“If you’re thinking about applying for the new $6,500 federal tax credit for repeat home buyers or the extended $8,000 version for first-time buyers, here’s some news: The IRS has just issued its first formal guidelines for you.

“Too many people bought too much house for too many years.

Yes, the financial system almost collapsed because mortgage bankers and brokers told lies about loan terms and loosened standards in dangerous ways, and investment bankers packaged those loans into bonds that were far more toxic than ratings agencies predicted.

But the roots of the mortgage contagion lie with all of us and our desire to own just a bit more house…”

Read the article: http://www.nytimes.com/2009/09/12/your-money/mortgages/12money.html?_r=1&em

“Tens of thousands of financially strapped homeowners who have asked lenders to lower their mortgage payments are instead winding up with higher monthly payments and larger debts on their homes.

Homeowners who were hoping for lower payments are discovering to their dismay that lenders roll late fees, back taxes or other costs into the principal, sometimes turning a difficult payment into an impossible one. That is one reason that many reworked mortgages are sliding back into default…”

Read the article: http://www.usatoday.com/money/economy/housing/2009-09-14-mortgage-modifications-not-helping_N.htm

“Mike Kennedy, a real estate appraiser in Monroe, N.Y., was examining a suburban house a few years ago when he discovered five feet of water in the basement. The mortgage broker arranging the owner’s refinancing asked him to pretend it was not there.

Brokers, real estate agents and banks asked appraisers to do a lot of pretending during the housing boom, pumping up values while ignoring defects. While Mr. Kennedy says he never complied, many appraisers did, some of them thinking they had no choice if they wanted work. A profession that should have been a brake on the spiral in home prices instead became a big contributor…”

Read the article: http://www.nytimes.com/2009/08/19/business/19appraise.html?_r=1&hp

“American homeowners are much more realistic about their own homes’ values than they were one year ago, but are more optimistic about the future than at any other time in the past year. More than half (60%) of homeowners believe their own home lost value in the past 12 months, according to the Zillow Q2 Homeowner Confidence Survey. In reality, 83% of homes lost value during that time, according to Zillow’s second quarter Real Estate Market Reports.

But homeowners are more optimistic than ever about the future values of their homes, with 81% of homeowners believing their own homes’ values will not decline in the next six months- the highest percentage on record since the first quarterly Homeowner Confidence Survey, which was fielded in the second quarter of 2008. Meanwhile, only 19% of homeowners believe their own home will decrease in value over the next six months.”

Read the article:  http://rismedia.com/2009-08-18/optimism-grips-homeowners-81-think-homes-value-will-increase-or-stay-same-in-next-6-months/#ixzz0OdyT1geQ

“If you’re applying for a loan to purchase a primary or secondary home, or planning to refinance, you should be aware of a little-publicized new set of federal consumer-protection rules that takes effect July 30. Among other key changes, the new Federal Reserve guidelines require lenders to give you initial disclosures of your mortgage costs within three business days of your loan application. If you don’t get them, you can pull the plug…”

Read the article: http://bit.ly/12q2vA

“After reviewing recent unemployment data and market fluctuations, plus patterns of mortgage fraud, Fannie Mae is making major mortgage guideline changes for the first time in more than 6 months. The changes are broad, impacting 15 separate areas of the mortgage approval process as detailed in Fannie Mae’s official announcement.

Across-the-Board Guideline Changes:

• Credit, income and asset documentation can’t be more than 90 days old. The former guidelines allowed for 120 days.
• Lenders must compare actual federal tax returns from the IRS to a borrower’s supplied income documentation. Previously, this review step was at the lender’s discretion.
• “Tip” income must be verified.
• Trailing secondary wage earning is now prohibited. This means that P&G employees relocating to Cincinnati can’t use a spouse’s “expected” Cincinnati income until that spouse actually has a job.
• Stocks, bonds and mutual funds get assigned 70% of current market value. Formerly, this was 100%.
• Retirement assets get assigned 60% of current market value. Formerly, this was 70%.”

Read the article: http://bit.ly/e0q8F

by Elizabeth Hurd

The March, April and May issues of Arizona REALTOR® included numerous articles on short sales, REOs, foreclosures and loan modifications. In the June issue, AAR included a quiz to help you determine how much you learned about these hot topics. Find out the answers here!

Q: Do Arizona’s anti-deficiency statutes apply to all properties?
A: No.  For the anti-deficiency statutes to apply, the property at issue must be a duplex or a single family residence; the real property must be two and one-half acres or less; and the loan at issue must be a purchase money mortgage.
A purchase money mortgage is one where the loan proceeds are used to acquire title to the property. A refinance of a purchase money mortgage is also considered a purchase money mortgage for purposes of the statute. A HELOC that is obtained after the close of escrow is generally not considered a purchase money mortgage.
Assuming all three of these requirements are met, the Arizona anti-deficiency statutes apply. What this means is that the lender’s remedy will be limited to regaining possession of the real property at issue through a foreclosure process or otherwise. If the anti-deficiency statutes apply, even if the amount due to the lender exceeds the value of the property, the lender may not pursue the borrower for the difference or deficiency.  The anti-deficiency statutes can be found in A.R.S. Title 33, Chapter 6.1.

Q: Does the Mortgage Forgiveness Debt Relief Act of 2007 exclude any debt forgiven through foreclosure or a short sale from being treated as 1099 income for tax purposes?
A: No.  The Mortgage Forgiveness Debt Relief Act of 2007 (Act) created limited circumstances under which sellers facing a foreclosure can be granted a relief from this requirement if they are able to work out a solution with the lender such as a short sale, where part of the debt is forgiven.  To be afforded protection under the Act, the debt must be considered qualified principal residence indebtedness.  Also, the total debt must be less than $2 million (or $1 million for married couples filing separately).

Q: In a short sale, when do the time periods in the contract begin to run?
a) Upon delivery of the accepted offer to the lender
b) On the date the offer is accepted and signed by both parties
c) Upon delivery of the Short Sale Agreement Notice to the buyer

A: The date of the seller’s delivery of the Short Sale Agreement Notice to the buyer is deemed the date of contract acceptance for purposes of all applicable contract time periods. In other words, although the parties have entered into an enforceable contract, the time periods do not begin to run until the seller has delivered the Agreement Notice. In the event that the seller and lender are unable to reach an acceptable short sale agreement, the seller must notify the buyer and the contract is cancelled due to the unfulfilled short sale contingency. 

Q: My buyer wants to make an offer on a short sale property.  Do I have to lower my commission?
A: No.  As a cooperating broker, you are entitled to the amount of commission specified in the offer of cooperation.  You may enter into an agreement with the listing broker to accept half of whatever commission the lender will allow, although this is not required.  If the listing broker refuses to pay the amount of commission specified in the offer of cooperation, you may pursue them for the balance. 
Commission agreements should be handled professionally at all times.  Understand that the listing broker is in a difficult position, making an offer of cooperation when the lender might come back and condition their acceptance on a lower total commission.  Since you are aware of this possibility before making the offer, it would be wise to come to an agreement beforehand regarding how any commission reductions will be handled.
Note: A.A.C. R4-28-1101(D) states: “A licensee shall not allow a controversy with another licensee to jeopardize, delay, or interfere with the initiation, processing, or finalizing of a transaction on behalf of the client. This prohibition does not obligate a licensee to agree or alter the terms of any employment or compensation agreement or to relinquish the right to maintain an action to resolve a controversy.”

Q: I represent the seller in a short sale transaction.  We have received multiple offers on the property.  Must we submit every offer to the lender?
A: No.  All accepted offers must be submitted to the seller.  Once the seller has accepted an offer, it must be submitted to the lender.  Unless otherwise prohibited, the seller may accept subsequent offers as backup offers.  However, once accepted, these backup offers must be submitted to the lender as well.

Q: Are all REOs sold “as is”?
A: Yes.  The bank/seller will normally not offer any warranties or guarantees.  However, in some limited circumstances, the lender may be willing to negotiate a price which allows for needed repairs.  If this is a concern for the buyer, they should submit an inspection report together with estimates on the cost of needed repairs.  There is no guarantee the lender/seller will agree to reduce the price.

Q: Can anyone qualify for a loan modification under Obama’s Making Home Affordable Plan?
A: No.  The Program, effective March 4, 2009, includes many restrictions. The Program is only available for owner-occupied properties, and therefore no investors will qualify. Furthermore, the maximum loan amount for a single family residence is set at $729,750.00.  The plan includes a few different scenarios under which a home owner may qualify to modify their existing loan.  The home owner should talk with their lender honestly about their situation.  The lender will be able to determine if there is a modification option available, based on the information they provide.

Q: Is a foreclosed home owner allowed to remove appliances from the home after foreclosure?
A: Yes.  Appliances, unless they are considered fixtures, are normally classified as personal property and belong to the home owner.  However, any appliances built-in, such as a built-in microwave or range hood, would likely be considered fixtures and stay with the property.  Some foreclosed sellers have been known to “strip” a property after foreclosure.  However, foreclosed home owners should be advised that removal of fixtures constitutes criminal theft pursuant to A.R.S. §13-1802. The lender can file criminal charges accordingly.
Note: The lender may also be able to file a civil lawsuit against the previous owners for “waste” due to the wrongful removal of the fixtures.

Elizabeth Hurd is a curriculum writer who has written continuing education courses for real estate agents, including AAR courses for rCRMS and GRI.

Note: This article was edited on 3/8/10. Under the question that begins, “Q: I represent the seller in a short sale transaction….,” the first portion of the answer was changed from, “A: No.  All accepted offers must be submitted to the lender.” to “A: No.  All accepted offers must be submitted to the seller.”

AAR leaders appeared on Voice America.com Internet Radio in April to talk about real estate in Arizona.  Hosts:  Peter Mosca and Dean Essa speak with Holly Eslinger, Holly Mabery, Frank Dickens, Sandi Foree, Mary Frances Coleman, JoAnn George and Sam Takach.

http://www.modavox.com/VoiceAmerica/vepisode.aspx?aid=37835

Changes are: The ADRE Public Report is now called The Subdivision Disclosure Report (Public Report), New City of Phoenix crime statistics website, and New Market Conditions Advisory added Get The Updated Buyer Advisory