October 2010 Homes Values Continue to Fall

Some reports indicate that home values are falling in October and are 5 % below 1 ago level. From the 2007 peak, values have fallen by 25.8 %. This big drop mirrors that seen in the Great Depression, where home values fell 25.9 %. These figures are not surprising when one considers the subprime mortgage crisis, foreclosures (over 7 million loans are delinquent or in foreclosure), and an unemployment rate of 9.8 %

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How Can You Get Out of This House Payment Alive

1. Are you having trouble keeping up with your monthly mortgage payment?
2. Have you received a notice from your lender asking you to contact them?

Don’t ignore the problem. The further behind you become, the harder it will be to reinstate your loan and the more likely that you will lose your home.

Today many homeowners find themselves upside down in their property and in financial hardship due to a challenging economy. They are uncertain as to what to do, and realize they cannot maintain the monthly payments for a home that is worth less than the actual loan balance. Some have turned to loan modification, but unfortunately a great number of homeowners who apply will not qualify. Are there any helpful answers to resolve this situation?

Some who need to sell a property which decreases in value are doing a Short Sale. A Short Sale is the ability to sell the home for the fair market value, yet the bank accepts less than what is owed on the mortgage. A number of homeowners are turning to some REALTORS® and Short Sale Negotiation Companies to facilitate a Short Sale.

One of the criteria a bank looks at is the seller’s hardship. A legitimate hardship can be found due to one or more of the following reasons:  

1. Adjustable Rate Mortgage Reset
2. Job Relocation
3. Damage to Property (natural disaster or unnatural)    
4. Death of Spouse or Co-Borrower / Death
5. Illness
6. Death
7. Loss of Job
8. Incarceration
9. Reduced Income
10. Divorce / Marital Separation
11. Failed Business
12. Medical Bills

 Ways to Avoid Foreclosure

The best way to avoid foreclosure is to prevent the filing of a Notice of Default. Lenders do not want to foreclose but will file a Notice of Default to protect their interests, if necessary. If you know you are unlikely to meet your mortgage obligation, you should act immediately and contact your lender or a specialist like myself who will find a legitimate solution to get you out of this financial mess.

A Short Sale is different from a foreclosure. A foreclosure is detrimental to ones credit score. A Short Sale is not reported on a credit report as a Short Sale, but is usually reported as “debt settled”, which is generally less damaging to one’s credit.

How long could this process take? What information will you need to find out if you qualify for a Short Sale? Please feel free to contact me with no obligation. I am here to educate you and provide you with real options and possibilities. Why trust me? Because I never put clients in a bad financial situation by selling them an overpriced home or referred them to loan sharks who sold bad loans and misled consumers with deceptive advertising. Why give the car keys to someone who drove homeowners into the ditch? I wouldn’t? Would you? If your house was on fire, would you shoot at the firefighters? I wouldn’t? Would you? I show homeowners how to buy and sell real estate correctly to build wealth. Some Create The Real Estate Malaise, WE SOLVE IT!

Warm Regards,

Andre Luc Plessis

REALTOR®, RCS-D^TM REALTOR®

Keller Williams® Realty

The Wealth Creation Team

CA DRE License # 01856185

Office: (818) 341-2972 - Cell: (310) 266-9463

Email: AndrePlessis@att.net

How Credit Missteps Decrease Your Credit Scoring

The company behind the popular FICO scoring model has published a “What If?” series for common, specific credit missteps.
If you’ve ever wondered how your credit score would be affected by a missed payment or a maxed-out credit card, now you can use a look-up guide to assess the probable damage.

As published by http://www.myfico.com/, here’s a few common financial difficulties and how they affect FICO scores.

Max-Out A Credit Card

• Starting score of 780 : 25-45 point drop
• Starting score of 680 : 10-30 point drop

30-Day Delinquency

• Starting score of 780 : 90-110 point drop
• Starting score of 680 : 60-80 point drop

Foreclosure

• Starting score of 780 : 140-160 point drop
• Starting score of 680 : 85-105 point drop

The higher your starting score, the more each given difficulty can drop your FICO.  This is because credit scores are meant to predict the likelihood of a loan default. People with lower FICOs are already reflecting the effects of risky credit behavior.

Also worth noting that the above is just a guide, your scores may fall by more, or less, depending on your individual credit profile.  The number and type of credit accounts you hold, plus their respective payments and balances make up your complete credit history.

California forgoes new foreclosure law

California has a law on the books requiring loan servicers to contact distressed homeowners and consider them for a loan modification before beginning foreclosure proceedings. But the law applies only to homeowners who took out a mortgage between Jan. 1, 2003, and Dec. 31, 2007.

Does the new health care law impose a 3.8 percent tax on profits from selling your home?

No, with very few exceptions. The first $250,000 in profit from the sale of a personal residence won’t be taxed, or the first $500,000 in the case of a married couple. The tax falls on relatively few — those with high incomes from other sources.

Only a tiny percentage of home sellers will pay the tax. First of all, only those with incomes over $200,000 a year ($250,000 for married couples filing jointly) will be subject to it. And even for those who have such high incomes, the tax still won’t apply to the first $250,000 on profits from the sale of a personal residence — or to the first $500,000 in the case of a married couple selling their home.

The sort of people who would have to pay the tax might include, for example:

• A single executive making $210,000 a year who sells his $300,000 ski condo for a $50,000 profit. His tax on the sale of that vacation home would amount to $1,900, in addition to the capital gains tax he would have paid anyway.
• An "empty nester" couple with combined income of over $250,000 a year who sell their $1 million primary residence to move to smaller quarters. If they cleared $600,000 on the sale, they would be taxed on $100,000 of the profit (the amount over the half-million-dollar exclusion). Their health care tax on the sale would amount to $3,800 over and above the usual capital gains levy.

However, a typical home sale would not incur any tax. In March, for example, half of all existing homes sold for $170,700 or less, according to the National Association of Realtors. Obviously, none of those sales could possibly generate a $250,000 profit, and so none would be subject to the tax.
Thus, for the vast majority, the 3.8 percent tax won’t apply. The Tax Foundation, in a report released April 15, said the new tax on investment income (including real estate) "will hit approximately the top-earning two percent of families" when it takes effect in 2013.

The Internal Revenue Service says that to qualify for the $250,000/$500,000 exclusion, a seller must have owned the home and lived there as the seller’s "main home" for at least two years out of the five years prior to the sale.

Yield Spread Premiums Will Soon Be The Past

Newly-approved federal regulations target a mortgage brokers/bankers/loan officers that experts say contributed heavily to the mortgage meltdown and ultimately the greatest financial recession since the Great Depression.

Effective April 1, 2011, the Federal Reserve will prohibit ALL loan originators from receiving compensation based on a borrower's interest rate or other loan terms. That will save consumers thousands of dollars on a mortgage.
 
In the past, loan originators were compensated, in part, for steering borrowers to more expensive mortgages. The more costly the mortgage, the higher the so-called "yield spread premium" (YSP) payment.
They pretented that YSPs helped borrowers avoid additional closing costs. They rarely did.
 
CRL also found in the 2004 study, "Yield Spread Premiums: A Powerful Incentive for Equity Theft":
 
• The average amount of a YSP was about $1,850 per loan, the largest part of a broker's compensation. Broker's earned an average $1,046 more on loans with YSPs than on loans without the fee.
• Loans that included YSPs cost borrowers an additional $800 to $3,000 more than loans without YSPs.
• There was no legal requirement to inform borrowers about the connection between the YSP and the interest charged on a loan.