Minnesota real estate | Surviving The New Normal

Dickenss says it best: “It was the best of times; it was the worst of times” Ideas around -Real Estate-Mortgages- Credit- that will help you prosper!Presented by: John Mazzara Patti Mazzara NMLS # 332556 & NMLS # 333279 john@johnmazzara.com patti@pattimazzara.com Real Estate License # 783657

• Homes Aren’t Selling – People are Afraid• Will There Be A Double Dip Recession• Unemployment Remains High – 8.5+% • High Inventory of Available Property • 25% of Homes are Underwater What’s happening out there?

http://www.MplsRealtor.com

• Speak to Your Favorite Realtor

http://www.RealtyTrac.com• I maintain a subscription and can get you Specific Data by Zip Code

http://www.lpsvcs.com

All UnemploymentMortgages 9% 12.63%Foreclosed Underemployment 18.2% 4.43%In Default 2011 Total Distressed loans- 8.2% 6,298,000

• Sell the Property – Use your equity to pay off the liens• Short Sale – You may be able to have the bank accept less than you owe• HAFA Short Sale – A new pre-negotiated short sale with release of liability• Rent The Home – You will be able to cover some/all of the payment while you wait for the market to return

• Refinance the loan • Modify The Loan – A NEW lower – The lender may agree payment may make to a temporary or the home affordable permanent reduction in payment• Reinstate The Loan • Loan Forbearance – All back payments as – The lender may work well as any late fees out a catch up plan and or legal fees are give you time to work brought current out of your issue

• Bankruptcy • Utilize a Reverse Mortgage – May delay loan – Need to have an equity foreclosure & relieve position and be 62 or you from 1099c tax older-the home now liability-NEW Chap 13 pays you-Can be used option for second liens for purchases as well• Deed In Lieu of • Foreclosure Foreclosure – This is the legal process – The lender may allow of the lender taking the you to deed the home home back for non back to them payment

• Do you want the possibility of qualifying for a NEW loan again in the future sooner? For example 2 years vs. 5 or 7? If so, try and avoid the foreclosure. Generally, there will be a lesser credit impact as well with a short sale Vs a foreclosure.• Fannie Mae and Freddie Mac have recently changed their guidelines to allow for an earlier entry back into a mortgage if you had a qualifying circumstance and you tried to do a short sale or deed in lieu. It could be as little as two years. You will probably have to put down a larger down payment as well.

• FHA & VA are more agreeable to allowing homeownership again sooner if you tried to resolve/mitigate your situation with your existing mortgage vs. a foreclosure.• Lenders-can put THEIR overlay on a loan program. So, while guidelines say one thing, lenders can say another. A mortgage broker may be able to bring more options from

• Minnesota Homeownership Center-non profit – http://www.HocMN.org• Making Home Affordable-modifications – http://www.MakingHomeAffordable.gov• The IRS 1-800-829-1040 Free Help Line – http://www.IRS.gov• Short Sale Secrets-Look Under Resources Tab – http://www.ShortSaleSecrets.org

• Purchase-it is possible that we will never see rates at this level again in our lifetime. What an opportunity to get an affordable payment on your dream home.• Refinance-You may be able to keep your payment the same and lower the amortization- i.e. switch from a 30 year loan to a 20 or 15 year loan.

• Consolidate higher interest and/or non deductible debt• Lower your monthly payment- free up cash for other things • Convert an ARM• Remove Private mortgage payment to a Fixed rate insurance loan• Find cash for making home • Match your mortgage to improvements your anticipated time frame for living in the home

• Almost 25% of homes have liens exceeding the market value-projected that it could go to 50% of the homes if prices continue to decline only 11% more in the future. Currently over 14M homeowners are underwater.• Deutsche Bank as well as First American CoreLogic both provide great research reports

• You must live in the home as your primary residence- rentals & second homes MAY be eligible with some lenders• Must be a 1- 4 unit type of property-condominiums are eligible• The loan has to be owned by either Fannie Mae or Freddie Mac: – Fannie has the Fannie DU Refi Plus – Freddie has Freddie Mac Relief Refinance Open Access• You need to be current and up to date on the loan-there MAY be the possibility of one late within the past 6 months, but they prefer no late payments within the last 12 months.• The loan to value of the new loan is no longer an issue• It may be possible to avoid an appraisal by substituting an AVM• Generally, the first lien must have been at 80% Loan to value when originated on loans or before 5/31/2009

• Developing--• Brand New-I am not aware of any lenders currently offering this loan• The existing lien must agree to reduce the principal balance by at least 10%

• Below are general guidelines-subject to exceptions and lender underwriting overlays:• FHA: – 96.5% LTV on a purchase loan – 85% LTV on a cash out loan – 98% LTV on a Rate & Term refinance(consolidating a 1st +second lien not used in 12 months)• VA: – 100% LTV on a purchase loan – 90% LTV on a cash out refinance• Conventional loans-depends a lot on the type of loan – 97% LTV on a purchase – 80% LTV on a cash out refinance• USDA – 100% LTV on rural loans

• Look at paying down on your mortgage as a way to achieve a better rate and program.• Consider possible sources of capital pay down your existing mortgage such as low yielding CD’s.Contrast and compare ananalysis of the interestrate spread between yourinvestment return/yield vs. what you’re paying off.

Certain communities are offering buyers grants and forgivable loans if they meet certain guidelines-such as purchasing a foreclosure, meeting a family incomerequirement, or being a first time buyer-(generally that means not having owned ahome within the past 3 years)We maintain a Database of programs –Call to Discuss

It can determine what type of job you maybe eligible for and it will impact anddetermine the cost of other credit-mortgages, credit cards, and insurance rates It can be improved and managed!

• i.e.-bump in the road-job loss, under employment, over extended, excessive medical bills, foreclosure or short sale• This year there have been almost 1.5M bankruptcy filings- through August of 2011 per http://www.UScourts.gov• Many people will consider a bankruptcy as way to eliminate taxation on any Net Debt forgiveness-which MAY accompany a short sale or foreclosure. Basically, if you are relieved of any debt, that can be considered taxable income.• Always review your situation with an attorney & accountant to discuss your particular situation and liability.

• Read how to qualify-here is the IRS website link: http://www.irs.gov/irs/article/0,,id=179073,00.html • This MAY allow you to sell your home as a short sale or walk away from your home as a foreclosure and receive debt forgiveness from the lender, and not have to claim the 1099c or 1099a as taxable income. • This Act doesn’t eliminate any deficiency judgment that a lender may seek to pursue you for at a later date.

• While you may think you never want credit again, only by re- establishing credit can you ever hope to rebuild your credit score. Future credit is always granted on past & present payment history.• Start with a secured credit card-it is your deposit that determines the amount of the credit line.• Unsecured merchandise card that reports to the credit agencies.• Other lines or liens that agree to report to the credit bureau-i.e. car loan, boat loan, secured bank loan, etc.• Pay ON TIME from now on-Try to get 3-5 trade lines that are reporting . Within 18-36 months you will have a much improved score. Three years is about the time that you may be eligible for an FHA loan if you have re-established your credit.

John Mazzara Patti Mazzara RE/MAX Results Venture Development 7300 France Ave S NMLS # 373115 Suite 410 7300 France Ave S Edina, MN 55435 Suite 410 952-929-2577 Edina, MN 55435 john@johnmazzara.com 952-285-4319NMLS #332556 patti@pattimazzara.com NMLS # 333279

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Minnesota real estate | Surviving The New Normal

by John Mazzara on Sep 14, 2010

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Minnesota real estate | Surviving The New Normal — Presentation Transcript