Housing Good News

Here’s a piece of good news about the foreclosure mess and the overall bad housing market. Good news in this arena is as rare as snowmen in the summer, so I wanted to pass it along right away.

An acquaintance called me some days ago to tell me he successfully got his mortgage company to renegotiate his mortgage loan terms.  Woot! Woot!

The Original Mortgage

• Taken out in 2003
• 5 year ARM, Interest Only payments at 5.875%
• Payments of 882.32 per month (interest only, not touching principle)

The New Mortgage

• 3.875% fixed rate for 40 years
• about $400 payment needed to start the new plan

This is phenomenal news! On your average $200,000 mortgage, this renegotiation brings the payment down from about $1183/month to $820/month.

Congratulations Tom!

The homeowner in this case had suffered both a medical disability and a job loss. Both these events are typically “qualifying events” for almost every mortgage company. Experiencing a qualifying event means you’re eligible for the mortgage company’s renegotiation plans.

Haven’t had a job loss or medical disability? It’s still worth contacting your lender if you’re struggling to make the current payment, or if you know you soon will struggle when the adustable rate (ARM) adjusts in the future.

.

Further good news on the credit card front –

Another friend of mine fell 2 months behind on credit card payments. He had a 5 to 15 year good payment history on the various cards. He’s 100% commission in a profession related to the housing industry, so times are tight.

Bank of America contacted him and offered their “Hardship Program” –

Old Payments

• Card 1 — $382.00 per month at 28.99%, payoff time about 40 years
• Card 2 — $213.00 per month at 15.22%, same

New Payments under B of A’s “Hardship Program”

• Card 1 — $200 per month at 4.75%, payoff time 60 months
• Card 2 — $168 per month at 4.50%, same

If you’re falling behind on or struggling to pay any of your consumer debt, call the servicing company today! They’re as scared of the word “recession” as we all are, and they’re agreeing to reduced payment plans to avoid writing off the bad debt entirely.

Help for Homeowners

Today’s Fed announcement marks another step towards getting the housing market un-slumped. Finally, Hank and Ben seem to be getting it: the world’s financial meltdown started in the US housing market and the solution should begin by focusing on housing.

Recently, mortgage industry heavyweights Countrywide (now Bank of America), JP Morgan and Citigroup announced a foreclosure moratorium to help struggling homeowners stay in their homes. Citi especially said their efforts would be aimed not only at homeowners behind in their payments, but those who’s credit profile reveals they might get behind.

Today’s new Fed housing stimulus package should make mortgages more affordable by pushing long-term mortgage interest rates down as much as a half-point. This should help new homebuyers jump into the market. (click the link for a breakdown of program details)

Some expect rates to fall to 5.50% soon. The National Association of Realtors (NAR) estimates that each 1-point drop in mortgage rates spurs 500,000 new home buyers into purchasing a home. NAR says it’ll keep pushing the Fed to enact programs and policies that will eventually get mortgage interest rates down to 4.50%, a rate not seen since well, not in my lifetime.

Here’s a chart of the history of mortgage rates, courtesy of my broker The Phoenix Real Estate Guy (see his post with many more charts here).

It’s interesting to compare the recent history to the truly historic data, based on a chart posted at The Financial Forecast Center. Seems like rates haven’t been at 5.50% since sometime in 2004, and haven’t been at 4.50% since about the late 1950’s.

Our housing problem is generally twofold – (1) too many homes for sale and more hitting the market daily due to swelling foreclosures, and (2) not enough buyer interest.

The Fed’s announcement today, combined with the foreclosure moratorium announced recently gives me real hope that the kinks might start working out soon.

Banks working to keep homeowners in their homes means less foreclosure homes going up for sale. The Fed making substantive moves to coax new homeowners into the marketplace means eating up some of the excess inventory of homes for sale.

This? Could be the beginning of real change.

Tune in tomorrow for a breakdown of the local Phoenix housing numbers, and how we’ll know we’ve begun to turn the corner towards recovery.

Fannie and Freddie Not To Blame

As a follow up to my October 4 post, I present the following chart created using Federal Reserve data.

This chart is a screen capture of the original which appeared on the Mark Thoma’s blog The Economist’s View. See the original chart and post accompanying it.

Thoma has waaaay more understanding of this than I do. He’s got the nifty cool graphs and charts to back up what I tried to say on October 4.

Namely, Fannie and Freddie did not cause the foreclosure crisis. As the chart shows, The Two F’s got out of subprime loans in 2002 before things got really crazy. Watch the pink line – see how it dips sharply at the sime time the dotted light blue line makes a jump shot? That’s Fannie and Freddie getting the heck out of dodge, because the loans the market started demanding felt way too risky. The light blue line is “asset-backed securities issuers,” namely entitities like the investment banks that have failed so spectacularly of late.

The Two F’s were still giving out some loans more risky than their standard fare. But as Thoma explains (and my personal experience proves) Fannie and Freddie largely did 30-year fixed rate loans. They weren’t doing the “exotic” liar loans that have caused so much pain.

Thoma says, “There is no excuse for the actions of the management of Fannie and Freddie, and I’m not trying to defend them or their choices, but the idea that Fannie and Freddie caused the general credit crisis is wrong.” (emphasis mine).

By the way, I’m still browsing through Thoma’s blog, trying to study up on all the intricacies he and his colleagues discuss about economics in general and the housing/financial crisis in particular. It’s not for bare beginners, but is an excellent resource if you’ve done some reading on the basics elsewhere. Check it out!

Sheila Bair Stole My Homework!

Well, not really. But that headline might get you out of your feedreader.

Sheila Bair is way smarter than me by any measuring stick you can think of. But this week Bair endorsed a loan workout program that’s remarkably similar to a plan I proposed back in April.

Sheila: “The FDIC has initiated a systematic loan modification program at IndyMac Federal Bank to reduce first lien mortgage payments to as low as 31% of monthly income. Modifications are based on interest rate reductions, extension of terms, and principal forbearance. A loss share guarantee on redefaults of modified mortgages can provide the necessary incentive to modify mortgages on a sufficient scale, while leveraging available government funds to affect more mortgages than outright purchases of specific incentives for every modification.” (emphasis mine)

Me:

“…lenders [should] do the following: (1) write down principal, (2) lower interest rates and use fixed (not adjustable) rates, (3) lengthen loan terms, and (4) use the homeowners’ credit score from before they missed their first mortgage payment to calculate the refinance terms.”

and me in September 2007:  Why is the 30 Year Mortgage Sacrosanct?

So Sheila, anytime you need to bounce some ideas around, gimme a call. ‘Kay?

Credit “Repair”? Not Likely.

NPR did a great little piece this morning on how many Americans are being sucked in by various credit repair advertisements.

Most of these firms promise to raise your credit score by hundreds of points in a just a few days or weeks. They claim to do this by disputing the incorrect information on your credit report. Many of them even dispute information on your report that you (and they) know for a fact is true. These credit repair “experts” claim that they’ll continually question everything on your report, and eventually the credit reporting agencies will “just get tired of dealing with it and remove the information from your report,” thus raising your score.

You can listen to the NPR audio here. (Click on the little “listen now” icon at the top left, near the headline)

The highlights of the NPR audio:

• These firms don’t do anything you can’t do yourself
• No one can raise your credit score by hundreds of points in mere weeks
• It’s illegal to ask you to pay an up-front fee to “fix” your credit
• If the information on your credit report is factual, it cannot and will not be removed

As I’ve written before, these firms are almost always a sham and a scam.

Instead of falling for credit repair scams, consumers worried about their credit report and score should consult a nonprofit credit counseling service through the AICCCA (Association of Independent Consumer Credit Counseling Agencies). Find a credit counseling service near you.

Related Posts

1. Credit Repair on the Roadside
2. I Can’t Pay the Mortgage, Help!

GMAC Mortgage in Trouble

The New York Times reports that the mortgage group GMAC is in trouble, posting it’s 5th straight loss in 3rd quarter 2008. CEO Alvaro de Molina indicates GMAC is attempting to become a bank holding company in order to take advantage of some of the US government’s $700 billion corporate handout package bailout fund.

What’s it mean? The credit crisis is probably frar from over. Or rather, the fallout from the credit crisis is far from over. The LIBOR continues to improve (2.51% today, down from 4.82% in October), indicating increased liquidity in inter-bank lending, which is after all what we’re told was the real crisis.

What if you have a GMAC mortgage? Don’t worry or panic. Your mortgage payments are still due on the usual dates. If/when GMAC is sold off or absorbed, or whatever, you’ll get a letter in the mail from the new owner of your mortgage loan. They’ll tell you where to send your payments (believe me!). Until then, keep making payments on time, to the address you’ve always sent them to.

What if you’re a GMAC employee? Polish the resume.

Financial Crisis (Still!) Related to Houses And Confidence

As six central banks cooperated in a rate cut this morning, ultra conservative Steve Forbes weighs in on the credit crisis in this video, laying much of the blame at the feet of the Fed and (remarkably!) agreeing with my post the other day that we’re facing a confidence crisis, not a financial crisis.

Steve Forbes Video Highlights & Quotes

• “One [problem in the past was] the Fed being much too easy on money”…. [combined with people thinking they could leverage their investments at a 30 to 1 rate]…. “We had a drinking binge combined with an excess of serving of booze by the bartender – the Federal Reserve – and the result is a severe morning hangover.”
• “The world is awash in liquidity. What we have today is a crisis of confidence, not a lack of liquidity.”
• “Mr. Paulson … has been completely blind as to the importance of stabilizing the dollar…”
• “As for Mr. Bernanke… he still can’t get away from his academic theories that if you just throw enough money at it, it’ll cure itself. Clearly that hasn’t worked.”

Forbes’ solution? Stabilize the dollar, and tell the regulators to stop the mark-to-market process because “there’s no way we can get a realistic price” for those troubled assets in this environment.

I have to admit I’m unsure how one accomplishes the task of “stabilize the dollar” but two of my knowledgeable Canadian investors (including one who trades currencies for a living) says this is paramount. And Paul Krugman has spoken before about the mark-to-market process and how it’s more important to establish the price paid for troubled assets than whether or not the federal government should be the buyer. Krugman recently blogged, “What prices will taxpayers pay to take over some of that toxic waste? How much equity will they get in return? Those numbers will make all the difference.”

In another venue, last night Presidential candidate Senator John McCain tried to turn our focus back to the root of the problem, the housing market. McCain says the government should directly help homeowners by buying up bad mortgages and helping homeowners renegotiate mortgages they can’t afford. However, it’s worth noting that Senator Barack Obama proposed just this sort of plan way back in April. Further, since Fannie Mae and Freddie Mac were recently ‘nationalized’, Treasury Secretary Henry Paulson already has the power to do what McCain presented as a new idea at last night’s debates.

“It’s All Fannie and Freddie’s Fault.” – Really?

I know I promised no politics. But I’m tired of hearing people in the media repeat the Republican party line that our current financial troubles are all the fault of Fannie and Freddie. The Two F’s are wrapped up in our troubles, but they didn’t cause them.

From the a series in the New York Times:

Fannie never actually made loans. It was essentially a mortgage insurance company, buying mortgages, keeping some but reselling most to investors and, for a fee, promising to pay off a loan if the borrower defaulted.

…

Dozens of interviews, most from people who requested anonymity to avoid legal repercussions, offer an inside account of the…. pressure from Wall Street firms, Congress and company shareholders, [which caused Fannie's CEO Daniel Mudd to take] additional risks that pushed the company, and, in turn, a large part of the nation’s financial health, to the brink.

…

Shortly after he became chief executive [8 years ago], [Fannie CEO Daniel] Mudd traveled to the California offices of Angelo R. Mozilo, the head of Countrywide Financial, then the nation’s largest mortgage lender. Fannie had a longstanding and lucrative relationship with Countrywide, which sold more loans to Fannie than anyone else.

But at that meeting, Mr. Mozilo … threatened to upend their partnership unless Fannie started buying Countrywide’s riskier loans. [Mozilo said] that Countrywide had other options. For example, Wall Street had recently jumped into the market for risky mortgages. Firms like Bear Stearns, Lehman Brothers and Goldman Sachs had started bundling home loans and selling them to investors — bypassing Fannie and dealing with Countrywide directly.

“You’re becoming irrelevant,” Mr. Mozilo told Mr. Mudd.

Indeed, Fannie’s share of the mortgage reselling marketplace had plunged by more than half in the year before the Mozilo-Mudd meeting. Adding to the pressure, Capitol Hill demanded Fannie buy more mortgages made to low-income and other risky borrowers. Fannie complied, purchasing more than 3 times as many risky loans between 2005 and 2007 as they previously had.

By the middle of 2007, it all added up to a toxic mess as homeowners started defaulting on their mortgages in droves. Fear of unknown toxicity sitting on banks’ books trickled up through the credit markets, eventually freezing the short-term bank-to-bank and bank-to-business credit cycle.

The rest is (recent) history, as Treasury Secretary Paulson took over both Fannie and Freddie, then oversaw the FDIC bailout of IndyMac, orchestrated the Bank of America buyout of Merrill Lynch, watched as Lehman Brothers imploded, stepped in to bail out AIG and oversaw the WaMu seizure as well. Friday saw the passage of a landmark $700 billion “rescue plan”.

In this campaign season, the Republican spin-meisters have a loose association with fact. It makes a good soundbite to lay the blame at Fannie and Freddie’s feet, whereas it takes a little time, a little digging and a little nuance to explain what The Two F’s actually did. Doggone it, we can’t be bothered with nuance at a time of crisis like this. The American people just want government to get out of the way and cut their taxes. It’s all about job creation, Katie. <wink> You betcha!

Related Post – An Economist Backs Up This Post with Nifty Charts

Bailout

Longtime readers might have noticed that I’m not shy about commenting on current events, and wondered why I’m not commenting on the bailout. Other than posting this cute photo of 2 cats debating the expense of the bailout, I’ve been silent.

That’s on purpose. I simply can’t keep up with the pace of the breaking news on this bad boy.

If you must get your fix of the local bloggers’ perspective, check out my broker Jay Thompson, The Phoenix Real Estate Guy on the bailout.

I have only two substantive comments on the topic. First, we’re facing a crisis of confidence, not money. Newscasters and even politicians who should know better keep saying “we need inject liquidity into the market,” which isn’t accurate. The Fed’s been pumping money into the market for months. We have enough money. What we’re lacking is confidence in that money. Banks are increasingly refusing to lend money to each other on over night or short term loans. It’s the short-term credit market that’s a problem, and that’s hard for the average American to “see” on a daily basis.

You can track this trend of no confidence by watching the LIBOR (London Interback Offered Rate). It’s the interest rate banks charge each other on overnight loans. The LIBOR shot up like a rocket this week and currently sits at an all-time high close to 4%.

Second, I wish the politicians would stop saying things like, “The consequences of inaction are too terrible to mention. I don’t even want to think about how bad it could get if we don’t do something.” What, are you all twelve?? Use your grown up words! The consequences are terrible, but not indescribable. Banks making short terms loans to other banks and to businesses large and small is what greases the wheels of the American economy. If the short term loan market freezes, it would very likely freeze the entire economy.

Businesses use short term loans all the time to cover everyday expenses like payroll, buying new equipment, expanding into new territories and so forth. If business can’t cover daily operating costs with low-cost short term loans, it means they’ll have to cut costs or maybe even shut down. Remember, in the business world, “cost cutting” often means “layoffs” or “plant closing”. Even when it just means “no raise this year” it hurts the economy in the long run. Workers without jobs or without a meaningful raise start defaulting on their home mortgage payments, their credit card payments, student loans, and everything else. They visit the local unemployment office and start collecting a measly unemployment insurance check. Government costs go up, consumer spending goes down. It’s a vicious spiral and it’s the result of our unrepentant love of easy credit and mass consumerism.

Fixing the mess we all made isn’t going to be easy or pretty. But it’s got to be done. Folks who say banks and businesses failing is part of the capitalistic business cycle and we should just let Wall Street take care of itself are ignoring the root causes of our troubles – the housing bubble trickled up to the short term credit markets and is freezing them. If the media would start describing the actual problems (lack of confidence and the short term credit market freeze) instead of focusing on the Dow’s gyrations and politicians playing the blame game, we’d all be a lot smarter and feel better about creating a plan to get us out.

Granted, CNN and some other news outlets started talking about these issues yesterday morning, but that was a week and a half into the trouble! It shouldn’t take 8 to 10 days for our media to get to the heart of the matter.

On the other hand, two writers I respect tremendously present well-reasoned arguments that the bailout plan is a disaster in the making. So maybe I’m an idiot. With a bailout plan this big and this complex, who knows anymore?? So now I go back to being silent on the matter.

Updated Oct 8, 2008: Ultra conservative Steve Forbes agrees in this video link, saying “the world is awash in liquidity. What we have today is a crisis of confidence, not a lack of liquidity,” although he lays much of the blame at the feet of the Fed.

Hank’s Busy Sunday

Hank Paulson works weekends. Our Treasury Secretary is hard at it again this weekend, negotiating the sale of Lehman Brothers. Barclay’s Bank of London is the suspected purchaser of the ‘good bank’ side of Lehman’s business, or the performing side.

A group of 10 to 15 Wall Street firms would buy the ‘bad bank’ side of Lehman, or the nonperforming side with all the bad loan debts. Each firm would provide a portion of the estimated $30 billion to underwrite Lehman’s mortgage related losses. That’s the same amount guaranteed by the US government in their bailout of Bear Stearns, by the way.

Expect an announcement some time today, before the US markets open Monday morning.

Update, 12:43pm Phoenix time – Barclays pulled out of the talks. Lehman needs a new buyer by Monday’s market opening bell or they’ll probably be declaring Chapter 11 bankruptcy. Yikers!

Fannie, Freddie Taken Over

 Orange may be contagious. Today’s financial news proves yet again that so is investor confidence.

Following Sunday’s announcement by the Feds that the government was taking over Fannie Mae and Freddie Mac stocks rose over 340 points within minutes of the opening bell on Wall Street.

International stocks followed suit. London’s FTSE 100 rose 3.8% on the news, while the DJ Euro Stoxx 50 (measuring euro blue chips) lifted by a similar 3.75%.

Fannie and Freddie are the Government Sponsored Entities (GSEs) responsible for over 1/2 of the nation’s home mortgages.  The takeover is meant to ensure the flow of credit through the US housing market, which is one of the US economy’s largest driving forces. But it seems to be also having the happy effect of calming uncertainties on the international stock and bond scene.

David Wessel of the Wall Street Journal, appearing on the NPR morning show Morning Edition, noted that overseas markets seemed to be showing “a vote of confidence that someone’s taking control.”

Speaking on Sunday at the press conference announcing the move, Treasury Secretary Henry Paulson said the move to federalize the two mortgage giants was justified. “Well, our objective here is to prevent a serious risk to the financial system which would hurt all taxpayers because our financial system is just critical to our overall economy. Anybody that wants to have a car loan, a mortgage, any kind of credit, needs a strong financial system,” said Paulson.

Like it or not (and many vocal critics don’t) easy credit greases the wheels of the modern American economy. What happens next is anybody’s guess, but for the moment the wheels seem to be back on track.

Other Resource for this News: NYTimes.com, NPR.org
Related Stories on The North Phoenix Agent

1. Fed Leaves Interest Rates Alone
2. Housing Stimulus Bill Changes Fannie and Freddie
3. F and F’s Stocks Take Nose Dive

Real Estate Road Signs – “We Pay Off, You Keep”

I’m noticing an uptick in the number of roadside cardboard signs that have something to do with real estate lately. You know the kind – here in Phoenix they’re usually hand-inked, on cardboard or oak tag, stuck in the ground with a stake.

Surely it’s a function of the bad economy, the looming recession, the credit crisis and the housing ‘bubble’.  Whatever, I figured it would make a good blog post or two. Here’s today’s Real Estate Road Sign:

I didn’t call to find out exactly what scam they’re peddling, but rest assured it isn’t as good as it sounds. No one is going to pay off your mortgage out of the goodness of their heart and not expect something for it. Either they’ll refinance you under their own (probably dubious) terms, or they’ll pay off the mortgage and let you stay in it, as a tenant.

There are some instances where it might be beneficial to let someone buy your home from you and then arrange to stay in it as a tenant. But contact a trusted Realtor or mortgage lender to do it. Placing your single largest financial asset into the hands of someone who advertises on roadsides with hand lettered cardboard signs is not in your best interests.

If this is a refinancing “plan” it probably involves people who look and sound a lot like the Sopranos and there are a lot of other, better options for refinancing if you’re facing foreclosure.

If it’s a plan to buy your home and rent it back to you, be very careful. There are a lot of scams out there now that start out this way, and then whack you with huge penalties if your rent is even an hour late. Worse, some of those rent back to owner schemes allow the company you’re dealing with the evict you from your home without notice if you pay late.

If you’re having financial troubles large enough to even think about calling the number on this sign, you’re probably better off contacting someone about a refinance or a short sale.

Related Posts

1. Real Estate Road Signs – Buy A House with $500 Down
2. Hire a Professional Lender, Not Your Buddy Who Does Mortgages Part Time
3. How Your FICO Score Determines Your Mortgage Interest Rate by the XBroker (not light reading but highly worth your time)
4. The AZ Mortgage Guru updates the status of the federal housing assistance bill
5. Try the federal Hope Now campaign designed to help you stay in your home

Will My Bank Fail??

US News and World Report offers a perspective I’ve been waiting to hear. The average Joe can’t predict whether a bank will fail. The experts can’t predict it! More importantly, the average Joe doesn’t need to predict that. Simply make sure your bank is on the list of FDIC insured institutions, then make sure you’ve got less than $100,000 in that bank (or $250,000 in a retirement account with that bank), and stop worrying.

As a bonus, the comments thread on this story is a real hoot! It took a mere 3 comments to devolve from on-topic questions and cogent, sourced answers to a comment along the lines of we’re going to hell in a handbasket so “plant seeds, buy water filtration systems and … have ammo and weapons” on hand. Too jaw dropping to miss.

Related Posts

• FDIC Shuts Down IndyMac Bank
• Bank Run at IndyMac
• IndyMac Goes Down (courtesy of the AZ Mortgage Guru)
• Did Senator Shumer Worsen IndyMac’s Woes? (courtesy of Realtor John Wake’s AZ Real Estate Notebook)

FDIC Shuts Down IndyMac Bank

Today it was announced that the FDIC (Federal Deposit Insurance Co) shut down IndyMac Bank after an old-fashioned ‘run on the bank’. IndyMac customers withdrew $1.3B from IndyMac branches since a June 26 letter written by Senator Schumer (D-NY) that said the bank posed “significant risks to taxpayers and borrowers” was leaked to the public.

What Happened to the Money?
There’ll be a name change, and a management change. For insured depositors (most average folk), their money isn’t going anywhere. They’ll still have have access to their money through the new name – IndyMac Federal Bank – and the new managment, courtesy of the FDIC.

From an InmanNews story: Insured depositors and borrowers will automatically become customers of IndyMac Federal, FSB and will continue to have uninterrupted customer service and access to their funds by ATM, debit cards and writing checks.

Uninsured depositors will be contacted by the FDIC to meet with their claims people. The FDIC typically insures bank deposits up to $100,000.

The FDIC has established a toll-free number for customers of IndyMac Federal Bank, FSB. The toll-free number is 1-866-806-5919 and will operate today from 3 p.m. to 9 p.m. (PDT), and then daily from 8 a.m. to 8 p.m. thereafter, except Sunday, July 13, when the hours will be 8 a.m. to 6 p.m.

Or visit the FDIC website: http://www.fdic.gov/bank/individual/failed/IndyMac.html for further information.

How to Buy Short Sale Homes, PART 4

This is the 4th in a series about buying metro Phoenix area short sales homes.

Photo credit to I Can Has Cheezburger

Many, many potential buyers in the Phoenix market lately want to look at “short sales”, “foreclosures” or “bank owned homes”. Often they’re not quite sure what these terms mean exactly, but they know the 10 o’clock news (or their brother’s cousin’s baker’s tailor) says short sales are a spanking good deal.

See here for the differences between REOs, bank owned, short sales, foreclosures and preforeclosures. This article talks about buying short sales. Lender owned homes are a different ballgame and I’ll address those soon. But regardless of type, the secret to buying one of these homes is organization combined with an open mind and a lot of patience.

ORGANIZATION – Getting the Deal Closed
Now you’ve got an accepted offer on the short sale or lender owned home of your dreams, what about closing the deal? Banks usually want you to close within 30 days of their acceptance. Sometimes they take their sweet time sending you the acceptance, thereby eating up some of your 30 days and some of your inspection period.

Get cracking! Are you working with a full time, professional Realtor who’s ‘got people’ and can get a home inspection, roof inspection, A/C inspection and mold inspection done inside of 4 business days if necessary? You’ve got no worries. Working with your sister in law’s cousin who does real estate on the side? Or working without a Realtor? You’ve got a challenge on your hands. Whatever you do, don’t miss the deadline for the end of the inspection period.

Most banks will do no repairs. Even if the pool is green and the front porch is falling off, you’re buying it as is. Over Fourth of July weekend I spoke with a loan processor who told me she had personally done a loan for a Buyer purchasing a short sale from HSBC bank. They’d done a bunch of repairs before the closing, and even did some repairs the Buyer didn’t specifically request. This is exceptionally rare. Inspect it till you drop and expect it to be as-is on closing day.

Most banks also make you sign an addendum that removes most of the Buyer protections in the contract, institutes some additional Seller (bank) protections, and generally tilts the contract heavily in their favor.

If you’re paying cash, you should know that your purchase funds must be immediately available on the closing day. Cashier’s checks are acceptable. Wire transfers in US funds are acceptable. Canadian funds and checks drawn on Canadian banks are not acceptable. We don’t discriminate against Canadians per se, because generally no foreign funds are acceptable.

Be aware that due to the USA Patriot Act and other federal regulations since September 11th, wire transfers take a long time to transit the federal wire system. I’ve seen wires take 8+ hours. Plan on having your wired funds arrive at the title office the day before closing. Expect a wire fee of about $25 to $75. Expect a currency exchange fee of about $15, if you’re using foreign currency. I’ve been told by a very trusted and experienced title officer that she can’t get anyone to tell her who collects that $15 fee and she has never had success at making that fee disappear.

Almost every bank imposes daily late fees if the Buyer holds up the closing. These are usually in the area of $100 per day. Getting a loan to buy the home? Make sure your lender has the loan documents at the title office at least a week or two in advance of the closing date. No sense taking chances and accruing hefty late fees. if you’re out of town when the closing occurs, there will be FedEx shipping transit time to consider, so get loan docs to title early. Also, now is not the time to help your sister’s kid who’s just got in to home mortgages. Send your nephew a gift card and use a mortgage pro.

Buyer Lessons

1. Play by the bank’s rules.
2. Conduct multiple inspections
3. Make sure loan documents arrive early
4. Send wire transfers early

Related Posts:

• How to Buy Short Sales/Lender Owned Homes, Part 1
• How to Buy Short Sales/Lender Owned Homes, Part 2
• How to Buy Short Sales/Lender Owned Homes, Part 3
• I Got a Notice of Trustee’s Sale. Now What?
• Are Short Sales a Good Bargain?