Aundrea Beach-Greco Blog

HOPE FOR HOMEOWNERS (H4H)
MORTGAGE ASSISTANCE TO STRUGGLING HOMEOWNERS

HOPE for Homeowners (H4H) will provide another resource to the Federal Housing Administration’s (FHA) existing efforts to aid struggling homeowners. Under the program, borrowers having difficulty paying their mortgages will be eligible to refinance into FHA-insured mortgages they can afford.

For borrowers who refinance under HOPE for Homeowners, lenders will be required to “write down” the size of the mortgage to a maximum of 90 percent of the home’s new appraised value. In many instances, lenders will determine that such a reduction in principal will allow them to avoid a costly foreclosure, while helping borrowers stay in their homes.

HUD strongly encourages borrowers to work with their current lender/servicer to determine if HOPE for Homeowners is the right program for them. Lenders should explore all options, including HOPE for Homeowners, before issuing foreclosure notices. For lenders, this voluntary program will serve as another loss mitigation tool that can be used to help families keep their homes.

Sustainable, Affordable Homeownership

HOPE for Homeowners will only offer 30-year fixed rate mortgages – so the borrower’s last payment will be the same as the first payment. Further, this program will maintain FHA’s long-standing requirement that new loans be based on a family’s long-term ability to repay the mortgage. Only owner-occupants are eligible for FHA-insured mortgages.

Consistent with statutory requirements, borrowers must also meet the following criteria:

• Their mortgage must have originated on or before January 1, 2008;

• They cannot afford their current loan;

• They must have made a minimum of six full payments on their existing first mortgage and did not intentionally miss mortgage payments;

• They do not own a second home or other properties;

• Their mortgage debt-to-income must be at least 31 percent and greater;

• They did not knowingly or willfully provide false information to obtain the existing mortgage, and they have not been convicted of fraud in the last 10 years;

• They must follow FHA’s long-standing and strict policy of fully documented income and employment.

• Homeowners must agree to share both the equity created at the beginning of their new HOPE for Homeowners mortgage and any future appreciation in the value of their home.

• To participate, existing subordinate lenders (ie: 2nd lienholders) must agree to release their outstanding mortgage liens.

The new HOPE for Homeowners mortgage payment must be at or below 31 percent of the borrower’s income, unless there is ‘trial modification’ period prior to loan application. A trial modification would give borrowers the opportunity to demonstrate their capacity and willingness to make a mortgage payment that does not exceed 38 percent of their monthly income.

Funding

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

Program Timeline

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

Voluntary Lender Participation

FHA will continue to offer lenders an alternative to foreclosing on borrowers. Similar to the FHASecure program, lenders will be required to write-down the outstanding mortgage principal balances to 90 percent of the new current value of the property. In many cases, reductions in principle will cost lenders less than the losses associated with foreclosure.

Homeowners In Need Should Act Now

While lenders are gearing up to offer this new program, families should not wait to seek mortgage relief. Right now, homeowners can determine if they are already eligible for mortgage assistance through FHASecure. They can obtain information through any of the following options:

1. Contact current lender

2. Contact a local, HUD-approved housing counseling agency at HUD.gov;

3. Contact the HOPE NOW Alliance at 1-888-995-HOPE; or

4. Call FHA at 1-800-CALL-FHA.

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 H4H Key Points 

• FHA H4H program allows refinance at 90% of current appraised value
• Owner occupied only
• Borrower cannot have ownership interest in other residential real estate including second homes and/or rental properties
• Borrower must have made at least 6 full payments on the mortgage
• Borrower may not have intentionally defaulted on their mortgage
• Borrowers convicted of fraud within the last 10 years are not eligible
• Borrowers must certify that they did not knowingly, or willfully and with actual knowledge, furnish false material information for the purpose of obtaining their existing mortgage(s)
• Borrowers debt to income ratio as of March 1, 2008 must be greater than 31%
• The first mortgage must have been originated on or before January 1, 2008
• Property must be one unit dwelling (SFR, Condo, townhouse, manufactured home)
• Appraisal must be ordered specifically for the H4H program and cannot be more than 3 months old at closing
• Monthly MIP (Mortgage Insurance Premium) is calculated at 1.5% (this is 3 times the normal FHA rate)
• Upfront MIP (which is financed into the new loan) is 3% of the base loan amount (2 times the normal FHA rate)
• Only 30 year fixed rate loan program available
• Limited availability of 2^nd mortgages for the first 5 years (only for safety/health repairs)
• Closing costs can be included into the new loan but cannot exceed the 90% loan to value
• As a condition of the H4H mortgage, the borrower agrees to share with HUD in both equity (50%) and appreciation (100% 1^st year…50% year 5 and beyond)
• See Example of Equity Sharing
• Lienholder/servicer is NOT required to participate in this program – voluntary

Additional Links

HUD website

HUD Mortgagee Letter _ HOPE Program

H4H Consumer FAQ

H4H Examples of How Equity and Appreciation Are Shared

Call today for more info to see if you qualify for this new FHA loan program! 

Aundrea Beach-Greco
Certified Mortgage Planner, CMPS™
702.326.7866 | 877.AUNDREA

info@aundreabeach.com

HOMESTEAD ACT (NRS 115)

We’ve had many inquiries lately regarding the act of filing a homestead on a primary residence as protection from credit cards debt. The Nevada Homestead Act does (NRS 115) not protect a homeowner from any debt that was voluntarily incurred. This category includes mortgage financing, credit card debt, auto financing, lines of credit and Federal Tax Liability. Following is an article that offers a brief explanation as well as links to print the required homestead document.

Homeowner’s are advised to seek competent legal counsel regarding the ramifications of filing a Declaration of Homestead. This article is intended as a public service and not legal advice.

I’ve heard I should Homestead my house … what does that mean?

The Nevada Homestead Act today doesn’t mean you can squat on 160 acres of public land and eventually own it, rather it is a means to protect equity in your home against seizure, forced sale by general creditor claims, and judgments that might be entered against you. The amount of protection was recently increased in Nevada to $550,000. The Nevada Homestead Act is one of the gifts the Constitution of the State of Nevada gives to homeowners and yet it’s amazing how few people actually take advantage of it. Most of the people we speak with don't even know it exists.

Here’s how it works: You must currently own or be buying your home, townhome, condominium or mobile home in order to file a Declaration of Homestead. The home must be your principle residence, not a rental or investment property. It doesn’t matter whether you are single, married or an unmarried head of household. You may homestead your mobile home even though you don't own the land the mobile home sits on. Some mortgages may prohibit homesteading, check with your lender to ascertain their position on you homesteading your property.

Be aware that a homestead will not protect your home or mobile home if the judgment or lien is for: Taxes, the mortgage or deed on the home or mobile home, improvements made on the home or mobile home, mechanics liens and other liens on the home or mobile home, any debt or obligation you willfully and voluntarily incur.

Thanks to legislative changes this year, you can protect $550,000 of your equity. If your equity exceeds $550,000 you should go ahead and homestead understanding that you will only be able to protect $550,000 of your equity. To protect your property all you need to do is:

Click here to download Homestead form

You will need your parcel number and legal description to complete your Homestead form. If you do not have this information (it is on your recorded deed), you may get it from our online Real Property Records.

Click here to search your property records.

If you have any legal questions regarding this document, please consult your attorney.

PROCEDURE FOR RECORDING DECLARATION OF HOMESTEAD

1. Complete the Homestead Declaration form. The form must be printed legibly in black ink. Text cannot extend beyond the one inch margins on all sides of the form. An additional $25.00 recording fee could be applied if the form does not meet these requirements at time of recording.

2. Sign in the presence of a Notary Public.

3. Take the completed document to:

 Clark County Recorder

If you have already filed a Declaration of Homestead on your property remember that you will need to prepare and record a new one if you: 1) Sell your home and buy another one, 2) move your mobile home from one lot space to another, 3) marry, 4) divorce or 5) become widowed, 6) get a new loan, 7) refinance.

Main Office: 500 S Grand Central Pkwy. 2nd Floor P. O. Box 551510 Las Vegas NV  89155-1510

Northwest Office: 3211 N. Tenaya Way Suite 118 Las Vegas NV  89118

Henderson Office: 245 N Stephanie Street Suite B Henderson NV  89074

The completed Homestead Declaration can also be mailed to the Recorder's main office. 

4. The recording fee is $14.00. Please make your check payable to the Clark County Recorder

WHAT THE LAW PROVIDES: When you record a Declaration of Homestead, Nevada law protects the equity in your home up to $550,000 from general creditor claims (unpaid medical bills, bankruptcy, charge card debts, business/personal loans, accidents) but would not preclude a seizure or forced sale of your residence from general creditors if your equity exceeds the $550,000. A creditor may file suit and can record a judgment lien against any real property you own. Recording a Declaration of Homestead protects your principal residence up to the statutory maximum. For example, if the value of your home is $645,000 and you have a first mortgage of $485,000 plus a second mortgage of $10,000, the equity is $150,000.

WHAT IS NOT PROTECTED?

The Homestead Law does not protect you against debts secured by a mortgage or deed of trust, payment of taxes, IRS lien, mechanic's lien, child support or alimony payments.

Our Advice
Filing a Declaration of Homestead is easy and is such a valuable tool that we recommend all Nevada homeowners utilize this very inexpensive means to protect their home equity. 

When it comes to choosing professionals to assist you with your real estate lending needs… Experience is Priceless!  Where are you getting your advice?

CONTACT ME TODAY FOR MORE INFO...

Aundrea Beach-Greco
Certified Mortgage Planner, CMPS™
Cell (702) 326-7866
info@aundreabeach.com

The Chinese have a proverb: "May you live in interesting times." And we are living through interesting times indeed.

Whatever the political posturing regarding the rescue plan, a plan needed to be passed. Credit markets are frozen and banks are going bust every day. This is not totally because of "toxic" mortgages. This has a lot to do with FASB 157, also known as "mark to market".

Each day, lenders must mark their assets to the marketplace. It's like you having to appraise your home everyday and, if your neighbor was under duress because she got very ill, divorced, lost her job and was forced to sell her home quickly, she may have sold it super cheap. Now, does that mean your house is worth that super cheap price, too? Clearly not. Why? Because you are not under duress. You have the time to sell your home and get a more normal price, which more accurately reflects true market conditions. But "mark to market" does not allow for this, which creates a vicious cycle.

Why is this so bad? Because, as lenders mark down their assets the amount that they have previously loaned becomes much riskier in relation to their assets. For example, say a bank has $1 million in assets and say they have $15 million in loans outstanding. Their ratio is an acceptable 15 to 1. But should they take a paper write down of $500 thousand due to "mark to market" requirements, their ratio suddenly changes to 30 to 1. This is because their assets are now only $500 thousand after taking the paper loss, while their loans outstanding are still $15 million. And at 30 to 1 this bank is viewed as a risky investment. So the stock price starts to get hit, it becomes harder to borrow, and most importantly harder to make money. The bank is then forced to sell some of its loans to reduce its ratio...at cheap prices. And this makes the vicious cycle continue.

And a quick look at the holdings of these loans show that 95% are problem free. Additionally, the Credit Default Swaps (CDS) that are used with the pools of mortgages are relatively safe. But this requires a bit of understanding. You see, when a pool of mortgage loans is put together it isn't just A paper or B paper etc. it's everything. It's got some A paper, B paper, C paper...and even what looks like toilet paper. An "A" investor buys the whole pool but because they are an "A" investor their safety is greater because they can avoid the first 20% (an example) of defaults. So they own the whole pool but are sheltered from the first batch of defaults, and for this they get the lowest rate of return. As you can figure from here the more risk investors want to take, the higher the return. So the investments are relatively safe, but the accounting rules currently place undue pressure on the banking institutions.

Now add to all this, the opportunistic "shorting" done on the financial stocks, much of it illegal because those shorts did not legitimately borrow shares (called naked shorting), and you exacerbate this whole problem. Thank goodness for the recent temporary ban on shorting in the financial sector. As for the plan, the government is the only one who can step in to do this.  And they have to do this. And they will do this. The nauseating political posturing from both sides is just part of the process.

This is not easy to understand for the general public. In fact most politicians don't get this either. That's why it was a difficult yet critical bill for them to vote on.

Now this is done, it will take some time but the markets will stabilize. As for the real estate and mortgage industries, it will take a bit of time but we will make it through this. Rates will remain attractive and the influx of credit availability will help the housing market gradually improve. This ultimately will be the medicine needed to improve the situation overall.

As always – please keep in touch during these volatile times. I am here to help you and your clients in any way that I can.