Chance Gates' Blog

By Pamela Yip

RISMEDIA, December 24, 2010—(MCT)—If you’ve been through a foreclosure, you may wonder if there is hope for you to become a homeowner again.

“It doesn’t mean you’ll never be a homeowner again,” said Linda Davis-Demas, director of housing at Consumer Credit Counseling Service of Greater Dallas.

But you’ll need to examine what caused you to fall behind on your mortgage and take steps to fix the problem.

“You have to look at what were the reasons you didn’t make the payment,” said Davis-Demas. “Was it budgeting? You can modify that type of behavior.”

A foreclosure is a major hit to your credit history and stays on your credit report for seven years.

“Foreclosure is one of the FICO seven deadlies,” said credit expert John Ulzheimer, referring to the dominant FICO credit score. “It’s considered a major derogatory item, regardless of the back story”—whether it’s a job loss, rate reset, underemployment or other reasons.

Your credit score will also suffer “the minute the foreclosure process begins,” said Ulzheimer, founder of 2StepCredit.com, a credit education website.

“It doesn’t have to be completed for it to be very damaging,” he said. “The damage will vary based on your scores, but it can damage the score as much as 200 points, especially if your scores are very strong to begin with.”

So, after a foreclosure, your priority has to be rebuilding your credit. You’ll have some time to do so, because mortgage giants Fannie Mae and Freddie Mac impose strict rules on how long it will take before you’re eligible for another mortgage.

For example, borrowers with a prior foreclosure and extenuating circumstances—such as a job loss, divorce or medical issues—must wait three years before they can qualify for a Fannie Mae-backed loan, said spokeswoman Amy Bonitatibus. For all other borrowers the waiting period is seven years.

At Freddie Mac, those who can prove extenuating circumstances must wait three years before applying for a new mortgage; everyone else must wait five years. But that will change in February, when the waiting period for those whose foreclosure was caused by their own financial mismanagement will increase to seven years.

Fannie Mae and Freddie Mac also have strict rules on the credit score and the size of the down payment required of borrowers with a prior foreclosure.

Here’s what you need to do to rebuild your credit to qualify again for a mortgage:

PAY YOUR BILLS ON TIME: The FICO score, the dominant credit score used by lenders, gives the greatest weight to payment history, so make sure you consistently pay your bills on time.

“Stability is the key,” said Craig Jarrell, president of the Dallas region of IberiaBank Mortgage Co. “Have you demonstrated that you are now capable of owning a home and paying the bills, and have recovered from whatever circumstance caused the original foreclosure?”

REVIEW CREDIT REPORT: You’re entitled to a free credit report once every 12 months from each of the three national credit bureaus—Experian, TransUnion and Equifax. You should get a copy and check it for any inaccuracies.

To get your free credit report, go to http://www.annualcreditreport.com. Go to only this website, not ones with similar-sounding names.

“Make sure it is about you and only you,” said Gail Cunningham, spokeswoman for the National Foundation for Credit Counseling. “If you find errors, dispute them. If you discover old debts, it will weigh in your favor to satisfy them. Paid late looks better than not paid at all. Make sure that debts older than seven years have rotated off your report, as these could be dragging your score down unnecessarily.”

CHECK YOUR MORTGAGE: You want to be sure that you don’t still owe anything on your old mortgage. Sometimes proceeds from a foreclosure sale aren’t enough to cover what’s owed on the mortgage, which would leave you owing the difference.

“Make sure there is a zero balance reflected, and if you are responsible for a shortfall, make arrangements to repay the remaining balance,” Cunningham said.

Many lenders are willing to settle that “deficiency judgment” for less than what’s owed because “it’s better than getting no money at all,” Jarrell said.

APPLY FOR CREDIT: In particular, apply for different varieties of credit.

“Credit scoring models value having different types of credit,” Cunningham said. “Having some revolving accounts, typically credit cards, and some installment fixed-payment loans, such as a car payment, can improve your score.”

But don’t apply for too much credit at once.

“This can appear as though you’re desperate for credit and perhaps make lenders less inclined to extend credit to you,” Cunningham said. “Further, too many credit inquiries can have a negative impact on your credit score.”

DON’T FALL PREY: Watch out for credit repair companies that promise to clean up your credit report so you can get a car loan, a home mortgage, insurance, or even a job—after paying a fee for the service.

“The truth is, that no one can remove accurate negative information from your credit report,” according to the Federal Trade Commission. “It’s illegal.”

Only the passage of time can assure that negative, but accurate, information on your credit report will be removed.

When it comes to repairing your credit, there are no quick fixes, the experts say. What lenders want to see is responsible financial behavior over time.

“Know that time is your friend, as the further you move away from the financial distress, the less negative impact it has,” Cunningham said. “Follow with responsible behavior with your new credit, and you’ll soon have a solid credit file.”

HOW TO HELP YOUR MORTGAGE CHANCES:
If you’ve been through a foreclosure, there’s still hope for you to become a homeowner again. Here are tips to make lenders want to take a chance on you:

—Save for a down payment.
—Clean up your credit. Pay off or pay down your debts and establish a record of consistent on-time bill payments.
—Get your credit score as high as possible.
—Show stability in your job.
—Monitor your credit report to ensure that your old loan shows up as closed and that you still don’t owe anything else on it.

As a Reno/Sparks real estate professional, I encourage all questions and comments on the Reno/Sparks real estate market or any of the articles posted in this blog. Please feel free to use my back door to the MLS and search the houses available in the Reno/Sparks and most Northwest Nevada neighborhoods. I can be reached by email @ chance@ballard-company.com or  http://www.myspace.com/chancegates .  You can also follow me at http://www.twitter.com/chancegates .  If you are behind on your house payment and looking for a loan modification, go to making homes affordable to request a modification.  If the modification fails, contact your local real estate professional to help short sale your home.  To make sure there is no deficiency judgment a homeowner might find it necessary to hire an attorney. For a free copy of my blog titled  “5 Steps For Reno/Sparks Homeowners To Prevent Foreclosures” go to my about page
Source: Dallas Morning News research

Fannie Mae says it will reduce or suspend mortgage payments for up to six months for military families if they are unable to pay because of the injury or death of a service member.

Military members or surviving spouses should contact their mortgage company or call this special military phone number: (877) MIL-4566.

Source: Associated Press (09/27/2010)

As a Reno/Sparks real estate professional, I encourage all questions and comments on the Reno/Sparks real estate market or any of the articles posted in this blog. Please feel free to use my back door to the MLS and search the houses available in the Reno/Sparks and most of Northwest Nevada neighborhoods. I can be reached by email @ chance at ballard-company.com or  http://www.myspace.com/chancegates .  You can also follow me at http://www.twitter.com/chancegates

An Energy Efficient Mortgage (EEM) is a mortgage that credits a home’s energy efficiency in the mortgage itself. EEMs give borrowers the opportunity to finance cost-effective, energy-saving measures as part of a single mortgage and stretch debt-to-income qualifying ratios on loans thereby allowing borrowers to qualify for a larger loan amount and a better, more energy-efficient home.

To get an EEM a borrower typically has to have a home energy rater conduct a home energy rating before financing is approved. This rating verifies for the lender that the home is energy-efficient.

EEMs are typically used to purchase a new home that is already energy efficient such as an ENERGY STAR qualified home. The term EEM is commonly used to refer to all types of energy mortgages including Energy Improvement Mortgages (EIMs), which are used to purchase existing homes that will have energy efficiency improvements made to them. EIMs allow borrowers to include the cost of energy-efficiency improvements to an existing home in the mortgage without increasing the down payment. EIMs allow the borrower to use the money saved in utility bills to finance energy improvements. Both EEMs and EIMs typically require a home energy rating to provide the lender with the estimated monthly energy savings and the value of the energy efficiency measures — known as the Energy Savings Value.

EEMs (and EIMs) are sponsored by federally insured mortgage programs (FHA and VA) and the conventional secondary mortgage market (Fannie Mae and Freddie Mac). Lenders can offer conventional EEMs, FHA EEMs, or VA EEMs.

Conventional Energy Efficient Mortgages

Conventional EEMs can be offered by lenders who sell their loans to Fannie Mae and Freddie Mac. Conventional EEMs increase the purchasing power of buying an energy efficient home by allowing the lender to increase the borrower’s income by a dollar amount equal to the estimated energy savings. The Fannie Mae loan also adjusts the value of the home to reflect the value of the energy efficiency measures. For more information about Fannie Mae’s EEM you can call 1-800-7FANNIE (732-6643). Visit Fannie Mae’s web site to find a Fannie Mae-approved lender in your state. A PowerPoint presentation is available with more information about Freddie Mac’s EEM .

FHA Energy Efficient Mortgages

The mortgage loan amount for an FHA EEM can be increased by the cost of effective energy improvements. The maximum amount of the portion of the EEM for energy efficient improvements is the lesser of 5% of:

• the value of the property, or
• 115% of the median area price of a single family dwelling, or
• 150% of the conforming Freddie Mac limit.

For more information on FHA EEM loan limits refer to FHA Mortgagee Letter 2009-18. No additional down payment is required, and the FHA loan limits won’t interfere with the process of obtaining the EEM. FHA EEMs are available for site-built as well as for manufactured homes. Applications for an FHA EEM may be submitted to the local HUD Field Office through an FHA-approved lending institution. HUD has a searchable list of approved lenders . Information about the FHA EEM can be found on FHA’s web site . Additional information is available from HUD’s Office of Single Family Housing by calling (800) 569-4287. There is also a fact sheet about FHA’s EEM (70KB). The Systems Building Research Alliance website has information about FHA EEMs for ENERGY STAR qualified manufactured homes.

VA Energy Efficient Mortgages

The Veteran’s Administration (VA) EEM is available to qualified military personnel, reservists and veterans for energy improvements when purchasing an existing home. The VA EEM caps energy improvements at $3,000–$6,000. Borrowers should ask their lender about a VA EEM at the beginning of the lending process. More information about VA EEMs can be obtained from the Web site for the U.S. Department of Veteran’s Affairs or by calling (800) 827-1000. Chapter 7 of VA Pamphlet 26-7 (Revised) (1.5MB) contains lender guidance on the VA EEM.

To learn more about EEMs contact Fannie Mae, Freddie Mac, the FHA or the VA. Additional information about writing energy-efficient mortgages can be found on the Web sites for the U.S. Department of Housing and Urban Development (HUD) and the Residential Energy Services Network (RESNET) .

ENERGY STAR Mortgages

An ENERGY STAR mortgage pilot program is underway to demonstrate that financing can be a useful tool for enhancing the success of investing in energy-efficient homes by lowering borrowing costs, as well as demonstrating the importance of utilizing a network of qualified energy auditors and contractors to ensure that cost-effective energy efficiency improvements are realized.

By incorporating the costs of energy efficiency improvements into the loan itself, an ENERGY STAR mortgage allows borrowers to pay for those investments over the life of their loan and deduct the interest from their federal and state income taxes. One of the key benefits of an ENERGY STAR mortgage is that a borrower can finance and make energy-saving improvements to their homes without paying more for financing than they would for a typical mortgage. Participating lenders also offer borrowers an additional financial benefit above and beyond the value of the home energy savings, such as discounted mortgage rates, reduced loan fees, or assistance with closing costs.

Read more at http://www.energystar.gov

As a Reno/Sparks real estate professional, I encourage all questions and comments on the Reno/Sparks real estate market or any of the articles posted in this blog. Please feel free to use my back door to the MLS and search the houses available in the Reno/Sparks and most of Northwest Nevada neighborhoods. I can be reached by email @ chance at ballard-company.com or  http://www.myspace.com/chancegates .  You can also follow me at http://www.twitter.com/chancegates

A survey by Fannie Mae shows that 70 percent of Americans believe it is a good time to buy a home.

That is up from 64 percent in January 2010.

Still, 33 percent–up from 30 percent in January–say they’ll rent next time around.

About 67 percent believe housing is a safe investment, down from 83 percent of people questioned in a similar survey in 2003.

Source: Reuters News (09/16/2010)

As a Reno/Sparks real estate professional, I encourage all questions and comments on the Reno/Sparks real estate market or any of the articles posted in this blog. Please feel free to use my back door to the MLS and search the houses available in the Reno/Sparks and most of Northwest Nevada neighborhoods. I can be reached by email @ chance at ballard-company.com or  http://www.myspace.com/chancegates .  You can also follow me at http://www.twitter.com/chancegates

RISMEDIA, August, 18, 2010—(MCT)—With sweeping financial reform legislation enacted, the White House and Congress now must focus on fixing the mess created by the failed housing finance giants Fannie Mae and Freddie Mac. It’s a complex challenge with high stakes for taxpayers and the struggling real estate market.

On Tuesday, key administration officials conferred with about 200 industry executives, affordable housing advocates and other experts about the role the government should play in the nation’s housing finance system. Treasury Secretary Timothy F. Geithner asserted that federal involvement still was needed, but he promised “fundamental change.”

“It is not tenable to leave in place the system we have today,” he said, adding that Fannie and Freddie will change dramatically when they emerge from government control.

Pressure is growing to remake or replace the mortgage leviathans, which were seized by the government in September 2008 after huge losses from subprime mortgages put them on the brink of bankruptcy. The bailout has cost U.S taxpayers nearly $150 billion. But lawmakers must tread carefully to keep from further damaging a housing market that Fannie and Freddie almost solely are supporting. The two companies, along with the Federal Housing Administration, collectively guarantee more than 90 percent of all new U.S. home loans.

“Nobody wants to mess up the mortgage market,” said Douglas Elliott, an economics fellow at the Brookings Institution think tank. “And any transition with Fannie and Freddie is going to be fraught with some risk.”

Tuesday’s event came as the second anniversary of the government seizure of the firms approached, a bailout that left taxpayers as 80 percent owners. The administration faces a January deadline, added by lawmakers to the financial reform legislation, to make recommendations to end the expensive federal conservatorship of the firms.

Congress plans to ratchet up its involvement as well, with House Financial Services Committee Chairman Barney Frank, D-Mass., saying his committee will begin hearings when members return next month.

That’s not fast enough for many Republicans, signaling another bitter partisan reform fight. They have been pushing the administration for more than a year to address the mounting losses at Fannie and Freddie by getting the government out of the housing finance business.

“It is past time to rid the American taxpayer of the liabilities of these financial institutions once and for all,” Rep. Mike Pence, R-Ind., said Tuesday as he blasted the Obama administration for continuing the bailouts of Fannie and Freddie begun under President George W. Bush.

But the Obama administration has been moving slowly for fear of further harming the housing market. There was fresh evidence of problems Tuesday as Southern California home sales plunged 21.4 percent in July compared with a year earlier, according to research firm MDA DataQuick of San Diego.

“It’s much more important to get this issue right than to do it fast,” said Michael Berman, chairman-elect of the Mortgage Bankers Association.

Shaun Donovan, the secretary of Housing and Urban Development, said the stakes were high not just for the financial system but also for average Americans because of the major investment in their homes.

Donovan said the federal government’s involvement in the housing market needed to be reduced. And Geithner said there was a strong case for a “carefully designed” government mortgage guarantee in the future, a point echoed by panelists at the conference.

There also appeared to be consensus among the participants that any government guarantee needed to be explicit, not murky and implicit like the guarantee that stood behind Fannie and Freddie as private, government-sponsored enterprises before they were seized.

William Gross, managing director of bond fund giant Pimco, said government guarantees were crucial to the housing market, helping keep mortgage rates low.

But there still is major debate about how to structure such a guarantee and what size mortgages it should cover.

“The challenge is to make sure that any government guarantee is priced to cover the risk of losses, and structured to minimize taxpayer exposure,” Geithner said.

Fannie and Freddie were created by Congress and later turned into private, government-sponsored enterprises mandated to expand homeownership with requirements to purchase a set amount of loans made to low- and moderate-income borrowers.

Fannie and Freddie combined hold the credit risk on about $5 trillion in mortgages, and losses from loans made during the housing boom have continued to mount. The Treasury Department has pledged it will cover an unlimited amount of losses through 2012. As of June 30, the department had pumped $144.9 billion into the two companies.

Federal officials have stressed that the losses came from loans purchased before the government seizure and said standards at Fannie and Freddie have tightened significantly since then. And as the housing market has stabilized, the losses at Fannie and Freddie have lessened. Fannie lost $1.2 billion in the second quarter, down from $11.5 billion in the first quarter. Freddie lost $4.7 billion in the second quarter, down from $6.7 billion in the first quarter.

Still, the losses meant the two firms would need an additional $3.3 billion from the Treasury Department, bringing their bailout cost to $148.2 billion.

(c) 2010, Los Angeles Times.

As a Reno/Sparks real estate professional, I encourage all questions and comments on the Reno/Sparks real estate market or any of the articles posted in this blog.  You can email me @  chance at ballard-company.com or http://www.myspace.com/chancegates

By Steve Gelsi

RISMEDIA, June 25, 2010–(MCT)–For decades, the push for solar power has stalled not on public support, but on cost. That might be about to change with the launch of a unique tax program that’s exciting some industry veterans.

Gary Garber is one. Garber built his first solar panels from scratch back in 1976. They went up on his parents’ roof top in nearby Walnut Creek, Calif. Today he runs Sun Light & Power, a 60-employee solar panel installation firm that’s been behind some of the San Francisco Bay Area’s biggest solar power arrays.

Like many other “alternative” industries, solar energy has gradually gone mainstream, scaling up operations, driving down costs — even partnering with local governments to promote renewable energy.

Yet it still generates less than 1 percent of the nation’s electricity. Why? Because a typical residential system’s $25,000 price tag is a huge hurdle for most homeowners.

Clearing that hurdle is the main mission behind an effort gaining momentum around the country called Property Assessed Clean Energy, or PACE. It allows people to borrow money from municipalities for energy efficiency upgrades and pay it back through their property taxes.

Gerber said the key to the program’s success is that energy savings paid for by PACE can be used to offset those higher property taxes.

“Let’s say you replace your $100 utility bill with a $100 a month payment to your property taxes — it’s pretty close to a wash,” said Gerber, who also serves as president of the California Solar Energy Industries Association. “And if it isn’t a wash this year, then two or three years from now it will be, because energy costs are going up.

“You’re basically saying, ‘I’m going to pay the same amount for energy for the next 20 years. I’m going to peg my energy cost to today’s costs.’ That’s pretty compelling.”

PACE was launched in 2007 as a pilot project hatched by Cisco DeVries, a former assistant to the Berkeley mayor. When the Berkeley test took off, states began passing legislation to allow municipalities to create their own programs. DeVries now works as president of Renewable Funding LLC, a private company that helps cities start PACE programs.

At last count, 19 states have passed PACE legislation, including California, Florida, Texas, New York, Massachusetts and Maine.

Some local governments, such as Sonoma County, Calif., in the San Francisco metro area, and Boulder, Colo., have set up PACE programs on their own. Sonoma’s is called Sonoma County Energy Independence Program.

Santa Rosa, Calif., resident Ed Smith said he heard about the county program a few months ago at a local home improvement show and decided give it a try.

Smith had 32 solar panels installed on his home at a cost of about $5,000, including a discount for being among the program’s first participants.

He figures his property taxes rose $100 a month while his electric bill has dropped as much as $300 a month over the past four months.

“It’s been totally fantastic,” Smith said. “We’d been wanting to do something green. I’ve been recommending it to my neighbors. It would be a great thing for schools to do since they have flat roofs that catch a lot of sun. Plus school districts need to save money.”

John Haig, Sonoma County energy and sustainability manager, said there was a surprisingly strong response to its version of the PACE program. Its energy improvement loans charge 7 percent interest and participants can choose to pay them off in 5, 10 or 15 years.

So far, Sonoma County has been paying about $2 million a month for energy improvement projects. Haig said the money has helped local contractors withstand a slowdown in residential construction.

Sonoma County initially put up the money for the loans, but plans to issue bonds or other debt instruments backed by property owner payment schedules.

“The appeal of the program is inherent in the financing model,” Haig said. “It provides an ability of people to get over the first cost hurdle, which is what stops many people from doing these sorts of projects, and allows them to keep the financing with the property should they happen to sell it.

“They don’t have to feel like they’re going to have to pay for a solar array that they’re leaving in the home in five years, because it stays with the property and the next person picks up the cost,” Haig said.

Wayne Seaton, head of the sustainable public infrastructure group within Wells Fargo Securities’ government & institutional banking unit, said his group has been helping municipalities set up the necessary financing.

“Our role would be to enable municipalities to acquire funding mechanisms for PACE programs and to arrange for cost-effective financing,” Seaton said. “As PACE evolves, we’re confident you will see financing mechanisms coming to the marketplace including bonds.”

Berkeley Mayor Tom Gates said his city is planning to pool resources with several other communities under a program called California First to relaunch its PACE program this year, three years after the pilot program.

“We’re really happy that this is one of the programs that got started in Berkeley, and it’s just taken off like wildfire,” he said. “We found that as good as the program was, you actually need to go to scale.”

Banding together with other communities will help cut administrative costs, he said.

“This is actually a free-market approach, believe it or not, that started in Berkeley; a free-market approach to take solar and make it go all over the United States,” Gates said. “It’s all done through lenders putting up the bonds and placing it on the property. So it’s a good mechanism that’s shown it can travel.”

Solar panel installer Gerber said other issues also need to be worked out, such as keeping interest rates low and assuring that contractors are paid promptly.

In the wake of the real estate crash, Fannie Mae and Freddie Mac, which guarantee many U.S. mortgages, are taking a close look at PACE loans. Some are wary of a program that would increase debt levels while home prices continue to drop.

“It’s got all the right economics to take off in a huge way and then cause huge losses,” David Felt, a retired senior Federal Housing Administration lawyer, told The Wall Street Journal recently. “When you’re able to market to people who can’t get financing for an ordinary home-equity loan, that should set off alarm bells.”

Gates said borrowers must have a good credit rating and equity in the home to qualify. He said the federal government could guarantee PACE bonds and help keep interest rates lower.

Shortly after Ronald Reagan won the presidency in a 1980 landslide, the solar panels installed by Jimmy Carter came down from the White House and the nascent solar business went from a new hero of the energy business to a near-zero.

Over the next 15 years, a period of cheap fuel prices and little government support, Gerber figures 95 percent of California’s solar businesses went bust. But he hung in there.

“I had found what I loved to do,” said Gerber, who kept busy servicing existing solar water heaters and construction projects. “It didn’t even occur to me to stop doing this.”

Toughing it out paid off for Gerber as the nation gradually turned its attention to achieving energy independence and lower greenhouse gas emissions. These policy shifts — and higher fuel prices—brought the solar installation business roaring back.

A nationwide solar tax credit now allows home owners to deduct up to 30 percent of the cost of their solar panels from their taxes, a program Congress has extend to 2016.

In addition, California and many other states require power companies to pay home and business owners for surplus power generated by solar panels through a program called net metering. That gives solar power owners the thrill of seeing their electric meters run in reverse as their surplus power flows onto the grid.

Meanwhile, utilities such as Pacific Gas & Electric Corp., California’s biggest electricity provider, have been investing heavily in solar and wind power to meet strict state-imposed renewable energy requirements.

Another boost comes from power-purchase agreements in which home owners and businesses buy electricity produced by solar panels owned by someone else. This approach is being championed by solar-power company SolarCity.

The Solar Energy Industry Association, the industry’s national lobbying group, is promoting an investment tax credit to defray solar panels’ manufacturing costs.

These and other programs helped U.S. solar power capacity jump 37 percent last year, according to the SEIA.

Yet Gerber said the industry still needs subsidies to compete with fossil fuels, which already receive ample government support.

“We’re getting to what we call grid parity, with the … cost of solar energy getting closer and closer to the standard cost of conventional fuels, which are subsidized,” he said. “If we took those incentives away for oil and coal and nuclear, solar would win right now.”

Incentives or not, solar energy continues to draw support from non-profits, businesses and individuals seeking looking to generate electricity with few environmental risks.

In one of its high-profile projects, Gerber’s company installed a 66-kilowatt solar panel array from SunPower Corp. at Berkeley’s David Brower Center, a large facility housing nonprofit groups and other tenants. The Web site for the building features real-time data on the amount of electricity being generated.

Amy Tobin, executive director of the center, provided a quick tour of the roof on a recent cloudy day and said that people often ask to see the solar panels.

“It’s amazing,” she said. “Look … it’s raining and we still have energy being generated by these panels on the roof.”

Gerber said he’s happy to see solar becoming more mainstream, but still laments the years when America mostly turned its back on solar power.

“We have a technology that, if we had stayed on the right trajectory, we would not be talking about the energy crunch that we’re looking at today,” he said.

As a Reno/Sparks real estate professional, I encourage all questions and comments on the Reno/Sparks real estate market or any of the articles posted in this blog.  You can email me @  chance at ballard-company.com or http://www.myspace.com/chancegates

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• How solar power could benefit everyone (slideshare.net)

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When shopping for a mortgage loan, homebuyers need to be aware of predatory lending practices. These unscrupulous activities can increase the cost of homeownership and rob the borrower of equity in the home. Many predatory practices are illegal.

Predatory lenders may mislead the borrower about the true cost of a mortgage loan, fail to provide legally required disclosure documents or add unexpected, unnecessary and excessive costs at settlement.

Unethical lenders may involve borrowers in mortgage fraud by asking the borrower to provide false information on the loan application or leave important line items blank on the application. Fraud can also involve inflated home appraisals and the misuse of mortgage funds.

The best protection against predatory lending and mortgage fraud is to shop around for a mortgage loan. Ask questions and get explanations so that you have a complete understanding of the loan. Be sure you know the total borrowing cost over the life of the loan.

Fannie Mae works to promote responsible lending and combat predatory lending and mortgage fraud. We want people to buy homes they can afford over the long term. We do this by:

• Offering home mortgage products through lenders that make home buying affordable and sustainable for borrowers.
• Supporting homebuyer education and counseling. Counselors and other housing professionals use our free Home Counselor Online™ tool as a resource to help consumers prepare for, apply for and receive home loans — as well as provide the post-purchase support necessary to remain successful homeowners.
• Providing consumers with home-buying information through Fannie Mae’s Resource Center
  at 1-800-7FANNIE (732-6643).

High-pressure sales tactics, including pressure to act quickly, can be signs of predatory lending. Deals that appear to be too good to be true generally are just that — too good to be true.

Fannie Mae

As a Reno/Sparks real estate professional, I encourage all questions and comments on the Reno/Sparks real estate market or any of the articles posted in this blog.  You can email me @  chance at ballard-company.com or http://www.myspace.com/chancegates

In February of 2010, the President announced additional help for homeowners living in areas deemed “hardest hit” by the fallout of the housing crisis. A new $1.5 billion funding initiative called the FHA Hardest-Hit Fund provides money for housing finance agencies or FHAs in Nevada, Michigan, California, Florida and Arizona.

The Hardest-Hit Fund was created to offer  “relief in direct proportion to the scale of each state’s housing challenges.” In plain English, that means housing finance agencies in the affected states will get government money based on the scale of declining home values, unemployment figures and the number of delinquent mortgages.

What does all this mean for someone with an FHA loan who is in danger of default and foreclosure? If you live in one of the affected states, when you go to your lender to negotiate forbearance, an altered payment schedule or other options designed to prevent foreclosure, the bank has more financial incentive from the government to help the borrower. The FHA Hardest-Hit program gives lenders in these five states more flexibility to create programs designed to prevent a mortgage from going into default or foreclosure including:

• Loan modification
• Mortgage forbearance
• Principal reduction for borrowers who are over-leveraged
• Loan principal reduction for borrowers with “severe negative equity”
  It’s very important to note that the Treasury Department has not mandated an across-the-board set of measures that must be taken with this funding; all programs a lender initiates with Hardest-Hit funds must be evaluated to insure it’s in compliance with rules put in place through the Emergency Economic Stabilization Act. Your lender may choose to design an anti-foreclosure program not offered in other areas, or one that has features similar programs lack—as long as the program is in compliance with federal law.One such type of relief suggested by the creators of the FHA Hardest-Hit program as an “acceptable transaction” is the unemployment program concept. This could be offered in the form of some assistance to qualified FHA borrowers who are currently unemployed and in danger of foreclosure on their FHA home loan. Another type of relief considered an acceptable transaction is second lien reduction where the second lien is either modified or reduced. Is your FHA loan eligible? At press time there doesn’t seem to be specific guidance that includes or excludes FHA mortgage holders–check with your lender to see if there are plans to create a relief program with FHA Hardest-Hit funds that could include your FHA home loan.

  Under the new Hardest-Hit guidelines, lenders who create programs to help individual homeowners must target residences with unpaid principal equal to or less than the Fannie Mae or Freddie Mac conforming limit (up to $729,750 for single-unit homes, more for multi-unit buildings).

  If you are in danger of default or foreclosure in Nevada, Michigan, California, Florida and Arizona, ask your loan officer if your FHA home loan could benefit through the Hardest-Hit program. If your lender is still putting together a program to help individual homeowners, you may be able to work out an arrangement in the meantime to put off foreclosure or default until the lender’s relief program is approved. Don’t wait until the last moment to act—if you are struggling financially you may be able to save your home in the meantime simply by asking your lender for help.

From www.fha.com

As a Reno/Sparks real estate professional, I encourage all questions and comments on the Reno/Sparks real estate market or any of the articles posted in this blog.  You can email me @ chance@ballard-company.com or http://www.myspace.com/chancegates

RISMEDIA, March 20, 2010—(MCT)—As the spring real estate season kicks in and the tax credit deadline for sale agreements approaches, the government is ending a program that has kept interest rates low and housing-affordability levels high for months.

On March 31, the Federal Reserve will stop buying mortgage-backed securities from Fannie Mae and Freddie Mac, returning control of interest rates to private investors.

For months, industry observers have predicted that once government supports are removed, interest rates will rise quickly, pushing many of the first-time buyers critical to housing’s recovery out of the market.

In late summer and fall 2009, lured by fixed 30-year mortgage rates under 5% and the first $8,000 tax credit, which expired Nov. 30, first-timers pushed sales of previously owned homes to the highest levels in at least three years, reducing record inventories and braking price declines.

That tax credit was renewed Nov. 5 and expanded to buyers who had not purchased a property in five years, although the credit for repeat buyers is $6,500. The second credit expires April 30, is unlikely to be renewed, and remains the engine moving buyers.

“Not a single one has expressed concern about interest rates,” said Cheryl Miller of Long & Foster Real Estate in Blue Bell, Pa., acknowledging that “there is, I suppose, a false sense of security regarding rates remaining low.”

As the date for the Fed pullout approaches, analysts now generally agree that an immediate rate spike is no longer the likely result. “We think there will be a significant increase in private demand for mortgage-backed securities to take the place of the Fed,” said David Berson, chief economist at PMI Group in Walnut Creek, Calif. Not enough to offset the Fed’s departure, he said, with rates possibly increasing a quarter of a percentage point, “but a significant one.”

Bankrate.com columnist Holden Lewis said rates are so low now—averaging 4.87% for a 30-year fixed this week—that an increase “is inevitable. But maybe they’ll rise gradually instead of jumping” April 1.

The Fed says it will stop buying “by” March 31 instead of “at” the end of the month, meaning that it likely has reduced its purchases and rates haven’t risen, Lewis said.

Moody’s Economy.com chief economist Mark Zandi said rates will “drift” higher in summer and fall, with the half a percentage point the Fed’s action cut working its way back in—mainly because investors believe the government would return if they got too high. For that reason, Philadelphia mortgage broker Fred Glick said, rates won’t change. “If the old buyers don’t come back, the Fed will intercede again to ensure rates during a continued slowly recovering economy will not go so high as to stymie a positive direction,” Glick said. Buyers of these securities “now see that the lenders have instituted rigorous standards to ensure that the Fannie Mae and Freddie Mac paper they are buying are very good loans,” he said.

On the other hand, said Holland, Pa.-based economist Joel L. Naroff, low rates are not sustainable, and “the only way to get the market to stand on its own is to get people to become realistic again about prices and rates.” Rates will likely rise, but “the level will still be historically low,” Naroff said.

When rates do rise, likely by year’s end, it won’t be because of the Fed’s action, but “natural macroeconomic forces” like a recovering economy and the high budget deficit, said Lawrence Yun, National Association of Realtors chief economist.

The possibility of renewed Fed intervention will likely prevent rate increases resulting from private investors demanding large risk spreads, said economist Brian Bethune of IHS Global Insight in Lexington, Mass. As a result, Bethune and IHS economist Patrick Newport believe, the rate will be at only 5.25% by the fourth quarter.

Many Fed officials have emphasized that “high unemployment and tame inflation warrant a continued promise to hold rates very low for a long time,” said Peter Buchsbaum, of Arlington Capital Mortgage in Horsham, Pa.

Some analysts expect the expansion to ease, “and I am sure the Fed does not want to extinguish the fragile recovery,” Buchsbaum said.

Treasury bond yields “did not move much after the Fed completed its $300 billion in purchases in November,” said Jerome Scarpello, of Leo Mortgage in Spring House, Pa., “meaning they were able to exit and not disrupt that market.” Rates will rise, he said, but not as high as the one percentage point others predict. “With unemployment high and foreclosures an issue, a significant rate increase can push home prices down,” Scarpello said, “and hamper the slight recovery we now have.”

(c) 2010, The Philadelphia Inquirer.

It is fun to read all the expert opinions on what they think is going to happen.  The question of the day is what do you think will happen to the interest rates when buying a house in the Reno/Sparks real estate market?

As a Reno/Sparks real estate consultant I always welcome any comments or questions on the Reno/Sparks real estate or any of the articles I posted.  You can email me directly at  chance at ballard-company.com

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RISMEDIA, March 13, 2010—(MCT)—Phil Kelly had 18 more months to go before the fixed rate on his $2.5 million mortgage became adjustable. But when Kelly, a former computer executive living in Rancho Santa Fe, California learned he could knock his interest rate down by a full percentage point by refinancing, he went for it.

“It’s always tough to pick the exact bottom or top of anything,” Kelly said. “But I think this rate is about as low as you’re going to get.”

Rates on jumbo mortgages — loans of more than $729,750 in counties with the highest-cost housing — shot up during the financial crisis as lenders and loan investors shunned anything tainted with even a whiff of higher risk. Rates on big mortgages were especially high relative to those on smaller loans.

But in a boon for borrowers in California’s expensive housing markets, the jumbo-loan market is starting to return to normal.

Two weeks ago, the average interest rate on 30-year fixed-rate jumbos dropped to 5.79%, a nearly five-year low, according to rate tracker Informa Research Services of Calabasas. It edged up to 5.88% on Tuesday, still very attractive by historical standards. The average is down from well above 7 percent in late 2008.

Rates are even lower on so-called hybrid adjustable mortgages, on which the rate is fixed for, say, five years and then adjusts annually. Kelly’s new loan is a five-year hybrid adjustable identical to his old one, except that he’s paying about 5%, down from 6%.

Banks are also relaxing slightly some of their requirements for jumbo loans. That’s an encouraging sign because the market for jumbos, in contrast with the rest of the mortgage business, isn’t being propped up by Uncle Sam.

The lower rates and somewhat easier terms reflect newfound confidence among banks in the housing market. That’s because, by definition, jumbos are too big to be bought by Freddie Mac and Fannie Mae or to be insured by the Federal Housing Administration. Plus, the private market for mortgage-backed bonds dried up when the meltdown hit. So lenders making jumbo loans these days must be willing to take the risk of keeping them in their portfolios.

The maximum amounts for Freddie Mac and Fannie Mae “conforming” mortgages, and for FHA mortgages, are set by Congress. The cutoff for single-family homes was $417,000 from 2006 until February 2008, when lawmakers increased it temporarily to $729,750 in certain high-cost areas, including Los Angeles, Orange and Ventura counties in California. Conforming loans top out at $500,000 in Riverside and San Bernardino counties and $697,500 in San Diego County.

The increased upper limits, which have been extended until the end of this year, have created a three-tier system in expensive areas, mortgage professionals say: loans of up to $417,000, which are the easiest to obtain and carry the lowest rates; “conforming jumbos” from $417,000 to $729,750, which are somewhat harder to get and have slightly higher rates; and true jumbos, with the toughest standards and highest rates.

In the boom years of 2005 and 2006, interest rates were typically no more than a quarter of a percentage point higher on jumbo loans than on conforming loans, according to Informa Research. That widened as the mortgage meltdown intensified and home prices dropped in late 2007. The spread ballooned to nearly 1.7 percentage points in early 2009 after the entire credit system froze.

But this year the rate spread has narrowed to less than a percentage point. It could shrink more if conforming-loan rates rise as expected after the Federal Reserve wraps up a $1 trillion-plus program to support the market for conforming loans next month.

In addition to lower rates, down-payment requirements are being relaxed in some cases. For example, to write a jumbo loan in coastal areas of Los Angeles and Orange counties, Wells Fargo Home Mortgage looks for a 20% down payment or that percentage of equity, down from 25% last year, said Brad Blackwell, a national mortgage sales manager at the lender.

The reason: Wells believes high-end home prices are stabilizing in those coastal counties. But the bank still requires higher down payments in the Inland Empire and other battered housing markets such as Florida, Nevada and Arizona, where prices for jumbo-size homes don’t appear to be stabilizing, he said.

Jumbo loans remain much harder to get than before the credit crunch and recession. Borrowers typically must have a credit score of at least 700, compared with boom-era minimums in the 600s, though Laguna Niguel mortgage broker Jeff Lazerson said at least one lender was again making sub-700 jumbos available.

What’s more, unless their down payments are very large, borrowers must provide evidence of high income, have sizable bank accounts as a cushion against the unforeseen and occupy the houses themselves.

But there are clear signs that the jumbo market has loosened. One is an increasing availability of “stated income” loans — those that don’t require proof of income — of as much as $2 million to borrowers with at least a 40 percent down payment, said mortgage broker Gary Bluman, owner of Real Estate Resources in Brentwood.

Also, instead of a true jumbo loan, some “piggyback” second loans are available again to help certain borrowers with 25% down payments pay for high-priced homes, Lazerson said.

Of course, adjustable, stated-income and piggyback loans were big contributors to the mortgage meltdown. But such provisions are less risky if a borrower has 25% to 40% equity.

Despite the confidence in the market that such terms imply, lenders and mortgage investors are still dealing with piles of bad jumbos made during the boom.

Delinquencies of 60 days or more on prime jumbo loans that were packaged into securities jumped to 9.6% in January, up from 3.7% a year earlier, Fitch Ratings reported this month.

The jumbo delinquency rate in California climbed to 11.3% from 4.1% a year earlier.

For now, the jumbo market remains limited to the volume of loans that banks are willing and able to keep on their books. But there is hope for a return to private outside funding.

Although no jumbos have been turned into securities for at least two years, packages of delinquent jumbos have begun to be sold again to “vulture” investors, a sign that the secondary market for the loans may revive, said Michael Fratantoni, vice president of research at the Mortgage Bankers Association.

“The ice sheet,” he said, “is starting to crack here and there.”

As a Reno/Sparks real estate consultant I always welcome any comments or questions on the Reno/Sparks real estate or any of the articles I posted.  You can email me directly at chance@ballard-company.com

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