Understand the rules of Government Foreclousre Plan's to better your chance for success!

The game has changed significantly. If you are behind on your payments, need to refinance, or are just looking to short sell your home, the game has recently changed. I am going to provide you with the facts for the key program called Making Home Affordable Loan Modification Program, with three sub-programs: Home Affordable Refinance Program, Home Affordable Modification Program, and Foreclosure Alternative Program.

The Obama administration created the Making Home Affordable Loan Modification Program. This program has two sub-programs.

1. The Home Affordable Refinance Program: this is available to 4 to 5 million homeowners who have a solid payment history on an existing mortgage owned by Fannie Mae or Freddie Mac. Normally, these borrowers would be unable to refinance because their homes have lost value, pushing their current loan-to-value ratios above 80%. Under the Home Affordable Refinance program, many of them will now be eligible to refinance their loan to take advantage of today’s lower mortgage rates or to refinance an adjustable-rate mortgage into a more stable mortgage, such as a 30-year fixed rate loan.
2. The Home Affordable Modification (HAM):program will help up to 3 to 4 million at-risk homeowners avoid foreclosure by reducing monthly mortgage payments. The program contains guidelines that are expected to become standard industry practice in pursuing affordable and sustainable mortgage modifications. This program will work in tandem with an expanded and improved Hope for Homeowners program.

In order to be eligible to participate in programs 1 or 2, the following applies:

1. Loans originated on or before January 1, 2009.
2. First-lien loans on owner-occupied properties with unpaid principal balance up to $729,750. Higher limits allowed for owner-occupied properties with 2-4 units.
3. All borrowers must fully document income, including signed IRS 4506-T, two most recent pay stubs, and most recent tax return, and must sign an affidavit of financial hardship.
4. Property owner occupancy status will be verified through borrower credit report and other documentation; no investor-owned, vacant, or condemned properties.
5. Incentives to lenders and servicers to modify at risk borrowers who have not yet missed payments when the servicer determines that the borrower is at imminent risk of default.
6. Modifications can start from now until December 31, 2012; loans can be modified only once under the program.

In addition, the Obama administration wanted to address the problem of what happens if you are eligible for the above programs (mainly the HAM) but you can not afford the loan modification. They created the Foreclosure Alternatives Program (FAP). The following are the key program highlights:

1. Borrowers (Homeowners). Borrowers/homeowners qualify under the FAP if they meet minimum eligibility requirements for the Home Affordable Modification program but don’t qualify for a modification or do not successfully complete the three month trial period. Before proceeding with a foreclosure, servicers must determine if a short sale is appropriate.
2. Incentives. Incentives include: (1) $1,000 for servicers for successful completion of a short sale or deed-in-lieu of foreclosure; (2) $1,500 for borrowers/homeowners to help with relocation expenses; and (3) up to $1,000 toward the cost of paying junior lien holders to release their liens (one dollar from the government for every $2 paid by the investors to the second lien holders).
3. Standardized Documents. The program will include streamlined and standardized documents, including a Short Sale Agreement and an Offer Acceptance Letter. The goal is to minimize complexity and increase use of the short sale option.
4. Property Valuation by Appraisal or BPO. Servicers will independently establish both property value and minimum acceptable net return, in accordance with investor requirements. The price may be determined based on an appraisal or one or more broker price opinions (BPOs), issued no more than 120 days before the date of the short sale agreement.
5. Timeline. In the Short Sale Agreement, servicers must give borrowers/homeowners at least 90 days to market and sell the property, or up to one year, depending on market conditions. Property must be listed with a licensed real estate professional with experience in the neighborhood. No foreclosure may take place during the marketing period (at least 90 days) specified in the Short Sale Agreement.
6. Commissions. The Short Sale Agreement must specify the reasonable and customary real estate commissions and costs that may be deducted from the sales price. The servicer must agree not to negotiate a lower commission after an offer has been received.
7. No Borrower Fees. Servicers may not charge fees to borrowers/homeowners for participating in the FAP.
8. Program Expiration. The program is in effect through 2012.
9. Deed-in-Lieu of Foreclosure Option. Servicers have the option to require the borrower/homeowner to agree to deed the property to the servicer in exchange for a release from the debt if the property does not sell within the time allowed in the Short Sale Agreement (plus any extensions).

The major key is the banks are receiving "payments" from the government to perform loan modifications, and short-sales. No incentives for foreclosures...just cost.If a short-sale is unsuccessful, the government provides homeowners with a $1,500 cash for keys offer basically to turn their homes over as a died in-lieu of foreclosure.

Be safe, Be smart....and seek a Realtor's Advice.

Mr. REO

Joseph Bradley

Family Realty has specialized in REO, Short-Sale, and Pre-foreclosure properties for over 30 years, with our founder and my grandfather Joseph Goodwill. My success as the owner and chairman is based on maintaining F.O.C.U.S. during market upturns and downturns: F.O.C.U.S. stands for Financially Secure, Operational Expertise, Customer Focus, Unparalleled Industry Knowledge and Superior Technology. We are a boutique real estate firms that provides personalized services to consumers or banking institutions looking to sell or purchase a home in Contra Costa, Alameda, and Placer Counties located within California. As the Broke-Owner of Family Realty Group, I am personally involved in all of our client transactions ensuring the highest level of focus and accountability in servicing your needs. If you would like a FREE Home Seller or Home Buyer Handbook, or list of available REO properties please call me at 925.401.0405 or email at josephb.frg@gmail.com.

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