The Negative Equity Carryover Model: A Practical and Effective Solution to Our Housing Crisis and the Epidemic of Negative Home Equity
Negative home equity for America’s Homeowners has become an epidemic problem. Nationwide, homeowners are chained to their homes unable to sell due to the shackles of negative equity. This lack of mobility comes at a cost to society and at a time when the public’s need for mobility is at its greatest.
Industry needs this mobility to balance labor requirements, labor needs this mobility to find and create job opportunities, families need mobility to consolidate households and care for aging relatives and others to simply downsize into homes that they can manage and afford financially.
Banks are resistant to negotiate short sale settlements for the fear that the losses on these mortgages will spiral out of control and bring the banks to their knees. Many borrowers are choosing to strategically default in an effort to break the chains of negative equity in order to get on with their lives.
Negative equity, short sales and foreclosures have become a lose-lose situation for both homeowners and lenders.
The Federal Government needs to create legislation making it practical and feasible for banks to offer a safe and equitable alternative.
The “Negative Equity Carryover Model” proposes that negative equity be carried forward to the purchase of a subsequent home purchase or as a personal loan to the homeowner after the property sale.
Homeowners and banks won’t need to negotiate the loss of equity as is currently being done through short sales and foreclosures. Negative equity can be “carried” by a homeowner as a second lien into the purchase of another home or onto a credit report as a personal line of credit. The Model suggests that rather than write the loss off at time of sale through a short sale or foreclosure, the negative equity can be carried into the future as an independent debt/lien and slowly forgiven over an amortized timeframe. The homeowner’s credit would be saved and we as a nation could avoid the wholesale destruction and lockout of a future homeownership class due to damaged credit. Lenders could amortize the negative equity over years while still maintaining some lien position just in case homeownership equity returned.
Gil Kerbashian (847) 873-7295
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gilkerk
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Tips for First Time Home Buyers
Tips for First Time Home Buyers
Before first time buyers begin looking at properties, they need to make sure they can qualify for a mortgage. The first thing any soon to be homeowner should do is obtain a credit report. Once a credit report is in hand, analyze it and determine what the monthly expenditures are.
Most banks and lenders allow borrowers to have a total debt-to-income ratio up to 45% or higher with strong compensating factors (or 41% max with private mortgage insurance).
By taking the total liabilities and adding it to a monthly housing payment, then dividing that number by the monthly gross income a home buyer can come up with a debt to income ratio.
Let’s use the numbers for and example:
$10,000 monthly gross income
$1,500 total monthly liabilities
We know from the above example that total monthly payments can’t exceed $4,500 or 45% DTI based on $10,000 gross monthly income.
So if the home buyer already has $1,500 in total monthly liabilities, the buyer can add a housing payment of $3,000 a month. $1,500 plus $3,000 equals $4500 or 45% of income
There are a number of mortgage calculators out there that will give the buyers a better idea of what they can qualify for. They can google Freddie Mac mortgage calculator to find an easy to use payment calculator.
Now that the home buyer has their credit profile in check and they know what they can afford, they'll need to show or secure verifiable seasoned assets for at least the down payment.
Funds to close can be gifted to first-time homebuyers using the FHA or VA program. Make sure the homebuyer has an account with at least the down payment available- a seller can pay for closing costs in most cases. Also, make sure the money in the savings account has been there for at least two consecutive months to ensure that it is seasoned (NO UNSOURCED CASH SHOULD BE USED). Banks and mortgage lenders don’t give much weight to unseasoned or cash assets because any friend, relative, Realtor or loan officer can easily dump assets into the buyers account before they apply for a mortgage to boost their net worth.
With all this preparation done, the loan flow will be a comfortable process with few surprises. It might not be perfect, but if the home buyer follows these steps they will definitely save money and reduce stress!
Let’s review the tips for first time home buyers in a condensed format:
- Order a credit report
- Review credit and clear up any derogatory accounts
- Do NOT open any new credit accounts or make any large purchases
- Calculate total monthly liabilities
- Figure out DTI and what can be afforded
- Make sure the homebuyer has a seasoned asset account with at least the down payment (for FHA a gift can be utilized as long as it can be fully sourced)
- Find the dream home and secure the purchase
- Lock your interest rate
Please call me at (847) 873-7295 to discuss nuances regarding the above information. Here to help you get homes financed.
Freddie Mac Important Internet Links
Freddie Mac Email Subscriptions
http://www.freddiemac.com/news/alerts/newscenteremail.html
Choose the Freddie Mac Bulletins, Announcements
and Publications you would like to receive notifications
of via email
Freddie Mac Forms & Guide Access
http://www.freddiemac.com/sell/guide/
Access Freddie’s Single Family Selling & Servicing
Guides as well as forms
Freddie Mac Learning Center
http://www.freddiemac.com/learn/
This website includes links to Quick Reference
Summary Charts on LP, Condominiums, Residency
and Citizenship, Various products, LTV/CLTV/HLTVs,
Refinances, New Construction, Income/Assets,
Collateral., Credit, and Super Conforming- just to name
a few!
Single Family Mortgage Products Page
http://www.freddiemac.com/singlefamily/mortgages/
This website includes links to Product Summaries,
Overviews, Marketing Materials, Affordable Income &
Property Eligibility Lookup Tool, FAQs, Links to live
product training opportunities and much more!
Training Events Page
http://www.freddiemac.com/learn/edu/train/
This page provides links to Live and Web Training
Events on LP, Underwriting, Product, Selling, Servicing
and Delivery-Related topics.
Loan Prospector Main Page
http://www.loanprospector.com/
This is the home page for all things LP! Features,
Benefits, documentation requirements, products, credit
report vendors, LOS vendors, news & highlights, best
practices, as well as login access to LP itself!
Loan Prospector Functionality Page
http://www.freddiemac.com/learn/uw/
This page provides resources and training associated
with documentation and underwriting-related topics
Loan Prospector Helpful Tips & Best Practices
http://www.loanprospector.com/getthemost/bp.html
This page provides links to guides that are very
detailed and well-written for originators, processors,
underwriters and quality control functions within an
organization. These are great reads for everyone!
Loan Prospector Training Page
http://www.loanprospector.com/learn/index.html
This page provides links to recorded training sessions
divided out by topic and category. These short
sessions are excellent educational resources that new
and even experienced LP users can benefit from!
Fraud & Quality Control
http://www.freddiemac.com/learn/uw/qc.html
This page provides links to Quick References
regarding predatory lending, property flips, appraisal
underwriting, documenting citizenship and residency,
rental income, standard income, Freddie’s
Exclusionary List, and standard quality control best
practices
Freddie Mac Homebuyer/Homeownership Page
http://www.freddiemac.com/corporate/buying_and_owning.html
This page includes various resources, tools and
information for both homebuyers and homeowners
Freddie Mac Loan Look-Up
https://ww3.freddiemac.com/corporate/
Determine if Freddie Mac currently services your own
or your borrower’s existing mortgage
Freddie Mac Marketing Kits & Materials
http://www.freddiemac.com/singlefamily/kits.html
Freddie offers excellent marketing materials in the form
of fillable flyers, mailers, post cards, door hangers,
brochures, and stuffers and some are even offered in
languages in addition to English! These are some of
the most professional-looking materials out there! Very
easy to sign up for access and easy to use!
Posted by
gilkerk
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FHA,
Home Loan application,
Home Appraisals,
Refinance,
Downpayment,
Homeownership,
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Mortgages,
Mortgage Interest Rates,
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Freddie Mac,
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Fannie Mae 105%,
Fannie Mae Refi Plus,
HUD Homes,
HUD Foreclosures,
Lake in the Hills Mortgage,
McHenry Home Loans,
realestateloans.com,
Mortgage Buydowns,
2-1 buydown,
FHA 2-1 Buydowns,
Mortgage loan application,
mortgage application,
fnma 1003,
HVCC,
203ks,
fha 203ks,
203k,
Gil Kerbashian,
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Condominiums )
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Cities Covered by My Mortgage and Home Loan Services
Addison IL., Algonquin IL., Alsip IL., Arlington Heights IL., Aurora IL., Barrington Hills IL., Barrington IL., Bartlett IL., Batavia IL., Bellwood IL. Belvidere IL.,Bensenville IL., Berwyn IL., Bloomingdale IL.,Bolingbrook IL., Burr Ridge, Carol Stream IL., Carpentersville IL., Chicago IL.,Chicago Heights IL.,, Chicago Ridge IL.,, Cicero IL.,, Clarendon Hills IL., Country Club Hills IL., Countryside IL., Crest Hill IL., Crestwood IL., Darien IL., Deerfield IL., Des Plaines, IL. Dolton IL., Downers Grove IL., Dundee IL., Elgin IL., Elk Grove IL., Elmhurst IL., Evanston IL., Elmwood Park IL., Evergreen Park IL., Flossmoor IL., Forest Park IL., Forest View IL., Frankfort IL., Franklin Park IL., Geneva IL., Gilberts IL., Glen Ellyn IL. Glendale Heights IL., Gurnee IL., Hampshire IL., Hanover ParK IL.,Hazel Crest IL., Crystal Lake IL., Hickory Hills IL., Hinsdale IL., Hillside IL., Hodgkins IL., Hoffman Estates IL., Homer Glen IL., Homer Township IL., Hometown IL.,, Indian Head Park IL., Itasca IL., Joliet IL., Justice IL. LaGrange IL., LaGrange Park IL., Lake In The Hills IL., Lansing IL., Lemont IL., Libertyville IL., Lisle IL., Lockport IL., Lombard IL., Loves Park IL., Lyons IL., Markham IL., Matteson IL.,, Melrose Park IL., Mchenry IL., Midlothian IL., Mokena IL., Morton Grove IL., Mount Prospect IL., Naperville IL., New Lenox IL., Niles IL., North Aurora IL., Northbrook IL., Northfield IL., Northlake IL., North Chicago IL., Oak Brook IL., Oak Forest IL., Oak Lawn IL., Oak Park IL., Oak Brook Terrace IL., Olympia Fields IL., Orland Hills IL., Orland Park IL., Oswego IL., Palatine IL., Palos Hills IL., Palos Heights IL., Palos Park IL., Park Forest IL., Park Ridge IL., Phoenix IL., Pingree Grove IL., Plainfield IL., Prospect Heights IL., Richton Park IL., River Forest IL., River Grove IL., Riverside IL., Robbins IL., Rockford IL., Rolling Meadows IL., Romeoville IL., Roselle IL., Rosemont IL., Sauk Village IL., Schaumburg IL., Schiller Park IL., Shorewood IL., Skokie IL., South Elgin IL. South Chicago IL., St. Charles IL., Steger IL., Stickney IL., Stone Park IL., Streamwood IL., Summit IL., Sugar Grove IL., Sycamore IL., Thorton IL., Tinley Park IL., Villa Park IL., Warrenville IL., Wauconda IL., Waukeegan IL., Wayne IL., West Chicago IL., Westchester IL., Western Springs IL., Westmont IL., Wheaton IL., Wheeling IL., Willow Springs IL., Willowbrook IL., Wilmette IL., Winfield IL., Winnetka IL., Wood Dale IL., Woodridge IL., Woodstock IL., Worth IL., Yorkville IL., Dupage County IL., Cook County IL., Will County IL., Kane County IL., Grundy County IL., Boone County IL., Lake County IL., Illinois, Indiana, Wisconsin.
Understand Home Buyer Closing Costs
Understanding Home Buyer Closing Costs:
Processing Fee Estimate: $350
This fee is charged by us to pre-approve, pre-underwrite and make sure the home buyers loan fits program guidelines prior to us submitting the loan to an underwriting unit for full approval. We will review all documents, submit the package, insure compliance, attend closing and maintain support all the way to closing. Fee paid directly to us at closing. This fee also includes credit reports, approval certificates and document gathering expenses.
Discount Points to Buydown Rate:
Normally not charged unless a buyer requests or needs to buydown an interest rate in order to qualify for the loan.
Appraisal Fee Paid to Independent Appraisal Company Estimate: $275-$450 Upfront Cost
This fee is paid directly to an independent appraiser to determine the maket value of the property. The appraiser is chosen by a neutral third party and you must pay this fee at the start of the loan process once a property is determined.
Underwriting Fee Paid to Independent Undewriting Unit Estimate: $600-$800
This fee is paid by the home buyer directly to the loan underwriting entity at loan closing. Once we have pre-underwritten the loan and we have determined the best lender able to actually fund the loan, we submit it to them for review, approval, legal documents and funding.
Homeowners Insurance Paid to Your Insurance Company Estimate: $300-$600 Upfront Cost
The home buyer will contact their personal insurance provider two weeks prior to the closing date to determine the cost of a homeowners insurance policy. This will be paid in advance of closing directly by the home buyer to the company they have picked. A one year policy must be paid for in advance of closing. If the property is in a flood zone, the home buyer will also be required to get flood insurance also.
Mortgage Interest Payment at Closing Estimate: Depends on closing date.
Depending on the day of close, the home buyer will pay for the days of homeownership from the day of closing to the last day of the month. Example: if we close on the 15th of the month home buyer will pay from the 15th to the last day of the month for each day they own the home.
Tax Escrow Paid Directly to Lender Estimated: Monthly property taxes times two. Most loans require borrowers to have the lender pay the property taxes on behalf of the buyer. Unless the home buyers are putting in 10-20% downpayment, expect to "escrow" for taxes. Lenders typically require a 2 month cushion placed into an escrow account. Ex: $500x2=$1000
Homeowners Insurance Escrow Paid Directly to Lender Estimated: $60-$120
Like taxes above, lenders will want to pay for the homeowners insurance when it comes due. Most lenders will require a 2 month cushion placed into the escrow account at closing.
Settlement Costs- Closing Attorney, Title Insurance, Closing Company, County Recording
Fees Paid Directly to Providers Pre-Chosen by Others Estimate: $1500-$2500
These are standard fees required to purchase a home. Refinances are much lower. These fees are not chosen by us but rather chosen by the sellers attorney.
Home Purchase Transfer Tax Stamps Estimated: Call the city to see if buyers pay these
Most common in the city of Chicago and a few others. Not all cities or villages charge buyers a transfer stamp tax. Usually a sellers expense. Can be expensive for buyers if they are charged.
**** In a home purchase transaction the home buyer may have the Seller of the Property pay for some, most, or possibly all of the above expenses. This is called a "Seller Paid Closing Contribution". This is highly recommended if the home buyer is short on funds to close or currently only has the downpayment and no other funds available. Seller can pay up to 3% of the purchase price towards closing costs.
If the Seller picks up yclosing costs, any monies paid up front other than the home inspection (appraisal and homeowners insurance up front) will be applied to the downpayment commitment.
Please call me at (847) 873-7295 to discuss nuances. Here to help you get homes financed.
Posted by
gilkerk
(
FHA,
Government Home Loans,
Homeownership,
Crystal Lake Real Estate Agents,
Agonquin Real Estate Agents,
Cary Illinois Real Estate Agents,
Mortgages,
Mortgage Interest Rates,
Fannie Mae,
Freddie Mac,
FHA Appraisals,
FHA Appraisers,
HUD Owned Homes,
HUD Homes,
HUD Foreclosures,
Lake in the Hills Mortgage,
McHenry Home Loans,
realestateloans.com,
2-1 buydown,
FHA 2-1 Buydowns,
203ks,
fha 203ks,
203k,
Gil Kerbashian,
FHA Gift Letter )
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Cash / Mattress Money is a Deal Killer
- Cash / Mattress Money is a Deal Killer-
AHEAD OF THE CURVE ARTICLE BELOW
Below is a list of my top programs that should be in every agents resource
folder:
-FHA closed on time: [http://www.realestateloans.com/fhadonewell.pdf]
[http://www.realestateloans.com/fhadonewell.pdf]
www.realestateloans.com/fhadonewell.pdf
-100% Rural Development: [http://www.realestateloans.com/usda.pdf]
[http://www.realestateloans.com/usda.pdf] www.realestateloans.com/usda.pdf
-$100 down for HUD owned homes:
[http://www.realestateloans.com/100hudhome.pdf]
[http://www.realestateloans.com/100hudhome.pdf]
www.realestateloans.com/100hudhome.pdf
-Deferred maintenance homes:
[http://www.realestateloans.com/uglyhomes.pdf]
[http://www.realestateloans.com/uglyhomes.pdf]
www.realestateloans.com/uglyhomes.pdf
-100% pre-approval to closing ratio:
[http://www.realestateloans.com/concierge.pdf]
[http://www.realestateloans.com/concierge.pdf]
www.realestateloans.com/concierge.pdf
-VA 100% financing: [http://www.realestateloans.com/va.pdf]
www.realestateloans.com/va.pdf
-Home Buyer job protection mortgage:
[http://www.realestateloans.com/rainydays.pdf]
www.realestateloans.com/rainydays.pdf
CASH IS KILLING DEALS:
I recently had a borrower call me and state she deposited $6000 into her
bank account from an unsecured loan. Without telling the Realtor or myself
she used this money for the contract deposit. Some form of outside monies
has been interjected into four of the last ten deals I've done and the
borrowers did it after reading
[http://gilkerk.realestateloans.com/condominiums/2009/05/07/i-need-to-make-a-home-loan-application-help.html]
my home purchase introduction link which clearly states that cash and large
deposits should be avoided.
Why isn't cash allowed into a transaction? It's the borrowers money right?
Several obvious reasons: Patriot Act/Banking Laws, Drug Money, Cash
Laundering, Straw Buyer considerations, Under the Table Seller Concessions,
Realtor or Loan Office contribution, Unsecured/unreported loan, Gift from
an unacceptable source, etc..
Loan officers and Realtors should never allow or encourage customers to
deposit or use cash for ANY part of the transaction nor turn a blind eye if
they know a client is borrowing money from credit cards or personal loans.
This type of mistake will certainly cause problems and create needless
tension. Now more than ever, loan files are being looked at with a fine
tooth comb. More and more careful verifications are being done a day before
closing- be prepared and don't let your deal die for dumb reasons.
Remember, FHA case numbers follow these loans. If one underwriter declines
a loan, the disposition will follow that loan. Realtors and Loan Officers
must work closely to prevent problems from day one.
Please call me at (847) 873-7295 to discuss nuances. Here to help you get
homes financed.
Is your loan officer less responsive than you'd like? Cut yourself free
from bad service, poor communication and start enjoying incredible support
today.
Could your team use an updated presentation to get agents up-to-speed on
loan program changes? Lending is a huge part of transactional business,
consider scheduling my lunch and learn for your team.
Gil Kerbashian
Mortgage Lending Since 1997
Gil's Loan Answer Hotline: (847) 873-7295
Posted by
gilkerk
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General,
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Mortgages,
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Freddie Mac,
Housing Recovery,
TARP,
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FHA Appraisers,
HUD Owned Homes,
Fannie Mae 105%,
Fannie Mae Refi Plus,
HUD Homes,
HUD Foreclosures,
McNeil Financial Group,
Lake in the Hills Mortgage,
McHenry Home Loans,
Home State Bank IL,
Harris Bank IL,
realestateloans.com,
mcneil financial group,
(847) 458-8700,
Integra Mortgage Schaumburg Illinois,
Mortgage Buydowns,
Mortgage Modifications,
2-1 buydown,
FHA 2-1 Buydowns,
Consumer Financial Protection Agency,
Mortgage loan application,
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fnma 1003,
HVCC,
203ks,
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203k,
Donald Brewer,
Gil Kerbashian,
Crystal Lake IL Teachers,
Northwest Suburbs Il,
Northwest Young Scholars Foundation,
Home Affordable 125%,
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(847) 794-5000,
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IHDA.ORG Down Payment Assistance
Two down payment assistance programs: There are two down payment assistance programs that I currently offier: IHDA and ADDI. Many of you have heard about CAHMCO which is really an extension of IHDA.
Here are the highlights to the most popular one- IHDA. As of this writing ADDI has ceased taking any more applicants due to volume. They expect to be back on line in January.
-Income limits
-$6,000 down payment assistance in the form of a second mortgage
-45 days typical to process through IHDA
-Homebuyer classes must be taken
-Additonal $300 to underwrite the second
-First time home buyers only-Veterans exempt from the first time buyer rule
-Purchase price limits are lower than current FHA limits
-Debt ratios are 31/41
-Income from everyone over 18 in the household will be counted (must provide 3 years tax returns)
-640 min fico
-Buyer must contribute 1% to the transaction
Please call me at (847) 873-7295 to discuss nuances. Here to help you get homes financed.
Posted by
gilkerk
(
FHA,
Government Home Loans,
VA,
Downpayment,
Homeownership,
Crystal Lake Real Estate Agents,
Agonquin Real Estate Agents,
Cary Illinois Real Estate Agents,
Mortgage Interest Rates,
Fannie Mae,
Freddie Mac,
FHA Appraisals,
FHA Appraisers,
HUD Owned Homes,
HUD Homes,
HUD Foreclosures,
Lake in the Hills Mortgage,
McHenry Home Loans,
realestateloans.com,
2-1 buydown,
FHA 2-1 Buydowns,
203ks,
fha 203ks,
203k )
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