Predatory lending is going to be a thing of the past if the proposed guideline changes are put into practice. Lenders warn these changes will bring costs to get a mortgage way up and will make it far more difficult to get borrowers approved.

The new rules, which Congress is expected to vote on this week, require that financial institutions ensure that borrowers can afford to repay the mortgages they are sold. Lenders would also have to tell borrowers the most they might pay on an adjustable rate mortgage and explain that payments will vary when the interest rate changes.

"These rules should help make sure people aren't put into mortgages they can't afford," said Julia Gordon, senior policy council for the Center for Responsible Lending.

Additionally, the comprehensive reform package would also ban banks from offering incentives to steer borrowers into costlier loans when they could qualify for cheaper ones, a controversial practice that fueled the subprime lending boom.

And it would prohibit prepayment penalties for adjustable rate, subprime and other risky loans and limits them to three years for traditional loans. This would help prevent borrowers from being locked into expensive loans.

More work to get a mortgage
While bankers and consumer advocates differ on the bill's impact on mortgage availability and cost, one thing is for certain: It would take more work to get a home loan.

While the bill doesn't specify downpayment size or creditworthiness, consumers would likely need some savings and a good credit score if they want to land a loan. This shouldn't be seen as a tightening of credit but as a return to prudent lending standards that existed before the recent housing bubble, experts said.

Gone would be the days of no-doc or stated income loans. Mimicking the current lending environment, borrowers would have to fully document their income with pay stubs, tax returns and the like.

This isn't to say that the self-employed or small business owners wouldn't be able to get home loans anymore. They'd just have to provide documentation that they can afford the mortgage.

"It's a little more work for the consumer but when they take out mortgage debt, there's a much higher degree of certainty that it's not disadvantageous to them," said Barry Zigas, director of housing policy for the Consumer Federation of America.

Other exotic loans, such as option adjustable rate mortgages, which allow borrowers to pay what they like but greatly inflates the principal balance, would be harder to come by. Lenders would be likely to stick with the more conservative fixed-rate or certain adjustable-rate loans.

Borrowers, however, would still have to be on their guard and thoroughly read through their paperwork and make sure they understand the terms of the loan, experts said.

Of course, many lenders are already putting these practices into place in the wake of the mortgage meltdown. But these rules are meant to codify them once the housing market picks up again.

"They are just basic, common sense rules of business and of fairness," Gordon said.

Standards: To be determined
If the bill passes, it may be another 18 to 24 months before lenders and consumers fully realize its impact. It will likely take the mortgage industry's proposed regulator, the Consumer Financial Protection Bureau, nine months to come up with the new rules and then more time for the industry to institute them, said John Courson, chief executive officer of the Mortgage Bankers Association.

The regulator also could decide to set standards on downpayment size, credit scores and total debt-to-income levels, Courson said. That would have a big impact on consumers.

Financial institutions warn that increased regulation -- and potentially greater legal liability -- could make it harder and more expensive to obtain a loan.

"The concern is there will be less choice for borrowers," Courson said.

This article was from Earl Schmidt at Network Home Loans. Phone-425-252-5757 or earl@networkhomeloans.com.   www.networkhomeloans.com

Thanks Earl for the insight and keeping us informed!

There was other housing news last week, as both New Home Sales and Existing Home Sales were well below expectations. While a decline in sales was expected after people were racing to qualify for the April 30th Tax Credit deadline, the numbers are still a bit of a disappointment.

However ? home prices remain affordable, and home loan rates are far from disappointing at the moment...last week they reached all time low levels!

Recently I had the opportunity to hear Jamie Jensen, Attorney at Law speak on mortgage "wraps". Jamie has given me permission to share this useful information-

Sellers have started to look to financing their own sales recently, in light of the refusal of lenders to extend loans to purchase homes, and the difficulty some good buyers find themselves in due to credit issues caused by the current market.

Why seller financing and why now?

1. Lenders are cutting back and becoming more picky: Traditional lenders are making fewer loans and are only making them to people with excellent credit, which leave out too many potential good buyers.

2. Buyers no longer qualify: Many good buyers had a bad streak of credit in the recent years and and may not qualify for a loan.

3. Some Sellers would prefer to hold the paper on their sale: There may be no better investment than in real estate. If the seller does not need money for a new purchase then seller financing is an easy and affordable way to invest in the real estate market with minimal investment risk.

Sale by Real Estate Contract- A real Estate Contract, also called a "Contract for Deed" or "Land Contract" is any written agreement for the sale of real property in which legal title to the property is retained by the seller as security to payment of the purchase price.

What is Good about the Real Estate Contract? As the continuing owner of the property you retain a great deal of control over the property and can declare, in the contract, whether any changes can be made to the property and how it can be used. You also have a much greater ability to get the property back in case of default. You would be able to get the property back in90 days, plus 10 days for the buyer to move out.

What is Bad about the Real Estate Contract? Compared to the other forms of seller financing, there are few pitfalls. There is some concern that the person in the property appears to have authority to hire work done, causing mechanic's lien against your property.

Sale by Note and Deed of Trust- Deeding of the property to the buyer, but taking back a note to evidence the amount owed, and a deed of trust which is the document that secures the note to the property.

What is Good about a Note and Deed of Trust? The best part of a sale of property by deeding the property to the seller and retaining the debt obligation is that the seller is no longer the owner of the property and cannot be held to any losses caused by the new owner.

What is Bad about by Note and Deed of Trust? It takes no less than 191 days to get a defaulting buyer out of the property. Even then, if the buyer had a tenant in the property the foreclosing seller will have to allow the tenant to stay for a minimun of 60 days, rent free, and maybe the term of the lease if the tenant pays rent. Additionally, the buyer can use the property as he wants. He can paint the house his choice of colors, make additions or subtractions to the house, and maintain if has he chooses.

Sale by Note and Mortgage- This form of sale and financing is very similar to a Note and Deed of Trust, with the exception that there is no Trust concept application.  The transaction is strictly between the parties.

What is good about Sale and Mortgage? This is a publicly recognizable way to finance a purchase of property. It has the same benefits of a sale by Note and Deed of Trust.

What is Bad about a Sale and Mortgage? This is the worst form of sale for an individual seller. The reason is that a mortgage must be foreclosed judicially, which means that a judge has to be involved and the seller has to sue the buyer and go to court. The time necessary to regain ownership and possession of a property that is sold by Note and Mortgage is no less than 14 months, during which no mortgage or rental payments are made. Also, the property is owned by the buyer, which means he can take the sink, water heater, and doors when he leaves, as well as anything else he can carry.

The above information was provided to you-

Jamie Jensen, attorney at law

Mukilteo Law Office, 4605 116th Street SW Suite 101    Phone- 425-212-2100

1. Community Property

Parties- Community property is presumed by any deed to married persons or to registered domestic partners

Division- Ownership interest is equal

Creation- The grantee language should indicate "married person", "husband and wife" or "registered domestic partner"

Title- Title is in the "community". There is one estate, not two halfs

Conveyance by One Owner- Both co-0wners must convey real property jointly. One co-owner cannot convey separately.

Death- The decedent's half may be given by Will, or it passes to decendants by laws of succession. The spouse or domestic partner is the    primary heir.

Creditors' Rights- Co-owners interest cannot be seized and sold separately for most separate debts.

Tenancy in Common

Parties- any number of persons. (Married persons or registered domestic partners.)

Division- Ownership can be divided into any number of different percentages.

Creation- The deed should state "as tenants in common". The shares are presumed to be equal if not stated.

Title- Each co-owner has a seperate legal title to their undivided interest.

Conveyance by One Owner- Each co-owner's interest may be conveyed separately.

Death- The decendant's interest may be given by Will, or it passes to decendants by laws of succession. No right of survivorship.

Creditors' rights- Co-owner's interest may be sold on execution sale to satisfy creditors.

Joint Tenancy with Right of Survivorship

Parties- Any number of persons. (Married persons or registered domestic partners)

Division- All owners must have equal interests and equal rights of possession.

Creation- All owners must acquire in one deed stating "as joint tenancy." The grantees should also sign to confirm their intention to hold title with survivorship rights.

Title-Each co-owner has a separate legal title to their undivided interest.

Conveyance by One Owner- A conveyance by one co-owner without the others breaks the joint tenancy. The Grantee is a tenant in common with the other owners and the interest does not pass to survivors.

Death- The decedent's interest terminates. All survivors own equal shares of the decedent's interest by right of survivorship.

Creditors' rights- Co-owner's interest may be sold on execution sale to satisfy creditors. The joint tenancy is then broken.

The County Assessor revalues all property in their County each year, notifying property owners of their new value determinations by mail. These new valuations will be the basis for the amount of taxes due the following year. Property owners who believe the new assessed value of their property exceeds its fair market value have the opportunity to appeal by filling a petition to theirs county's Board of Equalization (BOE).

Petitions must be received by the Board on or before July 1st of the assessement year or within sixty (60) calendar days after the date listed on the Assessor's value change notice- whichever date is later.

Each county has slightly different forms and steps to their process. For more information visit each county assessor's website or contact your county's Board of Equalizations.

King County -

Board of Equalization     www.kingcounty.gov/appeals     206-296-3496

Department of Assessments    www.kingcounty.gov/assessor    206-296-7300

Snohomish County -

Board of Equalization   www.co.snohomish.wa.us     425-388-3407

Assessor's Office    www.co.snohomish.wa.us         425-388-3433

Issue- Paid  unreleased loans

Solution- Research must be done to determine the circumstances surrounding the lack of release. Is the debtor or creditor/beneficary still holding the original note and deed of trust? Did the beneficiary ever prepare the request for reconveyance? Were the documents ever submitted to the Trustee of the Deed of Trust? Does the borrower have proof of payment?

Issue- Seller not vested in title

Solution- Depends on the vesting situation. Contact your title company  to investigate further.

Issue- Seller is deceased

Solution- Obtain a death certificate for the deceased. Probate can be resolved using a copy of a community property agreement, copy of last will and testament, probate affidavit or, in some cases, deeds from potential heirs.

Issue- Property over-encumbered

Solution-Start with an escrow prepared estimated closing statement that shows a shortfall. If you have a buyer willing to wait through the process, in some cases, debtors will negotiate pay-offs to facilitate the transaction.

Issue- Federal tax liens

Solution- Pay-off and release must be obtained from the IRS.

Issue- Judgement against seller or buyer

Solution- If judgement is against the seller, it must be paid from proceeds or a release of judgement must be obtained from the creditor(s). If against the buyer, it must be addressed by the buyer with the lender.

Issue- State warrant/state tax liens

Solution- Pay-off and release must be obtained form the appropiate state agency.

Issue- Pending lawsuits

Solution- The lawsuits may need to be resolved before the transaction can close. Sometimes a monetary hold back can be arranged.

Issue- Housing code violations

Solution- Violation usually needs to be corrected and appropriate releases obtained from the building department.

Issue- Mechanic's liens

Solution- Lien paid to closing and/or release of lien obtained from the lien claimant's attorney. Sometimes a monetary hold back can be arranged.

Issue- Numerous matters of record against people with similar name(s)

Solution- Principles complete statement of identity/ID afficavit

Issue- Seller is a partnership, LLC, corporation or trust

Solution- Agreements creating legal entity must be reviewed by title and escrow.

Bonus Issue- You need to sell your home or find a home to buy

Solution- Contact me and ask me about my 45 days or less your home will be sold or I pay you $500.00  and my "Love or Leave it"  for all buyers!!

*375 went pending in the month of May

We are now one month removed from the $8,000 tax credit! From what I see in the numbers and in my own personal business, it wasn't a whole lot of help, and in my opinion, a very poor use of our tax money. I did notice a jump in April solds due to the tax credit, but honestly, wouldn't have these buyers also have bought in May or June if they couldn't find the home they wanted until then? The most noticeable statistic is the "pending" stat - not much change there at all in the month of May. This tells me the market still has buyers out there looking for a home regardless of the tax credit. In my personal listings I have not seen a drop in showings or interest since the end of April and I am seeing the same number of offers. Interesting to note, however: buyers still recognize that it is a buyer's market and many offers are coming in less than full price with buyer's concessions being paid by the seller.

The percentage of "distressed" homes has remained constant since the beginning of 2010. This is good and bad - good that we have seen a large increase in "distressed" homes, bad because we have not seen an improvement either. We need to see this percentage go down on a consistent basis before we return back to a stable real estate market.

Current interest rates are hovering  around 5.05% with all indications leading to a rate increase in the near future.