Surplus Money at Sheriff's Sale?

An anonymous commenter posted a question on our February 4th blog post regarding deficiency judgments (Sued – After a Foreclosure). It’s not often we receive a question that we can’t answer quickly… so we thought we’d post the commenter’s question, and the answer, here:

I have a weird one for you. What happens if the Sheriff sale nets more than you owe? Our house was auctioned on Tuesday. We owe $360,000 and it sold for $403,000.

Given the current housing environment in Minnesota… this situation doesn’t happen very often… so we had to run the question by one of the Center’s partners, the Housing Preservation Project. Attorney Jane Bowman of the Foreclosure Relief Law project helped us with the following information. (Thanks, Jane!)

The vast majority of residential mortgages in Minnesota are foreclosed through a process known as Foreclosure by Advertisement (for more information on this process, the Center has a fact-sheet/process chart, here).

In a foreclosure by advertisement, if there is a surplus after a sheriff’s sale, the borrower receives the surplus. However, as often is the case, the devil is in the details. In this case, the important detail is how the word “surplus” is defined.

Before a surplus is established, there is a list of entities that take their cut BEFORE the homeowner:

1. The cost of the foreclosure sale is covered,
2. All late payments are paid (with interest),
3. Any outstanding taxes and insurance are paid,
4. The remaining amount of the first mortgage is satisfied,
5. Then any junior lienors get paid (HELOCs, lines of credit, second mortgages, etc.)

If at this point there is a surplus, then the borrower gets the surplus.

For those of you that would like to dig into the statutes, the relevant statutes are available on-line here: 580.09, 580.10 (581.06 covers surplus amounts in a judicial foreclosure).

The statute is silent as to how the borrower would actually get paid… and how to request an surplus funds. After discussing this with Jane and other specialists, we’ve concluded that the local Sheriff’s office more than likely oversees the payment distribution, and if you believe you have a surplus due, you should contact the Sheriff’s office on how to proceed.

There is also another ‘wrinkle’ in this situation… as there may be tax implications of any surplus as well! As it doesn’t happen often… we are unclear on how Uncle Sam would treat the gross surplus amount (in our commenter’s case, would the full $43,000, not the surplus amount after all payments have been made, be considered income?). Any tax specialists like to share their knowledge with us in the comments?

All-in-all… it is most likely that our commenter will see very little, if any, of the ‘surplus’ amount from the Sheriff’s sale, but still may have tax issues on those funds.

Home Maintenance Expenses

As we've mentioned before... one of the most important steps to becoming a successful homeowner is efficient and effective money management.  In fact, understanding finances and credit is a large segment of what is taught in the Home Stretch workshop.

Part of successful money management is the ability to save and prepare for FUTURE homeownership-related expenses.  The general 'rule-of-thumb' is to save between 1-2% of your home's purchase price EVERY year for future maintenance and upkeep on the home.  (Eventually, even brand new homes will need repairs and replacement of major systems like the furnace, A/C, roof, etc.).

Fixr.com has put together an AMAZING infographic showing how Americans typically spend their money on home improvement based on data from The American Housing Survey, the US Census, The National Bureau of Economic Research, and the Joint Center for Housing studies at Harvard.

According to their data, Americans spent $42 billion dollars on home improvements in 2009 - and that's down from the $49 billion they spent in 2008.


Here's their graphic:

(Click image to enlarge - it's HUGE)

SOURCE: Here

According the website Bundle.com, monthly expenses related to home maintenance and upkeep cost, on average, $363.00 per month, or $4,356.00 per year.

Click image to enlarge
Source: Here

Are you currently considering purchasing your first home? There are LOTS of factors to consider, including making sure that you are ready, willing and able to undertake the financial responsibility of upkeep and maintenance on your home. The first step to SUCCESSFUL homeownership should be a short visit with a Housing Counselor or taking a Home Stretch workshop. For more information on buying your first home in Minnesota, click here.
 

Disclosure: Fixr.com is a website that links homeowners looking to remodel with contractors.  The MN Home Ownership Center has no affiliation with Fixr.com.  Bundle.com is a website that compiles data on spending patterns in the U.S.  The MN Home Ownership Center has no affiliation with Bundle.com

Why Buy a home?

One of the first steps in a Home Stretch workshop is to explain to potential home buyers the advantages and disadvantages of homeownership.  The workshop actually starts by having people think through some of the reasons WHY they'd like to be homeowners.

Fannie Mae's 2010 National Housing Survey asked that same question of thousands of people across the country... "What led you to purchase your first home?"  (Translation: Why'd you become a homeowner?).  The results are shown here:

(Click Image to Embiggen)

Family changes (getting married, more kids) are, apparently, the top reasons people choose to become homeowners.


PARTICIPATE IN OUR NEW SURVEY:  Knowing the possible disadvantages of homeownership (depreciation, expense, yard work, maintenance)... We'd like to know what led YOU, or, if you haven't purchased a home yet, what MIGHT LEAD you to purchase your first home.  You can answer our survey question (Just 1) here.

As a follow-up to the question we asked earlier in the week... "Why did you choose your first home (what characteristic about the home lead you to choose THAT specific property)... Our completely non-scientific online survey shows that Minnesotan's reasons for choosing their homes differ slightly from the national survey:

(Click Image to Embiggen)

Are you currently considering purchasing your first home? There are LOTS of factors to consider - there are both advantages and disadvantages to homeownership! Make sure you're fully informed about how to be a SUCCESSFUL homeowner by speaking with a Housing Counselor or by taking a Home Stretch workshop first. For more information on buying your first home in Minnesota, click here.

Survey: Reasons For Buying a Home

Fannie Mae has released its 2010 "National Housing Survey"!

The Survey, conducted in December 2009 and January 2010 (so the data is fairly recent)... surveyed consumer perspectives on a range of related issues, including: current attitudes toward the economy and housing; present conditions for homeownership; owning versus renting; the present climate for borrowing; current mortgage satisfaction; the impact of being "underwater" on borrowers; and attitudes toward defaulting. In some instances, data are compared to a 2003 study on housing by Fannie Mae.

Over the next few weeks... we'll be highlighting some of the findings of the survey.

Here's the first highlight: Reasons for Buying a Home:

Nearly two-thirds (65 percent) of survey respondents prefer owning to renting, citing non-financial reasons such as safety (43 percent) and quality of local schools (33 percent) as driving factors in wanting to own a home. 

Here's the breakdown of responses:

(Click Image to Enlarge)

One of the interesting points of that question, is that only 11% of respondents listed "Energy Efficiency" as a reason to choose a home to purchase. 11%. There seems to be a large disconnect between the push for "Green Building" and what consumers really want. (Comments are welcome in the comment section! No flame wars, please).

Care to share with us the factors that are/were important to YOU when you purchase (or purchased) YOUR first home.  Take our non-scientific survey/poll here.

Are you currently considering purchasing your first home?  There are LOTS of factors to consider... as you can see from the Survey Results above.  Make sure you're fully informed about how to be a SUCCESSFUL homeowner by speaking with a Housing Counselor or by taking a Home Stretch workshop first.  For more information on buying your first home in Minnesota, click here.

Affordability Gains in Minnesota

We all know that house prices have dropped in Minnesota over the past year or so, and in some areas those drops have been dramatic. While painful for people who purchased at the height of the market, there is a silver lining: as home prices have dropped, the ‘qualifying income’ needed to purchase a median-priced home in Minnesota has dropped as well.

Simply put: homes are more affordable now for (prepared!) buyers than in recent memory.

According to the “Paycheck to Paycheck: Housing Affordability Report” from the Center for Housing Policy (CHP), buyers of median-priced homes in two metro areas in Minnesota needed less income in 2009 than in 2008.

“Qualifying Income”, according to CHP is “the income required to qualify for a mortgage on the median priced home by assuming a 90 percent loan-to-value ratio — that is, a 10 percent down-payment plus the use of private mortgage insurance. Monthly payments are calculated to include loan principal and interest as well as estimated taxes and insurance. These payments are annualized and assumed to comprise no more than 28 percent of annual income in accordance with conventional underwriting guidelines.”

That means that in 2008, in order to purchase a median-priced home in the Twin Cities of Minneapolis and St. Paul, homebuyer(s) needed a minimum income of just over $59,000.00. In order to afford a median-priced home in 2009, however, the qualifying income had reduced over 14% to just over $50,000.

Here’s a chart from the data for both Mpls/St. Paul and the Duluth Metro areas:

(Click Image To Enlarge)

In addition... there are more programs than ever to assist with down-payment and other entry costs. Does this mean everyone should run out a purchase home now while they’re more affordable? NO, of course not.

Affordability is only one of the MANY considerations homebuyers need to be thinking about when purchasing a home. Others include:

• Long term commitment
• Willingness to undertake maintenance & repairs
• Possible depreciation (2005 – 2009, for example)
• Time required to sell

...And many others.

Before jumping in to homeownership... even with prices as affordable as they are, potential homebuyers need to fully understand the advantages and disadvantages of homeownership. Are you thinking about buying a home in Minnesota? Your first step is to speak with a non-profit Housing Counselor or learn more about the home ownership process in Minnesota by taking a Home Stretch workshop.

Arm yourself with information before proceeding with one of the largest purchases you may ever make!

Metro Home Prices Not Back to Peak Until After 2015

According to the research firm Fiserv, Inc. ... Twin Cities Metro Area home prices won't recover to their mid-2000's peak until sometime between 2015 and 2025.  Yeah... that's 15 years from now!

Minneapolis was actually highlighted in their press release (but not in the data they've released for free, sorry):

A protracted recovery in home prices is also expected in many urban neighborhoods where predatory lending was most rampant. There, home prices rose rapidly from very low levels during the bubble years. These markets include neighborhoods in cities such as Minneapolis, Memphis and Chicago.  [Emphasis ours]

Here's the 'heat map' for housing-price recoveries according to Fiserv:

(Click To Enlarge)

BTW, that's a lot of RED in California, Arizona and Florida!

One bright spot, though, is that according to the same map, Duluth and parts of the Arrowhead should see prices back revert back to their peak prices in just a couple of years.

Fiserv came to its conclusions using the data collected from the Case-Shiller home price indexes and data from the Federal Housing Finance Agency and Moody’s Economy.com, and the Center makes no representations or warranties of any kind, express or implied, as to the accuracy of the data or projections. :-)


Now, what does this mean for the Center and our work?

For homebuyers:

• The idea of earning quick equity and/or using your home as short-term road to wealth should NEVER be a  deciding factor in purchasing your first home;
• Purchasing a home is a LONG-TERM decision... you may not be able to sell the home you purchase today FOR YEARS without incurring expenses;
• Home ownership is expensive and homeowners need to understand the costs as well as the benefits of owning;
• Pre-purchase education and counseling are keys to understanding REAL wealth generation and long-term successful homeownership.  Click here for more info on the Home Stretch program.

For current homeowners (and the foreclosure issue):

• Without price appreciation on the horizon for a number of years, struggling homeowners will be unable to access equity, or sell without incurring losses, for quite some time.
• More homeowners may decide to 'strategically default' that may lower prices even further, which in turn will further depress home prices in hard-hit areas.

ALSO... we couldn't post about foreclosure issues without warning Minnesota Home Owners, AGAIN, to make sure that they NEVER pay for any third-party loan modification service. Deal directly with your lender yourself, or with one of our free, non-profit Foreclosure Counselors.


Any thoughts?  Feel fee to share your opinions in the comments.

IDA Homebuyers Weathering The Crisis Better Than Others

There’s new research out on the foreclosure rates on low-income buyers that have participated in an IDA (Individual Development Account). The research study, involving over 800 IDA homebuyers, found that nearly all of these buyers were still in their homes and that they had fared far better than similar homebuyers in terms of foreclosure rates and mortgage terms.

The full report, funded by NeighborWorks America and the Ford Foundation, can be viewed here.

Individual Development Accounts are special savings accounts that can be used only for specific qualifying purchases such as a first home, starting a business, or for educational or job training expenses.

Accounts are held at local financial institutions and contributions/deposits made by lower income participants are matched, in some cases 3-to-1, using both private and public sources.

So what makes an IDA homebuyer different from other low-income buyers? Your input is welcome in the comments… but here are some ideas:

• IDA buyers must take financial literacy classes as a requirement of their participation
• IDA buyers must take an approved homebuyer education workshop (like HomeStretch) before purchasing their home
• IDA buyers, through their participation in the program, have learned to work with support network (volunteers, non-profit staff, bankers, etc.) and so they know where to turn for help when facing a financial struggle

Any other ideas? And what does this study mean for other low-income buyers? We welcome your comments!

Sad Testimonial

If you aren't familiar with the MN Home Ownership Center's website... we have a form/widget installed on several pages of the site that allows people to send us questions about their housing situation.  A few days ago the Center received a comment through our online form that I thought I'd share with all of you:

Hi, I wish I knew about your organization before I was put in a position where I was given poor advice by my real estate agent on my short sale of my home. I was told by [my agent] to sign a lien release at closing and that would be the same as a satisfaction of debt agreement but afterward my old mortgage comapny informed me that I owe the deficiency balance and now I have to file bankruptcy. do you know of anyway out of this situation so I dont have to file bankruptcy ? I can't afford to pay back the 145,000.00 dollars they want me to pay. Thanks for your time-

We've been able to connect this consumer with a Housing Counselor that may be able to refer the client on for free legal services... but the sad fact is that there is probably nothing that can be done for this client now... short of declaring bankruptcy. 

$145,000 is an expensive mistake to make... and we hope that this homeowner's sad tale will help motivate other homeowners that are struggling with their mortgage to seek the FREE, non-biased advise and support of a non-profit Housing Counselor.  For more information about the statewide network of Housing Counselors in Minnesota, click here.

April Is Financial Literacy Month

Did you know that April is officially "National Financial Literacy Month"? 

It's not often we get to quote the President of the United States on our home ownership blog, but in his press release on the announcement about Financial Literacy Month, the President had this to say:

While our Government has a critical role to play in protecting consumers and promoting financial literacy, we are each responsible for understanding basic concepts: how to balance a checkbook, save for a child's education, steer clear of deceptive financial products and practices, plan for retirement, and avoid accumulating excessive debts. [Emphasis Added]

and

I call upon all Americans to observe this month with programs and activities to improve their understanding of financial principles and practices.

Looking for 'programs and activities' to help you understand the financial concepts necessary for successful homeownership?  Perhaps you are struggling with your mortgage payment or trying to balance all your financial obligations?  The MN Home Ownership Center's website is a great resource!  Visit our site today. 

Short Sales - Facts and Fiction

Short sales are increasingly popular in Minnesota and can offer a significant bargain for buyers that understand the process. Before you jump in, there are important considerations, pitfalls and drawbacks to keep in mind.

The Minnesota Home Ownership Center has created a new Fact Sheet for home buyers titled “Purchasing a Short Sale Home” that explains the Short Sale process and explains how purchasing a Short Sale differs from traditional home purchases and outlines the advantages and disadvantages of purchasing a Short Sale.

The Center's goal is to help YOU be a successful homeowner.  We have other Fact Sheets for home buyers, here.

Not sure if purchasing a Short Sale is right for you? Not sure what your next steps to home ownership should be? Speak with a non-profit housing counselor! For more information about housing counseling and other assistance available in Minnesota... click here.

Even Princes Have To Pay Property Taxes

According to tax records in Carver County, Minnesota's famed musical artist formerly-known-as, and now known again as, PRINCE, is delinquent on his state tax liabilities.

The Associated Press has reported that Prince's company (PRN Music Corp.) owes over $227,000 to local tax agencies, in addition to his personal tax obligations.

PRN Music houses Prince's "Paisley Park Studios" in Chanhassen. County records also list several other properties under his full name, Prince R. Nelson, as delinquent.

According to the AP, the outstanding amount Prince and PRN music owe is about $450,000!

As the Center has highlighted repeatedly... not only can a lien holder (mortgage holder) foreclose on a property... counties can too!  If Prince and/or PRN music don't pay their back property taxes, the county does have "seizure authority" and can seize the properties in order to sell them to recover owed taxes.

While the Center can't help PRN music with their taxes, it is conceivable that one of our Foreclosure Counselors may be able to assist Prince IF the property that he owes taxes on is his primary residence.  There are no income minimums or maximums to receive counseling.  And counselors can offer information and assistance to ANYONE - even Prince - if they are struggling with mortgage payments or property tax payments on their home.

If Prince (or you) would like to speak with a FREE, non-profit Housing Counselor, visit the MN Home Ownership Center's website here. 

MHP Releases 4th Qtr "2x4" Report

The Minnesota Housing Partnership has recently released its Fourth Quarter 2009  "2 x 4 Report" that studies two indicators for each of four key housing areas:

• the home ownership market,
• the rental market,
• homelessness, and
• the housing industry.

The report is a great resource for housing information, and is designed to provide a concise, easy-to-digest, graphic overview of the state of housing in the state of Minnesota.

The complete report is available here.

The press release for the report is here.

Focusing on the "Owners' Market" segment of their report shows a market that is still struggling to hold ground:

• 8% of first mortgage holders were 60+ days late on their mortgage payments,
• Sheriff's Sales remained high at about 6,000

The "2x4 Report" has also begun tracking the number of Pre-Foreclosure Notices that the Center's network receives.  (FYI: We'll be updating our numbers soon.)

Dollars available to purchase in rural Minnesota

Looking to buy a home in rural Minnesota?  USDA Rural Development has about $2.4 billion available to assist individual and families, who make less than 80% of their Area Median Income, become home owners in 2010. Rural Development recently began a new campaign: "All the Way to 20K" to help assist at least 20,000 families achieve homeownership in 2010 through its Direct Home Loan program.



Some of the highlights of the Direct Home Loan program include:

• Targeted at very-low and low income applicants who do not qualify for traditional financing.
• Non-traditional credit accepted.
• Interest rates as low as one percent depending on income and interest rate subsidy.
• Low or no down payment.
• Fixed interest rates.

Are you thinking about purchasing your first home... and wondering if you might qualify for these funds through Rural Development?  Not sure what your next steps should be?  Speak with a non-profit housing counselor!  For more information about housing counseling... click here.

City of Minneapolis Utility Stuffer

On March 12th, the City of Minneapolis approved the use of a "Utility Billing Insert" that the Center created to notify Minneapolis home owners about the existence of local, FREE counseling services. 

Working with the City's Community Planning and Economic Development department, the Center designed a flyer that would link struggling homeowners to the City's 3-1-1 line, as well as linking them to other housing resources available at LiveMSP.org.  These partners will, in turn, connect homeowners to the Center's network of foreclosure counselors.

(Click Image To Enlarge)

The insert should reach close to 100,000 homes in the city!

In the past few years, the Center has worked with dozens of other utility companies, municipalities and other organizations to mail over HALF A MILLION similiar flyers to homeowners throughout Minnesota.  Would your organization like to be next?  Contact Ed Nelson at the MN Home Ownership Center to talk about how your organization, company, utility or municipality can partner with the Center to get the word out about trustworthy non-profit foreclosure counseling services available in Minnesota.

Don't let your friends and neighbors get taken advantage of by unscrupulous foreclosure prevention "Agencies"... help them get connected to the Center's network of community-based (FREE!) counselors today.

Next Wave of Foreclosures Coming to Minnesota

I've come across two recent items that point to what we've all feared... the next wave of foreclosures is rapidly approaching Minnesota. 

While no corner of Minnesota has escaped unscathed from the from the foreclosure crisis, the urban areas of Minneapolis and St. Paul have been especially hard hit.  HOWEVER... the next wave of foreclosures will be felt the most in the outer-ring suburbs of the Twin Cities and the counties that surround the TC metro area.

The first item is a slide from MN Housing, that was presented to the members of the "Foreclosure Partners Council" (Working group of organizations on the front line of the State's response to the foreclosure crisis.  The MN Home Ownership Center is an active member of the Council.)  John Patterson, Director of Research and Evaluation at Minnesota Housing, has taken data about the number of Non-Prime Adjustable Rate Mortgages that have not yet reset (or recast) and 'heat-mapped' the state of Minnesota:

The second item is an audio presentation from Dr. Jeff Crump, Professor of Housing at the University of Minnesota, who has studied the foreclosure issue for years.  He has come to the same conclusion as John Patterson.  You can hear Dr. Crump's presentation here.

Combined with the less-than-stellar employment figures in the 'red zones' of John's "heat-map"... it's obvious that there are parts of Minnesota... like the suburban areas around the twin cities... and parts of Crow-Wing county... that are still in for quite a bit of pain.

If you have an Adjustable Rate Mortgage... and you're not sure what will happen when the rate adjusts, or if you're struggling with payments now... don't delay, contact a Foreclosure Counselor through the Minnesota Home Ownership Center TODAY to learn about your options and steps to take to avoid a possible foreclosure.  Waiting limits your options.  For information on how to contact your local, FREE Foreclosure Counselor, click here.

IRS Data On Home Buyer Credit

On Thursday, March 11th, The Internal Revenue Service (IRS) released its 2009 IRS Data Book, which contains a ton of data about the IRS's fiscal year, Oct. 1, 2008 - Sept. 30, 2009.

Of possible interest to the "numbers and data" wonks that follow this blog is Table A: First-Time Homebuyer Tax Credit for Homes Purchased in 2009, by State, FY 2009.  Remember, the Fiscal Year for the IRS ends in September.

Under the American Recovery and Reinvestment Act of 2009, taxpayers could claim the First-Time Home Buyer Credit on either their 2008 or 2009 tax returns.  The data included in the report is for buyers that claimed the credit on the 2009 return. (Jan 1, 2009 through Sept 30, 2009)

According to the IRS:

•  10,341 taxpayers took advantage of the First-Time Homebuyer Tax Credit in Minnesota. 
• That ranks us as the state with the 14th highest usage of the claim. 
• Those 10,341 taxpayers claimed $76.7mm in credits,
• Or an average of $7,417.74 per household.

You can view the full 2009 IRS Data Book, here.


As we've mentioned numerous times before... a tax credit should NEVER be the deciding factor in purchasing your first home.  If you're thinking about buying a home in Minnesota... and have questions about the process or any assistance that may be available.. including tax credits, contact a Housing Counselor today to review YOUR options.

FHA Debating Higher Down-Payment Requrement

The Washington Post has a story regarding the fact that FHA is debating increasing the minimum down-payment on FHA Loans (currently as low as 3.5%) as their cash reserves have shrunk due to increases in defaults in the past few years.

One of the lines that caught my attention was from the FHA:

The Federal Housing Administration has concluded that its loan volume would have dipped by 40 percent in the next fiscal year and that 300,000 first-time home buyers would have been shut out of the housing market if it had raised its down payment requirements...

Here are a few questions:

• Would those homeowners truly have been "Shut Out" of the housing market... or would they have been "postponed out" of the housing market for now until they could save the additional amount for down payment?
• Is being "postponed" a bad thing?  Is requiring a higher down payment (10% for borrowers with a FICO score below 580) truly a barrier to homeownership?
• Should efforts be made to get people with 580 credit scores into homes now... or better preparing them (Home Buyer workshops, financial literacy, credit repair, etc.) for FUTURE homeownership?

Just some thoughts.

I love saying this... but Minnesota is UNIQUE.  Thanks to the efforts of the MN Home Ownership Center and our partners, we are the only State that has a complete matrix of available down payment and entry cost assistance programs.  The Center's Entry Cost Assistance Matrix is available here.

If you're thinking about purchasing your first home... and are wondering about down payment requirements or any of the other steps involved in becoming a SUCCESSFUL homeowner... visit the Center's website here.

HAMP, HARP and Now HAFA too?

Last week we mentioned that HAMP and HARP were members of the duet known as Making Home Affordable... well... the group has added a third band member and is now a trio.

The U.S. Treasury has announced the "Home Affordable Foreclosure Alternatives" (HAFA) Program which is designed to help struggling homeowners who are unable to qualify for a mortgage modification under the Home Affordable Modification Program (HAMP).

HAFA sings backup for HAMP, and provides incentives to servicers/lenders as well as borrowers to move forward with a short sale or deed-in-lieu of foreclosure.

Just as an FYI, in a short sale situation, the mortgage holder allows the homeowner to sell the property for a price short of the balance owed on the property’s loan.

The Center will be working on a more in-depth fact sheet over the coming weeks, but the basics of the program are as follows:

• Should speed up the Short Sale process, as it uses borrower financial and hardship information that was collected when they applied for a HAMP modification.
• Allows borrowers to receive PRE-APPROVED short sales terms (including minimum price accepted, proceeds to owner and real estate agents, etc.) BEFORE listing the property.
• KEY: While in Minnesota, as a non-recourse state, first mortgage debt is fully released from future liability, under HAFA, subordinate lien holders that receive an incentive under HAFA must also FULLY RELEASE that debt as well.  This means that homeowners will not have to sign a promissory note or worry about a future deficiency judgment.  (NOTE: This is ONLY if the junior, or subordinate, lien holder receives money under HAFA.
• Unifies documents, timeframes and deadlines to speed up the process.
• Provides financial incentives for all parties.  $1,500 to the borrower for relocation assistance and $1,000 for servicers to cover admin costs, and up to $3,000 in short sale proceeds to be shared among subordinate lien holders.  In most cases subordinate lien holders see nothing from a short sale... and have been the reason that many short sales have fallen through.  It will be interesting to see if this incentive changes their attitude.  It will be especially interesting to see if junior lien holders will be willing to trade possible FUTURE JUDGMENTS for a rather small ($3,000) incentive today.
• Requires ALL SERVICERS participating in HAMP to implement HAFA.
• Goes into effect on April 5th, but lenders and servicers may begin sooner if they choose.  The program is scheduled to end on December 31, 2012.
• Homeowners that are denied for a HAMP modification MUST receive a notification from their lender/servicer, in writing, of the HAFA option and give the borrower 14 days to respond orally or in writing.

Who qualifies for HAFA?

The homeowner must meet the basic eligibility criteria for HAMP

• the loan must be on their Primary Residence (no investors or second homes);  
• 1 to 4 units, as long as one of the units is the owner's primary residence;
• First lien originated before 2009 Mortgage either delinquent or in imminent danger of default,
• Unpaid principal balance no more than $729,750;
• Borrower’s total monthly PITIA payment exceeds 31% of gross income.

BIG QUESTIONS still remain about the program:

• Will homeowners that won't be able to hold on to their properties go through the extra effort to sell... or simply walk away.  "Post-HAMP-Denial-Strategic-Default"
• What effect will this new program have on already-pressured sales prices?  Short Sales already put a downward pressure on local "comps".  What will happen when there is a FLOOD of HAFA-generated short sales?
• What procedures are in place to prevent fraud?  Real Estate Agents are being called upon to help the bank determine the price they'll accept, and once the price is set, any offer over the minimum amount MUST be accepted by the bank.  This could be a magnet attracting fraud at all kinds of levels.

Feel free to respond in the comments!

Deadline Today For SAFE Act Comments

The deadline to submit comments on the proposed Secure and Fair Enforcement for Mortgage Licensing Act  (SAFE Act) is TODAY, Friday March 5th, 2010

The federal and proposed state legislation define foreclosure counselors, including those in the Center’s network, as loan originators.

Including foreclosure counselors in the legislation will necessitate extreme costs, irrelevant education, and unreasonable redundancies, all of which could jeopardize the existence of free, unbiased, trusted, effective foreclosure prevention counseling services at a time when they are most needed.

Foreclosure Counselors should not be subject to the SAFE Act, please consider submitting comments to HUD.

For more information... including copies of the text the Center submitted to HUD, copies of the proposed rule and comment submission instructions, please visit the Center's website here.

Foreclosure Prevention in South-East Minnesota

Today, Thursday March 4th, the Minnesota Home Ownership Center is pleased to be partnering with the SE Minnesota Association of Realtors®, Community Housing Partnership and LSS Financial Counseling to to offer a FREE foreclosure training workshop for professionals on how to help struggling homeowners.

Today's training, in Rochester, will provide an overview of the foreclosure process, where to refer homeowners and how to prepare them to talk with a housing counselor or loan servicer as well as information on national assistance programs like Making Home Affordable.

While space at the event is limited... the SE Minnesota Association of Realtors® will be offering a LIVE WEBSTREAM of the workshop! You can watch the web stream starting at 11:00am, here.

At today's event, the Realtors® association (SEMAR) will also be unveiling their new website and media campaign designed to let SE Minnesota homeowners know about ways to avoid foreclosure.  SEMAR worked closely with the MN Home Ownership Center to produce their website.

Here's the TV commercial that will run throughout SE Minnesota:

You can visit their new website, here.

Home Affordable Refi Program Extended

The Home Affordable Refinance Program (HARP), the lesser-known half of the "Making Home Affordable" duet, has been extended for one more year, and will now be available through June 30, 2011, according to a statement from the Federal Housing Finance Agency.

The idea behind the HARP program is to allow borrowers who owe up to 25% more than their homes are currently worth* to refinance to a quality, fixed-rate mortgage.   

The Minnesota Home Ownership Center has a fact sheet that can help understand the basics of the entire "Making Home Affordable" program, here.

ALSO... we couldn't post about loan modifications / refis with warning Minnesota Home Owners, AGAIN, to make sure that they DO NOT PAY for any third-party loan modification service. Deal directly with your lender yourself, or with one of our free, non-profit Foreclosure Counselors. For additional warnings about for-profit loan modification companies (and scams)... visit here.  To find your local non-profit Foreclosure Counselor, click here.

* While program guidelines allow for 125% Loan-To-Value (LTV) amounts... most lenders are only allowing 105% or less LTV... one of the major drawbacks to the program.

Foreclosure Prevention in SE MN

As many of you are aware, the Minnesota Home Ownership Center has teamed up with the SE Minnesota Association of Realtors® to offer a FREE foreclosure training workshop to provide information to professionals on how to help struggling homeowners:

Thursday, March 04 ………. 11:00 AM - 12:30 PM
Ramada Hotel & Conference Center,
Rochester, Minnesota
RSVP Required: here

The training will provide an overview of the foreclosure process, where to refer homeowners and how to prepare them to talk with a housing counselor or loan servicer as well as information on national assistance programs like Making Home Affordable.

The training is specifically designed for staff from public, private, and non-profit organizations that work with struggling homeowners – but who do not normally work with mortgage foreclosure as part of their job.  For more information, or to register, click here.


EVENT WILL BE WEB-STREAMED LIVE!
Space at the event is limited... however, due to the amazing response we've received (over 150 people have already registered!)... the SE Minnesota Association of Realtors® will be offering a LIVE WEBSTREAM of the workshop!  Watch the web stream (on March 4th) here.


If you weren't aware of the workshop... it might be because you haven't signed up for our bi-weekly electronic newsletter.  You can subscribe to the newsletter here.

Another Minefield For Struggling Homeowners: Discount Payoffs

A “Discount Payoff Agreement and Release of Claim” is growing trend that the Center's Counseling Network is seeing being offered by second and other junior lien holders.

A Discount Payoff Agreement is an offer allowing homeowners facing foreclosure to pay a small portion of the total remaining principal balance on a second (or third...) mortgage in exchange for release of that mortgage. The Agreement also suggests that it will forgive all remaining debt owed on the released mortgage. This seems like a great opportunity, and mortgage holders will encourage homeowners to quickly sign the agreement and send in a check for the payoff amount.

But is it too good to be true?  Maybe.

Homeowners need to proceed with caution, and before agreeing to a "Discount Payoff" they need to consider the following:

   1. Is the Mortgage Debt REALLY Forgiven?

   2. How does the lender handle "Release of Claims"?

   3. How does the lender REALLY define a “Discount Payoff”?

The answers to these questions can really be a minefield for struggling homeowners... who may view a Discount Payoff as a life raft from a sinking ship.  BE CAREFUL... this life raft may be full of holes!

Working with the Housing Preservation Project, a non-profit legal organization, the Center has produced a fact sheet that defines and explains "Discount Payoffs" and offers advice about some of the pitfalls and the possible dangers associated with them.

For a copy of this new fact sheet... click here.

Not all "Discount Payoffs" are dangerous... and they can be a great help for struggling homeowners burdened with second or third liens.  Before signing ANY documentation from a lien holder... whether it be a Discount Payoff or any other paperwork... the Center recommends that homeowners seek the advice of a certified non-profit Foreclosure Counselor.  To find your local FREE housing counselor, click here.

Wells Fargo Home Preservation Event

I came across an interesting article at American Banking News about Wells Fargo, that I thought I'd share with you all.  The article states that Wells Fargo now performs THREE modifications for every ONE foreclosure on owner-occupied properties.  In addition, Wells has more than doubled their "Home Retention" staff in 2009 to over 15,000 people.

Yes, we know that big banks, like Wells, still have a LONG WAY to go (no flame wars, please). -  But Wells' commitment to keeping people in their homes was on display here in St. Paul at the RiverCentre on Wednesday and Thursday.  Hundreds of homeowners were able to meet face-to-face with representatives at Wells Fargo to discuss their options for avoiding foreclosure.

The event was EXTREMELY well organized... here's a "behind-the-scenes" picture of the loss mitigation scheduling chart the organizers used:  (Click to enlarge)

The Center's applauds all efforts that large banks like Wells make to openly engage with struggling homeowners, and our counseling network was pleased to be able to participate. 

Here are a few follow-up pictures of some of the Foreclosure Counselors that were on-hand during the event:

(Aliesha Kruck (L), Twin Cities Habitat for Humanity; Rock O'Bannon (R) Minneapolis NHS)

(Celeste Tometz, City of St. Paul PED)

(Dana Snell (L) from the Center speaks with Laura Carroll and Celeste Tometz of the City of St. Paul PED)

One other fun picture I thought I'd add... in the 'waiting lounge', Wells had set up a small movie screen with inflatable chairs for the kids (and grown-ups) to watch movies while they waited:

Are other lenders & servicers interested in hosting similar events? the Center would be pleased to assist.  Contact us for more information.

If you're a struggling homeowner that wasn't able to attend... or don't have a Wells Fargo loan... help is still available!  To find your local Foreclosure Counselor, click here.

Report: 23,000 Foreclosures in 2009

The Center is pleased to announce the release of its 2009 "Foreclosures in Minnesota" Report, prepared in partnership with HousingLink.


There were 23,019 foreclosures in Minnesota in 2009, making it the second highest year on record.


While the number declined 12% from 2008, it is still an extraordinarily higher rate than the number of foreclosures experienced prior to the current housing crisis. The report shows that 1.28% of all residential parcels in Minnesota experienced a foreclosure in 2009.


This means that almost 5% of all residential properties in Minnesota have experienced a foreclosure in the last five years.


To view the press release of this report, click here.


To view the report, click here.




Press sightings:


To read the Pioneer Press story on the report, click here.


To read the Star Tribune story on the report, click here.

Update:

To read the MPR story, click here.

Update II:

To read the Star News (Elk River, Otsego, Rogers, Zimmerman) story, Click here.