They’re called USDA Rural Development 502 Loans

There is another news announcement that “Buyers Being Lured to 100% Loan Program” that was in the recent issues of The Wall Street Journal. The article states that more buyers in search of home loans are turning to an obscure program operated by the United States Department of Agriculture.

Well, we wrote about this program a few months back. The blog entry detailed this little know mortgage loan program.   The program allows no-money-down purchases. For those that qualify, a borrower can seek up to 102 percent, including a mortgage insurance policy.  To quality, buyers can’t have income that exceeds 115 percent of the median county income. Additionally, the loans are restricted to low-density areas (usually towns of no more than 25,000 residents). The loans are made by private lenders, which are then insured by the government.

For more information, contact your personal mortgage representative.  Or, if you don’t have one, we can highly recommend a few that we have done business with and have been completely satisfied with their service, as have our clients.  Just contact us by calling 609-417-1084. 

Find your next home at our new and updated web site.

Tags: buyers, Finances, financial, loans, mortgage loans, mortgages, no downpayment, no money down

States Impose Rules That Impact Home Foreclosures

Did anyone notice the drastic decrease in foreclosures in the State of Maryland?   In April, according to RealtyTrac.com, the State of Maryland ranked sixth in foreclosures among all the states but fell to 22nd just 30 days later for the month of May.

You will surely want to know what it is that the State of Maryland did to reduce foreclosure levels so drastically and quickly, and no less important, that other states will certainly want to borrow some of Maryland’s ideas and tactics.

The actual answer has nothing to do with home values, buyer demand or local economics. Even though the reported foreclosure filings dropped from 6,052 in April to 2,351 in May in Maryland this change was not the result of some economic miracle. What happened instead is that Maryland reduced foreclosure levels by changing the rules! Today if you’re a lender and want to foreclose on a home, it will take you longer to complete the process because the rules of the state of Maryland says it will take longer.  Under legislation that the state passed in April, the time required to foreclose on a home was increased from 15 days to not less than 135 days.  And it probably may take much longer. The State of Maryland now “requires a lender to wait 90 days after default before filing the foreclosure action and to send a uniform Notice of Intent to Foreclose to the homeowner 45 days prior to filing an action.”, according to the governor’s office.  That’s at least 135 days under the new rules versus just 15 under the old system.

The revised Maryland rules require lenders to physically notify homeowners about impending foreclosure actions.  This is important because the Maryland rules say that a foreclosure sale cannot occur until 45 days after such notice has been provided. Also, under the new legislation a lender must show that it actually owns the loan before it can foreclose. This new standard which may cause problems for lenders because home mortgages are sold, re-sold and divided up with electronic speed on Wall Street, for which records which may not have changed in local courthouses.

Other states are following Maryland’s example: 

1. Massachusetts has just passed legislation which will require lenders to give homeowners at least 90 days notice before starting a foreclosure.
2.  New York state is reviewing such legislation and is close to adopting similar rules.

While states cannot oversee national banks, savings & loan associations and credit unions regulated by the federal government, the federal government cannot regulate the debt collection process at the state level.  But the federal regulators could take the State of Maryland and any other states that adopt the same rules to court with claims that these state governments are interfering with the right of the federal government to regulate national lenders.  On the other hand, there are sources at REaltyTrac.com that state that there are endless precedents which favor state authorities and if the Supreme Court were to decide against the states then a new Congress and a changing political climate could well result in new federal laws which support the states.

In revising the debt collection rules the states have have not eliminated foreclosures but only slowed the foreclosure process. The impact of revised state legislation is likely to have several results.

1. Foreclosures will still take place, but at a later time.  The revised rules just postpone the inevitable, possibly. The number of toxic loans is unchanged, meaning that millions of badly underwritten mortgages, exploding adjustable rate mortgages (ARMs) and interest-only loans remain a potent source of steep foreclosure numbers in the future. 
2. These longer foreclosure periods give borrowers more leverage and time to negotiate with the lenders. 
3. There may be some homeowners will be saved from being foreclosed on because of these foreclosure delays. Owners will have more time to sell.  And real estate agents will have more time to market these homes without causing the owners to appear to be distressed (which may help them get a better sale prices).   Also, because the process now takes perhaps another 135+ days (an additional 4-5 months) to move through the foreclosure process the lender might well be interested in a short sale or a loan modification. 
4. However, these longer periods may be a benefit to loan servicers and lenders.   How?  Well, the lending community has been overwhelmed with the number of default loans and foreclosures they have to deal with and they have not had sufficient staff to deal with the large foreclosure increases that we have seen during the past 12-18 months. These state-based foreclosure delays may give lenders and loan servicers the much needed time to hire and train more people that can properly deal with owners and real estate agents.  The possible positive result could be more modifications, refinanced loans and repayment plans as opposed to outright foreclosures and short-sales.

In the above cases, both the lenders and owners could come out ahead.  Now the foreclosure numbers could fall as increasing numbers of homes were saved instead of delayed.

One concern may be that lenders may back away from those states where the foreclosure process has been tightened/revised, as in the State of Maryland. These lenders have already been writing down billions of dollars in losses so it could make sense to them to suspend loan activities in those areas which represent the most risk (like insurance companies have done in response to floods and hurricanes in certain areas in the recent past). Reduced loan availability in selected states could result in higher local interest rates, slower sales and reduced home prices throughout a state, thus causing an negative impact on the hosuing market in those states.

In trying to balance between the negative and positive aspects of the rule revisions by states, we believe that the positive aspects outweight the negative ones.  If there is anything that can or should be done to help owners save their homes from foreclosure due to being victims of predatory loans or because of circumstances completely out of their control, then those actions must be looked at seriously and in greater detail.  We look forward to when the State of New Jersey adopts such revisions and does so without causing more problems then it solves.

Linda & Terry Iwaniw
Foreclosure Prevention Consultants
REATOR Associates
RE/MAX Home Team
609-417-1084

Tags: Finances, Foreclosures, loan defaults, loans, mortgage loans, mortgages

House Rescue Bill Passes

On Wednesday, the House of Representatives passed H.R. 322, The House Rescue Bill.  It will now go to the Senate, who is expected to pass it with few or any changes and then send it ot the President for his signature.  Word out is that the President will sign this bill next week and thus making it into law effective October 1, 2008.

What affect does this new law have on the the housing market in Southern NJ?

1.  FHA loans will now require a 3.5% down payment, instead of 3%, and all seller down payment assistance programs will be prohibited. Buyers must invest at least 3.5% of the appraised value into their own home. 

2.  This law gives first-time homebuyers a refundable tax credit that works like an interest-free loan of up to $7,500 (to be paid back over 15 years) to spur home buying and stabilize the market.  The credit will begin to phase out for taxpayers with adjusted gross income in excess of $75,000 ($150,000 in the case of a joint return).

3.  It raises the Government Spronsored Enterprise (GSE) loan limits for single family homes to create affordable mortgage loans for moderately priced homes by allowing GSE loans up to 115% of the local area median home price, and to make GSE loans effective in high cost areas by raising the permanent loan limit from $417,000 to $625,500,.

4.  Raises the FHA loan limits to create affordable mortgage loans for moderately priced homes by allowing FHA loans up to 115% of the local area median home price, and to make GSE loans more available in high cost areas by raising the permanent loan limit from $362,790 to $625,500.

You can read the summary of this bill at:

Thomas – Library of Congress

Tags: downpayments, housing market, loan limits, loans, mortgages, Real Estate, real estate market