South Atlanta Househounds

“If one morning I walked on top of the water across the Potomac River, the headline that afternoon would read:  “President Can’t Swim.”"

 ~Lyndon B. Johnson

Good News?  Really? 

From swine flu, global economic meltdown to the housing bubble busting the news likes to keep us in the know about what scares the daylights out of us.  It’s hard to find the good news and we actually do have some good news in Atlanta. 

We’re Continuing to Grow 

Some items we learned from the U.S. Census Bureau’s latest report.

• Last year, 114,989 new people moved to the Atlanta metro area, which consists of 28 counties.
• The Atlanta metro area is now considered the eighth-largest in the country. We moved up one spot, jumping ahead of the Washington, D.C., metropolitan area.
• From 2000 to 2008, the Atlanta area added 1.13 million people. We were second only to Dallas, which added 1.14 million people.
• Fulton County has now surpassed the 1 million population mark —- and the rest of metro Atlanta keeps growing too, despite the slowing economy
• Census projections show Georgia could gain about 4 million people by the year 2030.
• In terms of percentage population gain, cities in the South took the lead nationally, with eight of the 10 fastest-growing cities.

We’re a Hard Working Group

Atlanta continues to be viewed as a place of great opportunity.  All these facets of Atlanta’s diverse economy will continue to drive our long term economic growth. 

• Metro Atlanta saw a net growth of 55,000 jobs last year.
• Consistent job gains among small companies has been the growth engine for the region.
• Atlanta currently ranks third in the nation in the number of Fortune 500 companies headquartered.
• In 2008 Atlanta placed sixth in Forbes’ ranking of “Best Places for Business and Careers.”
• Atlanta has the largest concentration of federal agencies outside of Washington, DC.
• Atlanta’s transportation infrastructure includes the busiest airport in the world, the largest highway system in the South, and extensive freight and passenger rail lines.

Lots of Folks Are Moving to Atlanta

U-Haul just named Atlanta the number one destination in the U.S.  Atlanta took the number one spot for a second year in a row.  Houston moved up to number two from number eight last year and Los Angeles rounded out the top three spots.   Here is the list of the top 10.  You can find the top 50 cities on the U-Haul website. 

1. Atlanta, Georgia
2. Houston, Texas
3. Los Angeles, California
4. Las Vegas, Nevada
5. Denver, Colorado
6. Portland, Oregon
7. Chicago, Illinois
8. San Antonio, Texas
9. Austin, Texas
10. Orlando, Florida

Note: Our goal is to become the best real estate resource for all of
South Atlanta – Henry, Clayton, Spalding, Butts, Rockdale, Fayette and surrounding counties. The ideas in this blog are our personal opinions and subject to market uncertainties. Should we ever be able to assist you with any of your real estate needs, please give us a call at any of the numbers to the right or call our main line at (770) 769-8000.

It use to be where a hand shake and a person’s word was how a deal got done… especially when you were talking about a rental property in South Atlanta.  There was no paper trail or deposit money needed in order to rent a property.  Ahh… the good ole’ days.  These days we need to submit an application fee, deposit, credit check, reference check, previous landlord reference check and list just seems to go on and on. 

But what about when you don’t have to jump through those hoops?  What if there is no checks and balances?  Well… your Spidey senses should be tingling! 

We know a very nice lady at church that just told me her story.  After looking through 50 plus rental units they finally found not just a house, but a house that was more then she could have imagined.  The rent was way less than any of the other rentals in the area, the square footage was nearly twice what she was looking at in her price range and it was in a private, gated community in McDonough.  She and her husband signed a year lease agreement, paid 2 months of deposits and also put down 3 months worth of rent in advance.  Within 45 days she had an agent knocking on her door and she was told that the house had been foreclosed on and she needed to make arrangements to move within next 10 days.  Needless to say, she was distressed. 

Unfortunately with today’s market, some homeowners are not able to maintain their home and as a last resort, they try renting the home out.  Because it took so long to obtain renters and in the meanwhile they have moved out of the house in preparation for foreclosure, they have depleted their checking account.  It wasn’t their intention to take someone else’s money, but they needed it more than the bank.  So here you have a renter who is out of the deposit money as well as any advance rental money that was given. 

So what can you do to avoid this situation? 

Use a reputable Real Estate Company when looking for a rental property.  At least make sure the landlord is asking for all the proper information such as place of employment, length of employment, reference check, previous landlord references, permission for credit check and appropriate amount for deposit.   A true professional landlord will place all your deposits into an escrow account.  If the property is being managed by an agent, ask to have the deposits placed in their brokers escrow account.  Ask questions.  Ask the landlord about their rental experience to see if this is their first go around or if they are in a desperate situation.  It’s amazing how much you can learn just through normal conversation.  If your instinct says “it’s too good to be true”, then it probably is.

Unfortunately for this nice family, they were forced to move out.  The bank was good enough to offer them cash for keys and it helped them to recover some of the moving expenses.  Looking back, she said that she should have known better because the landlord did not ask for previous landlord referrals, references, employment verification or credit checks.  The landlord did talk them into putting 3 months of rental fees, so that was rather slimy of them. 

Just a quick note, this situation also applies to Lease Purchases.  Make sure your agent has inquired with the listing agent of the seller’s situation and have all deposits held in either your agent’s or the listing agent’s brokers escrow accounts.  This is to protect you so you can get your deposit back. 

Note: Our goal is to become the best real estate resource for all of
South Atlanta – Henry, Clayton, Spalding, Butts, Rockdale, Fayette and surrounding counties. The ideas in this blog are our personal opinions and subject to market uncertainties. Should we ever be able to assist you with any of your real estate needs, please give us a call at any of the numbers to the right or call our main line at (770) 769-8000.

For the background on what a loan modification is, how it works and if it can help you, click here.

Step 1 – Evaluate Your Situation

Honestly decide if a loan modification is what you truly need. Only 37% of loan modifications end up with the homeowner attaining at least a 10% reduction in monthly payments. So using 10% as your target, if your monthly mortgage was 10% less than it is now, would you be able to maintain your monthly finances? If your answer is no then it may be better to consider a short sale or deed in lieu of foreclosure and plan on renting for a while. You also need to consider the amount of time, trouble and effort you are willing to put into attaining a modification. Even if you utilize a government or non-profit company it is still going to take a lot of your time just to get the information together. You should expect that this process will take 3-4 months to complete and you should plan on spending 3-4 hours each week.

Step 2 – Have Realistic Goals

Everyone would like a principal reduction, but that very, very, very rarely happens. In the past year only 2% of all loan modifications had a reduction in principal, and nearly all of those were in California or Michigan. As stated above, a reduction in monthly payments of over 10% is a good starting goal but your specific situation may require different goals. Remember that this is a negotiation and in a successful negotiation each side has to give some and take some. Please don’t threaten or try to throw your weight around telling them to come and pick up the keys. You will feel like telling them that several times through this process, but bit your tongue and remember what your goals are and have a plan to achieve these goals.

Step 3 – Get Your Paperwork Together

Regardless of who owns your loan, nearly all the mortgage companies will require the same basic information. The more information you have ready at your disposal the easier this entire process will be. Also the more information you have ready, the better informed you are as to what concessions you are willing to give on and which you can’t when you get to step 5, the negotiation. The usual documents you will need are:

• Proof of income.
• At least four months of bank statements.
• A hardship letter explaining your situation and requesting a loan modification.
• A monthly expense sheet detailing all your expenses.
• Your most recent mortgage statement
• 2 years W2 forms
• 2 years tax returns

Most of the list is self explanatory, but the hardship letter is critical. The hardship letter should be about 1 page long, but no more than 2 pages ever as most lenders and extremely busy, backlogged and staffed with overworked employees so keep it short and to the point. It should be a basic blueprint of how your current financial situation is, how you got into this situation and any other issues affecting your ability to meet your financial obligations.

Remember to include any of the following issues in your hardship letter if they apply: adjustable rate mortgage reset, death, death of a spouse or co-borrower, loss of job, reduction in salary, job relocation, did you business go under, divorce, separated, accident, illness, medical bills or military duty. I do not suggest you try and convince them about your local real estate market or how the value of your house has gone down as most lenders do not do any principal reductions anyway. Don’t blame the lender and don’t blame the value of your house. It is not the lenders fault that you have the loan on your home and trying to say that you can’t pay because your house is worth less now than what it was when you bought it doesn’t make any sense. You may not want to pay, but it doesn’t mean you can’t.

Step 4 – Contact Your Mortgage Company

It’s astounding the number of delinquent borrowers who never have the courage to pick up the phone and just talk to the lender before heading into foreclosure. Make the call and ask to speak to customer service. Have a note pad to keep up with everyone you talk to and what each person says they are going to do, yourself included. Identify yourself and ask to speak with the loss mitigation department. Don’t spend too much time with customer service, they generally can’t help you, but before you get transferred, ask for the direct dial number for the loss mitigation department. This will save a step in your many, many follow up calls.

Once you get the loss mitigation department get the name of who your speaking with and position and let them know your keeping a record of all your conversations to ensure all the I’s are dotted and t’s are crossed. Explain in general terms to the person that your having trouble making your monthly payments and that you are or may become delinquent on your loan and you need to modify it or there is a serious chance you’ll fall farther behind or could go into foreclosure. Don’t throw out the foreclosure word too much or threaten them, if they feel your headed into foreclosure they won’t waste their time with a lost cause. What you want to clearly communicate to them is that this is a serious problem and it requires their immediate attention.

Be prepared for them to ask you some basic questions. Have the list I gave you above handy to help with specific details. You MUST be honest or it will come back to bite you in the butt. You shouldn’t be overly optimistic or too upbeat about your financial situation, but it can’t be all gloom and doom either. Within the bounds of honesty you need to communicate that your in a bad financial place. Just as you had to qualify yourself to get the loan the first time, now you have to qualify to get a loan modification in much the same way. You have to prove that you are financially incapable of making your mortgage payments in the manner they are currently structured. Lastly, your going to have to prove that a loan modification will actually improve your situation to the point where you will be an acceptable risk to them.
If the lender decides that your situation qualifies, they will send you a loan modification information packet along with a worksheet to calculate your monthly expenses. Even if you already have it all in your own format, take the time to copy it over to their forms, it will speed up the process every time.

Step 5 – The Negotiation

Remember that the banks don’t want to loose any money, so don’t expect their initial offer to be worth taking. Fully expect that it will take 3, 4, 5 or more offers back and forth until you find one that is acceptable to both you and the bank. In most cases this is the time consuming and frustrating part of a loan modification. The endless calls going back and forth, waiting and waiting on the phone all to end up with a loan modification offer that just insults or angers you is what you should fully expect until you finally reach an agreement that you both can accept.

The average loan modification should result with a 31% debt to income ratio for your home which means your house payment should be around 31% of your gross monthly income. This is all about give and take for both sides. You can expect that the first loan modification the bank offers will actually have your monthly payments increase, for at least a few months. This seems idiotic but it’s true as the banks will initially try to begin with a forbearance agreement which temporarily increases payments because they try to add in any past due payments, penalties, interest and late fees. Don’t accept this, simply let them know you don’t have the ability to meet that financial obligation and you head back to the drawing board. Expect to have to say this several times during the negotiation.

Here is the list of the most common concessions.

• Reduction in interest rate or converting from an adjustable rate to a fixed rate. This can be a permanent or temporary (1-5 years). Some loan modifications reduce the rate down to as low as 2% for a short term. This is almost always the most favorable to both parties and is the most used concession.
• Forbearance Agreement. Expect them to try to add in missed loan payments, interest payments, insurance and other costs the lender paid on your behalf. You should try and fight these costs as much as possible.
• Extension of the length of the loan. You can expect them to extend the loan to 35 or 40 years. This is a toughie for many people, but it is one of the most used ways to reduce your monthly payment.
  Principal Forbearance. Basically they will defer payment of part of your loan and add it to the end of your loan or until you refinance or sell your property. This is commonly referred to as a “balloon payment”.
• Principal Reduction. As stated many times before, do not expect this. Only 2% of all loan modifications done in the past year had a principal reduction, and most of those were done in Michigan and California.

Step 6 – Wrap it up

Once you reach an agreement you can expect to be on a 3 month “trail period” in which if you are current at the end the lender will execute a permanent modification agreement and forward to you to sign.
Sign the paperwork, return it to the lender.

Good luck and if I can be of any further assistance give me a call at (770) 616-5062 or send me an email to alrichard@charter.net. I don’t do loan modifications and will not charge you any money but I can offer my opinion based upon my experience. I do not provide any legal advice and anyone seeking such advice should consult with their own lawyer.

If you can no longer afford to make your monthly loan payment, you may qualify for a loan modification. In essence a loan modification changes one of the variable items in your loan. It could be principle, interest rate, loan terms extended, arm rate converted to a fixed rate or they could forgive any past delinquencies. That said, lowering of the principal amount is very, very rarely done. A loan modification is never guaranteed as it is up to the bank to choose to accept or not.

Do Loan Modifications Work?

Yes and no. Statistically, it depends on the amount of modification you are able to attain. If you just can’t afford the house your in, lowering you monthly payments by 10% to 20% is not going to be the answer. Of the loan modifications written in the past year, only 37% actually resulted in a monthly payment that dropped by over 10%. What is startling is that nearly 25% of homeowners who attempted a modification had a monthly payment increase, which happens when the lenders add fees or past due interests to a loan. So what percentages of loan modifications actually work? If you get a reduction in monthly payments of 10% or more then 1 out of 4 (25%) will still go into foreclosure. If you get a reduction in monthly payment of less than 10% then nearly half of the time the borrower moves into foreclosure.

Please understand that sometimes loan modifications aren’t the right answer. If you have a second mortgage, an interest only loan or you have had a significant reduction in earnings then selling your property at a short sale and finding a rental may be a better option at this point. With second mortgages, loan modifications are very difficult to obtain as a first-lien holder doesn’t need approval to modify the first mortgage, but would have to make a more drastic change in terms if the second-lien holder doesn’t cooperate. If you’re in an interest only loan and wish to begin paying interest and principal, this will result in much higher payments than you have been making.

Who can do a Loan Modification?

You should always attempt to do your own loan modification by working with your lender personally first. I suggest you only consider using someone to assist you if you have attempted your loan modification first and it failed for some reason. Even then I suggest you start with non-profit or government agencies such as www.helpumodify.org or www.makinghomeaffordable.gov. If you are considering using a loan modification company, you need to be very cautious and protect yourself. Remember what each person or companies motivation is. You want to change the terms of your loan, the bank wants to continue loaning you money and they would rather not change anything, if you choose to use a loan modification company, they are looking to make money by assisting you. Remember that the only one who is truly looking out for your best interest first is you.

Additionally you should always be very leery of all loan modification companies. Everyone and their brother is all of a sudden a loan modification specialist and the number of loan modification scams out there is disgraceful. Beware of any companies that claim they can always get you a loan modification, anyone claiming they always get principal reductions and any that require money up front. I am not saying that ALL loan modification companies are bad, but many are so beware.

In truth, loan modifications are difficult to obtain. But this difficulty exists whether the person making the request is a homeowner, a non-profit, government agency or professional loan modifier. Lenders and loan servicers are slow to approve refinance mortgages and modifications because there’s no proof that doing so will improve the lender’s position. Many loan modifications end up in default again within the year. When this happens, the whole process starts over. But if the lender forecloses the first time, the home can eventually be sold, and some of the money can be recouped.

What You Need To Qualify

In January the Feds adopted the FDIC qualification criteria for Fannie Mae and Freddie Mac properties and have encouraged standardization with the banks by making it a prerequisite for receiving TARP funds. The good new and bad news is that you know what it takes to qualify, but if you don’t qualify it can make the entire process very, very difficult.  

If you have a FHA or VA loan, to qualify you must:

• Be 60 days late
• Must qualify with full income disclosure with a 38% debt to income (DTI)
• Must not purposefully fall behind

If you have a loan owned by Fannie Mae or Freddie Mac, to qualify you must:

• Be on time with your monthly mortgage payments
• Have the income sufficient to support the new mortgage payments
• Home must be owner occupied

These prerequisites are only current at the time of this posting. The rules are constantly changing so please make sure you have the most current information possible if you are researching a loan modification.

If you are 60 days behind your options really narrow. Everyone starts calling you for money, lenders may not accept partial payments and foreclosure is threatened and possibly even filed. Here in Georgia we have the fastest foreclosure process in the country.

So what’s the process to apply for a loan modification? Click here for information on how to apply for a loan modification.

In a recent town hall meeting hosted by the County Commissioners there was an explanation of the property tax assessment process and the procedures to go about to dispute your property valuation.  In the official code of the State of Georgia it states that property taxes are based on fair market value. 

But… the assessor cannot use sales of distressed properties (foreclosures, REO’s, short sales, auctions, etc.) in determining market value.  Under consideration in this session of the state Legislature is proposed legislation that would correct this issue.  In our local market the REO’s, foreclosures and short sales are driving property values and even finding a “fair market” sale to use as a comparable is few and far between. 

So How Do You Request a Reduction?

Per the Henry County Tax Assessors Office:  “After receiving a Notice of Property Value Change (assessment notice), you have the right to appeal this value to the Board of Assessors. This appeal must be in writing and must be filed in the Assessors Office within 45 days of the date on the notice. To insure your appeal rights, it is encouraged that the appeal be mailed by certified receipt or hand-carried to the Assessors Office.”

If you believe your home is currently valued for more than it’s fair market value and you want to file a dispute you can file this form with the Henry County Assessors office by April 1st, 2009.  You can go directly to the assessors office for assistance in completing the form.  You can also find other useful about your property by searching at http://www.co.henry.ga.us/MapsZonesDistricts/index_2.htm.  Submitting the form will preserve your right to a hearing on your valuation and you should expect your hearing some time in early May. 

Although the details of this article pertains directly with Henry County, should you need some help with Clayton, Fayette, Butts, Spalding or Rockdale Counties, just drop me a line at alrichard@charter.net and I will dig up the information for you on your specific county.