Fannie Mae announced a last resort option for distressed homeowners today. They will begin working with homeowners who have Fannie Mae serviced loans and are not eligible for the offered “work-out” or modification programs.

From Fannie Mae: Fannie Mae Announces Deed for Lease™ Program

Fannie Mae (FNM/NYSE) is implementing the Deed for Lease™ Program under which qualifying homeowners facing foreclosure will be able to remain in their homes by signing a lease in connection with the voluntary transfer of the property deed back to the lender.

“The Deed for Lease Program provides an additional option for qualifying homeowners who are facing foreclosure and are not eligible for modifications,” said Jay Ryan, Vice President of Fannie Mae. “This new program helps eliminate some of the uncertainty of foreclosure, keeps families and tenants in their homes during a transitional period, and helps to stabilize neighborhoods and communities.”

The new program is designed for borrowers who do not qualify for or have not been able to sustain other loan-workout solutions, such as a modification. Under Deed for Lease, borrowers transfer their property to the lender by completing a deed in lieu of foreclosure, and then lease back the house at a market rate.

To participate in the program, borrowers must live in the home as their primary residence and must be released from any subordinate liens on the property. Tenants of borrowers in this circumstance may also be eligible for leases under the program. Borrowers or tenants interested in a lease must be able to document that the new market rental rate is no more than 31% of their gross income.

Leases under the new program may be up to 12 months, with the possibility of term renewal or month-to-month extensions after that period. A Deed for Lease property that is subsequently sold includes an assignment of the lease to the buyer.

Months ago there was some buzz regarding the most recent stimulus and funds that would be available for grants to those who wish to purchase a foreclosure. The information has been fairly vague for some time, but there is now some specific (not too specific) information on the program.

The Neighborhood Stabilization Program (NSP) is a part of the Housing and Economic Recovery Act of 2008. The program allocates $3.92 Billion nationwide to local state and city governments to help reinvest into areas with abandoned homes. Implementation of the program will come on October 5th, 2009.

Most recently there has been some news that the Salem/Keizer area has $845,564 available for those areas. Today I will be attending a State of Oregon webinar to learn the specifics of the program and will report the information for qualifications, etc as soon as possible.

For now it’s good to know homes have to be in specific areas (we have a map of acceptable areas), income for the borrowers cannot exceed 120% of the areas median income for the given family size and the money will be given in a form of a grant which will be used to help with a down payment and will require the buyer live in the

On Tuesday details of President Obama’s Housing Affordability Plan became available to the public.  The program is still in the very early stages of establishment which means that although there is some information available there isn’t enough to make sense of it all.  Currently there is a website set up that provides some good information to determine if one is eligible for the program.  However, it’s important to know that the government’s website will just tell you to prepare some documents that will help your current lender decide if your eligible for any help from this program.

The program outlines two essential goals to this program:

• Making Home Affordable Refinance
• Modification Options

For nearly a year we’ve been hearing the federal government make claims about encouraging lenders to modify existing loans they service in order to help homeowners avoid foreclosure.  At this point the government has stepped it up a bit and is now encouraging banks andservicers to not only modify loans, but also refinance loans for those who have been responsible.  The modification has been geared towards those who are already late on their mortgage.  The Making Home Affordable Refinance is geared towards those homeowners who are currently “underwater”, as the government is now calling it.  This means that the lenders will help borrowers refinance if they owe more than the value of their home.  However, if the loan is greater than 5% of the value of the home, the borrower may be unable to take advantage of this program.

This quick fact sheet gives a basic outline to the new program.

To check eligibility or to see more details about the program visit financialstability.gov. The website encourages you to contact your lender after gathering pertinent information.  Since the details are still somewhat vague and the program is still new, you’ll have to be very patient with your lender as they will likely have little detail about how the process will work at this time.

A report of existing home sales showed an unexpected rise in December.  Purchases grew 6.5% at the end of 2008.  As foreclosures have forced existing home sales down throughout most of 2008 it was nice to see a gain on board.

2009 is setting up to be another recording breaking year.  Hopefully we’ll see more positive news than in 2008, but with so much on the line it’s tough to say which direction it will go.  The sign of rising exisiting home sales shows that people are beginning to take advantage of the amazing purchase opportunity at hand.

Make sure you’re prepared to take advantage of the opportunities at hand!

Remember, opprtunities are never lost…someone will take the ones you miss!

Happy Monday!

I met with several clients in 2008 who were looking to purchase a foreclosure or bank owned property.  Some for the investment purposes or for the purpose to use as a primary residence.  I thought I would give a brief description of few common types of foreclosure or pre-foreclosure properties.

Short sale: A home that is typically listed with a real estate agent.  The owner has to contact the lender and prove some sort of financial hardship and has to show that they have tried to sell the home to at least break even.  Each bank has specific guidelines for short sale approval.  Once the thumbs-up is given by the bank, the borrower can then list the home with a real estate agent for a price that is less than the mortgage owed on the property.  The offer will then go to the bank for approval.

Foreclosure/auction sale: A home that is typically sold the county courthouse steps via a trustee sale.  After several attempts to work with the home owner the bank will eventually sell the home at an auction for a starting bid starts at or sometimes less than the amount owed on the mortgage plus fees and defaulted payments.  Investors will purchase the property at the auction with cash on hand (cashier’s check).

REO: A home that is owned by the bank and typically listed with a real estate agent.  If a home does not sell at the auction the retains ownership and will list the property with real estate agent.  Once the home is listed offers will again be made to the bank for approval.  This type of property is now owned by the bank (i.e. REO – real estate owned).

According to Willamette Valley MLS there were 236 REO/bank owned properties sold in the Willamette Valley in 2008.  This number grew about 39% between 2007 and 2008, however, the number of properties sold as an REO was less in 2004.  To see the stats from WVMLS year end click on REOs in the Willamette Valley.

Today the Federal Housing Finance Agency (FHFA) announced that Fannie Mae and Freddie Mac, the nation’s largest mortgage finance companies, will begin accelerated loan modifications to lower payments for struggling homeowners in an effort to reduce foreclosure rates.

Now under a government conservatorship, Fannie and Freddie will target homeowners who are currently 90 days delinquent who have high debt-to-income and loan-to-value ratios.  The reduction in payment may come in the form of an interest rate reduction, a deferral of interest, an extended loan amortization period (i.e. 40 year term), or a reduction in principal.

Undoubtedly the question of fairness will rise with those who have been paying their mortgage on time.  However, with the amount foreclosures nationally continuing to grow throughout 2009, this might be much needed aid.

Further information will be available as details are released.

Foreclosure is a definite buzz word (one of many) for 2008.  Foreclosures are devastating for some and can create opportunities for others.  The default rate on mortgages that has caused so many problems for our financial and real estate markets affects more than just those involved in the industry.  Those who have reached the point where they can no longer afford their mortgage payment have obviously gone through a substantial financial burden.  Regardless of whether the driving factor was a life change, loss of job, or poor financial consulting, a foreclosure is a devastating experience.

We are fortunate live in the Willamette Valley where the foreclosure rate is significantly lower than the national average.  However, I understand that those facing foreclosure could care less about the “national average”.  With at least 7 years of bad credit history following a foreclosure, the best option is to find a solution prior to having your house sold at an auction.

My mission to help my clients build a strong financial foundation goes beyond real estate financing.  In the area of foreclosures, education is important.  Knowing what to do if you are facing foreclosure can help save your financial foundation.  Real estate investors play a key part in the assistance for those who are in foreclosure.  A great local resource in area of foreclosures is LMC Properties.

LMC Properties is a sister company of Landmark Mortgage.  Our goal with LMC Properties is to create real estate solutions for those in need.  We offer free guidance to those facing foreclosure and for those looking to invest in real estate.

If you are interested in learning more about LMC Properties visit www.foreclosuresinsalem.com.  You can also email lmcproperties@gmail.com.