Tampa Bay Real Estate Blog

Condo Financing in 2009

As financing parameters have changed, this is particularly relevant when attempting to identify funding sources for condominiums. Due to increased delinquency in communities, many fall into the above 15% rate, causing lenders to decline financing after reviewing condo questionnaires.

As always, cash is king and can solve the issue. However, not every buyer has that luxury. We have been able to identify select companies who can work with these situations with the buyer putting down 30% escrow deposits and using conventional financing. Amazingly, the rates have actually been very competitive. Talk to your valued lending partners when attempting to navigate through these situations.

Death Of The HELOC …Millions Of Homeowners Shut Out

Most major lenders are freezing withdrawals from Home Equity Lines of Credit (HELOCs) – and I don’t want you to be caught off guard by this development.  If you were planning on using your HELOC for spring home improvements or college tuition, chances are the money has been – or will be – shut off.

You should be aware that the lender retains the right to suspend or reduce the line of credit available if your property value falls below the appraised value used to originate the loan.  Lenders are actively assessing properties and then suspending access for account holders who have seen a downward slide in their home value.  Realtors who do Broker Price Opinions (BPOs) are reporting a dramatic increase in BPO requests from lenders for this reason.

These are excerpts from Countrywide ... sent to borrowers before Countrywide FROZE Helocs:

"Important message about your loan: At Countrywide Home Loans we are committed to helping customers sustain homeownership. As part of the commitment, and in keeping with its sound risk-management and responsible lending practices, Countrywide Home Loans is reviewing and analyzing home equity lines of credit in its servicing portfolio.

As you know, home values in many areas of the country have declined. We believe that the decline in the value of your property, from its original appraised value at the time your loan was made is significant.  In accordance with the terms of your Home Equity Credit Line Agreement and Disclosure Statement (Agreement), we have elected to suspend further draws against your account as of the Effective Date above.’  On Friday, the Los Angeles Times reported that Countrywide notified many homeowners they’ve lost their right to borrow against their credit lines:

‘ Tens of thousands of homeowners with home equity lines of credit are getting a rude surprise: They’ve been told by their lender that they can no longer take money out on their credit lines because sinking home prices have left them with little or no equity.

Among the lenders taking such action is Countrywide Financial Corp., which sent 122,000 letters to customers last week telling them they could no longer borrow against their credit lines.  In some cases, according to the company, the borrowers are now “upside down” — the total debt on the home exceeds the market value of the property.

Calabasas-based Countrywide, the nation’s largest mortgage lender, says it uses computer modeling that factors in changes in home prices to determine which customers will have their money tap shut off. ’

Will we see a Chase HELOC freeze or a Bank of America HELOC Freeze?  What will that do to the economy?

If there was any question that consumers were feeling the pinch before…just wait until they are told that their homes are worth LESS than what they owe.  Or in the words of Countrywide…"Significantly Less”.  Think that will have an effect on the economy?  Do you think this will make consumers feel more confident about housing?

 If you have a HELOC and you were considering using it to fund something important that your home or family needs, you might want to consider use it now before you receive such a letter.

In the current market, most Sellers will look at any creative solution to get their home sold and end their pain. Most recently a old type of Buyer has emerged once again. This one is inflating the listing price of the home and asking the Seller to bring money outside of closing to off-set the cost of future improvements. Because the Buyer or Buyer's Realtor also works for a mortgage company, they attempt to convince the Seller and Listing Realtor that they can guarantee the appraisal and close the deal. Sounds great, right?

The problem with this tactic is called mortgage fraud. If a Seller and their Realtor participates in this "adventure", don't be surprised if they later end up on the front page of their local paper or on the 6 o'clock news.

My mother always said, " if it sounds too good to be true, it probably won't be the result you are hoping for ". In this case, mom was right!

Any Buyer and/or Realtor who asks a Seller to provide incentives that will not be reflected in the main body of a Florida Real Estate Contract and also listed on a HUD-1 settlement statement, is setting you up for a huge problem. Beware the separate addendum that does not go to the underwriter at the mortgage company!

Personally, I never looked good in stripes and those post office pictures always catch a persons wrong side.

Until next week..Nancy Ward