Pam Marron Home Lending

Underwater homes on the decline nationwide – but that’s not the whole story

May 8, 2017 by · Leave a Comment 

HomeNews

by Ryan Smith, 08 May 2017

There were nearly 5.5 million seriously underwater properties in the US during the first quarter, according to new data from ATTOM Data Solutions. That’s an increase from Q4 of 2016 but still down by more than 1.2 million from the first quarter of last year.

Seriously underwater properties – property where the loan amount was at least 25% higher than the estimated market value – accounted for 9.7% of all US properties with a mortgage in the first quarter, according to ATTOM.

But those numbers don’t tell the whole story, according to Darren Blomquist, senior vice president at ATTOM. While negative equity is on a mostly downward trend nationwide, there are still swathes of the country where underwater property is almost the norm.

“While negative equity continued to trend steadily downward in the first quarter, it remains stubbornly high in often-overlooked pockets of the housing market,” Blomquist said. “For example, we continue to see one in five properties seriously underwater in several Rust Belt cities, along with Las Vegas and central Florida. Additionally, close to one third of homes valued below $100,000 are still seriously underwater.”

“And those underwater properties can pull down surrounding home values,” Blomquist said.

“Several of the cities with the biggest quarterly increases in underwater properties saw a corresponding increase in share of distressed sales in the first quarter, creating a drag on overall home values…” Blomquist said.

Baltimore, Md. Saw the biggest quarterly increase in underwater homes, up 26,974. It was followed by Philadelphia (up 8,919), McAllen, Texas (up 7,746), Cleveland, Ohio (up 7,631), and St. Louis, Mo. (up 6,844). All of those markets still had fewer underwater properties in the first quarter than during the same period in 2016, ATTOM said.

reprinted from Mortgage Professional America: http://www.mpamag.com/news/underwater-homes-on-the-decline-nationwide–but-thats-not-the-whole-story-66996.aspx

 

Pre-purchase help coming from HUD approved housing counselors to assist clients who still have credit issues with a past short sale or modification

May 4, 2017 by · Leave a Comment 

By Pamela Marron | National Mortgage Professional Magazine | May 2017

HUD approved housing counselors are being trained to provide assistance for clients who continue to have problems with short sale and modification credit that appears as a foreclosure. The goal is to correct problems prior to a new purchase.

A collaborative initiative has begun that connects loan originators who have clients with a past short sale or a modification with HUD approved housing counselors who can make sure that common credit issues are resolved before clients sign a home purchase agreement. The goal is to provide correction to a continued problem of foreclosure credit code that incorrectly shows up on short sale and modification credit and often results in a loan denial and loss of contract. Worse yet, a foreclosure coding delays a new conventional mortgage for seven years rather than the four year wait required after a short sale. And recently, it has been found that modification credit is being affected with the same foreclosure code.

Over 1 million past short-sellers are now beyond the four year time frame and are eligible to purchase a home again. Another 950,000 will become eligible over the next three years. For those with modifications, no wait timeframe is required and over 1 million have been put in place from March 2009 to March 2017.

Correcting continued credit issues ahead of signing a contract for eligible past short-sellers is the focus of a small group of loan originators and housing counselors who are preparing this initiative. “Too many times, past short-sellers are told within the processing time and during a live contract that their short sale shows up as a foreclosure, and that they need to go get it fixed and come back.” states loan originator Pam Marron. “A service is needed for affected clients to get this credit issue permanently resolved ahead of time so that these clients are mortgage – ready.”

Fannie Mae developed a workaround in August 2014 but not all lenders know about it. There is no workaround in Freddie Mac. And though both Fannie Mae and Freddie Mac note there may be exceptions when inaccurate credit exists, lenders are reluctant to address this.

Marron cites that additional credit issues commonly grow out of the inaccurate foreclosure code for most of these clients when they either attempt to remedy the problem themselves or go to credit repair companies. A “dispute”, the most common fix, temporarily masks the short sale credit and appears to work when credit scores go up. However, when the consumer applies for a mortgage, either the underwriter, Fannie Mae or Freddie Mac automated system findings require that the dispute be taken off. The result is that credit scores plummet, a conventional mortgage denial is received and a delay to fix often occurs and can be a serious problem if a contract deadline is looming. If the consumer is in a contract, the quickest remedy is a Rapid Rescore that must be paid for by the lender. Often, the resulting credit scores are lower and the consequence is a higher interest rate.

A second problem is a more recent “date reported” when the short sale credit is reopened in order to get it corrected. The more recent date reported often falls within the four year wait timeframe causing the Fannie Mae and Freddie Mac automated systems to issue a denial due to the wait timeframe not being met.

Marron thinks this service coming from third party HUD approved housing counselors is a perfect fit. “Loan originators are driven by contract deadlines. Housing counselors are not.”

Solutions for correcting the credit issues discussed are already available but assisting those who have had a past short sale or modification is the best way to find more ways for correction. Ms. Marron and Jim McMahan, a loan originator in Georgia, will begin taking calls for consumers with a past short sale or a modification this month. The National Foundation for Credit Counseling (NFCC.org) will start this effort and utilize HUD approved housing counselors to work with affected consumers to ensure the credit issues of a past short sale will not hamper their ability to get a new conventional mortgage.

There will be a fee for the one on one counseling and a credit towards closing costs on a home purchase can be provided. Contact Pam Marron at 727-375-8986 or email pam.m.marron@gmail.com or Jim McMahan at 404-808-0945 or email jim@mcmahanmortgage.com.

Stay tuned.

Morning Briefing: HELOC owners face sharp payment increases in 2017

May 2, 2017 by · Leave a Comment 

by Steve Randall
Challenging times are ahead for thousands of homeowners with HELOCs as their lines of credit reset with higher monthly payments while some may struggle to refinance.Analysis by Black Knight Financial shows that 1.5 million HELOCs will see interest-only draw periods end this year with just under $100 billion in outstanding unpaid principal balances; an average of $62,500 per HELOC.The data reveals that average borrowers whose lines of credit reset will face an additional cost of $250 per month, more than double the current average payment.

“In 2017, 19 percent of active HELOCs are facing reset,” said Ben Graboske, Black Knight Data & Analytics EVP. “This is the largest share of active HELOCs facing reset of any single year on record, although the approximate 1.5 million borrowers slated to see their HELOC payments increase this year is about 100,000 fewer borrowers than in 2016.”

Graboske explained that the lines resetting this year and early in 2018 are the last of the pre-crisis-era HELOCs that the industry has been focusing on since early 2014.

A third of those with HELOCs resetting this year will find refinancing challenging as they have less than 20 per cent equity in their homes. A fifth have less than 10 per cent and 1 in 10 are underwater.

While that is a concern, it reveals a large improvement from 2016 when 45 per cent of HELOC owners were below 20 per cent and a fifth were underwater.

For most borrowers though, recent conditions have enabled them to avoid the addition monthly cost of a reset.

“One thing that’s working in the 2007 vintage HELOCs’ favor has been the equity and interest rate environment of the last year. Rising home prices and low interest rates throughout 2016 have allowed borrowers to be much more proactive than in years past in terms of paying off or refinancing their lines to avoid increased monthly payments,” Graboske explained.

*originally published on Mortgage Professional America’s website.