Karen Cooper-Mtg Banker|Broker Ashland|Medford

Working with a lot of first time home buyers over the years prepares one to expect challenges in the mortgage process. One recent transaction that should THANKFULLY close before Thanksgiving was probably at the top of the challenging range. I found out some things on the journey with these buyers. Some of these things make sense to me, others were like being blindfolded and poked with a sharp stick repeatedly:

• Patience is not only a virtue, it is the key to these buyers successfully closing on their first home purchase
• Neighborhood Stabilization Program guidelines and provisions were not carefully thought out
• Real estate brokers handling the listing for bank owned foreclosure homes are not supportive of the Neighborhood Stabilization Program, and if they have an offer from a buyer not using NSP, they will choose it first
• The lender support the State of Oregon thought they had does not exist
• Diligent efforts of SOME of the parties to a transaction cannot trump other parties dropping the ball – the whole team has to work together, or we lose the game
• Expect the unexpected – over and over and over again! Trained NSP coordinator transferred to another position; new NSP coordinator doesn’t have lending background, so has a sharper learning curve to get up and running; three consecutive local NSP contacts – one fired but is appealing that decision, one goes out on vacation, the third gets to start from scratch trying to carry the ball forward until the 2^nd one returns; NSP application accepted, but documentation not reviewed for 6+ weeks with no mention of this during repeated fund requests; three inspectors do not require repairs, FHA underwriter does; FHA lender closes office due to the commercial building they are located in being foreclosed upon; chaos reigns with the merger of lender’s operations centers; notified lender’s corporate center has reviewed and approved NSP program as an acceptable down payment assistance program, but approval is retracted; lender’s rep goes out on maternity leave early; FHA lender’s underwriting approval is three pages long, but only two pages are provided; the missing 3^rd page contains additional FHA underwriter required repairs

This family WILL be recipients of Neighborhood Stabilization Program funding, as will roughly 7 others in the City of Medford. I cannot afford the time investment this program requires, and will only help this one family, having referred the other I had to another lender. God Bless this first family and the families that follow them…

Thank you, Damien Mann of the Medford Oregon Mail Tribune, for responding when this family reached out to you to share their story. It needed to be told.

See you at the closing table!

Really what this boils down to is one question. Banks selling Foreclosure Home Inventory… why do you accept the offer of a buyer using FHA or USDA home loan financing programs if you are unwilling to negotiate their lender’s required repairs?

Yes, we all read in the MLS sheet the “As Is” provisions. Saw all the “As Is” provisions and warnings in your addendum to the purchase contract. We read about all the other provisions that were negotiated before the buyers went under contract with you, too. Why, may I ask, are we experiencing this clash between your “As Is” sale expectations and the known requirements of the buyer’s financing terms AFTER the buyer has paid their whole house inspection and appraisal fees? And maybe after they’ve paid to de-winterize/re-winterize your REO home, too? This is $1,000 or more the buyer paid! When you accepted an FHA| USDA| VA buyer, did you not just make those provisions null and void? Shame on you Bank REO Seller – YOU should KNOW better!

Did you read the part in that same purchase contract about the buyers using FHA home loan financing? Using USDA home loan financing? Do YOU know, as a bank| lending institution that there are HUD required Minimum Property Standards for an FHA or USDA or VA home loan? Just in case, here is a link to those HUD minimum Property Standards in case the time has come for you to refresh your memory. Don’t have time to read all that? Here’s a General Summary that can be found as of today on HUD’s website:

CHAPTER 2

GENERAL ACCEPTABILITY CRITERIA

200 GENERAL

These general acceptability criteria apply to existing as well as new construction.

201 REAL ESTATE ENTITY

The project site shall comprise a single plot, except that two or more parcels separated by other parcels or a street or streets may be acceptable provided the resulting parcels comprise a readily marketable real estate entity. In either case, the property shall be sufficiently grouped to assure that convenient and efficient management during operation can be expected.

202 SERVICES AND FACILITIES

202-1 TRESPASS

The property shall be so designed that it can be used and maintained without trespass upon adjoining properties.

202-2 UTILITIES
Utilities and other facilities shall be independent for the property, without dependence upon other properties.

203 SITE CONDITIONS

HAZARDS

The property shall be free of those hazards which may adversely affect the health and safety of the occupants or the structural soundness of the improvements or which may impair the customary use and enjoyment of the property. These hazards include toxic chemicals, radioactive materials, other pollution, hazardous activities, subsidence, flood, erosion, expansive or compressible soils, inadequate drainage outfall,

landslides or mudflows, and deposition of suspended solids or others located on or off site. Projects with potentially significant hazards may be acceptable if any such hazards are effectively mitigated.

203-2 UNFORESEEN CONDITIONS

When special conditions exist or arise during construction which were unforeseen and which necessitate precautionary measures, the HUD Field Office may require such corrective work as may be necessary to meet the

special conditions. Special conditions include rock formations, unstable soil, high groundwater level and springs.

204 ACCESS

204-1 STREETS

Each property shall be provided with vehicular access by an abutting public or private street. Private streets shall be protected by a permanent easement.

204-2 ACCESS TO THE BUILDING AND THE NONDWELLING FACILITIES

204-2.1 Each building shall have safe and convenient pedestrian access from project parking areas.

204-2.2 Each building shall have convenient access for service and, when necessary, for delivery of fuel.

Still too much, Bank REO Seller? Did you know you could hire a forward thinking appraiser, such as one we have here in Southern Oregon, who will do a preview of a property for $75 to let you know what repairs likely would be called out on an appraisal for a buyer using financing subject to HUD’s minimum property standards? Yes, I know how fee conscious you are Bank REO Seller, but I’d say that would be $75 well spent – before I log that FHA home loan appraisal and the information on your foreclosure home becomes of record.

Wouldn’t it be nice if a buyer using FHA| VA| USDA home loan financing could know before they spent $1,000 in initial fees that the repairs on your Bank Owned Foreclosure Home would exceed their budget? Think the buyers that did that only to find out they can’t afford your home are ever going to want to bank with you? Is it not part of your business practices to build goodwill with the community members your banks| branches are located in?

Since your bank owned foreclosure homes represent such a large percentage of the inventory of available homes for sale in our area, I think the time is overdue for you to ease some of our pain in this community. Be PROACTIVE about fulfilling market needs! If you KNOW a large percentage of your buyers will be using home loan programs that will require your property meet HUD’s minimum property standards, why not spend the $75 and get repair estimates in advance so these issues may be hit head on?

Just a thought…

See you at the closing table!

Clash of the Titans | Bank Owned Foreclosure Homes vs. FHA VA USDA Home Loans Part 1 of 2

In this battleground home buyers and sellers find themselves on in today’s real estate market, it is often necessary to work our way through conflicting goals to reach the ultimate goal, a successful closing on the sale of a bank owned foreclosure home to a ready, willing and able buyer. That bank’s goal is to get the home sold as quickly as possible at the lowest possible cost to them, which doesn’t necessarily mean the highest possible price they can obtain, as is the case in a traditional private party transaction where individuals are selling the home vs. institutions. Banks are factoring in the more traditional costs of a sale, such as selling commissions and closing costs, negotiating the lowest price they can get these fees to while passing as many as possible on to the buyer. But, unlike a traditional private party seller, the institution seller (bank) is factoring in their employee costs, legal costs, asset management costs and maintenance costs of an abandoned home. Let’s not even get in to the bank’s focus on their balance sheet and reserve requirements! Bottom line is, the bank| institutional seller is focused on money, not service or win| win negotiations and no emotions come in to play here.

Every real estate market can be a little different... sometimes, a LOT different. Let’s look at Southern Oregon’s market. Here in Southern Oregon, a large percentage of the home loans buyers are choosing as the tool to purchase their home are FHA, VA and USDA loan programs. Based on the reports I’m reading, these three loan types, FHA, VA and USDA, have vastly increased their market share in the past 24 months. Why? Because they have low| no minimum down payment requirements, and with the deterioration of the private mortgage insurance industry and their corresponding tightening of underwriting criteria, conventional loans which require private mortgage insurance if a buyer is putting less than 20% down cannot meet the needs of the market. Entry level buyers and investors are driving the market here, and the entry level buyers are almost all using FHA, VA and USDA loans as the financing tool of choice to buy their homes with. If my pipeline is any indication of what other markets are experiencing, 99% of the home loans I am working on for California and Oregon home buyers are FHA, VA and USDA loans, and 99% of my pipeline is purchase transactions, because most of the existing clients in my database who would benefit from refinancing have already done so – or can’t, due to current market values being driven downward by the vast percentage of distress sales such as these bank owned foreclosure sales.

The buyers I am working with are in the market right now because they can buy a home for about what they have been paying for rent with little to no cash outlay. They see some amazing deals, and are attracted to the bank owned foreclosure inventory which is being put on the market at below market prices…below market for now, since as soon as those bank owned foreclosure home sales close, they become the market price for everyone since appraisers will use them as sales comparables until private party sales percentages pick back up again when the bank inventory of foreclosure homes sells through and distress sales no longer determine market values. These buyers are qualifying for such low interest rates, AND are getting tax credits for purchasing a home, so they have been coming out in droves these past 9 months. The naysayers say this is just the set up for the next real estate market crash, buyers going in to these homes without enough “skin in the game”. I say I’m sure there will be some of that out there, but since the home buyers I work with choosing FHA | USDA| VA home loans have analyzed their budgets, investigated the various loan programs available to them, and are planning to purchase these homes to live in for 5+ years, I suspect the default rate for these buyers will be as low as it has been for ALL the first time home buyers I have worked with since 1983 who have taken the time and made the effort to prepare for sustainable homeownership, none of whom have “strategically defaulted” on their home loans that I am aware of, although many have experienced financial hardship driving them to try to find solutions to help keep them in their homes.

Horns are locked and the battle is on! So what is the battle over? The battle is over the bank’s “As Is” provisions vs. the Minimum Property Standards required by HUD for FHA | VA loans which most banks and lenders adopt for USDA home loans, too. After 9 months of frenzied buyers snatching up REO inventory, we’re finding a lot of the homes on the market aren’t in the same condition some of the first waves of REO’s were in. Part 2 of Clash of the Titans | Bank Owned Foreclosure Homes vs. FHA|USDA|VA Home Loans will highlight the respective positions of the bank vs. the FHA| USDA| VA buyer in these foreclosure home sale transactions.

See you at the closing table!

After we have finished exploring Sunny Valley and the ghost town of Golden Oregon with the hydraulic mining sights across the road, we head to Historic Wolf Creek Inn to have dinner. In spite of the Rogue Valley population being well over 200,000 people now, we manage to bump in to two people we know having dinner with their families at the Wolf Creek Inn. After a delicious dinner of "Steak for 2" and Crab and Avocado Louie, we meet up with one group of friends and tag along for a tour of the Wolf Creek Inn, learning about the days the Inn was established as the overnight stop for the Portland to San Francisco Stage Coach run, housing notables such as Clark Gable and Robert Redford, while hearing tales of paramormal activities - appropriate for All Saints Day, don't you think?

Thanks for sharing our Sunday Drive to three very scenic locations here in Southern Oregon.

Part 1 - Sunny Valley, Oregon

Part 2 - Golden, Oregon

See you out there!

On this first day of November 2009, we continue our Sunday drive on this glorious day, leaving Sunny Valley, and heading north to go to Golden, Oregon. This historic town was settled by early Gold Miners, most of whom moved on to other areas for their treasure hunt. The State of Oregon is in the process of restoring/renovation this historic area, and we'll look forward to seeing it again one day. In the meantime, here you go!

There is such beautiful scenery in this area, and so many great places to sightsee and hike, or as we chose to do, take a leisurely Sunday drive!

Part 1 - Sunny Valley

Part 3 - Mill Creek Inn