More Details Emerge in $25B Mortgage Deal.

More Details Emerge in $25B Mortgage Deal

The government vows to closely monitor that the nation’s five largest banks fulfill the aid to home owners outlined in a $25 billion mortgage settlement over foreclosure allegations.

More details emerged in court filings on Monday of the landmark settlement among the nation’s five largest banks and state and federal government officials. The settlement, first announced last month, stems from allegations over banks’ foreclosure practices, although as part of the settlement the banks do not have to admit to any wrongdoing.

Among some of the aid outlined in the $25 billion settlement for home owners:

• Banks have agreed to pay about $20 billion to help home owners avoid foreclosure. The majority of that money will be allocated to reducing the mortgage principal and modifying loans for about 1 million underwater home owners.
• Banks have agreed to pay $5 billion to federal and state government officials, with a portion of that money going to compensate about 750,000 Americans who have been found to be wrongfully foreclosed upon from 2008 through 2011. Affected home owners will receive $2,000 checks.
• Banks will be required to adopt new processing standards for foreclosure. For example, banks will be unable to pursue a foreclosure when home owners are being considered for a loan modification.
• Banks must comply with the terms of the settlement or face stiff penalties. Banks are required to complete all loan relief requirements as part of the settlement within three years; 75 percent of it is to be fulfilled within two years. Any bank that violates the agreement will be fined $1 million for each violation, capped at $5 million for repeat violations.
• The settlement does not free banks from criminal action. Federal and state officials can still pursue criminal action action against banks for any wrongdoing over foreclosures.

The mortgage settlement only applies to mortgages held privately. It does not apply to mortgages held by Fannie Mae and Freddie Mac.

The banks part of the settlement are Bank of America, Citigroup, JPMorgan, Chase, Wells Fargo, and Ally Financial.

Some banks have negotiated separate requirements so they won’t have to pay as much in penalties to federal and state officials. For example, in return to a reduction in penalties, Ally Financial has agreed to cut the mortgage principal for struggling home owners by 105 percent of the home’s value. Bank of America says it will trim the mortgage principal of more than 200,000 struggling borrowers.

The settlement still must be approved by a judge to be final.

Source: “Feds Promise Tough Oversight in Mortgage Deal,” Reuters (March 12, 2012) and “Gov’t Files $25B Mortgage Settlement; Banks to Provide Relief Without Admitting Wrongdoing,” Associated Press (March 12, 2012)

Obama cuts refinance costs for some mortgages.

Obama cuts refinance costs for some mortgages

NEW YORK (CNNMoney) — Borrowers with some federally insured mortgages will be able to refinance into lower interest rate loans more easily and cheaply under a plan unveiled Tuesday by the Obama administration.

At a news conference, President Obama announced that the Federal Housing Administration will cut upfront fees for refinanced loans it already insures.

The new fees are for borrowers whose FHA loans were issued before June 1, 2009. An estimated 2 to 3 million borrowers could take advantage of the savings, which could reduce mortgage payments for the typical FHA borrower by about a thousand dollars a year, according to the administration.

“It’s like another tax cut in people’s pockets,” said President Obama.

Borrowers who refinance their existing FHA loans will pay an upfront insurance premium equal to 0.1%, the lowest allowable rate, of the mortgage amount — $100 for a $100,000 loan — plus an annual fee of 0.55%.

The new refinancing fees contrast sharply with the cost of obtaining a FHA loan, according to Jaret Seiberg, an analyst with the Washington Research Group. A borrower making a 3.5% down payment on a home purchase as of April 1 will pay a 1.75% upfront fee and a 1.25% annual fee. Those purchase fees were raised barely a week ago to improve the FHA’s capital reserve.

Has Obama’s housing policy failed?

Still, lowering refinancing fees “should be broadly positive for housing and the economy by reducing foreclosures and freeing up income for consumers to spend on other goods and services,” Seiberg said.

The new policy will also make it easier for the banks to refinance loans because it directs the FHA not to count the loans toward the lender’s “compare ratio.” That calculates the performance of loans issued by the lenders and compares it to the performance of other lenders.

Some lenders have not wanted to refinance FHA loans because many of them were made during years of high default rates, according to Seiberg.

Knowing that the FHA will not hold refinanced loans against them should they fail to perform could make lenders more willing to refinance loans for borrowers at a higher credit risk, according to Jay Brinkmann, chief economist for the Mortgage Bankers Association.

Is Your Seller Serious About Selling?

Is Your Seller Serious About Selling?

When sellers aren’t realistic about the price in listing their home, they may not be all that serious about getting their home sold in the first place.

“Before aggressively investing time in sellers who may never be ready to price their homes realistically for today’s buyers, get to know them and establish routine communications,” writes Bob Floss, 2011-2012 president of the Chicago Association of REALTORS®, in a recent RISMedia article. “If you connect with prospects effectively and provide a full picture of the market, the true sellers will eventually signal when they are prepared to make the move.”

Floss suggests negotiating — in advance — target dates in which the seller agrees to consider a price change on the property if it hasn’t sold yet. For example, the agent may have the seller to agree to consider a price reduction after a certain number of market days have passed.

Also, Floss suggests keeping clients informed about the local market conditions and selling trends. He recommends agents take advantage of housing data available through their local REALTOR® association’s multiple-listing service and other resources to educate sellers about what’s going on in the market so that they can be realistic when it comes to pricing and in negotiations for getting their home sold.

Source: “How to Tell When Your Seller Means Business,” RISMedia

Home Inspections: Understanding Your Legal Protections.

Home Inspections: Understanding Your Legal Protections

Home inspection reports are a summary of the health of a home on the day the inspection is made, but many buyers move through the home-buying process as if it is some type of guarantee. Home inspectors do a visual inspection of the home and will identify major defects and items that are at the end of their service lives; however, if something breaks, floods or leaks after the date of that inspection, the buyer is responsible for finding it and notifying the seller. In other words, Buyer Beware. An inspection report has very few legal teeth and the home buyer must exercise due diligence before buying the home. For more on this continue reading the following article from JDSupra.

Home Buyer Beware – Your Home Inspection Report Does Not Come With a Lifetime Guarantee

I have never represented a home buyer who did not get the property inspected before the closing (even during the days of the real estate bubble when sellers were not agreeing to any repairs). But, I find that the expectations of my buyers clients seem to be higher than they should be in terms of what the home inspection report is designed to do.A home inspector will go through the house and check out the conditions of the structure, the systems (heating, air conditioning (if the temperature permits), hot water, plumbing, and electrical) and the appliances. The better home inspectors will go into crawl spaces, up on the roof (but most just use binoculars while on the ground) but they are limited by what is visible. If there are bookcases or other furniture in a room or boxes in the basement or attic, the home inspector will not move anything to see what is behind them.   The home inspector will also look for termites or damage from termite infestation.

A home inspection report is a snapshot of what condition the property is in on that particular day. Unfortunately, I have had calls from clients who were upset that things broke down soon after closing or systems that could not be tested due to temperature were not working optimally or a basement that was disclosed as dry was now flooded. They wanted to know if they could get compensation from the home inspector, the seller or the seller’s real estate agent.

There are limitations to what you get from the home inspection. It is always possible that the seller lied on the disclosure form but you would have to prove that the seller had knowledge of the condition and lied about it. Or things do break down more quickly than predicted (most home inspectors will mention if something is at the end of its useful life but the seller is not obligated to replace it if it still working at the final walk-through. Or the law could change and what was an acceptable practice when you closed is now unacceptable to buyers and you have to spend money you were not expecting to spend. With flooding issues, we have had 100-year floods and 200-year floods recently, so in most cases, if a basement didn’t flood from Hurricane Irene or the other storms we’ve had, chances are you will be getting the dry basement you are expecting. But, there is no guarantee that we won’t experience a 500-year flood soon.

Also remember that if you want to sue someone, you have to pay your legal fees. If the costs of hiring a lawyer, missing work to appear at depositions and in court, and feeling the stress from having an ongoing lawsuit in your life won’t outweigh the damages you have suffered (and don’t expect to get millions for emotional distress or pain and suffering), it won’t be worth it to sue. There is a reason that the expression “Caveat Emptor” is still used when buying a house – the buyer must beware. You must diligently check out all possible issues, ask your home-buying team about the ramifications of what was found in the home inspection report, ask the seller to repair the items that need repair, but understand that no one can insulate you from all of the risks of buying a home.