Stop Foreclosure

We hear about mortgage fraud and title fraud but what in the world is Foreclosure Fraud. Foreclosure Fraud is an attempt by unscrupulous individuals or companies to deceive homeowners of distressed properties. Homeowners facing foreclosure are at their most vulnerable state emotionally and financially. These unscrupulous predators know that this is the time to take advantage of the homeowners. They show up as the knight in shining armor with the rescue plan. They use many different methods; however they always have one of two goals in mind…To get the homeowner to part with some money or to get the homeowner to sign over some form of ownership in the property. Rather than calling it Foreclosure Fraud perhaps we should just call it A Foreclosure Scam.

Here are some Red Flags to help homeowners identify potential Foreclosure Scam Companies or Individuals:

•    Request Money Upfront – Reputable organizations that specialize in helping homeowners prevent foreclosure Do Not request money upfront.
•    Transfer Financial Authority – Another ploy these predators use is to have homeowners sign a “Power of Attorney” where the homeowner appoints them to act on the owners behalf. This can have devastating results.
•    Guarantee To Stop Foreclosure – No third party company or individual can make this guarantee. The only company that can guarantee stopping a foreclosure is the actual mortgage company that holds the loan. This also applies to a guarantee of a loan modification.
•    Advise Stop Paying The Mortgage – Some of these predators advise homeowners to stop paying the mortgage because it will strengthen the homeowners position in the lenders eyes. All they want you to do is skip a payment or two and just give them that money to represent you. If this recommendation is made to you, end the conversation and ask them to leave!
•    Assign The Deed – Never transfer ownership in your home to someone who does not have a financial stake in it. If a company wants you to transfer ownership tell them they will be added to the deed when they are approved by your mortgage company to go on the mortgage and complete the required documents at the closing.
•    Official Government Approved Organization – Really… Confirm how legitimate they are with the Better Business Bureau or Governor’s Office of Consumer Affairs. Most government websites list their approved entities and make it very easy for you to verify
•    Supply Information Online – Before releasing any personal information or financial information online or over the phone make sure you know who you are dealing with.

Do you feel that you may now be a little better informed about what to look for from these scammers? I hope so. If you are having difficulty with meeting your monthly mortgage obligation talk to your Mortgage Company. If you feel that your best option will be to sell your home and you may need to utilize a short sale, give me a call and we can discuss your options.

No more 100% financing… No more First Time Buyer Tax Credit… No more move up buyer tax credit… What is a buyer in the Atlanta market to do? Currently there are several different programs that offer grant funds that can be used for down payment assistance. The nice thing about these grants is that they do not have to be repaid as long as certain criteria are met.

Why don’t we get together and see if you qualify to take advantage of one of these programs. Either call or email and see how easy it can be to get the ball rolling.

Reverse Mortgage Frequently Asked Questions

What is a Reverse Mortgage?

A reverse mortgage is a loan against your primary residence that you Do Not have to repay for as long as you live in your home. Through a reverse mortgage you turn the equity in your home into cash without having to sell your home or repay the loan. The funds that you receive can be done in one of several ways or possibly a combination of several of the ways:
•    A lump sum distribution at closing
•    A monthly cash advance
•    A credit line for you to draw from as you need the funds

What are the Requirements to Qualify for a Reverse Mortgage?

Qualification for a reverse mortgage is totally different from what we are all used to in qualifying for any type of loan. First of you do not have to have an income. Remember you do not make a monthly payment so you do not have to have an income. What about a credit score? It doesn’t matter. Your credit report will be accessed but only to verify that you do not have any federal tax liens against you. If you do have federal tax liens they must be cleared in order for the reverse mortgage to go into effect. They can possibly be cleared with funds at closing from the proceeds of your equity. What you do have to have is age. The minimum age requirement is 62.

Can I Purchase a Home Using a Reverse Mortgage?

Yes you can! One way would be to utilize the funds form your Reverse Mortgage and pay cash for a vacation or second home that is not your primary residence. After January 1, 2009 you will be able to use a Reverse Mortgage for the purchase of your primary residence.

Who has Title to My Home If I Have a Reverse Mortgage?

You Do, just the same as if you have a Forward Mortgage on your home.

What If My Credit is Not That Good?

It doesn’t matter. There is no credit, income or medical requirements needed in order for you to obtain a Reverse Mortgage, just equity in your home.

What are My Options for Receiving Funds?

You can receive your funds in several different ways or in a combination of them.
•    A lump Sum Distribution
•    As fixed monthly payments for a set period of time or for as long as you live in the home
•    As a line of credit that allows you to draw on the funds at any time

How much Will I Get?

The proceeds from your Reverse Mortgage are based on several factors such as your age, the appraised value of your home and current interest rates.

Am I Limited on How I can Use the Funds from a Reverse Mortgage?

The simple answer is NO. You can use the proceeds from a Reverse Mortgage for whatever you elect to use them for.

What If I Have an Existing Mortgage?

The Reverse Mortgage must be in the first position. What this means is that your existing mortgage would be paid off as part of the transaction.

What Am I Required To Pay With A Reverse Mortgage?

The nice thing about a Reverse Mortgage is that you do not have a monthly mortgage payment. You are however required to maintain the real estate tax and homeowners insurance on the property.

When Is The Loan Repaid?

A reverse Mortgage is repaid when you permanently move from the home, sell the home or fail to occupy the home as your principal residence.

How Much Will I Owe When My Reverse Mortgage Comes Due?

The amount owed will be determined by how much you have borrowed to date, accrued interest and mortgage insurance, along with any servicing fees due. In no circumstance will your Reverse Mortgage Payoff exceed the value of the home when the payoff becomes due.

What about My Heirs and Their Inheritance?

When the residence is sold and the Reverse Mortgage payoff is satisfied, any proceeds from the sale over the payoff amount go to your estate.

I realize that these may not be all the questions regarding Reverse Mortgages. If you have a question about a Reverse Mortgage in Greater Atlanta contact me. Together we will find the answer to your questions.

For additional information on Reverse Mortgages in Atlanta please visit these previous articles in this series:
•    Part One -  The Basics
•    Part Two – How to Use A Reverse Mortgage
•    Part Three – Examples
•    Part Four – Downsides and Pitfalls of Reverse Mortgages

As was stated in Part Three, everything about a Reverse Mortgage can’t be just perfect. There have to be some aspects of a Reverse Mortgage that may not be as desirable as on other mortgage products. Let’s examine what some of the downsides and pitfalls may be.

High Fees and Closing Costs

Fees and closing costs are higher on a Reverse Mortgage compared to a forward mortgage (Standard Mortgage with Monthly Payments). Each Reverse Mortgage has a one time 2% charge of the appraised value from FHA that goes into a pool of funds, much like a one time Mortgage Insurance payment. Reverse Mortgages also have a one time charge for monthly servicing of the loan. With a forward mortgage this fee is collected monthly and hidden in the payment. Origination Fees along with Attorney Fees and all other fees to close a loan remain in effect. A counseling fee has to be paid as HUD requires all applicants to obtain counseling prior to the lender processing the loan. On the bright side of most of the fees and closing cost associated with a Reverse Mortgage, the borrower is not paying them in the form of cash they are being rolled into the loan. The best way to evaluate what kind of fees and closing costs would be involved in a Reverse Mortgage for you would be to schedule a consultation with Qualified Atlanta Reverse Mortgage Lender.

I’m Spending My Kids Inheritance

With a Reverse Mortgage you are utilizing the equity in your primary residence as opposed to leaving it to your heirs. Of course the strong likelihood of appreciation exists for the residence thus leaving a situation where there may be equity for the heirs to divide.

Property Taxes and Insurance

If you had a forward mortgage on your primary residence and paid your property taxes and insurance through an escrow account you will now be paying those bills yourself.

Limits on Reverse Mortgage Amounts

Remembering from Part One in this series, Reverse Mortgages are an FHA product and are thus regulated and controlled by FHA loan limits. Currently that figure is $417,000. There are rumors that the possibility exists that there will be Jumbo Reverse Mortgages available in the near future. While I don’t know this to be fact or fiction I am just letting you know what I am hearing.

Possible Problems With New Construction

Newly built properties must comply with FHA minimum property requirements, the Certificate of Occupancy must be issued, if the residence is a Condo the Homeowners Association must have been in control of the association for 1 year and any loan that financed construction must be paid and the Reverse Mortgage assumes the first position on the residence.

Possible Problems With A Refinance

When utilizing a Reverse Mortgage for refinancing your primary residence there will of course be an appraisal performed. If the appraiser determines that major repairs need to be made, funds from the Reverse Mortgage can not be drawn upon until these repairs are completed. These needed repairs can be handled in one of several ways:
1.    Completed Prior to closing with borrowers funds
2.    Completed After closing with a Repair Rider to the Reverse Mortgage
3.    Completed After closing with funds escrowed at closing

I hope you are finding this educational series on Reverse Mortgages helpful. Just doing the research has been a huge educational experience for me. I have one more part planned and that will be a FAQ (Frequently Asked Questions) unless you as the readers have topics that you would like for me to research for you and report here. Let me hear from you, So until Part Five….

Before we dig any deeper into Reverse Mortgages lets review what we have covered so far. In Part One we found out what a Reverse Mortgage is, what the requirements are for obtaining a Reverse Mortgage, how not to be taken advantage of and using a Reverse Mortgage for the purchase of a home. In Part Two we examined some important questions to ask yourself about your financial health and we looked at some possible ways to use a Reverse Mortgage to your advantage. To aid with understanding how a Reverse Mortgage can work let’s look at a couple of examples.

Using A Reverse Mortgage For A Refinance

John is 77 years old and his wife Mary is 75 years old. They currently live in their $200,000 home that has a remaining balance owed of $75,000. Their current payment is $825 per month and their income is $2,200 per month from Social Security. Upon interviewing John and Mary, their loan officer establishes what their goals are and what they would like to accomplish:

•    They want to remain in their home
•    They want to have money available for a few repairs on their home
•    They want to eliminate their current mortgage thereby increasing their discretionary income
•    They want to have funds available in case of an emergency

Based on their age, John and Mary qualify for a Reverse Mortgage in the amount of $142,000. Subtracting the remaining balance owed on their current mortgage along with all the costs associated with closing the loan, John and Mary will have $55,348 available for repairs or emergencies, will never have to make another payment on their home as long as they live there and feel as though they just received an $825 per month raise. In fact they just received that $825 increase by keeping the monthly house payment they were used to making for themselves. SWEET!

Using A Reverse Mortgage For A Purchase

Mr. and Mrs. Smith, aged 77 and 75, are in the process of relocating to Atlanta to be closer to their daughter, son-in-law and their grandson. They have sold their very nice home in Oklahoma and have net proceeds of $200,000. They have asked their Atlanta Buyers Agent to help them find a home close to their daughter for $200,000 or less so that they will not have a mortgage payment. Their daughter happens to live in a very nice area of Gwinnett County and homes in the $200,000 range close by are not common. Fortunately the Smiths were working with a REALTOR who was also educated in the advantages of a Reverse Mortgage. After obtaining all the information and scheduling a consultation for Mr. and Mrs. Smith with a loan officer, it was determined that they would be able to purchase a $400,000 dollar home that kept them in a similar lifestyle that they were accustomed to. They would only have to use $127,000 of their proceeds for their downpayment with the balance of the purchase being financed via a Reverse Mortgage. The Smiths are able to keep part of their proceeds, live in a much nicer home than they anticipated and now can spend more quality time with family.

What To Expect in Part Four

It sounds as though a Reverse Mortgage is the greatest thing since sliced bread and for some that is true. In Part Four I think we should examine some of the pitfalls and downsides of a Reverse Mortgage. So until then…..

In Part One of this series we examined what a reverse mortgage is, what you need to do to qualify for one, the code of ethics a respectable lender will adhere too and being able to use a reverse mortgage to purchase a home. In this article let’s dig a bit deeper and examine how to use a reverse mortgage to your best advantage.

Questions to Ask Yourself

Having reached the age requirements to qualify for a reverse mortgage and coming close to retirement time you need to look at your financial health and determine what kind of impact retirement will have on your lifestyle. Will you have a retirement income from your employer? Will you be funding your retirement totally on your own from your investments? How will Social Security benefits fit into your future? Do you have a combination of these possibilities? The main question becomes, when I retire will I have the funds that I need to maintain my lifestyle? A reverse mortgage can help with the funds that you may need!

Ways To Use A Reverse Mortgage

Let’s examine a few of the possibilities for ways to put a reverse mortgage to work for you. One of the most common advantages to a reverse mortgage is providing the recipient with a supplemental monthly income. Recalling from Part One, one of the ways for you to receive you funds from your reverse mortgage is via monthly payments to you from the mortgage company. These can be set up as a fixed amount that is paid to you monthly for as long as you live in the house. So if retirement was not looking like it would be in your future any time soon due to monthly financial requirements a reverse mortgage may well solve your problem. Make certain to talk with a qualified Atlanta Reverse Mortgage lender along with your tax advisor or financial planner to determine what is best in your exact circumstances.

Let’s say that you have retired and your combination of employer funded benefits, your investments and your social security benefits provide you with ample funds to sustain your lifestyle but you have always wanted that vacation home at the beach or in the mountains. In order to obtain it prior to reverse mortgages you had to either pay cash from your funds or take out a loan that required a monthly payment. Consider that now you may be able to obtain your vacation home utilizing a reverse mortgage. By accessing the equity of your primary residence with a reverse mortgage you may be able to purchase your vacation home for cash while not having a payment on your current home. How about that, 2 homes with no payments is a real possibility.

Perhaps a vacation home is not for you. Well that’s OK also. Maybe you just want to modernize and update your current home. Finally having that dream kitchen with granite counter tops and replacing those avocado green or harvest gold appliances with stainless steel ones is what floats your boat. Guess what that is OK. Maybe you have decided that you want to help pay for your grandchildren’s education. As a parent that went through that process several years ago, I can tell you it would be greatly appreciated. Perhaps you just want that new luxury car that has been crying out to you for years. Well you could do that too. This is in no way a complete list but I think you can see there are limitless ways for you to put a reverse mortgage to work for you.

Stay tuned over the next week or so for additional articles in this series about Reverse Mortgages in Atlanta.

Recently there has been a considerable amount of conversation regarding the Reverse Mortgage. Today I had the opportunity to attend a continuing education class totally on Reverse Mortgages. Due to some misunderstandings by myself among many others I thought it my responsibility to provide the facts and let you the educated consumers decide if this could be a good match for you and your situation. This forum may not answer each and every question that you have concerning a reverse mortgage but I promise together we will get you the answers to help you with your decision.

What Is A Reverse Mortgage?

A reverse mortgage is a loan against your primary residence that you Do Not have to repay for as long as you live in your home. Through a reverse mortgage you turn the equity in your home into cash without having to sell your home or repay the loan. The funds that you receive can be done in one of several ways or possibly a combination of several of the ways:
•    A lump sum distribution at closing
•    A monthly cash advance
•    A credit line for you to draw from as you need the funds

What Are The Requirements?

Qualification for a reverse mortgage is totally different from what we are all used to in qualifying for any type of loan. First of you do not have to have an income. Remember you do not make a monthly payment so you do not have to have an income. What about a credit score? It doesn’t matter. Your credit report will be accessed but only to verify that you do not have any federal tax liens against you. If you do have federal tax liens they must be cleared in order for the reverse mortgage to go into effect. They can possibly be cleared with funds at closing from the proceeds of your equity. What you do have to have is age. The minimum age requirement is 62.

What About The Horror Stories?

We all hear horror stories of people being taken advantage of. Many times these horror stories involve unscrupulous vultures taking advantage of senior citizens. This could be an arena for that to occur in were it not for an ethics commitment by concerned lenders. Understand first that a true reverse mortgage is a FHA Insured Mortgage. Until maximum amounts exceed $417,000 they will continue to be FHA. Equally important is the fact that lenders that are truly concerned with your wellbeing will be members of NRMLA, the National Reverse Mortgage Lenders Association. Under the NRMLA Code of Ethics members are held responsible for the actions or failure to act by officers, directors, employees, agents and representatives. This Code of Ethics focuses on the following values:
•    Fairness
•    Confidentiality
•    Integrity
•    Competence
•    Diligence
•    Professionalism

To insure compliance “secret shopper type” calls are made to participating lenders.

What About Purchasing a Home?

Currently the reverse mortgage product is only available for the refinance of an existing primary residence. This is changing as this article is being written. One of the provisions of HR3221 – Housing and Economic Recovery Act is that effective on January 1, 2009 a reverse mortgage can be used to purchase a primary residence. So after the first of the year it will be possible to utilize this product for either a refinance or a purchase.

More To Come

This is the first in a series of articles on Reverse Mortgages. Stay tuned for insight into ways to use a reverse mortgage, pitfalls of reverse mortgages, costs associated with reverse mortgages and any additional pertinent information that will help in understanding this product.

December 2nd is a very important day in this year’s election. There is a runoff between Saxby Chambliss and Jim Martin due to neither candidate obtaining a majority of 50% plus 1 vote to win in the general election on November 4th. I normally do not post articles voicing opinions about politicians especially since this blog is primarily about Atlanta Real Estate, our local market and activities going on in the area.

With the current climate of the real estate market both locally and nationally I feel compelled to let every one who reads this blog know which of the US Senatorial candidates has proven to be an advocate for home owners and real estate. Here are some of the highlights regarding real estate related votes cast by Saxby Chambliss:

•    Modernizing FHA – FHA’s single family mortgage insurance program is a valuable tool that helps more people achieve the dream of homeownership. Saxby Chambliss voted for FHA Reform legislation that will update programs so that consumers have greater refinancing opportunities and better alternatives for safe loans at fair prices.
•    Improving Mortgage availability – Saxby Chambliss supported the efforts to expand access to GSE conforming and FHA loans limits by increasing the current loan limits.  Increasing these limits provides more liquidity to the market helping those trying to purchase homes in high cost areas gain access to lower cost fixed rates mortgage options. It also helps families trying to refinance their current mortgages in order to avoid foreclosure.
•    Tax Reform and incentives for homebuyers – Saxby Chambliss understands the need for investment in our nation’s neighborhoods and the importance of real estate to our economy.  That’s why Saxby continues to support the Mortgage Interest Deduction, eliminating the AMT for struggling middle class families and voted to lower Capital Gains rates for Real Estate.  He will work to ensure that any tax reforms proposed in Congress protect America’s homeowners and their most valuable asset.
•    First-time homebuyer tax credit – Saxby also understands the challenges that every homebuyer faces when buying a home. That’s why he supported efforts that created a limited time tax credit for first-time homebuyers who are able to shoulder the responsibilities that come with owning a home. He also supported efforts to expand the current credit so that it can operate as a valuable incentive for purchasers.
•    Short Sale Tax Relief – Saxby Chambliss knows that families are facing difficult choices in today’s market.  That’s why he voted for legislation to give some tax relief to sellers involved in the short sale situation.  The provision eliminates the income tax owed by the seller on the amount to cancel or forgive debt.
•    Veterans’ housing – The VA home loan guaranty program has successfully helped many veterans safely and affordable achieve the dream of homeownership. But now it needs some updates to provide even better access for veterans. Saxby supports reforming the VA home loan guaranty program to increase the loan limits, extend the VA Adjustable Rate Mortgage (ARM) programs, and ease refinancing for America’s veterans.
•    Small Business Health Coverage – Small businesses are the backbone of the nation’s economy. Yet roughly half of the 47 million uninsured Americans are self-employed, work in small businesses or are family members of small-business workers. That is why Saxby supports legislation to address the problems that the self-employed and small businesses face when looking for health coverage. Solving the problem of the uninsured must become a top legislative priority for Congress.
•    Keeping Banks out of Real Estate – Sen. Chambliss cosponsored the Banks in Real Estate bill which clarifies in law, that a real estate brokerage shall be a non-banking, commercial activity.  

This article is not about endorsing a political party; it is about endorsing a candidate that has a proven record of supporting real estate and the dream of homeownership.  No matter which candidate you select, remember to vote in the Georgia Runoff Election on December 2nd.

So you are tired of paying some one else’s mortgage and you want to buy a home but you have been told your credit just won’t allow you to. Let me see if I can guess the way the conversation went. You filled out a mortgage application and the person electronically accessed your credit report. They then told you that the report showed you with a middle credit score of whatever it is and they are not going to be able to help you. Or you were informed that they would talk to their investor or a senior loan officer to see what can be done to help. That is so typical of the way most transactions like this play out.

So What’s The Problem

Let’s look at what the problem is. It is actually very simple, your credit score is too low for you to qualify for a mortgage. With the current conditions in the real estate and financial markets credit has become more difficult to obtain and is being some what reserved for higher credit score customers who may be less of a risk to the lender. So what do we do to help you. First of all we need to know exactly where we stand in the credit score department. We then need to know what items on your credit report are driving your score down.

Credit Reports Are Not Totally Accurate

Are there some items on your report that do not belong to you? One thing we have learned is that the credit reporting agencies data is not always totally correct. In fact 79% of all credit reports contain mistakes, 54% of all credit reports contain personal information that is outdated or belongs to a stranger, 30% of all credit reports contain accounts that are closed by consumers but continue to be reported as open and 25% of all credit reports contain errors serious enough to result in outright credit denial.

Let’s Come Up With A Plan

Once we have reviewed your situation and credit report we can collectively come up with a financial plan to get you on track and set up a timetable for you to get into your new home. We can actually tie this all together with the “No Down Payment Mortgage” discussed yesterday.

The Fair Credit Reporting Act

Fortunately there are several laws that have been inacted to protect you the consumer. The most signifacant of these is the Fair Credit Reporting Act. This law protects your credit rights. You have the right to contest inaccurate information in the report and if a creditor cannot verify any inaccurate information within 30 days the inaccurate information must be removed from your credit report. The credit reporting agencies actually receive thousands of these disputes from consumers every day.

How Long Will It Take?

I know you have several questions about how this process works, with the main one being how long will it take? It is impossible and would be unethical for any individual or company to to guarantee an outcome or timeframe. However, based on experience and expertise you will be given an estimate.

If you would like more information concerning credit repair in the Greater Atlanta Area please Contact Me and we can set up a confidential conference.

While lying on it’s death bed it appears as though Seller Funded Down Payment Assistance may well be getting a reprieve. As many of you know, the Housing Stimulous Act of 2008 did away with Seller Funded DPA. Representative Al Greene (D-TX) has introduce H.R.6694 in the House of Representatives. This bill provides for the continuation of Seller Funded Down Payment Assistance by revising the requirements for seller funded down payments for mortgages for single-family housing insured by the Secretary of Housing and Urban Development under title II of the National Housing Act.

Financial Services Committee Chairman Supports Bill

Chairman of the House Financial Services Committee, Barney Frank (D-MA), has discussed openly that he has negotiated an agreement with HUD Secretary Preston that will provide for the continuation of seller funded down payment assistance and has virtually guaranteed that it will pass the house. The agreement allows HUD to impose risk-based pricing on down payment assistance transactions which provides Secretary Preston the fiscal protection he desired for the FHA insurance fund.

No Companion Bill In The Senate

Currently there is no companion bill to H.R.6694 in the senate even though Senators are well aware that this bill exists in the house. Over the past several weeks I have communicated with Senator Johnny Isakson (R-GA) via email of my concerns of this avenue for buyer’s being done away with. In an email from Senator Isakson dated 9-8-2008 he states “H.R.6694 is currently being considered by the House Committee on Financial Services and at this time there is not a companion bill in the Senate. Rest assured I will keep your thoughts in mind when this legislation comes before me on the Senate floor.” This morning I sent Senator Isakson another communication suggesting that he introduce the companion bill into the senate for consideration.

Get The Ball Rolling

By at least getting the ball rolling perhaps this valuable program will not be lost. Buyer’s nationwide stand to loose this option effective October 1, 2008 if H.R.6694 and the companion bill, which current doesn’t exist, in the Senate do not go into law. For anyone concerned with this important legislation get in touch with your Senators and Representatives to let them know how you feel.