New Jersey Estates/Weichert Realtors/ NJ Luxury Real Estate/ New Homes: March 2009

Teaming Up with Your Lender for a Loan Modification

Suppose you're behind on your house payments. You dial the phone number on your most recent mortgage statement, clear the usual hurdles, and finally reach someone who understands your situation and offers to help.

You are one of the lucky homeowners who has a cooperative lender. Now what? What can you do to team up with your lender to optimize the outcome? This article reveals ten ways you can expedite the process and negotiate an affordable loan modification that enables you to catch up on any missed payments, lower your monthly mortgage payment, and keep your house.

The following tips apply whether you are working directly with your lender or teaming up with an attorney or other professional you hired to represent your interest. If you hired professional representation, team up with your representative and defer all correspondence and phone calls from your lender to your representative - don't communicate with your lender unless your representative specifically advises you otherwise.

Come clean. Honesty is the best policy It can be tempting to bend the truth when you are trying to convince a lender to approve a loan modification. Some homeowners are embarrassed by something they did to place their finances in jeopardy - possibly a gambling addiction of substance abuse. Others try to fudge the numbers to make themselves eligible for a loan modification they cannot otherwise qualify for. Even worse, some homeowners lie to their partners or try to conceal the problem until it is too late to do anything about it.

Only by laying all your cards on the table and disclosing the truth can you begin to attend to the root cause of your financial hardship and then develop and implement solutions that put you back on the path to long-term financial health. Understand your lender's point of view Regardless of how you ended up in the situation you're in, blaming the lender or the mortgage broker or loan officer who placed you in your current mortgage does little good, unless you can prove your point in court.

Usually, you have a better chance of resolving the problem by understanding your lender's point of view, even if you don't agree with it. So, what is the lender's point of view? Lenders lack any emotional attachment to the situation. To them, it all boils down to money. If you can show them that modifying your loan cost them less than a foreclosure and they believe you will honor the terms of the loan modification, they are likely to approve it. If not, then they are likely to reject it. Keep in mind that some homeowners who don't need loan modifications are also applying for them. Lenders need to protect their own interests from homeowners who are trying to cheat them out of their profits. As a result, they need to carefully screen out ineligible applicants, which can often make the process much more difficult and frustrating for homeowners who genuinely suffer financial hardship and need a loan modification.

Keep a cool head. Understandably, homeowners often become frustrated and angry when seeking assistance from their lender. Unfortunately, anger can result in the following:

 

• "Accidental" disconnects: The customer service rep you're speaking with may put you on hold permanently or hang up "accidentally."

   

• Lost files: Your file may get "lost" or "misplaced."

   

• Rejection: Your lender may decide that you are unreasonable and that foreclosing would be less costly overall.

   

• A bad offer: Your lender may offer a workout solution that is worse than what you would get had you been nice about it. Or, you may be so exhausted that you agree with the first offer your lender puts on the table rather than negotiating a better deal rationally.

Tip: If you doubt your own ability to remain calm, cool, and collected during the entire process, consider hiring a professional to represent you. Give them what they need Prior to applying for a loan modification, call your lender or visit its website to obtain an application packet or a list of items you need to submit with your application. Some lenders allow you to apply online, but you usually have to ship or fax supporting documentation separately.

Find out exactly which forms you need to fill out and which documents your lender needs to process your application, and provide everything to your lender or representative in the manner specified. Label everything clearly and legibly with your name and loan number and provide a checklist of all items you're submitting in your application packet. Arrange the items in the order listed by your lender, so whoever is processing your application does not have to search for items. Include a cover page that in large print lists your name and loan number as well as an items-included list.

Ask for what you want Before discussing the terms of the loan modification with your lender, you should have a fairly clear idea of what you want and need. Answer the following questions for yourself. This will help you field questions from your lender:

 

• How much do you owe in late or missed payments?

   

• Can you catch up the missed payments?

   

• Do you need additional time to catch up on missed payments?

   

• How much can you realistically afford to pay each month?

   

• Do you really want to keep your home or would you prefer to sell if you could walk away not owing anything?

State clearly what you want up front. If your lender is unwilling to agree to the terms you need, you're better off knowing that up front, so you can explore other options. Don't waffle. It will only lead to misunderstandings and unsatisfactory "solutions."

Let them do their job. While you should track the process of your loan modification application and any negotiations, avoid the temptation to micromanage the process. Knowing the timeline in advance can help you develop realistic expectations of when you will hear back from someone, so you don't have to keep calling to check progress. Remember, the more time they spend on the phone consoling anxious applicants, the less time they have to review your application and work out a solution. The lender should have a timeline for just about every step in the process. Your lender can probably even tell you how many days it takes for items you fax in to get to where they need to be. Some lenders have a 4-day delivery period for faxed items. Most timelines are in place because of the volume of requests. Ask how long the steps in the process take. Follow up when timelines near expiration.

Get your financial house in order. Most homeowners, even those who can readily afford their monthly house payments, could benefit from reviewing their income and expenses and drawing up a monthly budget. If you don't have some way of tracking income and expenses with realistic goals in mind, put a tracking system in place today and start developing a budget. If you have a computer, a personal accounting program, such as Quicken or Microsoft Money can come in very handy. These programs allow you to assign each entry to a specific category, such as groceries, clothing, entertainment, utilities, auto insurance, auto: gas, auto: maintenance; and so on. You can then generate reports showing monthly totals for spending in each category.

If you're budget challenged, consider hiring an accountant or credit counselor to get you on track. It's worth the investment.

Keep everyone posted of any changes. If anything changes related to your financial situation, be sure to keep your representative or lender (if you're negotiating the loan modification on your own) in the loop. Withholding information that may affect your eligibility could cause problems.

Make sure the lender's offer is truly affordable. Assuming you qualify for a loan modification, your lender will present you with an offer. Be sure to review the offer carefully and have your attorney look it over - before you sign on the dotted line. Make sure the monthly payment is truly affordable. If the loan modification is unaffordable or makes your budget so tight that you're only one car repair or medical bill away from defaulting again, head back to the negotiating table to try to work out a better deal. It doesn't do you or your lender any good to accept an agreement that puts you on the path to repeating this same scenario.

Hold up your end of the bargain. By the time you finalize your agreement, you and your lender will have invested a great deal of time and effort in hammering out the details. To ensure long-term success, put some effort into keeping your budget on track. If you are having trouble, consult a credit counselor, who can help hold you accountable for your spending. Budgeting can be tough at first, but it pays huge dividends down the road. Most people who acquire the necessary skills discover that by tweaking their spending priorities they have more than enough to cover their expenses.

The key to success is discipline and commitment. All the effort you spend setting up a plan is of no use if you don't follow the plan you created. It's like signing up for a gym membership and then never walking through the doors to work out. Reestablishing your financial health will be work, but the results will be worth the effort. Like that gym membership, you won't realize results over night, but commitment to the routine will pay off.

Remember, loan modification success is a team effort. Do your part to achieve long-term success.


Written by Ralph Roberts
March 30, 2009 

Washington Report: FDIC and Loan Pools

The Obama administration's latest plans to bring relief to the financial markets have been dominating the news from Washington, but it's far from clear whether they'll actually produce more money for people to buy houses.

Here's why: Although the Treasury's and FDIC's programs almost certainly will help major banks clean some of the toxic suprime mortgages and commercial real estate securities out of their portfolios, that doesn't mean the banks will turn around and extend new mortgages to consumers.

That's because there's no "quid pro quo" in this program. The FDIC and Treasury are essentially helping banks sell off loan pools and securities at discounts to private investors and "public-private" joint-venture funds, but there's no requirement that the banks do anything in particular with the money.

Banks can take the sales proceeds and simply use them to bolster their capital positions. They can also wait for a higher price and sell nothing.

Of course there is a chance that some banks will take the money and plow it into parts of the mortgage market that really need it at the moment, like jumbo mortgages in high-cost housing areas throughout California, in Florida, Washington, D.C., the New York metropolitan and New England.

The Bank of America is leading the way on the move into jumbos -- loans above $730,000. Even without selling its own toxic mortgage assets, it has begun making an aggressive push into big home loans -- offering up to one and a half million dollar mortgages to borrowers with good credit and minimum 20 percent equity. Fixed interest rates are in the high five percent range.

You might ask: why would sophisticated investors have any interest whatsoever in the "bad" loans and securities on the banks' books? Why would pension funds want to buy somebody else's garbage? Here's why. Because those assets are better than garbage. Subprime mortgage backed securities and loan pools owned by the banks might have high rates of default and foreclosure: say 30 percent to 40 percent.

But that means 60 to 70 percent of the borrowers in these securities are still paying on time. The cash flows produced by those borrowers are worth something. And some of the delinquent borrowers may be salvageable through loan modifications and rate reductions.

How much will investors pay for these damaged goods? Since there's a lot of federal guarantees involved in the whole program -- and private investors won't need to put up a lot of equity -- the Obama administration hopes they'll pay whatever is necessary to get the banks to sell.


Written by Kenneth R. Harney
March 30, 2009 

Investor Report: Bailout at Work

It's by no means a federal bailout, but $731 million in new federal money began flowing last week to local communities to acquire and redevelop areas with high numbers of foreclosures and abandoned houses.

The $731 million sent out last week went to dozens of cities, towns and counties spread among 48 states. Among the recipients were some very large communities: Los Angeles, Detroit, Dallas, Houston, and Washington D.C and much smaller ones such as Kissimmee, Florida, and the U.S. Virgin Islands.

Under the program, local and state governments submit property acquisition and redevelopment proposals to the federal department of Housing and Urban Development. HUD then awards funds in a competitive process.

In announcing the $731 million in grants, HUD said the winners intend to undertake a wide range of activities, from purchases of blocks of distressed properties to creation of "land banks" for future redevelopment.

So how do private real estate investors and entrepreneurs fit into the equation? There are a number of ways: Under the guidelines, local governments are expected to contract with for-profit companies and nonprofit groups to rehabilitate houses acquired with federal funds, appraise properties and evaluate alternative land uses, build new housing and sell renovated units, among other potential services.

Private investors can also work jointly with nonprofits to assemble and prepare real estate for government purchase. Local developers and builders who've been sidelined by the recession may also be able to help reconstruct damaged houses and manage them until they're ready for resale.

How do you position yourself or your firm to take part? Number one: You've absolutely got to be in touch with local housing and community development agencies. They're the ones making the proposals to the feds under the stabilization program, and they can give you immediate feedback on whether you might have a role.

As an alternative, if you find that your local officials aren't up to speed on the Neighborhood Stabilization program and haven't prepared proposals for HUD, you might approach them with ideas aimed at turning around blighted streets, neighborhoods or individual abandoned properties, and making them available for affordable housing, either for rental or purchase.

Information on the program and the $731 million in new awards can be found at hud.gov.


Written by Kenneth R. Harney
March 27, 2009 

Managing Contacts

Regardless of the system you select, you must be able to access your contact database with reliability and ease.

This isn't the place to apply a shoestring budget. Minimally, you will want to invest in a computer (preferably a laptop) and all the software necessary to build and run your business, from contact management to MLS access to agency management.

While you are budgeting:

Budget for ongoing self-improvement. Start with a budget for a wardrobe that presents you as a successful agent. Some people will make assumptions on who you are based on the way you are dressed. Dress for success. Just as important, budget to attend every business seminar you can make time to attend. Your personal education and skills-based training is fundamental to your climb up the ladder of success.

In between, buy books, tapes, download podcasts, and get your hands, eyes, or ears on every piece of media that can help you develop sales skills, mental focus, leadership, discipline, and motivation.

The most significant asset in your business right now is you. Ten years from now the most significant asset in your business will still be you. Don't fail to invest in yourself.

Staying in Touch:

Use your contact management system to trigger the next call to a prospect and to make staying in touch automatic and easy.

 

• Each time you end a prospecting call, determine when the next call will take place. Learn your prospect's time frame and when you should speak again. Then schedule the contact right then and there.

   

• When talking to a past client or sphere member, schedule the next call without even asking. Then the next time you call, they will be pleasantly surprised to hear from you.

   

• In addition to calls, send e-mails to thank contacts for their time and to reiterate your service offer.

   

• Obtain permission to add contacts to your monthly e-mail newsletter mailing.

   

• Follow up first-time contacts with a copy of your agency brochure or marketing piece. Or send a just listed or just sold card to demonstrate your success as an agent.

   

• Craft a personalized business letter, perfectly typed on your letterhead and sent out in your matching #10 envelope.

But wait! As great as all of the above suggestions are for your business, none of them beat the all-time winning touch of a hand-written thank you note that says to the receiver, basically, you were so important that I took the time to pen this in my own hand rather than touching a few buttons on my computer or spitting out a pre-planned, standard issue, regurgitated letter that I have sent to 1,000 other people just like you.

Most of us get hundreds of e-mails a day -- most of which we don't even want. We receive hundreds of pieces of junk mail a month -- mostly from credit card and mortgage refinance companies.

The hand-written thank you note breaks through the clutter. It looks like an invitation to something special. It secures the relationship and keeps it active until you talk again in a few days. It is still the best way to keep in touch in our technology driven world.


Written by Dirk Zeller
March 27, 2009 

Paul Stillwaggon & Pat Cornish ,
New,Luxury Custom Built
& Pre-Owned Homes in
Central New Jersey
E-mail: njestates@gmail.com
Web: http://www.newjerseyestates.net
908-561-5492 (Paul S) 908-310-1358 (Cell)908-561-6499 (Pat C) 908-578-0890 (Cell)

Hot Market: Bloomberg: 2008 Home Prices Increase in Various U.S. States

Leading the list was West Virginia with an average sales price increase of 4.2 percent in 2008 over 2007. Other states where prices moved upward include:

 

• Texas - 3.6 percent

   

• South Dakota - 3.6 percent

   

• Montana - 2.6 percent

   

• Mississippi - 1.7 percent

   

• Utah - 1.5 percent

   

• New Mexico - 1.3 percent

The price increases were reported by First American CoreLogic, which sells mortgage data and is based in Santa Ana, Calif.

Hopefully, these price increases are signs of things to come. Reuters news service ran a piece quoting Moody's Economy.com stating, "Despite the darkening national economic outlook and the weak conditions in the housing market, some positive signs give hope that a bottom in the housing market is coming into view," the report said, written by the group's chief economist.

"More than three years since the market began correcting, inventories are flattening, prices are coming back down to earth, and sales are approaching stability," the report said.


Written by M. Anthony Carr
March 27, 2009 

Take mortgage rates and new loan applications. Rates hit their low point in decades last week, and it looks like they're going lower in the wake of the Federal Reserve's announcement that it plans to pump hundreds of billions more into mortgage securities.

Average thirty year fixed rates dropped to 4.89 percent, according to the Mortgage Bankers Association's latest national survey. Fifteen year rates hit four and a half percent with one point.

Not surprisingly, loan applications are rocketing. Last week they were up by 21 percent over the previous week and are now 31 percent higher than applications were at the same time in 2008. A lot of the volume is for refinancing, but applications for home purchases are up as well.

Meanwhile, housing starts took a surprise jump of 22 percent in February over January's depressed levels. Most of the increase was attributable to apartments and condominiums, but single family starts were up by one percentage point, and new home permits were up by 11 percent, after months of sharp declines.

Even sales may be starting to stir in the depressed new home sector. A survey of sales at sixteen hundred new home communities in 80 metropolitan markets by John Burns Real Estate consultants found small but noteworthy "improvements in sales that can't be explained by just "seasonal " changes in buying habits, according to the study.

On the west coast of Florida, builder John Cannon of John Cannon Homes told the Sarasota Herald Tribune that "there's a different buzz in the air (now) than we had sixty to ninety days ago. People are (suddenly) out there looking. Astute buyers know that they (can) take advantage of low pricing" and today's bargain financing rates.

Too much optimism here? After all, unemployment keeps rising and the national economy is still in recession. But Fed chairman Ben Bernanke sees reason for cautious optimism about the months ahead. He told a national TV audience last week that the recession will likely be over later this year.

"I do think we will get it stabilized" and then "pick up steam" as the recovery gets rolling into next year.

But here's what we believe at Realty Times: Real estate as a sector will see its own recovery sooner than most sectors. The signs are pointing that way already.


Written by Kenneth R. Harney
March 24, 2009 

My friend, Brian Tracy, shared with me years ago the law of forced efficiency. It is based on the premise that you will never have enough time to do everything you want or need to do, but in every day, there will always be enough time to accomplish the most important tasks. Obviously, you won't get to the most important things if you are bogged down with tasks of low importance that could easily wait until later. Nor will you get to the most important tasks if you procrastinate.

Once you set your priorities of what are the most important tasks, take action without procrastination by following these two pieces of advice:

 

• Limit the time in which you can get the job done. Too much time to work can lower urgency and lead to procrastination. By identifying days off and time off, you raise the efficiency and effectiveness of your production on the days you are working.

   

• Give yourself deadlines. Have you ever noticed how much gets done when you are leaving on a vacation in a day or so. I've seen people double or triple their work output in the days leading up to a vacation. What if you operated everyday at that pace and urgency all the time? Your income and quality of life would explode to heights you never imagined.

Moving forward with a clear vision

A good deal of procrastination results directly from the lack of a clear vision or clarity about what to do. If you don't know what you want, you can't possibly achieve it. You can hardly hit a target you can't see.

Clarity of purpose kills procrastination, yet fewer than 3% of all people define and write down their goals.

Answer these questions:

 

• What do you want to be?

   

• What do you want to do with your life?

   

• What do you want to have?

   

• Where do you want to go?

I know you want to be financially independent. Otherwise, you wouldn't be in real estate sales. But what does financial independence mean to you? How much money do you need to live the lifestyle you dream about? The famous success motivator, Napoleon Hill, explains the importance of identifying your goal when he says: "There is one quality that one must posses to win, and that is definiteness of purpose . . . the knowledge of what one wants and a burning desire to achieve it."

Clarify your desires in life. Once you are certain about what you want to achieve, you'll find it far easier set and follow an action plan that isn't hindered by the problem of procrastination.

Knowing your objectives

You'll set annual goals, of course, but also remember each day that you work or play in terms of daily objectives. What do you want to accomplish today? What result do you want to achieve by day's end?

I coached a young real estate Agent, Greg Ferrera, in Portland, Oregon. Greg had a high sense of urgency to succeed but struggled when it came to establishing plans and objectives necessary to achieve his goals. In 1998 he wanted to make $250,000 in income. He was less than a third of the way to his goal when we began working together in July of that year. Then, over the next five months, he closed deals for another $175,000! The key was setting a daily objective. Each morning he asked and answered the question: Who has the highest probability of buying or selling today? Then he focused single-mindedly on those prospects.

What big picture results do you want to achieve today?

Setting your priorities

Your priorities are the most important actions or steps you must take in order to achieve your objectives for the day. Objectives and priorities aren't one and the same. Objectives are results you intend to achieve. Priorities are steps you must take to achieve success.

By prioritizing the importance or value of the tasks on your to-do list, you greatly increase the probability that you will be motivated to overcome procrastination and get the job done.

Most people go about creating task lists in the wrong way. They write down all of the things that they must do each day and then go to work - proudly ticking off items as they are completed and equating their level of success with the number of items they check off the list. Success, though, doesn't result from how many things you get done. It results from getting the right things done. In other words, you need to know your priorities.

Following is an outline for the prioritization system I've used with success for years:

 

1. Create your daily task list as you normally would. Don't think at all about what is most important. Just think about what needs to get done over the course of the day. Put yourself in brainstorming mode and get your thoughts down on paper.

    

2. Once you have your list, create task categories. You're not prioritizing during this step. This isn't about what to do first, second, or third. All you're doing is sorting tasks into these categories:

    

   • You'll suffer a significant consequence if you don't complete these tasks today. If it means you have to work all day and all night, these items must get done.

      

   • These tasks trigger a mild consequence if they aren't completed today. You probably wouldn't stay late in order to finish them.

      

   • These tasks have no penalty at all if they aren't done today.

      

   • These tasks can be delegated. They involve low-value activities that should be performed by someone who has a lower hourly dollar value than you.

      

   • These tasks can and should be eliminated. They probably made their way onto your list out of tradition or habit. They aren't necessary, so you need to figure out a way to get them off the list. I call it pruning.

My friend, Zig Ziglar, tells a story of a little boy who asks his mother as they are preparing a holiday meal why she cuts the ends of the ham. She says, "I don't know. My mother always did it this way." Now this four-year-old boy (the reason I know he was four is that my son, Wesley, is four and would say the exact same thing) said, "Let's call Grandma right now and find out." So they call Grandma and ask why she always cut the ends off the ham. Her reply: Her roaster was too small!

Once your list is categorized, prioritize the tasks. Begin with your A category and determine which item deserves A-1 status. Follow by designating A-2, A-3, A-4, A-5, and so on. Then repeat the process for the B, C, and D categories. Go to work in the order of these priorities, and you'll be amazed at how you can accomplish more in less time without falling into the procrastination trap.

As you master the art of prioritizing, expect to see fewer cross-offs or checkmarks on your task list. By undertaking your most important tasks first, you'll complete fewer but more important activities.

Consider every day that you achieve closure on all your A category items a terrific success. If you complete your A items every single day you work this year, I guarantee that you'll see your production and income explode.


Written by Dirk Zeller
March 20, 2009 

 In this case, the "all available tools" included the equivalent of a massive shot of adrenaline for home real estate: The Fed pledged to essentially flood the mortgage market with so much new capital that loan rates will drop to unprecedented levels - possibly into the mid four percent range for 30 year fixed rate mortgages. Maybe even lower.

How will that happen? The Fed intends to buy $750 billion in new mortgage-backed securities from Fannie Mae and Freddie Mac . That's on top of the $500 billion it previously committed to buy.

Those mortgage securities will then sit on the Fed's balance sheet, providing long-term returns to the central bank.

More importantly, by providing a guaranteed outlet for conventional mortgages, the Fed will encourage lenders across the country to extend loan commitments to home buyers and refinancers immediately.

It should also throw a lifeline to large numbers of current home owners who are on the brink of not being able to make their monthly mortgage payments, and who simply need lower interest rates through refinancings to afford to keep their houses.

Lower mortgage rates through the new program will almost certainly pull buyers off the sidelines this spring and summer, and even put a floor on home prices in the hardest-hit markets.

Everywhere else, rates in the mid-four percent range or lower could even put upward pressure on selling prices. That's because when you lower the monthly cost of borrowing to buy a house, you make it more affordable, even at a slightly higher price.

Is there any downside to all this stimulation of the housing sector? Probably the biggest worry over the long-term is that inexpensive capital may contribute to higher inflationary pressures in the coming years.

But the Fed seems to be saying: Hey, let's tackle one problem at a time. Right now we're trying to help housing out its anemic state. If that eventually spikes inflation's ugly head, we'll deal with that when it comes up.


Written by Kenneth R. Harney
March 23, 2009 

"Do I have a capital loss of $25,000, and if so, how will that impact my tax return?" I'm currently getting a lot of calls from people with questions similar to this. Most of them are annoyed, and a few just down right mad, to discover that instead of the loss they think they have, they have a gain on the sale.

"How can that be," you ask? The answer is that when you do a 1031 exchange your basis from the Old Property rolls over to the New. The Old basis is modified slightly if you buy-up, but not if you buy-down. For example, if your Old Property that you just sold for $200,000 has a tax basis of $125,000, and you buy a replacement property for $200,000, your tax basis in the New Property is exactly the same as the Old ($125,000) and you've deferred paying tax on the $75,000 gain.

On the other hand, if you buy the New Property for $190,000, you've bought-down (which is a taxable event in a 1031 exchange), and you'll pay tax on the $10,000 buy-down. Your basis on the New Property is still $125,000, your deferred gain is $65,000, and you paid tax on the other $10,000.

The result is slightly different if you buy-up in an exchange. Assume, for example, that you paid $225,000 for the New Property; its basis would be $125,000 plus the buy-up of $25,000 for a new basis of $150,000, and your deferred gain remains unchanged at $75,000. This is how the IRS views it, although you arrive at exactly the same basis amount if you take the purchase price of $225,000 and back off the deferred gain of $75,000.

So, coming back to the purpose of this article, what does happen if you sell the New Property at a loss? If you sell the property for $175,000, and your basis is $125,000, you have a gain of $50,000, and it matter not that you paid $200,000 for the property. The net effect of the transaction is that you had a deferred gain of $75,000 when you did the exchange, but then lost $25,000 of value resulting in a taxable gain of $50,000 when you sold it.

A couple of final thoughts about this whole issue: first, depending upon the amount of your loan on the property, you may realize barely enough cash on the sale to pay the tax. Also, to point out the obvious, you can still do another exchange on this property and avoid paying tax on the gain.


Written by Gary Gorman
March 5, 2009