According to The Washington Post ( July 1, 2008), Fairfax County approved a landmark housing program June 30, 2008 yesterday to buy foreclosed properties for middle-income families, becoming one of the first communities in the country to tackle the nation’s growing mortgage crisis while also addressing the region’s increasing demand for affordable housing.

County leaders said the program, through which Fairfax will purchase some properties outright and help families buy others through subsidized loans, takes advantage of a unique moment when thousands of homes are entering foreclosure and available for purchase at below-market prices. The program will expand the county’s stock of affordable housing and help stabilize areas where clusters of abandoned, unkempt properties in foreclosure threaten the value and vitality of surrounding neighborhoods, county officials said. 

Loudoun County is also considering a program that would allow county employees, including firefighters, teachers and deputies, to get a low-interest loan with which to purchase foreclosed homes in the easternmost portion of the county.

If you get a foreclosure notice on your home, be sure to explore all of your options to avoid the foreclosure. The very first thing you should do is consult with an attorney and also pursue these options:

Negotiate a new payment plan with more affordable loan payments.

Negotiate a smaller mortgage payoff (known as a "short sale") with your lender. With the surplus of foreclosures, many banks may be willing to "forgive" the borrower’s debt with a smaller loan payoff amount and the sale of the property. 

Have the bank show instruments proving that they actually own the loan. Because banks have so many loans, loan papers can become lost and the bank may be unable to show proof of actual ownership of the loan. Use this opportunity to negotiate a new loan with an affordable payment plan.

 RISMEDIA, June 17, 2008-In an effort to stabilize declining home values in certain neighborhoods, the Bush Administration announced a temporary policy that will extend government-backed mortgage insurance and allow for the immediate sale of vacant foreclosed properties.

 For one year, the Federal Housing Administration (FHA) will insure foreclosed properties marketed and sold by property disposition firms on behalf of lenders. The properties, which must purchased by owner-occupants, will no longer be subject to the customary 90-day waiting period.

For more information, visit fha.com.

The typical buyer’s offer to purchase a property requires an appraisal value equal or greater than the offering price. The appraisal is ordered by the buyer’s lender, who’s objective should be to protect the investors from buying a loan that is above its market value and the buyer from purchasing a home for more than what it is worth.

Instead of describing local property values in an appraisal as “declining.”, some lenders have pressured appraisers them to change indicate ’stable’ conditions when all the relevant data suggested otherwise. Contrary to the purpose of the appraisal,the seller and loan officer benefit from excesses in property values; the invester and the home buyer lose. Inflated property valuations have contributed to current mortgage-market losses and is a significant contributing factor in many mortgage fraud cases and foreclosures.

But a lower property appraisal can be detrimental to the seller. The deal may fall through, unless the seller is willing to lower the price to the appraised value or the buyer is willing to pay the difference between the property value and the purchase price. If the property valuation is in question, the seller should order its own appraisal and present the results to the buyer’s lender for reconsideration of the property value.

It is important, that for this very reason, the real estate appraiser be reputable, experienced and familiar with the local real estate market and can perform an appraisal which accurately reflects the market value the property.

The quality of homes built during the real estate market boom and the homes prior to the homes built during a more normal market can be completely different.  Some builders had been cutting corners to meet the demands of a “hot” market.

This is becoming more evident as home inspections are being done on these homes when they go on the resale market.   Lower quality homes decrease the value of a home and can push the homeowner into foreclosure because of their inability to sell their home for enough to payoff their mortgages.

 Losing one’s job, the death of a spouse or unexpected medical conditions could cause the homeowners to no longer be able to pay their mortgages. The new home could quite possibly have been put into larger and riskier mortgage than they needed or possibly could not afford..

Inspections for these homes in the resale reveal that they are not worth what they were a couple years ago, and they were never worth what they were sold for in the first place because of crummy construction and expectations created by a housing bubble.

When purchasing a home, whether new or resale, it is essential to have the property checked by an  independent home inspector to assure everything is built up to standard and decrease the likely hood of encountering  problems after  you move in.   Home inspections done by independent home inspectors go beyond basic county inspections.    

Your home is a major investment and it is important to get an independent  inspector to check the electrical, heating, plumbing, and the overall structural of the home before firming up the purchase.  A good inspector will be your greatest advocate in determining and defining the merit of the home.

If  the inspector has any issues with your home, you will be in a position to ask for repairs or your money back for the home. Thousands of dollars have been saved by having  an inspector look at what is in the home and how it needs to be changed.

A final walk-through should also be done and  is typically done the day of or the day before closing.  A final walkrough inspection is important  because it’s your last chance to inspect the property before closing.  The purpose of  the walk-through inspection is to make sure the property is in the same condition as it was on the day you agreed to buy it, that any home inspection items that the seller and you agreed upon were in fact taken care of,  and that all heating, electrical and plumbing are in working order.

HOA and Condo Associations are feeling the pinch from the economic down turn. Many homeowner and condo associations are running into issues collecting dues from some of its members. The homeowner may no longer be able to afford their monthly dues or are not willing to pay. They just turned in the keys, moved and can’t even be found.

The homeowners association may have to raise the association fees for dues paying residents, lower expenses or cut in services to replace the missing revenue. Some associations have even gone bankrupt.

Fannie Mae and Freddie Mac’s underwriting changes, in addition to severe new restrictions by private mortgage insurers, could tighten the availability of loans to condo buyers in the future. The new restrictions will also make it harder for condo owners to refinance.
Fannie Mae’s new procedures requiring loan officers to research upfront the key characteristics of condo projects — their legal documentation, the adequacy of condo association operating budgets, percentage of unit owners who are late on association-fee payments, percentage of space allocated to commercial use and percentage of units owned by investors — must now be performed upfront by loan officers. Not only is this time-consuming and costly, but Fannie Mae expects the lender to warrant the accuracy of its research.
Fannie Mae spokeswoman Marilyn Kornfeld said the new procedures are designed to “protect borrowers and manage increased credit risk in the market.” But some lenders may discontinue condo financing because of all the restrictions and changes.
Freddie Mac has issued similar new guidelines. Freddie Mac spokesman Brad German acknowledged that the changes would make condo loans “more labor- and paper-intensive for the lender” but said weak sales, growing numbers of financially troubled projects and declining property values made them necessary.

Source: WashingtonPost.com (Saturday, April 19, 2008)

Freddie Mac counts foreclosures as a major credit black mark for seven years and is now aggressively pursuing walk-away borrowers, where permitted by law. Sending the keys back to the lender comes with rigid consequences which should be fully understand before a foreclosure.

The borrower will be unable to get another mortgage through Fannie Mae for five years, unless there are “documented extenuating circumstances.” In that case, the prohibition is three years. Even after the prescribed time has elapsed, a borrower with a foreclosure in his/her file will have to make at least a 10% down payment and have a FICO credit score of at least 680 to qualify for a Fannie Mae loan.

The short sale is by far the better option to a foreclosure, provided there is evidence of hardship. A short sale occurs when home owners negotiate loan modifications with lenders and have portions of their principal debt forgiven. A Federal legislation was enacted last year to eliminate tax liability for the amount forgiven in a short sale. 

By contrast, the debt from a foreclosure is not forgiven, and according to the Internal Revenue Service, the borrower may have to pay taxes on the unpaid balance.

The drop in housing prices and decline in home sales gives Loudoun County no option but to raise taxes to accommodate the needs of the fast-growing Loudoun school district, which is expected to swell by more than 3,000 students in the fall, officials said.

The Loudoun County Board of Supervisors, struggling with a sudden downturn in the housing market and a population that grows ever larger, approved a 19 percent increase in the property tax rate that will send the average bill soaring by more than $300 this year.

The tax-rate increase is necessary to make up for an unexpected drop in assessments across the county. The plan is expected to result in a 6.5 percent increase in the average homeowner’s tax bill. The budget year starts July 1.

Loudoun County, declared the nation’s fastest-growing large county by the U.S. Census Bureau,
has struggled over the years to keep up by investing enough in public safety and its overburdened schools. This fall, the school system is expected to grow by 3,270 students, enough to nearly fill a high school, a middle school and an elementary school, district officials have said.

Information from: The Washington Post, http://www.washingtonpost.com