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Many sellers and buyers have no clue about the new mortgage rules and will learn the hard way.
We had to ask several mortgage brokers since most of them didn't even know that on 8/16/2014 the rules got more strict and regardless if you agree or not, sellers and buyers need to know this.
Keep in mind that in our area many homes are priced higher than what will qualify for a FHA loan and we dealt with a client who waited for 3 years, excellent income and credit score over 720 and this month it would be 3 years of the short sale closing.
Qualification letter in hand for loan up to $600 k and obtained within the last 3 weeks from 2 different mortgage brokers after verifying income, etc. which is even a more thorough pre- qualification process than just putting the credit score and give the income without verification and even the HUD statement from the short sale was provided to proof it was not a foreclosure.
Only the builders associate told us 3 days prior to the due date about this since they were aware of this change and we had been open about the short sale.
We called around to mortgage brokers and nobody seem to know aside from one person and we searched the internet and the contract was signed the next day and the application for the loan was signed and submitted with all papers on the 15th to avoid another year of waiting.
This person had a short sale due to Chase telling the client to default in order to conduct a refi and after defaulting they denied the refi and the client was stuck with bad credit, additional charges for late payments and as a principal this client hired a lawyer who took more money and couldn't do anything and in the end we conducted a very quick 45 days short sale.
The client loved their previous house and rather had refi and stayed at the house but with being under water for over 400k there was not really much hope to get out of that and a divorce causing more issues this was the best way.
We were shocked that not one mortgage broker knew about the new guidelines and only the builder informed us about it. The huge delays in even getting the info to be true from numerous mortgage brokers was shocking to us since we feel they should be on too of changes and not qualify people if changes come up that will no longer qualify them.
One even stated than buy a small home and next year refi or buy another one and rent this one out or just sell and flip!!! Really that is the advise! Flip it...what kind of advise is that to someone with a job who doesn't like to move often and the mortgage broker even stated that the prices are on the rise so that would be an easy gain! That was quicken loans advise or at least the broker for Quicken Loans. Of course I told him not to say things like this to our client since nobody can predict the market and that is a huge risk and my client didn't even understand what he exactly meant since they are looking for higher end and didn't get the buy and refi or buy another one...they got very confused about the remarks.
Any seller in a contract with a buyer with a mortgage application better check if the buyer will be able to buy and eligible or they will waste their time.
Due to the new rules it may slower the market for higher end homes unless the person can pay it all cash or is at the 4 year mark.
I know you would argue every word in my post, but your client is about to make exactly the same mistake if he/she purchases house now. Prices for houses are well over it's actual value especially for new builds, so buying now will make your client being under water with their mortgage again in just few years.
To backup my words, look for house prices throughout last 10-12 years and you will see houses purchased during last house bubble and were foreclosed/short sell for that reason are getting sold AGAIN for the same BUBBLE-ERA prices!!! And all, no.... ALL new constructions are at this or even higher level.
On the side note, your client just absolutely HAS to buy $600K house now, three years after short sale. Right... And this cry about new rule is realtors cry since they will be effected by it first of all. It reminds me this ridiculous petitions when people sign student loans for their family members, family members passed away and now people don't want to pay and trying to argue what they signed has no ground...
I agree and disagree with things you are saying so don't think I will put all your input aside.
I agree with you on the amount of the house being bought but that is the clients choice and comes with the area and the type of house and when the person can afford it than I believe it is not my business.
The short sale happened due to a divorce combined with what many home owners were told when they requested refinance which was to default and than they would allow them to refi and this happened approx. 5 years ago and I have heard the same thing over and over.
This person could afford the mortgage and that was all discussed prior to the default but still was advised to default in order to apply and once the default happened they had to wait 3 month's in order to apply for the refi. They just followed instructions by Chase. After submitting all papers they got denied and they were shocked that the bank changed their mind and of course the person who they dealt with was no longer with Chase and they hired a lawyer and that took almost 2 years and was not done to stay and live for free but just to get what they were told.
In the end Chase didn't do what the judge stated which was mediation but just stated to conduct a short sale and offered the client a total above $ 30K at closing in exchange for a short sale and that happened pretty fast. Chase didn't even counter the cash offer that was considered low and we knew the buyer would have paid higher but Chase just wanted the cash offer and super fast closing. I had to make arrangements for a rental on very short notice and it all worked out.
I have been involved with people who just tried to stay as long as possible in their home to live for free and this was not a case like that and this person makes a very decent income and likes a nice home.
New homes are indeed priced too high mostly due to less labor available and due to other facts. We checked other homes that were way older but to get to what the builder had to offer it would cost just a little bit less but than this client needed to do it all on their own (with a contractor of course) but not everyone is willing to take on that task and see what they end up having to deal with since in that area, dated homes are still expensive and need extensive remodeling unless you like a dated home.
In the end the post was not about that but that hardly any mortgage broker was aware or able to inform us about the new guidelines and even after that date passed many professionals still don't seem to know about this.
FHA is also getting more strict and they heck on more things prior to closing which is all fine but why not checking more prior to pre-approving in order to avoid wasting agents time, buyers who get stressed out and disappointed and sellers who get stuck with their property off the market for a buyer who won't qualify. What good is that doing.
This client was open about the financial history incl. the short sale and showed income, bank statements, 3 years of excellent rental history incl. a letter of being a great tenant and NOT ONE mortgage broker told us that the rules were changing, except for the builders own mortgage company knowing it and informing their sales staff.
In this case so far it worked out and we will see how it ends and if it ends differently and this client has to wait longer than we will hopefully learn soon but this person has a large cash amount that will be used for the sale but wasn't available at the time when the short sale happened since many 401K are charging large penalties if they are taken out.
Again does anyone have to buy a $ 600K home..no but if you have the means why not an that was not at all the reason for the short sale in the first place.
Well, put a side your client and think about short sales in general. This rule is in place for a reason.
I don't mind the rule...that is not the issue either.
What bothers me is that none of the mortgage brokers mentioned anything about the new rule!
We dealt with mortgage brokers from private lenders and from the bigger lenders incl. Credit Union, Quicken Loans, etc.
All were given the same info/background about short sale incl. date of short sale, etc.
Only the builders mortgage company was aware of this date and the changes and it can cause many people to waste time.
I'm trying to bring this info out since may short sale home owners are back on the market to buy and some already bought again.
Is it fair? In many cases I'm stunned and shocked that people who walked away without a hardship can pick up a new property when it is a low price while others are still sitting and waiting for the values to come up...no that is not fair to me, but that is not the issue that I brought up.
I'm shocked about mortgage brokers no even be aware of new changes and not just one since I can understand that, but none of them!
Yes, I was aware of the new rules/guidelines going into effect.
A lot of people who were/are underwater have self-inflicted wounds as regards the housing market. I have little to no sympathy for most of them. Many bought a lot more house than they could afford, what did they think was going to happen? Prices rising forever?
And this doesn't apply to you, bentle, but I don't have a whole lot of respect for some of your colleagues, the way they acted during the bubble. But of course, their clients didn't have to take their advice, so it's on the buyer.
for a long time almost everyone could do a short sale, either a lie would do it or not even a lie was needed.
They started to call it calculated short sales and only recently less lenders will agree to them.
We even had sellers ask us tons of questions what was needed for a short sale and we tell them what kind of papers the lender will require and in some cases owners disappear to pop up months later stating they are ready. If you remember some of their questions well than you know that they came back exactly at the time frame where lenders will not ask about certain papers so most likely some money has been moved.
We also talk a lot to a bankruptcy lawyer and they get people showing up in Mercedes or other nice cars and than trying to file for bankruptcy and starting to get upset that the car is seen as an asset.
I hate that many people did strategic defaults (foreclosure-short sale) just to get rid off their debts, not because they cannot afford payments, but because they FEEL their home values were much lower than it was worth at that time.
These people cause problems not only for lenders, but other people as well. Rules have changed. Economy got pushed down...
And now all this smarty pants are getting back on the market because their time frame of 3 years have passed and by living in their houses mortgage free they were able to save cash for large down payments and some even for all cash purchases and here is comes, bidding wars began. It's not that bad now as it was 1,5 years ago, but if you look at the history you can tell it was just enough time for these people to wait until they can buy again...
And referring to Quicken Loans as trustful lender is just so wrong...
I hate that many people did strategic defaults (foreclosure-short sale) just to get rid off their debts, not because they cannot afford payments, but because they FEEL their home values were much lower than it was worth at that time.
These people cause problems not only for lenders, but other people as well. Rules have changed. Economy got pushed down...
And now all this smarty pants are getting back on the market because their time frame of 3 years have passed and by living in their houses mortgage free they were able to save cash for large down payments and some even for all cash purchases and here is comes, bidding wars began. It's not that bad now as it was 1,5 years ago, but if you look at the history you can tell it was just enough time for these people to wait until they can buy again...
And referring to Quicken Loans as trustful lender is just so wrong...
Of course not all bidding wars are caused by buyers who had previous short sales....so I wont say what you are saying since bidding wars also occur due to less inventory of great homes and people who see a nicer home go for it at the same time.
I have always bought within my means, not what the bank says I qualify for. I have never defaulted and can pay the house off tomorrow if I wanted to, but makes no sense to at the ridiculously low interest rate. I never plan on defaulting, so the rules mean bubka to me.
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