For Sale: 4BR/2+1BA Single Family House in Charlotte, NC, $269,900.

Question: I am a firsttime
homebuyer but was not within the prior income limits at the time I
entered into my contract to purchase on October 30, 2009. I will be covered,
however, by the new income limits. If the new rules have been signed into law by the
time I go to settlement, will I be eligible for a credit?

Answer: Yes. The new income limitations go into effect as soon as the President has signed the bill.
The income limit and other eligibility rules will look to your status as of the date of purchase,
which is the settlement date. So if the new rules have been signed when you go to settlement,
you should be eligible for the credit (or a portion of the credit if you’re within the phaseout
range).

Question: I am an eligible existing homeowner. I have a fair amount of equity in my home. I
have found a home with a nonnegotiable
price of $825,000. Will I be able to use any
of the $6500 tax credit?

Answer: No. The $800,000 cap on the cost of the purchased home is firm at $800,000. Any amount
above $800,000 makes the home ineligible for any portion of the credit. The $800,000 is an
absolute ceiling.

Question: I owned my home for 10 years, but sold it two years ago year and have been renting
since. If I purchase a home, will I be eligible for the $6500 tax credit if I meet all the
other eligibility tests?

Answer: Yes. Because you lived in the home for more than 5 consecutive years of the previous 8, you
will qualify for the $6500 credit. For example, Say John and his wife bought a home in 2000
and lived there until 2008 when he got a divorce. Whether John has been renting or bought in
the interim, he WOULD INDEED be eligible for the credit because he owned a home and
occupied it as his principal residence for 5 consecutive years out of the last 8 years. The
keyword here is “consecutive.” As long as he lived in that house for 5 years straight what he
did since 3 years doesn’t impact eligibility.

Question: I am an eligible firsttime
homebuyer. I entered into a contract to purchase on
November 1, 2009. Do I have to go to closing before December 1? How does the
extension date affect me?

Answer: You do not have to close before December 1. Once the legislation has been signed, it will be as
if the Nov 30 date had never existed. Therefore, so long as the contract settles before April 30
(or July 1, worst case), the purchaser will be eligible for the credit.

In 2008, the City of Charlotte was approved for $5,431,777 from the U.S. Department of Housing and Urban Development (HUD) through the Neighborhood Stabilization Program. The City has committed $1 million of these funds for down payment assistance and property rehabilitation.  These funds are available to qualified buyers, in designated neighborhoods for a limited amount of time.

Program Features

·         Down payment assistance of up to $10,000 for qualified buyers in designated neighborhoods

·         Funding available of rehabilitation and repair of the purchased property, up to $10,000

·         Pre-purchase home buyer education

10 Easy Steps TO BUY a Home with NSP Down Payment & Rehabilitation Assistance*

Step 1) Complete homebuyer certification class from HUD approved housing counseling agency. The agency must sign and date the NSP certification letter in addition to your homebuyer certification.  Both documents should be included in your loan documents sent to the City by your lender.

Step 2) Contact an approved lender to see how much home you can afford.  If your lender is not already approved, a simple verification is all that is needed for approval.  Let your lender know that you will be using City funds for down payment and rehabilitation if you purchase an eligible foreclosed or abandoned home in an eligible neighborhood.

Step 3) Find a home – identify a foreclosed or abandoned home in an eligible neighborhood that is less than $147,000.  Use the address search to see what neighborhood your home is in.  The “NSA” listed in your search result is the neighborhood your property is located in.  Check to make sure the same NSA is on the eligible neighborhood list.

Step 4) Have your lender send us your loan information with the address of the home you would like to purchase.

Step 5) The City will order an inspection of the home and send your real estate agent and your lender a list of mandatory repairs to bring the home up to code.

Step 6) You should work with your real estate agent to find a qualified contractor to give you a quote for rehabilitating your new home.  Remember, all the mandatory items on the inspection list must be brought up to code. You may also include cosmetic items like – new carpet, paint, appliances, siding, etc.  But, the City will only allow up to $10,000 including the cost of labor for rehabilitation.

Step 7) You must send the rehabilitation quote to the City for approval. Once the rehabilitation quote and all other documentation are approved the City will contact your lender to proceed with closing.

Step You or your representative must pick up your loan package which includes your rehabilitation and down payment funds, loan agreement, deed restrictions, deed of trust, promissory note, and attorney closing instructions.  Identification must be presented in order to pick up your loan package.

Step 9) At closing your attorney will hold the rehabilitation funds in escrow to pay your contractor when he completes your rehabilitation.  If your contractor requires multiple draws that should be worked out with the attorney and City before closing.

Step 10) Once your contractor has completed rehabilitation on your home you should contact the City. We will order a final inspection. If the inspection passes the City will instruct the closing attorney to release the rehabilitation funds from escrow directly to your contractor.

ALL DONE!

*Eligibility Requirements

·         Families with incomes that are 120% or less of the median income

·         Must complete a pre-purchase home-buyer education program

·         The home must be the family’s primary residence and in a designated neighborhood

·         The purchaser must be a first time home-buyer (not owned any property in the last 3 years)

·         Maximum purchase price of the home is $147,000

Government initiatives to stem the country’s mounting foreclosures are hampered because banks and other lenders in many cases have more financial incentive to let borrowers lose their homes than to work out settlements, some economists have concluded.

Policymakers often say it’s a good deal for lenders to cut borrowers a break on mortgage payments to keep them in their homes. But, according to researchers and industry experts, foreclosing can be more profitable.

The problem is that modifying mortgages is profitable to banks for only one set of distressed borrowers, while lenders are actually dealing with three different types of borrowers. Modification makes economic sense for a bank or other lender only if the borrower can’t sustain payments without it, yet will be able to keep up with new, more modest terms.

A second set are those who are likely to fall behind on their payments again even after receiving a modified loan and are likely to lose their homes one way or another. Lenders don’t want to help these borrowers because waiting to foreclose can be costly.

Finally, there are those delinquent borrowers who can somehow, even at great sacrifice, catch up without a modification. Lenders have little financial incentive to help them.

These financial calculations on the part of lenders pose a difficult challenge for President Obama’s ambitious efforts to address the mortgage crisis, which remains at the heart of the country’s economic troubles and continues to upend millions of lives. Senior officials at the Treasury Department and the Department of Housing and Urban Development summoned industry executives to a meeting Tuesday to discuss how to step up the pace of loan relief. The administration is seeking to influence lenders’ calculus in part by offering them billions of dollars in incentives to modify home loans.

Still, foreclosed homes continue to flood the market, forcing down home prices. That contributed to the unexpectedly large jump in new-home sales in June, reported Monday by the Commerce Department.

“There has been this policy push to use modifications as the tool of choice,” said Michael Fratantoni, vice president of single-family-home research at the Mortgage Bankers Association. But “there is going to be this narrow slice of borrowers for which modifications is the right answer.” The size of that slice is tough to discern, he said. “The industry and policymakers have been grappling with that.”

The effort to understand the dynamics of the mortgage business comes as the administration is prodding lenders to do more to help borrowers under its Making Home Affordable plan, which gives lenders subsidies to lower the payments for distressed borrowers. About 200,000 homeowners have received modified loans since the program launched in March, while more than 1.5 million borrowers were subject during the first half of the year to some form of foreclosure filings, from default notices to completed foreclosure sales, RealtyTrac says.

No doubt part of the explanation is that lenders are overwhelmed by the volume of borrowers seeking to modify their mortgages. Rising unemployment and falling home prices have added to the problem.

But a study released last month by the Federal Reserve Bank of Boston was downbeat on the prospects for widespread modifications. The analysis, which looked at the performance of loans in 2007 and 2008, found that lenders lowered the monthly payments of only 3 percent of delinquent borrowers, those who had missed at least two payments. Lenders tried to avoid modifying the loans of borrowers who could ”self-cure,” or catch up on their payments without help, and those who would fall behind again even after receiving help, the study found.

The administration has estimated that its foreclosure-prevention program would help 3million to 4 million borrowers by 2012. But lenders’ reluctance could limit the impact to less than half that.

Update: Foreclosure Alternatives and Home Price Decline Protection Incentives

On Feb.18th the Obama Administration announced the Making Home Affordable (MHA) Program, a comprehensive plan to stabilize the US housing market and offer assistance to up to 7 to 9 million homeowners by reducing mortgage payments to affordable levels and preventing avoidable foreclosures.

As promised, two weeks later on March 4th, the Administration published detailed program guidelines and authorized servicers to begin modifications and refinancings under the plan immediately. On April 28th, the Administration announced additional details related to the Second Lien Program and strengthening Hope for Homeowners. Fourteen servicers, including the five largest, have now signed contracts and begun modifications and refinancings under MHA. Between loans covered by these servicers and loans owned or securitized by Fannie Mae or Freddie Mac, more than 75 percent of all loans in the country are now covered by the MHA program.

Today we are providing a program update, including additional details on Foreclosure Alternatives and Home Price Decline Protection Incentives. Foreclosure Alternatives will help to prevent costly foreclosures by providing incentives for servicers and borrowers to pursue short sales and deeds-in-lieu of foreclosure in cases where a borrower is eligible for a MHA modification but unable to complete the modification process. This program will assist homeowners who cannot afford to stay in their homes by helping them to avoid foreclosure and relocate to a home they can afford. Building on insights developed by the FDIC, Home Price Decline Protection Incentives will provide additional payments based on recent home price declines, and therefore will incentivize additional modifications in areas where home prices have been falling. By increasing MHA modifications and the use of alternatives to foreclosure, we will reduce the negative impact of foreclosure, minimizing damaging costs for financial institutions, borrowers and communities.

Home Price Decline Protection Incentives and Foreclosure Alternatives, together with the other comprehensive elements of the Making Home Affordable program, will help to stabilize property values for homeowners in neighborhoods hardest hit by foreclosures. Based on estimates of the relationship between foreclosures and home prices, the Home Affordable Modification program could help to bolster home values for the average homeowner by as much as $6,000.

Foreclosure Alternatives and Home Price Decline Protection Incentives

1. Foreclosure Alternatives for Borrowers Eligible for MHA

• Short Sales/Deeds-In-Lieu Program to Facilitate Foreclosure Alternatives
• Incentives for servicers to pursue alternatives to foreclosures
• Borrower incentives to cover relocation expenses to homes that are affordable
• Streamlined process combining short sales and deed-in-lieu transactions

2. Home Price Decline Protection Incentives to Protect Against Falling Home Prices

• Incentives to support modifications in markets hardest hit by falling home prices
• Provides incentives for modifications by providing payments based on recent declines in home prices to reduce the risk of loss to lenders from modifications compared to alternatives that could result in the loss of homeownership

1. Foreclosure Alternatives for Borrowers Eligible for MHA but Unable to Sustain a Modification: For eligible borrowers unable to retain their homes through a Home Affordable Modification, MHA will provide incentives to borrowers, servicers and investors to encourage short sales and deeds-in-lieu. Both allow families and servicers to avoid the costly foreclosure process, and to minimize the negative impact of foreclosures on borrowers, financial institutions and communities.

Short Sales/Deeds-In-Lieu Program to Facilitate Foreclosure Alternatives

When a borrower meets the eligibility requirements for a Home Affordable Modification (HAMP) but does not qualify for a modification or cannot maintain payments during the trial period or modification, the servicer may consider a short sale, and if that is unsuccessful, a deed-in-lieu (DIL).

Both a short sale and a DIL provide an opportunity for borrowers and servicers to avoid the foreclosure process. In a short sale, a servicer allows the borrower to sell the property at its current value, even if the sale nets less than the total amount owed on the mortgage. Approval of a short sale requires the borrower to list and actively market the home at its fair value. The sale must be an arms length market transaction with all proceeds (after selling costs) applied to the discounted mortgage payoff. If the borrower actively markets the property but is unable to sell it within the agreed upon time period, a servicer may consider a DIL. With a DIL, the borrower voluntarily transfers ownership of the property to the servicer – provided the title is free and clear.

Short sales and DILs are complex transactions involving careful coordination and close cooperation among a number of parties — servicers, appraisers, borrowers, purchasers, real estate brokers, title agencies and often mortgage insurance companies and junior lien holders. A short sale or DIL usually provides a better outcome for borrowers, investors and communities. However, due to the complexity of and time required for completion of these transactions, servicers historically have often opted to pursue foreclosure instead, even where a short sale or DIL would have provided a substantially better outcome for borrowers, investors and communities.

The MHA Foreclosure Alternatives Program simplifies and streamlines the short sale and DIL process by providing a standard process flow, minimum performance timeframes and standard documentation. To compliment a standardized approach, Treasury provides incentives to borrowers, servicers and investors to pursue short sales and DILs.

How The Home Affordable Short Sale/DIL Program Works:

.                Borrower Eligibility. Borrowers will be eligible for the Foreclosure Alternative Program if they meet the minimum eligibility criteria for a Home Affordable Modification but did not qualify for a modification or were unable to sustain payments under a trial period plan or a modification. Prior to proceeding to foreclosure, participating servicers must evaluate each eligible borrower to determine if a short sale is appropriate. Considerations in the determination include property condition and value, average marketing time in the community where the property is located, the condition of the title including the presence of junior liens and a determination that the net sales proceeds are expected to exceed the investor’s recovery through foreclosure Incentive Payments.

.                Servicers may receive incentive compensation of up to $1,000 for successful completion of a short sale or DIL.

.                Borrowers may receive incentive compensation of up to $1,500 to assist with relocation expenses.

.                Treasury will also share the cost of paying junior lien holders to release their claims, matching $1 for every $2 paid by the investors, up to a total contribution of $1,000 by Treasury.

.                Standardized Documentation: The program will publish streamlined and standardized documentation, including a Short Sale Agreement and an Offer Acceptance Letter. These documents will outline specific marketing terms, describe the rights and responsibilities of all parties and establish clear timeframes for performance. Creating one standard set of documents that the industry can use is expected to minimize the complexity of these transactions and significantly increase use of the short sale option.

.                Property Valuation: The servicer will independently establish both property value and the minimum acceptable net return in accordance with investor guidance and will provide instruction to the borrower regarding the list price and any permissible price reductions. The price may be determined based on either: (1) an appraisal performed in accordance with USPAP and/or (2) one or more Broker Price Opinions either of which must be dated within 120 days of the Short Sale Agreement.

.                Minimum and Maximum Duration: Under the program, servicers will allow borrowers at least 90 days to market and sell the property, with possibly more time based on local market conditions. The property must be listed with a licensed realtor experienced in selling properties in the neighborhood. Marketing of the property may run concurrently with the foreclosure process, however no foreclosure sale can take place during the marketing period specified in the Short Sale Agreement as long as the borrower is acting in good faith to sell the property. There will be a maximum marketing period of 1 year for the property, provided any longer period not otherwise delay foreclosure sale, to ensure diligence by servicers and borrowers in moving as quickly as possible to complete the short sale and deed-in-lieu process.

.                Selling Commissions and Fees: Reasonable and customary real estate commissions and selling costs that may be deducted from the sales price will be specified in the Short Sale Agreement. The Servicer will agree not to negotiate a lower sales commission after an offer has been received.

.                Fees and Charges: Servicers may not charge borrowers fees for participation in the Foreclosure Alternative Program.

.                Property Eligibility: Any junior liens, mortgages or other debts against the property must be cleared for the property to be sold as a short sale or deeded to the servicer. The servicer can proceed with a short sale or deed-in-lieu if there is a reasonable belief that all liens on the property can be cleared.

.                Program Expiration: Eligible borrowers will be accepted until December 31, 2012. Program payments will be made upon successful completion of a short sale or DIL.

.                Deed-in-Lieu: At the servicer’s option, the Short Sale Agreement may include a condition that the borrower agrees to deed the property to the servicer in exchange for a release from the debt if the property does not sell within the time specified in the Agreement or any extension thereof. In this case the borrower would have 30 days to vacate the property and would be entitled to $1,500 to assist with relocation expenses, in addition to any other funds the servicer may provide to the borrower.

1. Home Price Decline Protection Incentives to Protect Against Falling Home Prices: This initiative provides lenders additional incentives for modifications where home price declines have been most severe and lenders fear these declines may persist. These incentives will encourage servicers to undertake more modifications by assuring that incremental investor losses will be partially offset.

To encourage the modification of more mortgages and enable more families to keep their homes, the Administration, building on insights pioneered by Chairman Bair and the FDIC, has developed an innovative payment that provides compensation based on recent home price declines, structured as a simple cash payment on every eligible loan. Home Price Decline Protection (HPDP) incentives are designed to address investor concerns that recent home price declines may persist. Together the incentive payments on all modified homes will help cover the incremental collateral loss on those modifications that do not succeed. HPDP payments will be linked to the rate of recent home price decline in a local housing market, as well as the average cost of a home in that market.

.                Increases Number of Loans that Are Modified: Making Home Affordable will make payments totaling up to $10 billion to to encourage lenders, servicers and investors to modify rather than foreclose by addressing concerns that home price declines will persist in the future. This should increase the number of modifications completed under the MHA program in markets hardest hit by falling home prices.

How The Program Works:

.                Payments will be based on the total number of modified loans that successfully complete the modification trial period and remain in the modification program.

.                Each successful modification will be eligible for a HPDP incentive, up to a cap for HPDP incentives of $10 billion.

.                If the trial modification remains successful, 1/24th of the HPDP incentive will accrue to the lender/investor each month for up to 24 months. HPDP incentive payments will be made at the end of the first and second year of the modification.

.                Calculation of HPDP Incentives: HPDP incentive amounts will be calculated based on a formula incorporating:

.                Declines in average local market home prices over recent quarters prior to the quarter in which the loan was modified based on housing price indices; and

.                The average price of a home in each particular market, since the potential loss due to a given rate of home price decline will be larger in higher cost areas.