Non-Refundable Deposit Deemed Invalid
By admin | February 16, 2010
An agreement for a “nonrefundable” escrow deposit is invalid and unenforceable, according to the recent California case of Kuish v. Smith (2010 WL 373225). This case serves as a good reminder for REALTORS® that inserting a “nonrefundable deposit” provision into a real property purchase contract may be legally ineffective.
The Kuish case involved a $620,000 escrow deposit for the purchase of a $14 million oceanfront home in Laguna Beach. Instead of using a liquidated damages provision, the buyer and sellers merely agreed in the purchase contract that the deposit would be “nonrefundable.” According to the trial court, both parties were “big boys,” meaning that they were “sophisticated business people [who] understood all the ramifications of their actions in freely negotiating to make the [deposit] non-refundable.”
The buyer eventually cancelled the agreement. The sellers refused to return the deposit to the buyer, even though they sold the property to someone else for $1 million more.
The buyer sued to recover the $620,000 deposit, and won on appeal. The court stated that “any provision by which money or property would be forfeited without regard to actual damage suffered would be an unenforceable penalty. To construe the term ‘nonrefundable’ to establish [the sellers'] entitlement to the full deposit without regard to actual damages would essentially create a liquidated damages provision.” Yet, the parties in this case did not separately sign or initial a liquidated damages provision.
Under C.A.R.’s Residential Purchase Agreement, the sellers would have been entitled to the escrow deposit (not to exceed three percent of the purchase price), if the parties initialed the liquidated damages provision, and the buyer had no contingencies or had removed all his contingencies. For more information about liquidated damages, C.A.R. has a legal article entitled Liquidated Damages and Deposit Forfeitures, which is available in English, Chinese, Korean, Spanish, and Vietnamese.
Copyright© 2010, California Association of REALTORS® (C.A.R.). Used with permission provided by the C.A.R. Legal Department.
Topics: Buying Real Estate, Real Estate | No Comments »
At-risk FHA borrowers to Receive Early Relief Assistance
By admin | February 8, 2010
Homeowners with loans insured by the Federal Housing Administration (FHA) experiencing financial hardship now are eligible for loss mitigation assistance prior to defaulting on their mortgage, the Dept. of Housing and Urban Development announced Friday. Previously, borrowers with FHA-insured loans were not eligible for such assistance until after they had missed payments.
FHA also issued guidance to FHA-approved loan servicers on how to assist FHA borrowers who are facing “imminent default,” defined as an FHA borrower who is current or less than 30 days past due on the mortgage obligation and is experiencing a significant reduction in income or some other hardship that will prevent him or her from making the next required payment on the mortgage during the month that it is due.
To become eligible, borrowers must be able to document the cause of the imminent default which may include, but is not limited to, a reduction in, or loss of, income that was supporting the mortgage; or a change in household financial circumstances.
Loan servicers must document the basis for its determination that a payment default is imminent and retain all documentation used to reach its conclusion. The servicer’s documentation must also include information on the borrower’s financial condition.
Copyright© 2010, California Association of REALTORS® (C.A.R.). Used with permission provided by the C.A.R. Legal Department.
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Consumer Confidence Index Rises in January
By admin | February 1, 2010
The Consumer Confidence Index rose in January to 55.9 (1985=100) compared with 53.6 in December, the Conference Board reported yesterday. The Present Situation Index increased to 25 in January from 20.2 in December, and the Expectations Index increased to 76.5 from 75.9 last month, according to the report.
“Consumer Confidence rose for the third consecutive month, primarily the result of an improvement in present-day conditions,” said Lynn Franco, director of The Conference Board Consumer Research Center. “Consumers’ short-term outlook, while moderately more positive, does not suggest any significant pickup in activity in the coming months. Regarding their financial situation, while consumers were less dire about their income prospects than in December, the number of pessimists continues to outnumber the optimists.”
Consumers’ assessment of current conditions was more positive in January than in December, with those claiming business conditions are “bad” increasing to 46.1 percent in January from 45.7 percent in December, while those claiming conditions are “good” increased to 9 percent in January compared with 7.5 percent in December. Consumers’ appraisal of the job market improved moderately, and their short-term outlook was mixed, according to the report.
Copyright© 2010, California Association of REALTORS® (C.A.R.). Used with permission provided by the C.A.R. Legal Department.
Topics: U.S. Economy | No Comments »
Foreclosures Rise 21 percent in 2009
By admin | January 31, 2010
Foreclosures rose 21 percent in 2009 compared with 2008, as nearly 3 million properties received a foreclosure filing, according to RealtyTrac®’s Year End 2009 Foreclosure Market Report.
Foreclosure filings were reported on 349,519 U.S. properties in December, a 14 percent increase from November and a 15 percent increase from December 2008. Despite the increase in December, foreclosure activity in the fourth quarter decreased 7 percent compared with the third quarter, according to the report.
California continued to lead the nation in foreclosure activity by volume, with 632,573 California properties receiving a foreclosure filing in 2009. Following four consecutive month-over-month declines, California foreclosure activity increased approximately 9 percent in December compared with November. Foreclosure filings declined 17 percent in California in the fourth quarter compared with the third quarter, the report found.
Copyright© 2010, California Association of REALTORS® (C.A.R.). Used with permission provided by the C.A.R. Legal Department.
Topics: Foreclosures, Real Estate | No Comments »
FHA 90-day Anti-Flipping Rule Waived
By admin | January 27, 2010
The Dept. of Housing and Urban Development (HUD) announced Friday it will eliminate for one year the Federal Housing Administration (FHA) 90-day anti-flipping rule.
FHA’s anti-flipping rule generally prohibits insuring a mortgage on a home owned by the seller for less than 90 days. That rule already has been waived for certain transactions, including REOs. Beginning Feb. 1, buyers may use FHA-insured financing to purchase properties resold through private developers and investors. This one-year waiver will give FHA buyers access to a broader array of recently foreclosed properties.
Under the temporary waiver, all transactions must be made at arm’s-length and may require additional documentation of improvements and justification of certain price increases. Additional documentation may include a second appraisal and a property inspection ordered by the lender.
C.A.R. recently submitted a letter to FHA Commissioner David Stevens detailing the challenges facing many FHA home buyers, such as the lack of housing inventory available to them, and the need to revise this rule to reflect current market conditions. The reexamination of the 90-day anti-flipping rule was passed as an action item during C.A.R.’s board of directors meetings in October.
For further information, please visit:
http://portal.hud.gov/portal/page/portal/HUD/press/press_releases_media_advisories/2010/HUDNo.10-011
Copyright© 2010, California Association of REALTORS® (C.A.R.). Used with permission provided by the C.A.R. Legal Department.
Topics: Buying Real Estate, Real Estate | No Comments »
FHA to Raise Fees to Avoid Tax Payer Bailout
By admin | January 25, 2010
Due to rising defaults, the Federal Housing Authority’s (FHA) reserves have been depleted. Congress mandates that the FHA maintain 2% of its outstanding insured loans in reserves. The FHA is opting to raise fees in lieu of jumping on the tax payer bailout bandwagon. FHA is going to increase the upfront mortgage insurance premium (UFMIP) from its current 1.75% to 2.25%. This will be the second increase in as many years. FHA is also considering an annual insurance payment fee paid for by borrowers. To stave off more defaults, the FHA is tightening its lending criteria. Borrowers with a 580 or below credit score will need to put 10% down (though most lenders require a 620 credit score to qualify). Borrowers with good credit will still be able to put 3.5% down. Another way it’s addressing defaults is fighting inflated purchase prices from sellers. Sellers will only be able to credit 3% of the home’s purchase price (down from its current 6% level).
FHA currently backs up nearly half of all loans originated in certain distressed markets (California being one). This means the FHA is largely responsible for keeping the housing market moving and facilitating its recovery.
Source: Nick Timiraos, Wall Street Journal “FHA to Lift Mortgage Insurance Fees” Jan. 19, 2010
Topics: Buying Real Estate, Real Estate | No Comments »
Credit After Foreclosure, Bankruptcy, or Short Sale
By admin | January 19, 2010
Many distressed homeowners worry or wonder what their financial futures may hold. What happens to a homeowner after going through the short-sale or foreclosure process? Will this homeowner ever be able to purchase another home? Read the article below to learn more about what the current ramifications are if you do find yourself in such a position and also educate yourself on the current Fannie Mae credit guidelines. Please keep in mind this information is current as of today, but seems to be constantly evolving. So, please be sure to ask a real estate professional or a qualified lending consultant for the most up-to-date information.
Credit After Foreclosure, Bankruptcy, or Short Sale
One of the concerns a consumer has after experiencing a bankruptcy, foreclosure, or short sale (referred to as a “preforeclosure sale” by Fannie Mae) is the ability to obtain credit to purchase another home. Fannie Mae has updated its credit guidelines. This legal article summarizes those guidelines in Part I. In addition, since lenders use FICO scores in order to determine the creditworthiness of a borrower, this article covers the impact of a bankruptcy, foreclosure or short sale on FICO scores in Part II.
I. Fannie Mae Credit Guidelines
Q 1. How long is the time period after a foreclosure before a consumer can be eligible to obtain credit to purchase a home?
A Five years from the date the foreclosure sale was completed.
Additional requirements that apply after 5 years and up to 7 years following the completion date are as follows:
. The purchase of a principal residence is permitted with a minimum 10 percent down payment and minimum representative credit score of 680.
. Purchase of a second home or investment property is not permitted.
. Limited cash-out refinances are permitted for all occupancy types pursuant to the eligibility requirements in effect at that time.
. Cash-out refinances are not permitted for any occupancy type.
(Source: FNMA Announcement 08-16, 6-25-08 )
Q 2. Why do the additional requirements for foreclosures in Question 1 only apply from 5 to 7 years following the foreclosure completion date?
A According to Fannie Mae policy in Part X, Section 103 of the Selling Guide, Fannie Mae requires only a 7-year history to be reviewed for all credit and public record information. The 7-year timeframe also aligns with the information provided by the borrower on the loan application relative to disclosure of a past foreclosure action. (Source: FNMA Selling Guide, 4-1-09. )
Q 3. Does a shorter time period apply if the borrower has “extenuating circumstances” that led to the foreclosure?
A Yes. Three years from the date the foreclosure sale was completed. The same additional requirements apply as listed in Question 1 except the minimum credit score of 680 is not required. (Source: FNMA Announcement 08-16, 6-25-08. )
Q 4. What are”extenuating circumstances” ?
A Fannie Mae describes “extenuating circumstances” as follows:
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 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, listing agreements, lease agreements, tax returns (e.g., covering the periods prior to, during, and after a loss of employment).
The lender must obtain a letter from the borrower explaining the relevance of the documentation. The letter must support the claims of extenuating circumstances, confirm the nature of the event that led to the bankruptcy or foreclosure-related action, and illustrate the borrower had no reasonable options other than to default on his or her financial obligations.
(Source: FNMA Selling Guide, 4-1-09 at 391. )
Q 5. How long is the time period after a deed-in-lieu of foreclosure before a consumer can be eligible to obtain credit to purchase a property?
A Four years from the date the deed-in-lieu was executed.
Additional requirements that apply after 4 years and up to 7 years following the completion date are as follows:
. Borrower may purchase a property secured by a principal residence, second home, or investment property with the greater of 10 percent minimum down payment or the minimum down payment required for the transaction.
. Limited-cash-out and cash-out refinance transactions secured by a principal residence, second home, or investment property are permitted pursuant to the eligibility requirements in effect at that time.
(Source: FNMA Announcement 08-16, 6-25-08. )
Q 6. Does a shorter time period apply if the borrower has “extenuating circumstances” that led to the deed-in-lieu of foreclosure?
A Yes. Two years from the date the deed-in-lieu was executed. The same additional requirements apply as listed in Question 4 after 2 years up to 7 years. (Source: FNMA Announcement 08-16, 6-25-08. )
See Question 4 for the definition of “extenuating circumstances.”
Q 7. How long is the time period after a “preforeclosure sale” before a consumer can be eligible to obtain credit to purchase a property?
A Two years from the completion date. No exceptions are permitted to the 2-year period due to extenuating circumstances. (Source: FNMA Announcement 08-16, 6-25-08. )
Q 8. What is a “preforeclosure sale” mentioned in Question 6 and is that the same as a short sale?
A “A preforeclosure sale involves the sale of the property by the borrower to a third party for less than the amount owed to satify the delinquent mortgage, as agreed to by the lender, investor, and mortgage insurer” (Source: FNMA Announcement 08-16, 6-25-08 ).
Although the terms preforeclosure sale and short sale have been used interchangeably, there is a significant difference for purposes of obtaining credit. For Fannie Mae purposes, a preforeclosure assumes that the borrower has been delinquent in paying his or her mortgage and the lender agrees to accept a lesser amount to avoid the time and expense of a foreclousre action. A short-sale, however, can also refer to situations in which the lender of the mortgage agrees to a payoff of a lesser amount than is actually owed, even on a current mortgage, to facilitate the sale of the property to a third party. (Source: FNMA Announcement 08-16 Q&A, 8-13-08. )
Q 9. Does a shorter time period apply if the borrower has “extenuating circumstances” that led to the preforeclosure (short) sale?
A No. There are no exceptions to the 2-year time period. (Source: FNMA Announcement 08-16, 6-25-08. )
Q 10. If a borrower sold his or her property as a short sale but was never delinquent on that mortgage and is now attempting to purchase a new primary residence, will Fannie Mae purchase the loan?
A The loan will be eligible for delivery to Fannie Mae provided that the borrower’s previous mortgage history complies with Fannie Mae’s excessive prior mortgage delinquency policy–that is the borrower does not have one or more 60-, 90-, 120-, or 150-day delinquencies reported within the 12 months prior to the credit report date–and the borrower has not entered into any agreement with the short sale lender to repay any amounts associated with the short sale, including a deficiency judgment. (Source: FNMA Announcement 08-16 Q&A, 8-13-08 ; FNMA Selling Guide, Part X, Chapter 3, Section 302.09. .)
Q 11. Are preforeclosure (short) sales and deed-in-lieu of foreclosure actions identified on a credit report?
A Preforeclosure sales may be reported as “paid in full” with a “settled for less than owed” remarks code, and the mortgage tradeline would indicate any recent delinquency. A deed-in-lieu may be reported by a remarks code indicating a deed-in-lieu. (Source: FNMA Announcement 08-16 Q&A, 8-13-08. )
Q 12. How long is the time period after a bankruptcy (all except Chapter 13) before a consumer can be eligible to obtain credit to purchase a property?
A Four years from the discharge or dismissal date of the bankruptcy action (Source: FNMA Announcement 08-16, 6-25-08 ).
Q 13. How long is the time period after a Chapter 13 bankruptcy before a consumer can be eligible to obtain credit to purchase a property?
A Two years from the discharge date and four years from the dismissal date (Source: FNMA Announcement 08-16, 6-25-08 ).
Q 14. Does a shorter time period apply if the borrower has “extenuating circumstances” that led to the bankruptcy (all actions)?
A Yes. Two years from the discharge or dismissal; however, no exceptions are permitted to the 2-year time period after a Chapter 13 discharge (Source: FNMA Announcement 08-16, 6-25-08 ).
See Question 4 for the definition of “extenuating circumstances.”
Q 15. How long is the time period after multiple bankruptcy filings before a consumer can be eligible to obtain credit to purchase a property?
A Five years from the most recent dismissal or discharge date for borrowers with more than one bankruptcy filing within the past 7 years (Source: FNMA Announcement 08-16, 6-25-08 ).
Q 16. Does a shorter time period apply if the borrower has “extenuating circumstances” that led to the multiple bankruptcies?
A Yes. Three years from the most recent discharge or dismissal date. The most recent bankruptcy filing must have been the result of extenuating circumstances. (Source: FNMA Announcement 08-16, 6-25-08. )
See Question 4 for the definition of “extenuating circumstances.”
Q 17. What is the difference between a Chapter 13 bankruptcy and a Chapter 7 bankruptcy?
A Chapter 13 permits a borrower with a regular income to propose a plan to repay some or all of his or her obligations over a period of up to five years. A borrower who files a Chapter 7 is permitted to retain exempt assets and receive a discharge of the borrower’s debts. Chapter 7 is a relatively quick liquidation process that is generally completed within 120 days. Chapter 7 cases are rarely dismissed. (Source: FNMA Announcement 08-16 Q&A, 8-13-08. )
Q 18. What is the difference between a Chapter 13 dismissal and a Chapter 13 discharge?
A A borrower who files a Chapter 13 can dismiss the case at any time (voluntary dismissal) or the case may be dismissed by the court based on the borrower’s failure to comply with the requirements of the Bankruptcy Code or to make the required payments. If the borrower who files a Chapter 13 case makes all of the payments required by the plan, the borrower receives a discharge at the end of the plan. A borrower who doesn’t make all the payment required by the plan may still receive a discharge if the court finds, among other things, that the borrower made a certain amount of the payments and the borrower’s failure to make all of the payments was due to circumstances beyond the borrower’s control. (Source: FNMA Announcement 08-16 Q&A, 8-13-08. )
Q 19. What are the requirements to re-establish a credit history?
A After a bankruptcy or foreclosure-related action, a credit history must meet the following rquirements to be considered re-established:
. It must meet the requirements for elapsed time (as discussed in this article).
. It must reflect that all accounts are current as of the date of the mortgage application.
. it must include a minimum of four credit references. At least one of the references must be a traditional credit reference, and one of the references must be housing-related.
(1) A housing-related reference must cover the period following the bankruptcy discharge or dismissal, foreclosure, or deed-in-lieu, and can be in the form of mortgage payments or rental payments.
(2) If rental payments wre not reported to the credit repositories, the lender must obtain copies of bank statements, money orders, or canceled checks for the most recent 12-month period as a supplement to the rent verification.
. It must reflect three of the four credit references, including rental housing references, as active in the 24 months preceding the date of the mortgage application.
. It must include no more than two installment or revolving debt payments 30 days past due in the last 24 months.
. It must include no installment or revolving debt payments 60 or more days past due since the discharge or dismissal of the bankruptcy or the completion of the foreclosure-related action.
. It must include no housing debt payments past due since the discharge or dismissal of the bankruptcy or the completion of the foreclosure-related action.
. It must include no new public records since the discharge or dismissal of the bankruptcy or the completion of the foreclousre-related action. Public records include bankruptcies, foreclosures, deeds-in-lieu, preforeclosure sales, unpaid judgments or collections, garnishments, liens, etc.
(Source: FNMA Selling Guide, 4-1-09 at 392. )
II. Bankruptcy, Foreclosure, and Short Sale and the Impact on a FICO® Score
Q 20. What is a FICO® Score?
A A FICO® score is a number representing the creditworthiness of a person or the likelihood that person will pay his or her debts. The three credit reporting agencies, Equifax, Experian, and TransUnion, collect data about consumers in order to compile credit reports. The credit agencies use FICO® software to generate FICO® scores, which are then sold to lenders. Actually FICO® is just one of the several credit scoring systems available. The Fair Isaac Corporation (known as FICO®) created the first credit scoring system in 1958. Others are NextGen, VantageScore, and the CE Score. They all evaluate the creditworthiness of a borrower. However, FICO appears to be the most-used credit scoring system. A FICO® score is between 300 and 850. The higher the better the credit.
Each consumer has three credit scores at any given time for any given scoring model because the three credit agencies have their own databases, gather reports from different creditors, and receive information from creditors at different times.
Q 21. What factors go into determining a FICO® score?
A Credit scores are designed to measure the risk of default by taking into account various factors in a person’s financial history. Although the exact formulas for calculating credit scores are closely-guarded secrets, FICO® has disclosed the following components and the approximate weighted contribution of each:
35% — Payment History – Late payments on bills, such as a mortgage, credit card or automobile loan, can cause a consumer’s FICO® score to drop. Paying bills as agreed over time will improve a consumer’s FICO® score.
30% — Credit Utilization - The ratio of current revolving debt (such as credit card balances) to the total available revolving credit (credit limits). Consumers can improve their FICO® scores by paying off debt and lowering their utilization ratio. The closing of existing revolving accounts will typically adversely affect this ratio and therefore have a negative impact on the FICO® score.
15% — Length of Credit History – As a consumer’s credit history ages, assuming the consumer pays his or her bills, it can have a positive impact on the FICO® score.
10% — Types of Credit Used (installment, revolving, consumer finance) – Consumers can benefit by having a history of managing different types of credit.
10% — Recent search for credit and/or amount of credit obtained recently - Multiple credit inquiries for a consumer seeking to open new credit, such as credit cards, retail store accounts, and personal loans, can hurt an individual’s score. Applying for lots of new credit in a short period of time is also viewed as risky and can cause a drop in an individual’s score. However, individuals shopping for a mortgage or auto loan over a short period will likely not experience a decrease in their scores as a result of these types of inquiries.
(Source: http://www.myfico.com/CreditEducation/WhatsInYourScore.aspx)
Q 22. How does a mortgage modification affect my FICO® score?
A FICO® credit scores are calculated from the information in consumer credit reports. Whether a loan modification affects the borrower’s FICO® score depends on whether and how the lender chooses to report the event to the credit bureau, as well as on the person’s overall credit profile. If a lender indicates to a credit bureau that the consumer has not made payments on a mortgage as originally agreed, that information on the consumer’s credit report could cause the consumer’s FICO® score to decrease or it could have little to no impact on the score.
(Source: http://www.myfico.com/crediteducation/questions/Mortgage_Modification.aspx)
Q 23. How does a bankruptcy affect my FICO® score?
A A bankruptcy is considered a very negative event regardless of the type. A bankruptcy is factored into your FICO® score until it is removed from your credit report. As long as the bankruptcy is listed on your credit report, it will be factored into your score. If you are considering bankruptcy as an alternative to foreclosure, keep in mind that it may have a greater impact on your FICO® score.
Typically, you can expect bankruptcies to remain on your credit report, from the date filed, as follows:
(1) Chapter 11 and Chapter 7 bankruptcies up to 10 years.
(2) Completed Chapter 13 bankruptcies up to 7 years.
These time periods refer to the public record item associated with filing for bankruptcy. All of the individual accounts included in the bankruptcy should be removed from your credit report after 7 years. (Source: http://www.myfico.com/crediteducation/Questions/Bankruptcy-Types.aspx)
If you plan to file a bankruptcy, here are some things you should do to make sure your creditors are accurately reporting the bankruptcy filing:
(1) Check your credit report to ensure that accounts that were not part of the bankruptcy filing are not being reported with a bankruptcy status.
(2) Make sure your bankruptcy is removed as soon as it is eligible to be “purged” from your credit report.
After a bankruptcy has been filed, the sooner you begin re-establishing credit in good standing, the sooner you can expect your FICO® score to rebound. A good practice is to obtain a secured credit card and continually make all of your payments on time. As time passes and the impact of the bankruptcy lessens, you might apply for a traditional credit card and also continually make all of your payments on time.
(Source: http://www.myfico.com/crediteducation/questions/Bankruptcy-Reach.aspx)
Q 24. How does a short sale, deed-in-lieu-of foreclosure. or a foreclosure affect my FICO® score?
A The alternatives to foreclosure, such as a deed-in-lieu of foreclosure or a short sale, aren’t any better as far as a FICO® score is concerned.
The common alternatives to foreclosure, such as short sales, and deeds-in-lieu of foreclosure are all “not paid as agreed” accounts, and considered the same by your FICO® score. This is not to say that these may not be better options for you from a financial or tax perspective, just that they will be considered no better or worse for your FICO® score.
If you are considering bankruptcy as an alternative to foreclosure, that may have a greater impact on your FICO® score. While a foreclosure is a single account that you default on, declaring bankruptcy has the opportunity to affect multiple accounts and therefore has potential to have a greater negative impact on your FICO® score.
(Source: http://www.myfico.com/CreditEducation/Questions/foreclosure-alternatives-fico-score.aspx)
Q 25. What won’t affect my FICO® score?
A The following information is not considered by the FICO® scoring formula:
. Your race, color, religion, national origin, sex, or marital status
. Your age
. Your salary, occupation, title, employer, date employed, or employment history
. Where you live
. Any interest rate being charged on a particular credit card or other account
. Certain types of inquiries (such as promotional, account review, insurance or employment-related inquiries)
. Credit counseling
. Any information not found in your credit report
. Any information that is not proven to be predictive of future credit performance
(Source: http://myfico.custhelp.com/cgi-bin/myfico.cfg/php/enduser/std_adp.php?p_faqid=55)
Q 26. Where can I get more information?
A For a credit missteps comparison (i.e., affect on credit scores after certain events), go to http://www.myfico.com/crediteducation/questions/Credit_Problem_Comparison.aspx.
Copyright© 2009, California Association of REALTORS® (C.A.R.). Used with permission provided by the C.A.R. Legal Department.
Topics: Buying Real Estate, Foreclosures, Real Estate, Short-Sales, Tax Information | No Comments »
If you’ve been in your existing home 5 or more years, the government’s potentially giving you 6,500 reasons to move
By admin | January 6, 2010
If you have lived in your current primary residence at least five of the last eight years, you may qualify for homebuyer tax credit up to $6,500. To qualify, you must purchase a home between 11/7/09 – 4/30/10. You can close escrow as late as 6/30/10, but you must be in a home purchase contract dated no later than 4/30/10. The home purchase price cannot be over $800,000 and income restrictions do apply. For those filing jointly, to receive the entire $6,500 credit, you must have a modified adjusted gross income of $225,000 or less ($125,000 for individuals). The credit starts phasing out between $225,001 and $244,999 until it disappears at $245,000 ($145,000 for individuals). Additional requirements are that the buyer needs to be 18 years or older and buyer must provide the IRS a copy of buyer’s settlement statement (HUD-1 Statement) showing proof of the purchase.
Topics: Buying Real Estate, Real Estate, Tax Information | No Comments »
FHA Looking to Make Some Changes
By admin | December 8, 2009
The Federal Housing Administration (FHA) is teetering with the possibility of needing some bailout money or program requirement changes to better protect itself against increasing loan defaults. What’s more is the FHA is required to hold secondary reserve fund equal to 2% of all its outstanding mortgages. However, an independent actuarial study showed that the reserve had fallen to 0.53%.*
Potential changes include raising the minimum down payment from its current 3.5% to 5% possibly for every borrower or possibly to just those with lower credit scores. Another possible change is requiring the home buyer to pay more mortgage insurance premium upfront (borrowers currently pay 1.75% of the loan amount) or not permitting the mortgage insurance premium to be financed.
The issue at hand is FHA was originally designed to help lower-income individuals purchase a home. So, increasing either the down payment requirements or upfront mortgage insurance could negatively impact a potential home buyer’s home buying power and ability. An additional 1.5% down payment could amount to a much longer time in making a home purchase. For example, on a $350,000 home, the down payment could go from $12,250 to $17,500.
FHA is also currently playing a dominant role in the lending arena. Just a short couple of years ago, FHA-backed loans only accounted for 2% of loans in October 2007 for purchases in Southern California.* However, with the credit markets tightening their ever-slimming belts, FHA backed nearly 39% of home loans in October 2009.*
Look for the changes to the FHA lending program to be finalized sometime in January 2010.
*Los Angeles Times “Home Buyers will have to lay out more cash for an FHA Mortgage” 12/3/09 by Jim Puzzanghera and Alejandro Lazo
Topics: Buying Real Estate, Real Estate | No Comments »
Home Buying Tax Credit – Not Just First-Time Home Buyers Anymore
By admin | December 2, 2009
The first-time home buyer tax credit has been extended through April 30, 2010 – April 30,2011 for military personnel. First-time home buyers still qualify for up to $8,000 tax credit. The tax credit is 10% of the home’s purchase price up to a maximum of $8,000. Home’s purchase price cannot exceed $800,000. In addition, the tax credit has also been expanded to include existing homeowners that have been in their current residence 5 of the last 8 years who choose to purchase a new primary residence by April 30, 2010. It’s focused at “move-up” buyers, but the home doesn’t need to be more expensive, just a different one. The tax credit for existing homeowners is up to $6,500. Since the home purchase does have to be a primary residence, second homes do not apply.
Other good news, the income limitations on receiving the tax credits mentioned above has increased from $75,000 for single tax payers and $150,000 to those filing jointly to $125,000 for single tax payers and $225,000 for joint tax payers.
The home purchaser must be in contract by April 30,2010 and close by June 30,2010 to qualify for the credit. Military need to be in contract by April 30, 2011 and close by June 30, 2011. Home buyer can even claim the credit on his 2009 tax returns by filing an amended return even if the purchase is made in 2010.
If the homeowner sells his primary residence within 36 months of purchase, the credit must be paid back (military are excluded).
For details, please visit: http://www.irs.gov/newsroom/article/0,,id=215791,00.html?portlet=7
Topics: Buying Real Estate, Real Estate, Tax Information | No Comments »
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