So What in the World is HAFA? A New Foreclosure Alternative

By now, everyone knows someone who has lost their home to a foreclosure or undergone a “Short Sale” that seem to take forever. In an effort to help homeowners avoid foreclosures and streamline the short sale process, on April 5, 2010 the Treasury Department enacted the Home Affordable Foreclosure Alternatives program, better known as HAFA. The program was developed to provide a viable alternative for struggling homeowners who are unable to keep their homes even after qualifying for the existing Home Affordable Modification Program (HAMP).

The program includes simplifying the “Short Sale” process by allowing homeowners to seek the lender’s pre-approval of the short sale price and terms prior to listing the property. The homeowner will be able to use the financial and hardship information already collected during the loan modification process to qualify for this program. It requires lenders to fully release homeowners from future liability for the first mortgage debt, and to provide homeowners with up to $3,000 in relocation money. The program also offers financial incentives for lenders to encourage their cooperation.

While it seems these guidelines may be flexible, the general qualifying criteria for the HAFA program are:

1. The property is the borrower’s principal residence;
2. The mortgage loan is a first lien mortgage originated on or before January 1, 2009;
3. The mortgage is delinquent or default is reasonably foreseeable;
4. The current unpaid principal balance is equal to or less than
$729,7501; and
5. The borrower’s total monthly mortgage payment exceeds 31 percent of the
borrower’s gross income.

For more details, visit the Making Homes Affordable Website. The program ends on December 31, 2012.

So help is on the way for struggling homeowners and soon short sales may actually close in less than 45 days. Struggling homeowners are encouraged to contact their local Realtor® today to
discuss alternatives to foreclosure.

--Virginia Hall
ABR, CRS, e-Pro, GRI, SFR
Coldwell Banker Residential Brokerage
Direct (619)258-8585
DRE#01409760

California First Time Home Buyer Tax Credit--First Come First Serve

The Federal tax credit is gone. However, California enacted a new first time (FTB) and "Brand New" Home Buyer Tax credit 5 percent of the purchase price or a maximum of $10,000 that began on May 1, 2010 that requires you to act now because the credit will only be available on a first come first serve basis. $100 million was allocated to FTB's and $100 million was allocated for buyers of New, never lived in, home buyers.

While these credit are available for taxpayers who purchase a qualified principal residence until the end of the year, the California Association Realtors® expects "the money will be used up very quickly".

Besides the limited funds, another issue that has come to light is the refunds are divided over 3 years and applied towards what the home buyers owe in state taxes. So many taxpayers may not be able to utilize the entire credit, if they don't owe as much as the credit. Taxpayers should consult their tax accountants to see how to take full advantage of the tax credit.

Please see the State of California Franchise Tax Board website for more detailed information.

So if are wondering if now is the time to buy a home and take advantage of the tax credit. Now is definitely the time, before the money runs out.

--Virginia Hall
ABR, CRS, e-Pro, GRI, SFR
Coldwell Banker Residential Brokerage
Direct (619)258-8585

Three FHA Loan Changes

In 1934, the FHA was created with the intent of helping those with low and moderate incomes to buy homes. In the past, FHA increased its market share during housing market slumps and played an important role in stabilizing the market. While a 10% share is optimal, FHA insured nearly 30% of all home loans in the past year. Even government officials believe this may be way too large.

So the FHA has made some more stringent changes to reduce their risk:

1. This month, the 3.5 percent down-payment requirements on loans insured by the FHA have increased to 10 percent for borrowers with credit scores below 580. Borrowers with credit scores of 580 or above still will be able to put down the traditional 3.5percent down.
2. The upfront mortgage insurance premium increased from 1.75 percent to 2.25 percent
3. The closing cost concessions that sellers could give buyers has been reduced from 6 percent of the loan amount to 3 percent.

However, these changes are encouraging some home buyers to return to Private-Mortgage-Insurance (PMI), who have also made changes to their policies. In the recent past, PMI was not available in an area with a declining market, such as California. Although, according to Lew Sichelman of The Los Angeles Times,"one private mortgage insurance company now will insure five-percent down-payment loans to borrowers nationwide."

Buyers need to remember that premiums for both private mortgage insurance and government-insured FHA loans may be tax deductible. Also, after gaining 20% equity in the home, with an appraisal, the mortgage insurance can typically be canceled.

--Virginia Hall
ABR, CRS, e-Pro, GRI, SFR
"2010 Five Star Real Estate Agent"
Coldwell Banker Residential Brokerage
Direct (619)258-8585
DRE#01409760