Adding Value by Dennis O'Hagan

The Short Sale

While the SHORT SALE may be a last resort for many homeowners facing foreclosure, it also represents a great opportunity for potential home buyers and real estate investors.  This article is designed to help answer a few basic questions about the substantial risk and reward in this extremely complex and often drawn out process.

What is a Short Sale?

A Short Sale is a legally-binding agreement to allow a home to be sold for less than the amount owed.  And, while Short Sales are not by any means common or easy, because of increasing inventory levels and foreclosures in some parts of the counrty, lenders are much more eager to negotiate with borrowers who are having troublepaying their mortgages.  For potential home buyers and real estate investors, a Short Sale also offers a great opportunity to purchase property at a discount.

However, don't expect a lot of help from the lender without first providing a sales contract from a qualified buyer and all the information required by the lender's loss mitigation department.

Of course, lenders are not looking to bail out "flippers" or other borrowers who simply overextended themselves.  In most cases, a borrower must have suffered a serious financial hardship that directly caused him or her to default on the mortgage: the loss of a job, a serious illness, or the death of a loved one.

A written declaration and supporting documentation demonstrating financial hardship will definitely be required by the lender.  This may include pay stubs, tax returns, and liquid asset statements, among other documentation.

Key Considerations to Keep in Mind

It's important to note that the difference between what is owed on a mortgage and the final amount the lender collects after the costs of the sale, including real estate commissions and possibly other charges don't simply disappear in a Short Sale.  In the past, this deficiency or "cancelled mortgage debt" was considered taxable income to the borrower.  However, thanks to the Mortgage Forgiveness Act of 2007, the tax burden for qualifying canceled mortgage debt (as high as 35%) for primary residences only has been temporarily waived until the end of 2009.

If there are multiple liens against the property, all lien holders will have to be involved in the negotiation process, not just the first lien holder.  Therefore, communication and patience are essential components of any Short Sale.  This is why an experienced real estate agent and mortgage professional become so valuable to the process.

This Short Sale Report was provided to us by:

Richard Stefanek (Senior Loan Officer) Primary Residential Mortgage, Inc..  He can be reached at 469-234-5456 or you can email him at Rick.Stefanek@homeloanusa.com. 

NTTA SPECIAL ALERT

Electronic Tolling Begins July 1 on Bush Turnpike

On Wednesday, July 1, the NTTA will transition to all-electronic toll collection (all-ETC) on the President George Bush Turnpike only.

Beginning at 12:01 a.m., cash will no longer be accepted on the Bush Turnpike.  If you have a TollTag, your payment method will remain the same and you will continue to use all open lanes.  Motorists without TollTags -- also known as ZipCash customers -- will have a new way to pay.  Instead of stopping to pay cash, ZipCash customers should KEEP MOVING.  A bill for the transactions at the higher ZipCash rate will be sent to the registered owner of the vehicle.

TollTag customers should use caution and slow down initially while current cash customers adapt to the new way to travel and pay.

NOTE: The NTTA will not transition the Dallas North Tollway (DNT), Addison Airport Tunnel and the Mountain Creek Lake Bridge to all-ETC at this time.  For cash customers, if there is a cash payment option – either a toll attendant or cash machine – you must stop and pay. 
 
The design of the Bush Turnpike makes it more convenient and cost efficient to transition first. The NTTA also will be able to study the effect the transition has on customers and allow for changes to be made prior to transitioning the more difficult DNT at a later date.  
 
Below are answers to some Frequently Asked Questions to help you navigate your way through the Bush Turnpike conversion:
 
Will there be lane closures during the evening of June 30 when the Bush Turnpike is converted to all-ETC?
Starting at 8 p.m., rolling lane closures will be in effect as new signs are installed and old signs are removed. Crews will use flags to direct traffic in front of and behind the work convoy, and advance electronic signs will also direct traffic. 
 
Will you be removing lanes?
No express lanes will be removed or eliminated. Access to cash booths will be eliminated so that all traffic uses free-flowing lanes. 
 
What type of construction will take place on the roadway?
●          Crews will remove all signage related to stopping to pay cash along the Bush Turnpike.  Signs detailing ZipCash payment rates will be unveiled and directional construction signage will be added to assist drivers with navigating through the construction zone.
●          On June 30, temporary barrels will be placed on the roadway, closing off the cash lanes.  At the Coit Road and Sandy Lake Road toll plazas on the Bush Turnpike, exiting traffic will temporarily be directed through a dedicated lane on the cash side of the plaza.
●          Traffic monitors will help during peak hours on July 1 to assist motorists advising them to “Keep Moving.”
●          Motorists will see new rate signs displaying the TollTag and the ZipCash rates, NTTA’s drive-now and pay-later option at a 45 percent higher rate. Drivers are encouraged to get a TollTag for ease of payment and preferred pricing.

How will construction activity affect my commute?
●          NTTA expects traffic to move slower for the first week as drivers adjust to the new lane configurations and traffic patterns.  We are requesting that all drivers use caution especially when entering and exiting the Bush Turnpike.
●          Traffic will continuously improve as drivers experience the free flow of traffic and the elimination of weaving, stopping and starting at cash booths.

When will the Bush Turnpike construction activity be completed?
●          Construction will continue through mid-October as NTTA crews replace temporary barricades with more permanent structures.  All booths and plazas will remain intact pending a final decision on widening the Bush Turnpike.
●          NTTA provides traffic information at www.ntta.org and on the hotline at 214-224-3030.

For more information and to watch a video on all-ETC, please visit http://www.ntta.org/AboutUs/Projects/AllETC.

NTTA Now on Facebook

The NTTA is now using social media technology – a national trend in the communications industry – to inform customers and motorists about its toll road initiatives, projects and construction-related activity.

In April, the NTTA joined Facebook, one of the most popular and free social online networks worldwide.  The NTTA page offers real-time information on lane closures, project updates, events and more to customers, motorists, or anyone interested in keeping up with the NTTA.
 
"Social media is just a great cost-effective way to provide our customers and stakeholders with information on our roads and projects," said Kim Jackson, NTTA director of communications. “In fact, most major companies and elected officials today are utilizing some type of social media to communicate with customers and/or constituents.”

Becoming a “fan” of the NTTA Facebook page is easy and free.  Registered Facebook users can simply visit their own page, conduct a search for the North Texas Tollway Authority, and then follow the prompts.  Once you become a fan of the NTTA, you will receive regular feeds containing project updates, traffic advisories, news releases and more.

If you’re not a registered Facebook user, simply visit www.Facebook.com to join and become a fan of the NTTA.  You can also learn more about the NTTA by visiting www.ntta.org.

Tax Time Savings Tip - Home Owner Deductions

Deductible Homeowners Expenses

One of the advantages of owning your own home is that the home mortgage interest and real estate taxes paid can be deducted from your federal income tax*. To do so, youll need to comply with current tax laws and complete the appropriate federal tax forms and itemized deduction schedules.

Home Mortgage Interest

For your home mortgage interest to be deductible, it must be for a first or second mortgage, a home improvement loan or a home equity loan. Additionally

• The mortgage loan must be secured by your main home or a second home
• Only interest paid for that tax year can be deducted

The amount you can deduct can be limited if your mortgage balance is more than $1 million ($500,000 if married filing separately) or the mortgage was taken out for reasons other than to buy, build or improve your home.

Points

Points (aka loan origination fees, maximum loan charges, loan discount, or discount points) are generally treated as pre-paid interest and, as such, the full amount cannot be deducted in the year paid. Rather, the deduction must be taken over the term of the loan.

Real Estate Taxes

State or local real estate taxes can be deducted from your income if they are paid in the tax year. To qualify, the tax must be levied on the propertys assessed value, the taxing authority must charge a uniform rate for properties in its jurisdiction, and the tax must not be for your special privilege but for the benefit of the general welfare.

Restrictions on Itemized Deductions

The amount of itemized deductions you can take are restricted by your adjustable gross income. In 2003, the limits were $139,500 for single persons, persons filing as head of household or qualified widow(er), or married persons filing jointly; and $69,750 for married persons filing a separate return.

Non-deductible items

Many of the expenses related to owning your own home cannot be deducted from your income tax. These non-deductible items can include:

• Most settlement costs, including (but not limited to) appraisal fees, notary fees, VA funding fees, and mortgage preparation costs
• Insurance
• Local assessments that generally add value to your home, such as sidewalks, sewers, etc.
• Utilities
• Domestic help
• Depreciation

Check with the IRS

*The information contained in this article is for informational purposes only and may not reflect current tax year rules and regulations. Youll need to consult with your tax attorney, CPA, or the IRS for current tax year rules, restrictions and regulations.

Short Sale Essentials

A Short Sale is a carefully agreed upon sale of a property where a lender is willing to accept less than the amount owed on it because the borrower, due to an acceptable hardship, is unable to make payments. For homeowners, there are only 23 universally “acceptable hardships” that cause “unexpected” financial crisis in their lives. 

The lender accepts an offer to purchase from a 3rd party buyer, thus relieving the original owner from encumbrances and potential, future liabilities. 

Home lenders are willing to take less for the home than is owed on it and less than it’s worth in today’s declining market. Why?   Because lenders will lose more if the property goes into foreclosure, and so will the homeowner. 

There are three stages in the foreclosure process. They are pre-foreclosure, foreclosure and post– foreclosure. The pre-foreclosure stage is the only one where  everyone comes out a winner.  In the foreclosure stage, the homeowner’s FICO credit score can be reduced by 250-280 points and it will take 3-5 years before a lender will offer a sensible interest rate to make it possible to buy another home.

In the “pre-foreclosure redemption status” stage, with the help of a Realtor^® , trained to negotiate a "short sale" with the lender, the FICO credit score will only take an 80-100 point "hit", and the homeowner will be able to buy another home with a good rate in 18 months to 2 years or less.

Other advantages of the "short sale" option in the pre-foreclosure stage include the possibility of leasing back the home from a third party investor/buyer, no defficiency judgement, no repair costs, no money to closing, stopping nagging collectors, avoid bankruptcy, a smoother transition to get out from under and get on with life.

As a trained Realtor^® you will be able to explain the other pre-foreclosure options you have to assit you a distressed Seller in making a decision that's in their best interest. With over 1 million properties expected to be in foreclosure this year, the difference in losses to be sustained by lenders between a negotiated short sale and a fully executed foreclosure is estimated to be in excess of $50 Billion.

The costs to the Lender for commissions, closing costs, basic repairs, property maintenance, insurance, taxes, homeowner association dues, eviction and court costs, attorney fees, and much more averages about $400 a day for an average priced home. Over the 11+ months that the Lender has to carry the property and their hard costs can add up to over $130,000. 

When you subtract these costs from the reduced sale’s price dictated by the depressed market and then take that sum away from the over-extended loan balance, the lender’s loss is substantially greater than a quick short sale. Time certainly is money!  

It should come as no surprise to Sellers that they’re behind in their payments or can’t  afford to continue making payments on their home because of a recent rate adjustment or for whatever other reason that has put their life in crisis. Sellers should not ignore the notice or telephone call that reminds them of their obligation. They should call their lender immediately so they won’t accelerate the process of foreclosure.

Remember, the lender does not want the property. Realtors^®  play the most important role in helping distressed Sellers reorganize their obligation to make their home more affordable, or get them out from under. by creating a WIN-WIN-WIN situation.

Daylight Savings Time ENDS This Saturday

This is a reminder to set your clocks back one hour before going to bed this Saturday night.

Find The Cheapest Gas Prices In Your Area

Click here to find the cheapist gas prices in your area.  It may take a few seconds for it to load the gas stations in and around your requested zip code so give it a few seconds.

5 FREE tips for improving your Credit Score

Do you need to improve your credit score? If you’re like the majority of Americans, the answer is yes. According to FICO, 60% of all people have a credit score less than 750. This means there is plenty of room for improvement for most people. There are many methods to check on your FICO scores/reports. While you can’t simply fix your credit history overnight, there are many things you can do to begin building a more positive credit history. Here are 5 tips you can take advantage of right now.

 

Click Here to Read this FREE Guide for Improving Credit

 

Big THANKS to Mick Mackey (972-489-0203 or mmackey@gnmtx.com) from Guardian Mortgage Texas for providing us with the above information.

Mortgage Occupancy Classifications

I’d like to THANK C.J. Winchester from Service First Mortgage for the below article.  There are new challenges and opportunities in the mortgage industry everyday…  C.J. has decided to pick a real scenario each week to help the general public better understand the changes that have taken place in mortgage lending. She choose this topic after she spoke to a potential client last week that was ready to sign the sales contract on Investment property but did not have any idea that he would need a 20% downpayment.  It is difficult to obtain PMI or secondary financing on investment property so that means a downpayment of at least 20% which is dependent on FICO scores. 

There are only 3 catagories of occupancy on mortage loans which is as follows:

Owner Occupied
· Also known as Primary Residence
· Eligible for homestead exemption
· This is the home where the borrower lives
· Co-borrower can be non owner occupant but program restrictions apply

Non Owner Occupied
· Borrower does not live in this home
· Property can be rented-also known as investment property
· Sometimes a family member lives in home
· Is not eligible for the homestead exemption
· Must do a conventional loan with at least 15-25% down
· Difficult to get PMI
· Difficult to obtain 2nd liens
· Must have strong cash reserves remaining after loan closes
· Must count full payment and cannot offset with a new lease
· Rate is higher than owner occupied
· Seller contribution is maximum of 2% of sales price

Second Home
· Typically in a vacation area
· Property cannot be rented
· Can be purchased if borrower stays in the home on a part time basis
· Rate and downpayment may be higher than the Primary home
· Not eligible for the homestead exemption

 

If you would like to have C.J. send you some information on a weekly basis regarding the Mortgage industry please send her an email at cj@waymark.net

C.J. Winchester
Service First Mortgage
175 Ridge Road, S# 600

McKinney, TX  75070

972-562-0096   Office
972-562-0087   Fax
214-298-3156   Cell

cj@waymark.net
www.cjwinchester.com
http://cjwinchester.blogspot.com

Cell Phones - National DO NOT CALL List

Cell Phone Numbers are now Public...all cell phone numbers are being released to telemarketing companies and you may receive sales calls at your expense. To prevent this, call the following number from your cell phone: 888-382-1222. It is the National Do Not Call List. You must call from the cell phone number you want to have blocked. It takes about 30 seconds.