America’s top 10 wealthiest communities

Here’s BusinessWeek’s list of America’s top 10 wealthiest communities:

1. Brookville, N.Y.; average income: $328,404; average net worth: $1,670,075
2. Atherton, Calif.; $380,535; $1,648,161
3. Rolling Hills, Calif.; $324,190; $1,647,622
4. Kenilworth, Ill.; $334,634; $1,619,702
5. Hillborough, Calif.; $300,943; $1,668,732
6. Roslyn Estates, N.Y.; $298,935; $1,664,191
7. Hidden Hills, Calif.; $318,843; $1,630,085
8. Oyster Bay Cove, N.Y.; 317,661; $1,625,524
9. (tie) Chevy Chase Village, Md.; $311,170; $1,635,311
(tie) Los Altos Hills, Calif.; $298,510; $1,653,676

Source: Business Week, Prashant Gopal (03/17/2009)

Arizona Short Sales 101; Q&A’s

Why are short sales an important option for seller’s in today’s market?
In the simplest terms, short sales are a last hope for people looking to avoid foreclosure. The market that we are experiencing today is full of homeowners who are truly hurting and they don’t know where to start or who to turn to. Short sales, although not an ordinary transaction, are a good alternative for sellers who are either in a foreclosure already, or are headed toward one. It is crucial that real estate professionals take the time to understand that these are real families on the verge of losing their home. It is our job to embrace these individuals and at the same time give back to the communities in which they live, and we work.

What are some advantages to offering short sales?
The biggest advantage to offering a short sale is that it helps the distressed homeowner avoid a foreclosure, which is crucial since foreclosures are one credit item that are almost impossible to repair. Foreclosures stay on your history forever and affect your credit score as well as your present employment and the hiring process for a new job.

What are some of the misconceptions people have about the short sale process?
Many people think short sales can be used as an alternative for homeowners who find themselves in trouble with their mortgage payments, but they are only an option for sellers who are either in a foreclosure already, or are headed toward one. It is important to understand the difference between dissatisfied homeowners- those who are simply upside down with their mortgage and are facing hardships- and homeowners who are in trouble.

What pitfalls do agents need to watch out for when working with short sales?
Before dedicating their time to help sellers through the short sale process, agents need to make sure the seller is 100% committed to the time frame of the process as well as being willing to work with them through the process.

A seller’s assessment sheet is an important tool to help save time and effort in pursuing a short sale. The assessment sheet is based on four criteria and each is graded on a 1-10 scale, with one being the lowest and 10 being the highest.

1. Expectation- The client has to have real expectations of the market and what is possible- both within value and market time.
2. Motivation- What is the client’s motivation to get out of the situation? If they aren’t motivated, they may become disinterested in the sale, and that will be a waste of the agent’s time, money and marketing.
3. Cooperation- Will the client work with you through the short sale process? Will they keep the property neat and accessible to show and be available when you need them?
4. Communication- The client has to be willing to communicate with their agent openly, honestly and on a regular basis. If the client isn’t being upfront, that is a huge warning sign.

RISMedia

Contact a short sale expert click here

Your 2009 Homeowner Tax Deductions: Taking Advantage of Deductions For Homeowners

Nearly everyone has heard about the new $8,000 tax credit for first-time home buyers, but what about tax advantages if you’re a homeowner today? As we approach the deadline for filing your taxes, we will discuss tax benefits that exist for existing home owners. Some of the many tax advantages for current home owners are listed below. As always, you should consult a professional tax advisor for details, but here’s a list of the top tax deductions for homeowners:

Mortgage Interest – Mortgage interest on a home is usually fully tax-deductible. You can deduct interest on multiple mortgages, as long as they do not exceed $1 million. The purpose of the mortgage must specifically be to buy, build or improve a home.

Points Paid on a Purchased/Refinanced Loan – If you refinanced last year, you may be able to write-off any points you paid to buy down the mortgage rate. To do this, you deduct the points proportionately over the life of the new loan. For example, if you took out a 30-year loan, you would deduct 1/30th of the points you paid each year. Remember, if you’ve refinanced before, and you have points from the previous refinance that you haven’t finished deducting, you can write off the rest of those points in the year you refinance.

If you bought your home last year, the points you paid at closing are deductible on your income tax statement for that year. If the seller paid some (or all) of your points for you, you may be able to deduct those seller-paid points too!

PMI – extended through 2010. Late in 2007, Congress extended the tax deduction for homeowners paying private mortgage insurance through 2010. This one has some restrictions – you must have bought or refinanced the home after January 1, 2007 and have an adjusted gross income under $110,000.

Capital Gains with No Income Taxes – Thanks to the 1997 Tax Act, once every two years, single homeowners can realize a tax-exempt profit of up to $250,000 – as long as the seller owned and occupied the home as a principal residence during any two of the last five years. Married homeowners who file jointly on their tax returns do not have to pay taxes on up to $500,000 of gains when they sell their primary residence.

Real Estate and Property Taxes – State and local property taxes can be deducted as an expense against income. However the real estate taxes are only deductible in the year they are actually paid to the government.

Home Offices – Work from home? If you have a qualified office in your home, you may be able to deduct costs associated with maintaining the portion of your home exclusively used for business. For example, 100% of your expenses related to the office such as painting and upkeep are deductible, as well as a portion of indirect expenses such as the cost of utilities and garbage pickup.

Vacation Homes – Owning a vacation home has more benefits than you may think. You can deduct some of the costs associated with owning a vacation home, such as real estate taxes, personal property taxes, mortgage interest, and points.

FHA Loans Become Popular Choice

Newly discovered FHA loans, which require low down payments but charge higher interest to borrowers with lower credit ratings, have quickly become a wildly popular choice for home buyers. The loans require a down payment of only 3.5 percent, while conventional loans require down payments of 10 percent or higher. However, the products also are drawing some unfavorable comparisons to now-abolished subprime loans.

Finance professionals, however, stress that unlike the infamous subprime mortgages of years past, FHA lenders go out of their way to verify income and ensure that they are not approving “liar loans.”

Source: Palm Beach Post (Fla.), Jeff Ostrowski (03/16/09)

Arizona Mortgage-Help Site, Call-in Number Go Live

The U.S. Treasury Department went live on March 19 with its Making Home Affordable program, which aims to help home owners refinance or modify their mortgages. The campaign includes a Web site at makinghomeaffordable.gov as well as a telephone hotline number at (888) 995-4673. The federal government is targeting 9 million home owners whose loans are held by Fannie Mae or Freddie Mac.

Source: Indianapolis Star (03/19/09)

Rehab a Arizona Home w/HUD’s 203(k)

Most mortgage financing plans provide only permanent financing. That is, the lender will not usually close the loan and release the mortgage proceeds unless the condition and value of the property provide adequate loan security. When rehabilitation is involved, this means that a lender typically requires the improvements to be finished before a long-term mortgage is made.

When a homebuyer wants to purchase a house in need of repair or modernization, the homebuyer usually has to obtain financing first to purchase the dwelling; additional financing to do the rehabilitation construction; and a permanent mortgage when the work is completed to pay off the interim loans with a permanent mortgage. Often the interim financing (the acquisition and construction loans) involves relatively high interest rates and short amortization periods. The Section 203(k) program was designed to address this situation. The borrower can get just one mortgage loan, at a long-term fixed (or adjustable) rate, to finance both the acquisition and the rehabilitation of the property. To provide funds for the rehabilitation, the mortgage amount is based on the projected value of the property with the work completed, taking into account the cost of the work. To minimize the risk to the mortgage lender, the mortgage loan (the maximum allowable amount) is eligible for endorsement by HUD as soon as the mortgage proceeds are disbursed and a rehabilitation escrow account is established. At this point the lender has a fully-insured mortgage loan.

more on the FHA 203k

Arizona Foreclosure %’s

35% Of homeowners with mortgage in Arizona have little or no equity
16% Of all mortgages will be in foreclosure in the next four years.

Search foreclosure properties here or request for a specific area here

Freddie Mac Launches REO Rental Initiative for Tenants, Owner-Occupants after Foreclosure

RISMEDIA, March 17, 2009-Freddie Mac (NYSE: FRE) launched its new REO Rental Initiative giving qualified tenants and former owners the option to lease their recently foreclosed properties on a month-to-month basis. The REO Rental Initiative will be managed by HomeSteps®, Freddie Mac’s national real estate unit, and implemented through several national property management firms.

Freddie Mac also announced it will continue to suspend all eviction actions until April 1, 2009 to ensure there is ample time for current occupants to learn about the options available to them under the new initiative.

“Freddie Mac’s REO Rental Initiative can help ease a foreclosure’s impact by giving renters and former owners more time to determine what options are best for them and their families. At the same time, the REO Rental Initiative helps stabilize property values and local communities by keeping homes occupied and less vulnerable to vandalism,” said Ingrid Beckles, Senior Vice President, Default Asset Management at Freddie Mac.

Property management firms will begin the process of contacting occupants of foreclosed properties to determine their interest in staying in the home and their eligibility for a month-to-month lease. Occupants will be contacted only after the foreclosure gives Freddie Mac the legal authority to offer a lease.

To qualify for a lease, the tenant or former owner must occupy the property and show they have adequate income to pay the monthly rental amount established by the property management company based on market rents for the area in which the home is located. Occupants must agree to allow HomeSteps to show the home to potential buyers as it will be marketed for sale during the lease period.

Additionally, the home must be in safe, habitable condition and meet all local codes for rental properties to qualify for the REO Rental Initiative. If an occupant does not wish to lease the property, Freddie Mac will continue its current practice of offering relocation assistance. In addition, Freddie Mac will also explore available workout options with owner-occupants after Freddie Mac gains title to the property through foreclosure.

RISMedia

Making Homes Affordable: Modification Initiative Details Announced

The Obama Administration unveiled the final details of its “Making Home Affordable Program,” which is designed to help up to 9 million American families refinance or modify their loans to a payment that is affordable now and into the future. Last week we discussed the refinance portion of the initiative, this week, we answer questions on the second part of the initiative, home loan modifications. Here are some common Questions and Answers about the Modification Initiative.

Who is eligible?
To apply for a Home Affordable Modification, you must: Own and currently occupy a one- to four-unit home. Have an unpaid principal balance that is equal to or less than $729,750 (for one unit properties). Have a loan that was originated before January 1, 2009. Have a mortgage payment (including taxes, insurance and home owner’s association dues) that is more than 31% of your gross (pre-tax) monthly income. And, have a mortgage payment that is no longer affordable, perhaps because of a significant change in income or expenses. If you answered YES to all of these questions, you may be eligible for the Modification Initiative.

Am I eligible if I missed some mortgage payments?
Yes. If you missed two or more mortgage payments and answered “yes” to the Modification Initiative requirements above, you may be eligible for a loan modification.

Do I need to be behind on my mortgage payments to be eligible for a Home Affordable Modification?
No. Responsible borrowers who are struggling to remain current on their mortgage payments are eligible if they are at risk of imminent default. Examples of being “at risk” include facing a significant increase in your mortgage payment or a reduction in your income. Contact me to discuss your specific situation.

I have a second mortgage. Am I still eligible?
Yes, but only the first mortgage is eligible for a modification.

I have an FHA loan. Can it be modified under this program? Are all loans eligible?
Most conventional loans including prime, subprime, and adjustable loans; loans owned by Fannie Mae and Freddie Mac as well as private lenders; and loans in mortgage backed securities are eligible for a modification. Contact me to discuss your specific situation.

I have a mortgage on a duplex. I live in one unit and rent the other. Will I still be eligible?
Yes. Mortgages on two, three and four unit properties are eligible as long as you live in one unit as your primary residence.

What does the Modification Initiative do?
If you are eligible for this plan and are approved, you will be put on a trial modification for three months at a new interest rate and payment. If you successfully make the payments and are current at the end of the three-month trial period, your servicer will execute a permanent modification agreement that will lower your interest rate to a fixed rate for five years.

What happens after five years?
Beginning in year six, the rate may increase no more than one percentage point per year until it reaches the “rate cap” in your modification agreement, which is basically the market interest rate on the date the modification is finalized. That means your rate can never be higher than the market rate on the day your loan is modified. This is great news because rates are currently at historic lows… and you can lock in now.

How low can my interest rate go?
Treasury is providing incentives to your investor to write the interest down as low as 2%, if necessary to get to a payment that you can afford based on your income.

What happens if that is not enough to get to an affordable payment?
If a 2% interest rate is not enough to bring your payment down to 31% of your gross monthly income, your servicer can extend your payment term–for example, give you a 40-year loan rather than a 30-year. If that is still not sufficient your servicer will defer repayment on a portion of the amount you owe until a later time. This is called a principal forbearance. A portion of the debt could also be forgiven. This is optional on the part of the investor. There is no requirement for principal forgiveness.

Are there any other benefits to this program?
Yes. For every month you make a payment on time, Treasury will pay an incentive that reduces the principal balance on your loan. Over five years the total principal reduction could add up to $5,000.

How much will a modification cost me?
There is no cost to borrowers for a Home Affordable Modification. You will not be asked for any money. If there are costs associated with the modification–such as payment of back taxes–your servicer will add those costs on to the amount you owe. Your servicer will also forgive any late fees.

Is housing counseling required under this program?
Borrowers are strongly encouraged to contact a HUD-approved housing counselor to help them understand all of their financial options and to create a workable budget plan. However, housing counseling is only required for borrowers whose total monthly debts are very high in relation to their incomes (55% of your gross monthly income). If you would like to speak to a housing counselor, call 1-888-995-HOPE (4673).

How do I apply for the Modification Initiative?
If you meet the general eligibility criteria for the program, you should gather the following information: Recent pay stubs to help determine your gross (before tax) household income. Your most recent income tax return.
Information about your assets. Information about any second mortgage on your house. Account balances and minimum monthly payments due on all of your credit cards. Account balances and monthly payments on all other debts, such as student loans and car loans. A letter describing the circumstances that caused your income to be reduced or expenses to be increased (for example: job loss, divorce, illness, etc.). Once you have this information, call your mortgage servicer and ask to be considered for a Home Affordable Modification. The number is on your monthly mortgage bill or coupon book.

My loan is scheduled for foreclosure soon. What should I do?
If your mortgage has been scheduled for foreclosure or if you have missed one or more mortgage payments, should contact your servicer immediately. You may also want contact a HUD-approved housing counselor by calling 1-888-995-HOPE (4673).

Loan Modification. Does it make sense?

Loan Modification. Does it make sense?

Kathryn and James in Southern California requested a loan Modification on their home. They had a rate change coming up on their Adjustable Rate Mortgage and felt that the new payment would take them over the edge. They had purchased the home in 2005 for the amount of $750,000 and the current market value had declined to $450,000. The lender offered them a reduction in rate to 4% interest and fixed the rate for 5 years. This actually reduced their monthly payment 400.00 per month and made their budget manageable. Knowing that the market value was three hundred thousand less than they owed, they still chose to accept the Loan Mod and were happy with the outcome. They still owed $750,000 to the lender.

Did this make sense for the Lender?

Was this a good, solid financial decision for Kathryn and James?

I had pointed out the fact that if they paid on this home for another 15-20 years they would still be upside down in their home and continue
to live in a negative equity situation for who knows how long. If they do decide to sell the home in the next five years, will they still fall short and be forced to sell the home in a Short Sale situation?Will they ever be in an equity position that will allow them to permanently refinance to a fixed rate?

If they were members of my immediate family, what would I have counseled them to do?

Another Family owned a home that had an appraised value of $890,000 15 months ago. They needed to move 65 miles away due to a job transfer. They completed a Short Sale on the home and received $428,000. This was over $280,000 short of a full pay off to the lenders.

They purchased another home, using seller financing, in the new location for $549,000. The home was equally as beautiful and had been listed
for as much as $950,000.

The new mortgage payment was $2,500.00 less than the previous payment and the home will more than likely appreciate from this point
forward. Is there a chance of further deterioration? Of course, however, they have a significantly greater chance for equity build up than Kathryn and James in the first example.

The money or equity lost in both examples is just that, LOST. Does it make more sense to “mitigate” the losses and start with a new lower level to re-build the foundation of the family’s financial structure? I believe that these factors should be weighed and balanced.

Let’s talk sense to our customers. After all they should be customers for life!

Dan Garber
Short Sales 4 Profit
347 West Gordon
Layton, UT 840