Weitz Law Firm - 520 Kirkland Way, Ste 103 - Kirkland, WA - (425) 889-9300

Saturday, October 29, 2011

New HARP Guidelines overview


The Home Affordable Refinance Program (“HARP”) was created to assist troubled homeowners in refinancing their loans to reflect current conditions within the housing market. Under the program, qualified homeowners were often permitted to refinance their mortgages at lower rates.

Restrictions on qualification and the general costs involved with HARP application lead to very few homeowners seeking relief under this program. In order to make HARP more accessible, the White House and federal regulators are implementing modifications to homeowner qualification requirements and reducing the costs associated with application this program.

Below is a brief outline of qualification requirements, the announced modifications to such requirements and the limitations of HARP:

(1) Who is eligible for HARP?
- Those whose loans are owned or backed by Fannie Mae or Freddie Mac, which the government took control of three years ago. Homeowners can determine whether their mortgage is owned by Fannie or Freddie by going online:
Freddie’s loan tool is at freddiemac.com/mymortgage;
Fannie’s is at http://www.fanniemae.com/loanlookup/

To qualify under HARP, a loan must have been sold to Fannie and Freddie before June 2009.

- Homeowners must be current on their previous six mortgage payments. One late payment within six months, or more than one in the past year, would automatically disqualify the homeowner from eligibility.

(2) What modifications have been made to HARP?- Previously, HARP only permitted homeowners who owed less than 125% of their homes fair market value to qualify for the program. Now, there is no restriction on how much value the home has lost in order to qualify if all of the other requirements are met. It should be noted that additional qualifications still exist if there are multiple mortgages on the property.

- Under the original program, many fees associated with closing, processing and appraisal were necessary costs borne to the homeowner. The modified program will eliminate certain fees for closing, title insurance and lien processing, making the refinance cheaper.

Additionally, loan fees will drop and will be waived for homeowners who reduce their loan term, and fewer homeowners will be required to have their homes appraised prior to seeking a refinancing. Lenders will also benefit in some instances because they won’t have to buy back the mortgages from Fannie or Freddie, as they previously had to when dealing with some risky loans.

- HARP was originally scheduled to terminate in June 2012. The modification has extended this program an additional 18 months, through 2013.

(3) The Major Limitation of HARP

Homeowners interested in HARP need be aware that lenders will remain free to reject a refinancing even if the homeowner meets all of the programs requirements, limiting the ultimate impact of this program.

For more information in your rights in modification, or other options including foreclosure, short sale, or bankruptcy, consider contacting a Seattle Foreclosure Attorney.

Our Firm:

Weitz Law Firm, PLLC
520 Kirkland Way, Ste 103
Kirkland, WA 98033

425 889-9300

weitzlawfirm.com

Washington State Emergency Home Loan Program


Weitz - below is the my summary of the Department of Housing and Urban Development (HUD) Emergency Homeowner Loan Program. My initial thoughts are 1) that it is arguable a huge waste of taxpayer dollars that favors the banks more than anyone; and 2) for the right client, its a great opportunity to get some easy government money - I will explain in more detail below.

I found the picture to the right assuming for this topic - while amusing, its not too far from the truth.

Click here for actual report.

The Dodd-Frank Wall Street Reform and Consumer Protection Act provided $1 billion to HUD to implement the Emergency Homeowners Loan Program (EHLP) Program. The program will offer a declining balance, deferred payment “bridge loan” (non-recourse, subordinate loan with zero interest) for up to $50,000 to assist eligible homeowners with payments of arrearages, including delinquent taxes and insurance plus up to 24 months of monthly payments on their mortgage principal, interest, mortgage insurance premiums, taxes, and hazard insurance.

Weitz: Let me paraphrase for the government: “Come get your free money!” We will pay up to $50,000 of your arrearages and assist with future payments with a loan that is 1) secured by your property; but 2) NON-RECOURSE (this means that if you stop paying, they can not pursue you for the debt).

While I hate the ideology of the program because I truly think it simply 'kicks the can down the road' for many and there are considerable issues with ‘fairness’ in who qualifies and who does not, I would always encourage clients to take a $50,000 INTEREST FREE, NON-RECOURSE loan.

Looking big picture, I also hate the idea because the parties that benefits the most are the banks as they will be paid with taxpayer money IN FULL.

Below are the details of the program, its qualification, and other important issues.


Qualifications:

Income Thresholds: The homeowner a total pre-event household income equal to, or less than, 120 percent of the Area Median Income (AMI), which includes wage, salary, and self-employed earnings and income.

Significant Income Reduction: The homeowner has a current gross income that is at least 15 percent lower than the pre-event income.

Pre-event income” is defined as the income prior to the onset of unemployment, underemployment, or medical emergency, while “current income” is the income at the time of program application, as well as income during the period that the homeowner continues to receive assistance from the fund.

Employment type: Both wage and salary workers and self-employed individuals are eligible.

Delinquency and Likelihood of Foreclosure: the homeowners must be at least 3 months delinquent on payments and have received notification of an intention to foreclose. This requirement can be documented by any written communication from the mortgagee to the homeowner indicating at least three months of missed payments and the mortgagee’s intent to foreclose. In addition, the homeowner can self-certify that there is a likelihood of initiation of foreclosure on the part of their mortgagee due to the homeowner being at least three months delinquent in their monthly payment.

Ability to Resume Repayment: Has a reasonable likelihood of being able to resume repayment of the first mortgage obligations within 2 years, and meet other housing expenses and debt obligations when the household regains full employment, as determined by: The homeowner must have a back-end ratio or DTI below 55% (principal, interest, taxes, insurance, revolving and fixed installment debt divided by total gross monthly income). For this calculation, gross income will be measured at the pre-event level.


Principal Residence: the homeowner must reside in the mortgaged property as principal residence. The mortgaged property must also be a single family residence (1 to 4 unit structure or condominium unit).

Termination of Monthly Assistance: Assistance is terminated and the homeowner resumes full responsibility for meeting the first lien mortgage payments in the event of any of the following circumstances:

1. The maximum loan ($50,000) amount has been reached;
2. The homeowner fails to report changes in unemployment status or income;
3. The homeowner’s income regains 85% or more of its pre-event level;
4. The homeowner no longer resides in, sells, or refinances the debt on the mortgaged property; or
5. The homeowner defaults on their portion of the current first lien mortgage loan payments.

Income re-evaluation: After initial income verification at application intake, the homeowner shall be required to notify the fiscal agent of any changes in the household income and/or employment status at any point throughout the entire period of assistance.

Forms of Assistance

Use of Funds for Arrearages: On behalf of the homeowner, the fiscal agent shall use loan funds to pay 100% of arrears (mortgage principal, interest, mortgage insurance premiums, taxes, hazard insurance, and ground rent, if any).

Homeowner Payments: Homeowner contribution to monthly payment on first mortgage will be set at 31 percent of gross income at the time of application, but in no instance will it be less than $25 per month.

Use of Funds for Continuing Mortgage Assistance: The fiscal agent will make monthly mortgage payments to the servicer of the first lien mortgage in excess of the payments made by the homeowner.

Duration of Assistance: If at any time the household’s gross income increases to 85% or more of its pre-event level, assistance will be phased out by the fiscal agent over a two month period. In any event, assistance with monthly payments may not continue beyond 24 months.

Repayment Terms

Transition Counseling: The designated counseling agent shall contact each homeowner that is approaching the last months of program eligibility and remains un/underemployed (3-6 months before the assistance ends) and require the homeowner to meet with a HUD approved counseling agent to explore other loss mitigation options, including loan modification, short sales, deeds-in-lieu of foreclosure, or traditional sale of home.

Repayment of HUD Note: Following the last payment on behalf of the homeowner, the fiscal agent will process the homeowner’s “HUD Note” and record a mortgage with a specific loan balance. The note and mortgage will be in the form of a five year declining

Repayment Terms

Transition Counseling: The designated counseling agent shall contact each homeowner that is approaching the last months of program eligibility and remains un/underemployed (3-6 months before the assistance ends) and require the homeowner to meet with a HUD approved counseling agent to explore other loss mitigation options, including loan modification, short sales, deeds-in-lieu of foreclosure, or traditional sale of home.

Repayment of HUD Note: Following the last payment on behalf of the homeowner, the fiscal agent will process the homeowner’s “HUD Note” and record a mortgage with a specific loan balance. The note and mortgage will be in the form of a five year declining 5 balance, zero interest, nonrecourse loan, and the mortgage shall be in the form of a secured junior lien on the property.

Terms for Declining Balance Feature: No payment is due on the note during the 5 year term so long as the assisted household maintains the property as principal residence and remains current in his or her monthly payments on the first mortgage loan. If the homeowner meets these two conditions, the balance due shall decline by twenty percent (20%) annually, until the note is extinguished and the junior loan is terminated.

Weitz – NO PAYMENT IS DUE FOR 5 years! In fact, it may never actually have to be paid back!

Events Triggering Note Repayment: The homeowner will be responsible for repayment of the applicable balance of the HUD note to the fiscal agent or its successor, if, at any time during the five year repayment period, any of the following events occur:

1. The homeowner rents out the property to a 3rd party;
2. The homeowner defaults on its portion of the current mortgage; or
3. The homeowner receives net proceeds from selling or refinancing debt on the home.

Net proceeds - after paying outstanding applicable brokers fees, first balances (and second lien balances, as applicable), and an allowance of $2,000 to the homeowner for relocation expenses when the home is sold -- will go towards paying down the HUD note. In the event that proceeds of a sale or loan refinance are not sufficient to repay the entire HUD note, the remaining applicable balance of the HUD note shall be considered to have been met, and the lien against the property shall be released.

Provisions for Underwater Homeowners: At all stages of the program, “underwater” homeowners2 will be encouraged to explore participation in short sale or short refinancing programs offered by their servicer and/or the federal government (i.e. Home Affordable Foreclosure Alternatives)3, which will not trigger repayment of the HUD note.

Note: Washington State received $56 Million dollars for this program!

For more information on your rights in Foreclosure or other alternatives, I would encourage you to discuss with a Seattle Foreclosure Attorney, or a Seattle Bankrutpcy Attorney.

Our Firm:
Weitz Law Firm, PLLC
520 Kirkland Way, Ste 103
Kirkland, WA 98033

425.889.9300

www.weitzlawfirm.com

Tuesday, October 25, 2011

The HARP Program - the skeletons within

Visit msnbc.com for breaking news, world news, and news about the economy



An overview of a terrific segment from the Dylan Ratigan show (video above):

1) Home prices down 3.8% from 12 months ago
2) The Government unveiled the HARP program today in Las Vegas (more on this soon)
Update: click here for further information on the new HARP program.
3) 11 Million homes (25%) are underwater (at least this many according to Mr. Black)
4) the government program will assist less than 10% (LESS THAN TEN PERCENT!!)
5) the deal gives the Banks a 'free out' from past liabilities

Our Firm can help guide you. If you are looking for a Seattle Foreclosure Attorney, Seattle Bankruptcy Attorney or a Seattle Short Sale Attorney, consider contacing us:

Weitz Law Firm, PLLC
520 Kirkland Way, PLLC
Kirkland, WA 98033

425 889-9300

Tuesday, October 18, 2011

New Government Mortgage Modification Plan

A great interview with Beau Biden (the Attorney General of Delaware)

Visit msnbc.com for breaking news, world news, and news about the economy



Here is the new Mortgage Plan Facts:1) its speculative right now; and 2) it applies to less than 20% of loans as 80%+ are owned by Fannie Mae and Freddie Mac

* Mr Biden has some other great facts regarding the current mortgage mess including some tough questions about Fannie and Freddie.

Why are Fannie and Freddie not doing more?
- they are 'owned' by the government as a Government Sponsored Entities (GSEs)
- thus, we the taxpayers have control over our mortgages - why are Fannie and Freddie not doing more to prevent foreclosure?...your guess is as good as mine.

Weitz - as usual, the 'government plan' falls dreadfully close and is misleading at best as most mortgages are even going to be considered

For more information on your rights in Short Sale or Foreclosure, consider contacting a Seattle Short Short Attorney or a Seattle Foreclosure Attorney.

Our Firm:

Weitz Law Firm, PLLC
520 Kirkland Way, Ste 103
Kirkland, WA 98033

425 889-9300

Sunday, October 16, 2011

401k withdrawls to pay your Mortgage? Know the facts.


WASHINGTON — With hundreds of thousands of homeowners facing imminent foreclosure and estimates of 2 million or more in the wings, are there any financial tools available to distressed borrowers that haven't been tried yet? Equally important politically: Is there a way to help owners that won't rack up huge federal expenditures and add to the deficit?

Weitz - this is disgusting and I’ll tell you why: Did you know your 401k is entirely protected from creditors and in Bankruptcy? So your politicians (who probably are getting some rather large contributions from banks) are working to allow you to empty your fully protected retirement account so you can pay that money in the form of interest to a Bank for a loan that is likely more than what your property is worth.

Why don’t they simply tell you to go burn that money over a camp fire as that is essentially what you are doing if your property does not appreciate in the near future.

Anyone who is considering taking out money from a retirement account to pay their mortgage should seriously consider the pros/ cons of such a decision prior to acting. The reality is that there are many other options available if you can’t afford your mortgage that are worth exploring prior to liquidating your retirement account(s).


The Obama administration has been exploring options — including a new refinancing program expected later this month — but a concept has surfaced on Capitol Hill that might offer modest help with no revenue cost to the government: Amend the tax code to allow homeowners who have 401(k) retirement plans to pull out money to save their houses from foreclosure without the usual tax penalties.

The change would work like this: Under current rules, anyone making what's known as a "hardship" early withdrawal of funds from their 401(k) must pay the IRS a 10 percent penalty on top of ordinary income taxes. A new bill introduced Oct. 5 would waive the penalty if the purpose of the distribution is to make loan payments to avoid loss of a primary home to foreclosure.

Co-authored by Sen. Johnny Isakson and Rep. Tom Graves, both Republicans from Georgia, the bill would allow owners to pull out up to $50,000. The money could be used in a lump sum to pay down the delinquent mortgage balance or to fill shortfalls caused by reductions of household income. It could also be used as part of loan-modification agreements with lenders designed to avert a foreclosure. However the money is used to resolve the mortgage delinquency, it would need to be spent within 120 days of receipt and could not exceed 50 percent of the current amount of funds in the retirement account.

Owners would still be subject to income taxes on the amounts withdrawn, but would escape the penalty. Though neither of the co-sponsors claims the bill would actually raise revenues — they simply say it wouldn't cost the government anything — some pension-program experts say it might. Edward Ferrigno, vice president for Washington affairs at the Plan

Sponsor Council of America, a group that represents employers who offer workers 401(k)
accounts, said that by triggering taxable distributions from otherwise untouched, tax-deferred plans, the bill "should generate revenues." Ferrigno declined to comment on the bill overall, pending further review of its provisions.

Weitz – so let me get this straight – you take out your fully protected retirement money, you write and check to the bank so they don’t have to ‘write down’ the loss on the mortgage, and then you write a check to the IRS for the right to do it. Don’t do it, folks!

Titled the HOME Act, the proposal sheds light on the potential foreclosure-avoidance resources — and the drawbacks — connected with tapping employee pension accounts. Many, but not all, 401(k) plans allow for loans to participants, including for housing-related purposes. Retirement advisers generally recommend taking a loan from a plan because the money withdrawn is not taxed or penalized. Borrowers are required to pay interest on the loan, but in effect they are paying it to themselves to offset the earnings forgone on the balances taken out.

Many 401(k) plans also provide for "hardship" withdrawals. However, these come with much stricter rules, fewer eligible uses, plus the tax penalties. The Internal Revenue Code limits hardship distributions to situations where there is an immediate and urgent financial need, and there are no other funds available to meet this need. On top of that, the rules require that taxpayers must opt first for a loan from the retirement plan — if permitted — before pursuing a hardship withdrawal.

Though avoiding foreclosure is one of the permitted hardship uses under the code, the 10 percent penalty discourages potential users, Isakson and Graves argue. Their bill would remove that disincentive and provide an emergency escape hatch for owners sliding fast toward foreclosure.

Putting aside the potential positives, are there downsides to making a hardship withdrawal from your 401(k), even penalty-free? You bet. Pulling out 401(k) dollars early — with or without a tax penalty — is still an expensive way to raise money. Not only does it deplete the tax-deferred savings you've set aside, but in the case of hardship withdrawals, you are prohibited by IRS rules from making new contributions to your plan for six months.

Weitz – AND MOST IMPORTANTLY, THIS MONEY IS FULLY PROTECTED FROM CREDITORS!!
Even if the HOME bill makes it through Congress — and there's no assurance it will — taking the hardship route should never be your first choice. It should be your last resort, when there's nothing else that will save your house and you don't want to walk away.

However, also consider the pension plan alternative that may already be buried away in your plan documents: a save-the-house loan to yourself. If the numbers work, and you have a reasonable chance of avoiding foreclosure and repaying the loan, check it out.

It just might be your solution.

For more information on your rights in Foreclosure or Bankruptcy, consider contacting a Seattle Foreclosure Attorney or a Seattle Bankruptcy Attorney.

Our Firm:
Weitz Law Firm, PLLC
520 Kirkland Way, Ste 103
Kirkland, WA 98033

425 889-9300

Friday, October 14, 2011

Nationwide Foreclosure Update for Q3 2011



Some interesting stats:

1) The average foreclosure process in non-judicial states (like WA) is about 330 days.

2) In judicial states like Flordia, it is over 700 days!

3) the notice of default filings (the beginning of the foreclosure process) are up 14% year over year nationwide

For more information on your rights in Foreclosure or non-foreclosure options, consider contacting a Seattle Foreclosure Attorney.

Our Firm:

Weitz Law Firm, PLLC
520 Kirkland Way, Ste 103
Kirkland, WA 98033

425 889-9300

Monday, October 10, 2011

Mortgage Financing Update - retreat of Fannie and Freddie?


Three years after virtually nationalizing the U.S. mortgage market, the government has embarked on a pullback to see whether private industry picks up the slack.

Some people in the housing industry worry that Washington's move will cause fresh pain in many regions where demand has yet to recover amid the sluggish economy.

Weitz – this is a big issue that many may not consider. Obtaining a private loan has been increasingly difficult in the past 3 years. Should Fannie and Freddie exit the lending business, the ability to get financing will become even more difficult.

At issue are the loan limits that Congress expanded in 2008, allowing Fannie Mae and Freddie Mac to buy mortgages that exceeded the national cap of $417,000.

When the mortgage market melted down four years ago and sent private mortgage investors fleeing, interest rates rose sharply on "jumbo" mortgages—those too large for backing by Fannie, Freddie or agencies such as the Federal Housing Administration. That accelerated home-price declines in high-end markets throughout California and the Northeast, where many pricey homes couldn't be bought with a government-backed loan.

To stem the fallout in prices, Congress raised the loan caps to as high as $729,750 in markets such as Los Angeles and New York. It then passed a series of one-year extensions to keep the higher limits in place. But this year, Congress and the Obama administration opted against an extension.

As a result, the limits in hundreds of counties fell by 10% or more on Oct. 1. For loans backed by Fannie and Freddie, the limits declined to between $417,000 and $625,500 in about 200 counties.

More worrisome to real-estate agents are declines in the FHA limits, which fell to between $271,050 and $625,500 in 600 counties. Those changes are causing heartburn because the FHA allows buyers to make down payments of just 3.5%, and it has financed as many as half of all home purchases in recent quarters.

Weitz - Note that nearly half the loans issued as of late are 3.5% down FHA loans - if you take that government aide away, the demand side of the supply/ demand analysis will fall considerable - my estimate is that it will lead to further price declines.

Policy makers allowed the limits to fall because they want private companies to hold more mortgage risk, and dialing down loan limits is one way to carve out space for those investors. Fannie, Freddie, and the FHA currently back nine in 10 new mortgages. Taxpayers already are on the hook for $141 billion in losses at Fannie and Freddie, and the FHA's reserves have plunged to razor-thin levels.

Mortgages that don't qualify for government backing typically have higher borrowing costs, including interest rates around 0.75 percentage point above conforming loans.

Mortgage rates currently are very low, but jumbo loans also require bigger down payments—at least 20%—and can have tougher qualification rules.
"The net-net here is that the available pool of credit for housing is shrinking.

Prices will have to decline," said Christopher Whalen, co-founder of risk-management consultant Institutional Risk Analytics.

On one side of the debate are mortgage investors who say the government needs to give the private sector more room to compete if a vibrant market for nongovernment-backed loans is to re-emerge. "The banking industry, flush with excess deposits, will fund those loans," said Mike McMahon of Redwood Trust, a real-estate investment firm in Mill Valley, Calif.

Assuming a 20% down payment, the new limits still allow homeowners in parts of California to qualify for a government-backed mortgage on a $780,000 home. Critics say there's little public policy rationale to subsidize loans for those borrowers, who need substantial incomes.

On the other side are real-estate agents and some economists who say sellers are in for a nasty surprise when they find that fewer potential buyers qualify to purchase their properties. They say the changes also could hamstring "trade-up" buyers who typically used home equity, which has plunged during the bust, as their down payment to move to a bigger residence.

Gisella Olivares closed on a home in Upland, Calif., on the day before the new loan limits went into effect. Without the FHA-backed mortgage, "there would be no way I could afford to get the house," said Dr. Olivares, who qualified for a $448,000 mortgage. In California's Inland Empire region, the metropolitan area an hour east of Los Angeles, the FHA loan limit fell to $355,350 from $500,000.

If Dr. Olivares, a 42-year-old physician, had to make the $100,000 down payment for a jumbo mortgage, she said she would have waited at least two years to buy a home.

The seller, meanwhile, was able to avoid foreclosure by completing a short sale, where the bank allowed the house to sell for less than the amount owed.

The loan limits wouldn't appear to have much of an impact on the overall housing market. In 2009, about 1.5% of home-purchase loans backed by government entities wouldn't have been eligible under the new limits, according to a study by the Furman Center for Real Estate and Urban Policy at New York University.

But the same study emphasized the outsize local impact. Some 9% of purchases would have been affected in San Jose, Calif., and 5% in San Diego.

Meanwhile, banks would have to increase the number of jumbo loan originations by 56% to make up the gap, "which the private sector could be hard pressed to fill," said Mark Willis, one of the study's authors. "If you want to get the market moving, why would you decrease the availability of credit for any part of it?"

Ultimately, the loan-limit issue shows the broader challenge in bringing back private capital and reducing taxpayer exposure: Housing markets are shaky, and the government is still offering better terms than private lenders.

Steps that raise borrowing costs could attract private investors, but if that pushes home prices down in the process, it may do more harm to the economy and to individual housing markets still reeling from the real estate bust.

Weitz - this is a tough issue - Do we want to continue to 'prop up' and 'subsidize' real estate to prevent further declines in prices, or do we want capitalism to take hold and see how far prices will fall - I guess the answer to that question depends on your perspective (property owners vs. non-property owners). Whatever your position, this lending issue is one to keep an eye on as it will inevitably play a big role in property values.

For more information on your rights in Foreclosure, or Short Sale, consider contacting a Seattle Short Sale Attorney.

Our Firm:

Weitz Law Firm, PLLC
520 Kirkland Way, Ste 103
Kirkland, WA 98033
(425) 889-9300

weitzlawfirm.com