Well, before we get into that, some back ground:  Short sales happen when a lender agrees to sell a home for less than it the mortgage is worth.  In this case the lender forgives the difference and the borrower is no longer responsible for the home they cannot afford.  The short sale process is becoming more efficient, which is both good news for lenders and borrowers. This streamlined process is much more organized making turn around quick; typically homes spend more than a year to finalize when being foreclosed on.

Lenders are making a strong effort in considering short sales as an alternative to foreclosure.  According to Bloomberg, large banks including, JP Morgan, Chase and Wells Fargo—started to give away cash to borrowers for agreeing to do a short sale instead of falling into foreclosure.

Similar to foreclosure, short sale can bruise home prices. The experts at the National Association of realtors (NAR), short sales normally sell for 17percent below the market according to February’s numbers. This is a huge price cut, but less than the average 22 percent for foreclosure sales.

Assuming that short sales typically pick up more money for the lender, it would be safe to assume that short sales would be another valuable option of unloading distressed homes.  It is important to note that short sales don’t add to the bank-owned homes (REO’s) supply, the houses don’t sit on the market long and the impact on home prices is not as substantial as that of a foreclosure.

Although foreclosures have typically surpassed short sales in terms of volume, that trend is changing. Bloomberg just reported the most recent data available which indicates that short sales exceeded foreclosure sales for the first time in January of 2012 by 4.2 percent.

If short sales continue to streamline their way past foreclosure it could mean that home prices will hit bottom by the end of 2012.  Over time, we will see less homes going through foreclosure, which would decrease home prices dramatically.  At best, this uptick in short sales will help avoid foreclosures a road that no homeowner wants to go down.

If you are a struggling homeowner and have questions about loan modifications or to find out if you qualify contact The Mortgage Law Group.

What Is A Credit Score?

A credit score is a number used by lenders to regulate how likely you are to pay back the loan.  They are calculated by using the information contained within your credit reports.  Scores can range from 300-850.  Generally most lenders look at higher credit scores more favorably than lower scores as the key indicator to the likelihood of being paid back.  So if you are looking to apply for a mortgage it would be in your best interest to increase your credit score before applying.

How Is Your Credit Score Calculated?

Your credit score is based off of whether or not you pay your bills on time (i.e. payment history), the total amount of dues owed (typically, a percentage of your outstanding credit), the length of your credit history, as well as the type of credit and how much is new.

How Does Your Credit Score Determine Your Mortgage Payment?

To put it more simply, the higher the score the lower your mortgage interest rate will be.  So for example, if we take a borrower who has a credit score ranging from 760-850, this person qualifies for around 3.55% mortgage interest rate on a 30 year fixed rate mortgage, whereas a borrower with a low credit score would receive a higher interest rate.  Needless to say, this was just an example for illustrative purposes only; the best way to find out your mortgage interest rate is to speak a mortgage lending professional.

How Can You Improve Your Score?

To get your credit score where you want it, it is crucial that you pay all your bills on time.  Keep in mind that your payment history is the largest factor of your credit score; therefore, any late or missed payments will hurt your overall credit score.

Also, amounts owed on existing credit lines may factor into your score.  So it is important that you pay off and lower your credit card balances.  Note that a ‘’maxed out’’ credit card may reflect poorly on your score as well.  So try to pay off any debts and not opening new credit cards to help improve your score.

The Point is…

Buying a home is possible, but it is a lot of responsibility that needs to be taken seriously.  If you continue to take care of your credit cards your credit score will likely by high, and your mortgage terms are far more likely to be in your favor.

Much of the nitty-gritty part of the settlement is still being worked out. But the Center of Responsible Lending, a nonprofit group that supports the borrowers printed a summary and a preliminary guidebook to help consumers find out if they are eligible under the settlement.

The guide is an overall outline of standards and conditions to help homeowners stay on top with their payments and determine if they qualify for benefits from the settlement. There are three categories by which the borrowers can determine the eligibility:

Borrowers who lost their homes to foreclosure, from Jan. 1, 2008, through Dec. 31, 2011 may be eligible for cash payment of $1,800 to $2,000. The loans must be serviced and owned by one of: Bank of America, Citibank, Wells Fargo, JP Morgan Chase or Ally Financial (GMAC).

Those who are currently underwater on their property—their home is worth less than they owe. Not only must your loan be serviced and owned by one of the five lenders listed above, the interest rate must be at least 5.25% or higher.

For homeowners who are late or on the verge of missing payments you may be eligible to receive a modification of your home loan, which would reduce your monthly payments and lower your principal. Once again your loan must be serviced and owned by one of the five lenders.

Any couples that are considering homeownership should be sure to go into the process with a well-laid plan that both partners agree upon in order to save themselves financial headaches in the future. The following are some tips that we’ve come up with to help budding, young homeowners on their journey into the housing market.

1. Communication is key.
Before even looking for homes, you and your partner should have a clear understanding of what you both want vs. what you can afford. Although it may not be the most romantic of conversation topics, you will need to discuss what each of you is bringing in each month and how much of it you are willing to invest in your property. If one of you is making more than the other, you might want to delegate more financial responsibility to that person, such as being in charge of home repairs or property taxes. Once you understand where you both are financially, you can start to create a plan on how you will finance the home.

2. Construct a financial road-map.
It is normal for lenders to cover 80-90 percent of a home’s cost, the rest of which the buyer must pay upfront in the form of a down payment. First make sure you can afford the home’s down payment, then analyze you and your partners combined monthly income to determine what type of mortgage you should pursue. Typical mortgages are usually spread out over 15 or 30 years; with the former having lower interest rates and the latter having lower monthly payments. Keep in mind that to reduce stress in your relationship it is recommended that you dedicate no more than a quarter of your income toward your property, including the mortgage and other extraneous expenses.

3. Bring in a third party.
It is easy to be blinded by the thrill and excitement that comes with buying a new home, which is why we recommend bringing in a neutral third party to help you weigh your options. This is a helpful tip that many couples tend to overlook, but mediators, financial planners and attorneys work with soon-to-be homeowners all of the time. Bringing in a third party can help to ease any tensions that may arise during the home-buying process and also help shed light on some financing options that maybe you wouldn’t have thought of on your own.

At The Mortgage Law Group, we’re dedicated to helping homeowners save their American Dream. That starts by taking a proactive approach on homeownership and educating potential buyers now, so they won’t find themselves in hot water later on. If you have any more helpful tips for first time homeowners, please share them in the comments section of our blog.

According to a report by Corelogic, the number of underwater mortgages as a percentage of all mortgaged homes in the US rose in the fourth quarter of last year.  Corelogic’s Negative Equity report suggests that mortgages 11.1 million homes out of the 48.7 million mortgaged homes are underwater.  Based on this report we were able to identify the ten states with the top percentage of underwater homes.

Some of the states on the list had been dealing with economic problems long before the current recession.  States like Rhode Island and Michigan have been dealing with long term industrial declines for quite some time, therefore, drops for their home values are only accelerated by recession that the rest of the country went through.

For the majority of the states on the list below, a decline in the housing market is the sole reason homeowners find themselves owing more than their house is worth.  Check out the 10 states depressed by underwater mortgages:

10. Virginia
Pct. homes underwater: 23%
Total property value: $428.46 billion
Mortgage debt outstanding: $307.48 billion
Median home value drop from peak: 16.7% (21st-biggest decline)
Homes in foreclosure or 90+ days delinquent: 4.1% (ninth-smallest percentage)

9. Ohio
Pct. homes underwater: 23.9%
Total property value: $310.62 billion
Mortgage debt outstanding: $238.20 billion
Median home value drop from peak: 14.4% (23rd-biggest decline)
Homes in foreclosure or 90+ days delinquent: 6.9% (14th-largest percentage)

8. Maryland
Pct. homes underwater: 24.3%
Total property value: $418.34 billion
Mortgage debt outstanding: $296.81 billion
Median home value drop from peak: 23.7% (12th-biggest decline)
Homes in foreclosure or 90+ days delinquent: 8.0% (tied for fifth-largest percentage)

7. Idaho
Pct. homes underwater: 25.0%
Total property value: $49.76 billion
Mortgage debt outstanding: $36.58 billion
Median home value drop from peak: 29.3% (sixth-biggest decline)
Homes in foreclosure or 90+ days delinquent: 5.2% (20th-smallest percentage)

6. California
Pct. homes underwater: 29.9%
Total property value: $2.73 trillion
Mortgage debt outstanding: $1.94 trillion
Median home value drop from peak: 46.7% (third-biggest decline)
Homes in foreclosure or 90+ days delinquent: 7.0% (12th-largest percentage)

5. Georgia
Pct. homes underwater: 33.0%
Total property value: $306.59 billion
Mortgage debt outstanding: $252.81 billion
Median home value drop from peak: 26% (10th-biggest decline)
Homes in foreclosure or 90+ days delinquent: 8.0% (tied for fifth-largest percentage)

4. Michigan
Pct. homes underwater: 34.7%
Total property value: $198.05 billion
Mortgage debt outstanding: $165.45 billion
Median home value drop from peak: 30.1% (fifth-biggest decline)
Homes in foreclosure or 90+ days delinquent: 6.5% (19th-largest percentage)

3. Florida
Pct. homes underwater: 44.2%
Total property value: $809.95 billion
Mortgage debt outstanding: $706.00 billion
Median home value drop from peak: 44.8% (fourth-biggest decline)
Homes in foreclosure or 90+ days delinquent: 17.4% (the largest percentage)

2. Arizona
Pct. homes underwater: 48.3%
Total property value: $243.02 billion
Mortgage debt outstanding: $226.22 billion
Median home value drop from peak: 47.9% (second-biggest decline)
Homes in foreclosure or 90+ days delinquent: 7.1% (11th-largest percentage)

1. Nevada
Pct. homes underwater: 61.1%
Total property value: $96.57 billion
Mortgage debt outstanding: $109.94 billion
Median home value drop from peak: 60% (the biggest decline)
Homes in foreclosure or 90+ days delinquent: 13.4% (second-largest percentage)

As 2011 wrapped up, 13.4% of mortgages are either 90 days delinquent or in the foreclosure process.  So now that 2012 is upon us, let’s see what numbers will change.  What do you predict?

Even if you’re currently not financially distressed, you may want to consider lowering your property tax anyway. The money you save could be your lifeline in the future. For more information on restructuring your finances and other ways to help you keep your home, please call The Mortgage Law Group today.

1.   Appraise the home
The first thing you should do before putting your home on the market is to have its value determined by an appraiser. By having the home appraised, sellers can get a realistic idea of what price a bank would value the home at before entering into a sale, saving them both time and money.

2.   Conserve utilities
Cutting back on utility usage while your house is on the market is an easy way to make the home more attractive to potential buyers. Many times buyers will ask to look at the home’s utility bills to determine if they can afford the “entire package,” and in this economy having lower bills can definitely tip a sale in your favor.

3.   Conduct your own inspection
Many buyers will want to have the home inspected before settling on a sale. Having your own inspection done allows you to know what red-flags the buyer may use to negotiate the home’s price and also gives you a chance to get them fixed for a lower cost beforehand.

4.   Rev up your curb appeal
The first thing a buyer sees when checking out a new house is the view from the street, so make sure to pay extra special attention to your home’s outer appearance. Take a walk around your block and see what other homes look like on the outside, then try to make yours stand out. Revving up your curb appeal can be as simple as cleaning out your gutters or edging your lawn, both which can be done for practically next to nothing.

Following these tips could be the difference between selling your home fast or watching it flounder. Keep in mind that today’s market is unpredictable and even the most attractive homes sit untouched. If you’ve exhausted all of your resources to sell your underwater home, it may be time to consider other options such as a short sale or a deed-in-lieu arrangement. In either case, always be sure to educate yourself first before making any major decisions as it will save you time and money in the long run.

Fortunately in the United States struggling homeowners may qualify for one of the several mortgage modification programs available to help them pay off their mortgage and save their home. So if you can demonstrate the factors (detailed below) and continue to stay current on your loan, your lender could reduce your payments, and/or spread out your payments. Not making a new loan—modifying your current terms on your existing loans.

 How does it work do you ask? Will you actually get the relief you need? Here’s what you need to know:

How Many Mortgage Modification Programs are Available?

The leading mortgage modification program is the Making Home Affordable Program, financed by the federal government, but also offered through individual lending banks. Alternatively there are other programs such as Federal Housing Finance Agency Loan Modification, offered by the Federal Housing Finance Agency, available to homeowners who have a mortgage held by Freddie Mac or Fannie Mae. Lastly, some popular lenders offer their own programs; Citigroup, JP Morgan, Chase, Bank of America all offer their own loan modification program.

Although there are quite a few different mortgage modification programs available, a majority of homeowners seeking them go through the Making Home Affordable Program.

Are You Eligible for a Modification?

There are several guidelines and restrictions to follow in order to be eligible. A couple questions to ask yourself:

• Is the home you are seeking a modification on your primary residence?

 • Are you current on your mortgage payments?

 If you answered yes to both these questions, then your best bet is to set up an appointment with your lender’s modification department. Get prepared and be sure to collect and bring in at least 2 months of current pay stubs, tuition bills, utility bills, mortgage statement, auto loan papers, and unemployment checks, anything that illustrates your current situation.

Additionally, be willing and prepared to talk about changes including loss of income, unexpected expenses and depressed home value. You will be expected to have your modification application and a hardship letter fully prepared including:

 • An explanation and proof you have made an effort to pay your current mortgage payment

• Demonstrate that you are being cooperative with your bank

 • Be able to fully describe your financial circumstances

 • Be willing to talk and provide all requested documentation.

 If granted a modification, it is likely to be granted a trial period during which you will be obligated to make lower mortgage payment. If you miss a payment during the trial period, your modification could be denied.

Obtaining a mortgage modification can be a lengthy process depending on your individual case, however, it typically varies between 4-6 months. Trial periods can range from 6-18 months. So from start to finish, the whole process could take up to 2 years. The process will be frustrating but try to keep calm and stay on top of your application process. Keep a log of all the interactions, dates, times, and banker’s name for your records. Try to remember that you are not alone and that your banker is trying to help. If you have any doubts or questions do not hesitate to seek the answers you need.

 Myth One: You have to be in default on your mortgage to meet the requirements for help

• This is 100% NOT true. Purposefully falling behind on your mortgage payments can flop on you for two reasons. First off, if you fail to pay 60 days past due, your bank is forced to run your modification through a net present value test. Meaning your lender would lose less by foreclosing than by modifying your loan, not qualifying for a modification. Secondly, if you don’t qualify for your modification, you may have put some serious setbacks in your credit score.

Myth Two: If you are unemployed you do not qualify for a loan modification

• False. The Home Affordable Modification Program (HAMP) guidelines states, “If the borrower receives public assistance or collects unemployment: Acceptable documentation includes letters, exhibits or a benefits statement from the provider that states the amount, frequency, and duration of the benefit. The servicer must be determining that the income will continue for at least nine months.” In addition, if you are getting unemployment paybacks, the bank can work them into your case when determining your ability to make a modified payment.

 Myth Three: Mortgage companies can guarantee getting your principal balance reduced

 • While that would be great, it is highly unlikely. Companies all over the US are boasting promises of principal write-downs to get consumers to sign up. Unfortunately, reality is that very few loan modifications involve principal reductions. Lenders are not paid by the government for write-downs. There are a lot of scammers that may “guarantee” to get your loan balance written down, however this is NOT true. If every company could guarantee, this practice would crush the lending industry.

When it comes down to it the more you know, the better you can protect yourself and your home. If you or someone you know may be facing foreclosure, please contact us today. The sooner you address the problem, the faster you will see results.