North Fulton Voices

Last month, the White House announced details on their Homeowner Affordability and Stability Plan, which is designed to help as many as 7-9 million families avoid foreclosure by restructuring or refinancing their mortgages. The three key components to the plan include, 1. Refinancing for Responsible Homeowners Suffering From Falling Home Prices; 2. A Comprehensive $75 Billion Homeowner Stability Initiative; and 3. Support Low Mortgage Rates by Strengthening Confidence in Fannie Mae and Freddie Mac.
Here are some questions and answers that Borrowers have about the plan:

Borrowers Who Are Current on Their Mortgage Are Asking:

1. What help is available for borrowers who stay current on their mortgage payments but have seen their homes decrease in value?

Under the Homeowner Affordability and Stability Plan, eligible borrowers who stay current on their mortgages but have been unable to refinance to lower their interest rates because their homes have decreased in value, may now have the opportunity to refinance into a 30 or 15 year, fixed rate loan. Through the program, Fannie Mae and Freddie Mac will allow the refinancing of mortgage loans that they hold in their portfolios or that they placed in mortgage backed securities.

2. I owe more than my property is worth, do I still qualify to refinance under the Homeowner Affordability and Stability Plan?

Eligible loans will now include those where the new first mortgage (including any refinancing costs) will not exceed 105% of the current market value of the property. For example, if your property is worth $200,000 but you owe $210,000 or less you may qualify. The current value of your property will be determined after you apply to refinance.

3. How do I know if I am eligible?

Complete eligibility details will be announced on March 4th when the program starts. The criteria for eligibility will include having sufficient income to make the new payment and an acceptable mortgage payment history. The program is limited to loans held or securitized by Fannie Mae or Freddie Mac.

4. I have both a first and a second mortgage. Do I still qualify to refinance under the Homeowner Affordability and Stability Plan?

As long as the amount due on the first mortgage is less than 105% of the value of the property, borrowers with more than one mortgage may be eligible to refinance under the Homeowner Affordability and Stability Plan. Your eligibility will depend, in part, on agreement by the lender that has your second mortgage to remain in a second position, and on your ability to meet the new payment terms on the first mortgage.

5. Will refinancing lower my payments?

The objective of the Homeowner Affordability and Stability Plan is to provide creditworthy borrowers who have shown a commitment to paying their mortgage with affordable payments that are sustainable for the life of the loan. Borrowers whose mortgage interest rates are much higher than the current market rate should see an immediate reduction in their payments. Borrowers who are paying interest only, or who have a low introductory rate that will increase in the future, may not see their current payment go down if they refinance to a fixed rate. These borrowers, however, could save a great deal over the life of the loan. When you submit a loan application, your lender will give you a “Good Faith Estimate” that includes your new interest rate, mortgage payment and the amount that you will pay over the life of the loan. Compare this to your current loan terms. If it is not an improvement, a refinancing may not be right for you.

6. What are the interest rate and other terms of this refinance offer?

The objective of the Homeowner Affordability and Stability Plan is to provide borrowers with a safe loan program with a fixed, affordable payment. All loans refinanced under the plan will have a 30 or 15 year term with a fixed interest rate. The rate will be based on market rates in effect at the time of the refinance and any associated points and fees quoted by the lender. Interest rates may vary across lenders and over time as market rates adjust. The refinanced loans will have no prepayment penalties or balloon notes.

7. Will refinancing reduce the amount that I owe on my loan?

No. The objective of the Homeowner Affordability and Stability Plan is to help borrowers refinance into safer, more affordable fixed rate loans. Refinancing will not reduce the amount you owe to the first mortgage holder or any other debt you owe. However, by reducing the interest rate, refinancing should save you money by reducing the amount of interest that you repay over the life of the loan.

8. How do I know if my loan is owned or has been securitized by Fannie Mae or Freddie Mac?

To determine if your loan is owned or has been securitized by Fannie Mae or Freddie Mac and is eligible to be refinanced, you should contact your mortgage lender after March 4, 2009.

9. When can I apply?

Mortgage lenders will begin accepting applications after the details of the program are announced on March 4, 2009.

10. What should I do in the meantime?

You should gather the information that you will need to provide to your lender after March 4, when the refinance program becomes available. This includes:

• Information about the gross monthly income of all borrowers, including your most recent pay stubs if you receive them or documentation of income you receive from other sources
• Your most recent income tax return
• Information about any second mortgage on the house
• Payments on each of your credit cards if you are carrying balances from month to month, and payments on other loans such as student loans and car loans

Borrowers Who Are at Risk of Foreclosure Are Asking:

1. What help is available for borrowers who are at risk of foreclosure either because they are behind on their mortgage or are struggling to make the payments?

The Homeowner Affordability and Stability Plan offers help to borrowers who are already behind on their mortgage payments or who are struggling to keep their loans current. By providing mortgage lenders with financial incentives to modify existing first mortgages, the Treasury hopes to help as many as 3 to 4 million homeowners avoid foreclosure regardless of who owns or services the mortgage.

2. Do I need to be behind on my mortgage payments to be eligible for a modification?

No. Borrowers who are struggling to stay current on their mortgage payments may be eligible if their income is not sufficient to continue to make their mortgage payments and they are at risk of imminent default. This may be due to several factors, such as a loss of income, a significant increase in expenses, or an interest rate that will reset to an unaffordable level.

3. How do I know if I qualify for a payment reduction under the Homeowner Affordability and Stability Plan?

In general, you may qualify for a mortgage modification if (a) you occupy your house as your primary residence; (b) your monthly mortgage payment is greater than 31% of your monthly gross income; and (c) your loan is not large enough to exceed current Fannie Mae and Freddie Mac loan limits. Final eligibility will be determined by your mortgage lender based on your financial situation and detailed guidelines that will be available on March 4, 2009.

4. I do not live in the house that secures the mortgage I’d like to modify. Is this mortgage eligible for the Homeowner Affordability and Stability Plan?

No. For example, if you own a house that you use as a vacation home or that you rent out to tenants, the mortgage on that house is not eligible. If you used to live in the home but you moved out, the mortgage is not eligible. Only the mortgage on your primary residence is eligible. The mortgage lender will check to see if the dwelling is your primary residence.

5. I have a mortgage on a duplex. I live in one unit and rent the other. Will I still be eligible?

Yes. Mortgages on 2, 3 and 4 unit properties are eligible as long as you live in one unit as your primary residence.

6. I have two mortgages. Will the Homeowner Affordability and Stability Plan reduce the payments on both?

Only the first mortgage is eligible for a modification.

7. I owe more than my house is worth. Will the Homeowner Affordability and Stability Plan reduce what I owe?

The primary objective of the Homeowner Affordability and Stability Plan is to help borrowers avoid foreclosure by modifying troubled loans to achieve a payment the borrower can afford. Lenders are likely to lower payments mainly by reducing loan interest rates. However, the program offers incentives for principal reductions and at your lender’s discretion modifications may include upfront reductions of loan principal.

8. I heard the government was providing a financial incentive to borrowers. Is that true?

Yes. To encourage borrowers who work hard to retain homeownership, the Homeowner Affordability and Stability Plan provides incentive payments as a borrower makes timely payments on the modified loan. The incentive will accrue on a monthly basis and will be applied directly to reduce your mortgage debt. Borrowers who pay on time for five years can have up to $5,000 applied to reduce their debt by the end of that period.

9. How much will a modification cost me?

There is no cost to borrowers for a modification under the Homeowner Affordability and Stability Plan. If you wish to get assistance from a HUD-approved housing counseling agency or are referred to a counselor as a condition of the modification, you will not be charged a fee. Borrowers should beware of any organization that attempts to charge a fee for housing counseling or modification of a delinquent loan, especially if they require a fee in advance.

10. Is my lender required to modify my loan?

No. Mortgage lenders participate in the program on a voluntary basis and loans are evaluated for modification on a case-by-case basis. But the government is offering substantial incentives and it is expected that most major lenders will participate.

11. I’m already working with my lender / housing counselor on a loan workout. Can I still be considered for the Homeowner Affordability and Stability Plan?

Ask your lender or counselor to be considered under the Homeowner Affordability and Stability Plan.

12. How do I apply for a modification under the Homeowner Affordability and Stability Plan?

You may not need to do anything at this time. Most mortgage lenders will evaluate loans in their portfolio to identify borrowers who may meet the eligibility criteria. After March 4 they will send letters to potentially eligible homeowners, a process that may take several weeks. If you think you qualify for a modification and do not receive a letter within several weeks, contact your mortgage servicer or a HUD-approved housing counselor. Please be aware that servicers and counseling agencies are expected to receive an extraordinary number of calls about this program.

13. What should I do in the meantime?

You should gather the information that you will need to provide to your lender on or after March 4, when the modification program becomes available. This includes:

• Information about the monthly gross income of your household including recent pay stubs if you receive them or documentation of income you receive from other sources
• Your most recent income tax return
• Information about any second mortgage on the house
• Payments on each of your credit cards if you are carrying balances from month to month, and
• Payments on other loans such as student loans and car loans

14. My loan is scheduled for foreclosure soon. What should I do?

Contact your mortgage servicer or credit counselor. Many mortgage lenders have expressed their intention to postpone foreclosure sales on all mortgages that may qualify for the modification in order to allow sufficient time to evaluate the borrower’s eligibility.

Source: http://www.treas.gov/initiatives/eesa/

If you are like most of my clients, then you are probably asking these same questions.  I thought it might make sense to share the dialogue between a client of mine that might help answer these questions.  Dialogue below.

Client:  Do you think the house prices will continue to drop?  Should we consider renting, and buy next spring?

Brenda:  I have been in real estate in Atlanta for 5 years and during the past 5 years have seen our average appreciation to be between 4% - 6% depending on the area. Right after the bank issues that occurred in the banking industry (July/August), we began to see a leveling off. During the 4th quarter of 2007 we began to see a decline, although still not significant compared to other US markets. In the first quarter of 2008 we saw prices, on average to be 6.6% below the same quarter of 2007. We are seeing a climb back upward, but it is hard to know if that is just because of the time of year or if we will continue to see the market recover. Some are already beginning to say the recovery has started, others say it has not. I will not have Q2 numbers until mid July to know the trends for sure, but even if I do, it can only give me a snapshot of the rear view mirror vs. a prediction of the future.

I can tell you that our team is swamped! It has really exploded for us in the last two to three weeks. This time of year is always busy, but we are really seeing alot of activity. Our Keller Williams office, of about 250 agents, has also just had two of its strongest months if that is any indication. Regarding waiting until next spring, I would have a hard time advising you to do that based on what I am seeing. I think now is the absolute best it has been in our market to buy in some time. It is always possible it will go lower, but I also think it may just level off and then recover as well. But if I could predict it for certain, I would be a very rich person!

I have been working with clients all week that are also relocating and want to live in Forsyth County. They thought they would have a lot of flexiblity to negotiate price, especially on new construction. However, just today they said to me that it is harder than they thought it would be to get sellers to negotiate their prices down. But, from my perspective, it is still the most flexibility I have seen over the past 5 years to negotiate prices. Depending on where you choose to live may also impact your negotiation. There seems to be more flexibility on price out in Forsyth County then there is in Dunwoody/Sandy Springs.

Below is a chart that might give you a little better visual on what we have seen in our market since 2000. As you can see we are currently on par with the same trend line we saw in 2004. Prices are currently holding at levels between 2004 and 2005:

Let me know if you have any other questions.

Client:  I am working hard to be educated. Another family from here is relocating to the area and they feel that the housing prices will drop more and they plan on renting. I was trying to locate more factual information so I can make an educated decision. I appreciate all of your help.

Brenda:  You are smart to try and gather factual information. I think it is very hard to do right now as the media has really run a bit wild with all of this. You can literally find two articles in the paper some days that say two totally different things about the market. The media also tends to paint the housing market with a very broad brush. The national statistics often do not apply at the local level.

I am pasting an article below that I think was one of the most factual and balanced articles that I had seen in a long time. It was in CNN Money and outlined the Top Ten Cities that would likely recover the quickest from the housing market challenges and why. Atlanta was ranked as #4.

I am not sure what your relocating friends are basing their information on, I can only tell you what I see happening and I work in this every single day and have for the past 5 years. I cannot say with absolute certaintly that we have hit the bottom, but I can say with certaintly that this is a great time to buy. Waiting may gain you a few more bucks, but I really do not see it being anything dramatic in the Atlanta market. And, in fact, I think waiting is more of a risk. If you wait for prices to go lower, but interest rates or inflation rise, then you waited for nothing. Instead, you have just spent more money on rent and storage costs…something you cannot recuperate.

Those who seem to know what they are talking about when it comes to our specific local market will consistently say that Atlanta did not see the extremely high appreciation rates that other cities experienced and as a result, Atlanta will also not see the lows. As a result, if we drop any further in our average prices, it would likely still be in the lower single digits. Even if we were to drop another 3%, on a $500K home, that is $15K. My sense is you could likely negotiate that 3%, and probably more, off the current price of the home now and not incur the additional rental and storage costs…not to mention the hassles of renting. It is pretty difficult to time the stock market and the housing market is the same.

The other thing that you see in many of the articles is they compare how much the prices have dropped from the same month/quarter of 2007 to 2008. I think 2007 prices are long gone and it doesn’t make sense to continue to compare to them. What does make sense is to look at if the 2008 numbers are following the natural trend lines that we see in Real Estate month to month as you can see visually in the graph below.

Inventories are also at their highest right now so you have the best selection to choose from. As we get past the summer months, selections will be a bit more limited. I have an entire book of about 30 charts that I get updated every quarter regarding how the market is doing. I’d be happy to review them with you guys when you are in Atlanta next….the file is too big and complicated to just send via email. If you find any other information that you would like me to take a look at, I am happy to do so.

Client:  Thank you so much for the article. My sense is that with the continued growth that Atlanta experiences the housing market cannot bottom out like other areas. We tend to do the research and want to buy in an area that tends to have good resale. I try to take the media with a grain of salt.

Driving by the large patch of red earth on Old Milton Parkway west of GA400 you might be tempted to think to yourself – great… another strip mall or big box retailer - just what Alpharetta needs! However, just like me, you might be surprised to find out that what is being built there is only partly retail and is just what Alpharetta needs!

I have recently visited the Stanbury Residences model center, located across the street from where the new 87-acre mixed use community called Prospect Park will be developed. Scheduled to open in 2009 and 2010, this community will be a world-class luxury destination that will put Alpharetta, Georgia on the map for many of the world’s elite. All zoning approvals have been obtained from the city so we will soon see the patch of red clay turn into an upscale community that will include the Stanbury Manor, an ultra luxury five star hotel with amenities such as a 16000 sq. ft destination spa and wellness center, a glass conservatory that seats 140 imported from London, a cuisine gallery that will bring epicurean tastes from all over the world (similar to the food hall at Harrod’s in London), and even a heli-pad. The homeowners of the nearby 2 / 3 bedroom & penthouse private residences, which start at $1.5 million, will have access to all hotel amenities and on-call services from hotel staff which will move between the residences and the hotel via underground tunnels. No mixed-use community of this caliber would be complete without the high-end designer retail, office, and gourmet dining establishments that have previously been associated with a Buckhead locale. Green space with gardens and an exclusive dog-walk area, an 18-theater AMC movie complex with cocktail seating and a Whole Foods slated to be larger than their Duluth location will round out Prospect Park’s indulgent amenities.

There is no doubt that Stanbury Collection/Prospect Park development team has conducted extensive research to determine that Alpharetta can support such an exclusive and luxurious addition to the community and I can only agree that this is a good thing for North Fulton.

Well, we are in full swing of the spring market! This past year has been a roller coaster ride. Sellers are gearing up for an exciting and busy selling season and the reality is that when the seller has the ability, they will price their home properly! One hopes this will get the attention of the buyers!

One method I feel that will help move homes this season, is the FHA Programs, especially the Nehemiah Program which is proving to be one of the most trusted names in Downpayment Assistance programs. I understand that this is one of the few true 100% program that can be offered to buyers at this time.

I recently took a class offered by one of the top lenders in the Atlanta area, Wells Fargo. It was very informative and after listening with an open mind, it changed my thought process. I feel it could be one of the major answers for getting listings out of the “longer days on the market”crisis that we are experiencing in most areas.

One of the biggest problems that I deal with when working with clients needing downpayment assistance, is that other realtors are not that educated on this Nehemiah Program and have never learned how to explain this to sellers at the initial listing meeting. If sellers are better prepared at the initial listing presentation that this program could achieve a higher and quicker sale by publicizing and marketing this program on their listings, then I think we would see more homes selling faster and at higher prices. In some areas, mls statistics are showing on an average, that homes list/sell percentages are much larger on standard conventional loans than what it would be on the Nehemiah Program.

I recently visited and viewed the websites for Nehemiah and discovered it offers so much in marketing for us realtors and consumers. I would strongly encourage more realtors that are selling within the FHA pricing limits to check this program out. It might be the one of the major pathways to a better market for all!

Relocating to a new city or moving to a new area can be a bit overwhelming as you try to learn your way around in unfamilar territory. Recently I found a very helpul website that can at least get you started: WalkScore. Just type in your new address and click on “Go”. Walk Score shows you a map of what’s nearby and calculates a Walk Score for any property. In just seconds you will find the location and distances of nearby ammenties, from dry cleaners and restaurants, to grocery stores and fitness centers.