FHA speeding up foreclosure sales

BMW billboard stops traffic

Under most conditions, FHA prohibits insuring a mortgage on a home owned by the seller for less than 90 days. That's to avoid "flipping" properties quickly so they are resold at inflated prices to unsuspecting borrowers. The FHA is lifting the ban -- under strict provisions.

by Broderick Perkins
© 2010 DeadlineNews.Com



Unauthorized use of this story is a copyright violation -- a federal crime


Deadline Newsroom - To speed up resales of foreclosed properties, the Feds are going to allow Federal Housing Administration (FHA) mortgage insurance on previously exempted homes.

Under most conditions, FHA currently prohibits insuring a mortgage on a home owned by the seller for less than 90 days. That's to avoid "flipping" properties quickly so they are resold at inflated prices to unsuspecting borrowers.

Effective Feb. 1, 2010, the prohibition will be waived, because FHA and it's overseer, the U.S. Department of Housing and Urban Development recognizes acquiring, rehabilitating and reselling fairly priced foreclosed homes can also take less than 90 days -- when well supervised.

Without FHA mortgage insurance for a resale within 90 days, sellers balk at FHA buyers because the sellers will have to endure carrying costs along with the risk of vandalism associated with allowing a property to sit vacant for long periods of time.

Low-down payment FHA loans account for 30 to 50 percent of new home purchases depending on the location.

The waiver is seen as a way to bolster FHA's reserves, which are well below levels recommended by Congress.

In related moves, to head off the financial impact of defaulting borrowers, the FHA is adding more-stringent lending requirements and higher fees borrowers must pay for the federally insured loans.

Troubled by the high rate of foreclosures, the Feds are also investigating 15 FHA lenders with high incidences of FHA mortgage insurance claims, triggered with a borrower defaults on his mortgage.

The market needs what it can get to speed up foreclosure transactions which are plagued by a host of conditions including, sellers' delays; unprepared borrowers; clean up issues; fix-up problems; and fraud.

The FHA's new 90-day waiver policy will be in place for one year, unless FHA Commissioner David H. Stevens withdraws or extends the policy.

"This change in policy is temporary and will have very strict conditions and guidelines to assure that predatory practices are not allowed," said HUD Secretary Shaun Donovan.

The new policy change will permit buyers to use FHA-insured financing to purchase HUD-owned properties, bank-owned properties, or properties resold through private sales.

To protect FHA borrowers against predatory flipping practices the waiver is limited to sales that meet the following general conditions:

• All transactions must be arms-length, with no identity of interest between the buyer and seller or other parties participating in the sales transaction.

• In cases in which the sales price of the property is 20 percent or more above the seller's acquisition cost, the waiver will only apply if the lender meets controlled conditions.

• The waiver is limited to forward mortgages, and does not apply to the Home Equity Conversion Mortgage (HECM) for purchase program.

"FHA borrowers, because of the restrictions we are now lifting, have often been shut out from buying affordable properties. This action will enable our borrowers, especially first-time buyers, to take advantage of this opportunity," said Stevens.

More details about the waiver are available on HUD's Web site.

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© 2010 DeadlineNews.Com

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Job loss mortgage insurance

What's scarier than job loss?

The recession spawned growth in job loss mortgage insurance, but you may not have the option to get coverage that would pay your mortgage should you get a pink slip.

by Broderick Perkins
© 2008 DeadlineNews.Com


Unauthorized use of this story is a copyright violation -- a federal crime

Deadline Newsroom - A growing number of job loss mortgage protection insurance policies help take the fear out of home buying, but the coverage is not for everyone.

The not-for-everyone catch isn't necessarily because of cost, home type, or financial feasibility of such insurance -- though they are issues to consider.

For some homebuyers, the coverage simply isn't an option.

Simply put, job loss mortgage insurance pays your mortgage when you lose your job -- to a point. Paid direct to the lender, policy benefits can cover principal, interest, taxes and insurance -- or all items are included in the mortgage payment.

Shopping for job loss insurance

Consider these factors when shopping for job loss mortgage insurance.

• Variations, Limits, Terms Premiums, terms, limits, benefits all vary. So shop around. Evaluate your debt and income to determine the policy that's best. Evaluate your mortgage payment to determine if a given policy will provide sufficient benefits.

Benefits aren't paid forever and they may not cover the full cost of your mortgage payment. Some policies pay for six months, some pay nine, others for 12 months. CAR limits payment to $1,500 a month, for six months, for example. And once funding is depleted the CAR policies will remain in force, but new policies won't be available.

Some policies require purchase as part of the acquisition process, other policies allow you to buy the insurance whenever, with waiting period provisions, of course.

Other policies require that you finance the cost along with the mortgage, still other policies allow you to buy coverage as a separate cost and payment.

• Affiliation. Some policies require an affiliation with a lender, realty agency or other entity. Keller Williams, for example, offers its policy through the Rainy Day Foundation, which requires participation in its home ownership counseling program. New home builders sometimes require that you use their affiliate lender. CAR requires that consumers buy homes from a licensed 'Realtor'.

• Waiting periods. Depending upon the insurer, potential policy holders must be employed full time or for at least 30 hours a week and for a period of time before they can obtain coverage. Once you buy coverage, there is a moratorium of a month or more before the policy kicks in. After the moratorium, the home owner typically must be out of work some time, say 30 days, before the first benefit is paid.

And now, here's the rub

Unfortunately, not everyone can buy the coverage.

"Where some of the programs fall short is most of them require you to be a W-2 wage earner, meaning self-employed individuals cannot get coverage," said Virgilio, also broker of Realty World, California Property Network.

Typically ineligible are those always on the bottom of the bailout/relief totem pole whenever it comes to special assistance -- hard working self-employed people, independent contractors, work-at-home business owners and the like. Washington has been literally mum on helping the self-employed.

Others ineligible for some or all policies include:

• The already unemployed.
• Individuals under 18 and over 60.
• Retirees at any age.
• Second home buyers
• People who work in sectors with a high rate of economic distress or existing unemployment.
• Military personnel, especially retirees.

The coverage can be a good deal if you fear job loss, if you have no other financial back-up should your employment end or if you know you later can't refinance or modify your loan out of trouble and don't want to lose your home.

"The job loss insurance is a big help for many mentally, knowing that the help is available if they should lose their jobs. And it gives comfort for some that are sitting on the fence," said Quincy A. Virgilio, Jr. president of the Santa Clara County Association of Realtors.

Today's job loss mortgage insurance has become a growth industry spawned by the recession. The idea is to incentivise home buying by adding protection against a shrinking economy. Theoretically, that will boost home sales.

Once only the product of traditional insurers, job loss mortgage protection now comes from a variety of sources.

The California Association of Realtors (CAR) became the nation's first realty association to offer a mortgage protection program. It's for first-time home buyers who lose their jobs.

"This program is a big success and all buyers who use a Realtor are eligible. All qualified first time buyers should definitely enroll in this program because the restrictions are few," said Julia Truesdale Keady, president of the Silicon Valley Association of Realtors.

Well, not quite. The program does have its limitations.

The $1 million program is only funded to assist some 3,000 homeowners, but CAR's Housing Affordability Fund Mortgage Protection Program (MPP) beats a blank for those who are lucky enough to land a policy.

MPP offers first-time home buyers who lose their jobs up to $1,500 per month, for six months, to help make their mortgage payments.

A qualified co-buyer also can participate in the program, and receive a monthly benefit of $750 per month for up to six months. Program benefits also include coverage for accidental disability and a $10,000 death benefit.

"The Mortgage Protection Program was developed to help ease the anxiety of consumers who are concerned about potential job loss and its impact on their ability to pay their mortgage should they purchase a home," said CAR President James Liptak.

To qualify applicants must:

• Be a first-time home buyer -- someone who has not owned a home in three or more years.
• Open escrow April 2, 2009, or later, and close on or before Dec. 31, 2009.
• Use a licensed California "Realtor" in the transaction.
• Purchase the property in California.
• Be a W-2 employee.

Request an application for the program from CAR.

Others offering job loss mortgage insurance include:

• Insurers -- See: InsuranceAgents.com and Mortgage Guardian.
• Home builders -- Offering policies are: Toll Brothers; Lennar; Ryland and others.
• Lenders -- The Bank of America has long offered a policy that covers not only job loss, but also hospitalization, disability and death.
• Realty agents -- For example, Keller Williams offers coverage through the Rainy Day Foundation.
• Government housing agencies -- The California Housing Finance Agency offers HomeOpeners.

Consumer advocate Mark Eisenson isn't sold on the coverage. He says buying job loss mortgage insurance may be a sign you haven't taken care when buying a home in the first place.

"Losing a job is more than a nuisance. It can be a catastrophe. Unfortunately, job loss insurance is something you only want if you are overextending yourself by buying a house you can't really afford, at a time when you have real concerns about losing your job," said Eisenson, co-author of the new e-book Reduce Debt, Reduce Stress: Real Life Solutions for Solving Your Credit Crisis.

"I'd rather stay where I am, cut expenses, reduce debts and stress, build an emergency fund, and create a back-up source of income -- before I'd start looking for a new house," he added.

If you believe the coverage is right for you, be prepared to sift through a variety of coverages, costs, provisions and requirements.

• Click on the keywords below for more stories on this subject.

© 2008 DeadlineNews.Com

Need a break from doom and gloom in the housing market? Get off the beaten news track and stop by the DeadlineNews Group's Offbeat News Examiner outlet for a few laughs.

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Broderick Perkins, an award-winning consumer journalist, parlayed 30 years of old-school journalism into a digital real estate news service, the San Jose, CA-based DeadlineNews Group, including DeadlineNews.Com, a real estate news and consulting service and Web site, and the Deadline Newsroom, DeadlineNews.Com's news back shop. Perkins is also a National Real Estate Examiner. All the news that really hits home from three locations -- that's location, location, location!

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Job-loss mortgage insurance for some, not all

Typically ineligible for job-loss mortgage insurance are those always on the bottom of the bailout/relief totem pole -- hard working self-employed people, independent contractors, work-at-home business owners and the like. Washington has been literally mum on helping the self-employed in this area and others.

by Broderick Perkins
© 2008 DeadlineNews.Com


Unauthorized use of this story is a copyright violation -- a federal crime

Deadline Newsroom - A growing number of job loss mortgage protection insurance policies help take the fear out of home buying, but the coverage -- sometimes over-hyped as a form of recessionary relief -- is not for everyone.

The not-for-everyone consideration isn't necessarily because of cost, the type of home you buy or the feasibility of such insurance, though they are issues to consider.

Unfortunately, for some homebuyers, the coverage simply isn't an option.

When it is available, there are a host of considerations consumers must ponder before buying.

Simply put, for policy holders, job-loss mortgage insurance pays your mortgage when you lose your job -- to a point. Typically paid direct to the lender, policy benefits can cover principal, interest, taxes and insurance, if all items are included in the original mortgage payment.

The coverage can be a good deal if you fear job loss, if you have no other financial back up should your employment end or if you know you later can't refinance or modify your loan out of trouble and don't want to lose your home.

Today's job-loss mortgage insurance has become a growth industry spawned by the recession -- incentivise home buying by adding protection against a shrinking economy to boost home sales. Because housing is a cornerstone of the economy, more sales, hopefully, will help stimulate the economy.

Once only the product of traditional insurers, job-loss mortgage protection now comes from a variety of sources.

• Traditional insurers -- See: InsuranceAgents.com and Mortgage Guardian.

• Home builders for new homes -- Offering policies are: Toll Brothers; Lennar; Ryland and others.

• Banks, credit unions, lenders -- The Bank of America has long offered a policy that covers not only job loss, but also hospitalization, disability and death.

• Real estate agents -- For example, Keller Williams offers coverage through the Rainy Day Foundation.

• Realty associations -- At least one, the California Association of Realtors (CAR) offers coverage.

• State and local housing agencies -- For example, NYHomes.org.

Shop around, a lot

With a host of variety in coverage, costs, provisions and requirements. Here are some issues to consider.

• Variations. Premiums, terms, limits, benefits all vary. So shop around. Evaluate your debt and income to determine the policy that's best. Evaluate your mortgage payment to determine if a given policy will provide sufficient benefits.

• Affiliation. Some policies require an affiliation with a lender, realty agency or other entity. Keller Williams, for example, offers its policy through the Rainy Day Foundation, which requires participation in its home ownership counseling program. New home builders sometimes require that you use their affiliate lender. CAR requires that consumers buy homes from a licensed 'Realtor'.

• Waiting periods. Depending upon the insurer, potential policy holders must be employed full time or for at least 30 hours a week and for a period of time before they can obtain coverage. Once you buy coverage, there is a moratorium of a month or more before the policy kicks in. After the moratorium, the home owner typically must be out of work some time, say 30 days, before the first benefit is paid.

• Limits, Terms. Benefits aren't paid forever and they may not cover the full cost of your mortgage payment. Some policies pay for six months, some pay nine, others for 12 months. CAR limits payment to $1,500 a month, for six months, for example. And once funding is depleted the CAR policies will remain in force, but new policies won't be available.

Some policies require purchase as part of the acquisition process, other policies allow you to buy the insurance whenever, with waiting period provisions, of course.

Other policies require that you finance the cost along with the mortgage, still other policies allow you to buy coverage as a separate cost and payment.

And now, here's the rub

Unfortunately, not everyone can buy the coverage.

Typically ineligible are those always on the bottom of the bailout/relief totem pole whenever it comes to special assistance -- hard working self-employed people, independent contractors, work-at-home business owners and the like. Washington has been literally mum on helping the self-employed.

Others ineligible for some or all policies include:

• The already unemployed.
• Individuals under 18 and over 60.
• Retirees at any age.
• People who work in sectors with a high rate of economic distress or existing unemployment.
• Military personnel, especially retirees.

© 2008 DeadlineNews.Com

Need a break from doom and gloom in the housing market? Get off the beaten news track and stop by the DeadlineNews Group's Offbeat News Examiner outlet for a few laughs.

Advertise on DeadlineNews.Com

Shop DeadlineNews.Com

Get news that really hits home for your Web site or blog from DeadlineNews.Com.

Broderick Perkins, an award-winning consumer journalist, parlayed 30 years of old-school journalism into a digital real estate news service, the San Jose, CA-based DeadlineNews Group, including DeadlineNews.Com, a real estate news and consulting service and Web site, and the Deadline Newsroom, DeadlineNews.Com's news back shop. Perkins is also a National Real Estate Examiner. All the news that really hits home from three locations -- that's location, location, location!

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Deadline Newsroom FAQ 81808

When you have questions needing answers that really hit home, contact the Deadline Newsroom. This installment: home equity use; home improvement cost-vs-value; mortgage insurance tax deduction.

by Broderick Perkins
© 2008 DeadlineNews.Com

Unauthorized use of this story is a copyright violation -- a federal crime

Deadline Newsroom - Q: My home equity has grown substantially in the past decade. Now home prices are falling. So is my equity. Should I use it before it evaporates?

A: Financial experts are divided on how you should or shouldn't use your home equity -- the difference between your mortgage balance and the value of your home. But dwindling equity alone isn't a sound reason to tap the till. For one thing, your equity is likely to rise from the ashes. Since the Great Depression, home value declines have never been as great as the home value appreciation that immediately preceded the declines.

Conservative financial planners say never, ever use your home's equity. They say pay off your mortgage so you can retire on a fixed income without a mortgage payment.

If you must use it, the experts agree, use it as a sound reinvestment -- home improvements, college education, business start-ups, a second home and other financial moves that provide an equal or better return on your money than the cost of the loan. Avoid cars, vacations, techno gizmos and other stuff that doesn't give you a return on your money. Emergencies are another consideration and home equity is a better alternative than plastic. Again, the financial conservatives would prefer that you to sock away an emergency savings fund as part of a sound financial plan to protects your home equity.

However, even if you avoid equity use, taking out a home equity line of credit (HELOC) as an emergency backup, could make sense -- at least until you've got that emergency savings pot. HELOCs, like credit cards, come with a revolving line of credit, but nothing is due if you don't use it. Using home equity to consolidate higher interest rate plastic from banks and retailers also can be a good use of your home equity, with a caveat. You must pay off the debt, close the credit card accounts and not backslide.

Q: I understand certain home improvements can help me shore up, even increase the value of my home. How is that possible in a market with falling prices?

A: Homeowners who perform improvements that bring their home up to par with other homes in the neighborhood -- or make them slightly above par -- can protect home value even in a down market because the right improvements increase your home's value. How much the improvement affects home value depends upon a host of factors -- the condition of the rest of the house, the value and condition of nearby similar homes, the local economy's impact on property values, and more.

Hanley Wood's annual Cost Vs. Value report generally says jobs that generate the most value are kitchen and bath remodels, however, the long-time report has yet to include improvements like solar panel arrays which can ultimately pay for themselves, with or without a cost-vs-value return. However, give they pay for themselves, the value derived from the work is invaluable. A home with a solar panel array, compared to an identical home, sans the array, will likely bring in a higher cost.

Q: I'm told I can continue to deduct my mortgage insurance from my income for tax purposes.

A: You can if you qualify. Effective January 1, 2008, the "Mortgage Forgiveness Debt Relief Act of 2007," act extended federal tax relief for homeowners who pay mortgage insurance, from one year, 2007, to four years, until 2010. The extension allows eligible home owners a tax deduction (which reduces your taxable income) on the cost of their government or private mortgage insurance premiums paid in any year from 2007 to 2010. Qualified borrowers are families with an adjusted gross income of $100,000 or less. Families with incomes up to $109,000 are eligible for a partial deduction. See your tax professional for more details.

Got questions? Send them to news@deadlinenews.com. We'll do our best to get you the most relevant answer.
© 2008 DeadlineNews.Com

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Broderick Perkins, an award-winning consumer journalist of 30 years, is publisher and executive editor of San Jose, CA-based DeadlineNews Group -- DeadlineNews.Com, a real estate news and consulting service and Web site and the new Deadline Newsroom, DeadlineNews.Com's news back shop. In both cases, it's where all the news really hits home.

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Mortgage Insurance Tax Deduction Extended

by Broderick Perkins
© 2007 DeadlineNews.Com

Deadline Newsroom - More home owners are likely to benefit from a new federal law's mortgage insurance tax deduction extension, than those who benefit from the more ballyhooed mortgage debt forgiveness tax relief provision.

Also see: A Dozen Tax Breaks, On The House

Effective January 1, 2008, the "Mortgage Forgiveness Debt Relief Act of 2007," says, for those eligible, no taxes will be owed on any mortgage debt on a principal residence that is forgiven or written off as part of a short sale, foreclosure, renegotiation, bankruptcy or other such action.

Before the law was passed, such forgiven debt was often, though not always, taxed as income.

The relief act came on the heels of the nation's housing and mortgage crisis after risky subprime and non-traditional home loans blew up in the faces of many home owners and blanketed the economy with foreclosures.

The relief act's debt forgiveness provision protects up to $2 million of indebtedness from taxation if the debt is secured by a principal residence and if that debt stems from the acquisition, construction or substantial improvement of the principal residence. For those who qualify, this special relief is available retroactively for eligible debt discharges from Jan. 1, 2007, through Dec. 31, 2009.

While the forgiveness debt tax relief portion of the act has grabbed headlines, another provision is likely to benefit more home owners.

The relief act also extends federal tax relief for home owners who pay mortgage insurance, typically those with low down payment mortgages. The extension allows eligible home owners a tax deduction on the cost of their government or private mortgage insurance premiums for three more years. The initial one-year provision for the deduction was set to expire Dec. 31, 2007.

A tax deduction, by the way, reduces taxable income, leaving less income to tax.

Now, qualified borrowers can continue to take the deduction for the amount of their mortgage insurance if their insured mortgage originates between 2007 and 2010, instead of just during the year of 2007.

Qualified borrowers are families with an adjusted gross income of $100,000 or less. Families with incomes up to $109,000 are eligible for a partial deduction.

Lenders levy mortgage insurance to protect themselves from risk when a borrower's down payment is less than 20 percent of the purchase price and other loans are not used to make up the difference.

The home owner pays the mortgage insurance premium (averaging $50 to $100 a month, for the national median priced home), but the insurance protects the lender from the risk of financing more than 80 percent of the cost of a home. Studies show borrowers with smaller starter equity stakes in their homes -- less than 20 percent -- have more mortgage payment problems than those who have larger equity stakes -- 20 percent or more.

To protect mortgage insurance consumers from paying the insurance longer than necessary, another federal law, the "Homeowners Protection Act of 1997" grants home owners greater disclosure rights and the right to cancel the insurance once they reach certain equity level milestones.

Economy.com estimates that forgiven debt tax relief could apply to 750,000 home owners, but would likely end up benefiting only 250,000 after weeding out those who aren't eligible.

For 2007, the Mortgage Insurance Companies of America (MICA) estimates 2 million families benefited from the deduction, resulting in an average tax savings between $300 and $350.

Home buyers today are also more likely to opt for home loans with mortgage insurance, because risky mortgages are less and less available -- especially for those who can't come up with 20 percent down. Being cash-poor is particularly prevalent in high-cost areas like California.

It's also significant to note, for meeting the needs of those who can't afford a large enough down payment, mortgage insurance laden loans have a better track record of fewer defaults and, today, more investor interest, than subprime loans.

Suzanne Hutchinson, MICA's executive vice president says, "As risky, exotic loans are no longer considered viable housing finance options, more secure loans with private mortgage insurance remain readily available for qualified borrowers."

More mortgage news that really hits home!

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© 2007 DeadlineNews.Com

Broderick Perkins, an award-winning consumer journalist of 30 years, is publisher and executive editor of San Jose, CA-based DeadlineNews.Com, a real estate news and consulting service, and the new Deadline Newsroom, DeadlineNews.Com's new backshop. In both cases, it's where all the news really hits home.

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