Do you have a neighbor who seems to only mow the yard when it has grown so high they can't find their car that's parked on the lawn?
Someone who has a boat parked in the driveway that hasn't seen a body of water in years?
How about a house with a broken fence or siding with peeling paint?
A neighbor who doesn't maintain their home brings down the value of the whole neighborhood.
Most municipalities have an office that is in charge of enforcing neighborhood preservation. Usually, all it takes is a phone call and an inspector is dispatched to the offending address for an inspection. Once a homeowner is cited, they city or county then gives the owner a certain period of time to clean up their act or be fined. In most areas, the inspector will return to ensure the problem has been rectified, or will take further action against the homeowner (such as the City mowing the yard and then sending the homeowner a bill).
In the Hampton Roads area, the following City offices handle complaints. Complaints are made anonymously so do not worry about retaliation from a fellow neighbor against you.
Virginia Beach: Department of Housing and Neighborhood Preservation, Code Enforecement: 757-385-5750
Whether you are relocating to Norfolk, Virginia Beach, Chesapeake, Portsmouth, Suffolk, Hampton or Newport News, we can help! Contact us today for your FREE no obligation relocation package for the Hampton Roads, Virginia area. Our relocation package includes an area guidebook, maps, information on area attractions and much more!
This seems to be THE NUMBER ONE question I get. Unfortunately there are several answers and which is correct for you depends on the Circumstances. I will address the common scenarios in this article.
Policy in my office is to never "tell" - as in "instruct" - our borrower client to pay or not to pay their mortgage. Paying or not paying has a lot of collateral effects and the borrower needs to know what they are before making the decision. We don't make the decision for the borrower (our client) because the effects of paying or not paying are not going to affect me - but they will affect the client, so it is the client that must make the final decision.
Let me make one issue clear - when we are hired to help facilitate a short sale or loan modification it is far easier for us to negotiate with the lender if the payments are late, but it is almost never a requirement. The exceptions to which will be discussed later in this article. Additionally, internal rules change at the banks constantly. A new client came in totally frustrated. They called their bank to help with a modification and the bank said they could not address their situation until they were at least 60 days late. So the near perfect (800+) credit score couple stopped paying for 60 days and then called the bank back. Now the bank says that because they are 60 days late they cannot speak to them about a modification! The point is, if you don't have to be late then why voluntarily create a late payment credit history that will adversely affect your credit-dependent life almost immediately and for years to come?
SO LET'S GET INTO IT - Danger - this is a long article and it covers a lot of ground!
Short Sale:
A borrower that is current and contemplating a short sale wonders if they should stop paying their (first) mortgage. They are upside down and until now they have been current. However they are paying the mortgage at a cost of not paying other bills. (Other or different facts may be that they are paying all their bills but taking the money from savings or a pension fund to make those payments, or they are borrowing money from another equity loan).
Generally, it is not a good idea to get into debt to pay your mortgage, unless you have a solid plan to both (i) keep the mortgage current and (ii) repay the additional indebtedness you are creating. It is not like taking from one pocket to put into another - it is more like taking from someone else's pocket to pay your bills. This would include credit card loans as the source of funds. It all has to be paid back, so if you don't have a plan to pay it back, don't borrow it in the first place! You are only digging a bigger hole for yourself and making it harder to get out of the hole.
If you are taking from your pension or savings money, again you better have a rock solid plan to get that money back into those accounts, or there is no sense in giving up that hard earned and usually irreplaceable retirement money, especially considering these are monies that are usually protected from creditors' judgments including those your mortgage lender could obtain (deficiency judgment)..
Of course the "amount" of money you have "in reserve" comes into consideration. If you have 2 million dollars in reserve and you decide to spend 10% of it to keep the loans current until you can short sale the property, that plan has a basis that the 10% is not going to make a difference in the way you run your life over the remaining time you have left as a mere mortal.
Sometimes, but rarely, we run into a lender that says they won't approve a short sale or modification because the borrower is current with his payments. When we have encountered this it is in most cases associated with a government backed loan, (but later on we will show you why this may be motivated by plain greed on the part of a loan servicer). A properly compiled financial snapshot of the borrower should show why they are current and what will happen if the short sale or modification is not approved.
Your decision on how to proceed should be based on what goal you are trying to accomplish and how you plan to get to that goal (see how to determine your goal).
Mortgage Modification:
Apart for some voluntary government programs regarding (Fannie Mae or Freddie Mac) government involved mortgages, I know of no lender that absolutely will not deal with a borrower who is current with their mortgage payments. Lenders deal with all sorts of situations and "absolutely not" is just not in the vocabulary. A typical borrower calling a lender may hear that they must be late, but that is more of a "vetting" statement than an absolute policy.
The exceptions are some government program guides for modification. The first step to seeing if your loan comes within this exception is to see if it is a Fannie Mae or Freddie Mac loan. You can do this online at the Making Home Affordable site. Many servicers and lenders whose loans are not "government backed" are now choosing to follow this government plan (known as the Home Affordable Modification plan or more affectionately called the "Obama Plan" - see below) for the simple reason that they are being compensated by the government for each successful modification they execute within its guidelines, and either the servicer or lender receive a residual bonus for the loan staying current under the modification. In these cases we have seen non-government backed loans insist on the borrower being late to qualify for modification as well. What is confusing on this point is that when the plan was introduced it included modifications (and compensation for such) for current loans as well. However, we are told time and time again from the lenders directly that they must be late to qualify. There is no such rule in the guidelines.
While this is contrary to what has been published by the government about the plan, keep mind that following the plan and any of its various aspects is entirely voluntary and up to the Lender or servicer. They can pick and chose from this plan as they see fit for their own internal reasons. Here is a more interesting twist - a servicer that modifies a delinquent loan is paid more under this incentive plan than if the borrower were to modify while the loan is current! If the borrower is current, the servicer can receive up to $3,500 in incentive fees from the government. If the borrower is delinquent, the servicer can receive up to $4,000 in incentive fees from the government. Thus it seems that it pays ($500 to)the servicer to encourage a borrower to be delinquent!
We often see a client that fits the profile for modification under this government plan. Some of these plans are said to require that to be qualified the borrower must be late 60 days (see Guidelines page 5 at bottom). But in fact, being late is not a requirement, but only one factor of many (see Guidelines page 16 at the top - "However, a NPV (net present value) positive result is not necessary to qualify a loan for a Home Affordable Modification"). If the goal is to qualify under such a plan as put in place by the lender at that time, then to accomplish that qualification the borrower may need to make themselves late, but that cannot be determined in a 2 minute telephone call with a lender representative. I cringe when we go this route because just like these "plans" came into existence, I can see them change the plan thus leaving the now 60 day late borrower with ruined credit scores that occurred needlessly.
Generally about a quarter of our modification clients never go late and still get a modification offer from the lender. However, keep in mind that nearly all lenders put up as their first line of defense the policy that going late is a necessity to qualify. We can only speculate this is done to deter the enormous inflow of loan modification requests from borrowers that would come in if this was NOT said to be a requirement. It also helps address those in the most dire amount of need first.
The Pro's and the Con's:
The general rule of thumb we use is if you can pay your mortgage and maintain your life's necessities, you may consider keeping the loan current, taking the points in this article into account. However, if you need to choose between buying food or medications and paying the mortgage, the decision that should be made is clear: your life necessities take precedent.
Here are the pro's to consider when in the short sale or modification process. Keeping the loan CURRENT has the following benefits:
a) Your credit score is not dinged until the short sale transaction occurs (and not at all in most loan modifications) and your overall credit score reduction will be minimized, and b) You will remain in good standing with your lender without worry of penalties, fines, or a foreclosure.
The "con's" of keeping the loan current are that:
(a) You will be out of pocket for the monthly mortgage payment (monies which you may or may not need to survive), and
(b) Your lender may question the sincerity of your claimed hardship, and you may be spending funds that would otherwise be potentially (but rarely) forgiven by the lender. In addition, occasionally the lenders in a short sale may require a lump sum payment above the sale amount from the borrower to forgive the debt. Coming up with that money is sometimes the difference between a deal or no-deal. If you can put your mortgage payments aside and stockpile them, it will help you cover that potential lump sum.
A similar pro/con approach applies to GOING DELINQUENT with your mortgage. In favor of going late is being able to keep the unspent mortgage payments in your pocket (or applied towards other necessities as the case may be) in which event your hardship may appear more sincere to the lender. On the other hand, there are very real consequences to going late with your mortgage payment:
a) You WILL incur late fees and other penalties on the late interest. Usually this is not a large issue as it is part of the forgiven debt in a short sale and usually forgiven in a modification, but it is something to consider,
b) Your credit score downgrade will be harder as you will compound the short sale hit with a 30 day late, 60 day late, etc, (and if this is a modification you will make a non-negative credit score event turn into a negative credit score event), and
c) You will eventually cross a threshold (typical industry standard of 90 days late) where the lender will initiate a foreclosure action in State court.
Going Late on Your Second Mortgage:
Often a borrower comes to us and says that they are late on the first mortgage but current on the second mortgage. The second mortgage is almost always totally upside down with no equity left in the property to secure that financial obligation. The borrower says they paid the second mortgage because they had the money for the smaller payment (second) mortgage but not the larger amount first mortgage. Our answer - if you don't pay the first mortgage they are going to foreclose it and then paying the second mortgage is not going to save your house.
Lately we have seensecond mortgage lenders with 90 day late mortgages skipping the foreclosure process (since if they cause a sale of the house it is sold subject to the first mortgage, and thus any buyer still has to pay the first mortgage, which usually makes no economic sense). Instead the second mortgage lender sues the borrower on the promissory note only and gets a money judgment that they can keep for a long time (20 years in Florida).
So if a client says they are paying the second mortgage but not the first mortgage, we usually suggest they look at the common sense approach and what are they likely to gain or lose by doing so.
Effect of Non-Payment / Late Payment on Credit Score:
This is a big question and nowhere is the answer clear cut. Definitely if you get a report on your credit that you were "late" (in mortgages that means 30 days or more late) then your credit has been "dinged" and your credit score is adversely affected.
Credit scores are used for many purposes, including the amount of credit you can get on a credit card, the interest rate you get on credit cards, car loans and mortgages, your ability and price of life and disability insurance and even car or house liability insurance, your ability to get a certain type of job, or to establish business relationships, and your ability to rent a place to live, to name a few. So credit scores are important. If you want to better understand credit scoring you can see the Federal Reserve Board's Report to Congress from April 2008.
How much your credit score is affected by a 30, 60 or 90 day late report depends on a lot of other factors about your financial well being, your past credit history and myriad other issues. Generally though we have our clients reporting drops of as little as 50 points for a no late payment short sale or up to 150 points for a short sale with multiple late payment reports. We have seen an 800 go to 720 and we have seen a 740 go to 500. It all depends on too many uncontrollable credit issues to be able to give a formula that works for everyone. For a discussion on credit scores this our past article.
Confused?
Rightfully so. The fact of the matter is that we are in uncharted waters and there is no industry standard for Short Sales or Loan Modifications, which makes pinning down exactly what the Lenders may do near impossible. Pile on the fact that there are a large number of lenders out there and each have their own internal policies which change as readily as the tides. The best anyone can hope to do is make an educated decision, set a plan, and be ready for anything.
Copyright 2009 Richard P. Zaretsky, Esq.
Be sure to contact your own attorney for your state laws, and always consult your own attorney on any legal decision you need to make. This article is for information purposes and is not specific advice to any one reader.
Why: REBarcamps are great events where industry experts around the nation gather to participate in Learning, Sharing, Networking and Motivating. Expect a highly anticipated Engaging and Fun event to improve our overall success in our business.
If you, or someone you know, would like to get their company name out in front of lots of industry professionals, please let us know! WE NEED SPONSORS! For just $250, sponsors get great exposure on the website, on Facebook, Twitter, emails and more.
Earlier this week, I had an IRL conversation with the lovely Lisa Sanderson (IRL = "In Real Life" for those of you not using Twitter). While the purpose of the call was a referral I had for the Poconos area, as typical females, we ended up going way outside the subject at hand and on to other things.....
"So, Lisa, how do you like Better Homes and Gardens Real Estate?" I asked. (As you may or may not know, the Better Homes and Gardens real estate franchise is coming up on it's 1st birthday this August.) Lisa's response, "I love it and here's why........"
After telling me about the great technology and gushing about the company philosophy, Lisa mention Sherry. Sherry - as in Sherry Chris, the CEO of BHGRE. Sherry - as in @BHGRE_Sherry on Twitter. Sherry - as in a presence at virtually every RE Bar Camp and Real Estate Conference this year.
If you are active in social networking in real estate, you probably know Sherry. She probably follows you on Twitter, Facebook, LinkedIn, ActiveRain, etc. If you have attended real estate conferences, you have probably seen her mingling at the after-party. She isn't loud, she isn't boisterous.....she's just....a presence. She is also the only large-brokerage CEO I can name (besides the one at the company where I work).
In just one year, Sherry has been able to put BHGRE on the map in part through networking and engaging with agents throughout the country. Rather than sit back in a plump leather chair in a big corporate office, she is out networking, mingling and getting to know the agents, the "worker bees".
So, while the other large-brokerage CEO's are sitting at their desks trying to figure out how to make the indians work harder for less of a split so the chiefs can keep their jobs, Sherry Chris is out meeting their agents and engaging with them. Who do you think is doing a better job of connecting with the agents?
Here's a little quiz, besides your own company, how many brokerage CEO's can you name?
Welcome to 3308 Brighton St. in the convenient Westhaven area of Portsmouth. This cape cod features lots of "new", including: new roof, new hvac, new hot water heater, new windows, new carpet new kitchen and much more! Seler will pay all of buyer's closing costs.
Yes, I know what you're thinking - "But it's on a Friday, and I have soooooo much to do to prepare for the weekend. Buyers ready to take a second look at the house their considering, meetings with sellers, getting ready for the final Spring-time push as schools start to close and parents are preparing to move this Summer."
And that's EXACTLY why you should take time for your day to attend REBarcamp-SLC on Friday. Huh?
Check out what these attendees from the REBarcamp-Phoenix had to say:
http://rebarcamp.com/phoenix
Need more convincing, well, as Dale Chumbley put it -
It's the middle of the Spring and you're busy (woohoo!). But, like every good business owner, you have to continue to develop your own knowledge and business with fresh ideas. What do you do when the phone rings on Thursday evening or Friday morning while you're on the way to the day's event and someone needs your help?
Here's what Dale suggests you tell your clients:
Thank you for the call, I’m happy to help you. Unfortunately, I’m already scheduled full on Thursday (every other professional in the world does it, why don’t we?). However, I’m available this weekend of Monday. Which works better for you?
Beautiful!
You owe it to your business, your clients, and yourself to make this the "boulder" in your time schedule.
Need more convincing? Check out the real-time conversations on Twitter from agents and the topics that have been covered in other recent REBarcamps, including links to more about the presentations and learning sessions:
If you're serious about learning and building your real estate practice, then this is a MUST! This is a free event - you just need to register and the rest is up to you. I'll see you in Salt Lake City.
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Follow the the REBarcamp-Salt Lake City events on Twitter:
Violating this act can result in fines of up to $2500.
Many agents think that Miss Utility needs to be called to mark utility lines on when installing a post sign. Apparently, that is not true.
The SCC is also including the small metal framed signs that you push into the ground with your hands! They feel that the installation of temporary signs falls under the definition of “excavation” which is prohibited without the proper utility markings.
There is an exemption to this rule! The HOMEOWNER can install the temporary sign without calling Miss Utility first.
To read an article from the Virginia Real Estate Board regarding this issue, click here.
Cartus relocation company is a CROC! (that is an opinion, for more opinions Google Cartus sucks).
Actually many "relocation" companies that are supposed to help the employee are just fronts for making profit. And they have such a compelling pitch! How could an eligible buyer actually decide to bypass them?EASILY!
I'll explain exactly why you might want to bypass your relocation company AND how you can use PART of their system to your benefit and ditch the other part.
Why am I picking on Cartus? Cuz I was robbed. I got this email the other day:
Hi, I'm moving to Virginia with my job in a month and my fiance and I are a big Frank fan! {Name Omitted} recommended you to us. We love the website and reading/listening to your blog. And, we'd like to go with your realty firm when we purchase a place in Northern Arlington this summer. Fortunately for us, my company (XYZ) is willing to pay Realtor's fees and closing costs but I need to approve you as a realtor/realty before they will allow us to get started.
I added the emphasis.
1)Fortunately for us. Wow, the company is so gracious. They really care about their employees. Consider it a benefit like healthcare. They will pay Realtor fees and closing costs! (end sarcasm here)
Ok, first of all when you are buying, there are NO "Realtor fees" (sidenote: ha, I wonder if they pay for the bogus Realtor Admin fees which the Washington Post, link, just covered and cited my blog) per se because the Realtor fees are paid by the buyer. But it surely makes for a good BS pitch in the brochure. Why not also add: free keys! As for the "closing costs" I'll get to that shortly...
2) Approve you. Approve me for what? Make sure I'm good? Knowledgeable with people that are relocating? Maybe a quiz or a check for references? No. None of this happened.
I knew the "approve" the agent sounded fishy. I warned the buyer... I said "I bet they are up to something."
Finally Cartus contacts me. I get an email that effectively said: You are approved when you agree to give us 40% of your commission. (actually it said "registration entails a verbal agreement of a 40% referral fee.")
Are you F-ing kidding me? "Referral fee?" Did they refer business to me? Hell no. These buyers found me on their own. They were a personal reference from a friend that felt like they got great service. And Cartus demands 40% to be part of their program. What is this Robin Hood? Take from one to give a another? And keep a little for profit in the process?
So here are the details for their program, I am a fine print reader, so at the end I will try to parse this out for you.
CARTUS HOME PURCHASE CLOSING COSTS
There are numerous expenses associated with the purchase of your new home that vary by state and local custom. You will be reimbursed for buyer’s expenses customary in the new location; which should be discussed with your Cartus Relocation Consultant.
In all cases, only one set of lending fees and one-time closing fees will be reimbursed. Fees and charges most commonly recognized for reimbursement are:
Abstract or title search, Amortization fee,Application fee, Appraisal fee (1), Attorney fees (where required by state law), Certified copies,Credit report (1),Document preparation fee,Escrow fee, Guarantee fee,Inspections that are normal and customary for the area (termite, well/septic),
- Loan origination fee not to exceed 1% of the mortgage amount. If you do not contact Cartus prior to beginning the home purchase assistance program, you will not be eligible for the 1% loan origination fee.
Homeowners title policy for new construction only, Lender's Title Policy,Messenger service fees/express shipment fees, Notary fees,Recording fees,Settlement or closing fee,Survey, Tax service fee, Title examination, Underwriting fee
Isn't it fun making a really long list of fees that are paid? Even though many of them are next to nothing. I just pulled up a HUD1 for a buyer (note that fees can vary by closing company and frequently get renamed and shuffled around).
Here are a few of the next to nothing fees on the list that you get FREE!!: Notary Fee= $0, Messenger= $55, Tax service fee $0, Recording $65, Termite $35, Credit report $14, Title examination=$0.
The fees that have some real value: Survey= $265 Settlement fee=$195 Title Search=$175 Lender's title insurance=$1,800 (on a $650k VA home, reissue rate) NOT present in the list of closing costs: Owner's title insurance= $1350 (except for closing costs) Read more on Owner's Title
Conditional costs. Ie IF, a big IF, you use their "approved" Realtor.You get: Loan origination fee 1%. Lenders have a ton of names for these types of fees. Sometimes they are called "Rate buy down" points, or "Discount Fee." The short hand is just "points." Points aren't necessarily bad (make sure to subscribe to this blog for a full post on when to buy points). More often than not, if you put down 20% there are ZERO POINTS, ie $0 Loan Origination fees. So if you DO use the Cartus program, and an "approved" Realtor, make sure you go out of your way to max out the full 1% point. (ie if the lender was going to charge you no points, they can make up the fee and buy down your rate, as in make your 5% rate 4.75% approximately)
But here is the fine print as I understand it...
BOTTOM LINE: You only have to use their approved Realtor IF you need that Loan origination fee. In other words, you can still pick your favorite Realtor and get all the other fees covered for free by Cartus. (I could be wrong, but that is how I understand their rules above).
Why in God's world would you give up the ability to get a "free" 1% loan origination fee?
Well that is a separate and lengthy discussion on rebating and discounting. Heck, there are several companies that will give you a 1.5% cash rebate. Heck a 1.5% cash rebate is MUCH better than no cash reimbursement for a 1% fee you might not have purchased normally.
WAYS TO MILK CARTUS
1) Have them pay ALL your fees except the 1%, and find your own Realtor that will give you a rebate.
2) Or if you find a Realtor that is willing to be "approved" by Cartus, tell them "hey buddy, you are willing to give 40% to Cartus right? And Cartus will just turn around and refund 33% (1% or 1/3rd of the 3% offered to buyer's agents) of the 40% in the form of a 1% loan rebate, why not just give me the 40% directly?! Cut out Cartus and get 1.2% refunded on your HUD1 vs 1% lender fee repayment and Cartus pocketing the rest.
3) Get your own un-approved agent, skip the loan fee reimbursement, yet accept all the other fees. So why am I telling you the secret path to getting the most cash out of the relocation company and system? Well maybe, just maybe you will then believe me that #3 above might be the best solution for you in the end.
Stop and think about for a second. Cartus demands 40% from a Realtor that you pick or one that they pick. So for the ones that they pick, what kind of Realtors will accept that? Oftentimes desperate ones. Perhaps those that are kinda struggling. You know, economy is tough right now. Weekend warrior Realtors that have nothing better to do? One that will pressure you into a house and hope to get you off their slate as fast as possible so they can make the next 60% deal from Cartus. Perhaps they have to cut down half the time they spend on you, to make it worth it.
So signing with Cartus with an "Approved" Realtor, is not much different than Rebating. I have no problem with the rebating business model. (note: you won't find many other non-Rebating Realtors talk about it openly).
In the end, know you do have a choice. You can get the best of both worlds. You can get Cartus to pay a good amount of your closing costs, get a loan with NO loan origination fees, and get to pick an agent that is working for YOU, and not for Cartus.
ps. My experience was on the BUYING side. Can somebody comment on the SELLING side of relocating? Do they really buy the house at the appraised price and eat any subsequent loss? Now that seems to have some value in this market.
Disclaimer: ActiveRain Corp. does not necessarily endorse the real estate agents, loan officers and brokers listed on this site. These real estate profiles, blogs and blog entries are provided here as a courtesy to our visitors to help them make an informed decision when buying or selling a house. ActiveRain Corp. takes no responsibility for the content in these profiles, that are written by the members of this community.
Do you have a neighbor who seems to only mow the yard when it has grown so high they can't find their car that's parked on the lawn?
FREE Concerts every Wednesday this summer on the Sandler Center Outdoor Plaza at Towne Center in Virginia Beach!
Agents beware!
;)
;)
