Alabama Right of Redemption (ROR)

Posted November 12, 2015 by scottelangley
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In Alabama, there is a right of redemption for one year after a foreclosure. The right of redemption is the right to purchase the property from the current owner, even if that person does NOT want to sell the property. Because people are getting SO MUCH bad advice on this topic, I decided to help clarify things on one point: How much does it cost to redeem?

Many different categories people have the right of redemption. That list is outside the scope of this post.

You can lose your right of redemption if you don’t comply with the Ten Day Notice to Vacate. That topic is too complicated for this post.

After a lender foreclosure, if the former owner wants to redeem, they must pay the following charges, all at 12% interest:

1. Amount bid on the courthouse steps; plus

2. Insurance premiums paid or owed in the meantime; plus

3. Ad valorem taxes paid or owed in the meantime; plus

4. Any other debt owed to the current owner of the property; plus

5. The value of permanent improvements.

a. Case authority in the early 20th century involved fights over whether “repairs” counted as “permanent improvements.” The courts said permanent improvements include anything done to improve the property, anything erected on the property, anything added to the property, AND any repairs to the property.

b. In a recent Alabama Supreme Court case, the property foreclosed was a warehouse. The purchaser completed revamped the property and turned it into a manufacturing facility. The value of those permanent improvements was a very large $$ amount. When the former owner tried to redeem, he said they didn’t count as permanent improvements because they didn’t “improve” the property, they completely changed the nature of the property. Alabama Supreme Court said, “too bad,” they are improvement and they are permanent, they qualify.

c. There have been some court battles over “value” vs. “cost.” The courts are clear, it is the VALUE, not the cost. If you spend $1,000 and increase the value $50,000, you get the $50,000. If you spend $100,000 and increase the value only $25,000, you get only $25,000.

d. The value of improvements is determined as follows:

i. The redeeming party sends a letter to the current owner stating his/her intention to redeem and asking for a statement of all lawful charges.

ii. The current owner has 10 days to respond with a statement of “all lawful charges” including the value of permanent improvements.

iii. If the current owner fails to respond within 10 days, they lose their right to demand the value of the permanent improvements.

iv. If the current owner responds in 10 days and places a value on the improvements, the former owner has 10 days to accept that number or contest it. If he/she contests it, the former owner has 10 days to appoint a referee and notify the current owner. If the former owner misses his deadline, he loses the right to contest the value of the permanent improvements.

v. The current owner then has ten days from receipt of the notice about the referee to appoint his OWN referee. If he misses this deadline, he loses the right to claim the value of the improvements.

vi. The two referees meet and try to come up with a value. The referees can be anybody. They don’t have to be appraisers or real estate agents.

vii. If the two referees cannot agree, they (the referees) appoint an umpire. Whatever value has two votes to support it wins, and that is the value.

viii. If someone disagrees at that point, they can hire lawyers and go to court.

6. If the property is redeemed, the current owner gets to keep all rents earned up until the former owner “tenders” or offers to redeem.

7. If the property is redeemed, the current owner must give the former owner a credit for the value all minerals taken from the property and the value of all timber cut.

8. You can’t demolish structures during a right of redemption period. No matter how ugly you might think they are, that doesn’t count as a “permanent improvement.”

9. If the property is redeemed by the former owner, all liens that used to be on the property when he/she owned it, reattach after redemption (except, of course, the mortgage that caused the foreclosure.)

10. If the property is redeemed by a junior lien holder, all liens that used to be on the property before foreclosure AND that were superior to that junior lien holder reattach, except the mortgage that caused the foreclosure. In other words, Regions has a 1st mortgage, WAMU has a 2nd mortgage, IRS has a tax lien that is 3rd, Community Hospital has a judgment lien that is 4th and Bob’s Plumbers has a judgment lien that is 5th. If someone buys the Community Hospital judgment lien and then redeems, the WAMU mortgage and the IRS will lien come back on the property, but Bob’s Plumbers will not.

I hope this helps you. This is a complicated area of the law, and this blog is not intended as legal advice. There are SO many other little things that might change the above rules, you should always ask a lawyer for advice before making any decisions or taking any action. Written by Denise L. Evans

Fannie Mae Replaces HomePath Mortgage with Financing Flexibilities

Posted November 5, 2015 by scottelangley
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As of October 7, 2014, the HomePath loan program is no more, folks.  Fannie Mae made the announcement in July along with its requirements for meeting the programs deadlines:

“On October 7, 2014, Fannie Mae will remove the HomePath Mortgage and HomePath Renovation Mortgage logos from properties listed on HomePath.com, and Fannie Mae REO properties will no longer be listed as eligible for HomePath Mortgage/HomePath Renovation Mortgage financing. We are making corresponding changes to the requirements applicable to delivery of HomePath and HomePath Renovation Mortgages under the subject Variance. The Variance will be modified to reflect the following requirements for delivery of HomePath and HomePath Renovation Mortgages on or after October 7, 2014:

(a) The lender must have an executed purchase contract for the sale of the related property that is dated on or before October 6, 2014;

(b) The lender must document the loan file with a copy of the property’s “Listing Details” page printed fromhttp://www.homepath.com on or before October 6, 2014, showing the HomePath Mortgage and/or HomePath Renovation Mortgage logo, indicating the property’s eligibility for HomePath Mortgage and/or HomePath

Renovation Mortgage financing. The Real Estate Purchase Addendum reflecting the selection of HomePath Mortgage or HomePath Renovation Mortgage financing may be used as a substitute for the printed “Listing Details” page showing the logo, if it is dated on/or before October 6, 2014; and

(c) HomePath Mortgage/HomePath Renovation Mortgages meeting the above requirements that are sold as whole loans must be purchased by Fannie Mae on or before March 31, 2015 and loans delivered for MBS must be in pools with issue dates on or before March 1, 2015(this impacts lenders only).”

The letter also explained, “Fannie Mae will update the Selling Guide at a later date to offer some flexibility for financing the purchase of Fannie Mae REO properties.”

At First Home Mortgage, we are removing the product as of tomorrow, Friday, September 12th.  Any loans in progress must be locked in by tomorrow, and we will not take any new HomePath applications.  If you are counting on HomePath financing for a home in the next couple of weeks, touch base with your lender to make sure the proper steps are being taken to meet the above criteria.

New “Financing Flexibilities” to Replace the HomePath Mortgage

Even though the HomePath mortgage program is being retired, Fannie Mae will still be offering some of its features to borrowers purchasing Fannie Mae REO (foreclosure) properties.  Below is an overview of the “Financing Flexibilities” announced on their fact sheet:

  1. Interested Party Contributions (IPCs): For principal residences with LTV/CLTVs greater than 90%,
    Fannie Mae allows up to 6% interested party contributions (rather than the 3% standard per the Selling
    Guide).
  2. Multiple Financed Properties: For borrowers owning 5–10 financed properties, a maximum
    LTV/CLTV ratio of 75% for 2-4 unit investment properties is permitted (rather than the standard 70%
    per the Selling Guide) on fixed rate mortgage transactions only. LTV/CLTV ratio limits for ARM
    transactions and High Balance Loans are per the Selling Guide. All other eligibility requirements for
    borrowers with Multiple Financed Properties continue to apply.
  3. Resale Restrictions: In the event the mortgaged property is subject to any resale restriction imposed
    by Fannie Mae as the property seller, the mortgage is eligible for sale to Fannie Mae, notwithstanding
    any Selling Guide restrictions on properties subject to resale restrictions. by WHITNEY WATSON

The Hidden Costs of Homeownership

Posted September 23, 2015 by scottelangley
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If you’ve never owned your own property before, there are some costs you should prepare yourself for ahead of time. Should you take out a mortgage, you’ll have your monthly mortgage payment, but often there are additional costs and fees added that a new homeowner will not expect. Listed below are items you should expect to pay once you become a homeowner.

Property Taxes

When you rent, you are not responsible for the property taxes on the property. But when you become a homeowner, you’re expected to pay yearly property taxes, of which go to public works, wages for government workers or public school boards. Based on the current value of your home, property taxes are assessed every year and will likely change to reflect an increase (or decrease) in your home’s value. Property taxes can be paid at one time, or they can be divided into 12 payments over the course of a year and added to your mortgage payment. When you’re trying to determine what your mortgage payment will be each month, don’t forget to factor in property taxes.

Home Maintenance

When you live in a rental property, most maintenance is performed by the landlord or a property manager. When you become a homeowner, those maintenance costs fall upon you. When you purchase a home, all maintenance items should be considered when it comes to your overall budget. Will you want to replace all the appliances? Will the property need new windows or a new roof? Does the home need basic upgrades? Most people in the industry suggest you allocate 1% of your home’s worth for maintenance costs every year, but the reality is that 1% is likely the minimum – you should plan on more than 1% maintenance costs each year as a homeowner, and if you plan on any larger renovations, bet on the costs to be even higher.

Mortgage Insurance

Most people, when they buy a home or property, are able to do so by taking out a mortgage loan. If you put less than 20% of the cost of your property down, you’re required to have Private Mortgage Insurance (PMI). PMI protects lenders if the borrower defaults on their loan. PMI is charged annually, and it will typically cost 0.5% to 1% of the entire loan amount. The payments are generally paid each month rather than in a large one-time payment. If you plan on taking out a mortgage loan, and you don’t have 20% to put down, expect to add private mortgage insurance payments to your other monthly bills.

Supplemental Insurance

Do you live in an area prone to natural disaster? As a homeowner you’ll need to have regular home insurance to protect your home or property from typical things (plumbing issues, roof leaks, etc.) that homeowners encounter. Should you live in an area that’s prone to weather-related issues (floods, tornadoes, earthquakes, hurricanes) you will want to purchase supplemental insurance to make sure your home is covered should nature decide to show herself.

Landscaping and Lawn Care

When you rent a condo or an apartment, it’s highly likely you are not spending a lot of time outside in a yard. When you buy your own property (should it have a yard or some kind of outdoor area), expect some hidden costs to come in the form of lawn care. Does the yard need some major landscaping? Are you going to mow it yourself, or will you hire a company to do it? Do you have a lawn mower, rakes, snow or leaf blower, yard tools, shed, and any other items needed to keep your yard looking great year-round? A yard comes with extra costs, so be sure to know how much you want to spend on upkeep per year.

HOA Fees

If you’ve been renting your previous residence, it’s likely you haven’t had to pay Homeowners Association (HOA) fees for your apartment or rental. Should you buy a house, condo or townhouse in a neighborhood with common areas, a clubhouse, pool, or any other kind of community meeting places, it’s likely you’ll move into a neighborhood with an HOA. HOA fees can vary in terms of what the HOA covers within the community, but unless you know through your Realtor or through the homeowner the monthly fee, you can expect to spend anywhere from $10 to hundreds of dollars per month on HOA fees.

Buying your first home or property is a huge step in anyone’s life. Before you start your property search, make sure you consider all of the items above when you’re thinking of buying a home or property and during your property search.

How to repair my credit and improve my FICO Scores

Posted January 7, 2015 by scottelangley
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It’s important to note that repairing bad credit is a bit like losing weight: It takes time and there is no quick way to fix a credit score. In fact, out of all of the ways to improve a credit score, quick-fix efforts are the most likely to backfire, so beware of any advice that claims to improve your credit score fast. The best advice for rebuilding credit is to manage it responsibly over time. If you haven’t done that, then you need to repair your credit history before you see credit score improvement. The tips below will help you do that. They are divided up into categories based on the data used to calculate your credit score.

3 Important Things You Can Do Right Now

  1. Check Your Credit Report – Credit score repair begins with your credit report. If you haven’t already, request a free copy of your credit report and check it for errors. Your credit report contains the data used to calculate your score and it may contain errors. In particular, check to make sure that there are no late payments incorrectly listed for any of your accounts and that the amounts owed for each of your open accounts is correct. If you find errors on any of your reports, dispute them with the credit bureau and reporting agency.Read more about Disputing Errors on Your Credit Report
  2. Setup Payment Reminders – Making your credit payments on time is one of the biggest contributing factors to your credit score. Some banks offer payment reminders through their online banking portals that can send you an email or text message reminding you when a payment is due. You could also consider enrolling in automatic payments through your credit card and loan providers to have payments automatically debited from your bank account, but this only makes the minimum payment on your credit cards and does not help instill a sense of money management.
  3. Reduce the Amount of Debt You Owe – This is easier said than done, but reducing the amount that you owe is going to be a far more satisfying achievement than improving your credit score. The first thing you need to do is stop using your credit cards. Use your credit report to make a list of all of your accounts and then go online or check recent statements to determine how much you owe on each account and what interest rate they are charging you. Come up with a payment plan that puts most of your available budget for debt payments towards the highest interest cards first, while maintaining minimum payments on your other accounts.

More Tips on How to Fix a Credit Score & Maintain Good Credit

Payment History Tips

Contributing 35% to your score calculation, this category has the greatest effect on improving your score, but past problems like missed or late payments are not easily fixed.

  • Pay your bills on time.
    Delinquent payments, even if only a few days late, and collections can have a major negative impact on your FICO Scores.
  • If you have missed payments, get current and stay current.
    The longer you pay your bills on time after being late, the more your FICO Scores should increase. Older credit problems count for less, so poor credit performance won’t haunt you forever. The impact of past credit problems on your FICO Scores fades as time passes and as recent good payment patterns show up on your credit report. And good FICO Scores weigh any credit problems against the positive information that says you’re managing your credit well.
  • Be aware that paying off a collection account will not remove it from your credit report.
    It will stay on your report for seven years.
  • If you are having trouble making ends meet, contact your creditors or see a legitimate credit counselor.
    This won’t rebuild your credit score immediately, but if you can begin to manage your credit and pay on time, your score should increase over time. And seeking assistance from a credit counseling service will not hurt your FICO Scores.

Amounts Owed Tips

This category contributes 30% to your score’s calculation and can be easier to clean up than payment history, but that requires financial discipline and understanding the tips below.

  • Keep balances low on credit cards and other “revolving credit”.
    High outstanding debt can affect a credit score.
  • Pay off debt rather than moving it around.
    The most effective way to improve your credit score in this area is by paying down your revolving (credit cards) debt. In fact, owing the same amount but having fewer open accounts may lower your score.
  • Don’t close unused credit cards as a short-term strategy to raise your score.
  • Don’t open a number of new credit cards that you don’t need, just to increase your available credit.
    This approach could backfire and actually lower your credit score.

Length of Credit History Tips

  • If you have been managing credit for a short time, don’t open a lot of new accounts too rapidly.
    New accounts will lower your average account age, which will have a larger effect on your score if you don’t have a lot of other credit information. Also, rapid account buildup can look risky if you are a new credit user.

New Credit Tips

  • Do your rate shopping for a given loan within a focused period of time.
    FICO Scores distinguish between a search for a single loan and a search for many new credit lines, in part by the length of time over which inquiries occur.
  • Re-establish your credit history if you have had problems.
    Opening new accounts responsibly and paying them off on time will raise your credit score in the long term.
  • Note that it’s OK to request and check your own credit report.
    This won’t affect your score, as long as you order your credit report directly from the credit reporting agency or through an organization authorized to provide credit reports to consumers.

Types of Credit Use Tips

  • Apply for and open new credit accounts only as needed.
    Don’t open accounts just to have a better credit mix – it probably won’t raise your credit score.
  • Have credit cards – but manage them responsibly.
    In general, having credit cards and installment loans (and paying timely payments) will rebuild your credit score. Someone with no credit cards, for example, tends to be higher risk than someone who has managed credit cards responsibly.
  • Note that closing an account doesn’t make it go away.
    A closed account will still show up on your credit report, and may be considered by the score.

To summarize, “fixing” a credit score is more about fixing errors in your credit history (if they exist) and then following the guidelines above to maintain consistent, good credit history. Raising your score after a poor mark on your report or building credit for the first time will take patience and discipline.

What is the bid-opening procedure on HUD bids 4/14

Posted April 25, 2014 by scottelangley
Categories: Uncategorized

    

  I.        – Unchanged: Length of the Exclusive listing period for FHA-uninsurable homes remains at 5 days. (As always, there are no investor bids during an Exclusive listing period.)

 

           II.        – Unchanged: Bids submitted on Monday, Tuesday, Wednesday, and Thursday will be available to the Asset Manager on the same schedule as before, as long as one of those days (or Friday) is not a Federal Holiday.

 

          III.        – Unchanged: Bids for an earlier listing period are considered separately from bids from a later listing period. That is, any Exclusive listing period bids must be reviewed first and all of them canceled before bids from the Extended listing period would be made available to the Asset Manager to review.

 

·         Here’s what has changed:

 

             I.        – Exclusive listing period for FHA-insurable homes is 15 days instead of 30.

 

           II.        – Bids coming in on Friday, Saturday, or Sunday will be grouped together for the Asset Manager’s consideration on Monday.

 

          III.        – The 10-day bid-accumulation period at the beginning of the Exclusive period for FHA-insurable homes will be extended up to three days depending on whether the 10th day falls on a Friday, Saturday, or Sunday, and if there’s a Monday Federal holiday.
Note: This does not apply to the 5-day Exclusive bid-accumulation period for FHA-uninsurable homes since day 6 falls in the Extended listing period.

 

          IV.        – Bids coming in on a Federal holiday will be grouped with the previous days’ bids. For example, bids coming in on Martin Luther King Day (Monday) will be grouped with the preceding Friday, Saturday, and Sunday bids (if the listing period doesn’t change). And bids coming in on the Wednesday before Thanksgiving will be grouped with Thanksgiving’s bids, so the Asset Manager will be looking at two days’ bids on the Friday after Thanksgiving.

 

What Does Short Sale Really Mean?

Posted April 3, 2014 by scottelangley
Categories: Real Estate, Short Sales

The basic answer to what is a short sale is a short sale is a property that sells for less than the balance owing on its mortgage. A short sale can be an underwater home, an apartment building or even vacant land. If there is a mortgage balance that is greater than the market value of the home, that property is a short sale.

The home can also be a short sale if the accepted sales price is higher than the mortgage but not high enough to pay all of the closing costs and commissions. Moreover, in some instances involving 2 mortgages, the sales price might be high enough to pay off the existing first mortgage yet insufficient to completely pay the balance due on the second mortgage. If there is a shortage involved to close, it is a short sale.

A Short Sale is a Privilege, Not a Right

Not every property qualifies as a potential short sale in a bank’s eyes. A bank must agree to grant a short sale. Banks are under no obligation to approve a short sale. Banks will grant a short sale if the bank feels it is in the bank’s best interest to approve the short sale.

It is in the bank’s best interest to approve the short sale if the bank will make more money through the short sale than to foreclose. It is estimated that banks might save 25% to 30% on foreclosure costs to grant a short sale over a foreclosure, but some investor guidelines make it more profitable for the bank to foreclose.

What is Necessary for a Short Sale?

Most short sale transactions are handled by real estate agents who specialize in short sales. There are 4 essential ingredients to a short sale; however, strategic short sales, those without a hardship, are also possible. What makes a short sale work are the following:

  • An underwater home
  • A willing short sale bank
  • A seller with a hardship
  • A buyer willing to purchase the home

What Role Do Real Estate Agents Play in a Short Sale?

Some real estate agents throw homes on the market that will never close as a short sale. That’s because the agents do not always qualify the short sale sellers. Some agents place unrealistic price tags on the short sale, which the bank will never accept. It is wise to choose an experienced short sale agent who has closed at least 100 short sales. Here is what an agent does in a short sale:

  • Determines the type of short sale. There are many types of short sales, from Fannie Mae HAFAs to regular, non-GSE HAFAs to a traditional short sale, and a few more in between.
  • Gathers the required paperwork and submits the short sale package to the bank. Sometimes agents outsource this part of the process or they might hire a third-party to negotiate the short sale.
  • Helps the seller to price the short sale home. The price needs to be attractive enough to entice a buyer to wait for short sale approval but high enough to satisfy the bank’s BPO.
  • Puts the home on the market. The agent must submit all offers received to the seller. Some offers will be lowball offers because buyers don’t know any better.
  • Negotiates the short sale. Sometimes sellers will hire a lawyer to do the short sale, but often it’s the agent who negotiates with the bank on behalf of the seller.
  • Submits the short sale approval letter to the seller. Most sellers want a release of liability and no deficiency to do a short sale. State laws tend to govern the terms in the approval letters.

Sellers should always get legal and tax advice before completing a short sale.

10 Steps to Buying a Home

Posted January 31, 2014 by scottelangley
Categories: Buying A Home, Real Estate

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Step 1: Find the Right Real Estate Agent

Real estate agents are important partners when you’re buying or selling a home. Real estate agents can provide you with helpful information on homes and neighborhoods that isn’t easily accessible to the public. Their knowledge of the home buying process, negotiating skills, and familiarity with the area you want to live in can be extremely valuable. And best of all, it doesn’t cost you anything to use an agent – they’re compensated from the commission paid by the seller of the house.

Step 2: Determine How Much House You Can Afford

Lenders generally recommend that people look for homes that cost no more than three to five times their annual household income if the home buyers plan to make a 20% down payment and have a moderate amount of other debt.

Step 3: Get Prequalified and Preapproved for Your Mortgage

Before you start looking at home’s in person, you will need to know how much you can actually spend. The best way to do that is to get prequalified for a mortgage. To get prequalified, you just need to provide some financial information to your mortgage lender, such as your income and the amount of savings and investments you have.

Step 4: Start Your Research

Have your real estate agent send you listings that you are interested in. Start reading Web sites, newspapers, and magazines that have real estate listings. Make a note of particular homes you are interested in and see how long they stay on the market. Also, note any changes in listing prices. This will give you a sense of the housing trends in specific areas.

Step 5: Shop for Your Home and Make an Offer

Start touring homes in your price range, and place an offer.

Step 6: Get a Home Inspection

Typically, purchase offers are contingent on a home inspection of the property to check for signs of structural damage or things that may need fixing. Your real estate agent usually will help you arrange to have this inspection conducted within a few days of your offer being accepted by the seller. This contingency protects you by giving you a chance to renegotiate your offer or withdraw it without penalty if the inspection reveals significant material damage.

Both you and the seller will receive a report on the home inspector’s findings. You can then decide if you want to ask the seller to fix anything on the property before closing the sale. Before the sale closes, you will have a walk-through of the house, which gives you the chance to confirm that any agreed-upon repairs have been made.

Step 7: Work with a Mortgage Banker to Select Your Loan

Deliver Negotiated contract to your lender to begin the underwriting process.

Step 8: Have the Home Appraised

Your lender will provide an appraiser to provide an independent estimate of the value of the house you are buying. The appraiser is a member of a third party company. The appraisal will let all the parties involved know that you are paying a fair price for the home.

Step 9: Coordinate the Paperwork

Once all of the paperwork has been completed, it is returned to the closing attorney to complete their portion of the documents.

 

Step 10: Close the Sale

At closing, you will sign all of the paperwork required to complete the purchase, including your loan documents. Once this is done, you get your keys.