Orlando Real Estate Voice, Short Sale Expert & Specialist

The easiest way to explain a short sale is to describe what happens when a short sale occurs. A short sale takes place anytime a property is sold for less than what is owed on the mortgage and the lenders who own the underlying mortgages accept less than full payoff as a settlement. This has become common in today’s real estate market.

This allows the property to transfer to the buyer even though the lenders did not receive the full amount that they were owed.

Short sales usually take place during the foreclosure process when a buyer is trying to buy a property and the purchase price will not cover the payoff of the mortgages in full. Most often these properties are bought and sold after the foreclosure process has started but before the process is completed through a sheriff’s or trustee’s auction sale. This stage is called the pre-foreclosure stage.

Lenders and mortgage companies have loss mitigation departments whose responsibility is to deal with properties in foreclosure. The main objective of these departments is to find ways to resolve properties in default other than just foreclosing. In other words they’re responsible for mitigating the bank’s losses and keeping them to a minimum. Those options include short sales, deed in lieu, loan modifications and forbearance agreements all of which will be explored in this course.

Foreclosing on a property is a problem for everyone: the lender, the homeowner and the community. Lenders and investors who own mortgages on houses in foreclosure do not want to foreclose and repossess the property. They would prefer the homeowner make the mortgage payments. Mortgage companies profit greatly by lending money and receiving interest payments in return. Many institutional investors also

invest in mortgages to receive the interest payments in return.

Here’s one myth about the companies who service loans. About 80 percent of the mortgages that service companies like Countrywide, Wells Fargo, Option One, Washington Mutual and Homecomings work are owned by some other investor. Those mortgages are not owned by the service company who sends out the mortgage payment coupons and collect the mortgage payments.

Rather, the mortgages are owned by some other “big hitter” like Fannie Mae, Freddie Mac, FHA, VA, a hedge fund or pension fund. The servicer just collects the payments, calculates the numbers and answers customer calls.

Jerry LaRose is an Orlando Area Residential Real Estate Expert, who can assist you with the purchase and/or sale of Real Estate in Orlando, Windermere, Winter Garden Florida or any place in the country. Jerry has created a team of professionals throughout Orlando and the country to ensure that you enjoy a smooth transition to your new area. Please visit www.JerrySellsOrlando.com for your real estate needs. Please give me a call if you have questions about the Orlando and Central Florida real estate market.

P.S. If you are listing your home as a short sale in Orange County Florida and Orlando, Windermere, Winter Garden, or Ocoee Florida make sure you hire an agent who knows how to do short sales and has the experience to get the job done. We are doing successful short sale packages. Call us at 407-580-7011 to find out more about Orange County Short Sales and Orlando Area Short Sales.

1. The bank is going to what to see your entire financial picture.  This means you will need to provide copy of back taxes, paycheck stubs, bank statements, personal financial statement, etc.  They will want to know what all your assets are.
2. The bank may want you to sign a promissory note for the difference, now it will most probably be at a hugely reduced amount and may include monthly payments.
3. When the bank gives the final approval of the short sale, they may request that the escrow close in as little as 30 days, sometimes sooner.
4. As the seller, you can not receive any proceeds from the sale.  Period.
5. Your Real Estate agents, and Title company, may have to work for reduced fees.
6. The banks are incredibly overwhelmed with short sales and many times a decision can take upwards of 90 days; however, recently the approval process has been streamlined at many lenders.
7. Your property may be foreclosed on during the short sale process because the bank can not process the short sale in time; however, if you have a strong agent they should be able to get the foreclosure postponed give me a call to help postpone any foreclosure dates.
8. Do not expect to receive any information on a regular basis.  There may be weeks that go by with no news from the lender.  This is perfectly normal.
9. The bank will want to get a BPO (broker price opinion) and/or an appraisal of your house.
10. Be patient.  This is the best policy.  Try to avoid being stressed out over something that you can not control.  If you have a well trained agent, you are in good hands.

If you have any questions, please don’t hesitate to contact me.

*************************************************************************************** 

Jerry LaRose is an Orlando Area Residential Real Estate Expert, who can assist you with the purchase and/or sale of Real Estate in Orlando, Windermere, Winter Garden Florida or any place in the country. Jerry has created a team of professionals throughout Orlando and the country to ensure that you enjoy a smooth transition to your new area. Please visit www.JerrySellsOrlando.com for your real estate needs.  Please give me a call if you have questions about the Orlando and Central Florida real estate market.

P.S. If you are listing your home as a short sale in Orange County Florida and Orlando, Windermere, Winter Garden,  or Ocoee Florida make sure you hire an agent who knows how to do short sales and has the experience to get the job done. We are doing successful short sale packages. Call us at 407-580-7011 to find out more about Orange County Short Sales and Orlando Area Short Sales.

If you have been contemplating short sales chances are you are familiar with the favorable tax treatment afforded by  real estate; the ability to use Capital Gains rather than earned income for property held longer than 365 days, 1031 exchange options and depreciation are just a few of the perks short sale investors have come to know and love. However, there are a few terrific tax benefits that are easily overlooked including these five frequently forgotten options:  

 1. Tax Deductible Travel. Not just around town but in almost any location where short sales are to be found. Meals, lodging, fuel charges and other common costs may reduce your tax burden. Consult with your CPA for specifics related to your individual situation.  

 2. Computers, Equipment, Cable Internet, Phone and Other Home Office Deductions. If you are following the Short Sales action plan then you already know it is possible to run the entire business from the comfort of your home. Home office deductions can add up fast especially when you calculate the percent of mortgage, homeowner’s insurance premiums and other items used to conduct business. Everything from cell phones (and service) to equipment is often able to be pre-rated.  

 3. Books, Training, Software, Educational and Investment Programs. Staying up to date on the latest and greatest information is a legitimate business expense so start saving those receipts.  

 4. Interest Paid on HELOC’s or Home Equity Loans. Not only is the mortgage, interest and other costs associated with the purchase of a short sale property deductible but  it is often possible to obtain a line of credit, HELOC or other form of home equity loan on a short sale property then write-off the interest portion of the payments.  

 5. Home Improvement Costs. Tools, supplies, travel and other costs associated with repairing or improving the property are also valid methods of reducing your tax burden when selling the home. Just remember, the IRS rarely allows investors to deduct their own time or labor unless established under an independent LLC or other entity so it often makes more sense to hire someone to do the work for you rather than attempt to go it alone. Run the numbers to determine if doing the work yourself makes financial sense – in most cases it doesn’t.

*************************************************************************************** 

Jerry LaRose is an Orlando Area Residential Real Estate Expert, who can assist you with the purchase and/or sale of Real Estate in Orlando, Windermere, Winter Garden Florida or any place in the country. Jerry has created a team of professionals throughout Orlando and the country to ensure that you enjoy a smooth transition to your new area. Please visit www.JerrySellsOrlando.com for your real estate needs.  Please give me a call if you have questions about the Orlando and Central Florida real estate market.

P.S. If you are listing your home as a short sale in Orange County Florida and Orlando, Windermere, Winter Garden,  or Ocoee Florida make sure you hire an agent who knows how to do short sales and has the experience to get the job done. We are doing successful short sale packages. Call us at 407-580-7011 to find out more about Orange County Short Sales and Orlando Area Short Sales.

1. Absolutely DO NOT ever deed your property to a third party without absolute confirmation your loan has been paid off!

Note: if you believe this option is best for you, please consult with an attorney – not the buyer’s attorney – before completing the transaction.

If you deed your property to a third party, that party then controls the property. The new owner can rent the property (and keep the rent), attempt to sell the property to make a profit, move into the property or use the property in other ways.

What the new owner might not do is make mortgage payments, and that could become a big problem for you.

Just because you no longer own the property does not mean you are no longer responsible for the mortgage loan obligations. The lender made the loan to you. And until it is paid off you will be primarily responsible for the mortgage obligation.

If you give up control of the property and the new owner does not pay on the loan, the damage to your credit could be catastrophic.

2. Do Not sell your home at a huge discount.

Unless the actual foreclosure sale is less than 45 days away, you have time to explore options. Take a day or two and make a few phone calls. As a general rule, if someone is pushing you hard to get you to sell your property to them, it’s probably because the deal they are proposing is very favorable – to them.

If you have equity in your Orlando home, it belongs to you. Let’s see if we can get it to you.

For a Free, no obligation assessment, just call or send an email.  

3. Do Not authorize a prospective buyer to deal directly with your lender.

The buyer has one goal and one goal only, and that is to negotiate a low, probably very low, price with your lender. The buyer will ask your lender to accept a discounted payoff.

The negotiations could go on over an extended period of time, and if the transaction does not work out the buyer may elect not to buy your property. It could leave you with very little time to resolve the situation and avoid foreclosure. Further, you have no control over the information that goes to your lender or the accuracy thereof. It is entirely possible that the buyer could handle the negotiation and presentation of information in a way that makes it very difficult for you to resolve your loan situation later.

If, however, you believe that your best option is to allow the buyer to work directly with your lender, make certain you consult with a real estate professional and/or an attorney before signing a contract. If you are going to do a Short Sale in Orlando get representation from a real professional. It costs you nothing – the lender pays the fees. Someone should be looking out for you.

We can help, and it costs you nothing. We have fought for homeowners like you many times – and won. The lender wins also. They do not want to take your property through foreclosure. That’s why they will negotiate to get the deal done.

4. Do Not do nothing.

A surprising number of people just accept what they see as the inevitable, and let foreclosure run its course. Don’t let it happen – the damage to your credit will follow you for years.

Take a little time to explore potential options. You do not want a foreclosure on your credit record. It will hamper your ability to get a consumer loan or a car loan for at least a few years, and it will be very difficult to obtain another mortgage for a very long time.

Also, in some cases, doing nothing and letting the property go to foreclosure leaves you open to the lender coming back to you AFTER the foreclosure in an attempt to collect.  When a lender agrees to and completes a short sale, they release their rights to this option.

*************************************************************************************** 

Jerry LaRose is an Orlando Area Residential Real Estate Expert, who can assist you with the purchase and/or sale of Real Estate in Orlando, Windermere, Winter Garden Florida or any place in the country. Jerry has created a team of professionals throughout Orlando and the country to ensure that you enjoy a smooth transition to your new area. Please visit www.JerrySellsOrlando.com for your real estate needs.  Please give me a call if you have questions about the Orlando and Central Florida real estate market.

P.S. If you are listing your home as a short sale in Orange County Florida and Orlando, Windermere, Winter Garden,  or Ocoee Florida make sure you hire an agent who knows how to do short sales and has the experience to get the job done. We are doing successful short sale packages. Call us at 407-580-7011 to find out more about Orange County Short Sales and Orlando Area Short Sales.

Members of the Orlando Regional Realtor® Association were involved in the sale of 37.63 percent more homes in September than during the same month last year: 1,335 compared to 970. Geographically, home sales in Osceola County jumped a whopping 72.02 percent and Orange County sales increased 54.05 percent.

Each of the four counties in the Orlando MSA area increased their sales numbers in comparison to September 2007 tallies. All except Lake County increased sales in comparison to the previous month (August 2008). Also turning in a big increase this month were sales of duplexes, town homes, and villas, with 53.13 percent more sales of these home types taking place in September 2008 compared to September 2007.

The median sales price of the homes sold in September rose by 5.00 percent to $210,000 from August’s $200,000. However, the median sales price is still 10.64 percent below what it was this time last year ($235,000).

Other market positives include month-over-month increases in the number of new contracts and in the number of pending sales. Those pending sales, considered by housing economists to be a reliable predictor of future sales activity, are expected to continue closing the current year-to-date sales deficit of 18.53 percent by year end as there are 61.82 percent more homes under contract this month (3,256) than in September of 2007 (2,012).

The increase in the median home price to $210,000 means that the area’s affordability index decreased slightly in September to 107.24 percent. (An affordability index of 99 percent means that buyers earning the state-reported median income are 1 percent short of the income necessary to purchase a median-priced home. Conversely, an affordability index that is over 100 means that median-income earners make more than is necessary to qualify for a median-priced home.) Buyers who earn the reported median income of $51,848 can qualify to purchase one of 13,386 homes in Orange and Seminole counties currently listed in the local multiple listing service (MLS) for $225,204 or less.

The first time homebuyer affordability index decreased to 76.26 percent from August’s 76.75 percent.

The area’s average interest rate was 6.00 percent in September 2008, down from 6.39 percent in August.

Homes of all types spent an average of 113 days on the market before being sold in September 2008, and the average home sold for 94.33 percent of its listing price (an increase over August 2008′s 92.81 percent). In September 2007 those numbers were 111 and 93.41 percent, respectively.

The majority of single-family homes (188) that changed hands in September 2008 were sold in the $200,000 – $250,000 price range; another 128 homes sold in September for between $140,000 and $160,000. Five hundred eighty-six homes sold for less than $200,000 in September, and 229 sold for more than $300,000. On the far ends of the scale, 13 homes were sold for $1 million or more (again the least this year) while 26 homes sold for less than $50,000 (again the most this year).

Inventory

There are currently 24,690 homes available for purchase through the MLS. Inventory decreased by 144 homes from August to September, which means that 144 more homes left the market than entered the market. Compared to last year, the September 2008 inventory level is 6.16 percent lower than it was in September 2007 (26,310).

The current inventory level reflects an 18.49-month supply at the current pace of sales, which is down from the 19.40-month supply recorded in August. Altogether, inventory months-of-supply has declined 58.44 percent since January 2008.

There are 18,169 single-family homes currently listed in the MLS, a number that is more than 1,500 less than this time last year. As usual most (2,961) are listed in the $200,000 – $250,000 price range. Condos currently make up 4,393 offerings in the MLS, while duplexes/town homes/villas make up the remaining 2,128. Most condos (572) are priced at $100,000 – $120,000. The majority of duplexes/town homes/villas (378) are listed in the $200,000 – $250,000 price category.

Condos and Town Homes/Duplexes/Villas

The sales of condos in the Orlando area held perfectly steady in September: A total of 116 condos changed hands in both September of this year and September of last year. Year to date, condo sales are down 40.75 percent, with 1,057 condos sold so far in 2008 compared to 1,784 sold through the same time in 2007.

In September, the most (20) condos that changed hands were in the $100,000 – $120,000 price category, while an additional 11 sold condos fell in both the $80,000 – $90,000 range and the $140,000 – $160,000 range.

Orlando homebuyers purchased 98 duplexes, town homes, and villas in September 2008, which is a 53.13 percent increase from September 2007 when 64 of these alternative housing types were purchased. Year-to-date, duplex, town home, and villa sales are down 14.47 percent. The majority (17) of duplexes, town homes, and villas sold in September 2008 fell into the $140,000 – $160,000 price category, while another 13 sold in both the $120,000 – $140,000 range and the $160,000 – $180,000 range.

MSA Numbers

Sales of existing homes within the Orlando MSA (Lake, Orange, Osceola, and Seminole counties) in September were also up by (coincidentally) 37.63 percent when compared to September of last year. Throughout the entire MSA, 1,624 homes were sold in September 2008 compared with 1,180 in September 2007. Year to date, sales in the MSA are down by 17.63 percent, with 13,344 homes sold far in 2008 compared to 16,201 sold through September 2007.

Seminole County’s September 2008 sales increased 7.35 percent over that of September 2007 (292 to 272), while Orange County jumped 54.05 percent (818 to 513). Lake County saw a 7.66 percent improvement in the number of sales in September 2008 compared to September 2007 (225 to 209), and Osceola County experienced a massive 72.02 percent increase (289 to 168).

Each county’s year-to-date sales comparisons are as follows:

Lake: 10.28 percent below 2007 (2,234 homes sold to date in 2008 compared to 2,490 in 2007);
Orange: 18.65 percent below 2007 (6,555 homes sold to date in 2008 compared to 8,058 in 2007);
Osceola: 9.15 percent below 2007 (1,966 homes sold to date in 2008 compared to 1,164 in 2007); and
Seminole: 25.80 percent below 2007 (2,589 sold to date in 2008 compared to 3,489 in 2007).

***************************************************************************************

Jerry LaRose is an Orlando Area Residential Real Estate Expert, who can assist you with the purchase and/or sale of Real Estate in Orlando, Windermere, Winter Garden Florida or any place in the country. Jerry has created a team of professionals throughout Orlando and the country to ensure that you enjoy a smooth transition to your new area. Please visit www.JerrySellsOrlando.com for your real estate needs. Please give me a call if you have questions about the Orlando and Central Florida real estate market.

P.S. If you are listing your home as a short sale in Orange County Florida and Orlando, Windermere, Winter Garden, or Ocoee Florida make sure you hire an agent who knows how to do short sales and has the experience to get the job done. We are doing successful short sale packages. Call us at 407-580-7011 to find out more about Orange County Short Sales and Orlando Area Short Sales.

NOTE: Homeowners, contact your existing lender and/or a new lender to discuss how you may qualify for the H4H program.

The list of participating lenders is not available yet. We will publish it in the coming days.

The HOPE for Homeowners (H4H) program was created by Congress to help those at risk of default and foreclosure refinance into more affordable, sustainable loans. H4H is an additional mortgage option designed to keep borrowers in their homes.

The program is effective from October 1, 2008 to September 30, 2011.

As many as 400,000 homeowners could avoid foreclosure through this program over the next three years. If you are having trouble making your mortgage payments, HOPE for Homeowners may be able to help you, by refinancing your loan into a new 30-year fixed rate loan with lower payments.

How the Program Works

There are four ways that a distressed homeowner could pursue participation in the HOPE for Homeowners program

Homeowners may contact their existing lender and/or a new lender to discuss how to qualify and their eligibility for this program.

Servicers working with troubled homeowners may determine that the best solution for avoiding foreclosure is to refinance the homeowner into a HOPE for Homeowners loan.

Originating lenders who are looking for ways to refinance potential customers out from under their high-cost loans and/or who are willing to work with servicers to assist distressed homeowners.

Counselors who are working with troubled homeowners and their lenders to reach a mutually agreeable solution for avoiding foreclosure.

It is envisioned that the primary way homeowners will initially participate in this program is through the servicing lender on their existing mortgage. Servicers that do not have an underwriting component to their mortgage operations will partner with an FHA-approved lender that does.

Step 1: Cost-Benefit Analysis

Lender considerations:

Given their fiduciary responsibilities and financial obligations, lenders will assess their portfolio and perform a cost-benefit analysis to determine the feasibility of offering this program to struggling homeowners.

Affordability versus value: lenders will take a loss on the difference between the existing obligations and the new loan, which is set at 90 percent of current appraised value. The lender may choose to provide homeowners with an affordable monthly mortgage payment through a loan modification rather than accepting the losses associated with declining property values.
Borrower eligibility: Lenders that determine the H4H program is a feasible and effective option for mitigating losses will assess the homeowner’s eligibility for the program:

The existing mortgage was originated on or before January 1, 2008;
Existing mortgage payment(s) as of March 1, 2008 exceeds 31 percent of the borrowers gross monthly income;
The homeowner did not intentionally default, does not have an ownership interest in other residential real estate and has not been convicted of fraud in the last 10 years under Federal and state law; and
The homeowner did not provide materially false information (e.g., lied about income) to obtain the mortgage that is being refinanced into the H4H mortgage.
Consumer considerations:

The lender will disclose to the homeowner the benefits of the program:

Home retention,
New affordable mortgage based on current appraised value,
10 percent equity
The lender will also disclose to the homeowner the costs of the program:

3 percent upfront mortgage insurance premium and a 1.5 percent annual premium,
Equity and appreciation sharing with the Federal government, and
Prohibition against new junior liens against the property unless they are directly related to property maintenance.
Step 2: Negotiations Between Borrowers and Lien Holders

If the lender refinancing the loan does not hold the senior mortgage lien, it will need to secure an agreement from the existing lien holder to waive all prepayment penalties and default fees on the existing loan and accept the loan proceeds from the H4H loan as payment in full. The loan amount (including the 3 percent UFMIP) for the new H4H loan cannot exceed 90 percent of the current appraised value of the property.

The lender will engage existing subordinate mortgage lien holders to extinguish all subordinate liens on the subject property. To entice subordinate lien holders to participate in the negotiation process and release their liens, FHA has the authority to share its future appreciation entitlement with them.

Step 3: Originating an H4H Mortgage

The lender will qualify the homeowner for the new H4H mortgage using the guidelines established under the terms of the program’s unique statutory requirements, ensuring the homeowner has the capacity to make the new payment on the H4H mortgage in a timely manner.

During underwriting of the loan, the lender will calculate the future appreciation interest amount for each subordinate lien holder in accordance with instructions provided by FHA.

At settlement, subordinate lien holders will receive a certificate that evidences their interest as an obligation backed by HUD, with payment conditional on the value of HUD’s appreciation share.

Following funding of the loan the lender will record – in addition to the typical security instrument and note for the first mortgage – a shared equity note and mortgage (SEM) and a shared appreciation note and mortgage (SAM). These mortgages will be serviced by FHA.

The lender will also submit the new mortgage for insurance to FHA, certifying that it has been originated, underwritten and closed in accordance with the H4H program guidelines.

Step 4: Fulfilling H4H Mortgage Obligations

Upon sale of the property, the homeowner will use their sale proceeds to pay off the H4H mortgage as well as the shared equity and shared appreciation mortgages.

FHA will provide instructions to the settlement agents regarding subordinate lien holders who are entitled to a portion of any appreciation. The lien holder that previously held the highest priority will receive payment up to the full dollar amount of its interest, not to exceed the amount of available appreciation, and so on, until all prior lien holders are satisfied or the amount of available appreciation is exhausted. All remaining appreciation is remitted to FHA.

In instances where the homeowner failed to make the first payment on their new H4H mortgage, the H4H statute prevents FHA from paying claim benefits to anyone holding the mortgage.

Housing and Economic Recovery Act of 2008 FAQ

U.S. Department of Housing and Urban Development

 

www.hud.gov

August 4, 2008

Q: How will the law help struggling homeowners keep their homes?

A: Through the Federal Housing Administration (FHA), an estimated

400,000 borrowers in danger of losing their homes will be able to refinance

into more affordable government-insured mortgages. The program offers

government insurance to lenders who voluntarily reduce mortgages for at-

risk homeowners to at least 90% of the property’s current value.

 

Q: When will the program begin?

A: The program will begin on October 1, 2008 and sunset on September

30, 2011. Homeowners in danger of losing their homes before October 1,

however, should not wait to contact their loan servicers and should begin

applying for federally insured mortgages now.

 Q: Who is eligible?

A: To be eligible to participate in this program, a borrower must:

• Have a loan on an owner-occupied principal residence. Investors,

speculators, or borrowers who own second homes cannot participate

in this program.

• Have a monthly mortgage payment greater than at least 31 percent of

the borrower’s total monthly income, as of March 1, 2008.

• Certify that he or she has not intentionally defaulted on an existing

mortgage, and did not obtain the existing loan fraudulently.

• Not have been convicted of fraud.
•  

Q: How can a homeowner access this new program?

A: Homeowners or a servicer of an existing eligible loan need to contact an

FHA-approved lender. The FHA-approved lender will determine the size of a

loan that a borrower can reasonably repay and that meets the requirements

of the program. If the current lender or mortgage holder agrees to write-

down the amount of the existing mortgage and make the new loan

affordable, the FHA lender will payoff the discounted existing mortgage.

Loans provided under this program must be 30-year fixed rate loans.

 Q: Are lenders required to participate in this program?

A: No. The program is completely voluntary for lenders, investors, loan

servicers, and borrowers.

 Q: How does this law help neighborhoods that have been hit by theforeclosure crisis?

A: The impact of the current crisis has not been isolated to individual

borrowers or investors, but has been felt broadly by neighbors,

communities, and governments across the nation. The law strengthens

neighborhoods hit hardest by the foreclosure crisis by providing $3.9 billion

in Community Development Block Grants to states and localities to buy

foreclosed homes standing empty, rehabilitate foreclosed properties, and

stabilize the housing market.

 Q: Will this law be a bailout for speculators, homeowners, investors,

and lenders?

A: No. It is narrowly tailored to keep families in their homes. For example:

• Only primary residences are eligible: NO speculators, investment

properties, second or third homes will be refinanced.

• Investors and lenders must take big losses first in order even to

participate. The owner of the old mortgage can get a maximum of

90% of the current value of the home (which presumably will be

considerably less than the value of the original loan). In many cases

the loss will be significantly greater, but 10% is the minimum.

• In addition, lenders must waive any penalties or fees, and help pay

            for the origination and closing costs of the new loans.

• Most homeowners will have seen the equity in their homes disappear

 before being able to refinance under this program. In addition, the

FHA will get a portion of any future profits on the house, to make sure

the government recoups its investment over the long run.

 Q: Will this law reward families who bought homes they could notafford?

A: Many homeowners facing foreclosure were misled, were deceived, or

were in other ways the victims of unfair lending practices. To prevent future

abuses by lenders, this law will establish a nationwide loan originator

licensing and registration system to set minimum standards for all

residential mortgage brokers and lenders. It also strengthens mortgage

disclosure requirements to help ensure that borrowers understand their

mortgage loan terms.

 

Q: How will this law make it more affordable to own a home?

A: There are a number of provisions that will make homeownership more

affordable:

• Creates a refundable tax credit for first-time homebuyers that works

like an interest-free loan of up to $7,500 (to be paid back over 15

years) .

• Grants states $11 billion of additional tax-exempt bond authority in

2008 that they can use to refinance subprime loans, make loans to

first-time homebuyers and to finance the building of affordable rental

housing.

• Raises conforming loan limits for the FHA, Fannie Mae and Freddie

Mac to $625,500. Because of the high cost of housing in California, a

majority of the state IS residents were previously shut out from these

programs. Raising these loan limits will lead to lower interest rates on

some loans, greater refinancing opportunities, and enable more

borrowers in high cost areas to avoid the type of nontraditional and

frequently abusive loans that led to the current crisis.

• Provides couples using the standard deduction with up to an

additional $1,000 deduction for property taxes ($500 for individuals).

 Q: Does the law provide help to those who still cannot afford to own a

home?

A: Yes. The bill includes a number of provisions to increase the supply of

affordable housing, which has been a major problem in California pre-

dating the current foreclosure crisis. For example:

• The bill creates a new permanent affordable housing trust fund -

financed by Fannie Mae and Freddie Mac and not by taxpayers – to

fund the construction, maintenance and preservation of affordable

rental housing for low and very low-income individuals and families

nationwide in both rural and urban areas.

• In addition, the legislation provides a temporary increase in the Low-

Income Housing Tax Credit and simplification of the credit to help put

builders to work to create new options for families seeking affordable

housing alternatives.

 Fact Sheet: 

The President has signed into law legislation that will allow HUD’s Federal

Housing Administration (FHA) to continue providing targeted mortgage

assistance to homeowners. The Hope for Homeowners program will

continue FHA’s existing and successful efforts to provide aid to struggling

families trapped in mortgages they currently cannot afford. Under the

program, certain borrowers facing difficulty with their mortgage will be

eligible to refinance into FHA-insured mortgages they can afford. The

program will be implemented on October 1, 2008.

 

Homeowners May Already Be Eligible For Assistance

Families should not wait to seek mortgage relief. Right now, homeowners

can determine if they are already eligible for mortgage assistance through

FHASecure, FHA’s existing refinancing program. They can obtain

information through any of the following options:

 

1. Contact a local, HUD-approved housing counseling agency at

www.HUD.gov;

2. Contact the HOPE NOW Alliance at (888) 995-HOPE; or

3. Call FHA at (800) CALL-FHA.

Sustainable. Affordability Homeownership

Hope for Homeowners maintains FHA’s long-standing requirement that

new loans be based on a family’s long-term ability to repay the mortgage.

FHA only allows owner-occupants to be eligible for FHA-insured

mortgages. Borrowers must also meet the following eligibility criteria:

• Their mortgage must have originated on or before January 1, 2008;
• Their mortgage debt-to-income must be at least 31 percent;
• They cannot afford their current loan;
• They did not intentionally miss mortgage payments; and
• They do not own second homes.

Features of FHA-insured loans under the new program include:

• 30-year, fixed rate mortgage;
• Maximum 90 percent loan-to-value ratio;
• No prepayment penalties;
• $550,440 maximum mortgage amount;
• Extinguishment of any subordinate liens; and
• New home appraisals from FHA-approved appraisers.

 

HUD, Treasury, FDIC and the Federal Reserve will form the

Congressionally-mandated Board of Directors and work together to

establish additional program standards.

 Voluntary Lender Participation

FHA will continue to offer lenders an alternative to foreclosing on

borrowers. Similar to FHASecure’s recent expansion, lenders will be

encouraged to write-down the outstanding mortgage principal balances to

90 percent of the new value of the property. In many cases, reductions in

principle will cost lenders less than the losses associated with foreclosure.

 Market Stability and Liquidity

By continuing to slow the rate of foreclosures, this program will support

FHA’s existing effort to stabilize local housing markets. From September

2007 to June 2008, FHA has guaranteed more than $93 billion of mortgage

capital.

 

Funding .

FHA will insure up to $300 billion in new loans. Borrowers will pay an

upfront premium of 3 percent of the original mortgage amount and an

annual premium of 1.5 percent of the outstanding mortgage amount. Any

additional costs incurred by FHA will be reimbursed by Fannie Mae and

Freddie Mac.

 Program Timeline

The program will last from October 1, 2008 through September 30, 2011.

Since September 2007, FHASecure has helped more than 290,000 families

obtain safer, more affordable mortgages. FHASecure is on pace to help

500,000 families by the end of the year.

If you have patience then buying a short sale is the way to go. If you can wait the 3-4 months that it takes to negotiate a short sale then your patience should pay off. A short sale is another word for pre-foreclosure. You are purchasing from a motivated seller and negotiating with a motivated lender. The seller want to sell to avoid foreclosure and the lender also wants to avoid foreclosing. Foreclosing on a property is very expensive to a lender, sometimes costing the lender up to $40,000 to foreclose on a property. The savings can depend upon many factors like condition of the property, location of the property, the motivation of the lender and seller. A buyer normally can purchase the property for approximately 10%-20% below market value.

So, if you have the patience and are looking for a great deal on an Orlando area property please give me a call.

***************************************************************************************

Jerry LaRose is an Orlando Area Residential Real Estate Expert, who can assist you with the purchase and/or sale of Real Estate in Orlando, Windermere, Winter Garden Florida or any place in the country. Jerry has created a team of professionals throughout Orlando and the country to ensure that you enjoy a smooth transition to your new area. Please visit www.JerrySellsOrlando.com for your real estate needs. Please give me a call if you have questions about the Orlando and Central Florida real estate market.

P.S. If you are listing your home as a short sale in Orange County Florida and Orlando, Windermere, Winter Garden, or Ocoee Florida make sure you hire an agent who knows how to do short sales and has the experience to get the job done. We are doing successful short sale packages. Call us at 407-580-7011 to find out more about Orange County Short Sales and Orlando Area Short Sales.

Included in H.R. 3221, the Housing and Economic Recovery Act of 2008, were numerous additions, and amendments to real estate tax rules. Below is a brief summary of the tax provisions that were part of H.R. 3221.

Low-Income Housing Tax Credit

• Temporarily increases the volume cap for low-income housing tax credits for 2008 and 2009.

Homebuyer Tax Credit

• The tax credit only applies to first time homebuyers. A first time homebuyer is defined as a homeowner who has no present ownership in a principle residence or has not had ownership of a principle residence for at least 3-years.
• The tax credit is 10% of the purchase price, capped at $7,500. The tax credit is reduced when the buyers adjusted gross income (AGI) is over $75,000 ($150,000 married filing jointly). The amount is reduced by the amount over the allowed AGI divided by $20,000.
• The tax credit does need to be repaid, therefore working more as an interest free loan than a true tax credit. The credit is repaid out of your taxes over 15-years, or a rate of 6.66% of the credit per year. If the home is sold before the credit is paid back, payments are accelerated in the following taxable years by the amount still owed on repayment over the original amount of the credit. However, if your gain on the house does not exceed the amount still owed at the time of sale, you will not owe any more repayment on the credit.
• The home must be purchased between April 8, 2008 and June 30, 2009. The purchase must be of an owner occupied primary residence.
• You cannot get the credit is the property is purchased from a relative, the purchase is financed by a tax exempt qualified mortgage issue/bond, the taxpayer is a nonresident alien, or if the taxpayer disposes of the residence before the close of the taxable year.

Standard Deduction for Property Taxes

• Creation of a new standard deduction for property taxes by nonitemizers in the amount of the taxes, capped at $500 ($1000 for joint filer).

FIRPTA FIX

• Modifies FIRPTA to allow the documents to be given to a qualified substitute instead of the buyer.

Second Home Conversion Tax Offset

• One of the offsets included in H.R. 3221 was the closing of a tax loophole concerning the conversion of a second home to a primary residence and the capital gains exclusion. This offset ONLY applies when a second home is converted to a primary residence and does not affect the capital gains exclusion when a home has only been a primary residence.
• The loophole allowed it so that if a second home was converted to a primary residence and was used as such for at least two out of the previous five years; the homeowner could use the $250,000/$500,000 capital gains exclusion.
• H.R. 3221 closes that loophole and will now only allow the capital gains exclusion to apply to gain received once the house became a primary residence
• Any gain earned prior to January 1, 2009 would be affected by this provision and there are some exclusions of this policy for extended military service (with limitations) as well as change of employment, health conditions or other unforeseen circumstances (not to exceed an aggregate period of two years).
• There is also an allowance of 5-years of gain if a property is converted from a principle residence to a second home.
• The new formula to calculate the gain allowed to be included in the capital gains exclusion would be: Profit from the sale multiplied by the number of days the home was a primary residence over the number of days the home was owned.

***************************************************************************************

Jerry LaRose is an Orlando Area Residential Real Estate Expert, who can assist you with the purchase and/or sale of Real Estate in Orlando, Windermere, Winter Garden Florida or any place in the country. Jerry has created a team of professionals throughout Orlando and the country to ensure that you enjoy a smooth transition to your new area. Please visit www.JerrySellsOrlando.com for your real estate needs. Please give me a call if you have questions about the Orlando and Central Florida real estate market.

P.S. If you are listing your home as a short sale in Orange County Florida and Orlando, Windermere, Winter Garden, or Ocoee Florida make sure you hire an agent who knows how to do short sales and has the experience to get the job done. We are doing successful short sale packages. Call us at 407-580-7011 to find out more about Orange County Short Sales and Orlando Area Short Sales.

• Will I owe the bank money after the short sale is accepted?
• If you are able to negotiate a price and buy it for less then I owe, will the bank come after me for the difference?

When the lender or bank accepts a short sale on the property for less than what was owed, then a deficiency exists with the loan. The deficiency is the difference between what the homeowner owed and the amount the property sold for.

For example, Mr. Jones owes $300,000 on her home and the lender accepts a short sale for $200,000. There is a deficiency of $100,000 for which the lender can then sue the homeowner. The key phrase is “can sue.” That is the right of the lender. However, that is a practice that almost never happens but, it is a real concern for the homeowner. In most cases, the homeowner wants nothing else to do with the lender once the property is sold.

If the deficiency judgment is granted, it would appear on the homeowners’ credit report just as any other judgment would appear.

Will they be required to pay the difference? During the short sale process, we will negotiate with the lender to not seek a deficiency judgment against the homeowner.

Some lenders as a matter of policy, will not seek a judgment against the homeowner because they feel they have waived their right by accepting a short sale however, if you can get them to openly acknowledge they will not seek a judgment; the owner will be more than happy.

There is a second issue as it relates to the deficiency and that is the 1099.

The lender will issue a 1099 to the homeowner for the difference. In Mr. Jones case, the lender will issue him a 1099 for $100,000. This will have to be reported as income Mr. Jones had received and thus he will have to pay taxes on the $100,000 as though it was earned income.

Upon successfully closing a short sale, lenders will always report a loss to the IRS and issue a 1099. However, the Mortgage Forgiveness Act of 2007 was signed into law on 12-20-07 and is now official, effectively getting rid of the question “will I be taxed on the Short Sale”. Prior to this action, forgiven mortgage debt due to foreclosure, short sale, or deed in lieu of foreclosure, was potentially taxable income to the borrower. This was the subject of much media attention and led to many questions and concerns from Sellers wondering whether or not they were going to get “hit with taxes” on the Short Sale. The new law, however, temporarily waives these taxes for debts forgiven (as high as35%) from the beginning of 2007 to the end of 2009.

This will effectively put an end to the question from Sellers… will I be taxed on the Short Sale discount. The definitive answer (at least until the end of 2009) is NO! For a copy of the Mortgage Forgiveness Debt Relief Act of 2007, go to: http://www.govtrack.us/congress/bill.xpd?bill=h110-3648 or http://www.whitehouse.gov/news/releases/2007/12/20071220-6.htmlThe bottom line here is that only Acquisition funding can be forgiven by the Mortgage Forgiveness Debt Relief Act of 2007.Foreclosure, Deed in Lieu and Short Sales are all treated the same in regards to taxes. Any cancellation of debt is a taxable event except for any acquisition funding for your primary residence that you’ve lived in for the last 2 years. Everything else is taxable. However, please see you tax advisor if you have a second home or investment property that you are considering a short sale on. You accountant may advise you that you may have a loss on this investment property that would offset any gain. Please seek advise from your tax advisor.

In my dealing with lenders, we have found that they generally will not seek a deficiency judgment because of the hardship. There are a couple of options that the homeowner has as it relates to the deficiency judgment. In Mr. Jone’s case, he could file bankruptcy to address the judgment. Mr. Jones could also short sale the deficiency with the lender at a later date. In other words, offer the lender a lesser amount as “payment in full.”

Here is an important note. The lender, if they issue a 1099 cannot then sue for a deficiency judgment. The lender can only pursue one or the other. In other words, Mary can’t receive both a deficiency judgment and 1099 from the lender.

It is obviously in the best interest of the homeowner to be proactive and deal with the short sale before it becomes a foreclosure. At least there is a chance that we can negotiate away the deficiency before it even becomes an issue.

About the author:

Jerry LaRose is an Orlando Area Residential Real Estate Expert, who can assist you with the purchase and/or sale of real estate in Orlando, Windermere, Winter Garden Florida or any place in the country. Jerry has created a team of professionals throughout Orlando and the country to ensure that you enjoy a smooth transition to your new area. Please visit www.JerrySellsOrlando.com for your real estate needs. Please give me a call if you have questions about the Orlando and Central Florida real estate market.

Jerry LaRose, P.A., ABR, GRI, e-PRO, CLHMS, REALTOR® 407-580-7011