset, and will require much more stringent criteria for interest-only borrowers.

During the housing boom, borrowers increasingly used adjustable-rate mortgages with low initial rates to buy bigger homes and banked on ever-rising values to refinance before payments rose higher. When prices stopped rising, more borrowers weren’t able to sell or refinance to avoid higher payments. That sent defaults soaring.

Fannie said it will require borrowers to have credit scores of at least 720 and 30% equity. Borrowers must also have at least two years worth of cash reserves remaining after closing.

For adjustable-rate mortgages that reset within their first five years, lenders will have to qualify borrowers under higher payment levels, using the greater of either the current interest rate plus two percentage points, or the current interest rate plus the extra margin charged by the lender.

If you have the money to buy, just  hope that the markets remain volatile so  that you can find underpriced properties worth purchasing! Good news for investors and buyers.

This is the man who is responsible for working with the Treasury Dept. to formulate the New HAFA PROGRAM about which I have written here. Mr. Lisher represents the National Association of Realtors of which I am so proud to be a member. Our annual dues contribute to lobbying in Washington for buyers and sellers.

Mr. Lischer clarified for us how the HAFA plan works. Please feel free to contact me anytime if you are a distressed homeowner having financial difficulty and need advice. It would be my PRIVILEGE to help you. If I do not have the answers, I do have the resources and will find the answer for you.

 It is called The Home Affordable Foreclosure Alternatives program which  will provide certain incentives to lenders, and to home owners who chose to do a short sale, rather than wait until the bank takes the property.

 The program is part of the Home Affordable Modification Program, or HAMP which was implemented in February 2009 to modify homeowners’ loans to avoid foreclosure. Both programs are funded through $50 billion from the bank bailout. The government wanted to basically create a streamlined process as an alternative to the foreclosures going on right now.

 Due to the high volume of offers made on short sales, banks can take months to respond. Discouraged buyers will often back out  of or cancel  the offer.

 Timelines have been put into place through the new program in order to speed up the short sale process.

 The short sale transaction must be completed within 120 days. The time can be extended up to 12 months if necessary.

 Short sales take up to six to nine months to get approved. It’s getting reduced to 10 days, so a bank will have to give a response to a buyer’s offer within 10 days.

 It may not be an approval, it may be a rejection or it may be a counter offer, but there will be an answer.  Through HAFA, lenders will be required to give the homeowner preapproved short sale terms before going to market. This will include a listing price and an amount of sale proceeds the lender is will to accept.

 What this new program is doing is streamlining the process and allowing for all banks to have consistent forms and a consistent number of items that can be requested.

With a short sale, a buyer will make an offer and the lender will have to review it and respond
Banks are not required to participate, but most banks will likely participate.

 Homeowners can receive up to $3,000 to pay for moving costs after the sale is completed. It’s the government’s way of offering a little bit of help, to pay for rent of a U-Haul truck,  or help with first month’s rent payments.

 In addition, the servicer, which the organization responsible for collecting monthly loan payments, will receive up to $1,500 per short sale to cover administrative fees.

The program only applies to homeowners with one mortgage.

Many people in Southern California took out second mortgages on their homes either because they needed the money or wanted to make large purchases .

 The program will not be automatic. Homeowners have to call their lender to request a short sale through HAFA.

Why Short Sale?

 Entering into a short sale agreement provides more benefits to homeowners than foreclosure, on which the HAFA program is attempting to capitalize.

Many borrowers want to know:

  “How does this impact their credit good and bad? They want to know will this satisfy my lender for any further action against them. They want to know what are the tax ramifications surrounding short sales and foreclosure. And they want to know, believe it or not, this is very important, they want to know `when will I be able to buy again?’ ”

Upon the closing of a short sale through the HAFA program, the homeowner will be released from all liability for the debt of the first mortgage.

 However that does not necessarily protect them from the tax ramifications, Sorensen said.

The benefits of HAFA is that it requires the lender to disclose this fact that by cooperating in pre-foreclosure or a short sale may have tax implications.

 Through HAFA lenders are required to divulge all information relating to tax consequences and credit score impact to the homeowners considering a short sale.

It is now being required that lenders disclose that there are serious tax implications when one cooperates in a short sale or losing their home to foreclosure. That now must be disclosed in writing for the first time ever. It will also affect the borrower’s FICO score. However, a short sale will not lower the FICO score as much as a foreclosure will.

 The homeowner will take a hit to their credit score, but not as much as with a foreclosure, Starks said.

The HAFA program is expected to alleviate the burden of foreclosures on homeowners hoping to enter a regular home sale.

It puts homeowners back into the community generating taxes again instead of another boarded up house. Every house that’s boarded up and foreclosed upon drops other home values up to $9,000 for each foreclosure.

On average, a bank will lose up to 40 percent on a foreclosed loan, but up to 19 percent on a short sale.

Bank of America is making a new effort to modify mortgages by cutting loan balances.

Under the program, Bank of America will reduce certain loans by up to 30% in order to lower monthly payments for borrowers facing foreclosure. Here’s how it works: ONLY  borrowers who had loans from Countrywide Financial, which Bank of America acquired in mid-2008, will be eligible. And ONLY the riskiest loans will qualify: subprime loans, “option adjustable-rate” mortgages that have low initial monthly payments but that can adjust sharply higher, and certain prime loans that have a fixed interest rate for the first two years before starting to adjust annually.

The program is also limited to customers who have missed at least two consecutive payments, who can demonstrate that a financial hardship prevents them from making payments at the current level, and whose loan balance is at least 120% of the estimated home value.

Bank of America will go through its loan book to see which loans might qualify for reductions (while checking property values to see which ones are far enough under water), and then the bank will contact the borrowrs.

Bank of America says that around 45,000 borrowers could see their loan balances reduced with an average reduction of more than $62,000.

The bank’s approach has an interesting design feature in an attempt to prevent homeowners who are still paying their loans from defaulting and becoming eligible for the program. Loan balances aren’t reduced in one clean strike. Instead, the bank  is offering what’s called “earned forgiveness.”

The program works like this: for a borrower who owes $300,000 on a home worth $200,000, the bank would reduce up to $100,000 in principal and place it in an interest-free account. For each of five years, the bank would forgive another $20,000 as long as the borrower continued to make payments and until the borrower was returned to a 100% loan-to-value ratio. If home prices have recovered by the fourth or fifth year to meet the amount owed, Bank of America would stop forgiving money in the interest-free account, which would have to be paid off when the home is sold or the loan is refinanced.

What about SECOND MORTGAGES? To be sure, there are drawbacks.  Bank of America said it will modify first mortgages that have seconds behind them only when Bank of America owns the first mortgage AS WELL.  The government’s modification program, Home Affordable Modification Program, has faced challenges because borrowers haven’t been able to document their incomes, and those requirements don’t go away in this effort.

This is aimed towards helping those in deep financial difficulty so it will be interesting to see how it works.

As of April 5, 2010, the government is doubling the incentives for banks to cooperate in short sales; they are now going to receive $3000 to bank participants on the first loan, and up to $6000 on the second loan.

They are also going to double the incentive to borrowers / sellers participating in short sales to assist in relocating.

* NOT every Short Sale will be a HAFA Guidelines Short Sale. Remember, these are guidelines not laws.

* A borrower does NOT have to go through the HAMP Loan Mod process to qualify for a HAFA Short Sale. In other words, they can simply request a Short Sale (or Deed in lieu of foreclosure) which means giving the house back to the bank.

* Virtually ever lender is participating.

* There will be standardized, uniform forms.

* Lender will tell the real estate broker/ agent the NET dollar amount they need upfront.

* Borrowers MUST list with an agent. No For Sale By Owner doing a HAFA short sale.

* Lenders have 10 days to approve/ accept or request and extension to all offers.
* If the lender (servicer) doesn’t accept your Short Sale offer they have to tell you IN WRITING why.

* Fannie and Freddie HAFA Guidelines are coming soon.