More than just real estate.
Helping Homeowners
New Details Emerge about ‘Making Home Affordable’ Program
The new Administration has announced details of new efforts to help bring relief to responsible homeowners under the Making Home Affordable Program, including an effort to achieve greater affordability for homeowners by lowering payments on their second mortgages as well as a set of measures to help underwater borrowers stay in their homes. “With these latest program details, we’re offering even more opportunities for borrowers to make their homes more affordable under the Administration’s housing plan,” said Treasury Secretary Tim Geithner. “Ensuring that responsible homeowners can afford to stay in their homes is critical to stabilizing the housing market, which is in turn critical to stabilizing our financial system overall. Every step we take forward is done with that imperative in mind.”
“These new details will make it easier for borrowers to modify or refinance their loans under FHA’s Hope for Homeowners program,” said HUD Secretary Shaun Donovan. “We encourage Congress to enact the necessary legislative changes to make the Hope for Homeowners program an integral part of the Making Home Affordable Program.”
The Second Lien Program, one of the new details, will work in tandem with first lien modifications offered under the Home Affordable Modification Program to deliver a comprehensive affordability solution for struggling borrowers. Second mortgages can create significant challenges in helping borrowers avoid foreclosure, even when a first lien is modified. Up to 50% of at-risk mortgages have second liens, and many properties in foreclosure have more than one lien.
Under the Second Lien Program, when a Home Affordable Modification is initiated on a first lien, servicers participating in the Second Lien Program will automatically reduce payments on the associated second lien according to a pre-set protocol. Alternatively, servicers will have the option to extinguish the second lien in return for a lump sum payment under a pre-set formula determined by Treasury, allowing servicers to target principal extinguishment to the borrowers where extinguishment is most appropriate.
Separately, the Administration has also announced steps to incorporate the Federal Housing Administration’s (FHA) Hope for Homeowners into Making Home Affordable. Hope for Homeowners requires the holder of the mortgage to accept a payoff below the current market value of the home, allowing the borrower to refinance into a new FHA-guaranteed loan. Refinancing into a new loan below the home’s market value takes a borrower from a position of being underwater to having equity in their home. By increasing a homeowner’s equity in the home, Hope for Homeowners can produce a better outcome for borrowers who qualify.
Under the changes recently announced and, when evaluating borrowers for a Home Affordable Modification, servicers will be required to determine eligibility for a Hope for Homeowners refinancing. Where Hope for Homeowners proves to be viable, the servicer must offer this option to the borrower. To ensure proper alignment of incentives, servicers and lenders will receive pay-for-success payments for Hope for Homeowners refinancings similar to those offered for Home Affordable Modifications. These additional supports are designed to work in tandem and take effect with the improved and expanded program under consideration by Congress. The Administration supports legislation to strengthen Hope for Homeowners so that it can function effectively as an integral part of the Making Home Affordable Program.
Making Home Affordable, a comprehensive plan to stabilize the U.S. housing market, was first announced by the Administration on February 18. The three part program includes aggressive measures to support low mortgage rates by strengthening confidence in Fannie Mae and Freddie Mac; a Home Affordable Refinance Program, which will provide new access to refinancing for up to 4 to 5 million homeowners; and a Home Affordable Modification Program, which will reduce monthly payments on existing first lien mortgages for up to 3 to 4 million at-risk homeowners. Two weeks later, the Administration published detailed guidelines for the Home Affordable Modification Program and authorized servicers to begin modifications under the plan immediately. Twelve servicers, including the five largest, have now signed contracts and begun modifications under the program. Between loans covered by these servicers and loans owned or securitized by Fannie Mae or Freddie Mac, more than 75% of all loans in the country are now covered by the Making Home Affordable Program.
Continuing to bolster its outreach around the program, the Administration also announced a new effort to engage directly with homeowners via MakingHomeAffordable.gov.
Homeowners will have the ability to submit individual questions through the website to the Administration’s housing team. Members of the Treasury and HUD staffs will periodically select commonly asked questions and post responses on MakingHomeAffordable.gov.
information from Risemedia 04/09
Thursday, April 30, 2009
Thursday, April 2, 2009
Atlanta Real Estate Investment Market
More than just real estate.
Those of you who are seasoned investors out there will have realized by now that Today’s dire economic circumstances have conspired to produce the perfect real estate storm for buyers and investors. Huge inventory, low interest rates, and highly motivated sellers all combine to make this an ideal time to pick up a house, or two, or even three. But before we all rush out and buy the first house we can find, let’s look at the four most important factors of an investor real estate deal:
LOCATION
If you are looking for a rental property that will pay for itself on a monthly basis, you may be best off looking in lower middle class neighborhoods where most of the owners occupy their homes and keep their homes in relatively good condition.
Gang graffiti and boarded-up doors and windows are signs to avoid, while accessibility to transportation and relatively recent construction make for good rental income properties. Good public schools are also an important feature for many prospective renters.
Another desirable feature related to location is a neighborhood where most of the homes are similar in size and amenities. You want to buy in a neighborhood where the other properties won’t pull down your value due to wide-ranging sales prices.
CONDITION
Try to avoid neighborhoods where most of the homes are less than three bedrooms and two baths, or where most of the construction is pre-1950. Homes more than fifty years old will eventually need almost all systems updated, and that is an expense to avoid in a rental situation.
Homes less than ten years old have almost all up-to-date systems, and shouldn’t need major renovations any time soon. In addition, newer homes sometimes offer space for expansion, an inexpensive way to add a bedroom or office.
In an ideal situation, the home should need no work before the renter moves in. However, in today’s real estate market, the condition is where you are going to find the greatest degree of variation. At no time in the past thirty years has there been such a large number of homes on the market needing significant repairs.
Many of these homes are bank owned, and some are uninhabitable. Others may need nothing more than paint and carpet. Being able to distinguish between the two extremes is critical to your success in finding a great deal. At the very least, make all offers
contingent upon a full inspection of the property and a satisfactory estimate for
all needed repairs.
PRICE
The glut of bank-owned homes has, in my opinion, kicked the floor out from under the Atlanta residential real estate market. We don’t know what anything is worth, because so many of the comparable sales that appraisers use a re distressed sales.
But if you can get a price discount in the 40% to 50% range, it really doesn’t take a great investor to see that there is plenty of room for upside profit, both in the monthly cash flow and in the long term resale price. I believe that most lenders had, until recently, hoped for a “Resolution Trust Company style” bailout from the federal government. But now that the Obama administration has indicated that troubled bank assets will not be
purchased directly, pressure to sell is mounting on a daily basis. Seller motivation is growing. Investors making initial offers on bank-owned homes should be especially
careful to stay in touch with the current market of bank resales. Discounts of 25% are not uncommon, and sales at 50 cents on the dollar are being seen by investors. My advice is to start low, then be prepared to negotiate up.
FINANCING
This is the big wildcard for investment property, because the current Fannie Mae “ten property rule” has kept many veteran investors on the sidelines. But if FNMA were to relax investor guidelines, or if banks began offering any kind of reasonable seller financing, the floor under housing prices in Atlanta could be re-established
fairly quickly.
All but the most ardent “doom and gloomers” believe that the current condition of variable home values will end sooner rather than later, and anyone who can lock in a low price now will be glad they did. But the real key is how to finance that low price.
A super-low price combined with a great financing makes for a fabulous real estate investment opportunity. And I believe the solution to this problem is seller financing. I am already starting to get reports of banks selling their houses and agreeing to carry back some sort of financing. The key for investors is not necessarily a 30-year fixed rate loan at 6% interest with nothing down, although that would be nice. Instead, the key is for banks to be able to convert their non-performing assets (the vacant houses) into performing assets (loans requiring a substantial down payment and reasonable qualification guidelines). These loans can be good for the banks and good for the borrower, and they could still be attractive with terms as short as five to seven years. The investment community is ready, but needs the financing to act. Once the banks make this leap of logic, the huge oversupply of vacant houses in Atlanta can begin to disappear, and we can get on with the business of re-establishing a market for real estate.
Source John Adams - March 09
Those of you who are seasoned investors out there will have realized by now that Today’s dire economic circumstances have conspired to produce the perfect real estate storm for buyers and investors. Huge inventory, low interest rates, and highly motivated sellers all combine to make this an ideal time to pick up a house, or two, or even three. But before we all rush out and buy the first house we can find, let’s look at the four most important factors of an investor real estate deal:
LOCATION
If you are looking for a rental property that will pay for itself on a monthly basis, you may be best off looking in lower middle class neighborhoods where most of the owners occupy their homes and keep their homes in relatively good condition.
Gang graffiti and boarded-up doors and windows are signs to avoid, while accessibility to transportation and relatively recent construction make for good rental income properties. Good public schools are also an important feature for many prospective renters.
Another desirable feature related to location is a neighborhood where most of the homes are similar in size and amenities. You want to buy in a neighborhood where the other properties won’t pull down your value due to wide-ranging sales prices.
CONDITION
Try to avoid neighborhoods where most of the homes are less than three bedrooms and two baths, or where most of the construction is pre-1950. Homes more than fifty years old will eventually need almost all systems updated, and that is an expense to avoid in a rental situation.
Homes less than ten years old have almost all up-to-date systems, and shouldn’t need major renovations any time soon. In addition, newer homes sometimes offer space for expansion, an inexpensive way to add a bedroom or office.
In an ideal situation, the home should need no work before the renter moves in. However, in today’s real estate market, the condition is where you are going to find the greatest degree of variation. At no time in the past thirty years has there been such a large number of homes on the market needing significant repairs.
Many of these homes are bank owned, and some are uninhabitable. Others may need nothing more than paint and carpet. Being able to distinguish between the two extremes is critical to your success in finding a great deal. At the very least, make all offers
contingent upon a full inspection of the property and a satisfactory estimate for
all needed repairs.
PRICE
The glut of bank-owned homes has, in my opinion, kicked the floor out from under the Atlanta residential real estate market. We don’t know what anything is worth, because so many of the comparable sales that appraisers use a re distressed sales.
But if you can get a price discount in the 40% to 50% range, it really doesn’t take a great investor to see that there is plenty of room for upside profit, both in the monthly cash flow and in the long term resale price. I believe that most lenders had, until recently, hoped for a “Resolution Trust Company style” bailout from the federal government. But now that the Obama administration has indicated that troubled bank assets will not be
purchased directly, pressure to sell is mounting on a daily basis. Seller motivation is growing. Investors making initial offers on bank-owned homes should be especially
careful to stay in touch with the current market of bank resales. Discounts of 25% are not uncommon, and sales at 50 cents on the dollar are being seen by investors. My advice is to start low, then be prepared to negotiate up.
FINANCING
This is the big wildcard for investment property, because the current Fannie Mae “ten property rule” has kept many veteran investors on the sidelines. But if FNMA were to relax investor guidelines, or if banks began offering any kind of reasonable seller financing, the floor under housing prices in Atlanta could be re-established
fairly quickly.
All but the most ardent “doom and gloomers” believe that the current condition of variable home values will end sooner rather than later, and anyone who can lock in a low price now will be glad they did. But the real key is how to finance that low price.
A super-low price combined with a great financing makes for a fabulous real estate investment opportunity. And I believe the solution to this problem is seller financing. I am already starting to get reports of banks selling their houses and agreeing to carry back some sort of financing. The key for investors is not necessarily a 30-year fixed rate loan at 6% interest with nothing down, although that would be nice. Instead, the key is for banks to be able to convert their non-performing assets (the vacant houses) into performing assets (loans requiring a substantial down payment and reasonable qualification guidelines). These loans can be good for the banks and good for the borrower, and they could still be attractive with terms as short as five to seven years. The investment community is ready, but needs the financing to act. Once the banks make this leap of logic, the huge oversupply of vacant houses in Atlanta can begin to disappear, and we can get on with the business of re-establishing a market for real estate.
Source John Adams - March 09
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