Question 1 : Can a mortgagee utilize the buyer's appraisal to review the property that is accepted into the PFS or must the mortgagee acquire an independent one?

Answer: If the buyer has secured an FHA-insured appraisal, use of the buyer's appraisal would be allowed.

Question 2: Mortgagee Letter 2008-43 incorporates guidelines for varying minimum net sales proceeds based on the length of time a property has been competitively marked for sale. Please advise the correct Tiered Net Proceeds Requirements and the length of time the ratio is valid.

Answer - The mortgagor(s) must be willing to make a commitment to actively market their property for a period of four (4) months.  

 1. For the first 30 days of marketing, mortgagees may only approve offers that will result in a minimum net sale proceeds of 88% of the "as-is" appraised Fair Market Value (FMV).

 2. During the next 30 days of marketing, mortgagees may only approve offers that will result in minimum net sale proceeds of 86% of the "as-is" appraised FMV.

 3. For the duration of the marketing period (60 days), mortgagees may only approve offers that will result in minimum net sale proceeds of 84% of the "as-is" appraised FMV.

Most banks follow the above guidelines when reviewing short sale contracts.

Question 3: Mortgagor is deceased, his father has been making the payments, property was tenant-occupied for eight months, and now the father wants to know if he can acquire the property under the PFS Program?

Answer: Mortgagee Letter 2008-43, Paragraph I, bullets 1 and 5 state respectively:

Use of Real Estate Broker - …."The broker/agent selected should have no conflict of interest with the mortgagor, the mortgagee, the appraiser or the purchaser associated with the PFS transaction. Any conflict of interest, appearance of a conflict, or self-dealing by any of the parties to the transaction is strictly prohibited. A broker/agent shall never be permitted to claim a sales commission on a PFS of his or her own property or that of an immediate family member (e.g., spouse, sibling, parent, or child)."

Arms-Length Transaction - "Mortgagors and mortgagees must adhere to ethical standards of conduct in their dealings with all parties involved in a Preforeclosure Sale transaction. The Preforeclosure must between two unrelated parties and be characterized by a selling price and other conditions that would prevail in a typical real estate sales transaction."

Question 4: If a mortgagee is the holder of both the first and second mortgages can the mortgagee utilize the $1,500 that is available to pay towards the settlement of the second mortgage?

Answer: Yes, Mortgagee Letter 2008-43, page 13, paragraph J, Contract Approval, states, "5. Up to $2,500 to be used for the discharge of junior liens if closing occurs within 90 days, Within 90 days, the first $1,000 represents the mortgagor's consideration and the additional $1,500 represents FHA's consideration for a total of $2,500. If settlement occurs after 90 days, the first $750 represents FHA's consideration for a total of $2,250."

Question 5 : Is it possible to do a PFS after the mortgagee has already completed a Partial Claim?

Answer: PFS may follow a Partial Claim if there is a new reason for default and the mortgagor lacks the financial ability to cure the present default. The Partial Claim amount must be added to the Unpaid Principal Balance and the Accrued Interest amount to correctly calculate total outstanding mortgage indebtedness.

Question 6: Can a buyer utilize Nehemiah-type financing programs in conjunction with the purchase of a house that has been approved to participate in the PFS Program?

Answer: No, Nehemiah mortgages are disallowed when the buyer is obtaining FHA financing to purchase a house that is participating in the PFS Program.

Question 7: What kind of hardships does a mortgagor has to have experienced in order to qualify for the PFS Program?  

Answer: Mortgagee Letter 2000-05, Paragraph B. Cause of Default, page 4, states "HUD does not have a "hardship" test. Mortgagees may offer FHA relief options to mortgagors who have experienced a verifiable loss of income or increase in living expenses to the point where the mortgage payments are no longer sustainable."

Question 8: Is it the responsibility of the mortgagee to acquire marketable title?

 Answer: Mortgagee Letter 2008-43, Paragraph G. Condition of Title, Page 9, states in part, "All properties sold under the PFS Program must have marketable title."

Nick Gioia | www.NGRealtyGroup.com

High foreclosure rates continue to have devastating effects on families and neighborhoods. The Federal Housing Administration's PFS Program can help many families in Baltimore City, Baltimore County, Howard County, Anne Arundel County, Harford County, Howard County and Carroll County who are facing foreclosure. The PFS loss mitigation option allows a mortgagor in default to sell his or her home and use the sale proceeds in satisfaction of the mortgage debt when the proceeds are less than the amount owed.

To facilitate greater use of this program, we have consolidated the requirements of the PFS Program below.

Key Features of the PFS Program

• Establishing Market Value – Mortgagees are reminded to ensure that properties in the PFS program are sold at or near fair market value as established by an independent appraisal, prepared by an appraiser on the FHA Appraisal Roster. 
• Minimum List Price Requirements – Properties offered for sale under the PFS program are to be listed for sale at no less than the “as-is” appraised value as determined by a current FHA appraisal, obtained and reviewed by the mortgagee.
• Negative Equity – The ratio of 63% for the fair market value (FMV) to the outstanding mortgage balance (including unpaid principal and accrued interest) has been updated to address events in the current housing market, and replaced with tiered net sales proceeds.
• Tiered Net Proceeds Requirement – This New revision incorporates guidelines for varying minimum net sales proceeds based on the length of time a property has been competitively marketed for sale.
• Marketing Documentation – Prior to accepting a discounted offer, evidence of competitive marketing from the selling broker is to be presented and mortgagees are to retain this documentation in the claim review file. 
• Non-owner Occupant Exceptions – Mortgagees are authorized to grant reasonable exceptions to non-occupant mortgagors when documentation indicates a property was not purchased as a rental or used as a rental for more than 18 months, immediately preceding the approval into the PFS program.
• Removal of Repair Limitations –With prior approval from HUD, properties with surchargeable damage (i.e., damage caused by fire, flood, earthquake, hurricane, boiler explosion or mortgagee neglect) may be eligible for the PFS program if funds - sufficient to cover the government’s estimated repair costs - are applied to reduce the outstanding debt when a claim is filed.
• Increase in Funds Available for Discharge of Subordinate Liens – In instances where a mortgagor has made an initial contribution/incentive of $750 or $1,000, the amount that can be used from sales proceeds for the discharge of liens or encumbrances (which represent an impediment to conveyance of marketable title) has been raised from $2,000 to $2,500. 
• Change in Allowable Closing Costs – Subject to the stated ratios, HUD allows up to 1% of the buyer’s mortgage amount for closing costs to be included in the “Seller’s Costs” on the HUD-1 for all transactions that involve a new FHA-insured mortgage.

If you have any quesitons regarding the PFS program please feel free to email or call us anytime.

Nick Gioia | www.NGRealtyGroup.com

1. Who can perform repairs when the appraiser noted defective paint in a home built prior to 1978 in view of EPA’s new lead based paint Renovation, Repair and Remodeling Rule?

On April 22, 2010, the EPA changed its requirements regarding renovation, repair and painting for houses built prior to 1978 as follows:

• Homeowners performing renovation, repair or painting work on their own home are exempt from the rule but are encouraged to learn to perform lead-safe work practices.

• Property owners/landlords who renovate, repair, or prepare surfaces for painting in pre-1978 rental housing must be certified and follow lead-safe work practices required by the rule.

• Contractors who perform the repair must be certified and must follow specific work practices to prevent lead contamination.

2. Who can inspect for completion of repairs when the appraiser noted defective paint in a home built prior to 1978 in view of EPA’s new lead based paint Renovation, Repair and Remodeling Rule?

FHA Roster appraisers and inspectors as well as other independent third parties may perform inspections to verify if painting repairs have been performed as required. These inspections are to determine completion of the repairs, not compliance with the Rule.

3. What is appropriate documentation to evidence compliance with EPA’s new lead based paint rule?

If the repair has been made by a contractor and/or property owner/landlord if rental housing, the underwriter must be provided with a copy of the EPA or state-lead training certificate in the name of the party who performed the work. If the repair was made by the homeowner on their own home, the homeowner must provide the underwriter a letter stating that the homeowner made the repair and an inspection to verify completion of the repair is required.

Robert O'connel
MetLife Home Loans
Office 410-828-5200 x20
Cell 443-829-0300
https://lo.mlhl.com/robertoconnell

With rising costs of living and a dwindling budget to accommodate the elderly and disabled, we will see increased usage of the reverse mortgage in Baltimore. This loan allows equity to be taken out of the home to meet day-to-day expenses, and was designed in the late 1980s to help those who owned property, but lacked sufficient income to live on. However, there are benefits and disadvantages to be considered before going into this type of loan.

In most loan scenarios Baltimore Homes will go into foreclosure if payment is not made. If payments are made, the debt decreases and equity increases. The opposite holds true for a reverse mortgage; equity is taken out of the home to sustain the family, causing debt to increase while equity decreases. There is an exception - if the actual value of the home increases, less equity will be lost overall.

Most reverse mortgages in the Baltimore area are set up so there is no monthly payment as long as the owner or co-owner(s) resides in the home. There are no minimum income requirements, and the money can be used for any purpose. Equity disbursed from this type of loan is tax-free. Depending on the type of plan, reverse mortgages will usually allow the owner to retain the title to the property until they have lived in a different residence for 12 months, sold the property, died, or the end of the loan term has been reached.

On the flip side, reverse mortgages can be more costly than a normal equity loan. Interest is added to the principal balance each month, and the amount of interest owed is compounded over time. The interest will not be tax deductible until the loan is paid off, in part or in full. Also, since the reverse mortgage uses equity in the property, this constitutes a loss of assets one could pass on to heirs.

The Federal Trade Commission warns of abuse with this type of loan, as they have received reports of predatory lenders taking advantage of the elderly. It is best for the individual interested in a reverse mortgage to research and obtain counsel from reputable sources.

If find out more informaiton on Reverse Mortgages please contact Allan Ward with Jacob Dean Mortgage .

The increase, from 6,304 foreclosure filings in June to 6,961 in July, ranked Maryland the 10th hardest-hit state in the country, according to Irvine, Calif. market tracking firm RealtyTrac. Compared to July 2009, foreclosure filings are up 35 percent.

Nationally, home foreclosure filings increased 4 percent from June to July and 10 percent from July 2009 to July 2010.

There is good and bad news in the national foreclosure situation, RealtyTrac CEO James J. Saccacio said in a statement. The number of default notices compared to the prior year has fallen for each of the past six months, Saccacio said. But July also marked the 17th consecutive month with total national foreclosure activity in excess of 300,000.

 Nick Gioia | www.NGRealtyGroup.com

The Baltimore Business Journal reported that the mid-Atlantic housing market continued to show signs of recovery during the second quarter with both sales and prices up.

Rockville-based Metropolitan Regional Systems Information Systems Inc. says unit sales volume in the second quarter was up 60.6 percent from the first quarter, and up 15.9 percent from a year ago. The average sale price in the second quarter was up 4.2 percent from the second quarter of 2009, the third straight quarter prices have risen compared to the same period a year earlier.

Houses are also selling faster, with the average time it takes a listing to sell falling to 56 days, compared to 71 days in the first quarter and 93 days a year ago. That is the fastest houses have sold on average since 2006.

The mid-Atlantic housing market includes: Anne Arundel County, Baltimore City, Baltimore County, Carroll County, Harford County and Howard County.

“While the mid-Atlantic housing market is not yet performing at the robust levels of 2005, it is clearly showing some important signs of recovery that are crucial to reestablishing a stable housing market,” said MRIS CEO David Charron.

The average sales price of a home in Baltimore County was $165,959 in the second quarter of 2010, an increase of 3.2 percent from the 2nd quarter of 2009. The second-quarter 2010 average sales price is down 17.5 percent from a peak in the second quarter of 2008.

Nick Gioia | www.NGRealtyGroup.com

Maryland’s 6,304 foreclosure filings in June was nearly a 104 percent increase from the same month last year, according to report released Thursday by market research firm RealtyTrac. Nationally, the number of foreclosure filings declined nearly 7 percent in June to 313,841.

For the first half of the year, January to June, Maryland’s 28,293 filings was a 56.2 percent increase from the same period a year earlier. That comes out to 1.2 percent of Maryland homes receiving a foreclosure filing during the six-month stretch.

Between January and June, foreclosures jumped 8.3 percent nationally to 1.7 million.

“The roller coaster pattern of foreclosure activity over the past 12 months demonstrates that while the foreclosure problem is being managed on the surface, a massive number of distressed properties and underwater loans continues to sit just below the surface, threatening the fragile stability of the housing market,” RealtyTrac CEO James J. Saccacio said in a statement.

Nick Gioia | www.NGRealtyGroup.com

Home sales across the Baltimore area continued to increase in June by nearly 9 percent, while median sale prices also took their biggest jump in three years.

During the month, 2,579 homes sold across Greater Baltimore, according to Rockville market research firm Metropolitan Regional Information Systems Inc. That was up from 2,375 in June 2009.

The median sale price in the Baltimore area — Baltimore City and Anne Arundel County, Baltimore County, Carroll County, Harford County and Howard County — increased 2 percent to $255,000. That was up from $250,000 during the same month last year. In May the median sale price dropped more than 4 percent to $235,000.

MRIS’ report comes one day after Clear Capital released data saying the Baltimore area was among two major markets not to see housing prices rise in the past year.

Meantime, the average number of days home stayed on the market in June across the Baltimore area also improved to 100 days, a more than 17 percent decline, according to MRIS.

In Baltimore City, the number of homes sold in June increased 11 percent to 579 compared with 521 during the month last year. But the median sale price of homes fell nearly 8 percent to $143,000.

Baltimore County home sales jumped nearly 1 percent to 681, and the median sale price held steady at nearly $230,000.

Anne Arundel County saw the biggest bump in home sales in the Baltimore area. Sales increased more than 15 percent to 556 in June. The median sale price spiked 5 percent to $325,000.

Nick Gioia | www.NGRealtyGroup.com

The Asssociated Press reported that homebuyers may get an extra three months to finish qualifying for federal tax incentives that boosted home sales this spring.

Senate Majority Leader Harry Reid, said Thursday that he wants to give buyers until Sept. 30 to complete their purchases and qualify for tax credits of up to $8,000. Under the current terms, buyers had until April 30 to get a signed sales contract and until June 30 to complete the sale.

The proposal would only allow people who already have signed contracts to finish at the later date. The National Association of Realtors estimates that about 180,000 homebuyers who already signed purchase agreements are likely to miss the deadline.

Reid introduced the proposal as an amendment to a bill that would extend jobless benefits through the end of November. Joining him were Sen. Johnny Isakson, and Christopher Dodd.

The Senate is expected to take up the amendment next week. Senate Democratic leaders hope to finish work on the jobless benefits bill next week, but they have yet to secure enough votes.

Reid, who faces perhaps the toughest re-election campaign of his political career, represents a state that has the nation's highest foreclosure rate.

The Realtors group has been pushing hard in Congress for the extension. Mortgage lenders, the trade group says, have been swamped with borrowers trying to get approved by the end of the month. Many potential borrowers are unlikely to make the deadline.

"Time is of the essence," said Lucien Salvant, a spokesman for the group. "It's important for Congress to get this done, because there's whole bunch of loans that aren't' going to close on time."

First-time buyers were eligible for a tax credit of up to $8,000. Current owners who bought and moved into another home could qualify for a credit of up to $6,500.

Nick Gioia | www.ngrealtygroup.com

The Baltimore Business Journal reported that a group of green building advocates is opposing plans by Baltimore County Council to change the way the county rewards environmentally conscious homeowners.

The U.S. Green Building Council has launched a campaign seeking to defeat county legislation requiring homeowners to show how much they’ve reduced their energy costs to qualify for a reduction in property taxes.

The county council is scheduled to hold a work session at 2 p.m. Tuesday on Bill 43-10, which is slated for final vote June 7. The bill was sponsored by Councilman Vincent J. Gardina, who could not immediately be reached for comment.

The legislation changes Baltimore County’s current tax credit program, which is based on homeowners meeting standards the building council established called LEED for Homes. The designation, short for Leadership in Energy and Environmental Design, outlines certain steps a homeowner can take to make their properties more energy efficient like installing better-insulating windows or using appliances that do not use as much power to operate.

Meeting LEED does not guarantee homeowners will save a certain percent on their utility bills, which is why council is looking to change the program. Under the proposed bill, homeowners would only qualify for a reduction in their property taxes if the improvements they make to their homes cut down on their energy usage by 40 percent or more. That would be measured not by the green building council but another standard called Home Energy Rating system.

Nick Gioia | www.ngrealtygroup.com

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