New mortgage law impacts on buyers (Newton, Uxbridge: short sale, real estate market, foreclosure)

[DL0299]

Found out the hard way this morning that the "punishment" period for selling a house in a short sale went from 2 to 4 years, thanks to Dodd-Frank and the democrats. New law went into effect january 10.

This was from bank of america, and they told me all major banks will follow.

So with income of 225k/ year, we cannot get a loan of 400k to buy a 500k (20% down).

With all the money freshly minted for our billionnaire bankers every month, thanks to Care-for-the-poor Obama, you would think that regular folks would benefits. But no.

For all my skepticism about the government, I did not think it would catch up to me so fast. These laws will keep a huge chunk of buyers away from the game this year. All this when new mortgage application is at a 20 years low.

I did not have any impression that BoA was interested in my business whatsoever. This is bad.

I don't know what will be the impact of this on real estate markets. I dont even know the provision of the rest of the law for things like income, debt ratio, etc. This does not look good.

best of luck for those who will try it out this spring. It may end up being easier than you think to get a house, but you may end up loosing more than you think if you have to resale quickly (if one looses a job, for example).

I never thought I would say this, but I miss the canadian system. As long as you give them half your salary, they at least leave you alone.

if you own rental properties, this is good news for you.

[SpringMom3]

Do you mean a "short sale" or do you mean selling after a short amount of time?

[Cape Cod Todd]

I thought the "punishment" period was roughly 3 years anyways depending on the bank that is. If you did a short sale in the near past then you did actually sell a house for less than it was worth, probably less than what they bank loaned you for it and depending on that bank they may have forgiven the difference. After short changing the bank and reneging on your end of the loan I don't think 2, 3 or even 4 years is that long to have to wait until another bank will trust you with a loan.
From experience I have a very low opinion of Bank of America and would never use them for anything.
The trouble is that the higher ups don't understand that the economy would be much stronger if the housing market was better. Housing provides many jobs across the country from bankers, real estate agents, attorneys, carpenters, tradesmen, landscapers, the local home improvement store etc etc plus it provides the town or city with taxes.
Housing is one of the best trickle down economic boosters this country has.
As always the banks and people who borrow from them need to be careful that they can afford it.
Good luck.

[Beachcomber4]

Back in the early 2000's people were yanking equity from their homes to support a lifestyle they couldn't afford. Then in 2007, the mortgage relief act said, hey, go ahead and sell your house at a loss, the banks will eat the loss and you don't have to pay taxes on that $. That helped many people out. Let's face it, the banks rarely lose so the taxpayers bailed them out- but that didn't include those people who sold in short sale- they no longer paid tax on the difference. I am sure many thought meh, 2 years before I can buy again. No worries!

NOW, having said that, I realize there were many people, who were good, honest people who just ended up upside down or had a catastrophic situation that forced them to sell. I get that. Unfortunately, those people, along with other people who are responsible members of society are punished because of the greedy, entitled jerks in the aforementioned paragraph.

BoA I would lump in with the greedy entitled jerks. Try a small local bank. They have a stake in the community. You may even be able to borrow from a private lender at a higher interest rate for a period of time. Or maybe you can work something out and pay back the bank that lost on the short sale and have that released?

I hope the dream of home ownership works out for you.

[DL0299]

Originally Posted by Cape Cod Todd

After short changing the bank and reneging on your end of the loan I don't think 2, 3 or even 4 years is that long to have to wait until another bank will trust you with a loan.

There are so many things wrong with this statement that writing a complete rebuttal would take me a full day. Lets sum it up quickly though:

-No banks go "shortchanged". In fact, they got "cash-flushed" with TARP money 1st, then with QE 1 to 3 second, all with our tax dollars.
-I paid an insurance that protected them, I dont know if you heard of it. Its called PMI? (being ironic here).
-We had to pay to close at the short sale, and the current value of the house we sold is actually lower then the short-sale price in 2012. Should I asked my money back? Is that how it works?
-I have to demonstrate to a Bank that they can trust me? Really? How about them showing us that we can trust them to actually loan out the QE money instead of inflating the stock market to enrich boomers IRA yet some more? How about that?
-Lets drop the pre-K moralistic BS about real estate and honoring your debt. It all went out the window in 2008 when Goldman Sachs were shorting investment that they were selling to you and me, all that while receiving their bonus money out of my tax dollars. Please, do yourself a favor and get real. Seriously.

[miu]

Originally Posted by DL0299

-I have to demonstrate to a Bank that they can trust me? Really?

It's not that they don't trust your financial ability to pay off a mortgage, but that YOUR INTEGRITY to stick it out and commit to paying off an entire mortgage no matter what the real estate market has done, including short term bubble bursting.

IMO everyone is happy paying their mortgage as long as their home keeps or goes up in value. But they want to pull out if their home suddenly drops in value. Boohoo. There is no guarantee that everyone is going to make money on their residence, and certainly for a short term stay, the odds are that it will be a losing transaction. However if you stay put for many decades, allowing for inflation, most likely the value of the home will keep or increase. Real estate will always be prone to bubbles, but what's key is when buying be sensible and unemotional. And a commitment is a commitment.

For the majority of property owners, a residence will not be some amazing profit making experience. The long time adage when I was young was "a real estate was either a residence or an investment, but never both". If my family house has doubled in value, it's only because we've owned it for 20 years. But don't forget, we've also had to put in a new roof and then paid 20 years of Newton property taxes and never once put a child through the public school system.

So why would a bank want to lend you money if you have a track record of bailing out of the house YOU picked out and YOU made the offer on plummets in value?

[massnative71]

Originally Posted by miu

It's not that they don't trust your financial ability to pay off a mortgage, but that YOUR INTEGRITY to stick it out and commit to paying off an entire mortgage no matter what the real estate market has done, including short term bubble bursting.

IMO everyone is happy paying their mortgage as long as their home keeps or goes up in value. But they want to pull out if their home suddenly drops in value. Boohoo. There is no guarantee that everyone is going to make money on their residence, and certainly for a short term stay, the odds are that it will be a losing transaction. However if you stay put for many decades, allowing for inflation, most likely the value of the home will keep or increase. Real estate will always be prone to bubbles, but what's key is when buying be sensible and unemotional. And a commitment is a commitment.

For the majority of property owners, a residence will not be some amazing profit making experience. The long time adage when I was young was "a real estate was either a residence or an investment, but never both". If my family house has doubled in value, it's only because we've owned it for 20 years. But don't forget, we've also had to put in a new roof and then paid 20 years of Newton property taxes and never once put a child through the public school system.

So why would a bank want to lend you money if you have a track record of bailing out of the house YOU picked out and YOU made the offer on plummets in value?

...excellent post

Not to mention costing the rest of us taxpayers a fortune (a form of welfare). What, because BOA and Goldman Sachs are morally bankrupt that makes it OK for an individual to be a thief as well? I pray for society.

[jiba]

Hello all. I am a new comer here. Could I add some irrelevant information not directly related to this topic about mortgages snake oil bankers? In 2008, I filed Chapter 7 and voluntary gave up home to foreclosure. I got behind because of Litton Loan Servicing Hazard Insurance Scam. The same year the house was up for auction; no buyers so bank buys back at auction. In May of 2009 Bankruptcy was discharged. In 2010 we joined a class action on mortgage fraud based on the Hazard Insurance and other reasons. So present date we get pre-approved to buy a home for under 200k in Uxbridge. Just today we find out from under writer can’t do the loan because of foreclosure on house in 2012. Past foreclosure was later deemed illegal and invalid and foreclosed on. I had not owned since 2008 and no one in my camp was ever notified.
I have lived and had same phone #, same post office box and office Tele numbers for years. Not one shred of notice to me or wife I have not heard back from past Lawyer
What do you think of this?????

[495neighbor]

So you have $100,000 for a down payment, but had so little money you had to "short sale" on your other home rather than use some of that $100,000 to pay the mortgage on the first home you purchased?

Your thread title should have been "New mortgage law impacts buyers who walked away from their mortgage."

Seems like you are looking only to spread the misery.

[thelopez2]

Although this looks more like a rant rather than a question, it is posted in the Ma Forum, versus mortgage or real estate, and with all of the blue and red comment might fit better in the political forum. A question really hasn't been asked by the OP, and they miss the Canadian system they they might have already left the US.

I wouldn't be surprised if the person at B of A which the OP encounter was green and lacked experience. There are exceptions for 1 year and why would you take the word of a bank stating what all of their competition will do? With 20% down you are looking at 2 years wait. A simple call to a mortgage broker over working with a "Big Bank" probably would have saved raising the OP blood pressure.