Short Sales – Answers Sellers and Investors Need To Know

In a short sale, the bank accepts less than what is owed on the mortgage. In order to do a short sale, the owner must have a hardship reason. The criteria for defining a hardship has changed significantly, allowing families to do a short sale in some cases even if they are not behind on their payments or they are still employed. The banks are more willing than ever to work with families.

Here are just a few of the hardships that may allow you to consider a short sale [Read more...]

Quantitative Easing QE3: What is the Impact on Real Estate and Mortgages?

Quantitative easing, or simply known as QE, is a form of monetary policy that is used by the central bank to raise the supply of money in an economy where the rates on discount, interbank interest and normal interest is at zero or close to that. QE3 stands for the third round of this process of quantitative easing and is aimed directly at the mortgage and housing industry.

How is Quantitative Easing Done?

The Federal Open Market Committee (FOMC) announced recently that purchases will be made that will target Housing. Their aim is to buy $40 billion of securities per month in 2012 which are mortgage-backed. The goal is to lower interest rates.

stimulate the economy 300x290 Quantitative Easing QE3: What is the Impact on Real Estate and Mortgages?The FOMC will first credit its account with cash that it has created ex nihilo (a Latin phrase that means “out of nothing”). With this money,the FOMC then goes ahead and buys financial assets including different types of bonds from different financial institutions through a process termed open market operations.

This process will enable the committee to acquire new money through deposit multiplication. The increase in money circulation will ultimately stimulate the economy. The term quantitative easing comes about due to the fact that a specific amount of money is being generated (quantitative) and it is helping reduce the burden on the banking system (easing).

What is the Effect of QE3 on Mortgages?

When you go out to buy a house, you usually pay a certain amount of interest on the loan. With QE3, you will have access to purchasing mortgages which are backed by bonds. This will most likely provide you with lower interest rates for new mortgages.

Why lower the rates? It is believed that when the mortgage rates go lower, many individuals will take advantage of the lowered cost of home ownership and thus buy homes. Though many buyers don’t see this as the only motivator in buying a house, at least some will be motivated to purchase.

When more homes are bought, investors will construct more houses which inevitably create more jobs and increase the employment levels. Lower mortgage rates will definitely motivate investors to purchase housing and convert them into rental units suitable for single families.

Previous QE programs were limited to a specific amount of stimulus. QE3 is different because the government has announced it will continue the program as long as necessary to jump start the economy. Clearly, the government sees housing as a key ingredient of a robust economy and they are willing to do whatever it takes have a healthy housing market and increased home prices.

Bank of America Writing Off HELOC Loans

If you have a Bank of America HELOC, this could be huge.

First the good news. The bank has finally started writing off some HELOC loans.

Here is a letter from Bank of America to a home owner regarding BofA “writing off” their HELOC.

bofa heloc Bank of America Writing Off HELOC Loans

Now the bad news, from what I hear the HELOC needs to be past due. If you are in the unfortunate situation where this may apply to you then I encourage you to do your research and take advantage of any opportunities to get your loan written off.

Why Should You Consider A Self Directed IRA?

Recent statics show that up 10,0000 Baby Boomers per day will turn 65 for the next 19 years in which up to 80% the that population either lack a retirement account and/or underfunded retirement accounts to sustain them in their retirement years. Part of this problem is attributed to the economic downturn that occurred in 2008 which is still haunting many of us in the present.

Over the past 50 years the population has been advised to fund an IRA or 401K along with other miscellaneous retirement related accounts and all would be fine at the age of retirement. Another segment of the population had depended on the equity in their real estate to serve as their primary, additional and/or supplemental retirement savings vehicle to serve as their income source in retirement.

Unfortunately for many, that plan is no longer a viable plan based on past retirement planning practices with declining returns in the stock market and declining real estate values resulting in negative equity for a vast majority of the population whom purchased properties prior to the 2008 economic meltdown. This can all be reversed by incorporating the use of a self directed IRA into your retirement planning strategy by allowing you to take control of your retirement funds, choosing a wider array of alternative investment options outside of the stock market and having the ability to TRULY diversify your investment portfolio.

ira shackles 300x225 Why Should You Consider A Self Directed IRA?

Take the Shackles Off Your IRA

The ability to TRULY diversify your retirement portfolio is key to growing and securing your retirement nest egg. The historic rule for a sound investment strategy has always been “diversify”. Unfortunately, many of us were not diverse enough in 2008 when the stock market crashed.

The reason being is that ALL of your funds were invested in a single investment engine, the stock market. Imagine if you had the opportunity to invest in other asset classes outside the stock market that weren’t affected by the crash, it could have resulted in losses not as great as those realized in having all their money in the stock market. While I believe stocks, bonds, mutual funds, money market accounts should be a part of your retirement portfolio, others alternative asset classes should also be included such as:

Real Estate

Secured Private Notes

Private Placements/Private Shares

Precious Metals

Business Investments

Secured Business Loans

Accounts Receivable Factoring

Seed Capital For Starting Your Own Business

The above listed investment options are just some of many options available to you using a self directed IRA. The list also reflects the type of investments that are in demand for capital that could grow your retirement accounts faster and more securely than some of the traditional investments you have invested in the past. With a self-directed IRA, your only two investment restrictions as it relates to asset classes are life insurance and collectibles. Outside those two investment class restrictions, you have almost unlimited investment options available to you using a self-directed IRA.

It’s almost a certainty taxes will increase in 2013 based on the current economic affairs of our country. Therefore, anticipate higher income taxes and capital gains taxes on investment in 2013. In order to reduce and/or avoid taxation in these two areas would be to consider establish a self-directed IRA, in particular a self-directed ROTH IRA in 2012.

Making your investments with a self-directed IRA funds versus private capital allows you the ability to defer taxes on your gains or not pay taxes at all on the gains with a self-directed ROTH IRA. The rules are as follows for avoiding taxation on growth within a self-directed ROTH IRA:

1. The ROTH account must have been established and funded with for at least (5) years

2. The accountholder must be 59 ½ or older to withdraw gains without penalty nor taxes

Many may not feel it’s worth establishing a ROTH because of the low contribution limits of $5k/$6K and/or may not meet the requirements to contribute based on too much income. Keep in mind, you are able to convert from your tax deferred IRA, 401K or retirement plans to a ROTH. There are no income restrictions on a conversion, full or partial and you are the amount you are allowed to convert has no limits. So take advantage of these tax advantages before they become subject to change in the future.

The objective of using a self-directed IRA is to take more control over your investment choices and invest in what you know and understand. The use of this investment tool requires the necessary due diligence to be performed on any investment you choose. If you lack the ability to perform the necessary due diligence on an investment, consider hiring a professional to assist you. Arm yourselves with the required information and education for the investment choices you choose to prevent the potential for losses. Remember, this is your retirement account we’re talking about here, so become diligent and proactive to protect it.

lamarr baxter 150x150 Why Should You Consider A Self Directed IRA?Lamarr Baxter

Director Of Business Development

Accuplan Benefit Services

lamarrbaxter@accuplan.net

(916) 708-0235

How the $25 Billion Settlement Affects You

The big big news in the banking, mortgage, and real estate industries last week was the announcement of a $25 billion settlement with banks over foreclosure abuses. As additional banks participate in the settlement, the total pot may grow to a staggering $54 billion. The settlement adds to a series of recently expanded government steps to protect consumers and encourage lenders to refinance homes and modify payment terms for homeowners facing foreclosure.

In the settlement, participating banks agreed to help homeowners with principal reductions or short sales. For example, California homeowners, with the highest number of properties in the foreclosure pipeline, will receive $12 billion, and Florida homeowners will receive $7.6 billion.

Short-term there may be a wave of new foreclosures due to the backlog that should have happened last year. As an investor this is an excellent time to build a strong portfolio of undervalued properties and benefit from both high cash flow and strong appreciation as the recovery continues.

Long-term this settlement is excellent news. The big dark cloud that has been hovering over the real estate market for over a year is dissipating. Demand for homes is improving and the 6 year slide in home prices could be all but over as the market stabilization that started in 2011 is poised to continue.

Private equity funds such as Oaktree Capital Management LP are planning to buy billions in foreclosed homes to manage as rentals. They see a scenario in which prices have over corrected on the low end and rental demand is strong, the perfect scenario for investing and maximizing returns with minimal risk.

Bottom line, this settlement can be good news for you in the form of a principal reduction, loan modification, or short-sale if your home is currently under water. And if you are a real estate investor, this settlement is even better news as it positions the real estate industry for a healthy recovery sooner rather than later.

Read the entire Bloomberg News story here

If you would like to take advantage of the high  returns currently possible with real estate without getting your hands dirty, Summit Assets Solutions has a limited selection of cherry-picked, CASH-FLOW properties that we offer on a first-come, first-serve basis. In many cases they are ALREADY RENTED. Here are the facts on our current investor specials:

  • They have STRONG CASH FLOW
  • They are priced for immediate sale, with prices ranging from only $32,700 to $58,950!
  • The rent is guaranteed for a full 12 months!
  • They are in hand-picked areas of the country poised to rebound strongly

These are as turnkey as it ever gets. We’ve already managed the contractors and the rehab and these ARE NOT JUNKER HOMES in the Midwest.

You just collect the cash.

NOTE: These deals are first come, first served. If you’re SERIOUS, not curious, I need you to send an email NOW with 4 simple things.

PLEASE follow these directions:

  1. Put “I’M SERIOUS!” in the subject line of your email addressed to susanw@summitassetsgroup.com. Do NOT put “I’m interested” or “Please send info”. We only send info to those that are SERIOUS, and then we’ll answer questions you have after you’ve reviewed the info we send on the properties. 
  2. In that same email, tell me if you’re interested in more than one property. If so, a quantity discount will apply. And…
  3. Tell me if you plan to pay all-cash, or finance the investment. If all cash, do you expect to use your self-directed IRA money, OR cash in the bank. And…
  4. Tell me how soon can you close? Obviously, the sooner the better.

NOTE: Remember, make sure to respond by email ONLY to susanw@summitassetsgroup.com

HINT: It’s no coincidence that every time we offer GREAT Deals like this, those that follow directions get priority. In other words, simply put “I’M SERIOUS!” in the subject line, and answer the 3 questions above (#2, #3, #4) in that same email. That’s it.

Proposed Real Estate Lending Changes – Act Now To Save This Industry!

THIS IS YOUR OPPORTUNITY! A CALL TO ACTION IS UPON US TO SAVE THIS INDUSTRY!

Submit a public comment opposing the new rule. THIS ONLY TAKES A FEW MINUTES!

  • Seller “financing” provides housing for millions who otherwise could not qualify for conventional loans.
  • Homeowners are not bank officers or mortgage lenders. By requiring them (many if not most of whom who take back a mortgage are elderly) to qualify buyers using bank standards means they will simply refuse to sell with owner financing. Thus millions of people will be deprived of home ownership.
  • Why should the buyer be required to divulge their income and assets to the very person with whom they are negotiating the terms of a sale? This is not required when there is a 3rd party lender.
  • Requiring the buyer to turn over all their financial information to a stranger opens the door for identification theft and fraud.
  •  This also creates the opportunity for predatory borrowing. This is where an unscrupulous buyer knowledgeable about the Dodd-Frank Act leads an uninformed seller (and this will be the majority of sellers) into negotiations not in compliance with the ability-to-repay requirements. (An example of that could be a balloon, an interest rate greater than 1.49% above a standard mortgage, or the seller did not know how to calculate the income-to-debt ratio correctly, or know what residual income means). That buyer lives in the property trying to resell it for a profit and if they are not successful within three years they rescind the sale and get all their money back.
  • By not allowing them to negotiate a balloon payment, there is a good chance that a seller 55 years or older will die before receiving all their equity. A lot of seniors have invested in real property with the intent of selling it using seller financing (an installment sale) in order to supplement their income in retirement, but also with the hope that they would not be stuck with a 30 year investment. The Dodd-Frank Act does the same thing insurance companies do who sell 30 year annuities to seniors. Our government has criticized this deplorable practice because seniors will die before they receive all their investment.
  • The restriction of no balloon doesn’t affect just seniors, it has financial consequences for anyone using seller financing. Under the Dodd-Frank Act community banks are allowed to originate fully amortizing loans with a five year balloon. The rationale is that they hold these loans in their own portfolios and the government recognizes their need to hedge  against inflation and rising interest rates. Yet, the Act does not recognize that private property owners who have 100% skin in the game need the same protection. A five year balloon is predatory lending. If there has to be a restriction it should at the very least be the same allowance given to community banks of a balloon in 5 years.
  • There are a lot of small builders that have a spec house or two that they can’t sell unless they offer great terms using seller financing. Otherwise they have to let these properties go back to the bank, which doesnot help housing or the economy.
  • It has been said that a seller financing the sale of his or her own property would completely avoid the issue of licensing by retaining the services of a licensed loan originator. If a mortgage loan originator (MLO) fails to properly follow the ability-to-repay guidelines the buyer still has three years in which to rescind the sale which leaves the seller at risk and will most likely bankrupt them.

A sample letter you can use that was developed by National REIA is available online.

I suggest you submit this to your Representative and/or Senator in Congress  as well as submit as part of the proposed rule
comments.

Take Care,
Lori Greymont