Dean Graziosi

Fannie Mae s one of two government-backed mortgage enterprises responsible for ensuring the liquidity of the mortgage market. The recent economic meltdown resulted in a lot of government bailouts. These bailouts were not just limited to banks but also to the real estate sector; to Fannie Mae and its twin, Freddie Mac. The resulting effect was tighter controls on the institutions leading to even more foreclosures flooding the market. All of a sudden, people who were once considered prime purchasers were not unable to meet the steep conditions set by the institutions and could not qualify for housing loans.

The direct result of this is that even though there are now more foreclosed properties on the market than ever before, there is even less buying going on because getting a housing loan is now a rigorous process for prospective purchasers.

Probably as a result of this and other developments in the real estate sector, Fannie Mae recently released a couple of incentives geared towards homebuyers and realtors. These are financial incentives provided on sales of HomePath properties and run through October. According to a press release by Fannie Mae on June 11, the goal of the incentives is to stabilize neighborhoods and is only available to buyers who intend to purchase as a primary residence.

For homebuyers, the incentives offer up to 3.5 percent of the final sales price to put towards closing costs. Realtors representing the owner occupant buyer get to receive a $1,200 bonus on the sale. These are for HomePath properties and for buyers who intend to live in the purchased property as a primary residence. Besides these, there are also some other conditions which must be met in order to qualify for these incentives.

Conditions

One of the conditions is that the buyer or the agent representing the buyer needs to request the incentive upon submission of the initial offer.

The initial offer needs to be submitted on or before June 14, 2011 and any offers made before that do not qualify for the incentives.

Also, the deadline for the incentives is October 31, 2011 and it is absolutely mandatory that the sale close before that date as there would be no extensions to that deadline.

Sales made by pool or auction will not be eligible for the June 14, 2011 to October 31, 2011 incentives.

Any property that was acquired by Fannie Mae in connection to a financing under a reverse mortgage is not eligible for this incentive.

In order to qualify, a buyer has to sign the Owner Occupant Certification Rider to the Real Estate Purchase Addendum.

These are the main conditions although there are a few more which are available on the website, homepath.com.

It is important to note that Fannie Mae also has a lot of other incentives available for homebuyers which can be found on the Homepath.com website.

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Hard money loans have been a tool used by real estate investors since investing began.  These are not your standard 15 year or 30 year mortgages with fixed or adjustable rates.  They’re short term money loans using real property as collateral.  Investors use them primarily in flipping deals, as their interest rates are higher than other funding, adding costs, and requiring short term payoffs. 

In the heady market days when properties were being purchased, rehabbed and flipped in days to weeks for a handsome profit, hard money lenders were popular and made a lot of money as well.  These very short term loans would fund some or all of the purchase, the rehab work, and be paid off at closing when the property was sold.  It has been a win-win situation for the real estate investor and the hard money lender as well.

If there’s less flipping going on, how can hard money loans become more important?  With the housing market and mortgage industry troubles beginning in 2006, there has come an enormous tightening of lending standards.  Real estate investors are having to devote more time and effort to funding their deals, whether for a flip (still happening) or for long term rental properties.  Sometimes longer term funding is available, but only after a “seasoning period” of ownership showing solid rental income.  When this is the case, a hard money loan can help to bridge the gap.

The real estate backs the hard money loan, and these type of loans are being used more frequently to fund business operations as well as real estate investing.  With this new importance in the marketplace has come new scrutiny, and a new Code of Ethics for private hard money lenders.  The American Association of Private Lenders (AAPL) developed this Code of Ethics to include stipulations about strictly adhering to all related real estate lending laws, nondiscrimination in lending, and honesty in all dealings.

For real estate investors, hard money lenders are a resource and profit tool.  When short term funding can make or break a deal, a list of local hard money lenders can make the difference.

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Since August, the number of owners offered loan modification programs has doubled, reaching 919,965 in October. This makes up around 29 percent of the eligible programs as per the Treasury Department on its monthly report. This benefit is extended to those who are able to pay three months of repayments without delay or default on the trial phase of 3 months. Since April, the government has extended this benefit to around 650,000 borrowers. California leads the pack with highest trial modification program numbers, followed by Florida.

It is believed, however, that almost 80 percent of those who need help haven’t received it yet. This help would eventually stop these borrowers from turning delinquent and prevent foreclosure. Lenders are trying their best to get more into the trial mortgage modification program. In the year 2009, lenders other than the government machinery have extended the mortgage assistance program to nearly 2.3 million owners according to Hope Now. These programs would include different options like modifying loans, repayment plans, reducing principal amounts, forbearance.

There are many assistance plans working outside the government’s requirement mandates. Bank of America, for instance, has covered 14 percent of the eligible population with default payment terms of 60 or more days under the government’s modification plan. This number has reached 136,994. Under its own program, Bank of America has offered modification programs to close to 450,000 customers since 2008. This year the bank has completed the loan modification for around 220,000 homeowners. What this essentially tells us that the system is working for many homeowners that might otherwise be facing foreclosure.

As per the Home Affordable modification program guidelines of March 2009, the lenders have to reduce the mortgage payments to a 38 percent debt to income ratio at the front end. The treasury will match this offer by a 31 percent reduction for the borrower. There are preconditions to avail the program, which include that the occupancy should be a single family, that it should be primary residence and that the unpaid balance on the principal is $729,750 or below for a single unit. The borrowers who are bankrupt or are in litigation are not disqualified from this program.

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