Saturday, January 16, 2010

Phoenix real estate - IRA down payment funds

Down Payment on House Gift |Tax Free Way from IRA

Looking for a way to get a down payment gift from a relative? Did you know your parents could take money from their IRA to give you a down payment gift -- and not face any tax penalties?

Many people are buying Phoenix foreclosures for owner occupied homes and using FHA financing because it allows the least amount of money down from the buyer. One of the nicest features about using FHA financing is that it allows gift funds to be given from a relative to the buyer.

So let's say that you were buying a 100,000 home and you needed the required 3.5% or $3,500 dollars of down payment to qualify -- but you only have $1,000 in your bank account. A relative (and in some cases a non relative) can gift you the money with a statement stating that no repayment is required (called a gift letter) along with some other simple documentation. Then the gift funds can be counted as YOUR funds.

This might save you up to several months/years of saving money to make it to the $3,500 down-payment mark.

One thing many people don't know is that the IRS allows a parent to pull money out of their IRA "WITHOUT" penalty or taxation in order to gift those funds to a family member's home. Most people know you can take money out of your IRA for your own home. But many do not know that you can take money out of your account for the use of a parent's, child's or grandchild's home -- even if you will not live in that home!

See how nice the government is to NOT tax you on something.

See the IRS publication attached and see for yourself.

Click here Down Payment on House Gift |Tax Free Way from IRA

Phoenix real estate

Phoenix homes for sale

Investing in real estate, Phoenix, Scottsdale, Tempe

An announcement from HUD on waiving the FHA guidelines for flipping:

"In an effort to stabilize home values and improve conditions in communities where foreclosure activity is high, HUD Secretary Shaun Donovan today announced a temporary policy change in FHA guidelines that will expand access to FHA mortgage insurance and allow for the quick resale of foreclosed properties. The announcement is part of the Obama administration commitment to addressing foreclosure."

The waiver will take effect on February 1, 2010 and is effective for one year, unless otherwise extended or withdrawn by the FHA Commissioner. To protect FHA borrowers against predatory practices of "flipping" where properties are quickly resold at inflated prices to unsuspecting borrowers, this waiver is limited to those sales meeting the following general conditions:

  • All transactions must be arms-length, with no identity of interest between the buyer and seller or other parties participating in the sales transaction
  • In cases in which the sales price of the property is 20 percent or more above the seller's acquisition cost, the waiver will only apply if the lender meets specific conditions.
  • The waiver is limited to forward mortgages, and does not apply to the Home Equity Conversion Mortgage (HECM) for purchase program.

Download the HUD and FHA guidelines for Flipping Waiver

Phoenix Real Estate

Saturday, December 26, 2009

HR3126 and Arizona Mortgage Companies

Although HR3126 appears to be coming to end, I wrote a commentary on HR 3126, the Consumer Financial Protection Act of 2009, passing the House Financial Services Committee. My original post (hyperlink to the left) brought out some strong feelings from an appraiser named Max. The comment brought out another side to HR3126 that did not get much press: HR3126 put many apprasiers out of work.

The comment from Max about one of my opinions:

    [Quoting me] "Personally, I believe a good appraiser does not need to be an expert in a specific geographic area to do his/her job."[end of quote]I disagree, Ron. It's because of people like you we are in this mess! In every city there is an area where 2 homes real close to each other -- and even look the same -- can be valued very differently. Unless you've done the work there and have the experience you are not going grasp all that's needed to get to the correct outcome, doesn't matter how much research you google! HVCC is a monopoly. It only helps the banks because its another big scam they make money off! Do your research, buddy.

My Reply:

Everyone is entitled to their own opinion. I say PART of the reason this industry got in this mess was because of appraisers buckling under the pressure of mortgage brokers and realtors who were "just needing to make this deal work." That translates into appraisers who over-valued properties. This wouldn't have happened if appraisers would have stood firm. A good part of the reason that happened was because appraisers knew the mortgage brokers and the realtors personally. Realtors can write contracts all day long, and mortgage brokers can write loans all day long, but nothing happens if the appraisal doesn't at least match the purchase price. In some cases the appraisers were more than happy to accommodate to make a deal work. In some documented cases, they even got paid for it. The HVCC put an end to all this by taking "friendships" out of the picture.

Are you telling me you would decline a job if it was 10-15 miles from your house and you were not an "expert" in that subdivision? If you are, you may have very high integrity, but you may also be a little hungry. Are you telling me you cannot call the listing agent and get the details of a house that was sold -- if you are not an "expert" in that subdivision? Can you not do your research by calling other industry professionals involved with your comparables? Most professionals I know do it all the time. If you are concerned about variances in neighborhood values, you call the professionals involved in the transaction who can explain the difference in values. I've never had a professional not willing to tell me about the upgrades in the house, who it was built by, construction quality, and any other pertinent details.

Keep in mind a key opinion of my article: "I hope any replacement to the HVCC keeps the original intent of the code." The intent was to keep the appraisal process independent of pressure from mortgage brokers and realtors. I'm aware that HVCC is a monopoly, but I still believe the pure purpose of the code of conduct is correct.

Finish reading this post

Arizona Home inspectors, mortgage, credit

HR3126 and the mortgage lending process

A continuation from part one of this post. Max (the appraiser)and I had a lively discussion about HR 3126, the Consumer Financial Protection Act of 2009. The first post was getting long so it was time to break the conversation into two parts.

The response from Max:

    "Until you know how to appraise you have no way of knowing what is best related to this issue. Yes, this rules help some (banks) and screws others like borrowers, appraisers and others! First of all, all they needed to do was ENFORCE the rules and NOBODY did that. I think that would be a great place to start! Second, in order to change something you got to get the top professionals who are ethical in each field and together come up with a new solution and not just decide behind closed doors like the moron Cuomo did, to give his friends in the banking industry another revenue to screw everyone! All they did was kill a lot of small business and gave it the big banks basically! You are talking about putting somebody in the middle, how is the management company in a better position to order appraisals when they are owned by the banks?? See a little conflict of interest there? ENFORCE the rules and hold everyone accountable, should have been a good way to start! Instead they screwed the hard working average Joe and closed down a lot of small businesses, nice way to go!"


There's always more than one side to a story. Appraisers, many of whom were innocent of any wrongdoings, went out of business because of HR3126. Consumers -- who for the most part only knew what their realtor told them about home values -- had an added level of protection against overpriced homes. And of course, it was now much more difficult for people who actually wanted to perpetrate loan fraud to get away with it. However, as Max pointed out, over regulating an industry can cause financial hardship with the average small business.

What are your thoughts?

Arizona mortgage company, mortgage lending process

Thursday, December 3, 2009

Arizona Mortgage Company News

Arizona Mortgage Company News: HR 3126 Passes House Committee

If you are currently working with an Arizona mortgage broker you may be interested to know that on October 22, 2009 HR 3126, the Consumer Financial Protection Act of 2009, passed the House Financial Services Committee with an amendment that could ultimately end the Home Valuation Code of Conduct (HVCC). The HVCC was aimed at the selection of appraisers by Arizona mortgage brokers -- as well as mortgage brokers from across the country. At the very minimum it HR 3126 will enforce an 18-month moratorium on the HVCC.

In Arizona, I'm not so sure that the HVCC was such a bad idea or that it caused any serious problems for any mortgage company or their clients. I hope any replacement to the HVCC keeps the original intent of the code. Let me explain what the HVCC is and how it affects any Arizona mortgage broker, realtor, and their clients:

Home Valuation Code of Conduct (HVCC) | Effect on Arizona Mortgages

Effective May 1, 2009, the Home Valuation Code of Conduct (HVCC) established standards for solicitation, selection, compensation, conflicts of interest and appraiser independence as they relate to mortgages and Arizona mortgage brokers. It is effective for any mortgage that will be sold to Fannie Mae or Freddie Mac. Federal Housing Administration (FHA) and Federal Home Loan Bank (FHLB) mortgages are not covered in the agreement.

From Bob Hunt, RealtyTimes staff writer:

    The major emphasis of the HVCC has to do with the selection of appraisers [by an Arizona mortgage company]. Believing that much of the abuse of appraisal practices resulted from quid-pro-quo selection practices, and good-old-boy networks, the Code seeks to insure that the selection of an appraiser [by an Arizona mortgage company] will be an arms-length transaction. Hence, for example, under the HVCC neither a mortgage broker nor a real estate agent may be the person who selects the appraiser. A lender may select the appraiser, but the person who does the selecting can have nothing to do with the loan production staff.

    The institutional response to this, following the path of least resistance, has been to employ a third-party Appraisal Management Company (AMC) to select the appraiser. An AMC is a middleman. It receives an appraisal request from a lender [Arizona mortgage company] and then it assigns an appraiser from its list of approved appraisers who have agreed to take assignments.

The primary complaints about AMC appraiser selection processes are:

  • appraisers are given assignments that take them out of their geographical area of familiarity and expertise
  • it's turning out to be much more difficult for an agent (the one who is likely to know the neighborhood and relevant comparables) to provide helpful information to the appraiser -- everyone is so uptight about the new regulations they have been interpreted to mean that no one can have a meaningful discussion with the appraiser

National Association of Realtors President, Charles McMillan, met with both the New York State Attorney General and with the head of the Federal Housing Finance Agency (the overseer of Fannie Mae and Freddie Mac) to convey industry concerns. Representatives Travis Childers (D-MS) and Gary Miller (R-CA) have co-sponsored HR 3044 that would impose an 18-month moratorium on the use of the HVCC.

The complaints from NAR have undoubtably come from the ranks of realtors who were upset because they lost deals when homes wouldn't appraise for the asking price. Perhaps there were also concerns expressed by Arizona mortgage brokers. This makes me wonder just how me more deals were lost after the enactment of HVCC? Personally, I believe a good appraiser does not need to be an expert in a specific geographic area to do his/her job. There are enough tools available on the MLS for appraisers to get a firm grasp on property features. Additionally, appraiserss have full reign to talk to the listing agents of all properties sold in an area. Therefore, if the appraiser has any questions about a property about to be used as a comparable -- he/she can get a full disclosure from the listing agent.

It would seem a good time to pause and reassess.

Phoenix Real Estate

Wednesday, November 18, 2009

Mortgage "Buy and Bail" Affecting the Mortgage Lending Process

If you don't know what "Buy and Bail" is read this post. For the rest of you who know what buy and bail is, how has buy and bail changed the lending industry for every American?

flashing astrickLook at it this way: A bank gets robbed by a 20-yr old white male wearing a Cubs baseball hat. Then it happens again with the same type of guy and same hat. You start to see a pattern when hundreds of banks are robbed by a person with the same MO. Could this be an organized gang or perhaps tons of copycat bank robbers?

picture of frustrated womanOne day a customer enters a bank fitting that description and the teller behind the counter gets very nervous and the adrenalin starts to pump. "OH NO! I'm going to get robbed!" Perhaps the guy has a Red Sox hat. The teller still gets nervous because he looks close enough to the other robbers.

The banks say "Let's not wait till we get robbed again. Let's increase our security (like at the airport) and search all guys fitting this description. WAIT -- let's search everybody because maybe later we'll get robbed by a Chinese woman wearing glasses and a wig.

Buy and Bail people are like bank robbers. They "rob" Fannie Mae of money owed on house "number 1" while going out and getting house "number 2" -- knowing full well they are going to buy and bail.

Unfortunately it isn't as easy as "what you are wearing" to determine who will be the next buy and bail person. To see who might be a potential buy and bail robber simply look at what the other buy and bail robbers had in common when they did their buy and bail:

  • woman with her arms foldedBuy and Bail clue 1 - they had homes that were upside down
  • Buy and Bail clue 2 - most bought a new home in the same general area where they lived
  • Buy and Bail clue 3 - they all said they were going to rent their current home
  • Buy and Bail clue 4 - they all had no history of rental income from their current home
  • Buy and Bail clue 5 - most had no renter lined up or a fake rental agreement
  • Buy and Bail clue 6 - they could not afford two home mortgages.

When your current home is upside down and you are trying to buy a new one, please understand that you look like the last 1,000 buy and bail bank robbers. The government put out a warning that if you look like (or your file even smells like) the other buy and bail bank robbers they will assume you might be a buy and bail robber and REFUSE your loan. If you get the loan you will need to jump through extra hoops such as: take a lie detector test, get fingerprinted, and possibly get a GPS tracking chip in your forehead.

picture of a bloodhoundUnderwriters are now like bloodhounds sniffing out anything that might lead them to the scent of another buy and bail robber!

It's sad for the ordinary 20 yr old white guy in a Cubs hat who is coming into the bank for some honest business. He's in for a rude awakening. person in jailPUT YOUR HANDS IN THE AIR AND STEP AWAY FROM THE COUNTER you buy and bail robber!

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