What does this mean for home buyers?
A home buyer purchasing a $200,000 home using a $193,000 FHA mortgage before October 4 would pay an insurance premium of $88.46 per month. If the same home buyer waits until after October 4, the insurance premium would jump to $148.01.

“In this example, the home buyer would lose $59.55 per month, or $7,146 over a 10-year timeframe,” Nicholas said. “Although the upfront mortgage insurance premium is going down after October 4, the real impact to the home buyer is actually a net increase in their out of pocket costs because the monthly premium is going up by 63%. Remember, sellers can pay the upfront premium or it can be financed into the loan amount, so homebuyers rarely pay the upfront premium out of pocket. On the other hand, the increase in the monthly premiums will be paid right out of the home buyer’s pocket with their mortgage payment each month.”

Ironically, home buyers who plan to be in the mortgage for less than three years and decide to pay the upfront fee themselves (instead of having the seller pay it for them), may actually save money by waiting until after October 4 to apply for an FHA loan.

“Home buyers with a short term time horizon may actually benefit from this change because the upfront premium will be reduced to 1% from 2.25%,” Nicholas said. This change will impact over 30% of the home buyers in today’s market who use FHA-insured financing. Home buyers considering an FHA loan should find and contact a CMPS professional in their area to discuss their options and what this means for their situation.

Also, you can follow CMPS Institute on Twitter to stay updated on these and other mortgage and housing industry developments.

The FBI has found that fraudsters are evolving new ways to take advantage of others and hide their intent. For this reason, anyone involved in the mortgage industry needs to be educated on the red flags of possible mortgage fraud, such as those outlined below:

Flipping vs. Serial Flipping:
A fraudulent flip is one that erroneously increases the value of the property by using an inflated appraised value. If a property was purchased for $175,000 and soon thereafter was sold for $500,000, most professionals would notice. However, serial flipping is trickier. Say a house sold for $175,000, soon after sold for $250,000, then $325,000, then $400,000 and then $500,000. Fewer professionals would even raise an eyebrow. This scheme takes more time, but the end result is the same: fraud.

Multiple Contracts & HUD-1 Settlement Statements
In this scheme, unbeknownst to the seller, the contract and settlement statement that is sent to lender shows inflated sales price. This enables the buyer to obtain a higher mortgage. In the end, the seller believes the property was sold for $300,000, but lender, agent and buyer believe the sales price was $500,000 (the amount on which the agent’s commission is calculated).

Fraudulent Qualification Documents
In this scenario, the borrower’s ability to qualify for a loan is misrepresented by fabricated employment history, income, credit records, and bank statement balances. FBI calls this is an “emerging issue” and a result of sophisticated Photoshop and editing software.

Bogus Assignment Fees
Buyer #1 enters into an assignable contract with the seller at an inflated price. Buyer #1 locates Buyer #2 who may be a co-conspirator or a naïve investor. Buyer #2 takes an assignment of the contract at the inflated price and agrees to pay Buyer #1 an assignment fee. Inflated appraisal is used and Buyer #2’s application may contain misrepresentations.

Bogus Liens or Invoices
A buyer contracts with a seller at an inflated price. At closing, the difference between the true sales price and the inflated contract piece is paid to a bogus shell company of the buyer or individuals affiliated with the buyer.

Chunking
Chunking transactions are similar to flipping, but instead of multiple sales of the same property, it involves multiple loans to the same borrower. In this situation, a borrower purchases more properties than underwriting guidelines would allow or obtains multiple refinance loans secured by the same property.

Chunking usually begins with an unsophisticated borrower attending a “how to get rich quick” seminar. At or following the seminar, a third party contacts the unsuspecting borrower to encourage investment in a specific property with no money down. The third party acts as an agent for the borrower and simultaneously submits loan applications on the borrower’s behalf to multiple financial institutions for the various properties. The borrower may not be aware of this.

The third party acts as agent for the borrower during the closing, and often, unbeknownst to the borrower, pockets the loan proceeds. The “unsophisticated” borrower is left with numerous loans from various financial institutions and usually has insufficient cash flow to repay the debt.

Builder Bailouts
These bailouts often occur when a builder is highly motivated to move inventory that has been sitting in a declining or depressed market. According to the FBI, condominium conversions are particularly vulnerable to this type of fraud.

In a builder bailout, the builder may use a variety of ways to quickly dispose of the property. Some of the methods are:

• Aiding in fraudulent borrower qualification.
• Offering excessive incentives not disclosed to the buyer’s lender.
• Offering no down payment by inflating the sales price by the buyer’s down payment and forgiving the buyer of that amount.
• Inflating the sales prices and using bogus liens or invoices.

Straw Borrowers
This type of fraud intentionally disguises the true beneficiary of the loan proceeds.
It may be used to:

• Conceal questionable transactions;
• Replace a legitimate borrower who may not qualify for the mortgage or intend to occupy the property
• Circumvent applicable lending limit regulations by applying for and receiving credit on behalf of a third party who may not qualify or want to be contractually obligated for the debt. The straw borrower may be a friend or relative of the true beneficiary, or merely a paid participant.

Mortgage Elimination
Mortgage elimination is an attack on an existing mortgage through forced cancellations and unusual cancellations (usually called a “declaration of avoidance”).

Purchase Disguised as Refinance
In this scenario, the buyer executes a contract for purchase and convinces seller to quitclaim the title to buyer prior to closing. This is done with or without a security deed from buyer to seller and is done without the payment of the sales price to seller. At this point, the buyer then applies for a refinance of the property instead of a property purchase.

Reverse Mortgage Fraud
The FBI calls reverse mortgage fraud an emerging type of scheme that takes years to identify. In this scenario, fraudsters identify foreclosed, distressed or abandoned properties and use straw buyers to commit occupancy fraud. Seniors are recruited to purchase the property from the straw buyers without the exchange of money. After living in the property for 60 days, the seniors obtain a reverse mortgage. A fraudulently inflated appraisal is used as justification, possibly based on repairs or renovations that may not have been performed. At this point, a lump sum disbursement of the equity is requested, which the fraudsters abscond with at closing. Unfortunately, this type of fraud usually is not discovered until after the death of the borrower.

Short Sales
Many argue that residential mortgage fraud cannot be involved in a short sale transaction. The misstatement, misrepresentation or omission of fact to the seller’s existing lender would not be in the mortgage loan process. Nevertheless, mortgage fraud is often involved! Not against the seller’s lender (although other crimes may be involved), but usually against the buyer’s lender. Sellers, agents, buyers, and others involved in the process find a way for the buyer to pay some money to the seller for the purchase of personal property or as rent for the buyer taking possession prior to closing.

The issue is whether the buyer made a misstatement, misrepresentation or omission of fact in the mortgage loan process for the new loan being obtained. If the buyer is paying $2,000 to the seller for personal property or rent that expenditure would have to appear on the Loan Application Form or itemized on the HUD-1 Settlement Statement. Otherwise, the buyer is misstating assets. The lender believes the buyer has $2,000 more in liquid assets than the buyer actually has. If the buyer became committed to pay $2,000 for a car or furniture prior to closing, this would have to be disclosed to the lender. That requirement is not changed merely because the payment is to the seller. Even if the seller has not committed residential mortgage fraud against the existing lender by receiving the undisclosed funds, the existing lender could refuse to accept the negotiated payoff.

Buyer brokers in particular, beware! How can a broker or agent avoid becoming involved in such fraudulent activity? Here is my advice:

• Closely evaluate the “chain of sales”
• Communicate with other agents involved in the most recent transactions
• Consider if the sales price is congruent with the sales and list price of other homes in the area
• Communicate with the loan officer…and your broker…if unsure
• Consider the buyer’s apparent ability to qualify for the purchase
• Avoid assignment fees payable to “original” buyers
• Avoid multiple transactions involving the same borrower in a short period of time
• Realize that any attempt to satisfy a mortgage without payment in full typically is NOT going to work. In a short sale, it might work, but ensure the lender has given written consent for the acceptance of a lesser amount…
• …and, be sure the conditions for the lender to accept a lesser amount are fulfilled

Howell Haunson, partner in charge of education at Morris|Hardwick|Schneider, has been practicing real estate law for more than 25 years. He has served as member of the Board of Directors of the Georgia Real Estate Closing Attorneys Association, is an Adjunct Professor of Law at John Marshall Law School in Atlanta, Georgia and is actively involved in presenting lectures and seminars relating to real estate issues throughout the country.

The FHA Short Refinance option is targeted to help people who owe more on their mortgage than their home is worth – or ‘underwater’ – because their local markets saw large declines in home values. Originally announced in March, these changes and other programs that have been put in place will help the Administration meet its goal of stabilizing housing markets by offering a second chance to up to 3 to 4 million struggling homeowners through the end of 2012.

“We’re throwing a life line out to those families who are current on their mortgage and are experiencing financial hardships because property values in their community have declined,” said FHA Commissioner David H. Stevens. “This is another tool to help overcome the negative equity problem facing many responsible homeowners who are looking to refinance into a safer, more secure mortgage product.”

Today, FHA published a mortgagee letter to provide guidance to lenders on how to implement this new enhancement. Participation in FHA’s refinance program is voluntary and requires the consent of all lien holders. To be eligible for a new loan, the homeowner must owe more on their mortgage than their home is worth and be current on their existing mortgage. The homeowner must qualify for the new loan under standard FHA underwriting requirements and have a credit score equal to or greater than 500. The property must be the homeowner’s primary residence. And the borrower’s existing first lien holder must agree to write off at least 10% of their unpaid principal balance, bringing that borrower’s combined loan-to-value ratio to no greater than 115%.

In addition, the existing loan to be refinanced must not be an FHA-insured loan, and the refinanced FHA-insured first mortgage must have a loan-to-value ratio of no more than 97.75 percent. Interested homeowners should contact their lenders to determine if they are eligible and whether the lender agrees the write down a portion of the unpaid principal.

To facilitate the refinancing of new FHA-insured loans under this program, the U.S. Department of Treasury will provide incentives to existing second lien holders who agree to full or partial extinguishment of the liens. To be eligible, servicers must execute a Servicer Participation Agreement (SPA) with Fannie Mae, in its capacity as financial agent for the United States, on or before October 3, 2010.

For more information on FHA Short Refinance option, read FHA’s mortgagee letter.

Some cities have dozens of attractive condominium listings selling for $50,000 or $25,000. There are some selling for less than a new Toyota Corolla. And these are not derelict hovels in crime-ridden communities: These homes are often in move-in condition and located in nice neighborhoods.

“Not to sound like a salesman, but there are some real bargains out there,” said Kevin Berman, a broker with Bankers Realty Services in Fort Lauderdale, Fla.

The housing bust has taken down the national median home price by about 23% since 2007, according to the National Association of Realtors (NAR). But condo have fallen even further, down about 25%.

In Sacramento, Calif., condo prices have fallen 59% from what they averaged in 2007, according to NAR.Miami condo prices have plunged 65%, and in Las Vegas they are off 66%.

Prices of individual units are down even more. One condo in Deerfield Beach, Fla., that sold for $115,000 five years ago now lists for $25,000. That’s a drop of nearly 80%.

Much of these price drops can be attributed to over development during the boom. Much of that came in Sand State markets such as Las Vegas Miami and Phoenix, where prices for all properties are have fallen precipitously.

Berman has a one bedroom condo in one of these areas with a listing price of $15,000. He said it needs a little work, and it’s in a community that doesn’t allow you to rent out the property,, but still, $15,000?

“It’s great for a vacation property or a retirement home,” he said.

Another of his listings is in North Miami, about three miles from the beach. It’s a 900-square foot, one-bedroom, one-and-a-half bath with a community swimming pool, central air and assigned parking that costs just $23,450. That’s less than a fully loaded new Camry.

In Las Vegas, there are more than 200 condos listed for $30,000 or less. A two-bedroom, two-bath condo with a covered patio in North Las Vegas can be had for just $30,000.

Of course, condo owners have other expenses, particularly maintaining the grounds and common areas, but these tend to be quite low. And the property taxes are also often modest.

Plus, if these housing markets ever rebound, there’s even likely to be some price appreciation for these homes. You can’t say that about a new car.

Tip 1: Remodel your kitchen
Kitchen updates are one of the best ways to increase the value of your home. Adding modern appliances and refacing your cabinets to give it a more modern look is well worth the investment.

Tip 2: Add a Garage
Homes with at least a two car garage are more attractive to potential home buyers. Having a home with a small garage is almost as bad as having no garage, so consider upgrading before putting your home on the market.

Tip 3: Remodel your bathroom
Bathrooms are very important to home buyers. Just as with the kitchen, home buyers look for modern conveniences. Adding a Jacuzzi bathtub, painting the walls and adding appropriate flooring will go a long way toward increasing your home’s value.

Tip 4: Install the right flooring material
Natural materials such as wood and ceramic are popular among home buyers today. Laminate flooring is a good option, as well, as it creates a natural look without the headaches associated with natural flooring materials.

Tip 5: Install granite counter tops
Granite counter tops are popular in both kitchens and bathrooms. These countertops are low maintenance and quite attractive and can add significant value to your remodel.

Tip 6: Increase curb appeal
Your home needs to grab a potential home buyer’s attention and look great as soon as he or she pulls in the driveway. Add flowers to the outside of your home and make sure it looks bright and cheery.

Tip 7: Add natural light
Home buyers like homes that are bright and cheery on the inside as well as the outside. Look for places to add windows or patio doors that will allow more natural light to come in.

Tip 8: Open up the space
Homes with an open floor plan are more valuable to home buyers than those that feel closed up. Knock out walls wherever possible and open your home up. A great place take out a wall is between your kitchen and your dining room.

Tip 9: Apply a fresh coat of paint
A fresh coat of paint makes a home look new again. When repainting walls, choose neutral colors that don’t stand out too much. Bold colors may be attractive to you, but they may be a turnoff to potential buyers.

Tip 10: Clean up clutter
A cluttered home appears small and dirty. Make certain all clutter is cleaned up on the inside and the outside of the home. Rearrange furniture or remove furniture in order to make the home feel less cramped.

1. Low mortgage rates serve as an equity shock absorber. When buyers borrow at today’s record-low rates, they start building equity as soon as they close. That means they have a little give to absorb a few ups and downs as the still-recovering housing market gains traction.

2. Houses are in move-in condition. Homeowners have continued to spend on maintenance and repair, according to the Harvard Joint Center on Housing. Homeowners who have been holding back kept their houses in good shape while they waited. As those houses enter the market, they are in marked contrast to tattered foreclosures.

3. Terrific houses are coming on the market. Foreclosures are finally starting to clear the system – and this is just the opportunity that owners of many desirable properties have been waiting for.

4. Appraisal regulations are finally aligned with market realities. Fannie Mae has adjusted its appraisal guidelines…again. Now that appraisers have more flexibility to set values that reflect the current market, today’s deals will make it over the finish line.

5. Plenty of programs. Homes are more affordable than they have been for years, but communities have stuck by “workforce housing” programs that encourage middle-class families to buy houses. Buyers who qualify can get a big boost by combining one of these programs with today’s low mortgage rates.

RISMEDIA, July 16, 2010 — Sometimes all a home really needs is a littile bit of organization…in this case, not to sound cliche, but a little bit certainly does go a long way.

It’s easy to get bogged down by clutter throughout our daily lives. And, if you’re renovating, project remnants compound the problem. Here are some tips, courtesy of Lowe’s, to help you stay clutter-free:

Daily Clean-up
If you stay on top of simple chores every day, the bigger organization projects won’t appear as overwhelming. Keep the house tidy by doing the small stuff daily. Make your bed each morning. After meals, do the dishes. And keep dirty laundry off the floor and in the hamper.

Storage Under the Bed
A lot of people forget the amount of storage a bed (or any other raised furniture) provides. You can store a lot under your bed in storage containers and boxes. The same can apply for sofas and chairs that have ample clearance. Just make sure your storage is out of sight with skirts. Think outside of the closet. The underside of your bed is the perfect place to store comforters, bedspreads and pillowcases.

Give Your Shoes the Rack
Often, closet floors suffer from shoe infestations. A cobbler’s clutter can be easily solved with a tiered shoe rack. A shoe rack organizes your footwear while keeping them readily available (a luxury not afforded if you’re using stacked boxes). A rack also keeps shoes in better condition, as they are kept away from the dirt and dust that collect on the floor. As you begin organizing, remember to keep shoes grouped by type and color. Heels, flats and sneakers should have their own sections. If your collection exceeds a rack, hang additional pairs from the inside of your closet door.

Kitchen Zoning
Your kitchen will house a wide range of dinnerware, food, storage and cooking items. Create separate areas for each kitchen activity. Keep your baking utensils, appliances, pans and sheets grouped together. And designate a specific spot on the countertop or island for use. Do the same for your grilling, frying and juicing needs.

Food storage can also get messy. Make sure your plastic food containers are adequately stored by size and shape. And clean out your refrigerator regularly. Don’t forget to keep an opened box of baking soda in the fridge’s corner to help control odors.

Finally, set up a shelving system for your pantry, and group your foodstuffs accordingly. Remember, it’s best to not mix your cereals with the kitty litter. Cans – separated by vegetable and fruits – go on one shelf, while grains go on another. Spices should get their own rack.

Manage Magazines and Mail
Keep your magazines stored in a specific location instead of sprawled throughout your house. Group your periodicals by title and date. Give your mail the same treatment. Group your bills separately from other important letters and announcements. And trash junk mail immediately. Remember to shred any mail that may contain personal information. Baskets and racks help control the printed pages, especially if you’re an avid reader.

Tame the Toys
Keep toys stored in plastic bins or hampers that are low to the ground. You want to make sure toy storage is easily accessible for your child. As kids grow, they’ll start cleaning on their own. You can even make tidying up another game to play (e.g. shoot hoops with stranded Legos). Like the rest of your belongings, try to specialize each container. Keep one for books and crafts, and another for larger toys like trains or stuffed animals.

In the Garage
Garages usually become a default space for sporting goods, garden supplies and tools. If poorly managed, a garage can quickly become an eyesore. Keep your garage organized with wall systems, cabinets, worktables and shelving units. There are also specialized containers for nails, screws, nuts and bolts to help minimize the mess. Keep sporting goods, like bicycles and skiing gear, on hooks hung from your garage’s walls or ceiling. Gardening supplies, like fertilizer and pesticides, should be properly sealed and stored out of reach from children.

Like the organization projects inside, keep your garage’s contents separated by their function: tools with tools, toys with toys, etc.

RISMEDIA, July 16, 2010 — Home appraisals are a necessary step in the process of selling or refinancing your home. While many homes today aren’t worth as much as they were when they were bought, it is crucial for homeowners to be realistic when it comes to getting their home appraised.

If you are in the process of getting your home ready to be put on the market or interested in refinancing, the experts at Equity Mortgage Lending offer the following things to keep in mind as you prepare for your home appraisal.

• The appraiser will need approximately 30 minutes to one hour to complete the inspection phase of the appraisal process, which includes: exterior photos of the front and rear of the home and a photo of the street in front of the property; measurements of the exterior of the home, garage and any outbuildings; a walk-through inspection of all rooms and levels of the interior of the home including the basement.

• Get organized. Put together a checklist that will help you get ready for your appraisal and get the results you’re looking for.
• Be flexible when scheduling the appointment.
• Have a copy of your home’s blueprint to help verify measurements and lot size.
• Provide a list of improvements made to the property since the purchase. Improvements that should be noted include adding a pool, patio, updating your kitchen or bathroom and any room additions, etc.
• Allow your appraiser access to the entire property, including access to any crawl space or attic areas.
• Keep in mind that a clean home makes a good impression. Be sure to trim the lawn, clean the pool and garage, repair cracked windows or torn screens, check for leaky faucets and secure gutters and down spouts before your appraisal.
• Point out any amenities that may not be obvious to the appraiser: sprinkler systems, patios, pools, security systems, built in vacuum, etc.
• Provide a copy of last year’s tax assessment information.
• Know what year the house was built and when improvements were made.
• The first thing appraisers look for is comparables, so be prepared and have a list of recent sales of similar properties in the immediate

In its annual rankings of America’s best small cities, Money Magazine named Gilbert among its top 100 places to live.

Scottsdale was the only other Arizona municipality recognized in the rankings. No Arizona cities made the list last year.

COMING IN AT No. 36

The rankings describe Gilbert as the 36th best place to live, a safe suburb of Phoenix that offers a lot to do. Gilbert’s Heritage District, Trilogy Golf Club and Gilbert Days celebration are mentioned, as is one caveat: “The housing market was hit here hard, though, and it has yet to recover.”

TOPS SCOTTSDALE

One other Arizona community made the top 100: Scottsdale. It was ranked No. 71 and praised for its “zillions” of golf courses, upscale shopping, restaurants and hiking. Like Gilbert, Scottsdale’s only knock was its shaky real-estate market.

ARIZONA BOUNCES BACK

No Arizona cities were recognized in Money Magazine’s 2009 rankings, but the state bounced back this year with two communities in the top 100. In 2008, four Arizona municipalities were ranked: Gilbert (28), Chandler (30), Scottsdale (47) and Peoria (55).

ARIZONA CITIES RANKED AS ‘HOTTEST’

The magazine also listed the 25 cities with the hottest summer temperatures.

Yuma, with average high temperature of 106.5 degrees in July took the No. 1 spot and was joined by 14 other Arizona communities. Eleven Valley municipalities tied for the second hottest behind Yuma, with an average high of 105.1 degrees in July, according to the magazine.

There’s a shift in who is investing in metro Phoenix homes. Californians are no longer the region’s biggest group of out-of-state buyers.  Now, the dominant group of out-of-state buyers is from outside the country. Canadians bought 405 Phoenix-area houses in April, according to the Information Market.

About one-fourth of the people who bought homes in metro Phoenix during April weren’t from Arizona.

Californians purchased 368 Phoenix homes. Buyers from Washington state were third with 146.  More people from the Midwest are also investing in the Valley. Residents of Illinois, Minnesota, Wisconsin and Iowa bought a total of 332 homes.

Information Market analyst Tom Ruff believes the new makeup signals an important change.  Californians have long led the pack for buying Valley homes, and investors from that state are often speculating on the Arizona market.

But Ruff believes Canadian and Midwestern homebuyers are less speculative and will hold onto homes they purchase in metro Phoenix for much longer than Californians.