Nearly 850,000 Home Borrowers Escape NegativeEquity In Q1

"The impressive home price gains of 2012 and the beginning of 2013; Helped, 1.7 million borrowers regained positive equity."

Overall, 9.7 million borrowers, or 19.8 percent of all residential mortgages, were underwater in the first quaarter of 2013, down from 10.5 million, or 21.7 percent of all mortgages, in the previous quarter, acccording to the data provider's estimate.

As more homeowners are freed from negative equity, prices might also stabilize in certain markets.

While 850,000 returned to positive equity in Q1, 2.1 million residntial propeties are at risk of transitioning into negative equity if home proces were to fall since they have less than 5 percent of equity in their homes. Another 11.2 million borrowers have a less than 20 perent of equity compared to the average amount of 32.8 percent for all mortgaged propetes.




-­‐-­‐-­‐sources DSNews.com, Housingwire.com, and Bloomberg.com-­‐-­‐-­‐
 

   In a short sale you go with the draw. I listed a Columbia SC property on 07/01/2012 after the listing interview I discover it is a divorce, short sale with HSBC Mortgage and it was attached to a bankruptcy. Right out of the gate 3 strikes; I knew it would not be easy but I can do this. I have successfully closed several short sales already.

   I advise the sellers that the bankruptcy could be a problem with a HSBC short sale and it would be best to get the house released from the bankruptcy before HSBC can approve a short sale.

  The Columbia SC property is listed; 1 week no offers, no looks. The price is reduced. This continues for a couple of weeks.

  The owners advise that the house has been released from the bankruptcy. I breath a sigh of relief; 1 strike removed. It is finally priced right we are getting showings and we receive multiple offers.

  The short sale package is submitted to HSBC mortgage 08/14/2012, after all documents are collected the HSBC orders a BPO. The HSBC counters $30,000 over the offer price, which is $25,000 over the list price. I am flawed, I tell the selling agent and his response is "What are they smoking" I have to laugh, because we both know the BPO is over valued.  I tell him that we will dispute the BPO but I need to know what his clients are willing to offer. The buyers best and final offer is an increase of their offer price by $5,000 which is the list price. The new offer along with comps and an estimate of repairs of the property is submitted to HSBC.  HSBC counters back with a decrease of only $5,000 of their original 1st counter. That is still $25,000 over the offer price and $20,000 offer the list price. I can't believe it  I tell the listing agent and of course he is shocked and says "It will not appraise" I feel the same

  His clients want the house but they do not want to pay that price. They are upset that the counter is over the list price and feel that I as the Columbia listing agent have done something wrong. I explain to the selling agent that HSBC want to clear as much of the debt as they can. Based on their BPO the house is worth more.


  I have multiple offers so I extend the offer to the other buyers in waiting. One of the backup's increases their offer by $18,000 and HSBC accepts the offer. We have a deal!

  Finally a HSBC short sale approval! The Short sale needs to be completed by 12/22/2012. The buyers loan is approved! and we can close 12/15/2012. Here comes the 1st hiccup buyers appriasail comes back $12,000 less than contract price, with improvements. The original problem I knew we would have to face. Back to the HSBC negotiator I go, I send a copy of the appraisal and they counter back to appraised value, advising that they want the full appraised value. the buyers counter $5,000 under appraised value due to the repairs needed; which are also requirement of the lender and the appraiser. Back to the HSBC negotiator. I advise the appraised value is contingent upon the repairs being completed, and since the house is being sold "As-Is" the buyers have to pay for repairs before closing. They agree finally and a 2nd HSBC Short sale approval! The short sale needs to be completed by 01/31/2013

  The buyers loan is ready to close, scheduled for 01/28/2013. Here comes hiccup number 2; a bankruptcy is attached. I am lost we cleared this up months ago, the seller advised that the bankruptcy attorney will have to file a motion to release the home from the bankruptcy and this motion could take 30 days. What happen I thought this was cleared? Nope the seller has filed another bankruptcy after the HSBC short sale was approved and they included the house again. Back to the negotiator, I receive a 3rd HSBC short sale approval! the short sale needs to be completed by 02/28/2013

  Tick,Tick,Tick, we wait judge signs the order 02/22/2013 we receive the order 02/27/2013. HSBC is notified that we are ready for the closing package. Here comes comes hiccup number 3; buyers loan has to go back through underwriting; the package will be ready in 7 days, back to the negotiator. 4th HSBC Short sale approval! the short sale need to be completed by 03/07/2013

Great News! everyone is ready we CLOSE!! on 03/05/2013, buyers get a wonderful house, for the listed price, sellers receive $2,500 in incentives and everyone walks away smiling.

Successful HSBC Short sale negotiated in Columbia SC!

1. Time frame of a short sale.

Well the truth is each lender has their own policies on when decisions may be rendered.  With their own internal deadlines.  Of course, the lenders generally do not abide by their own published time frames and deadlines. We can only predict certain things based upon past experience and knowledge of the other parties, but every short sale is different and inherently unpredictable.  Lenders frequently do not abide by their own (published or unpublished) deadlines, nor do they hold themselves accountable to their own deadlines.

2. Primary elements of a successful short sale.

Successful short sales require a seller's willingness to cooperate, a buyer who is patient, a reasonable appraisal by the seller’s lender, skilled real estate agents, a good negotiator, and a mortgage lender that is willing to communicate frequently with that negotiator.  If one party to the short sale is not participating or cooperating, then the entire transaction is in jeopardy.

3.Focus on the Important Elements to Complete a Short Sale

You may hear stories of short sales that closed in two months.  There are also stories of short sales that take more than two years.  On average short sales take four to six months from the date of the listing to the settlement date.  A good number of short sales fail.

The important elements is all parties in a short sale transaction should be flexible and committed.  They should focus more on the outcome and less on the process.  Their flexibility and commitment may be rewarded in the end.

 Great news for Columbia Homeowners who intend to sell their primary residence via a short sale this year. 

The tax break that has saved struggling homeowners from paying thousands of dollars to the IRS has been extended.

The Mortgage Forgiveness Debt Relief Act of 2007 was extended for one year, through December 31, 2013, as part of the fiscal cliff compromise approved by the House and Senate.  Section 202 contains the language about the extension.  Attached is the bill, or you can access it by clicking here:  http://www.scribd.com/doc/118551686/Mat-12564 .

This means if a Columbia Homeowner owes $150,000 on their home and it sells for $100,000 in a Short Sale,   the remaining $50,000 may now still be covered under this Act. For a Columbia homeowner in the 25% tax bracket, that could mean a savings of $12,500 in taxes on the short sale. Similar taxes would apply for amounts that were forgiven in other short sales and principal reductions.

The Mortgage Debt Relief Act of 2007 is an Act written to provide protection for some Columbia Homeowners regarding the tax liabilities from the 1099-C received when a lender forgives their debt. Meaning, when a lender waives deficiency, that amount is “Forgiven” debt, and a 1099-C is issued.

According to IRS tax rules, this forgiven debt is to be considered as “income,” and therefore subject to be taxed. While this seems unfair to the seller, since this is not actually income received, it is, nonetheless, law. The Act protected those Columbia Homeowners who are selling  primary residences, and usually applies only to first liens, credit lines used for purchase money or home improvement.

In many cases, this was a major decision point for a Columbia Homeowner's consideration of how to address their selling situation, and one that made a short sale attractive over a Deed in Lieu or a foreclosure.

The Mortgage Debt Relief Act of 2007 is set to expire on December 31, 2012. As of today, there is no replacement or extension in place. Some Columbia homeowners may be concerned about the future of short sales, and question whether a Short sale is still the best decision for them.

Well I say yes. The main reason is that now about 40% of short sales do not qualify for the protection of the Act , and yet; many Columbia Homeowners still feel that the benefits outweigh the risks. and, with new (Fannie/Freddie/HUD) guidelines making full deficiency waivers more of a certainty than in the past. It is extremely rare that Columbia Homeowners not protected by the Act actually owe a tax liability.

With the Act in force, only primary residences are covered. This means that a large percentage of sales are not covered. There are certainly many Columbia Homeowners who are liquidating investment properties and second homes. The benefits afforded to these Columbia Homeowners are:

• The chance for a full deficiency waiver
• Avoidance of a foreclosure on credit

Deficiency is the difference between what the Homeowner owes and what the lender nets on sale. This difference will be reflected on the 1099-C issued by the lender and is the amount that may be considered forgiven debt, and therefore, income, based on current IRS Tax rules, or now the Tax Liability. This is what is also currently covered in some cases under the Mortgage Debt relief Act.

Columbia Homeoners, Deficiency is what you owe the bank, and Tax liability is what you owe the IRS.

Columbia It’s a sign of the times!

Most of us here in Columbia SC  grew up thinking that if we planned well and played by the rules, we’d never have to stand by as our financial lives unraveled. 

But upheaval on Wall Street, unacceptable rates of unemployment and plummeting real estate values have taken their toll on Columbia residences.  Since 2007, 7.9 million homeowners have lost their homes to foreclosure. Current estimates are that one in four homeowners owe more on their mortgages than they could get from the sale of their home. Millions more homes will be lost to foreclosure before this real estate crisis runs its course.

The sad fact is that foreclosure is not an isolated event. For months leading up to the loss of a home, some Columbia financially strapped homeowners live under a cloud of uncertainty.  And then for many years afterwards, the blow to credit gets in the way of buying another home or buying anything on credit. Foreclosure even complicates employment prospects.

The impact of foreclosure is huge and the sad fact is that it’s often avoidable.

As a Columbia SC real estate professional who has earned the Certified Distressed Property Expert (CDPE) designation, my mission is to provide financially strapped homeowners with options to foreclosure, ensure that they steer clear of scams, and help navigate them through the solution that best meets their needs.

Among the most important facts to keep in mind: the sooner help is sought, the better the options.

These are tough times, but more help is available than ever before. If you or someone you care about is ready to navigate away from the dark cloud of an unmanageable mortgage and realize that hope and blue skies are within reach, contact me today and let’s get started.

 

Are the housing scares behind us?

As much as we would like to say yes…. We all know the only true answer is… In our dreams.    While home prices may be nearing a bottom, by no means is the market about to recover. We expect that major housing markets will be dominated by short sales and REOs for at least the next 5 years.

Good news: The highly regarded S&P Case Shiller home price index showed its first monthly increase in 7 months. Home prices rose 1.3% in April.  On a yearly basis, home prices fell, but the decline was smaller than in previous months.

Bad news:  There are still more than 10 million properties (Zillow estimates that the real number is 16,000,000) with underwater mortgages, and a shadow inventory of 1.5 million, or four months supply.  Negative equity will continue to take its toll on consumption, while the shadow inventory, worth about $246 billion according to CoreLogic, will constrict lending.

Out of those 10-16,000,000 mortgages that are underwater, about 3-6 million remain “severely underwater,” which means the initial loan-to-value ratio (LTV) is 125% or more (in other words, the value of the mortgage is at least 25% higher than that of the property).  While seriously delinquent mortgages (at least 60 days) have declined, the percentage of loans in foreclosure has remained stubbornly high, at about 10% of underwater mortgages. Borrowers with high negative equity are also many times more likely to default.