NACA Loan Modification Event

NACA stands for Neighborhood Assistance Corporation of America. The founder is Bruce Marks.

This is an non-profit and volunteer supported organization with some considerable weight. They have it by virtue of a history of some heavy corporate coercion. Google NACA and go to their website at http://www.naca.com if you want to learn more about their history. They are so popular that you may have to wait for a month just to get a date to attend an orientation. You cannot make an appointment for assistance with a loan modification without attending an orientation. You will learn at the orientation that NACA will only assist owner-occupant borrowers who own no more than one property.

I attended a Saturday orientation workshop for NACA in San Leandro on August 20th with a client friend who needs to modify his mortgages. He would like to avoid bankruptcy. But like many others, he is facing income challenges and his home is underwater, probably to the full extent of his second mortgage. He had tried to work with the bank to the extent that he became really annoyed with the ineffectual process. I thought I would offer some assistance to see if my years of experience with lending and law might be some help. After trying for a couple of month with the same results I heard about NACA and starting checking them out. I am favorably impressed.

My friend’s situation is instructive and it is like this. Bank of America is servicing both the first and the second, loans previously from Countrywide. The second has been sold to Quicken Home Loans for what could not have been very much money since it is basically unsecured with equity. In the process of trying to negotiate with the first, we tried the HAMP process. He was denied twice before we found out that Wells Fargo was the actual lender and would not consent to the modification. The bottom line is that no lender can be forced into a modification unless the borrower has a bigger hammer than we were using.

The interesting thing about NACA is that they have successfully coerced most of the major mortgage banks into cooperation with their non-profit NACA. They entered into enforceable contracts by which the banks provide funding for the non-profit in exchange for cooperating with NACA’s clients in modifications. It will be a real test to see if they will be able to make Wells Fargo move on this one. NACA only negotiates with the holders of the first. So what we’ll be able to do with the second remains to be seen.

Once the first is handled, if it is, then we will try to work on the second. If the family didn’t want to stay in the home, it might be possible to try a short sale and negotiate with the second in that scenario. However, the real point of coercion in a short sale is the potential threat that the holder of the second will become a sold out junior lienholder in the trust deed sale by the first trust deed holder. The prospect of getting nothing makes them willing to take less. That is not available when the homeowner wants to stay put. The client will have to look at the options if and when the first is modified.

Failing a short sale or if the family wants to stay in the home, there is the possibility of filing a Chapter 13 if there is enough other debt to make that worthwhile. Assuming there is, the second can be reduced to the amount of the equity, or stripped off entirely if the 2nd is completely unsecured. This is referred to as lien stripping. This is only available in a Chapter 13 bankruptcy where the debtors have to agree to repay something inside a Chapter 13 plan over a period of some years. That is the subject of another conversation.

More on that later….

Barry Mangan

Nab a real estate deal… While you still can

Nab a real estate deal…

While you still can

By Beth Braverman, staff reporterMarch 2, 2010: 10:30 AM ET
(Money Magazine) — If you’ve been holding off on a real estate purchase, glimmers of a turnaround in the housing market may have you wondering if it’s finally time to make your move.

While home prices remain low, they’re no longer free-falling in most markets. Mortgages are historically cheap. And the sweet tax credit that was offered to new buyers last year has been extended to April 30 and expanded to include current homeowners too.

// But for all the motivation to act quickly, buying right now is not a no-brainer. In some areas home prices may fall further. If you own a house now, it may take longer than you expect to sell it, and you may walk away with less cash than you thought.

“It’s a good time to buy, but it’s still a really difficult market,” says Patrick Newport of IHS Global Insight. As the clock ticks toward the tax-credit deadline, answer these questions to decide whether it’s time to get off the sidelines.

Can you really nab that tax credit?

Current homeowners who sign a contract to buy a home on or before April 30 get a dollar-for-dollar reduction on their taxes of 10% of the purchase price of the home, up to a maximum of $6,500 (first-time buyers can get up to $8,000).

But according to the National Association of Realtors, buyers spend about 12 weeks home shopping before making an offer, so if you haven’t already started looking, you may be pressed to meet the deadline.

Plus, to qualify for the full credit, your household income must be under $225,000 if you’re married and less than $125,000 if you’re single; repeat buyers must have lived in the home they are selling for five of the past eight years. The good news: Once you’ve signed the contract, you have until June 30 to close the deal.

How much could you lose by waiting?

Besides the loss of the tax credit, the biggest game-changer facing buyers is a potential jump in mortgage rates. If the Fed moves ahead with its plan to stop buying mortgage-backed securities at the end of March, the rate on a 30-year fixed mortgage is expected to increase nearly a percentage point from today’s 5.18% to 6.1% by the end of 2010, according to the Mortgage Bankers Association. On a $300,000 fixed-rate mortgage, that’s an extra $174 per month.

But if home values are falling in your area, you don’t have much to lose by waiting. If the house you want costs $375,000 today and you put down 20%, you’d pay $1,644 a month for a fixed-rate mortgage at 5.18%. Buy that same home for 5% less later on with rates at 6% and you’d only pay an extra $65 a month. If prices plunge 10% or more this year (as they are expected to in 12% of markets, according to Fiserv), you’ll come out even or ahead.

To get a handle on the direction of your market, check trulia.com to see whether inventory levels are increasing, and visit realtytrac.com to find out whether foreclosure filings are still rising. A glut of properties and bank-owned homes means a recovery may not be in sight.

How quickly can you sell the home you now own?

Even in markets that are recovering, sellers must price aggressively to make a fast deal.

“Everybody thinks their house is worth more than it is,” says Dallas realtor Bruce Lynn. Before you sign a contract for a new place, ask a few agents to give you a realistic figure that will generate a quick sale. Can’t bear to part with your home at that price? Waiting may be your only option.

Also keep in mind that, with the credit crunch not far in the past, lenders may not approve your purchase until you’ve sold your home. A delay in sale could also stick you with two mortgages, far outstripping any savings from the tax credit.

You might try to negotiate a contingency long enough to allow you to back out of your purchase if you can’t find a buyer for your home.

While extra contract negotiations may be a hassle, the past few years have proved that a purchase decision shouldn’t be taken lightly. “This may be the best time in history to buy a home,” says Denver realtor Jeff Fogler, “but only if you can really afford it.”

Finally, you should only purchase now if you feel comfortable that your employment or earnings situation is stable and that your savings over and above your down payment will allow you to continue making payments through any period during which you may be looking for another job or replacement income.

(Comments added by Barry Mangan in italics.)

8 Ways to Make Your Home More Energy Efficient

8 Ways to Make your Home More Energy Efficient

September 3, 2009 By Harvey M. Sachs, Ph.D., Greenhouseguide

1) Make sure your walls and attic are well insulated.

Blown-in insulation can greatly improve your comfort and save enough energy to be very cost-effective.  If your attic is unfinished, ensure it has insulation.

2) Upgrade or replace windows.

If your windows are old and leaky, it may be time to replace them with energy-efficient models otherwise boost their efficiency with weather stripping and storm windows. It is almost never cost-effective to replace windows just to save energy however, they do also cut down noise dramatically.  Refer to www.EnergyStar.gov, for further details.

3) Replace an older furnace with a high-efficiency system.

If your furnace was built before 1992 and has a standing pilot, ACEEE recommends early replacement  (http://aceee.org/consumerguide/heating.htm).  For houses with boilers and hot-water heat distribution (radiators, baseboard), the savings from a modern condensing boiler with outdoor reset or equivalent feedback controls can be cost effective.

4) Improve the efficiency of your hot water system.

First, turn down the temperature of your water heater towards the warm setting (120°F). Second, insulate your hot water lines so they don’t cool off as quickly between uses. Third, use low-flow fixtures for showers and baths. Regardless of age, it is probably not cost effective to throw out an existing water heater that is working well.  In ACEEE’s opinion, a continuous recirculating “hotel” loop system wastes enormous amounts of water-heating energy, not to mention the electricity used for pumping.

5) Replace incandescent light bulbs with compact fluorescent lamps (CFLs).

CFLs can save three-quarters of the electricity used by incandescent.  The cost of the CFL (bulb & electricity) is less than one-third of the cost for the incandescent. The best targets for replacement are 60- to 100-watt bulbs used several hours a day.

Reminder: Fluorescent (CFLs) bulbs contain mercury.  If one breaks, the amount of mercury in one blub can be quite toxic if not cleaned up.  Mercury should never be touched with bare skin.  All fluorescent bulbs and mercury should be disposed of according to US EPA guidelines. (http://www.epa.gov/waste/hazard/wastetypes/universal/lamps/index.htm)

6) If you are thinking of buying a new refrigerator, don’t continue use of the old one, as a backup for party supplies and liquid refreshment.

Electricity to operate the old refrigerator costs an extra $50–150 per year to run it. In contrast, the new one, particularly if Energy Star rated, may cost only $30–$60 per year to run. The best rule is to have only one refrigerator, and to size it to meet all your real needs.  Also consider configuration. A similarly sized refrigerator with a top-mount freezer will use 20 to 25 percent less energy than a side-by-side model and often offers more usable refrigerator and freezer space.

7) Take advantage of Federal tax incentives to improve your home.

Energy efficiency incentives for upgrades to existing homes are now available for 2009 and 2010. These incentives are from $500 – $1,500, up from just $500. (www.energy.gov/taxbreaks.htm).

8) Schedule an energy audit for more expert advice on your home as a whole.

Look for auditors who are RESNET Accredited (www.natresnet.org).

4 great Green Websites

1) Getting started going green http://greenbootcamp.blogspot.com/

2) Healthy & Green Living http://www.care2.com/

3) US Dept of Energy: Energy Efficiency & Renewable Energy http://www.energysavers.gov/

4) US Environmental Protection Agency: US Department of Energy http://www.energystar.gov/

Reasons You Need a Good Real Estate Agent

The Real Reasons You Need a Good Real Estate Agent

Excerpts from Alex Wang: Silicon Valley Real Estate Blog

The Internet has enough information to help buyers identify neighborhoods they’re interested in exploring.  From that point on, however, an experienced, professional agent is invaluable.  Here’s why:

1)  Agents are market experts, and continually renew their expertise by having their ears to the ground at all times.

Consistent tracking of the pulse of the real estate market is a trait of any good agent: we’ll provide current, sometimes up-to-the-minute, information on local prices, trends, schools, neighborhoods, and even tracts of homes and builders.  Many times it’s information you will never find on a website.

2)  Agents provide counseling and legal knowledge

For a seller, an agent will carefully go through the entire offer with you and furnish you with expert guidance and counseling. Your listing agent will help you put together a response that will give you the highest possible price for your home and do everything possible to protect you from liability.

3)  Agents know what makes sellers tick.

Good agents can help buyers get the property they really want at the best price possible. They can advise when to write an offer for lower than the asking price or when to be aggressive by offering at or near a property’s full listing price.

They know that by being good at selling homes, you develop the knowledge to be able to make good offers to buy them.  And they know how to talk to other agents of different ages and experience levels.  That versatility helps you in every step of the way, particularly in the little details that need to be caught before they cost you your dream home.

4)  Agents negotiate on your behalf.

Because they have a fiduciary responsibility to protect their clients, agents will negotiate on your behalf over not only a property’s price but also the contract terms, which in many cases are just as important as the amount of money you offer or accept.

Experience and negotiation are what set a good agent apart from others.  You can’t buy experience in this area.

5)  Agents can refer you to trusted associates.

The best agents have a team of other professionals, from appraisers, lenders, home inspectors, to contractors whom they trust to make sure buyers and sellers are protected through every stage of the real estate process.  Agents stake their reputation on their referrals.

The moral of the story is this: real estate agents provide real value.  When you try to navigate the purchase or sale of a home on your own, you may end up wishing you’d had an expert on your side.