Housing prices in most urban areas will face pressure in the upcoming years because of a variety of factors.  Last month as prices fell in many areas including Southern California, some were surprised because a belief that a trough had been hit had already set in.  This is not the case.  For the most part […]

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Housing prices in most urban areas will face pressure in the upcoming years because of a variety of factors.  Last month as prices fell in many areas including Southern California, some were surprised because a belief that a trough had been hit had already set in.  This is not the case.  For the most part the bulk of home sales are still coming from the distress side.  These homes do not yield the bank the full balance of the mortgage and consequently push overall prices lower.  In many troubled states like California, Florida, Nevada, and Arizona many of these homes are secured by questionable mortgages so the gap between the current mortgage and the market price is rather large.

We also have issues on the supply side.  During the peak days of the bubble housing starts were running at a stunningly high rate of 2 million per year.  This at a time when household formation was closer to 1.2 million.  So this enormous imbalance occurred.  The current stall in housing starts is simply allowing the overall market to catch up.  That is one of the big questions regarding when housing will recover.  When will housing starts pick up?  Today we are going to look at 5 major trends that will keep housing prices low for the next few years.

Reason #1 – Household Formation

Source:  The Urban Land Institute

The Urban Land Institute put out an interesting paper in January examining the future of housing.  One of the main trends they found revolves around younger generations living in urban centers.  In fact, on their survey they found that many would accept a smaller living space in order to be closer to work, friends, and entertainment venues.  Another important factor they highlight is those from 25 to 34, a peak household formation range, have seen wages fall in real terms by 12 percent for men and 3 percent for women.  What this translates for housing is less money for housing.

Another big problem keeping households from forming in the current market is the high unemployment rate.  Many of these people are doubling up, moving back home, or simply taking on cheaper rental housing.  Once the employment market picks up we can see a pent up demand for housing slowly pick up but that is why we keep discussing that without solid employment growth, there is little reason to believe home prices will suddenly move up.

The unemployment rate for those from 20 to 24 is 15.8 percent and for those 25 to 34 it is 9.9 percent.  Both of these rates are higher than the current headline rate of 9.7 percent.  Until job prospects improve, the demand for more expensive housing will remain muted.

Reason #2 – Overbuilding and Housing Starts

The above chart shows the massive overbuilding that occurred during the housing bubble.  With housing formation steady the rate is closer to 1.2 million but we were building closer to 2 million.  Now, this has translated into a massive glut of housing.  So the housing start rate plummeted in 2007 as we worked our way through too much demand.  In addition, we added a large number of new homebuyers that were never qualified to own a home to begin with.  This is the group that took out subprime or option ARM loans on homes that clearly were unsupported by their incomes.  As we now know, most of these loans are now gone so now millions that once were “qualified” to buy are out of that buyer pool.  So demand is also falling because people don’t qualify with tighter loan standards.

If we look at the housing start side of the equation, builders clearly realize that the demand side is still weak for new construction:

Although housing starts are up from their depressed levels, they are nowhere near a healthy market level.  We still have inventory that we need to work through before builders start growing at a pace of even 1 million.

Reason #3 – Single Family Home Sales

If you examine the above chart carefully, you’ll notice that up until 2007 both existing and new home sales tracked very closely.  For example, close to 5 million existing homes were selling on a seasonally adjusted rate while roughly 1 million newly built homes were selling from 1999 to 2002.  Then even in the over building days both of these tracked together.  The disconnection has started in 2009 where existing home sales have perked up while newly built home sales are still near the bottom.  Why?  The reason has to do with the amount of distress sales.  The big driving factor in home sales is home price.  In a price conscious market people are gravitating to foreclosure re-sales and short sales where prices are lower to meet with the new economics of households.

Newer homes that carry a bigger price tag have seen demand simply disappear.  In areas even like California, areas that have lower home prices like the Inland Empire have seen sales pick up briskly but prices remain low.  Those areas that still have higher prices have seen sales completely stall.

Reason #4 – Home Prices

Source:  Calculated Risk

If you look at the above chart, the top eight areas with depressed home prices are California, Nevada, Florida, and Arizona.  The one exception is Detroit but this area has seen low prices trending even before this current housing collapse.  One recent stat shows that 70 percent of mortgage holders in Nevada are underwater.  In California that number is 35 percent.  So with these kinds of market indicators it is very likely that in these states prices will continue to trend lower.  Throw in the high unemployment rate in these regions and you can understand why it is so important to get jobs growing in this country again.

Ultimately prices have to reach a level where local households can afford the mortgage.  This crisis has gone on long enough where younger households, hit by a double whammy of low wages and higher home prices have seen older generations now lose their home or struggle simply to pay on a mortgage so big that nearly all disposable income is eaten by the mortgage.  The idea that real estate is “always a good investment” is now gone for a generation.  That is why in recent surveys many are looking to live in city urban centers as opposed to suburban tract homes.  This is another reason why home prices will remain low for a good portion of time.  I just don’t see a massive flood of the household formation generation heading out and purchasing homes in suburbs like baby boomers did.  They will buy but nowhere close to what baby boomers did.

Reason #5 – Homeownership Rates

Buying a home is an opportunity that should be given to those that have demonstrated some ability to save and pay their mortgage.  That is why down payments were so important.  A 10 percent down payment at least demonstrates that you can save for a few months or years for a big purchase.  This is how it was for generations.  But with no money down loans and easy financing those who should have never bought were allowed to buy to feed the Wall Street beast hungry for any mortgages to securitize.  Now, the only game in town is government backed loans.  And as we saw on Friday, Fannie Mae lost in 2009 over $70 billion.  I just keep recalling the day when we were told that these GSEs were going to turn a profit.  Yeah right.

But we have bigger issues.  The FHA with FHA insured loans is allowing people to buy homes with only 3.5 percent down.  It actually is lower because people can use the tax credit in combination and make this close to a nothing down purchase.  Is it any surprise that FHA default rates are now at historic levels?  Homeownership is not a right but a privilege we have.  This is no different from buying a luxury car.  I’m sure many of us would trade in our current vehicles for a Ferrari if we could but that isn’t how the market works.  But when you allow everyone access to mortgage debt they cannot support it shouldn’t be a surprise that people took on too much debt.  The above chart shows that consumption part of the equation.

But now the homeownership rate is falling as millions lose their homes to foreclosure.  Many more will lose their homes as toxic mortgages do what toxic mortgages do.  The trend for the homeownership rate will be lower for years.  Also, the weak economy is going to keep pressure on housing prices since people do pay for their home payment out of income they get from their jobs.

When we step back, the market is already telling us many things.  Lower home prices will get more Americans to buy homes so having Wall Street and the government trying to prop up prices is a bad thing.  In markets where demand is high prices will remain high because of supply and demand forces.  Why the need for government backed easy money mortgages?  Why the need for all these support programs that only prolong the misery?  There is absolutely nothing wrong with renting and frankly, it is a shame that many in this country look down upon that.  This is similar to those “keep up with the Joneses” folks that had to keep up with their neighbors jet skis, Hummers, and other items that sunk many families.  Just look on eBay and Craigslist and you’ll see many people selling these items trying to downsize.  Buying a home is the biggest purchase most Americans will take on and should be entered with caution.

There is a delicate balance to all of this and currently the market is still out of balance.  How anyone can see home prices booming in the next few years is hard to understand.

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Filed under: Currency

Sentiment regarding the dollar is turning more bullish — a foreign exchange attitude that, at first, appears at odds with conditions on the ground. But is it?

The dollar bears point to back-back-back $1 trillion U.S. budget deficits, and the Fed’s accommodationist quantitative easing policy. More dollars borrowed, more dollars in circulation, equals dollar-lower, the bears says.

Continue reading Is the Dollar Bullish Sentiment Warranted?

Is the Dollar Bullish Sentiment Warranted? originally appeared on BloggingStocks on Thu, 11 Mar 2010 12:20:00 EST. Please see our terms for use of feeds.

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Filed under: Wal-Mart (WMT), PepsiCo (PEP), Newsletters, Walgreen Co (WAG), AFLAC Inc (AFL), Procter and Gamble (PG), Stocks to Buy

“It’s an understatement to say that 2009 was a lousy year for dividends. According to Standard & Poor’s, last year was the worst year ever for dividends; in fact, dividend cuts caused investors to lose $58 billion in income over the year,” says Chuck Carlson.

The editor of The DRIP Investor — and author of the just released The LIttle Book of Big Dividends — explains, “For 2009 overall, more than 800 companies cut their dividend payments, according to S&P. That was nearly 200 more than in 2008 and more than seven times the number of cuts in 2007.”

Continue reading Investing in ‘Dividend Aristocrats’

Investing in ‘Dividend Aristocrats’ originally appeared on BloggingStocks on Thu, 11 Mar 2010 12:00:00 EST. Please see our terms for use of feeds.

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There is a proposal for new guidelines in the way lenders and servicers deal with borrowers throughout the foreclosure process. These new guidelines are designed to improve communication between lenders and borrowers to improve the rate of troubled borrowers receive a loan modification for their mortgage.

One of the issues that leave many homeowners without a home is time and awareness. Troubled homeowners that are behind on their mortgage often do not realize the details of what will happen to their home and when.

This proposal suggests that lender and loan servicers, which are the companies that actually manage mortgage payments, should be required to provide homeowners with at least 30 days to reply when their loan modification has been denied under the HAMP program. These 30 days would give the borrower time to appeal, time during which the lender would not be allowed to continue with the foreclosure procedure.

The new guidelines would also put the responsibility on lenders and servicers to contact borrowers that are 60 days or more behind on their mortgage payments and fill the basic requirements for a HAMP loan modification. The guidelines are very specific in the nature of the notifications lenders must make before a foreclosure can proceed. There must be at least 4 telephone calls, two notices in writing, one of them which must be by certified mail. If these guidelines are approved it will mean a drastic increase in the work required for lenders to carry out a foreclosure. Extra staff will have to be brought in to fulfill these requirements.

However, these guidelines would also provide lenders with the right of denying a loan modification application that was filed within 6 days of a foreclosure sale. Loan Modifications can be lengthy processes and include a large investment in time and resources for lenders and servicers. Nevertheless, lenders will have to inform borrowers of the foreclosure schedule, and the deadline they must meet so that their application can be considered.

These are part of a list of requirements and guidelines the US Treasury is considering in their efforts of improving the rate of loan modification trial conversion and the number of troubled homeowners that apply for a loan modification. The idea is to screen those that actually qualify for the HAMP program and would benefit from the aid it provides.

Unfortunately the HAMP program is only designed to help troubled homeowners that still have a regular income and whose home has not dropped in value too drastically. For instance, if your mortgage is worth over 150% of your current home value, you might struggle to pass the NPV test required for a loan modification.

These proposals are working in line with others that are also being prepared for California and four other states that have suffered from a severe drop in house prices. The Obama Administration announced last week that these states will receive 1.5 billion dollar to be used at the discretion of each state to provide flexibility when considering borrowers for aid and loan modifications.

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2. Loan Modifications Are Going To Be Simpler, What Do You Need Now?
3. The Obama Loan Modification Plan, An Overview

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For borrowers, Federal Housing Administration changes are on the horizon. Some of the new policies are effective next month, and are all part of a plan to bolster FHA’s reserves.

Last year, FHA insured one-third of all approved mortgages. The capital-reserve ratio is no longer at the Congress-mandated 2 percent threshold. FHA Commissioner David Stevens even voiced his intention to hire a chief risk officer, a position the administration has never had since its 1934 inception.

“To be clear, the fund’s reserves are sufficient to cover our future losses, so the FHA will not require taxpayer assistance or new Congressional action,” Stevens said in a September press release.

In efforts to avoid a bailout, the FHA will make a series of policy changes:

• The up-front mortgage insurance premium (MIP) will increase to 2.25 percent from 1.75 percent. This change is effective starting April 5.
• To qualify for the FHA’s 3.5 percent down payment program, borrowers must have a credit score of at least 580. Those with a sub-580 score have to put down at least 10 percent.
• Seller concessions will be reduced to 3 percent from 6 percent, meaning buyers will not be able to inflate a home’s appraised value in efforts to pay off their closing costs.
• The FHA will implement an array of enforcements on FHA lenders, such as publicly reporting lender rankings and seeking legislative action that would make mortgagees for loans they give and underwrite.

“When combined with the risk management measures announced in September of last year, these changes are among the most significant steps to address risk in the agency’s history,” Stevens said in a January press release.

In addition to upping the MIP, the FHA is requesting legislative action to increase the maximum annual MIP. Should such legislation pass, the FHA plans to shift some of the up-front MIP to annual MIP, allowing borrowers to pay off the increase in monthly payments.

With less than a month before the MIP jump is effective, the other policy changes have no definite start date, but the FHA plans to implement all changes by this summer.

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3. Cutting LTVs is coming to a market near you!

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Filed under: Analyst Reports, Analyst Upgrades and Downgrades, Yahoo! (YHOO), Hershey Co (HSY), Analyst Initiations

Analyst Upgrades

• UBS upgraded Dr Pepper Snapple (DPS) to buy from neutral, citing strong fundamentals and buybacks. The firm raised its target to $42 from $31.
• Piper Jaffray upgraded ProAssurance (PRA) to overweight from neutral. The firm has a $76 price target on shares.
• Hershey (HSY) and Sunoco (SUN) were upgraded to sell from conviction sell at Goldman.
• Level 3 Comm (LVLT) was upgraded to neutral from underweight at JPMorgan.
• Cathay Pacific (CPCAY) was upgraded to buy from hold at Deutsche Bank.

Continue reading Analyst Calls: BBBY, DPS, HSY, MT, PSYS, SUN, TMK, YHOO …

Analyst Calls: BBBY, DPS, HSY, MT, PSYS, SUN, TMK, YHOO … originally appeared on BloggingStocks on Thu, 11 Mar 2010 11:00:00 EST. Please see our terms for use of feeds.

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The banking system has captured our government and frustration is boiling over.  Yet those in the housing and banking industry seem complacent and even self congratulatory that we “have avoided Great Depression 2.0.”  Really?  Now we’re taking advice from the same group of cronies that led the economy off the financial cliff.  And the most […]

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The banking system has captured our government and frustration is boiling over.  Yet those in the housing and banking industry seem complacent and even self congratulatory that we “have avoided Great Depression 2.0.”  Really?  Now we’re taking advice from the same group of cronies that led the economy off the financial cliff.  And the most troubling thing is we are at the height of unemployment even though the headline rate seems to have steadied out.  California’s unemployment rate still continues to move upward hitting 12.5 percent.  Yet all is well in delusional banking world since their idea of a solution is simply not foreclosing.  What is even worse, these banking crooks are now offering fire sale deals to other banks and hedge fund investors!  I’ve contacted a few banks about short sales and in many cases, preference is being given to “all cash” investors.  Glad those bailouts are supporting the crony banking system.

One of the most troubling trends is the belief that all is well because banks aren’t foreclosing on homes or the fact that there is no second wave.  Really?  Let us look at nationwide foreclosure filings shall we?

Who needs a second wave when the first wave is still in place?  Some in the housing industry seem to be patting their back that there won’t be a second wave of foreclosures (even though it is still high) and base this on the mounting distress inventory with Alt-A and option ARMs but no actual foreclosure filing.  The wave is hitting as people stop paying their mortgage.  Take for example option ARMs.  Nearly 50 percent of all outstanding option ARMs are at least 30 days late.  In other words, the borrower isn’t paying the mortgage!  Yet in some form of twisted abracadabra housing logic, this is avoiding the wave because banks are ignoring the problem.  The wave was the distress.  Foreclosures are still on the market.  The bank balance sheet is still loaded with mortgage junk.  But just because banks are putting their hands over their eyes doesn’t mean the issue was avoided.  In fact, it is corrupt to the core and the way they acknowledge this is absolutely stunning.  The fact that we have no solid financial reform after 2 years of major crisis is incredible.  Banks simply ignoring missed payments while taking trillions demonstrates what has become of our financial system and their idea of dealing with the problem.

Take for example HAMP:

“(Huffington Post) As of the end of January there were over 116,000 permanent modifications and over 67,000 permanent modifications pending final approval,” Geithner wrote in his letter, which the panel received last week. “This group of approximately 180,000 permanent and pending permanent modifications represents about a third of the population of total modifications who have completed the trial modification and are at a point in the process where they are able to convert to permanent.”

HAMP has been an absolute failure.  Yet HAMP is symptomatic of the bigger issue.  Banks were able to raid the entire U.S. Treasury and Federal Reserve for $13 trillion in backstops and bailouts, with no questions asked but then start talking about moral hazard when it comes to HAMP:

“Kucinich was pessimistic about the ability of any program that doesn’t involve principal reductions to help floundering homeowners. “Instead, we’re going to stay on this slow path to default, foreclosure and personal bankruptcy,” Kucinich said. “And our economy is going to continue to suffer.”

He added: “It’s funny that moral hazard is a concept when it comes to Main Street but not to Wall Street,” a reference to the massive bank bailouts.

More than 2.8 million homes were lost to foreclosure last year, according to data provider RealtyTrac. The firm expects a record three million foreclosures this year.”

I’ve talked with colleagues who are Republicans and Democrats and both are absolutely appalled by what is going on with Wall Street and the housing industry.  They have transformed our economy into one giant casino and houses are now life sized Monopoly tokens that are traded on the New York Stock Exchange with no regard to local economies.  Moral hazard applies to the masses yet those rules don’t apply to the plutocracy that sits on Wall Street.  While the stock market soars from the March low by a stunning 68%, job creation is nowhere to be found:

Where are the jobs?  Last month they blamed the snow and now next month, we can expect a big boost because of Census hiring.  That is great that we have thousands working at $16 or $17 an hour with no benefits but then what?  Are we going to do the Census every month?  Most Americans realize that things aren’t as rosy as Wall Street is leading on.  And California is certainly not doing any better:

California Doing a Housing Industry on the Budget

“SACRAMENTO, Calif.—Gov. Arnold Schwarzenegger said Tuesday that he vetoed the largest piece of legislation in a package of budget bills because it did not take immediate steps to cut spending.

Democratic lawmakers said the bill would have shaved $2.1 billion from the $20 billion shortfall projected for California’s budget through June 2011. So far, the Legislature and governor have agreed to just $200 million in spending cuts.

“It’s extremely important that we immediately jump into action and make midyear cuts,” Schwarzenegger told reporters on Tuesday. “We’re spending, right now, $600 million a month more than we’re taking in. It’s irresponsible.”

This came out on Tuesday by the way.  We still have a $20 billion shortfall and are spending $600 million a month more than what is being brought in.  So what does that mean?  It means more cuts or higher taxes.  How is this good for housing?  More importantly, how is this good for the state economy?  If we look at the unadjusted unemployment rate California is up to 13.2 percent unemployment (headline).  We are seeing 23 percent underemployment.  This is something none of us have seen in the modern era.  Yet those in the banking and housing industry are claiming mission accomplished just because banks aren’t moving on foreclosures.  This is their ultimate solution.  Because that is all they have.  This suspension of belief is their idea of avoiding the second wave.  Humor them and take this out to the logical conclusion.

Many Californians are underemployed as we have highlighted.  Those that are employed, can expect tighter wages and higher taxes thus cutting into their disposable income.  So how does this create higher home prices?  Even if banks “trickle” out inventory once that inventory hits the market it confronts the economic realities people have to live by.  That is why when we show examples of short sales they are selling at deep cuts.  Home prices have to reflect local area incomes and what people can afford.  Unless we plan on bringing back toxic waste mortgage sludge like Alt-A and option ARMs, people can only buy what their income can support.

If things are so fantastic in the housing market for California, I’m sure builders are out there in mass right?

Not exactly.  Because there is a glut of housing on the market.  And more importantly, that second wave of housing is sitting on the banks balance sheet.  So they won’t be making construction loans when they realize just how much inventory is really out there.  Just look at the above chart.  Building permits and construction jobs are at the trough.  No visible turn around.  And take a look at notice of defaults and foreclosures:

The only reason the foreclosure number has fallen was because of HAMP (which as we now know is a failure meaning more short sales or foreclosures will hit the market soon because many on trial mods will not make it to permanent modification status).  Whether it is a flood or just a steady trickle, this will happen.  And these homes sell for lower prices thus pushing area prices lower.  This is the next round for mid to upper tier markets.  They have bought some time but it is running out.  Eventually there will have to be some realization of local economic factors.

I was curious to see what industries were adding jobs:

Who will be buying the homes in 2010?  More importantly, why would people be overpaying for homes?  The above chart shows no real improvement in the real economy.  In fact, all the banking industry is doing is stalling the inevitable but at the same time sucking the taxpayer dry.  With the $13 trillion in bailouts and backstops we could have had enough to pay off every single residential mortgage in the United States and taken everyone to Disneyland.  Instead, we are financing the crony banking system full throttle robbery of the American people.

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Filed under: Newsletters, Stocks to Buy, Israel

“For our latest recommendation, we enter into the world of software again with an Israeli small cap: Click Software Technologies (CKSW),” says Vivian Lewis.

The editor of Global Investing says, “Its software lets companies and government entities manage their workforce and customer service by fully integrating call centers, customer relationship management (CRM), scheduling, location tracking, and mobile telephony links with workers in the field and their waiting customers.”

Continue reading Click Software (CKSW): Israeli Firm Eyes Workforce Management

Click Software (CKSW): Israeli Firm Eyes Workforce Management originally appeared on BloggingStocks on Wed, 10 Mar 2010 13:00:00 EST. Please see our terms for use of feeds.

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The sad truth is that most troubled homeowners do not qualify for a trial loan modification. Of these, only a small percentage will receive a permanent modification. Analysts estimate that over 5 million households have underwater mortgages and are struggling with their payments. This represents nearly 20% of all American households. Many of these homeowners are going to lose their houses. The question is how soon can borrowers that foreclose on their homes buy a new home. The answer depends on the type of foreclosure and the extenuating circumstances of your particular case.

Who decides how soon you can get a new home loan?

The answer is the lender and their insurer. Although there is not one central body that sets fixed rules on this issue, there are clear guidelines set by Fannie Mae. Fannie Mae is America’s largest mortgage buyer. You might not even know that Fannie owns your mortgage because “she” does this on the secondary mortgage market. Because this corporation buys such a large percentage of mortgages, lenders will often follow in line with its guidelines.

What are the guidelines?

They can be found in Fannie Mae’s website and documentation. Below I detail the current guidelines, but these can change quite regularly so I encourage you to see them as a ballpark figure and then check for yourself.

How long you must wait after a foreclosure?

The quick answer is 5 to 7 years. However if there are extenuating circumstances the waiting period can be reduced from 3 to 7 years.

What about when you carry out a Deed-in-Lieu of Foreclosure?

It is actually worse; you should expect to wait between 4 to 7 years. However, if there are extenuating circumstances this might be a good option for troubled borrowers that want to buy a new home quickly, as the waiting time is reduced from 2 to 7 years.

What about short sales?

The current waiting period is two years. However, and this is an important point, if you are current on your monthly payments you can purchase a new home immediately. This is a powerful reason to stay up-to-date with your payments if you possibly can.

What are extenuating circumstances?

This refers to the reasons (or excuses) you provide to explain why you cannot pay your mortgage. There are many extenuating circumstances but your bank is only going to accept those you can prove, with documentation, are beyond your control and fall within their list of acceptable extenuating circumstances.

Fannie May will consider death (of a close relative, or partner), illness, job transfer, serious injuries from an accident, and other mitigating factors that dramatically affect your ability to pay your loan and are outside of your control. Unfortunately not being able to afford your payments because the interest rate on your variable interest loan has increased is not considered a mitigating circumstance.

These guidelines can help you make better decisions when trying to find the best choice when foreclosing on your home. Make sure you can prove the financial hardship you are going through and try to work with your lender with an option that will give the best chances of getting a clean start as soon as possible.

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1. Deed In Lieu of Foreclosure, The Last Resort Loan Modification
2. Loan Modification, New Guidelines For California
3. Avoid Foreclosure With A Personalized Home Loan Modification

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1. Deed In Lieu of Foreclosure, The Last Resort Loan Modification
2. Loan Modification, New Guidelines For California
3. Avoid Foreclosure With A Personalized Home Loan Modification

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The sad truth is that most troubled homeowners do not qualify for a trial loan modification. Of these, only a small percentage will receive a permanent modification. Analysts estimate that over 5 million households have underwater mortgages and are struggling with their payments. This represents nearly 20% of all American households. Many of these homeowners are going to lose their houses. The question is how soon can borrowers that foreclose on their homes buy a new home. The answer depends on the type of foreclosure and the extenuating circumstances of your particular case.

Who decides how soon you can get a new home loan?

The answer is the lender and their insurer. Although there is not one central body that sets fixed rules on this issue, there are clear guidelines set by Fannie Mae. Fannie Mae is America’s largest mortgage buyer. You might not even know that Fannie owns your mortgage because “she” does this on the secondary mortgage market. Because this corporation buys such a large percentage of mortgages, lenders will often follow in line with its guidelines.

What are the guidelines?

They can be found in Fannie Mae’s website and documentation. Below I detail the current guidelines, but these can change quite regularly so I encourage you to see them as a ballpark figure and then check for yourself.

How long you must wait after a foreclosure?

The quick answer is 5 to 7 years. However if there are extenuating circumstances the waiting period can be reduced from 3 to 7 years.

What about when you carry out a Deed-in-Lieu of Foreclosure?

It is actually worse; you should expect to wait between 4 to 7 years. However, if there are extenuating circumstances this might be a good option for troubled borrowers that want to buy a new home quickly, as the waiting time is reduced from 2 to 7 years.

What about short sales?

The current waiting period is two years. However, and this is an important point, if you are current on your monthly payments you can purchase a new home immediately. This is a powerful reason to stay up-to-date with your payments if you possibly can.

What are extenuating circumstances?

This refers to the reasons (or excuses) you provide to explain why you cannot pay your mortgage. There are many extenuating circumstances but your bank is only going to accept those you can prove, with documentation, are beyond your control and fall within their list of acceptable extenuating circumstances.

Fannie May will consider death (of a close relative, or partner), illness, job transfer, serious injuries from an accident, and other mitigating factors that dramatically affect your ability to pay your loan and are outside of your control. Unfortunately not being able to afford your payments because the interest rate on your variable interest loan has increased is not considered a mitigating circumstance.

These guidelines can help you make better decisions when trying to find the best choice when foreclosing on your home. Make sure you can prove the financial hardship you are going through and try to work with your lender with an option that will give the best chances of getting a clean start as soon as possible.

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1. Deed In Lieu of Foreclosure, The Last Resort Loan Modification
2. Loan Modification, New Guidelines For California
3. Avoid Foreclosure With A Personalized Home Loan Modification

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1. Deed In Lieu of Foreclosure, The Last Resort Loan Modification
2. Loan Modification, New Guidelines For California
3. Avoid Foreclosure With A Personalized Home Loan Modification

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