AIM Realty Group Chicago’s Blog

Visitors to the Sears Tower’s new glass balconies all seem to agree: The first step is the hardest.The balconies are suspended 1,353 feet in the air and jut out four feet from the building’s 103rd floor Skydeck. Their transparent walls, floor and ceiling leave visitors with the impression they’re floating over the city.

“The Ledge,” as the balconies have been nicknamed, open to the public Thursday. Visitors are treated to unobstructed views of Chicago from the building’s west side and a heart-stopping vista of the street and Chicago River below — for those brave enough to look straight down.

John Huston, one of the property owners of the Sears Tower, even admitted to getting “a little queasy” the first time he ventured out. But 30 or 40 trips later, he’s got the hang of it.

“The Sears Tower has always been about superlatives — tallest, largest, most iconic,” he said. “Today is also about superlatives. Today, we present you with ‘the Ledge,’ the world’s most awesome view, the world’s most precipitous view, the view with the most wow in the world.”

The balconies can hold five tons, and the glass is an inch-and-a-half thick, officials said. Sears Tower officials have said the inspiration for the balconies came from the hundreds of forehead prints visitors left behind on Skydeck windows every week. Now, staff will have a new glass surface to clean: floors.

The balconies are just one of the big changes coming to the Sears Tower. The building’s name will change to Willis Tower later this summer. Last week, officials announced a 5-year, $350 million green renovation complete with wind turbines, roof gardens and solar panels.

AIM Realty Group Chicago

Builders take out more permits to build than expected; still trail prior years badly.

The nation’s builders boosted their production in May, starting new housing units at an annualized rate of 532,000, up 17.2% from the revised estimate of 454,000 in April.

The data release, a monthly report from the Census Bureau, also revealed that building permits jumped by 4% to a rate of 518,000 from 498,000 in April.

Both figures were higher than expected. A consensus estimate from Briefing.com had forecast that starts would rise 485,000 and permits to 508,000.

But despite those big improvements against record lows set the month before, the home construction industry still sits deep in the doldrums. In May 2008, new home starts showed an annual rate of 975,000. Two years ago, the rate was about 1.4 million units.

Builders’ confidence may get a boost from existing home sales, which have inched up from record lows set during the winter.

In the latest survey of builder confidence, released Monday, it actually declined a point to 15. Scores above 50 indicate more builders are optimistic about their industry that not and scores of 70 and more were common during the boom years.

“The outlook for home sales has improved somewhat in recent months, due largely to implementation of the first-time home buyer tax credit and gains in housing affordability,” said the chairman of the National Association of Homebuilders, Joe Robson.

“However, looking forward, home builders are facing a few headwinds, including expiration of the tax credit at the end of November; a recent upturn in interest rates; and especially the continuing lack of credit for housing production loans.”

Condo developers have been especially hard-hit by financing problems, according to Mike Larson, a real estate analyst for Weiss Research. That has led to volatility in the statistics for multi-family housing starts and permits.

Much of the rise in starts during May can be attributed to the 61.7% spike in multi-family housing starts. That compared with a nearly 50% drop in multi-family starts during April. Also noteworthy about the May report was the rise in single-family starts, which posted the biggest jump since January 2006 at 401,000 from 373,000.

“That’s evidence that the market is no longer falling off a cliff,” he said. “But we’re still not seeing any rip-roaring rebound. Tighter lending standards, rising mortgage rates, and a dismal employment market will all combine to drag out the turnaround timeline, and ensure the recovery remains a muted one.”

Every region gained housing starts in May. The Northeast was up 2%, the Midwest 11.1%, the South 16.8% and in the West a whopping 28.6%. Permits grew 5.7% in the Northeast, 8.9% in the Midwest, 2.3% in the South and 3.8% in the West.

AIM Realty Group Chicago

It’s tough for buyers to find financing and hard for sellers to find buyers. A solution that can work well for both is renting with an option to buy.

With buyers scarce and financing tight, some home sellers are offering rent-to-buy options to potential buyers. In fact, there’s been enough of a spike in interest that ForSaleByOwner.com added it as a search option on the site, says spokesman Eric Mangan.

These deals, also called rent-to-own and lease-option, usually require buyers to pay extra rents each month plus up-front fees of about 5% of the purchase price. The regular rent then goes in owner’s pocket (presumably to pay the mortgage), but the additional payments are used to buy down the price of the home.

“Lease option agreements, if properly drafted, by and large are an effective way of enabling people to buy who are having trouble arranging financing or coming up with down payments,” said Lawrence Jacobson, a real estate attorney in Los Angeles.

The Advantages

Because the contract is typically written to close in 12 to 36 months, it gives buyers the chance to experience homes and neighborhoods without having to make major commitments.

But the biggest reasons buyers opt for rent-to-buy deals are to build up down payments and to improve their credit profiles so obtaining a mortgage is easier.

For example, if they buy a $200,000 home, paying $5,000 up-front and a rent premium of $400 a month on top of their $1,000 market rent, they’ll have $9,800 saved after one year and $19,400 after three.

In New York City, condo conversions are increasingly offering the option after having units sit empty. For example, the developers of a former commercial building on Wall Street are offering to apply 100% of “buyers” rents toward the purchase prices. And there are no up-front fees.

It’s a luxury building with prices starting at $630,000 for a studio to $8.4 million for a four-bed penthouse. Sales were slow because buyers were having difficulties arranging financing, according to sales director Larry Kruysman.

“What we were finding from customers was that banks were making it more difficult to purchase,” he said. The lenders were asking borrowers to put up 30% of the purchase price to obtain a mortgage rather than the traditional 20%.

But most rent-to-buy offers are from individual sellers, often people who have purchased new homes, can’t sell their old ones and need to offset some of their mortgage costs.

Renee Haworth, a Louisiana homemaker, tried to sell a house in Mandeville, La., for many months without success.

“We had two or three buyers ask us if we would do a lease option,” she said. “We hadn’t thought about it before that.”

She consulted an attorney and made a deal this past March. It calls for a sale price of $217,000 for the four-bedroom two-and-a-half bath house. The buyer put $3,000 down and pays $1,400 a month, $400 of which accumulates toward the sale price.

The renters agreed to exercise their option after 12 months. Under terms on their contract, if they decide to walk away, they lose both the $3,000 deposit and the $400 per month they pay over normal market rents.

The Drawbacks

But there are drawbacks to these deals. You need a good contract and a healthy sense of “buyer besmeared.”

Losing your investment: For one, there’s little protection for buyers who fall behind in payments. If you fall behind and are evicted, you lose any up-front fees and rent premiums you paid.

Can’t get a loan: If you still can’t arrange financing at the end of the rental period, you may have to forfeit all the extra cash you’ve invested. The terms for that scenario would need to be spelled out in the contract. In buyers’ markets, you may have the leverage to get a contingency clause specifying any up-front fees and extra rent be returned if you don’t qualify for a loan.

Falling home prices: Buyers may be hesitant to lock into a set price a year in advance considering how much home values are plunging. If the comparables are significantly more attractive when it’s time for your deal to close, you can sometimes renegotiate, but that’s at the seller’s discretion. If renegotiating is impossible, then you have to decide whether it’s cheaper to walk away or go through with the deal.

Foreclosure scams: Some renters have been burned by doing lease-option deals with owners who are going through foreclosures. After months of taking the inflated rent payments even though they are in foreclosure, the owners finally have the home repossessed by the bank and the renters are served with eviction notices and are out their investments.

There have also been instances of foreclosure-prevention scams in which fraudsters take title to homes and do lease-option deals with unsuspecting renters. Instead of applying the initial deposit and the extra rent money to the down payments, the scam artists simply pocket everything and disappear. Because the renters don’t get a title to the property until they close the bank loan, they are again out their investments.

Walk aways: Pitfalls exist for sellers as well. Renters may decide to not exercise their options if prices fall. That can leave sellers with large paper losses by the end of the lease compared with if they had sold the home when they originally planned. They are also stuck carrying the costs of the home until they find other buyers or tenants.

Affordability

Most importantly, however, buyers must be cautious about entering into a deal that’s unaffordable. The payment can seem manageable when you’re just looking at the monthly “rent” payment. But there are more expenses than that.

First, the mortgage payment on a $200,000 home after paying $20,000 down, comes to more than $1,000 a month at the current very low interest rates, which are only available to borrowers with the best credit.

Over the past few weeks, rates have been creeping up again, so there’s no guarantee they will be as low when the purchase is completed. Plus, credit-damaged buyers can expect to pay one or two percentage points higher at a minimum. That could add another $250 or more to the monthly bill.

Then add in private mortgage insurance, property taxes, all the utility and routine maintenance costs, and it could push the monthly payment past $2,000 - and affordability. 

AIM Realty Group Chicago

Home price declines are causing tax assessors to revalue properties downward. Taxes will follow.

Your home value has sunk like a stone, and you’re so far underwater you’ll have to hold your breath for years. Can you at least get a break on your property taxes?

In some cases, yes. Many municipalities’ tax bills are due in May, and the tab for 2009 could be lower.

As a rule, city and county assessors reappraise property values annually or biannually, using recent sales of comparable homes in the neighborhood to set values. So in areas that have seen significant drops in home prices, appraisals - and thereby property taxes - could also drop.

“Assessors have been flooded with requests from homeowners to reassess their home values,” said Los Angeles County Assessor Rick Auerbach.

California is a special case, however, thanks to Proposition 13, a 30-year-old amendment to the state constitution that limited property tax increases to 2% per year. That meant that as California markets churned out double-digit price increases year after year, assessed values soon fell way behind market values.

As a result, only people who purchased homes at or near the market peaks are likely to have their homes revalued down. Those bought before 2003 likely have their assessed value still lagging market values.

For example, if you bought a home in Santa Monica in 1998 for $300,000, the home may still be worth $1 million - even after losing 25% of its value during the past two years. Meanwhile, its assessed valuation has only crept up about 25% to $375,000. No soup for you. As a matter of fact, your assessment should rise 2%.

However, recent buyers in areas such as Merced and Los Angeles, where prices have fallen more than 50% from their peak, should get tax breaks. Someone may have purchased a Merced house two years ago for $200,000, but the property is now valued at $100,000. The assessment, and the taxes, will be cut to reflect that decline.

In Los Angeles, the savings could be substantial; the average owner of those properties Auerbach is now reassessing should save an average of about $1,300 a year.

Less likely to get cuts

In other states, even if tax assessors reduce appraised values to reflect market conditions it still does not automatically mean a property tax cut. Localities could still raise their tax rates, the percentage of the home’s value that is used along with the assessed valuation, to calculate the final bills.

“Taxes are based on property values times [the tax rate]. We could have declining values but make up for it by raising the rate,” said Bill Donegan, the property appraiser for Orange County, Fla., which includes Orlando.

This year, though, the value drops are so steep that any rate rise will probably not offset the lowered assessments. Plus, governments usually can’t just raise rates indiscriminately.

“In most places there’s a statuary limit to rate increases,” said Ken Wilkinson, the property appraiser for Lee County, Fla., where Cape Coral home values have plunged 44% from their peaks. “In Florida, they can’t be raised more than 10%.”

That should lead to substantial savings. In Orange County, the average taxpayer paid about 8% less last year, or nearly $130. “They may see a bigger drop this year,” said Donegan.

The savings will be more modest, or non-existent, in states with lesser price declines. Many localities will raise rates enough to offset lower assessments, according to Joseph Henchman, the Director of State Projects for the Tax Foundation, a group that studies tax policy.

“The actual [revenue] collections could still rise or stay about the same,” he said.

Governments may also raise fees on water, sewage and other services to keep up with looming budget deficits. They could even create entire new taxing entities, known as tax district, to fund fire departments, law enforcement, even libraries.

The local governments must keep revenues up to pay for programs they initiated during more flush times.

“We often see a ratchet effect,” said Henchman. “Spending goes up when collections are strong but stay up even when collections go down.” 

AIM Realty Group Chicago

Congress passed a bill amending HOPE for Homeowners that may make the program more useful.

One of the biggest disappointments of the foreclosure prevention fight has been HOPE for Homeowners, a plan Congress passed in an attempt to help as many as 400,000 underwater, delinquent borrowers from going into foreclosure.

In its first seven months, HOPE for Homeowners helped one family stay in its home.

Congress and the Obama administration are hoping to do a lot better than that.

On Wednesday, President Obama signed into law a bill that attempts to correct the program’s problems. The president said the program had many provisions that discouraged servicers from using it.

“This bill removes those hurdles,” Obama said.

The original bill, which took effect Oct. 1, was intended to help defaulting homeowners by having banks voluntarily reduce mortgage balances to 90% of a home’s current market value. The loan would then be refinanced into a mortgage insured by the Federal Housing Administration (FHA).

The idea was that the lenders take “haircuts” and the government would then bail them out of any future losses by insuring the new loan.

As a result, most of the big lenders didn’t offer the program, which was strictly voluntary though heavily encouraged by the Bush and Obama administrations. “The lender basically short-sells the mortgage into the plan, and there’s no more chance for upside,” said Tom Kelly, a spokesman for JP Morgan Chase (JPM, Fortune 500).

The new version of HOPE sweetens the FHA-refinance option - for lenders. It only requires servicers to reduce balances to 93% of market values instead of 90%. It also pays servicers $1,000 for every Hope-refinanced loan.

For example, borrowers who owed $220,000 on a house valued at $200,000 would need their mortgage balances reduced to $180,000 to qualify for an original HOPE for Homeowners refi. That’s a $40,000 writeoff. Under the new plan, lenders would have to forgive $34,000.

But the biggest change is that it authorizes FHA’s parent agency, the Department of Housing and Urban Development (HUD), to share future home-price appreciation with investors, up to the appraised value of the property when the existing loan was first issued.

The original bill gave HUD the right to share potential profits 50/50 with homeowners, but now some of HUD’s share would go to the original investors.

Also certain to increase servicer utilization of HOPE for Homeowners is a change in Treasury Department policy announced late last month. Treasury will require any servicer that signs up to participate in the Making Home Affordable program, the administration’s mortgage modification plan, to evaluate borrower eligibility for Hope for Homeowners as well.

If borrowers don’t fit into the Making Home Affordable program but are viable for HOPE, the servicers must offer them this option.

Industry insiders say they hope the changes will spur more lenders to use the plan.

“It’s very important that it becomes a better program,” said Faith Schwartz, director of Hope Now, a coalition of lenders, servicers, mortgage investors and community advocates. “We need the FHA to provide another outlet for refinancing these problem loans.”

The final bill removed a provision that would have authorized bankruptcy court judges to lower mortgage balances to reflect current market values. Supporters of this “cramdown” believed it would pressure lenders into making more affordable modifications for at-risk borrowers. But the Senate removed that from their version of the bill and the House followed suit.

AIM Realty Group Chicago

In Indianapolis, good paying jobs and low-priced homes make it the most affordable place to buy a home. New York has the least affordable metro area.

U.S. home prices are their most affordable in at least 18 years, according to a report released Monday.

Nearly 73% of all homes sold in the United States during the first three months of 2009 were considered affordable. That was the highest percentage ever reported by the 18-year-old Housing Opportunity Index, an analysis of markets compiled quarterly by the National Association of Homebuilders and Wells Fargo Bank.

To be deemed affordable, a family making the median national income of $64,000 must be able to buy the property and devote no more than 28% of their income toward housing costs.

Plummeting home prices were primarily responsible for sending affordability soaring from just over 60% in last three months of 2008 to 72.5% in the first quarter of 2009. Sinking interest rates also contributed to affordability. A 30-year fixed mortgage averaged less than 5% during much of the quarter, according to mortgage giant Freddie Mac.

“Underlying the increase in affordability are lower home prices and record low interest rates,” NAHB Chairman Joe Robson said in a prepared statement. “Combined with the $8,000 federal tax credit for first-time homebuyers, consumers are beginning to return to the marketplace.”

Most affordable city

For the 15th consecutive quarter, Indianapolis led the nation’s large cities (population 500,000 and up) in home affordability. The Indiana capital tops the list due to very reasonable home prices and relatively high median income: Nearly 95% of all homes sold were affordable to those earning the metro area’s median income of $68,100.

On the other end of the spectrum, only 21% of the homes sold in the New York/White Plains metro area were affordable to those earning the median income of $64,800. Even there, affordability jumped seven percentage points compared with the last three months of 2008.

Rust-belt cities dominated the most affordable list, with Youngstown Ohio; Akron, Ohio; Grand Rapids, Mich.; and Syracuse, N.Y., all near the top. Joining New York at the bottom were: San Francisco; Los Angeles; Nassau-Suffolk, N.Y.; and Honolulu.

Several smaller cities were even more affordable than Indianapolis. In Sandusky, Ohio, about 98% of homes sold were affordable to those earning the local median income. Monroe, Mich., and the Ohio towns of Mansfield, Springfield and Canton all exceeded 95% affordability.

Less affordable small markets were led by Ocean City, N.J.; San Luis Obispo, Calif.; Flagstaff, Ariz.; and Hanford, Calif.

Markets still slow

Despite the record affordability, both existing and new home sales are still slow. New homes have been selling at an annualized rate of 350,000 for the past few months. Existing sales have been consistently running at an annualized pace of less than 5 million units - about two/thirds the boom-years rate.

And increased affordability is not enough to drive sales quickly upward, according to Ken Goldstein, an economist and real estate analyst for the Conference Board.

“What really hurts is that people are losing their jobs now,” he said. “The unemployment rate is at 9% going to 10%. That means that 90% of people still have their jobs but everyone is looking over their shoulders wondering if they’re next.”

As a result, there’s still a double-digit inventory of homes on the market. Plus, a large proportion of recent sales have been foreclosures, homes repossessed from defaulting borrowers and put back on the market, often at fire sale prices.

Still, homebuilders are taking some heart in the improved affordability stats and other data indicating that perhaps the worst is over. Pending home sales were up slightly last month, and new home sales have risen off their bottoms.

Those trends have buoyed industry confidence slightly. The NAHB/Wells Fargo Housing Market Index, an indicator of builder sentiment that was also released Monday, inched up two points in May to 16 after jumping five points in April.

AIM Realty Group Chicago

Adding to its mortgage rescue program, the government will now offer additional incentives to get troubled borrowers out of homes.

When all else fails, the Treasury Department is now willing to cough up cash to get homeowners to move on and to get loan servicers to forgive mortgage debt.

The new initiatives are part of the government’s Making Home Affordable program.

Under the original program, unveiled earlier this year, homeowners could be eligible for loan adjustments or refinancings if they meet several criteria: the home must be their primary residence, for example, and the mortgage balance must be no more than $729,750.

Even then, however, mortgage help is not assured. The homeowners may still not be able to afford reduced monthly mortgage payments of 31% of income. And to protect the investors who own the mortgage, the value of a modified loan still has to be greater than the value of what would be recovered in foreclosure.

In these cases, lenders first consider a short sale, a deal in which the home is sold for less than the mortgage balance, and loan servicers may forgive the difference.

If that is unsuccessful, the final step is a “deed in lieu of foreclosure,” when borrowers voluntarily forfeit the deed and the debt may be erased.

Under the new initiatives, for short sales and deeds in lieu, borrowers will get up to $1,500 to assist with relocation expenses. Treasury will also pay the servicers $1,000 to complete a short sale or deed in lieu.

A deed in lieu can be the least painful way of ending a mortgage default nightmare, according to Pamela Simmons, a real estate attorney in California.

“Borrowers often prefer to end it quickly and cleanly,” she said. “They just want to get it over with.” And it’s better than just walking away from a mortgage, a situation where the debt still looms.

A deed in lieu might also be better for the banks. Banks acquire the properties back from delinquent borrowers faster and more easily, saving them legal, financial and other costs associated with going through the entire foreclosure process.

Not every deed in lieu involves “cash for keys,” but motivated lenders will often pay borrowers something, typically about $1,000, to vacate by a fixed date and to not vandalize the homes or strip it of fixtures.

Who is this good for?

The borrowers who may benefit most from this program are the ones who would still not be able to repay their mortgages under any reasonable workouts.

These would include delinquent borrowers who are way underwater, owing much more on their mortgages than their homes are worth, people who have lost their jobs with little hope of finding another and ones who have gone through a divorce or another life-changing event.

In those cases, they may be better off cutting their housing expenses by switching to a rental and the cash-for-keys is one more good reason to do so.

Complications

But deed in lieu may not be simple, according to Lawrence Jacobson, a Los Angeles-based real estate attorney.

The least complicated scenario is a borrower with no other debt on the home. In that case, it’s just a matter of the lender taking its lumps and writing off the difference between what it’s owed and what the repossessed home realizes when resold.

If there’s a second mortgage, however, the lender will not allow a deed in lieu unless they get the full cooperation of the holder of the second mortgage.

“[Giving the deed back to the bank] is a transfer of title,” said Jacobson, “and it’s subject to all encumbrances. Lenders will only consider deed in lieu if they’re the only [mortgage holder] or if the second lien-holder is willing to give up its interests. Everyone has to be a party to the transaction.”

To help solve that issue, Treasury will also make incentive payments to second mortgage holders, up to $1,000, if they give up all claims.

AIM Realty Group Chicago

I just read a great article on Realtor Magazine that talked about the $8,000 first-time home-buyer tax credit and how, effective immediately, FHA borrowers can use the credit as a down payment. Previously, most buyers wouldn’t receive the funds until after they filed their tax return, and that deterred some people from using the credit. This is great news for any FHA buyers that were sitting on the sidelines because they lacked the funds for a downpayment. The full article can be found here.

AIM Realty Group Chicago

The Obama administration’s housing stabilization plan is underway and starting to have an impact. As of last week, Chase had modified 15,000 home loans.

Two months ago, Ivan Coleman was struggling, his mortgage payment having ballooned to $1,200 - more than half his income. Starting June 1, his monthly payment will fall to $725.

“My mortgage company was helpful, eager to have me stay in my home,” said Coleman, who first fell behind on his payments after losing his job.

Coleman, who has owned his Maple Heights, Ohio, home for ten years, is among the first wave of homeowners to have their mortgages modified under President Obama’s foreclosure-prevention program. As of last week, for example, Chase Mortgage, the servicing side of JP Morgan Chase (JPM, Fortune 500), had issued more than 15,000 modifications under the plan.

Bank of America (BAC, Fortune 500), which began reaching out to at-risk borrowers in early April, has sent out 100,000 letters to borrowers who could potentially benefit. It has issued some modifications, although it’s not releasing data on just how many.

When the plan went into effect on March 4, Obama predicted it could help as many as 4 million people stay in their homes. It did this primarily by encouraging lenders to assist delinquent or at-risk mortgage borrowers by lowering interest rates to the point that total monthly housing payments would not exceed 31% of their gross monthly income.

How to apply

Becoming one of those 4 million takes five simple steps.

Step 1: Visit the Web site

Everything you need to get started is located here MakingHomeAffordable.gov

Step 2: Take the quiz

Click on “Find out if you are eligible” and then select the “Home Affordable Modification” option. (The “Refinancing” option is just for those who are current on their loans.) Take the five-question quiz. Based on your answers the site will tell you if you likely qualify for a modification under the Obama plan.

If you do - meaning you bought your house before Jan. 1, 2009, and owe less than $729,750; it is your primary residence; you are delinquent on your payments; and your payment is more than 31% of your monthly gross income - the site will present an eight-item checklist of paperwork you’ll need to submit to your lenders.

Step 3: Compile the paperwork

The site recommends that you have: household-income documentation, such as pay stubs; tax returns; savings account records; mortgage statements; second mortgage info, such as home-equity loans statements; credit card bills; and information on other debt, including student and car loans.

You will also be asked to write a letter describing why you need assistance. Your reasons could include medical expenses, job or income loss, or even divorce.

A well-done hardship letter can make a difference in whether a loan wins modification, according to foreclosure-prevention counselors. These letters can point out factors that led to the delinquency but that may not be evident from your other paperwork.

“Don’t say, ‘I never could have afforded it in the first place,’” advised Tom Kelly, a spokesman for Chase Mortgage. “That isn’t the ideal answer.”

Instead, explain that illness prevented you from working for a time, that you’ve recovered and are back at work and paying bills again. Or a temporary job loss cause the problem, etc. Without that context, lenders may think you were just careless - or worse.

Step 4: Call your lender or servicer

Once your information packet is complete, call your lender or servicer - the company you write your monthly mortgage check to. To see if your lender is participating in this plan - or to get the phone number - click on “Contact Your Mortgage Servicer” on the Making Home Affordable site. After you’ve talked to one of their modification specialists, you’ll be instructed to fill out an application and submit your documents.

There should be no need for face-to-face meetings with servicers, according to Jumana Bauwens, a spokeswoman for Bank of America. She said borrowers will be able to do everything over the phone and through the mail.

Step 5: Wait

During this phase, the lender will decide the approach it wants to take to reducing your debt: lowering your interest rate, extending the life of your loan, or reducing your debt balance.

The lender’s first step will be to get your payment down to 38% of your monthly gross income. Once the debt is reduced that far, the government will pay the lender to lower it to 31% of income.

At that point, the loan will be rewritten, you will get the new paperwork to sign and the new payment will go into effect on your next bill.

This process has been taking several weeks to a month, so be patient. Although the banks expect it will get quicker as their personnel become more familiar with the modification plan.

“The 31% is now an industry standard and that’s much more easily calculated,” said Chase’s Kelly.

One thing to remember: These are trial modifications that only become permanent once you make on-time payments for three consecutive months.

Another option

Some borrowers may prefer going through a foreclosure-prevention counselor rather than dealing directly with lenders. The counselors can answer questions about what specific documents are needed, make sure that applications are complete and take the time to explain the proposed deals.

In addition, the counselors offer advice on getting spending under control. “Budget counseling is critical, but the banks have told us they’re not set up to do that,” said Mark Seifert, director of Cleveland-based East Side Organizing Project (ESOP), a community advocacy group that does extensive foreclosure counseling.

Ofelia Navarro, executive director of the Spanish Coalition for Housing in Chicago, said her organization filed 300 packages for modification under the new plan on April 9. She is still waiting to hear back on those applications, but she believes the new program will eventually make the process go faster and smoother.

“I understand that the servicers did not get the final regulations until [a couple of weeks ago],” she said. “Now, they’re ready to move forward.”

In fact, Ivan Coleman used ESOP for his modification, and it took more than two months to complete. “My counselor, Ana Gonzales, handled everything,” he said. “She told me to be patient, that it would take 30 days, but it took more than that.”

But he’s very pleased with the outcome and that he now has a good chance of keeping his home. 

AIM Realty Group Chicago

A colleague and friend of mine in the western suburbs recently posted a very interesting blog post regarding property taxes and how they are truly calculated. This is pretty much the same across the board.. it doesn’t matter whether you live in Chicago (Cook County), Dupage, or Lake county. The full article can be found here.

AIM Realty Group Chicago