Real Estate is the Subject

_{The country’s two largest sources of mortgage money have a blunt warning for anyone thinking about joining the growing “walkway” trend, where homeowners stop making payments and months later send the house keys back to their lender: you will feel the pain.}

_{In March, Fannie Mae sent out new guidelines to lenders intended for walkaways and other foreclosure situations. Fannie will now prohibit foreclosed borrowers from getting another mortgage through the giant investor for five years, unless there are “documented extenuating circumstances.” In those cases, the mortgage prohibition is for three years.}

_{Even after five years, borrowers with foreclosures in their files will be required to make at least a 10 percent down payment, and will need minimum FICO credit scores of 680.}

_{Free Mac, Fannie’s rival, counts foreclosures as major credit blots for seven years, and a senior official said the company is now aggressively pursuing some walkaway borrowers “to preserve our deficiency rights” where permitted under state law.}

_{The walkaway trend is particularly noteworthy in former housing boom markets — including California, Florida and Nevada—where many homeowners find themselves upside down on their loans, owing tens of thousands more than the current market value of their houses. If they invested little or nothing in down payments, some owners reason, continuing to make payments —even if they can afford to — may be throwing good money after bad.}

_{A number of websites have popped up claiming to cut the hassles of bailing out of a mortgage. One company promises that clients “will be able to live in the home for up to eight months with no mortgage payments,”  after paying $995 for a customized plan. The same site says it will provide clients with “legal credit repair” to “improve your FICO scores.”}

_{Another website claims that “your credit can be repaired and (you will) be able to purchase a house in as few as two years”—after paying a $495 fee. Still another company says walkaways can expect “up to one year living payment free” as the lender goes about filing for foreclosure. That company charges $995 for its how-to-do-it kit.}

_{Fair Isaac Corp. of Minneapolis, developer of the FICO scores used in mortgage transactions is unhappy at any suggestion that a foreclosure could be minimized or wiped away in a short period of time. Its scoring model counts foreclosure as a long-standing and severe events, nearly comparable with bankruptcy, with negative consequences for all forms of credit that walkaways might seek to obtain. That includes credit card applications, auto loans, student loans — and even insurance and employment.}

_{FICO spokesman Craig Watts said that the impact of a foreclosure on an individual’s score depends heavily on the payment history, length and number of credit trade lines in a consumer’s file, but “It is always significant.”}

_{Robin Stout Migala, consumer outreach manager for Freddie Mac, said in an interview that “there are so many bad reasons for walking away” from a home loan. Not only are borrowers’ credit standings wrecked — forcing them into excessively high interest rates on any credit they can manage to obtain —but they also face other potential problems including federal income tax liabilities.}

_{Federal legislation enacted last year allows homeowners who negotiate loan modifications with lenders and have portions of the principle debt eliminated to escape income tax liability for the amount forgiven. Walkways borrowers, by contract, have nothing forgiven and the IRS may demand income taxes on the balance they never paid, according to Migala.}

_{When they apply for a loan from either Freddie Mac or Fannie Mae, she said, the standard application form asks whether they have ever experienced a foreclosure or handed over their deed in lieu of foreclosure. If applicants check “yes” the loan is immediately shifted to manual underwriting. Every piece of information is scrutinized by underwriters, who probe for the fact surrounding the loss of the house.}

_{For borrowers who faced genuine financial hardships leading to foreclosures, underwriters are likely to be more sympathetic a few years down the road. But if you walk away, here’s the deal: Don’t expect to get a new home loan — certainly not one with favorable terms — for five to seven years.}

_{That’s no matter what some promoter promised you online.}

_{Kenneth Harney}

_{San Francisco Chronicle Real Estate}

_{kenharney@earthlink.net}

Should you invest in Real Estate?

What is so appealing about Real Estate investing? What type of financing is required to purchase a single-family home, or multi-family unit? What about the problems associated with rentals such as property maintenance, tenant issues, taxes, etc., etc.? These are questions one must answer to their personal satisfaction before deciding to enter the world of Real Estate.

 OK, lets get this out of the way. You and several million other people have seen Carlton Sheets in his television infomercial touting his “No money down” technique. “You too, can purchase a personal home or investment property for no money down. All you have to do is call the 800 number flashing on your screen and I will send you my course that gives you all the techniques I have used in my 30 years of investing in real estate.” he says. This is following by a parade of people, mostly husband and wife team who tells how Mr. Sheets course has changed their life for the better. Their net worth is double, triple, or even quadruples what it was before they purchase his course and became a real estate investor. At least that's what they say. Should you believe them?

Frankly, it doesn’t matter whether you believe them or not. Money can be made in this business. If you are a rookie investor and you want to know the answer to the question posed a the start of this article, you need to purchase Mr. Sheets program or a program from someone who is offering similar instructional books, tapes, videos, in whatever media type your prefer. If you are serious about spending your hard earn money on real estate property, learn how its been done in the past. Save yourself a few headaches, not to think of time and money. My suggestion is to buy the basic course, and it is Carlton Sheets course I am advocating, go through the instructional material two or three times and keep them in mind as you begin to look for investment property.

Having said that, remember you are an entrepreneur. Preparing to and actually negotiating with a seller and finally investing in real estate requires the same business sense that you would use in any business venture.  You must do your homework that includes analyzing the potential property as a sound investment, prepare a cash flow analysis, and qualify for the loan it will take to finance the deal.

Some will tell you to pre-qualify before making an offer for real estate. It’s not a bad idea. I will add that you should invest in a service that will allow you to monitor and clean up errors on your credit report. That report is going to provide bankers the information about your current and past finances that will generate a credit score. That score will determine how much money they might ask you to put down and the interest rate they will charge for such a loan.

You may think that I am advocating a “no money down” course only to reveal that you may expect a lender to ask for a five or ten percent of the properties selling price down before you can purchase a multi-unit property. Keep in mind that the “No money down” techniques are tailor toward assumable loans and owners who have a lot of equity in their property.  Yet I still recommend the course as previously stated.

Frankly whether you become a real estate investor is up to you. But I will say this. Real estate is a better investment than stocks and bonds in my opinion. It appreciates faster, one realizes numerous tax savings and your net worth increases. All of these things contribute to making you a much better and successful entrepreneur. It places you in position to borrow money for other ventures that may not have happen without an increase in your spendable cash and net worth. And most of all, it provides collateral which affords you the opportunity to run with the big boys.

Well...the party is about to end as Alan Greenspan as recent as April 20th stated the economy "has picked up again" signaling a rise in the interest rates. Here are four question to consider whether you are a live in homeowner or investor,

1. Will my monthly payments increase if Interests Rates increase, stay the same, or decrease?
2. Is my personal income or rental income going to rise to the level needed to pay the increased mortgage amount?
3. How much more will I have to pay and what is the ARM cap?
4. How long do I plan to own the property.
5. What options do I have and maybe even negotiated when the interest rate begins to rise?
6. Finally, be completely aware of all the terms and conditions included in the contract. As with any contracts this practice should be a no brainier. 

Call Mr. Hampton at 925-207-4672 for details.