It’s bad enough that a short sale can take six months to close. It’s even worse when the short sale payoff lender decides at the last minute to change the terms of its agreement.
Can they do this? In short, yes.
After all, they are the ones who are agreeing to take less than what is owed in order to complete the transaction – they are under no legal obligation to agree to do this.
Click beyond the jump for some recent short sale nightmares that I have seen.
Funding for popular program dwindling rapidly
In 2009, Congress passed the Expanded Homeowners’ Assistance Program (“HAP”) to assist military members suffering as a result of the housing bust across the country. As part of that bill, assistance was to be given to members of the military receiving PCS orders through September 30, 2012.
However, as the Army Corps of Engineers has recently reported, of the $855 million designated for the program, approximately $763.8 million has already been used on behalf of 5,093 homeowners.
There are another approximately 4,500 military members who have been deemed eligible to receive benefits, and the funding is dwindling rapidly. Additionally, new applications are still being submitted for consideration at approximately 300 per month. As a result of the funding issue, the cutoff date for those receiving PCS orders has been moved up by 2 years to September 30, 2010.
Military members who otherwise may have been eligible for benefits under HAP may no longer be able to receive benefits because they were in the middle of a deployment and therefore unable to receive their permanent PCS orders while deployed. In a recent article in the Army Times, Karen Jowers stated that the Army has proposed a policy change which would allow deployed personnel to still be considered eligible for benefits if: (1) they were forward deployed from March 1, 2010 through August 31, 2010, (2) received PCS orders within 45 days of their return from deployment and (3) met all the other eligibility requirements for expanded HAP assistance. It is expected that a decision on this policy change will occur in the next week or two.
Even if the proposed policy change is adopted, it is unclear whether or not additional funding will be allotted to the expanded HAP program. While government purchased HAP homes are being sold, with the proceeds being added back into the funding pool, it is possible that there are still not enough funds available to cover the losses military members face on the sale of their properties.
If you are purchasing a home in Maryland as a “first-time homebuyer,” and you intend to take title in the name of your revocable trust, or another type of entity, you can forget about realizing the benefit of the Maryland First-Time Homebuyer State Transfer Tax Exemption.
That’s because the Maryland State Transfer Office will only honor the exemption to individuals; specifically, all individuals taking title to the property must be “First-Time Homebuyers” in Maryland in order to qualify for the exemption.
Now the truth is that most mortgage lenders discourage homebuyers from taking title in the name of a trust or other legal entity with the purchase of a residential, owner-occupied, property.
However, in some cases, a homebuyer may be counseled by their attorney to seek an exception from the mortgage lender and to vest title in the name of a revocable trust – a common estate planning vehicle.
In Maryland, for first-time homebuyers, this advice will cost the homebuyer the benefit of the state transfer tax exemption; an amount equal to 0.025% of the purchase price.
Here’s some good news we’d like to pass along to you and your clients regarding refinance costs for properties in the District of Columbia and Virginia: Reissue Rates Automatically Apply.
What does this mean for your borrower?
It means the borrower is no longer required to provide a copy of an existing owner’s title insurance policy to obtain the full reissue rate.
It means that a 40% discount is automatically applied against the lender’s title insurance premium.
It means that, previously, without an existing owner’s title insurance policy, a DC refinance for $500,000 would have cost $2,100 for the lender’s title insurance premium. As of April 1, 2011, the same transaction will cost only $1,260 in premium — a savings of $840!
All online quotes from Federal Title now reflect these new changes so please feel free to share the news with your colleagues.
In the meantime, if you have any questions about the new reissue rate policy, please feel free to contact the team at Federal Title.
Homebuyers who close with Federal Title are often surprised to learn how much money they've saved on their closing costs. This is because we offer every homebuyer (and refinancing homeowner) an instant rebate known as a REAL Credit™.
So why don't all title companies offer a similar savings?
As our fearless leader Todd Ewing likes to say, long ago Federal Title kicked the "affiliated business arrangement" habit. Some title companies out there are affiliated with real estate firms, mortgage companies – and sometimes both. When they send business to the title company, the title company pays those guys a referral fee, an expense that's often passed on to the homebuyer.
This is why we tell every homebuyer to shop for title services, just as Todd told Michele Lerner of the Washington Times in the recent article "Shop to save on title services," which ran last Friday on the cover of the Homes Section.
Our REAL Credit™ represents what a title company would typically pay to the referral source and ranges anywhere from $100 to $1,100 depending on the purchase price.
Proponents of these so-called ABAs like to say it's actually beneficial for consumers, a sort of "one-stop shop" system that's more convenient. They don't like to talk about how the cost for said convenience often comes at an increased price.
I don't know about you, but I find saving money to be pretty freakin' sweet, and if it's a question of saving as much as $1,100 or more, you can bet I'm going to do some research. It is so easy to shop for title services. The Internet is a magical invention that pulls information – such as closing fees and title insurance rates – at the click of a button.
We've even gone a step further and done the homework for you. Check out the DC Metro Closing Cost Report to review closing fees from title companies who've published their rates online.
With a solid understanding of title insurance & closing costs, you will know the right questions to ask your real estate agent or title agent here at Federal Title.
A steal of a deal in the DC real estate market is increasingly rare, but by understanding your closing costs, you can make sure you’re not overpaying on the back end of your real estate transaction.
Check out our article, which appeared today on DC Urban Turf: 10 things you should know about closing costs. Give it a read and feel free to leave your comment below.
10 things you should know about closing costsBank of America intends to create a new program to assist military homeowners, in light of the recent stories of military members being denied their rights under the Servicemembers’ Civil Relief Act (SCRA), a spokesman said on Feb. 10, 2011. Recent articles in the Army Times and the Wall Street Journal, illustrate the new programs are finally coming to light.
Effective April 1, 2011, the following new programs will go into effect:
1. Reduced Interest Rates on Mortgages. The SCRA requires interest rates on loans secured prior to a service member’s active duty status be reduced to 6% upon application for SCRA protection. Bank of America has announced they will reduce interest rates on mortgages entered into prior to active-duty service be reduced to 4%.
a. Applies for the entire term of active-duty service and for 12 months upon release from active-duty service. At the end of this period, the interest rate will then revert to the pre-SCRA protected rate, and
b. Goes into effect for April 2011mortgage payments, and
c. Applies only to mortgages which are owned by Bank of America. If your mortgage is only serviced by Bank of America, the 4% reduced interest rate will not apply. (For example, if your original loan is with a bank other than Bank of America, and then you were notified that your loan was sold to Bank of America, this means that Bank of America only services your loan and the original bank from whom you obtained the loan technically owns it.)
2. New Customer Service Team for Military Members. A special customer service team is being established to handle military loans, and can be contacted at 888-325-5357.
3. Reduced Principal Balances. For military members about to leave active-duty service, and thereby lose their protection under SCRA, Bank of America will work to assist those members having difficulty making their mortgage payments with several options:
a. Forgiveness of a portion of the outstanding balance still owed, or
b. A reduction in the outstanding principal balances to “as low as 100% of the current market value,” or
c. Additional reduced interest rates, or
d. Extended repayment periods.
e. However, this only applies to loans which are owned by Bank of America and will not apply to service members who must relocate as a result of PCS orders.
It seems like prices never go down. Gas prices have gone up, taxes have gone up, the 5-cent bag tax has increased the cost of shopping, etc. And yet, sometimes, if you look closely enough, you can find prices that actually do drop. In this case, prices have dropped for refinancing borrowers by 40%.
First American Title Insurance Company, our title insurance underwriter, published their new title insurance rates effective April 1, 2011. The purchase title insurance rates remained unchanged, except for purchase prices in the highest brackets where the rate dropped considerably.
The big change is in the refinance category. First American has dropped their refinance loan policy rates by 40%! In essence, every refinance in Washington, DC will obtain a discount equal to what was previously the full reissue rate discount.
Previously a 40% discount on title insurance was available on a refinance, but the borrower had to jump through some hoops to be eligible. The full 40% discount was only available if the borrower had previously purchased a title insurance policy and if the policy was under 10 years old and if the prior policy was for an amount greater than the amount of the new loan.
Often clients either did not know where or how to find their title policy, and often clients who may have been eligible for the discount were not obtaining it. And frankly, often title companies kept the reissue discount a secret, not revealing it to a client unless the client asked for it.
Well, with this new change by First American, every refinance will obtain the equivalent of the old reissue rate discount, even if the refinance would not have been eligible under the prior guidelines. What does this mean for a borrower? It means that refinancing borrowers will save hundreds of dollars on their closing! For example, previously a refinance for $500,000 would have included a $2,100 for lender’s title insurance. As of April 1, 2011, a refinance for $500,000 will now include a charge of $1,260 for lender’s title insurance – a savings of $840.00!
We've updated the refinance rate chart is posted on our website. While you're there, check out our homebuyer videos for a better understanding of title insurance and what title insurance does for you.
It’s that dreaded time of the year again — tax time! For those military service members, there are some distinct tax advantages for you that may result in a windfall:
First-Time Homebuyer Credit. For service members serving overseas for at least 90 days between January 1, 2009 through May 1, 2010, you are entitle to an extension of the $8,000 First-Time Homebuyer Credit, if you enter into a contract prior to April 1, 2011 and settle by June 30, 2011. Even if you settle in 2011, you are entitled to claim the credit on your 2010 Federal tax returns.
Military Spouse Residency Relief Act. Under the Act, military spouses who maintain their state residency in one state (for example, Florida), but move to another state due to PCS orders of their military spouse (for example, Virginia), can claim an exemption from having to pay state income tax in Virginia. Some states like Virginia however, do require proof that the non-military spouse’s domicile is in another state. Therefore, it may be necessary to file an additional tax form in the non-domicile state. Please seek legal and tax advice, if you have any questions.
Combat Zone Tax Exclusion. For any day that a service member serves in a designated combat zone, the member’s entire month of pay is excluded from their gross income for tax purposes. There is no limit to the exclusion for enlisted member or warrant officers. For officers, however, the exclusion is limited to the highest rate of enlisted pay (currently capped at $7,714.80) plus hostile fire or imminent danger pay they may be entitled to receive.
Click beyond the jump for a list of combat zones.
People have successfully built fortunes through real estate investment for decades. In the current housing crisis, many more people are finding success by snatching up the many foreclosures available. To reduce the risk of failure, beginning real estate investors and first-time homebuyers should research the many different aspects of property investing before getting started.
Here are a few basic things to consider first:
• Personal goals
• Level of responsibility
• Location
• Current market
All of these factors can be addressed in a business plan. Real estate investing is a business, and just like any other business, should include a “road map.”; Having a business plan or financial goal will help keep you on track, reduce frivolous investments, and help you reach your goals faster. Let’s look at each aspect a little closer.
First of all, it’s important to have specific goals. Do you want to set up a residual monthly income through rental properties, or would you rather buy and sell properties for a quick profit? Are you interested in commercial properties or residential? When outlining your goals, be as specific as possible.
Next, what level of responsibility are you looking for? If you’re purchasing properties for resale, more renovations are usually needed. You'll also need to consider resources needed to list the property and find a buyer. Rentals often require renovations as well as regular maintenance and the time consuming task of finding tenants. It’s possible to hire others to do the property management side of things, but that will add more costs.
The location of a property is important; not only what area of the country, but also what part of the city or town, and even what section of a street the property is on. The location affects the value as much as the appearance of the home.
The final consideration new investors and homebuyers must make involvesthe current market. For example, in Florida, because so many people are currently losing their homes to foreclosure, it’s more of a rental market than a selling market. Either way, it’s important to look at the values of other properties in the area. This involves looking at what houses in the area have recently sold for and what price rentals are bringing in.
Don’t get discouraged; investing in real estate really is a great way to build wealth. It’s just important to learn everything you can before diving in. There are many investment brokers that deal strictly with property investments. Contact one in your area, or the area you wish to invest in, and ask them for advice.
Jennifer Hill and the agents at Realnet of Tampa Bay are experts at finding the best investment property for sale. Setting your goals and knowing how to get there are vital to your success! Realnet can help you determine the best investment properties to help you meet those goals.
The Washington, DC metro area is the home to numerous military installations, which results in thousands of members of the military and their respective families moving into and out of the area on a regular basis. As a recent article in the Washington Post pointed out, as most military members move into the area in June and July, now is the time that most begin looking for their future home.
For military members looking to purchase property in the DC area, it is important for you to consider the following:
1. Be prepared to pay considerably more for a house than you may have paid in your current location. While housing prices have dropped in the area over the past few years, the cost of living in this area is significantly higher than in most other areas of the country. However, also note that you receive a higher BAH.
2. Be prepared to sit in traffic – and lots of it! Any person living in the area will tell you that even if you buy or rent a home within 5 miles of your duty station, that does not necessarily translate into a 5 minute commute every day!
3. If you think you are interested in purchasing a home in the DC area, but know that you will be transferred in 3-4 years, be sure to find out what the rental market is like in the area you are looking to purchase in. As lending guidelines tighten, it is possible that fewer people will be able to secure a mortgage, leading more to start pursuing rentals. In addition, as the DC metro area is so accessible to multiple military bases, service members are generally some of the best rental applicants you can find.
4. If you are looking to purchase a property and you have been overseas for at least 90 days between December 31, 2008 and May 1, 2010, the $8,000 first-time home-buyer tax credit still applies to you, as long as you enter into a binding contract by April 30, 2011 and settle on the property by June 30, 2011.
5. If you are interested in taking out a VA loan, the current VA loan limit in the DC Metro area is $818,750. However, it is important to note that the loan limit is lower in certain areas.
June, July peak moving times for military families
The Washington, DC metro area is the home to numerous military installations, which results in thousands of members of the military and their respective families moving into and out of the area on a regular basis. As a recent article in the Washington Post pointed out, as most military members move into the area in June and July, now is the time that most begin looking for their future home.
Click beyond the jump to find out what sellers should consider to market their homes to members of the military.
The proponents used two Harris Interactive consumer surveys (2002 and 2008) to claim that homebuyers were more satisfied with the ABA settlement service providers.
The 2008 study revealed that homebuyers who used “one-stop shopping” in their latest real estate transaction were more satisfied with their home buying experience compared to those who used services of multiple providers.
The 2002 study used by the proponents revealed that 64% of homebuyers who used “one-stop shopping” programs had a better overall experience with their home purchase transaction.
RESPRO cites Federal Title website
First, it’s dishonest to call the arrangements “one-stop shopping” since it only means that the real estate broker or mortgage lender will take care of ordering settlement services on behalf of the homebuyer - and, mostly unbeknownst to the homebuyer, receive a kickback from the settlement company for the referral.
Most homebuyers are completely unaware that they may shop for and select their own settlement company. The proponents of ABAs exploit this lack of consumer knowledge and their supposed fine-print “disclosures” do little to enlighten the homebuyer to this important and costly component to the transaction.
Naturally, without knowing that they could shop and save on settlement services, a homebuyer is going to be more satisfied with their trusted advisor taking care of the finer details of ordering settlement services on their behalf.
Along comes a recent survey from the Ohio Association of Independent Title Agents (OAITA). According to this survey, conducted from 2009 through 2010, when homebuyers are made fully aware of ABAs, they become uncomfortable and prefer a title company or title agent to be a third party (i.e., independent) to the transaction.
First, to the delight of our ABA proponents, 77% of respondents did not independently select their settlement company. When made fully aware of the ABA relationships, 50% of respondents said they prefer a title company that does not share profits with a referral source compared to 6% of respondents saying they prefer a title agent that shares profits with a referral source.
Further, 58% of respondents said they believe that ABAs are a conflict of interest. The OAITA stands in stark contrast to the Harris Interactive surveys used by ABA proponents only because homebuyers, as respondents, were clearly informed of the financial benefit gained by the referral source.
Consumers must be informed in order to make sound financial decisions. While ABAs are very profit-friendly to its participants, ABAs are simply not consumer-friendly. Let’s all hope that the Federal Reserve Board retreats from its complicity in bad business.
By the time you arrive at the table to close on your home purchase, you're tired. It's been a long haul to get to this point, and the last thing you want is any kind of surprise.
Particularly if you're a first-time homebuyer, knowing ahead of time what to expect at closing can help ease any anxieties you may have, and ensure that you get your keys with no unforeseen hiccups.
The good news is, if you have worked with a trustworthy real estate agent and have chosen a reliable mortgage lender, you should anticipate a smooth settlement. All the professionals you've been working with are helping you get through the final steps of the transaction.
"Buyers should not expect any surprises at the settlement as long as they have carefully reviewed their Good Faith Estimate (GFE), shopped for their title services and compared written estimates of closing costs," said Todd Ewing, president of Federal Title and Escrow Co. in Washington, D.C.
"Don’t worry about it – title insurance will cover it!” ... This is what I keep hearing from agents when they talk to their clients about potential title insurance issues: “Don’t worry about it, you are getting title insurance – that will cover it!”
My response: “Whoa!”
The most recent instance was a District of Columbia tenant issue. I had to break it to the agent and the purchaser that the title insurance would not cover it and the underwriter would take specific exception to this issue because all of the parties were aware of the issue.
One thing many folks do not seem to understand is that the title insurer literally steps into the purchaser’s (new owner’s) shoes and commences legal action based on the title issue at hand on behalf of the purchaser (new owner) and can only pursue a legal action the actual owner would be able to pursue.
In other words, title insurance is to cover the unforeseen title issues. If the purchaser, now the new owner, has knowledge of an issue or has waived the right to sue the seller for any title issues it is difficult for the title insurer to pursue any legal action on behalf of the new owner. (Hint: look at the addendum to a contract for properties bought from a foreclosing bank or acknowledged tenants in the property, etc.)
So, before a purchaser becomes a new owner to a property with known potential title issues, that purchaser should consult the settlement attorney to fully understand what he or she is “signing up for.”
Title insurance doesn’t always “cover it.”
