Christina Inman

If you are a Californian who has been waiting for the perfect time to buy your first home, take a look at the clock, because that time has arrived!

Now, we all know about low interest rates and affordable prices, but the current state of the economy has made many qualified first-time buyers leery of taking the leap. I mean, what if they were to get laid off? How would they make their monthly payment? That's the one fear that has kept so many from making the purchase, but guess what? The California Association of Realtors^® Mortgage Protection Program is the answer to their prayers and the reason that now (or at least until the end of the year) is the time to make buying their first home a reality.

This program--which C.A.R. announced at the end of July but few people seem to know about--provides qualified first-time buyers with protection that will help them make their mortgage payments if they find themselves involuntarily unemployed. The California Association of Realtors^® Housing Affordability Fund ("CARHAF") has committed $1 million to, as the FAQ page of their website states, "...help build confidence in the purchase of a home and to reduce the fear of foreclosure in the event of job loss."

This free program (yes, I said f-r-e-e) makes qualified first-time buyers eligible to receive up to $1,500 per month for up to six months to help make their monthly mortgage payments in the event of a lay-off or other qualified job loss. An eligible co-buyer can also participate in the program and receive a reduced benefit of up to $750 per month for the same time period if unemployment occurs. And, this benefit includes taxes and insurance if they are impounded as part of the monthly payment.

In order to qualify for the program, the buyer(s) may not have owned property in the last three years and must open and close escrow between 4/2/09 and 12/31/09, purchase a principal residence in California, be represented by a California Realtor^®, and be a W-2 employee. However, there are no income or home price caps. Of course, all the details of the program can be found on the C.A.R. web site.

Hopefully this outstanding program will inspire confidence in those first-time buyers whose anxieties over the economy have made them hesitant to turn their dream of ownership into a reality. And, with only a little over two months left to qualify, the time to contact a California Realtor^® who can help them find that perfect home is now!

Now, before I get started, please keep in mind that I am not a lawyer, nor should you consider what you are about to read as legal advice. I am just trying to pass something along that I think you should all be aware of.

In case you haven't heard, on October 5, the Federal Trade Commission issued an update to its Guides Concerning the Use of Endorsements and Testimonials in Advertising--the first update since 1980!

This update is mainly concerned with two things; first, stopping fake blog sites where the blogger is a totally made-up person with a totally made-up story designed to sell something (you know, those fake weight loss blogs, teeth whitening blogs, and money-making blogs we've all seen time and again), and second, how advertisements can use testimonials and endorsements.

Now, the blogging aspect is probably not that much of a concern to you (I highly doubt that any of you have created fictional bloggers to tell wildly false stories about deals you never really closed), and I'm pretty sure you're not too worried about the celebrity endorsement stuff (but, just in case you do happen to have celebrities in your advertisements, you might want to let them know that if they make false or unsubstantiated claims on your behalf, or if you don't disclose that you're paying them to say how terrific you are, they may find themselves in trouble along with you!) but the new rule about testimonials is something you need to be aware of and take care to follow!

As you probably know, in the past, you were allowed to use testimonials to describe specific successful experiences clients had with your business as long as you included a disclaimer that said something like, "Results not typical." In other words, you were allowed to have a quote from your clients, the Joneses, on your web site or flyers that said, "Our agent sold our house the first day it was on the market!" as long as the cover-your-rear-end statement "Results not typical" was written beneath it.

From this point on, however, this is not going to cut it! According to the FTC's web site, "Under the revised Guides, advertisements that feature a consumer and convey his or her experience with a product or service as typical when that is not the case will be required to clearly disclose the results that consumers can generally expect."

What this means, is that just putting "Results not typical" or "Your results may vary" on your web site or flyer underneath that stellar quote from the Joneses will not keep you in compliance with the new guidelines. Instead, you're going to either have to include a disclaimer that says something along the lines of, "Results not typical. The average client's home sold in x number of days" or not use these kinds of testimonials at all.

So, be aware, be careful, and--when in doubt--consult an attorney so you don't end up in a heap o' trouble!

Apparently, there' some major confusion about Senate Bill 306 floating around out there!

Approved by the Governor in August, the bill--which contains several changes to real estate-related laws and is set to come into effect on the first of next year--has been misrepresented by some as--among other things--a piece of legislation that will institute a 21-day deadline for short sale approvals. However, this is not the case.

What the bill actually does is require lenders to respond to a request for a short-pay demand statement within 21 days after the approval has been granted--not to approve the sale within 21 days. And, even at that point, the lender still has the option to respond--in writing, of course--that they have decided not to move forward with the proposed transaction.

Another article of the bill that may be causing confusion is the one that states that lenders must approve short sale closing statements within four days or else the statement will be deemed approved as long as it isn't in obvious conflict with the terms of the short-pay agreement or demand statement given to the escrow holder. What it does not say, however--as some seem to think--is that the lender is bound to a short payoff amount on an offer the lender has not approved.

The bill does make a couple of pretty noteworthy changes, though. The current requirement that lenders contact certain borrowers to discuss options for avoiding foreclosure at least 30 days prior to filing a notice of default has been expanded to include owner-occupied residential property with two-to-four dwelling units as well as owner-occupied residences, and the requirement that lenders record a notice of sale 14 days prior to a trustee's sale has been extended to 20 days (though it does not change the existing requirement that lenders wait at least 20 days after mailing a notice before conducting the sale).

So, if we all spread the word, hopefully the confusion will be cleared up by the time the law goes into effect on January 1!

Obama administration releases new principal reduction guidelines designed to help struggling homeowners with Federal Housing Administration (FHA) insured mortgages.

"Tens of thousands of FHA borrowers will now be able to modify their mortgages," said HUD secretary Shaun Donovan

On May 20, 2009, the president signed the "Helping Families Save Their Homes Act of 2009." This new law provides the FHA with additional loss mitigation authority to assist FHA mortgagors under the Making Home Affordable Program (MHA).

When MHA was initially introduced to the public back in February 2009, MHA excluded FHA insured mortgages, with the understanding that the FHA would create its own standalone program.

Effective August 15^th 2009, mortgage services are now allowed to modify FHA mortgages, under the Home Affordable Modification Plan (FHA-HAMP). This will provide homeowners in default a greater opportunity to reduce their mortgage payments to a sustainable level while following the fundamentals of MHA designed to help homeowners retain their homes and prevent the destructive impact of foreclosures on families and entire communities.

Basic Guidelines

The new FHA-HAMP authority will allow use of a partial claim up to 30%of the unpaid principal balance as of the date of the default combined with a loan modification. Like the broader Obama program, the FHA seeks to reduce mortgage-related payments to 31% of monthly income. But it gets there in a different way, by focusing on changes in the principal amount rather than only evaluating the interest rate. The maximum partial claim (principal reduction for payment purposes) consists of the sum of (i) arrearages, (ii) legal fees and foreclosure related costs (iii) principal reduction. The arrearages included in the partial claim cannot exceed 12 months PITI. Combining each of the above the maximum partial claim amount is 30% of the outstanding principal balance as of the date of the default or modification.

Although rate reductions and extended mortgage terms are as outline in the modification agreement, and appear to be permanent, the principal reduction is only a deferment of debt and required to be paid back if at all possible when the subject property is either refinanced or sold. There doesn't appear to any stipulations on any required timelines and only suggests that if and when values increase and the option is initiated by the borrowers.

To be eligible, the front end debt to income ratio must be as close as possible, but not lower than, 31 percent. The front end ratio is defined as the total monthly mortgage payment (PITI) for the modified mortgage divided by the borrower(s) gross monthly income. The back end debt to income ratio must not exceed 55 percent and is defined as the total monthly mortgage payment plus all recurring monthly debt dived by the borrower(s) gross monthly income.

FHA-HAMP can be utilized only if the borrower does not qualify for current loss mitigation home retention options (priority order FHA Special Forbearance, Loan Modification and Partial Claim).

To confirm the borrower(s) is capable of making the new FHA-HAMP payment, the borrower(s) must successfully complete a trial payment plan. The trial payment plan shall be for a three month periodand the borrower must make each adjusted scheduled payment on time. If the borrower does not successfully complete the trial period, the borrower is no longer eligible for FHA-HAMP.

Disposition options (pre-foreclosure sales and deed-in lieu of foreclosure) are still available to the servicers/mortgagees immediately upon default, if the cause of default is incurable, i.e. the borrower has no realistic opportunity to replace the lost income or reduce expenses sufficiently to meet the mortgage obligation.

Under FHA-HAMP, the Mortgagees may receive an incentive fee up to $1,250. This total includes $500 for the partial claim and $750 for the loan modification.

It has been reported that an estimated 15% of all FHA insured loans are 30 days or more past due on at least one mortgage payment. Although most FHA modification guidelines stay intact, the new action allows for additional borrower(s) qualification opportunities to reduce monthly obligations while they proceed to build financial stability.

FHA-HAMP Full Guidelines

Christina Inman, the CEO of TheAgentCenter.com, has been a real estate industry specialist, author and broker for 17 years.