Donne Knudsen

Although nearly half of today's home purchases are being made by young first time buyers, there are many other first time buyers who are still sitting on the fence - and rightfully so. With CA unemployment at an all-time high, #4 in the nation in unemployment rates, many first time buyers are extremely reluctant about buying home because of the uncertainty of their own financial future. To help provide CA first-time home buyers with peace of mind when purchasing a home, the California Association of Realtors (C.A.R.) Housing Affordability Fund is offering a new mortgage protection program.

On Thursday, April 2, 2009, C.A.R. launched a new program designed for first-time buyers who are hesitant about entering the housing market due to concerns about potential job loss, and subsequently being unable to meet their monthly mortgage obligations.

Through the Mortgage Protection Program, first-time home buyers who lose their jobs due to layoffs may be eligible to receive up to $1,500 per month, for six months, to help make their mortgage payments. A qualified co-buyer also can participate in the program, and receive a monthly benefit of $750 per month for up to six months. Program benefits also include coverage for accidental disability and a $10,000 death benefit. It costs the home buyer absolutely nothing! If the home buyer is granted an insurance policy, the insurance premium is prepaid for one year by CARHAF.

The Mortgage Protection Program provides a combination of involuntary unemployment, accidental disability and accidental death insurance protection for qualified first-time home buyers. Before involuntary unemployment insurance can be utilized, there is an initial "vesting period" of six (6) months and a four (4) month "actively at work" requirement. These periods can run concurrently, so you must be enrolled for at least six (6) months and also be working for at least four (4) consecutive months immediately prior to the date your involuntary unemployment begins before you can have an unemployment event qualify for a claim.

Involuntary unemployment does not include voluntarily choosing to become unemployed, expiration of employment contracts, willful misconduct, criminal misconduct, death, disability, family leave, childbirth, pregnancy and war. See the insurance policy for specific definitions of these exclusions.

Additionally, there is a one (1) month "waiting period" before benefits would be paid. The vesting period is the amount of time you would have to wait before becoming eligible for any benefit and the waiting period is the amount of time after you become unemployed before payments can start. If you become unemployed anytime before the initial vesting period is over, you will not be eligible to file a claim, and you will have to return to work for at least four (4) consecutive months before eligibility begins. The unemployment claims procedure requires documentation of registration with California's unemployment office which will verify the date of your unemployment.

To qualify for the Mortgage Protection Program, applicants must:

• Be a first-time home buyer - someone who has not owned a home in the last three years
• Open escrow April 2, 2009, or later, and close on or before December 31, 2009
• Use a California REALTOR® in the transaction
• Purchase the property in California
• Be a W-2 employee

You cannot be self-employed, an independent contractor, a business owner, a temporary or seasonal worker, an educational employee on a scheduled break, or work for your immediate family.

For a copy of the MPP Application Click here. This form must be submitted by an active California REALTOR® to apply.

With historically low rates low and home prices continuing to decline, right now, it's the perfect time for the first time homebuyer purchase market. Just recently, National Association of Realtors (NAR) came out with the results for their 2008 Home Buyers & Home Sellers Survey.

• First Time Homebuyers Made Up 41% of All Home Purchases
• Living Arrangements Prior to Buying Their First Home
  • 75% of FTHB lived in apartment complexes or rented a home or condo prior to purchasing.
  • 19% lived with parents prior to purchasing
• Marital Status of First Time Homebuyers
  • 49% Married Couples
  • 12% Unmarried Couples
  • 24% Single Females
  • 12% Single Males

Single female buyers are double the percentage of single males and half of married couples. It's a niche within a niche, so consider targeting this particular demographic.

• Median Age of First Time Homebuyers
  • 54% - Age 24-35
  • 20% - Age 35-44

Think Gen X here! They are independent, blunt and skeptical! Creative emails, an awesome website and social networking all need to be part of your marketing business plan.

• Average Income of First Time Homebuyers
  • $70K - Married
  • $65K - Unmarried
  • $54K - Single Male
  • $47K - Single Female

Single women earn 13% less income than single males, but they purchase twice as many homes. Another reason to consider increasing your marketing to this specific demographic.

• Purchase Price Range
  • 16% - Price Range of $75K to $100K
  • 39% - Price Range of $100K to $175K

Based on this info, more than half of your first time home buyers are more likely to purchase a home $175K or below.

• Moving Distance from Current Residence

13 miles from their previous residence (apartment or parent's home). SO if you are marketing to apartment complexes consider the location of the complex and compare it to the surrounding (affordable) homes as a guide in choosing the complexes to market to.

• Information Sources PRIOR to Buying Home
  • Internet Search - 94%
  • Virtual Tour - 63%
  • Newspaper Ads - 45%
  • Open Houses - 48%
  • Homes Magazines - 30%
  • TV - 9%

While spending your money on a cool-looking website is a must, it's more important that the site is ultra-easy to navigate.

• The Internet, Virtual Tours and Social Networking
  • Found Home on Internet - 37%
  • Found Agent Online - 28%
  • Mortgage Pre-qual Online - 11%
  • Mortgage Application - 7%
• Length of Time to Buy Home
  • 3 weeks - Research Time to Find an Agent
  • 12 weeks - Sign a Contract

The "selling time" is about 30 days longer and you should have a system in place and stay in touch over a longer time period.

• FTHB Tenure in Home Resale
  • Age 18-25: 88% plan to sell their home within 2-3 years after buying it
  • Age 25-44: 28% plan to sell their home within 2-3 years after buying it

You are three times more likely to re-sell to a previous client in the 18-25 age group, than the 25-44 age group. It's critical to keep in touch, especially via emails or social networking, if you want the chance to sell them another home.

The bottom line is that you might want to concentrate your marketing to young renters or combining your database for clients whose children might be buying a home in the future and asking for their referrals. If you do anything, create a functional website and a database system to stay in touch with your clients (past, present, future), contacts, prospects and leads.

The other day, I was on the Mortgage Girlfriends (MG) website (http://www.mortgagegirlfriends.com) when I came across an article on how to protect your credit during a divorce. Having a client in escrow right now who is also currently going through a divorce, this article interested me.

The article was written by fellow MG, Linda Ferrari author of The Big Score, Getting It & Keeping It - Buying Power for Life, and President of Credit Resource Corporation. Linda is the mortgage industry's credit improvement and education resource, and she is a leading nationwide credit score expert who has dug into more than 15,000 credit reports providing in-depth solutions through coaching and consultation to thousands of consumers and professionals. In doing so, Linda has orchestrated higher credit scores and better financial opportunities and futures for individuals and families from all walks of life. And now, with Linda's permission, I would now like to post her article for those AR members who are interested in how to protect yours or your client's credit during a divorce.

So, you're are on the phone with someone who wants to get pre-approved for a loan and about a third of the way thru the conversation, they announce "By-the-way, I'm going thru a divorce, does that matter?" Or, you get that call from a past client who just separated from their spouse - and ask for your advice on how to maintain their credit! Yeah, it's always good to refer them back to their attorney-but most attorneys are not knowledgeable when it comes to advising their clients credit and credit scores. In fact, a lot of the advice they get from attorneys' about credit is simply wrong!

While I don't advise you to get involved or take sides, you can provide your clients and prospects with a proactive plan to help them protect their credit during and after a divorce. Linda has created a white paper called Divorce & Credit: What You Need to Know that you can send to those experiencing a separation or divorce. Why would you care? If you help them now, you'll have a more qualified client when the divorce is final and when it's time to buy another home!

Download your copy of Linda Ferrari's White Paper, Divorce and Credit: What You Need to Know, now!

Linda outlines the basic steps you need to take to protect your credit. By proactively taking just a few simple steps, individuals who are starting over can ensure that they are doing everything possible to start over with their good credit intact.

Following is an example of a proactive action plan Linda has come up with that will help you protect your credit during and after a divorce.

STEP 1: GETTING A CLEAR PICTURE

• Get copies of your credit reports: Request copies of your credit report from each of the 3 major credit bureaus, Equifax, Experian and Trans Union so you will have full disclosure of your situation.
• Get all of your information into one place: Make a list of all open accounts and accounts with balances. Then create a spreadsheet with columns for the following information:

1. 1. Creditor Name
   2. Creditor Contact Number (if it's not listed on the credit report, you can find the customer service number on the back of your statement, or you can always search for it on the internet. Where there's a will, there's a way.)
   3. Account Number (sometimes credit reports do not list the full account number, so you may have to dig up some paperwork, but it will be well worth it.)
   4. Type of Account (i.e. auto loan, mortgage, credit card)
   5. Current status of the account (i.e. current, past due, collection, etc.)
   6. Total amount due
   7. Monthly Payment Amount
   8. Vesting of Account (i.e. Joint/Individual/Authorized Signer)

STEP 2: ACTING ON THE INFORMATION

Once you have assembled your information in one place, you can now begin to determine the best course of action for handling the accounts. There are two types of accounts you will be dealing with: secured and unsecured. Both are handled very differently during a divorce. Secured accounts are all accounts that have an asset attached to them, i.e. a mortgage or a car loan. Unsecured accounts are debts with no assets backing them, i.e. credit card accounts. Here are Linda's suggestions:

• UNSECURED ACCOUNTS - YOUR OPTIONS:

1. 1. ELIMINATE OBLIGATIONS WHERE YOU CAN: A credit card or a statement with your name on it does not make you a joint owner of the account. Unless the account was originally opened with an application SIGNED BY YOU, you may only be an authorized signer and you can request to have your name removed from the account immediately. Or vice versa, if your spouse is on the account as an authorized signer you will want to have his name removed to avoid any future charges. Be aware however, if negative credit was incurred while you were on the account, the past information will still remain.
   2. CLOSE JOINT ACCOUNTS: If there is no balance on the account, call the creditor and close the account immediately.
   3. FREEZE ANY FUTURE CHARGES: If there is a balance that cannot be paid off right away, the creditor typically will not allow you to close the account. In this case, call the creditor and request to freeze the account from any future charges. This will allow you to pay off the balance over time without making you vulnerable to more debt. Such an action will stop BOTH spouses from using the account, so it is important that you make certain you have another credit card in your own name before you take that course of action.
   4. TRANSFER BALANCES TO RESPONSIBLE PARTY'S INDIVIDUAL CARD: Request that the responsible spouse transfer remaining balances on a joint card to another credit card with available credit that is in their name only. Once this is done, CLOSE THE JOINT ACCOUNT IMMEDIATELY.

• SECURED ACCOUNTS - YOUR OPTIONS:

1. 1. SELL IT: This is the safest and best option. You sell the asset, pay off the loan in full, wipe the slate clean and move on.
   2. REFI IT: If the spouse who has responsibility can qualify for a refinance in their own name, or they have a family member who can assist them with the loan, you can have them buy you out completely and you can walk away without obligation and get your name removed from the account.
   3. BE CAREFUL: The least desirable option is to keep your name on the loan with certain terms and conditions. This option leaves your credit vulnerable to the responsible spouse's actions going forward. A late payment or a default on the loan will damage your credit.

• SOME IMPORTANT TIPS THAT WILL HELP:

1. 1. MAKE SURE THE BILLS GET PAID-NO MATTER WHAT THE JUDGE SAYS: Regardless of what the divorce decree stipulates, it does not override your account agreements with your creditors. Both spouses are liable and responsible for joint debt regardless of who the judge orders to pay the bill. If the bills are not paid and an account defaults, both spouses can be sued, and both spouses can have their wages garnished. Most late pays occur during the divorce negotiations phase. Don't allow this happen. One 30 day late can drop your score anywhere from 25-75 points, and it takes months to gain those points back.
   2. PROTECT YOURSELF IN JOINT ACCOUNT SITUATIONS: The best way to handle joint accounts is to eliminate such accounts whenever possible. Because joint accounts are approved using the information from both spouses' credit reports, a creditor will not remove one spouse's name from an account regardless of the presence of court documents declaring a specific spouse responsible for payment and upkeep.
   3. IF YOU DECIDE TO LEAVE YOUR NAME ON A SECURED LOAN ACCOUNT, BE SURE THAT YOUR NAME REMAINS ON THE TITLE: Once your name is removed from the title, you no longer own the asset. This means that if the responsible spouse defaults on the loan, and you have to pay it, you'll be paying for something that you no longer own.
   4. FINALLY, putting the action plan to work as early in the divorce process as possible will ensure your credit will be protected to the greatest extent possible. Decisive, quick action will empower you to move forward.

In Conclusion, though it may seem challenging at first, you will soon find that putting the above recommendations into action is easily done once you get started. You will also put behind you a crucial first step toward moving on with your life.

I just read this blog (Why Do Buyers Need a Buyer's Agent--That ISN'T Representing the Seller?) by Debe Maxwell (Debe Maxwell Talk Charlotte with Charlotte's Realtor®) that scared the beejesus out of me and should scare the holy crap out of any buyer out there right now thinking that they're going to save money by using the listing agent to buy your home.

So often, I have heard so many of my clients tell me that they will only work with listing agents because they will save money.  Many times (thankfully), the listing agent will tell my clients to get their own agent because they will only represent the seller (even though here in CA they CAN do both, many choose not to). 

Anyway, I just wanted to repost this video that Debe posted because I want to let buyers out there know that this can happen to them if they do not have their own buyer's agent.

There is a short commercial before you get to the news reel but watch the video.  Debe has said to feel free to pass this example (click on link) on to buyers who refuse to realize that not having their own representation can not only cost them hundreds of dollars but, hundreds of thousands of dollars!

So, Fannie Mae finally rolls out their new DU Refi Plus program that was specifically geared to help gads and gads of struggling homeowners who owe more on their mortgages than what their homes are worth. So, let's take a look at just who exactly is going to benefit from this new program.

The goal is to allow homeowners with a relatively good and stable payment history refinance their current loan into a more stable loan product and hopefully lower their monthly payment. Here are just some of the program requirements:

• Current loan must be a Fannie Mae loan with an acceptable payment history (no 60-day lates in the last 12 months).
• The new loan must be either a reduction in the monthly principal and interest payment or the new loan must be a more stable loan product.
• The new loan can be up to 105% loan to value (ltv) with no more than the existing level of MI coverage required.
• Cash out refinances are not permitted but limited funds can be used for closing costs.
• No standard minimum credit score requirements, although credit scores are required at loan delivery for pricing purposes.
• Limited income documentation - one paystub, one year tax return and verbal verification of employment.

To find out if your current loan is a Fannie Mae loan, you will need to check at http://loanlookup.fanniemae.com/loanlookup/. If you have a Fannie Mae loan, then you may qualify for refinancing options as follows:

• For existing loans with an original ltv ratio at of below 80% and no existing MI coverage, then the new loan will not require MI coverage regardless of the new ltv.
• For existing loans with an original ltv ratio of more than 80% that does not currently have MI, then the new loan will not require MI coverage.
• For existing loans with an original ltv ration of more than 80% that currently do have MI, then the new loan will require only the lesser of standard MI coverage or the existing MI coverage.

As I've mentioned before, DU Refi Plus is only available for limited cash out refinance transactions that allow the first mortgage to be paid off and closing costs financed and the borrower may receive up to the lesser of 2% of the new loan amount or $2,000 in cash. This cash back amount is intended to cover differences in payoff amount or closing costs items and is not intended to be a part of every limited cash out refinance transaction just so the borrower can get cash back.

The new loan can not be used to pay off subordinate liens/mortgages and no new subordinate liens/mortgages can be obtained in connection with this refinance. Also, existing borrowers may not be removed but new borrowers may be added. Reverse mortgages, government mortgages and second mortgages are not eligible for DU Refi Plus. Additionally, the new loan can not be an ARM with an initial fixed period of less than five years.

While this program is slated to help homeowners who are still current on their mortgages and have managed to maintain a pretty decent payment history, this program is fraught with gaps and holes. Two of the many issues I see with this new program in being able to assist as many people as it was supposed to help is a) the fact that it does not allow homeowners to payoff their second mortgages and b) it only allows up to 105% ltv.

For many years, prospective homeowners were encouraged to get piggyback loans as a way of avoiding mortgage insurance. So, millions of homeowners are now stuck with not just one adjustable rate mortgage (ARM) that is going up but two ARM's that are resetting and wrecking havoc on their budgets. Furthermore, many of these same homeowners have suffered the loss of equity in the double digits.

If Fannie Mae and the Obama Administration really wanted to assist struggling homeowners refinance into more affordable loans, why would they restrict the ability to get rid of that rising second mortgage that in many cases is worse than the first and only limit the new loan amouts to 105%? Go figure!

It will be interesting to see how successful this new program is. Let's all hope that it's results don't end up being as disastrous as FHA's now defunct HOPE for homeowners program. Anyone remember that horrid program? Yeah, I thought so.