South Atlanta Househounds

Halloween conjures up images of the boogeyman and these days the big scary snarling beast is foreclosure.  According to the AJC the value of property entering foreclosure in the Atlanta Metro area in November is $1,076,975,783.  That represents 6,809 properties in 13 counties around Atlanta, many here in South Atlanta.  In October in Henry County we had over 400 foreclosures.  With the increase in foreclosures we also have to increase our foreclosure vocabulary.  Have a seat class, here are some of the new terms you may see and what they mean.

• Short Sale -  A sale of a house where the proceeds fall short of what the owner still owes on the mortgage.  Some lenders will accept the shortsale and forgive the rest of what is owed on the mortgage. 
• Deed in Lieu of Foreclosure – A potential option taken by a homeowner to avoid foreclosure under which the mortgagor deeds the home back to the mortgage company in exchange for the release of all obligations under the mortgage. 
• Short Refinancing – The refinancing of a mortgage by a lender for a homeowner currently in default on their payments.  This is done to avoid foreclosure and the new loan amount is less than the outstanding loan and the difference is typically forgiven by the mortgage company. 
• REO (Real Estate Owned) – Property owned by a mortgage company or bank that was foreclosed on and taken back after an unsuccessful sale at the courthouse steps.   The minimum bid taken at the courthouse steps is equal to the outstanding loan amount, the accrued interest and any fees associated with the foreclosure. 
• Predatory Lending – Actions of a dishonest nature carried out by a mortgage company to entice, induce, and/or assist a borrower in taking a mortgage that carries high fees, a high interest rate, removes the borrower of equity, or places the borrower in a lower credit rated loan to benefit the lending institution.  Georgia as in most states has anti predatory laws, but an informed consumer who is more financially literate and shops around for a mortgage is unlikely to be taken advantage of. 
• Resetting Mortgage – If you have an ARM (Adjustable Rate Mortgage) the mortgage rate will be reset.  Some are based upon an index and will reset annually.  Some mortgages carry “Negative Amortization” and are written to give the homeowner the ability to make minimal payments for the first several years but once the initial period is over payments could double.  Other interest only mortgages were interest only for the first few years, with no reduction in the original loan balance and now payments can jump by 50%.

 All news is not bad news however.  Currently many mortgage companies are using “Loss Mitigation” to keep homeowners in their homes instead of foreclosure.  More and more we’re seeing a shortsale or deed in lieu of foreclosure which is much easier on the homeowners credit than a foreclosure.  The mortgage industry is working hard to eliminate loan fraud and predatory lending.  On the other side of the coin there are plenty of opportunities for buyers seeking either investment properties or homes for themselves. 

I got a phone call from a past client who has a ARM (Adjustable Rate Mortgage) that is about to reset and his payments are going through the roof.  He asked me if I know about all the stuff on the news and what it really meant.  I did some digging and found that most of the hubbub really comes down to two programs.  The first is the “Hope Now Alliance” program and the other is “FHA Secure”. 

Hope Now Alliance

The Hope Now Alliance is a group of private companies and the government working together.  They want a five year freeze on interest rates for those who can now afford to keep paying their mortgages, but would be at risk of foreclosure if their adjustable rate mortgage ballooned at the next reset point.  This group is very new… they are only taking baby steps at this point.  The website is http://www.hopenow.com/ but it is not overly helpful yet.  One of the key factors for this program is that it’s only available to those who ASK for it.  So if you don’t contact your lender, someone through the website or call 1-888-995-HOPE then you won’t get any additional information.  If you do contact the number you will be matched up with a HUD approved credit counselor who will help you begin the process. 

FHA Secure

The Federal Housing Administration (FHA) has a program called FHA Secure which gives homeowners with Non-FHA Adjustable Rate Mortgages (ARMs), current or delinquent and regardless of reset status, the ability to refinance into a FHA insured mortgage.  FHA Secure is part of the underwriting process and not an actual loan program.  That means you need to refinance your mortgage to see if you qualify.  With FHA Secure the lender will not automatically disqualify you because of delinquent status on your loan.  Here are the qualifications for the FHA Secure:

• 3% equity in your home
• Sustained employment history
• Your income must meet qualifying guidelines
• You must have a history of timely mortgage payments before the ARM reset
• Your ARM must have reset between June 2005 and December of 2009

If you would like more information about the FHA Secure Program you can visit the FHA FAQ at http://www.fha.gov/about/fhascusqa.cfm.  I can’t tell you who to talk to for your mortgage needs but I can give you a couple folks that I trust and you can use them if you wish.  Travis Evans with Brayden Capital at (404) 713-8662 or Ebony Hairston with First Service Mortgage at (404) 767-1111.  They are both knowledgeable about these programs and can be a source of good information if nothing else.