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This issue is common in many market places today.  Mortgage lenders will only close/fund up to a specific percentage of the appraised value for refinance and for purchase.  When properties don’t appraise for the value necessary to refinance or the agreed upon purchase price most transactions fall out or cancel.  In the case of a purchase a home buyer could increase their cash down payment or the buyer and seller could renegotiate the purchase price AND your agent could take the five steps listed below.

1. Read the appraisal and look for errors.  Sometimes appraisers undervalue properties because they mistakenly use comps that are not neighborhood comps, sometimes the bedroom or bathroom count is wrong, sometimes the square footage is wrong.  On occasion, other neighborhood information is wrong, such as schools.  All of this data impacts the final appraised value.  If you find errors then dispute the appraisal immediately.
2. If the lender or appraiser refuse to correct the appraisal then ask for a second opinion.  Request that the lender consider a second appraisal.
3.  Once a true appraised value is decided and the value is still lower than the previously negotiated price then renegotiate.  In today’s market your Buyer pool may be primarily FHA buyers who lack cash to make up the difference or the buyer simply does not want to make up the difference.  Work with your agent to renegotiate the purchase price.  While most Sellers want to avoid this tactic the reality is that once you start over again you may face the same appraisal results with a new buyer and by then you may have lost considerable time.
4. Buyers should consider splitting the difference with the seller.  How long have you been shopping for your home?  What will you lose by waiting?  If you have been looking for a year and think the solution is to wait think again – when interest rates that are so begin to increase a waiting buyer could experience a payment increase of up to $200/month on a purchase price of $300,000.  Buyers making a home purchase where they will raise their children will reside in their homes for upwards of ten years which equates to a possible savings of $24,000 in monthly mortgage payments based on today’s lower rates.  So if your appraisal came in $20,000 below your negotiated price work on splitting the difference with the seller.
5. If all else fails, extend contingencies and change lenders.  A new lender, mortgage banker or broker will have their own appraisal process and approved appraisers that could have very different results.
Stay tuned for more tips on completing successful closings in today’s market!

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The Federal Reserve Board issued enforcement actions against four large mortgage servicers            –GMAC Mortgage, HSBC Finance Corporation, SunTrust Mortgage, and EMC Mortgage Corporation–in April 2011. Under those actions, the four servicers were required to retain independent consultants to review foreclosures that were initiated, pending, or completed during 2009 or 2010. The review is intended to determine if borrowers suffered financial harm directly resulting from errors, misrepresentations, or other deficiencies that may have occurred during the foreclosure process. The servicers are required to compensate borrowers for financial injury resulting from deficiencies in their foreclosure processes.       

           If you had a mortgage loan on your primary residence and believe you were financially harmed during the mortgage foreclosure process by any of the four servicers in 2009 or 2010, you can request an independent review and potentially receive compensation. The four servicers are required to make the independent reviews available to borrowers as part of their compliance with the April 2011 enforcement actions.        

           A number of servicers supervised by the Office of the Comptroller of the Currency (OCC) are also required to conduct independent reviews. (See below for the full list of servicers.)       

           Eligibility for Review       

           Borrowers are eligible for an independent foreclosure review if        

  •             the property securing the loan was the borrower’s primary residence;         
  •             the mortgage was in the foreclosure process (initiated, pending, or completed) at any time between January 1, 2009, and December 31, 2010; and           
  •             the mortgage was serviced by one of the following mortgage servicers:         
              America’s Servicing Company                          Countrywide                          National City           
              Aurora Loan Services                          EMC                          PNC           
              Bank of America                          Everbank/Everhome                          Sovereign Bank           
              Beneficial                          GMAC Mortgage                          SunTrust Mortgage           
              Chase                          HFC                          U.S. Bank           
              Citibank                          HSBC                          Wachovia           
              CitiFinancial                          IndyMac Mortgage Services                          Washington Mutual           
              CitiMortgage                          Metlife Bank                          Wells Fargo           
                                                                    Wilshire Credit Corporation           

           If you previously filed a complaint with these servicers about foreclosures pending during the review period, you may still seek an independent review of your foreclosure.        

           There are no costs associated with being included in the review; the review is a free program. Beware of anyone who wants payment to assist you in connection with the independent foreclosure review or any other foreclosure assistance program.       

           Review Process       

           Information about the review process, including how to request an independent review, is being provided in mailings to borrowers who may be eligible for a review. Those mailings began November 1, 2011, and should be completed by the end of the year. Assistance and answers to questions about the process and borrower eligibility are available at 888-952-9105, Monday through Friday from 8 a.m. to 10 p.m. (ET), and Saturday from 8 a.m. to 5 p.m. (ET). Individuals can also get more information about the review through a website set up by the servicers, www.IndependentForeclosureReview.com  A list of Frequently Asked Questions and Answers are available on the website.        

           Individuals will be sent an acknowledgement letter from the review administrator within one week after their request for an independent review is received. Individuals will be notified in writing of the results of the review. Because the review process will be a thorough and complete examination of many details and documents, it could take several months to complete the review.         

           Rust Consulting was selected and hired by the servicers to serve as the central administrator of the independent foreclosure review. Rust Consulting will notify borrowers, receive requests for a review, and respond to questions about the independent foreclosure review process.          

           Deadline to Request a Review       

           Requests for review by the servicers’ independent consultants must be received by April 30, 2012.  Borrowers are encouraged to carefully consider the information about the review program to determine if they are eligible to participate.         

           Federal Reserve’s Role       

           The Federal Reserve’s role is to ensure compliance with the enforcement actions issued in April 2011. As required by those actions, independent consultants will conduct the reviews of foreclosures and determine whether errors, misrepresentations, or other deficiencies resulted in financial injury. The Federal Reserve will monitor the independent foreclosure review process and the servicer’s outreach efforts.       

           Related Links       

Federal Reserve Board announces that borrowers from four mortgage servicers can request an independent review and potentially receive compensation

Interagency Review of Foreclosure Policies and Practices

OCC’s Correcting Foreclosure Practices

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8 things you should know about down payments.

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Not all homeownership expenses are tax-deductible.

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Obama Pledges to Refinance Millions of Mortgages at Today’s Rates

By: Carrie Bay 09/08/2011

Housing got only a brief mention in President Obama’s highly anticipated jobs speech Thursday night. But it was a pledge that some pundits say is finally a step in the right direction. Others say it’s likely to have little impact.

Obama told Congress that his administration is going to work with federal agencies to refinance millions of homeowners’ mortgages at today’s record-low rates.
With those rates now near 4 percent, the president says the move could “put more than $2,000 a year in a family’s pocket, and give a lift to an economy still burdened by the drop in housing prices.”

While the specifics have not been released, it’s expected that the program will make homeowners with government-backed mortgages eligible for new, lower-rate, lower-payment loans even if they are underwater or have bad marks on their credit as a result of financial hardship.

The Congressional Budget Office (CBO) released a paper just one day before Obama’s speech outlining the impact of such an extensive refinance program.
The agency analyzed a “stylized large-scale mortgage refinancing program” that would relax current income and loan-to-value restrictions for borrowers who wish to refinance and whose mortgages are backed by Fannie Mae, Freddie Mac, or the Federal Housing Administration.

CBO concluded that the specific program analyzed is estimated to lead to an additional 2.9 million mortgage refinancings, resulting in 111,000 fewer defaults on those loans and estimated savings for the GSEs and FHA of $3.9 billion on their credit guarantee exposure.

Offsetting those savings, however, CBO says federal investors in the mortgage-backed securities holding those loans – including the Federal Reserve, Treasury, and GSEs – would experience an estimated fair-value loss of $4.5 billion.
Based on these figures, CBO says the estimated cost to the federal government for a refi program of this magnitude would be $600 million.

For private investors, the costs run significantly higher. CBO says they would experience an estimated fair-value loss of $13 to $15 billion. Most of that wealth would be transferred to borrowers, the report notes.

CBO concludes that the benefits of a 4-percent-rate, government-led refi boom would be “small” relative to the size of the housing market, the mortgage market, and the overall economy.
DS News

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Culver City FHA Approved Building

 

GREAT OPPORTUNITY FOR FIRST TIME HOME BUYER OR AN INVESTOR LOOKING FOR AN EASY PROPERTY TO LEASE AND MANAGE.

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Dear Liz: We just refinanced our $100,000 mortgage into a 15-year fixed-rate loan at 3.75%. We have an extra $500 a month and want to know what we should do with it. Should we use the money to pay off the mortgage early, increase the contribution to my 403(b), or start a rainy day fund and try to save up to three months of my take-home salary? I’m 44, my wife is 35, and we have three kids ages 5, 3 and 9 months. I would like to retire in 16 years.

Answer: At least two of your children won’t be through college by the time you want to retire, so you may need to rethink your plans unless you have an exceptionally generous pension or a lot of money saved in that 403(b) already……

Click here for the entire article

Money Talk: What to do with extra money from refinancing a mortgage – latimes.com.

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