Foreclosure

Weekly Mortgage Watch

Significant amounts of very important economic data are due this week, along with a meeting of the Federal Reserve. Mortgage rates have the potential to fluctuate, in either direction, during the course of this week. Few are expecting the Federal Reserve to make any announcement regarding any new policy direction. Most analysts are expecting the Fed to take a wait-and-see position following the recent extension of Operation Twist. If the Fed does announce a new policy, mortgage rates could be driven downward. Economic data will also influence rates this week. A few experts are expecting a bit of an economic bounce. If the data shows a measurable improvement, then rates could climb…  To read the full story and see today’s interest rates, click the link below: http://ftemerson.wordpress.com/2012/07/16/weekly-mortgage-watch-85/wmw-7-15-12/

How long until I can buy again after a short sale or foreclosure?

How long until I can buy again after a short sale or foreclosure?  This question comes up a lot.  The answer depends on the type of defaulted loan and circumstances.  See the chart and commentary below.

Right now, I think a more important question is, “If I do a short sale on my home in California, will I have any tax obligations on the forgiven amount?”  The answer is NO if we start before July.  The mortgage tax forgiveness act is due to sunset at the end of the year, so there is still time get started and end the year with a Short Sale approval and no tax consequences.

CONVENTIONAL LOAN    
Reason Extenuating
Circumstances
Financial
Management
Bankruptcy 2 years 4 years
Multiple Bankruptcies 3 years 5 years
Foreclosure 3 years 7 years
Deed in Lieu 2 years 4 years
Short Sale 2 years 4 years
FHA LOAN    
Reason Extenuating
Circumstances
Financial
Management
Bankruptcy 12 months 2 years
Foreclosure/
Deed in Lieu
3 years 3 years
Short Sale* 3 years 3 years

* New FHA financing is allowed, before the 3 year waiting period, if borrowers’ were current on their mortgage and other installment debts at the time of the short sale of their previously owned property and the proceeds from the short sale serve as payment in full.

Borrowers will not be eligible for new FHA financing before the 3 year time period if they took advantage of declining market conditions and purchased at a reduced price a similar or superior property within a reasonable commuting distance.

Per Fannie Mae, Extenuating Circumstances are nonrecurring events that are beyond the borrower’s control that result in a sudden, significant, and prolonged reduction in income or a catastrophic increase in financial obligations.

If a borrower claims that derogatory information is the result of extenuating circumstances, the lender must substantiate the borrower’s claim.  Examples of documentation that can be used to support extenuating circumstances include documents that confirm the event (such as a copy of a divorce decree, medical reports or bills, notice of job layoff, job severance papers, etc.) and documents that illustrate factors that contributed to the borrower’s inability to resolve the problems that resulted from the event (such as a copy of insurance papers or claim settlements, property listing agreements, lease agreements, tax returns (covering the periods prior to, during, and after a loss of employment), etc.).

Individual lenders will usually have their own credit guidelines as well when the mortgage that was attached to the adverse credit was their own, i.e., if mortgage attached to a property that was foreclosed upon was Wells Fargo, borrower would need to wait 7 years to get a new Wells loan.

Borrowers must also exhibit improved credit history since the adverse credit incident, for all situations.

* New FHA financing is allowed, before the 3 year waiting period, if borrowers’ were current on their mortgage and other installment debts at the time of the short sale of their previously owned property and the proceeds from the short sale serve as payment in full.

 Borrowers will not be eligible for new FHA financing before the 3 year time period if they took advantage of declining market conditions and purchased at a reduced price a similar or superior property within a reasonable commuting distance.

Per Fannie Mae, Extenuating Circumstances are nonrecurring events that are beyond the borrower’s control that result in a sudden, significant, and prolonged reduction in income or a catastrophic increase in financial obligations.

If a borrower claims that derogatory information is the result of extenuating circumstances, the lender must substantiate the borrower’s claim.  Examples of documentation that can be used to support extenuating circumstances include documents that confirm the event (such as a copy of a divorce decree, medical reports or bills, notice of job layoff, job severance papers, etc.) and documents that illustrate factors that contributed to the borrower’s inability to resolve the problems that resulted from the event (such as a copy of insurance papers or claim settlements, property listing agreements, lease agreements, tax returns (covering the periods prior to, during, and after a loss of employment), etc.).

Individual lenders will usually have their own credit guidelines as well when the mortgage that was attached to the adverse credit was their own, i.e., if mortgage attached to a property that was foreclosed upon was Wells Fargo, borrower would need to wait 7 years to get a new Wells loan.

Borrowers must also exhibit improved credit history since the adverse credit incident, for all situations.

Grandpa Knows Best

Knowledge is Power.  There is a flurry of activity in the news about renting vs. buying.  It really boils down to whether you are thinking short versus long-term.  We are watching this closely.  The fact remains; it has never been a better time to purchase a home – or a second home as an investment.  So who do you listen to?  Our friends at Keeping Current Matters may have hit upon the right source…Grandpa.

 There are those currently debating the financial advantages of owning a home. Some are looking at studies and reporting that homeownership has never really been a great investment.

One of these people is Jack C. Francis, a former Federal Reserve economist and professor at Baruch College. He said in a recent CNBC article:

“For generations, parents and grandparents have been telling us that the way to get ahead was to buy a house and keep making payments with a fixed interest rate and after 20 or 30 years it would be way up in value and that was your nest egg in old age. You could either live in it rent free or sell it and use the proceeds to rent an apartment.”

The article goes on to explain the rest of Mr. Francis’ comment:  

That was good advice until 2006 when home prices collapsed, he says, and it “may become good advice 10 years from now, but right now it’s not.”

Mr. Francis bases his conclusions on a study he completed which covered the years 1978 through 2008. In his study it showed that home prices increased annually by 5.7% and that the S&P 500 increased by 10.8%. Based on this information, Mr. Francis gives the following advice:

To students who come to him for guidance on whether to buy or rent in the near term, however, Francis has one word of advice: wait. “I keep telling them this is not the time to buy,” he says.

Let’s take a closer look at this conclusion.  http://ftemerson.wordpress.com/2011/03/22/we-think-we%e2%80%99re-going-to-believe-grandpa/