Maui Real Estate Blog
A Quick Follow Up to Our Mortgage Relief Post
This is just a quick follow up on the mortgage relief post I wrote on April 4th. Yesterday, I read an NPR article about issues with mortgage relief . It featured a couple from Maui. Like many island residents, the couple is experiencing a massive loss of income due to the impact on COVID-19. They are one of the many homeowners pursuing mortgage relief that are finding the terms offered by their lenders to be onerous.
In the case of the Maui couple, their loan is through Freedom Mortgage. While the lender offered to defer their loan payments for three months, Freedom Mortgage required a balloon payment at the end of that period. Even under the most optimistic scenarios, it seems unlikely that the borrowers would be able to come up with that balloon payment.
The Consumer Finance Protection Bureau website indicates that federally backed mortgages should be able request forbearance for up to six months. The CARES Act creates mechanisms to move deferred payments to to the end of the mortgage. Freedom Mortgage originally claimed that the balloon payment was the only option they could offer for deferred payments. They claimed they could not defer the amount of the forbearance to the end of the loan. NPR brought this to the attention of federal regulators. On a subsequent follow up, Freedom Mortgage changed its tune with NPR. The Maui Couple is still trying to get clarification on their options.
To be clear, not all borrowers are running into the roadblocks encountered by this Maui couple. A number of lenders are making adjustments that allow for six month deferments with deferred payments at the end of the mortgage. That said, borrowers should expect prolonged long wait times and filing an application to get the forbearance. Forbearance terms can also vary depending on your loan program.
The biggest takeaway is that borrowers should be cautious if they are seeking mortgage relief. Make sure you read the terms of any relief offer closely. Reach out to a housing councilor (800) 569-4287 if the terms offered by your lender are confusing or not financially feasible.
Maui Real Estate Blog
Potential Mortgage Relief
Maui depends on tourism for a significant part of its economy. Covid-19 and the ensuing shut down means a big loss of income for a number of Maui homeowners. If you are a Maui resident unable to pay your mortgage, there may be some mortgage relief options for you based on the CARES act.
To be eligible, your mortgage needs to be federally owned or backed by a federal agency. Relevant federal agencies include:
- Fannie Mae
- Freddie Mac
It’s pretty clear when your loan is HUD, USDA, FHA or VA. Fannie and Freddie back over 50% of the nation’s mortgages, but not all homeowners know or remember who backs their loan. You can check to see if your loan is backed by Fannie or if it is backed by Freddie.
If you are unable to pay your mortgage due to financial difficulties related to Covid-19, you can contact your mortgage servicer to request forbearance for 180 days. Forbearance allows you to pause or reduce your mortgage for that 180 day period. To be clear, this does not reduce the principal on your loan. You would still need to pay off the missed payments or the difference on the reduced payment in the future. You may apply for an additional 180 day forbearance if your financial situation does not improve by the end of the first 180 days. Your forebearance options may depend in part on your loan program. If you are concerned by impacts on your credit score, servicers must not report to the credit agencies a Borrower who is on an active forbearance, repayment, or trial period plan due to COVID-19 related hardship.
If you are facing foreclosure due to existing loan challenges, your loan servicer or lender may not foreclose on you for 60 days after March 18th. The CARES Act forbids beginning either judicial or non-judicial foreclosure proceedings. The Act also prohibits finalizing a foreclosure judgement or sale during this period.
Still Confused or Need Help?
The Consumer Finance Protection Board offers a guide to Coronavirus mortgage relief options that gives advice and provides a lot more detail. They provide important suggestions like questions to ask your mortgage servicer. You may also find your nearest housing councilor by calling by calling (800) 569-4287. If you don’t have a federally backed mortgage and you are not able to pay your mortgage, you should still contact your mortgage servicer to see what options they may have available to you. Last, but not least be wary of scams. Unscrupulous Sleazeballs will try to take advantage of the current situation. Lean heavily on the advice of the CFPB.
Maui Real Estate Blog
The New Hawaii Purchase Contract and its impact on Buyers and Sellers
The new Hawaii Association of Realtors purchase contract that goes into effect on May 1, 2012 is dramatically different than the current purchase contract. The new purchase contract is meant to flow and read more naturally; groups like contingencies and provisions together; and more clearly defines roles, responsibilities, time frames and obligations of Buyers, Sellers and their Realtors.
I would imagine that the first 30 to 60 days after implementation will involve some back and forth between brokerages as we adapt to the new purchase contracts. The Maui Real Estate Team is taking a proactive approach to understanding how the new purchase contract impacts Buyers and Sellers by taking the following actions:
- Attending the Realtors Association of Maui training session the other day.
- Discussing the implications of the new purchase contract with our corporate attorney.
- Spending several hours this weekend analyzing the changes.
- We will have a company meeting / training session regarding the new purchase contract.
- We will create a Buyer’s Guide to the New Hawaii Purchase Contract and a Seller’s Guide to the New Hawaii Purchase Contract which will be available to registered users of The Maui Real Estate Team’s website in the next 30 days.
As with any document that has undergone a major revision/ re-write, the new document isn’t perfect. In fact, in some ways it is more complex and requires more written communications between Realtors, Buyers and Sellers. The new Hawaii Purchase Contract requires Sellers to be more organized and diligent in their approach to selling their Maui properties. For instance, upon closing, under the “cleaning clause”, carpets are now designated as needing to be professionally cleaned. An odd addition, but one to be aware of. Did someone on the purchase contract committee have a cousin in the carpet cleaning business?
As for Buyers there are potentially additional “Buyer safeguards”, some of which require intimate knowledge of the new purchase contract. However, there are also different “options” for cash transactions which need to be carefully handled. There is also the mention of several types of resources that Buyers should use whenever purchasing a home, condo or land on Maui. We are in the process of updating our list of resources.
If you are thinking of buying or selling Maui property at this time, please consider contacting The Maui Real Estate Team for a free consultation regarding how the new Hawaii Purchase Contract will impact your purchase or sale. Our experience and insights will help you minimize headaches and surprises and help you execute your real estate transaction without a hitch.
Maui Real Estate Blog
Quick Seller’s Tip-Get A Survey Before You List
I will be honest, real estate transactions can be challenging in this market. As a seller, you can take steps before you list that will help mitigate against unexpected escrow drama. If you have the means, we strongly recommend that a seller obtain a survey. We recently closed on a transaction where at first glance you would never expect survey to be problematic. The property was in a subdivision that was new within the last 15 years. There were no outward signs of any significant encroachments. When the survey was completed all parties were shocked to find a three foot encroachment. It turns out there had been an error by the original developer of the subdivision. The error was recognized in the late 1990s, but was not corrected as it was supposed to have been by the developer. While a solution was created to satisfy all parties, closing was delayed almost two months. I may have also lost a few of those scarce hairs on top of my head in the process. Unless it is a short sale or an REO, most sellers are required to do a survey. If you get it done before going under contract, you may have the opportunity to address any encroachments.
Maui Real Estate Blog
Maui Short Sale Lessons
Over the last year or so, Billy and I have had the opportunity to work on a fair number of short sale transactions. Short sales are where the seller owes more to the property’s lien holders than its current market value. Offers need to be approved by the lien holders. One of the challenges of working with short sales is setting expectations on what to expect from the banks. To be honest, bank behavior depends on the banks involved, the number of mortgages and a whole lot of other factors. That makes it hard to come up with a “typical” short sale process. That being said, here are some observations that we have based on our experiences.
- The time frame for bank responses varies pretty widely. It appears that smaller banks tend to process short sale offers faster than larger banks. While the big banks have made improvements in their processes and efficiency, they are still overwhelmed by the volume of short sale transactions.
- A Broker Price Opinion is where a bank will hire local real estate professionals to give their opinion on the value of a property. It sounds easy enough, but assigning value in this market can be challenging. The reduced volume of transactions means fewer comparable sales are available to estimate value. Maui is already a tough market to assign value when you get outside of subdivisions as land values, construction types and materials vary considerably. This means the results of BPO’s can sometimes be a surprise.
- Banks rely heavily on Broker Price Opinions (BPOs) when determining their sales price. Most banks won’t consider offers that are well off of the BPO. A high BPO tends to lower the odds of a successful transaction while a low BPO tends to raise the possibility of a successful sale.
- After a bank approves a short sale, the buyer will have a limited time frame to close. Typically, the banks are giving 30 days from approval. If you are using financing on a short sale transaction, buyers will need to be working on their loan approval prior to bank acceptance.
The number of short sales being approved is increasing. That being said, buyer’s pursuing short sales require some measure of emotional detachment. The length of time associated with short sales and the success rate of short sale offers can be frustrating. There are no guarantees when it comes to short sales. There are however some beautiful short sale properties available on the market. Contact us today you need assistance in purchasing a short sale property on Maui.
Maui Real Estate Blog
Bureau of Conveyances Changes
The Hawaii Bureau of Conveyances is the state body that records all real estate transactions. Like many states, Hawaii is facing some budget challenges due to the current recession. Those budget issues are having an impact on staffing at the Bureau. As a result, the Bureau has some new rules that will go into effect as of July 1, 2009 that could potentially impact a real estate transaction. Here is a quick summary of the changes.
- No Specials: The Bureau of Conveyances will no longer allow specials regardless of the liability
(dollar) amount. Specials are where title and escrow are able to submit documents to the bureau on the same day of recording instead of a day or more in advance as is the norm.
- No Pulls: The Bureau of Conveyances will no longer allow documents to be pulled once they have
been submitted for recording.
- Projects or Bulk Recordings: No project/bulk recording will be allowed during the
last five business days of each month.
- Recording Fee: The Regular System Recording fee will increase from $25/document to
$30/document. Land Court document Recording fees are not affected.
- Good Funds: Documents will not be submitted unless escrow has good funds in hand
two business days prior to recordation.
The new Good Funds rule is going to have the biggest impact on buyers and sellers. As it stands now, loans are taking longer. Buyer’s and sellers are going to need to make sure they allow sufficient time to close to accommodate longer loan processing and more time at the bureau of conveyances. The no specials rule will also have an impact. Specials were helpful if there were any delays getting documentation from a lender and there was a threat that recording may have needed to be pushed back. While there were no guarantee on specials, that safety net is no longer available.