On March 4, mortgage assistance became available to homeowners across the nation through the Obama administration’s Homeowner Affordability and Stability Program.Jill McFeron, RE/MAX broker associate, specializes in helping homeowners with mortgage difficulties. Over the past year, she has adapted her business, increasingly working with homeowners on the verge of losing their homes.”The people I work with have hardship,” McFeron said. “There’s been a job loss, a sick child, a car accident; something that triggered these events.”In Falcon, home values have dropped 20 percent in the last 12 months, McFeron said. “Homes are selling, but short sales (when the property is sold for less than the remaining balance on the loan) are the only things that are moving,” she said.Woodmen Hills has been hit especially hard, McFeron said. She attributed the high rate of foreclosures and distressed property sales to the large percentage of young families and military personnel who have moved to the area. “About 30 percent of home sales in Woodmen Hills last year were distressed or compromised sales,” McFeron said. She expects the trend to continue through the end of this year.The trend is not isolated to Woodmen Hills. As the inventory of houses remains high, McFeron said sales of distressed properties are creeping into Meridian Ranch and surrounding neighborhoods.With the new affordability program in effect, McFeron said homeowners who need to sell their homes or those who face difficulties making their payments have several options.First, homeowners could consider a short sale. McFeron said banks average a $40,000 loss on a foreclosure. They benefit when properties are prevented from reaching that level. Although sellers receive a 200-to-300-point hit on their credit score, the penalty is less severe than a foreclosure, she said.McFeron said Colorado is a recourse state, where banks are allowed to seek the remaining funds from the seller. However, she said banks have not taken much action because of the high volume of short sales and the lack of manpower to collect the money. And banks are hindered from reclaiming their losses by a one-year statute of limitations to do so.The second option for struggling homeowners is to structure a short-pay option. Similar to a short sale, the home is sold for less than the loan balance, but in this case, banks structure an unsecured loan for the remainder of the balance. McFeron said the loans are amortized over 30 years and have a low interest rate, usually between zero and 2 percent.Third, homeowners who want to stay in their home but cannot meet the current payments can take advantage of the Obama loan modification plan, McFeron said. Not all loans qualify – homeowners must meet specific criteria. The program does not include mortgage problems related to job losses, she said.While information on the plan is available from the federal government on sites like www.treas.gov and www.financialstability.gov, the details remain sketchy.”We’re still waiting for a lot of information to come out from the lenders,” said Kevin Bent, WR Starkey Mortgage branch manager.Bent said the large mortgage holders are telling his customers, who want to take advantage of the affordable home package, that details are not available.He suggested that people in financial trouble look to the loan modification programs already offered through their lender. “The programs vary from lender to lender; some offer temporary relief, some permanent relief,” Bent said.With any relief measures, Bent said homeowners need to beware of predators who try to take advantage of people facing financial hardship. The way to avoid those predators is to make sure the organization a homeowner is working with is licensed. Tightened lending practices also affect Falcon residents who own modular homes. McFeron said Federal Housing Authority loans are the only loans available on those properties. “FHA criteria for appraisals are much stiffer than conventional loans,” she said.Preston Hall has lived in Falcon for 10 years. Hall said his real estate agent told him that his 10-acre property on Curtis Road would sell for $305,000 under normal conditions. With the market glutted with distressed properties, Hall said they will likely list the property for $220,000. Even so, he’s concerned that it won’t sell at that price.”It’s a beautiful home with an art gallery building on the property,” Hall said. “At this rate, you have to give our property away.” McFeron said the value differences among acreage properties create a problem with setting the appraisal price. Because so few sales are on the books at this time, she said she searches as far back as a year to find a comparable property. But, with data that old and a market in flux, it is difficult to draw a true comparison, McFeron said.Although she predicted that the market is in for another tough year, McFeron said she is seeing some good signs for the future.”We’re seeing more and more showings; they are on distressed properties, but as soon as those go, we’ll start seeing a snowball to recovery,” she said. “We will get through it. In five years, we’ll be a different public because we’ll have the battle wounds.”
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