Real Estate Investing

Any contract written after July 30, 2009 will have a whole new set of rules to follow - primarily the Mortgage Disclosure Improvement Act which included amendments to the Truth-in-Lending Act.  The new rule amends disclosure requirements, sets waiting periods, and institutes fee disclosure requirements.  All are important measures to protect the consumer.

Here’s a link to the detailed information about Regulation Z.

First, lenders must now disclose if there is a rate change - or extension of credit.  If the annual percentage rate (APR) changes by more than 1/8 of a percent, a new good faith estimate must be SENT no later than three business days prior to the closing.   These same disclosures must now say, “You are not required to complete this agreement merely because you have received these disclosures or signed a loan application.”

The waiting period is the funkiest part of the new regs, though.  A creditor may not close a home loan until SEVEN business days following the MAILING or delivery of the initial disclosures.  Saturdays count as business days, but Sundays and holidays do not.  If there are any changes, yet another seven-day waiting period is required.

What does this mean for buyers, sellers, and their agents?  Count on a longer period of time to close a house.  Where we might’ve before been able to close in 30 days, it MIGHT now take 45 days.  In any case, for a home loan there is a minimum 7-day wait until closing.  Of course, a CASH deal is always an option.

Out here in the streets, I’ve already talked about how people are facing major struggles to find mortgage relief from lenders even after the foreclosure rescue plan has been put into place by the administration of President Obama.  Apparently the problem is widespread as indicated in an article published by CNNMoney.com.  The news agency published the experiences that home owners have shared with them in seeking relief and in reading through them, it appear that most have been either told “No.” directly or are still waiting for an answer after being given the runaround.  For example Jose Rivera was seeking a lower interest rate,

Rivera hit roadblocks from the start. He never received a call back from the first customer service agent at Bank of America, which bought Countrywide, despite leaving three messages. In May, he requested a different agent and was told because he has private mortgage insurance, he couldn’t apply until the end of May. He called back in early June and was told to try again at the end of July. Now that interest rates are rising, he’s concerned it won’t be worth it to refinance.

According to the article, the plan allows people with little or no equity in their home to refinance so they can have lower mortgage interest rates. “The plan waives the requirement that homeowners have at least 20% equity in their home, allowing them to participate even if they have loans of up to 105% of the value of their property, as long as they meet other criteria. This aids those who are current in their payments but have seen their home values decline.”

However people making their payments - even though they struggle - are the low man on the totem pole so are not finding help.  This is why one of my friends skipped her December payment …. so she could move up on the priority list.  In January she was able to refinance at a much lower rate.

This is a sorry state of affairs when people do try to hold on, but get such negative responses such as those experienced by Jeffrey Huegel,

It’s been nothing but a runaround. They just don’t care. Rather than let me stay in my home at an affordable interest rate, the bank would rather foreclose and receive nothing. I guess it’s better just to let them foreclose because I am fighting a losing battle trying to stay.

Tsk tsk.  Read the full CNN article here.

I watched part of the NBC News Special this weekend that Brian Williams hosted - a look inside President Obama’s White House.  I regret that I only watched the first half, but one thing definitely caught my attention.  It was how the President replied to how he’d respond to a woman’s letter stating her disappointment in how the banks with federal bailout money aren’t doing anything to help people save their homes.  He said he would answer that he’s also very concerned with how the money is being handled.

Lately I’ve had an abundance of experiences with both my friends and clients where lenders are quite UNWILLING to help sellers.  I might have talked about it before, but one friend was having a difficult time making her high-interest rate mortgage payment, so she called her lender to ask about refinancing.  The lender explained they could do nothing unless she missed a payment.  In response, she skipped her December payment and bought her kids a Wii for Christmas.  In January, she called back and they nearly fell over themselves to do a refinance… her payment went from a ridiculous $1200 p/month payment (for a $120,000 house) to about $850.

Another case study: a buyer has written an offer for a house - a GOOD offer.  The institution holding the mortgage has indicated they’d rather see it go to foreclosure than allow a short-sale.  Now I don’t know what gives with that - it seems like it would make better sense to forgive $10,000 than go to the expense of losing more than $50,000 if they foreclose, but I believe this is indicative of why we have a mortgage mess in the first place.  Are there any sound business guidelines to be found under the roof of this lender?

I don’t believe I’m the only one scratching her head wondering at the insanity.  In addition to the White House receiving letters, phone calls, and emails from people seeking help, they’ve also begun to contact their members of Congress.  And they’re getting results. According to MSNBC.com,

Rep. Maxine Waters, who represents Los Angeles, has called mortgage lenders directly to seek lower payments for her constituents.

Waters said it’s frustrating. She’s spent more than an hour on hold before, listening to music and getting transferred to different departments.

She said the process can be worse for homeowners who are only slightly behind in their mortgage payments. A grossly delinquent homeowner might get a specialist on the line who can modify the loan, Waters said. But other cases are handled by someone who merely threatens homeowners to pay up.

When members of Congress also get a run-around, you know something is wrong with the system.  I advocate that lenders take a long hard look at how their decisions are made, be more responsive to responsible homewoners, and stop trying to be punitive when homeowners are trying to find ways to make it work.