Inside San Diego Short Sales

If you’re a California homeowner contemplating or in the process a short sale, here is some great news!  On Friday July 15, Governor Brown signed into law Senate Bill 458 which prohibits a deficiency after a short sale for any 1-4 unit residential properties, regardless of whether or not the lender is the senior or junior lien holder.  This means that neither the 1^st or 2^nd mortgage holder can demand that the homeowner pay for any deficiency, nor can they file a deficiency judgment.  The law became effective on the 15^th and applies to all escrows closing from that day forward. 

This is a huge relief for homeowners facing a short sale.  Up to this point, it was often the practice for a lien holder to file a deficiency judgment or request payment of thousands of dollars, prior to allowing the short sale escrow to close.  This was particularly true for 2^nd lien holders who seldom recoup any money from the actual sales proceeds.

The new law however, does not prohibit lenders from negotiating for payment towards the deficiency from other interested parties such as relatives, buyers, and agents.  It also allows a homeowner to voluntarily make a contribution in the hopes of gaining a short sale approval.

As 2^nd lien holders will no longer be allowed to demand compensation from the homeowner, my bet is that we will see an increase in the number of requests for payment by 3^rd parties…especially the buyer and the agents.  So while this law is great news for homeowners in terms of avoiding recourse, it may present new challenges in negotiating approvals that are fair to all parties. 

Please feel free to contact me with any questions about this new law or subscribe to stay on top of the latest short sale news.

As I’ve recently noted, getting a home loan these days can be extremely difficult unless you have a 20% down payment, a credit score in the mid 700’s and sufficient income so that your housing costs are no more than 28% of your gross income.  In fact, according to the Financial Institutions Examination Council, roughly 25% of all conventional home loan applications submitted in 2010 were rejected. 

These stringent qualification requirements are for loans backed by Fannie Mae and Freddie Mac, but luckily they aren’t the only game in town.  Today, more and more borrowers are taking advantage of the less demanding criteria for FHA loans. The Federal Housing Administration has been in existence since 1934 and has become the largest government insurer of home loans in the world today.

Although every lender might have slightly different requirements, here are the basics needed to qualify for an FHA insured loan:

• Technically, 580 is the minimum acceptable score, but in practice lending institutions require a minimum of a 620 mid score.  The mid score is the middle score when credit is pulled from all three major reporting agencies; Experian, Equifax, and Transunion.
• Housing expenses, (mortgage, taxes and insurance) must not equal more than 31% of your gross income, and all payments, (including cars and credit cards) must not exceed 43%.
• The down payment must be at least 3.5%.  If the down payment is less than 10%, most lenders require a credit score of 640.
• There is also an Upfront Mortgage Insurance Premium paid at closing and usually financed into the loan.  This premium is 1.75% of the base loan amount.  There is also an annual premium paid on a monthly basis.  This amount will be based on the loan-to-value ratio.

An FHA loan is an excellent choice for first-time buyers, or anyone with less than perfect credit or a small down payment.  If you’re thinking of buying in San Diego,Orange orRiverside County, please give me a call.  The time to get qualified is before you start looking for a home.  There is nothing worse than finding the perfect home, only to discover you can’t get a loan!

For those of us in the industry, it hardly comes as any surprise that Bank of America has failed to help thousands of Americans receive a permanent loan modification through the Home Affordable Modification Program (HAMP).  And it now looks like they might have some explaining to do:  A judge has denied the bank’s request to dismiss a case involving tens of thousands of homeowners who claim they were refused help through the HAMP program.

As you remember, HAMP uses federal funds to help struggling homeowners.   Under the program, Bank of America is required to provide foreclosure alternatives and permanent loan modifications to eligible homeowners.

However, according to Steve Berman, managing partner of Hagens Berman, the firm representing the homeowners. Bank of America has refused to permanently modify the loans of thousands of borrowers, even after successfully completing a Trial Period Plan (TPP).  “The vast majority tell us the same thing: Bank of America claims to have lost their paperwork, failed to return phone calls, made false claims about the status of their loan and even taken actions toward foreclosure without informing homeowners of their options,”  said Berman.

In the lawsuit, Berman seeks to prove that Bank of America “intentionally postpones homeowners’ requests to modify mortgages, depriving borrowers of federal bailout funds that could save them from foreclosure.”

“The bank ends up reaping the financial benefits provided by taxpayer dollars financing TARP-funds and also collects higher fees and interest rates associated with stressed home loans,” Berman added.

The case will be limited to homeowners who entered a TPP, but were denied a permanent modification.  Judge Rya Zobel also ruled that homeowners in nine state, including California could pursue claims in their states where consumer protection laws are stronger. 

So if you’re a homeowner in the middle of trying to get a HAMPmodification form B of A, the outlook is not encouraging.  The federal government has cut-off HAMPfunds to Bank of America until they make improvements in how they administer the program, which could mean more foreclosures and short sales on the horizon for Bank of America borrowers.

A new law goes into effect today requiring the installation of carbon monoxide detectors in all single family homes in California.  However, there seems to be some confusion about the exact requirements and how the new law applies to rental homes and apartments, so here’s what you need to know.

A carbon monoxide detector is required in all single family homes that have fossil-fuel burning appliances such as a gas heater, water heater, or stove, fireplaces, and/or an attached garage.  If you are the owner of a qualifying home that you rent to others or plan to sell, you must have a detector installed immediately.  If you rent a single family home, please contact your landlord or property management company to make sure that your home is protected.  All multi-family rental units have until January 1, 2013 to have the detectors installed.  Installation of the detectors is now required prior to close of escrow on all single family home sales transactions.

According to the Chimney Safety Institute of America, carbon monoxide poisoning kills approximately 200 people every year.  It is called the silent killer as the gas is colorless, tasteless, odorless and otherwise undetectable.  Most carbon monoxide accidents are caused by faulty LP and natural gas heating systems. 

The detectors cost $10 – $50 each and must be a model approved by the State Fire Marshal.  Like smoke detectors, they should be mounted high on the wall or ceiling and there should be one on every story of your home.  Some homes with alarm systems may have the detector connected to their existing system, so please check with your security company provider.

Symptoms of carbon monoxide poisoning include:

• Shortness of breath
• Nausea
• Vomiting
• Dizziness
• Unconsciousness

If you or a family member has these symptoms, or the alarm on the detector goes off, get everyone outdoors, and then call for help. 

Please don’t leave yourself and your family unprotected.  Make sure your detector is installed today!