An agent in my office told me today about her sister who is a Realtor in California.  She was excited because recently she’s receive at least two emails saying that to qualify for a home loan, you can opt in to a “No Income Documentation” loan.

My first instinct was to flinch because these are the loans that are now most at risk for foreclosure (if they haven’t already foreclosed).  However my friend was pretty excited about them because it means that the economy is starting to turn to the point that investors feel confident in releasing no-income loans.

The paperwork shows that a minimum FICO score of 620 is required and are 30-year fixed mortgages with no pre-payment penalties.  To verify that a buyer is able to make the payments, the lender will verify current employment but is not asking for pay check stubs, W-2’s, tax returns, 1099’s, or 4506 forms. One lender states the loan amount must be at least $220,000 but no greater than $729,750, while another offers a minimum loan amount of $100,00 with a maximum of $3 million.

The loans are available both for new purchases, home owners wishing to refinance, to purchase condos, or for non-owner occupied loans (at a higher interest rate, certainly).

This will be an interesting trend to follow - to see if it expands to the rest of the country.  If it does, it might just be the electric shock the heart of real estate needs to get going again.

It should have been predicted a year ago - and perhaps it was.  With more people in foreclosure or facing short-sales to get out from under their house mortgage, credit scores across the country are sinking.

According to a report by FICO, Inc., more than 25 percent of Americans today have a credit score of 599 or less.  There have been increases in people whose scores are above 800, but the middle-of-the-road borrowers are fewer and farther between.

MSNBC reports on the lower scores,

It can take several months before payment missteps actually drive down a credit score. The Labor Department says about 26 million people are out of work or underemployed, and millions more face foreclosure, which alone can chop 150 points off an individual’s score. Once the damage is done, it could be years before this group can restore their scores, even if they had strong credit histories in the past.

How has your credit score been impacted in the last two years?

At the height of the new vampire craze in popular culture, why not talk about the fangs that Fannie Mae is growing when it comes to collecting deficiency judgments!

With Fannie Mae on board during the TARP bail-out and with their tacit approval of sub-prime mortgages via their purchase of the same, you’d think they would be more forgiving to home-owners who default on their mortgages.  Instead, Fannie Mae is getting ready to sink their teeth into former real estate owners who walk away from their homes in a strategic default.

For another article about Fannie Mae’s lead in showing banks how to go for deficiency judgments, click here.

Of course, the case can be made for personal responsibility - that the homeowners knew when the made the purchase that the future value of the property could not be guaranteed - so they need to stand by their fiduciary promise to pay the note.  However, it’s just not fair to ordinary folks when the fat cats get away with the same thing and all is forgiven, according to Virginia Broker Lenn Harley,

IF THE AMERICAN HOME OWNER IS IN A POSITION OF NEGATIVE EQUITY, WHY CANNOT THEY CLAIM A FINANCIAL LOSS FOR TAX PURPOSES AND “WRITE IT OFF” as a corporation can do when they lose money on investments or P&L???? Why is the American home owner the entity that many would FORCE to have to HOLD THE PROPERTY WITH NO MARKET VALUE, LIVE IN IT AND CONTINUE TO PAY FOR IT WHEN IT NO LONGER MAKES ANY FINANCIAL SENSE.

The corporation USES THE TAX LAWS TO MITIGATE THEIR LOSSES.

Only the American home owner is forced to live in and continue to pay for their financial loss even when they didn’t make the decisions that caused the loss.

While I disagree with her political finger-pointing because both sides of the aisle deserve equal blame, her points are valid.  Would you ever do a strategic default?

My husband and I refinanced our mortgage several years ago in the heyday of real estate.  We bought our current home in 2003, then watched - amazed - as the value went up by $40,000 in just two years.  We thought, “Let’s refinance for the value and pay off our car and credit card!”

Bad move.  Our home is now worth only about $10,000 more than our original purchase price - only because we also added a sun room.  So in essence, we are about $50,000 underwater because we jumped right in the middle of the feeding frenzy of property values increasing like white lightning.  Hindsight… yea yea…

So is refinancing a good idea?  For us - even though we could decrease our interest rate from a 6.5 to a 4.5 percent rate - we can’t do it because the house won’t appraise for the refinance.  For others, it may still be a good option according to cashmoneylife.  Some of the reasons to refinance:

• Your credit score has improved.
• Mortgage interest rates increasing.
• Have trouble making your payments each month.
• Need to consolidate other debts.
• Making more money.

Again, proceed with caution if you decide to refinance, but the good news is if you bought your house before 2007, you are probably in good shape not getting in upside down.  Good luck!

Members of Congress let it tick down to the wire, but on June 30th they passed an extension for the closing date that will impact about 200,000 home buyers.

Read all about it here, but in a snapshot,

Previously, buyers had to be under contract by April 30th (that’s still true), but had until June 30th to close in order to qualify for the $8000 first-time home buyer tax credit (or $6500 for buyers who have owned five consecutive of the last eight years).  The measure extends the closing date to September 30, 2010.

I do have one buyer who is quite relieved.  Although he and his wife had a “clear to close” we learned that HUD hadn’t recorded their name to the deed upon foreclosure so the closing has been delayed until the title company refiles and the county records the name.  Their closing has been delayed until mid- to late-July.

I was happy to make that $8000 phone call to him!

Thank you, Congress.

Photo by Digital Planet Design.

If you aren’t investing in real estate right now, why not?  If you don’t have a job or if you have bad credit, okay.  That’s understandable.  But if your plan was to wait to buy until homes are affordable and loan rates are low, then now is the time.

From a local lender, here are the rates today:

30 Year Fixed Rate
Conforming Loan - 4.25
FHA Loan - 4.25

15 Year Fixed Rate
Conforming Loan - 3.875
FHA Loan - 4.0

These rates are amazing!  Consider now as a time to buy…

ne of my first-time homebuyers will not get the $8000 tax credit this week.  They were under contract to buy an amazing HUD house, but when the loan went to closing - lo and behold - HUD hadn’t filed the warranty title deed correctly, so now we have to wait about two weeks for it to be cleaned up.

Which means closing won’t happen until mid July.  Which means the deadline of June 30th to close to get the tax credit will have expired.  Which means my buyers lose out on the $8000.

The feds mess up a federal program.

I do not bang the anti-government drum by any means - in fact I think most government programs that help boost the economy and help people are good.  However in this case I find it ironic that it’s a federal agency that is costing my buyers from benefiting from another federal program.

There have been efforts to extend the closing date for the nearly 200,000 buyers who will otherwise miss the deadline, but the Senate killed the measure last week.  While the Wall Street Journal reports there may still be a chance of the closing deadline being extended, there is no guarantee that the House and Senate, Republicans and Democrats, can get along long enough to make it happen.

But I’m keeping my fingers crossed on behalf of my first-time homebuyers.

Here’s more about the failed effort to extend the deadline.

While it might be in good jest for certain red haired comediennes to be on the D-list, Fannie Mae and Freddie Mac’s impending delisting on the New York Stock Exchange caused shares to plunge yesterday.  According to CNN Money.com,

FHFA said in a statement that the planned delisting is due to the weak stock price for both firms, and not due to any determination about a change in condition at the firms or decisions about their futures.

“A voluntary delisting at this time simply makes sense and fits with the goal of a conservatorship to preserve and conserve assets,” said FHFA’s acting director Edward DeMarco in the statement announcing the move.

The main worry is investor confidence.  Investors are willing to risk more on government backed securities than on privately owned, so we could see an investor meltdown.

June 28, 2010 is the D-Day for D-Listing.

I read a really good article online today about paying off debt.  Logic states that you should pay off your higher interest rate debts first because in the long run, they’ll cost more.

Let’s say you have $400 to pay toward two credit cards.  One charges a 10 percent interest rate and the other charges 22 percent.  Naturally you would want to pay $200 each, but in the long run it would be smarter to pay off the higher interest rate card first.  Instead, I’d make the minimum payment to the 10 percent card and use the rest to pay down the principal of the other card.

However according to the article, sometimes the emotional satisfaction of paying off something that reminds you of a terrible time in your life is a better option.  For example, say someone was planning to get married and bought a $20,000 wedding gown, $5,000 for flowers (paid in advance), a deposit of $2000 for a church and reception area, etc.  Then the groom breaks up with the would-be bride - he left her for her best friend.  Yet the bride has accrued $27,000 on a new credit card just for the wedding.  Every single month as she makes her payment, she’s reminded of the two horrible people who very nearly ruined her entire life.  To get rid of that credit card (at a low interest rate of 8 percent) may be better for her psychologically than paying off another higher rate card.

From MSNBC.com, think about how freeing yourself from an emotional debt will help you in the long run,

… if the hatred you feel for a debt is keeping you up at night, feel free to attack it with abandon. It may not be costing you more than others financially, but sleep and peace are precious commodities too. In the end, says Crawford, any repayment approach can be effective, but “what really matters is staying motivated and seeing progress. Just find and plan and stick with it.”

Here, here.

Photo by Video4Net via flickr creative commons.

I wrote over at Shak & Jill that tomorrow is a HUGE closing day across the country because home buyers taking advantage of the federal tax credit for first-time home-buyers don’t want to delay closing until the last minute so it’s this week and next week that title companies are extremely busy.

To qualify for the tax credit, purchase and sales contracts needed to be binding by April 30th and the mortgage loan must close no later than June 30th.  However according to MSNBC, Senate Majority Leader Harry Reid is proposing an extension,

Senate Majority Leader Harry Reid, D-Nev., said Thursday he wants to give buyers until Sept. 30 to complete their purchases and qualify for tax credits of up to $8,000. Under the current terms, buyers had until April 30 to get a signed sales contract and until June 30 to complete the sale.

From the real estate perspective, the National Association of Realtors is pushing for agents to contact members of Congress to grant the extension.  The extension would be partnered with extending jobless benefits until the end of November.

What do you think?  It’s not a new tax credit, just an extension of the one whose deadline is looming.  20 days and counting.

Photo from 3 Chic Chicks and Chicken Scoop for the Soul.