In an effort to cut down on fraud by borrowers and tighten underwriting criteria, lenders will require a second full credit report just prior to closing escrow. This is part of Fannie Mae’s “loan quality initiative” (LQI) which takes effect June 1st.

Lenders are concerned that  mortgage borrowers shop for things they need for their anticipated new home – often furniture or even a car – possibly thousands of dollars worth of purchases . The home buyer often will open up a new credit account, thus affecting the borrower’s debt-to-income ratio.

What should a home buyer do? The rule of thumb is – abstinence, resist the spending until after escrow closes! Read Fannie Mae’s FAQs on this topic.

Each Thursday, the California Franchise Tax Board updates the numbers for credit availability. Escrow must have closed before a home buyer can submit for the credit. Here are this week’s numbers!

The Treasury Department released data this week on the Home Affordable Modification Program that shows 3.2 million homeowners are eligible for the HAMP program but that only 295,000 have actually gotten a permanent modification.

The Wall Street Journal yesterday also reported that some homeowners, trying to get a loan mod but often having to wait 6-12 months for their bank to determine eligibility, continue making payments but deplete their savings, putting them into worse financial straits.

For many homeowners who can’t get a loan mod through the HAMP program and want to avoid foreclosure, the Administration has begun the Home Affordable Foreclosure Alternatives (HAFA) program – basically, a “pre-packaged” short sale that provides a $3,000 relocation allowance for the homeowner plus financial incentives for the lenders to do a short sale.

OPM means Other People’s Money and it’s a great scam if you can figure out how to do it. You get the glory and someone else pays for it – sweet! Well, a number of developers figured it out. When a developer builds out their homes or condos, they can insert into the covenants and/or deeds a requirement that when the property is sold, a fee must be paid to the  developer’s charitable foundation.

The Lennar complex of condos (between Telephone Rd and Thille, a couple of blocks west of Victoria) has such a deal. Looking at a previous deal we did there, $202.50 went to the Lennar Charitable Housing Foundation. This scam is getting so prevalent that the Residential Purchase Agreement we Realtors use in submitting an offer just added a line item under “Other Costs” called a “private transer fee” for just this sort of thing.

Wanna start your own foundation? Just build some homes!

Morgan Stanley made a business decision to walk away from  5 office buildings in San Francisco they bought at the height of the market in 2007. It’s estimated their value dropped by almost 50%. They were not in foreclosure and were making the payments. It’s called a ‘strategic default‘ – a purely business decision. If Morgan Stanley can walk away, why not you?

Read the rest of this article »