WORD: Notice of Non-Responsibility

And the WORD for Today is:

Notice of Non-Responsibility – a notice filed by an owner of a property to show that work being done has not been contracted for performance by the owner. This notice should be used when a tenant has ordered work to be done on a property which they are renting. When an owner files a non-responsibility notice properly it may offset or prevent a mechanics lien from being enforceable.

Copyright © 2008, Home Ownership Matters, LLC. All Rights Reserved.

You can find more helpful definitions of WORDS like these in Your Real Estate Advisor which can be purchased at www.DovePublishingHouse.com.

(Please E-mail Heather at homeownershipmatters@gmail.com with any questions, comments or concerns you might have! We appreciate all comments and feedback, so please don't be shy.)

WORD: Caveat Emptor

And the WORD for Today is:

Caveat Emptor – means “let the buyer beware”. Caveat emptor is a legal expression, which means the buyer is assuming and accepting the risk regarding the quality or condition of an item purchased, unless they are protected by a warranty or there is misrepresentation. Consumer protection laws during recent years have placed more responsibility on the seller and broker to make appropriate and timely disclosure. In real estate, seller disclosure laws have been passed in most states since the early to mid-90’s which provide better protection for home buyers.

Copyright © 2008, Home Ownership Matters, LLC. All Rights Reserved.

You can find more helpful definitions of WORDS like these in Your Real Estate Advisor which can be purchased at www.DovePublishingHouse.com.

(Please E-mail Heather at homeownershipmatters@gmail.com with any questions, comments or concerns you might have! We appreciate all comments and feedback, so please don't be shy.)

Q&A: Should I Buy?

Q: I am thinking about buying a home even though the market is really bad in my area right now. It seems I might be able to get a really good deal on a house and I want to stop paying rent and get into home ownership. What are some of the things I need to consider? Or should I just wait altogether?

A: In today’s market you should certainly consider not only whether or not you can afford the home (down payment—20% or so, insurance, maintenance, etc) but it is critical that you are comfortable with the stability of the market in the area where you are considering purchasing. Are property values still sliding, or have they stabilized? Do you plan to live in the home for the next 8-10 years so the market conditions overall have returned to a more normal state? Can you buy the home at an amount which you feel will not have you upside down (owing more than possible re-sale) on day one?

If the home needs repairs do you have the funds readily available to handle them or can you do them yourself? Are you sure you are ready to assume the responsibilities associated with owning, caring for the yard, etc? Only you can answer most of these questions. I would recommend that you take some time and evaluate not only the questions which I already asked but also:

1. Why do you wish to buy? Is it to build equity? Enjoy a certain lifestyle? To feel that you have accomplished a goal you set for yourself? Because you are a certain age and you SHOULD? Is it because you are being told you are foolish if you keep renting? Carefully examine whether or not the reasons for considering the purchase come from within and that buying a house will, in fact, meet your needs.
2. Are you informed enough about all the aspects I have raised questions about to make a good decision?

If you are not, then do the research, seek out the answers, get the details so you make an educated decision. Then go for it.

Lastly, please tell me you are looking for a house for shelter, not a house as an investment. On the surface the question above gives the impression it is from an individual looking for a personal residence. I answered based on that assumption.

If you are very strong financially and want to invest in rental property for the long haul, then go for it—with caution. Keep in mind that everything written above still applies.

Copyright © 2008, Home Ownership Matters, LLC. All Rights Reserved.

(Please E-mail Heather at homeownershipmatters@gmail.com with any questions, comments or concerns you might have! We appreciate all comments and feedback, so please don't be shy.)

WORD: Appraisal Report

And the WORD for Today is:

Appraisal Report – is the written document, prepared by the appraiser, which shows the documentation for the value, which the appraiser has assigned to the property. The report should include information about the neighborhood of the subject property, recent sales as well as data on homes currently on the market. All properties selected should be within fairly close proximity to the subject and be similar in age and design. Price adjustments should have been made for any major differences in each comp as compared to the subject.

Copyright © 2008, Home Ownership Matters, LLC. All Rights Reserved.

You can find more helpful definitions of WORDS like these in Your Real Estate Advisor which can be purchased at www.DovePublishingHouse.com.

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WORD: Appraisal

And the WORD for Today is:

Appraisal – is a document which is used to give an estimate of a property’s fair market value based on its condition. An appraisal is usually requested by the lender as part of the loan process and one purpose is to determine if the value of the house is at least as much as the loan being requested. Since the house will be the security for the loan, it is reasonable for the lender to need this assurance. Lenders also use the appraisal to determine the loan-to-value ratio, which will let them tell you how much of a down payment is needed. The consumer pays for the loan and is entitled to see a copy. The appraisal is seldom provided to consumers; instead consumers will be given a disclosure at closing which tells them how they can get a copy by mailing in a request at a later date. They will only be able to do so for a limited period of time and seldom do consumers discover that they need the appraisal until AFTER the time frame to make the request has expired. YOU SHOULD KNOW THAT YOU ARE ENTITLED TO HAVE A COPY PRIOR TO CLOSING. THE APPRAISAL HAS BEEN COMPLETED BEFORE CLOSING, YOU PAID FOR IT AND IT IS IN YOUR BEST INTEREST TO GET A COPY AT OR BEFORE THE CLOSING.

Copyright © 2008, Home Ownership Matters, LLC. All Rights Reserved.

You can find more helpful definitions of WORDS like these in Your Real Estate Advisor which can be purchased at www.DovePublishingHouse.com.

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WORD: FHA Appraiser

And the WORD for Today is:

FHA Appraiser – is an appraiser who has studied the guidelines required by FHA in order to evaluate a property when the borrower plans to us an FHA-backed loan. FHA maintains a list of “approved” appraisers so lenders can select from this list when ordering an appraisal to complete processing of a loan application. The use of an FHA appraiser is extended to avoid making/approving a loan on a property which has structural or mechanical problems, exhibits safety concerns or has code violations. A house which needs numerous, repeated or expensive repairs can drain a budget and lead to default on the loan. An ounce of preventions, packaged as an FHA appraisal could be just the solution to sustained home ownership.

Copyright © 2008, Home Ownership Matters, LLC. All Rights Reserved.

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Q&A: Appraisal Disappointment

Q. I want to re-finance my house and the appraisal came back significantly lower than I had expected. My broker says I can’t refinance now because of the low appraisal. How can I get another appraisal from another bank?

A: Sometimes when you answer literally the question which has been asked, you miss providing the information the person is really seeking. I will try to address both what you asked and what I think you are trying to get to.

Can you get an appraisal from another bank? The simple answer is “yes, you can.” By applying for a re-finance at another institution they will require you to pay another appraisal fee and they will also order an appraisal.

I am going to go out on a limb and assume that you mean by “the appraisal came in low” that it came back for less than the amount you had hoped for in order to cover expenses and make it worthwhile for you.

If your real goal is to find out what the value of your home is, there are several recommendations I would make which could accomplish that:

1. Find an independent appraiser and pay for an appraisal of the home, on your own—without an order from a bank
2. Select one or two competent, experienced real estate agents in your area and request a Complimentary CMA (Comparative Market Analysis) or BPO (Broker Price Opinion). Agents are usually happy to do this since they hope you will give them a listing later or at least a referral to someone else
3. Check the tax records on your home to see what valuation is used by the local Tax Assessor

Our current financial crisis was caused, in large part, by inflated appraisals; many of those were associated with re-finances. Lenders across the country are now being ultra-conservative and you are not likely to find anyone who is willing to refinance unless you have equity in the home which can be clearly demonstrated with an appraisal. Marginal values are not going to cut it.

Copyright © 2008, Home Ownership Matters, LLC. All Rights Reserved.

(Please E-mail Heather at homeownershipmatters@gmail.com with any questions, comments or concerns you might have! We appreciate all comments and feedback, so please don't be shy.)

WORD: Federal Law

And the WORD For Today Is:

Federal Law – a law of the United States which applies throughout the county. Federal law is the highest law of the land and supersedes or overrides any state or local law which conflicts with the Federal law. Bankruptcy laws are a good example of Federal law.

Copyright © 2008, Home Ownership Matters, LLC. All Rights Reserved.

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WORD: Federal Deposit Insurance Corporation (FDIC)

And the WORD for Today is:

Federal Deposit Insurance Corporation (FDIC) – is an independent organization created by Congress in 1933 in order to maintain financial stability and the public’s confidence in the nation’s banking system. The FDIC provides insurance coverage for your deposit in banks and thrift institutions up to $100,000. The FDIC is also responsible for examining and supervising more than half of the institutions in the US Banking system.

The FDIC is a governmental agency which provides insurance on bank deposits to maintain the stability of banks and keep public confidence high regarding the safety of the United States depository system. Following the crash of 1929 the general public was understandably worried about putting a substantial portion of their life savings into a bank—any bank. The FDIC offered a degree of confidence that the financial devastation could not or would not occur again due to federal government insurance. The FDIC insures a consumer’s deposit up to a total of $100,000. That’s an important number if you have accumulated more than $100,000.

Copyright © 2008, Home Ownership Matters, LLC. All Rights Reserved.

You can find more helpful definitions of WORDS like these in Your Real Estate Advisor which can be purchased at www.DovePublishingHouse.com.

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Community Service Announcement: Do-Not-Call List

Do-Not-Call-List

Are you still being interrupted during dinner or your evening television program by telemarketers wanting you to buy this or that or put a roof on your apartment? Are you sick of rushing to the phone thinking it might be your sister calling and it is yet another sales pitch for something you never heard of and certainly don’t need?

Then STOP it!

The Federal Trade Commission had provided you with a solution but you need to take some action. Perhaps you were unaware that you could block most calls from folks trying to solicit your business over the phone by signing up for the national DO NOT CALL LIST.

• There is NO deadline. Sign up today if you have not done so already
• Applies to both cell phones and/or regular phones
• You can register BOTH of your phones, cell AND land line
• Process is simple

How to send telemarketers packing:

To add your name to the DO-NOT- CALL-LIST you may either:

• Register at www.DONOTCALL.gov or
• Call toll free 1(888) 382-1222. If you choose to call to register, then you must call from the number you wish to sign up.

Give a gift to a senior you know.

Want to do a major favor for some senior family member or friend? Then talk with them about this and handle it for them, if they agree that they would like to stop falling over things trying to get to the phone only to discover it was a telemarketer. Telemarketers are so bad that they have caused my 75 year old mom, who is a salt of the earth, good Christian woman to utter one of her few non-church words after rushing to the phone just to have someone trying to sell her something on the other end. She was definitely NOT happy. I have given her instructions on how to register her new phone number with DO NOT CALL.

Will ALL the calls stop?

Not all the calls will stop. But most of them will. Give them at least 31 days after you have signed up before you should expect most of the companies to have you in their system. But there are exceptions in the guidelines which will still allow certain types of calls. Those include:

• Calls from political organizations ( I know, we’re excited about getting those calls) as well as charities and telephone surveys
• Calls from companies with whom you have a business relationship (and they may continue to call up to 18 months after you purchased something from them or up to 3 months after you called them to inquire about something)
• Calls from companies who you granted permission to call you

Still receiving calls—RAT them out.…

If it has been more than 31 days since you signed up and you are still getting calls then report the offending company. The process is not complicated and will help the FTC to find and fine the violators. You may either go online to DONOTCALL.GOV or call 1-(888) 382-1222.

The Federal Trade Commission is one of the governmental agencies whose entire job is consumer protection. They serve as educators and enforcers. You would be amazed and would benefit greatly from studying their website and ordering some of the thousands of helpful booklets and pamphlets which they have to enlighten you about your rights and what recourse you have when they are violated.

That’s ftc.gov or call 1 (877) FC-HELP. 1 (877) 382-4357

Copyright © 2008, Home Ownership Matters, LLC. All Rights Reserved.

(Please E-mail Heather at homeownershipmatters@gmail.com with any questions, comments or concerns you might have! We appreciate all comments and feedback, so please don't be shy.)

WORD: Unsecured Debt

And the WORD for Today is:

Unsecured Debt – means a loan which does not have collateral backing the guarantee to repay as promised. Department store charge purchases are examples of unsecured debt. Homes and cars are secured by collateral.

Copyright © 2008, Home Ownership Matters, LLC. All Rights Reserved.

You can find more helpful definitions of WORDS like these in Your Real Estate Advisor which can be purchased at www.DovePublishingHouse.com.

(Please E-mail Heather at homeownershipmatters@gmail.com with any questions, comments or concerns you might have! We appreciate all comments and feedback, so please don't be shy.)

WORD: Second Mortgage

And the WORD for Today is:

Second Mortgage – a mortgage recorded immediately behind or below a first mortgage. This becomes very important in the event the consumer defaults since proceeds from a sale of the real estate will be dispersed based on the order in which liens were recorded. The second mortgage may get only a sliver of the pie. Sometimes they get not even a smell. The value of a second mortgage is typically less than the first mortgage.

Copyright © 2008, Home Ownership Matters, LLC. All Rights Reserved.

You can find more helpful definitions of WORDS like these in Your Real Estate Advisor which can be purchased at www.DovePublishingHouse.com.

(Please E-mail Heather at homeownershipmatters@gmail.com with any questions, comments or concerns you might have! We appreciate all comments and feedback, so please don't be shy.)

WORD: Down Payment

And the WORD for Today is:

Down Payment – refers to the amount of money needed to cover the difference between what a borrower agrees to pay for a home and the amount of the mortgage they will have. The down payment on conventional loans is typically 20% of the sales price. The real estate crisis which currently exists in the United States is partly due to home purchase with little (3%) or no (0%) as a down payment. When the borrower has made little or no down payment they have limited risk if there is a default AND the property will usually be difficult to sell should their financial circumstances change. Not only does the lender assume greater risk, but the borrower has less incentive to struggle through the difficulty.

Copyright © 2008, Home Ownership Matters, LLC. All Rights Reserved.

You can find more helpful definitions of WORDS like these in Your Real Estate Advisor which can be purchased at www.DovePublishingHouse.com.

(Please E-mail Heather at homeownershipmatters@gmail.com with any questions, comments or concerns you might have! We appreciate all comments and feedback, so please don't be shy.)

Q&A: 2nd Lien Hold-out on Short Sale

Q: We have been trying to sell our house as a short sale since we owe more than the home is worth today. We have a second mortgage and we were just told that they have the ability to reject an offer for a short sale. Is this true? We thought only the first had the right to approve a short sale offer.

A: Short answer with a long explanation. The answer to the question, as you phrased it is no, they can not reject an offer for a short sale. But they can prevent you from being able to get a short sale approved and closed.

A second mortgage holder does NOT have the power to approve or reject a short sale offer. However, because you must get their cooperation to either wipe out their lien or at least “lift the lien” for the purpose of closing, they can successfully BLOCK a short sale from moving forward by refusing to do either one of those things.

When there is an attempt to short sale a property which involves a second lien holder, there cannot be a closing unless the second receives the full amount which they are due or a lesser amount which they have agreed is sufficient for them to release the lien which they hold against the property. By releasing the lien, they would be acknowledging that they have no further claim against the home, or the borrower, in exchange for a stipulated amount. It has been commonplace for several years for second lien holders to release the lien for a tiny fraction of the amount owed when it appeared that foreclosure was imminent. This is especially true in a judicial foreclosure state where the second will receive absolutely nothing if there is a foreclosure.

In the past year it has become more common for the second lien holder to try to play hardball and agree to “lift the lien” for the closing on a short sale BUT not to release it.

That means that while it is no longer secured by the real estate it remains a collectable debt against the borrower. With such an agreement signed, the borrower has, in fact, re-obligated themselves to the debt. It is possible that such a document, acknowledging the validity of the debt, could be used to secure a judgment. With a valid judgment a lender can request a wage assignment (garnishment).

I always advise borrowers to seek legal advice when it comes to this sort of situation. An attorney might be able to negotiate for a lower amount on the unsecured debt, if, in fact, it is necessary to agree to that in order to avoid foreclosure. Foreclosure should be avoided at all costs.* Failure to use an attorney could cost you dearly down the road.

Copyright © 2008, Home Ownership Matters, LLC. All Rights Reserved.

(Please E-mail Heather at homeownershipmatters@gmail.com with any questions, comments or concerns you might have! We appreciate all comments and feedback, so please don't be shy.)

WORD: Credit Reporting Agency

And the WORD for Today is:

Credit Reporting Agencies – agencies which maintain records of consumer credit as reported to them by creditors. Businesses use this information to evaluate your applications for credit, employment, insurance and other purposes. It is important that the information in your credit file is complete and accurate. Recent legislation has made it possible for all consumers to receive a copy of their credit report from each of the agencies once a year. If you are considering a purchase you might want to check and see what they have to say about how you pay your bills. It would be wise to check all 3 agencies since they may not have the same information in their file. Likewise if you are working on credit repair you should forward any corrections to all 3 agencies since they do not share information with each other.

There are 3 major credit reporting agencies in the United States. They are:

Equifax
P.O. Box 105252
Atlanta, GA 30348
1-800-685-1111

Experian
P.O. Box 2002
Allen, TX 75013
1-888-397-3742

TransUnion
P.O. Box 1000
Chester, PA 19022
1-800-888-4213

Copyright © 2008, Home Ownership Matters, LLC. All Rights Reserved.

You can find more helpful definitions of WORDS like these in Your Real Estate Advisor which can be purchased at www.DovePublishingHouse.com.

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WORD: Credit Score

And the WORD for Today is:

Credit Score – is a number that represents the possibility a borrower may default. It is based on your credit history and is used to determine your ability to qualify for a mortgage loan.

The numerical value assigned to a consumer’s credit file. It is commonly referred to as a FICO score.

Copyright © 2008, Home Ownership Matters, LLC. All Rights Reserved.

You can find more helpful definitions of WORDS like these in Your Real Estate Advisor which can be purchased at www.DovePublishingHouse.com.

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Q&A: Getting a Loan

Q: It is hard to meet the criteria to borrow money from a bank these days. Our credit score is not bad but we do not have the 20-30% being requested as a down payment by the 3 banks we have talked to so far. Where do you go to borrow money when banks won't loan?

A: Banks are not the only sources for financing. The question does not specify what you wish to borrow money for, but if it is for a car or a house then considering your local credit union is the first thing I would recommend.

Credit unions have always been a good resource for financing large ticket items like cars or homes or home repairs. While credit unions started out as a resource for employees of a particular company or industry, many credit unions have expanded their memberships so that almost anyone can join a credit union if they choose to. Most of us have either a family member or friend who is a member of a credit union we would qualify to join. Additionally, there are credit unions which you can join just because you live in a specific geographic area.

While it is frequently not a good idea, borrowing from family may be a solution as well.

Lastly, I would be remiss if I did not address the fact that banks are, in fact, still loaning money.

It is true that loans are harder to come by. They have raised the credit score to qualify as well as increased the amount of paperwork and the down payment required to get a loan in most cases. Those are good guidelines which would have prevented the mortgage mess we are experiencing had they been in place during the past 4-6 years. While it is true that conservative lending will reduce the number of loans which are made, it will also decrease the number of defaults which occur.

If your credit needs some repair, get a copy of your credit report from all three credit reporting agencies and work on getting yourself ready for a good loan at a reasonable interest rate.

Log onto: www.freeannualcreditreport.com. Why not get started today? It will be time well spent.

Copyright © 2008, Home Ownership Matters, LLC. All Rights Reserved.

(Please E-mail Heather at homeownershipmatters@gmail.com with any questions, comments or concerns you might have! We appreciate all comments and feedback, so please don't be shy.)

WORD: Garnishment/Wage Garnishment

And the WORD for Today is:

Garnishment – means that a creditor has received permission through legal court action to seize property (most often income or wages) which is being held by a third party. The third party must honor official garnishment requests when they are accompanied by a bona fide court order.

Wage Garnishment – refers to the legal process of taking the wages of someone who owes an obligation to satisfy that debt.

Copyright © 2008, Home Ownership Matters, LLC. All Rights Reserved.

You can find more helpful definitions of WORDS like these in Your Real Estate Advisor which can be purchased at www.DovePublishingHouse.com.

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WORD: Garnishee

And the WORD for Today is:

Garnishee – refers to the person against whom a garnishment is issued. The word refers to the person who is holding the funds of the debtor, not the debtor themselves. The garnishee is required by law to turn over the amount of money designated in the garnishment. Failure to do so would mean they were in contempt of court.

Copyright © 2008, Home Ownership Matters, LLC. All Rights Reserved.

You can find more helpful definitions of WORDS like these in Your Real Estate Advisor which can be purchased at www.DovePublishingHouse.com.

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Q&A: Garnishment Worry

Q: We are behind on our mortgage (seems everyone we know is) but hope to work something out with the bank so we can keep our home. I am still working but now get fewer than 30 hours some weeks. My husband has been laid off indefinitely since January of 2009. We still have some money in a 401K and worry that the bank will either take money from the 401K or get permission to garnish my paycheck. We can hardly manage groceries and utilities now. We would be in dire straits if they did that. Can a lender garnish your check or 401K?

A: A lender does not have the right to garnish your paycheck/attach a 401K until AFTER you have lost the home to foreclosure OR given it back through deed-in-lieu AND they have gone into court and gotten a “deficiency judgment” which indicates they are entitled to additional funds since the re-sale of the property did not cover the entire amount you owed them. Once they have taken this legal step they will be able to use the judgment as proof of the financial obligation. Then they can ask an employer to garnish wages based on the judgment.

Individual state law will determine how long a lender has to file for a deficiency judgment. Additionally, the type of loan and other guidelines may preclude a lender being able to acquire a deficiency judgment. (i.e. FHA regulations prohibit the lender going for a deficiency judgment IF the borrower attempted, in good faith, a short sale prior to the foreclosure.) I hope this helps to ease your mind that you don’t have to worry about just being ‘surprised’ that they have taken part of your paycheck or the 401K. It can’t happen without you having notice well in advance.

Copyright © 2008, Home Ownership Matters, LLC. All Rights Reserved.

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WORD: Wage Assignment

And the WORD for Today is:

Wage Assignment – means a voluntary agreement to have part of your wages paid to a person other than yourself. Common assignments include deductions for health insurance, credit union payment or a retirement fund.

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WORD: Garnish

And the WORD for Today is:

Garnish – means to bring garnishment proceedings against a person. Legal action is required to garnish another’s earnings.

Copyright © 2008, Home Ownership Matters, LLC. All Rights Reserved.

You can find more helpful definitions of WORDS like these in Your Real Estate Advisor which can be purchased at www.DovePublishingHouse.com.

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shy.)

Your Real Estate Advisor: 4 Prudent Rules for Buyers of Short Sale Listings

Four Prudent Rules for BUYERS Who Write Offers on Short Sale Listings

Rule 1: STAY PUT: Do not give notice in your existing housing until after you have closed on a short sale listing. Even if you have to pay a significant amount to go to a month to month arrangement where you currently live. The path to a closing on a short sale listing could get bumpy. The seller might:

1. File for bankruptcy which removes the home from availability
2. Receive an offer from another potential purchaser which the lender decides to accept instead of your offer
3. Lose the home to foreclosure in which case you will no longer have a valid offer and will need to attempt to purchase it as an REO, if you are still interested

Rule 2: BE SUSPICIOUS: If your offer is signed by the seller very shortly after you write the offer (within a few days) then the chances are pretty good that the seller signed without the lender’s approval. There is no guarantee that the lender is going to approve. Most likely you have a listing agent who does not clearly understand that “lender approval required” means the “Lender has the right to accept or reject any offer which is not to their liking”. Everyone should wait until you have the lender’s “required” approval for the acceptance of a short sale.

You should not be celebrating that you are going to be closing if the seller signed but you do not have the lender’s approval. Lenders make the final decisions on short sales, not the sellers who are upside down nor the REALTORS who are unfamiliar with or unwilling to bend to the way short sale transactions are typically handled.

Rule 3: BE PATIENT: We mean be prepared to be ‘seriously’ patient, like for a few months. Literally. Buying a home which is listed for a short sale can get you a great deal on a property, but you must be prepared to wait for an extended period of time (2-3 months is common). The lender has numerous things they must check and cross-check before they can approve a short sale. Watch for a future blog on “What is Taking Them So Long?” We’ll address the laundry list of things which must be checked before a short sale can be approved.

Rule 4: EXPECT A COUNTER: Four things you should understand from the beginning:

1. Your offer is likely to be set aside until the lender gathers the information they need to make a decision
2. Your offer is likely to be ‘joined’ by additional offers during this waiting period
3. The Lender is likely to present a COUNTER OFFER to the potential purchaser who they believe has the offer which will net them the most
4. That this COUNTER may not be presented to all potential buyers

Consequently, you should write the offer for the amount you are willing to pay since you can not be guaranteed a second opportunity to increase that amount. Short sale transactions are a real estate gamble; you’ve got to realize that going in and decide if you have the stomach for this kind of acquisition. If not, find a regular listing which will offer you the comfort of more traditional negotiating and timing.

It’s all in the game. All in the wonderful game that we know as: Short Sale.

Copyright © 2008, Home Ownership Matters, LLC. All Rights Reserved.

(Please E-mail Heather at homeownershipmatters@gmail.com with any questions, comments or concerns you might have! We appreciate all comments and feedback, so please don't be shy.)

WORD: Pre-payment Risk

And the WORD for Today is:

Pre-payment Risk – refers to the possibility of receiving full or partial payment from the borrower before the principal is due. A full pre-payment typically results from the sale or refinancing of a mortgaged property. A partial pre-payment typically occurs when a borrower applies additional money toward the reduction of the principal owed on a mortgage. While such a pre-payment is not a common practice, it is an excellent way for a borrower to significantly reduce the amount of interest they pay over the term of the loan. Pre-payments reduce the value of the mortgage servicing right asset, as the anticipated servicing cash flows are effectively reduced. Many lenders in the sub-prime market strongly inhibit pre-payment activity my imposing harsh pre-payment penalties on a borrower who wishes to pay the entire loan off early. Reinvesting the money from pre-paid principal could be very costly to an investor since they would then need to reinvest and are most likely going to receive a lower interest rate (yield) than the mortgage was paying. Borrowers should be aware that pre-payment penalties can be high enough to effectively lock you into a mortgage you would prefer to pay off early. The solution: be sure your loan does not include such a penalty for repaying the principal early.

Copyright © 2008, Home Ownership Matters, LLC. All Rights Reserved.

You can find more helpful definitions of WORDS like these in Your Real Estate Advisor which can be purchased at www.DovePublishingHouse.com.

(Please E-mail Heather at homeownershipmatters@gmail.com with any questions, comments or concerns you might have! We appreciate all comments and feedback, so please don't be shy.)

WORD: Pre-payment Penalty

And the WORD for Today is:

Pre-payment Penalty – means that you must pay extra money in order to repay the loan early. If your circumstances changed or you discovered that you could have qualified for a lower interest rate or you needed to move and sell the home you would find it cost prohibitive because this penalty means you have to pay a high cost in order to repay early. The penalty might be equal to 6 months’ mortgage payments or a flat fee of several thousand dollars. This practice is now prohibited in many states and/or on what is described as high-costs loans. Until 2000 most sub-prime loans included this as another source of income for the lender with no benefit to the consumer.

Copyright © 2008, Home Ownership Matters, LLC. All Rights Reserved.

You can find more helpful definitions of WORDS like these in Your Real Estate Advisor which can be purchased at www.DovePublishingHouse.com.

(Please E-mail Heather at homeownershipmatters@gmail.com with any questions, comments or concerns you might have! We appreciate all comments and feedback, so please don't be shy.)

WORD: Power of Attorney

And the WORD for Today is:

Power of Attorney – the authority by which one person (principal) enables another (attorney-in-fact) to act for him or her. A power of attorney may be a general power of attorney or a specific power of attorney.

Copyright © 2008, Home Ownership Matters, LLC. All Rights Reserved.

You can find more helpful definitions of WORDS like these in Your Real Estate Advisor which can be purchased at www.DovePublishingHouse.com.

(Please E-mail Heather at homeownershipmatters@gmail.com with any questions, comments or concerns you might have! We appreciate all comments and feedback, so please don't be shy.)

WORD: Counseling Center

And the WORD for Today is:

Counseling Center – is set up to provide counseling and assistance to individuals on a variety of issues. Nationally, HUD provides certification that centers and the counselors there are qualified to help the consumers whom they serve.

• Bankruptcy counseling
• Budget counseling
• Credit counseling
• Default counseling
• Pre-foreclosure counseling
• HUD approved housing counseling agency

Copyright © 2008, Home Ownership Matters, LLC. All Rights Reserved.

You can find more helpful definitions of WORDS like these in Your Real Estate Advisor which can be purchased at www.DovePublishingHouse.com.

(Please E-mail Heather at homeownershipmatters@gmail.com with any questions, comments or concerns you might have! We appreciate all comments and feedback, so please don't be shy.)

WORD: Counselor

And the WORD for Today is:

Counselor – an individual who helps others by providing guidance in personal issues. It is best to choose a counselor who has received training and/or certification.

Counselor is a term not commonly thought to refer to the real estate professional. However, a person may be designated as a real estate counselor by the American Society of Real Estate Counselors. The designation signifies an extremely high level of knowledge and experience on the part of the recipient. As more and more consumers fall into default on their mortgage, counselors who specialize in default counseling are being sought out.

Copyright © 2008, Home Ownership Matters, LLC. All Rights Reserved.

You can find more helpful definitions of WORDS like these in Your Real Estate Advisor which can be purchased at www.DovePublishingHouse.com.

(Please E-mail Heather at homeownershipmatters@gmail.com with any questions, comments or concerns you might have! We appreciate all comments and feedback, so please don't be shy.)

WORD: Notice of Default

And the WORD for Today is...

Notice of Default – is a formal, written notice to a borrower that a default has occurred and that the lender may move forward with foreclosure proceedings.

A notice of default is filed to show that the borrower under a mortgage or deed of trust is behind on their scheduled payments (in default). Whether or not the borrower has received notice of default could be important in their efforts to get the lender’s cooperation with a loss mitigation workout work-out. In judicial foreclosure states, notice of default is a required step in the foreclosure process.

“Notice of Default” – [as used in the PROMISSORY NOTE] basically states that if you are in default the NOTE Holder may opt to send you a notice which states you are in default and that they may demand payment of the full amount due under the NOTE (accelerate) if the past due amount is not received by a certain date. If the NOTE HOLDER chooses to accelerate then payment of the entire principal balance and all interest plus other allowable expenses will become due.

Copyright © 2008, Home Ownership Matters, LLC. All Rights Reserved.

You can find more helpful definitions of WORDS like these in Your Real Estate Advisor which can be purchased at www.DovePublishingHouse.com.

(Please E-mail Heather at homeownershipmatters@gmail.com with any questions, comments or concerns you might have! We appreciate all comments and feedback, so please don't be shy.)

WORD: Loan Modification

And the WORD for Today is...

Loan Modification – is a loss mitigation tool which involves a permanent change in one or more of the terms of the loans, which results in a loan payment the consumer is able to afford. It might accurately be called an ‘in-house refinance’ meaning that the consumer’s current lender (NOT A NEW LENDER) would be the entity to provide such a modification. A loan modification is a permanent change in one or more of the loan factors, which might include term, interest rate or loan type. If the loan is an FHA loan, it must first be purchased out of the Ginnie Mae pool and then re-pooled after it has been modified.

Copyright © 2008, Home Ownership Matters, LLC. All Rights Reserved.

You can find more helpful definitions of WORDS like these in Your Real Estate Advisor which can be purchased at www.DovePublishingHouse.com.

(Please E-mail Heather at homeownershipmatters@gmail.com with any questions, comments or concerns you might have! We appreciate all comments and feedback, so please don't be shy.)

Q&A: Leaving the House

Q: We have been notified that our mortgage is in default and that the lender can start to pursue foreclosure. They did not say how long this process will take or tell us we had to move, but we are sure it won’t take forever and wondered if we should just move out. Will the lender contact us to tell us when we need to get moved? What should we do?

A: STAY PUT. It is not in your best interest to vacate as soon as you receive the default notice. No matter what state you are in there has to be “due process” based on the default before you will need to vacate. How long you have will depend on a number of variables including whether you have a deed-of-trust, which allows for a trustee sale instead of judicial foreclosure, OR if you have a mortgage and live in a state which requires judicial foreclosure. Judicial foreclosure takes longer (several months).

Check with your state’s attorney general’s office to get the particulars on foreclosure in your state. Get clarity on when you MUST vacate (usually just prior to the actual sale date). BIDE YOUR TIME, in today’s climate, almost anything could happen.

Be cautious about making another financial obligation too soon, since the date could get pushed back, the lender could go belly up and not be able to move forward with foreclosures for months, the government could step in and mandate a moratorium on foreclosures, or your state could take some action which grants you more time.

*** Borrowers who hold mortgages which are backed by Fannie Mae and Freddie Mac can breathe a sigh of relief that both entities are now required to aggressively pursue modifications whenever feasible.

In any case, if all else fails, then the local sheriff’s office will notify you when you absolutely must move. Best of luck.

Copyright © 2008, Home Ownership Matters, LLC. All Rights Reserved.

(Please E-mail Heather at homeownershipmatters@gmail.com with any questions, comments or concerns you might have! We appreciate all comments and feedback, so please don't be shy.)