How can a home inspection company add value to the real estate process?

A home inspection is now a common practice for clients who are looking to buy or sell a home. In addition to performing a high-quality inspection, a good home inspection company adds value for all parties involved in the transaction. How?

They Understand Your Time Is Valuable
Most real estate transactions are time sensitive, and the typical home inspection can last anywhere from 2.5 – 4 hours. HomeTeam Inspection Service cuts this time nearly in half by utilizing a team of inspectors. This approach allows for more time slots available each day, and greater availability when you need an inspection.

They Utilize Technology to Simplify the Process
The home inspection process—from scheduling to report delivery—should be convenient for you and your clients. Offering several scheduling options—over the phone, online or through an app—provides greater flexibility. HomeTeam offers real estate professionals an app on their mobile phone that allows them to call or email HomeTeam, schedule an inspection online and view all past inspection reports with the click of a button.

They Offer a Full-Service Solution
Home inspection companies offer a wide range of services, starting with the basic whole house inspection and then adding additional services that include items your client may or may not need. Since different homes, different clients and different regions require different types of inspections, choose a home inspection company that offers a la carte services like pest, radon or mold inspections.

They Handle Coordination for You
Valuable time is often spent calling and coordinating various types of inspections from several different service providers. HomeTeam schedules any additional inspections for you and your clients. Therefore, you only need to make one call, or indicate the services you would like in your online booking, and they’ll be scheduled at the same time as the home inspection.

They Present Themselves as a Professional
Recommending a home inspection company with a professional brand image serves as an extension of your professionalism. Home inspection companies that show up in uniform with branded vehicles help make the client feel at ease. Be sure the home inspection company your client chooses provides email and text message reminders of the inspection time, as well as a verbal introduction to the home. They should also review their findings and answer any questions.

Choosing a home inspection company that can add value results in a true benefit to the client, and ultimately, more referrals for all.

For more information, visit www.hometeam.com.

Reverse Mortgage

A recent change added two steps to the process of obtaining a reverse mortgage. The goal is to reduce defaults on reverse mortgages by making certain that borrowers can pay property taxes or home insurance.

Steps to Determine Reverse Mortgage Eligibility

  • Do an assessment of your finances, specifically your credit history and income.
  • Set aside part of the mortgage proceeds, based on the results of the financial assessment, to help cover estimated tax and insurance payments over the expected life of the youngest borrower.

Decreasing the Default Rate

  • These requirements are the latest in a series of changes intended to decrease the default rate on reverse mortgages. In 2014, about 12 percent of reverse mortgages were in technical default, says Stephanie Moulton, associate professor at the John Glenn College of Public Affairs at Ohio State University. That is, the borrowers hadn’t paid taxes or insurance or both. On top of this, these borrowers had no proceeds remaining from their reverse mortgages.
  • What’s more, the percentage in default had actually increased from 2012, when it stood at 9.4 percent, according to a report by the Consumer Financial Protection Bureau.
  • In comparison, the delinquency rate for single-family residential forward mortgages — the mortgages most people use to buy homes — was 10 percent at the end of 2012 and had fallen to 6.6 percent two years later, according to the Federal Reserve.
  • A July 2016 study from the Center for Retirement Research at Boston College concluded that the new rules could cut the reverse mortgage default rate by as much as half.

Ensuring Financial Stability

  • Not every reverse mortgage in technical default will proceed to foreclosure. Lenders often work with borrowers to “cure” the default. About half are successful, she says.
  • Even so, the relatively high rate of technical defaults is a concern. Most reverse mortgages are federally insured through the Department of Housing and Urban Development, or HUD.

Are these reverse mortgage borrowers struggling to maintain financial stability? After all, reverse mortgages are intended to improve borrowers’ financial stability.

HUD has implemented a number of changes intended to improve and strengthen its reverse mortgage program over the past few years, such as limiting the portion of loan proceeds that could be disbursed at closing and over the first year of the loan.

The changes requiring the financial assessment and set-asides cover reverse mortgages issued on or after April 27, 2015.

The Financial Assessment

Each financial assessment includes an analysis of the borrower’s credit history, with special attention given to any foreclosures, defaults, late mortgage payments and late payments for property charges.

Research has shown prospective borrowers’ credit scores are “huge predictors” of their likelihood to default on reverse mortgages.

What is Residual Income?

It’s the amount of money the homeowner has after paying debts and personal expenses. The lender assesses whether there is enough of this money—residual income—to pay for property taxes and insurance.

Part of the assessment is an analysis of a borrower’s cash flow and residual income, since the borrower still owns the home and will be responsible for paying taxes, insurance and other housing-related expenses. The assessment helps to ensure someone can maintain the obligations of the loan.

This analysis looks at income from employment, self-employment, Social Security, alimony, child support, military income, pensions and retirement accounts, among other sources. If the lender determines the borrower isn’t willing or able to make tax and insurance payments, then a portion of the mortgage proceeds will be set aside to cover these future costs.

Set-Asides

Calculating the life-expectancy set-aside requires estimating how much the cumulative property taxes and insurance will cost during the life of the youngest borrower. Property and flood insurance premiums are included.

The sum could be large enough that the reverse mortgage no longer makes sense.

Say a homeowner’s property taxes average $2,000 per year, and he or she is expected to live another 20 years. That could mean setting aside at least $40,000 from the proceeds of the reverse mortgage—and that’s before adjusting for any increases. In the end, it may no longer be a viable funding option.

Partially Funded Set-Aside

If the borrower has a clean credit history but doesn’t have enough income to make tax and insurance payments, it may be possible to do what’s known as a partially funded set-aside.

Still, the changes in the rules mean an estimated 10 percent-25 percent of potential borrowers will no longer qualify for reverse mortgages.

However, the regulations aren’t much different from the underwriting requirements in place for traditional mortgages, says Peter Bell, president of the National Reverse Mortgage Lenders Association. The goal is to avoid making loans to borrowers who have a high likelihood of failing.

Options besides Reverse Mortgage

If a reverse mortgage isn’t available, there could be other options to help seniors improve their financial footing. Some cities reduce property taxes for seniors.

In some families, a parent could sell the home to an adult child, who then would rent it back to the parent.

Even for individuals still able to obtain reverse mortgages, the financial assessment and set-aside requirements likely will lengthen the time between application and settlement.

But the idea of conducting a financial analysis of prospective borrowers and requiring set-asides for those at higher risk of default are steps many have said were needed. These are common-sense changes for a viable reverse mortgage market.

FHA Streamlines Process to Help Delinquent Homeowners Stay in Homes

The Federal Housing Administration (FHA) recently announced new procedures to strengthen the process mortgage servicers use to help struggling families avoid foreclosure and remain in their homes.  FHA is streamlining its loss mitigation protocols that servicers must use when evaluating and deploying ‘home retention options,’ foreclosure alternatives that allow delinquent borrowers to retain their home.

FHA’s revised procedures streamline the process servicers use to engage borrowers, specifically when evaluating them for the FHA-Home Affordable Modification Program (FHA-HAMP).  These changes will reduce the number of steps that a servicer and borrower must take to resolve a delinquency and enter into a loss mitigation home retention product.  In addition, FHA is removing certain obstacles that will allow servicers greater flexibility for evaluating an unemployed borrower for a special forbearance agreement.

Specifically, FHA will:

  • Require servicers to convert successful 3-month trial modifications into permanent modifications within 60 days instead of the average four-to-six months;
  • Allow borrowers with three missed mortgage payments to qualify for a partial claim to bring their arrearages current versus the previous requirement for a minimum of four missed payments;
  • End the traditional stand-alone Loan Modification option so struggling borrowers can access the FHA-HAMP option, with its greater payment relief, sooner; and
  • Eliminate the required 12-monthterm for FHA’s special forbearance option.  This will allow servicers to offer this option to more unemployed households.

For more information, visit www.fhfa.gov.

HUD and VA Work to Find Permanent Homes for Homeless Veterans

The U.S. Department of Housing and Urban Development (HUD) and the U.S. Department of Veterans Affairs (VA) recently announced a second round of funding to help provide permanent homes to an estimated 108 veterans experiencing homelessness in seven states.  The rental assistance announced this week is provided through the HUD-Veterans Affairs Supportive Housing (HUD-VASH) Program which combines rental assistance from HUD with case management and clinical services provided by VA (see attached list of HUD’s voucher awards).

Recently, HUD, VA and the U.S. Interagency Council on Homelessness (USICH) announced the number of veterans experiencing homelessness in the United States has been cut nearly in half since 2010. The data revealed a 17 percent decrease in veteran homelessness between January 2015 and January 2016—quadruple the previous year’s annual decline—and a 47 percent decrease since 2010. Additionally, while answering the Obama administration’s Mayor’s Challenge to end Veteran’s Homelessness, several mayors have declared their cities have officially ended it.

“There is momentum across the nation as community after community effectively ends veteran homelessness,” says Secretary Julián Castro. “Today’s funding will help more cities reach this important goal and ensure that we serve the brave men and women who have served and sacrificed for us. HUD and its local partners are determined to give every veteran the opportunity to secure a safe, stable place to call home.”

“The dramatic reduction in Veteran homelessness in recent years would not have been possible without the pairing of housing choice vouchers with case management and supportive services under the HUD-VASH program to help the most vulnerable Veterans become and remain stably housed,” says VA Secretary Robert A. McDonald. “The HUD-VASH awards announced [this week] will support the ongoing and important work underway to ensure that homelessness among Veterans is rare and non-recurring.”

In June, HUD awarded nearly $38 million to help more than 5,200 homeless veterans find homes. That funding ensured that communities could provide the critically needed housing assistance and case management services to those veterans and their families experiencing homelessness.

In 2010, President Obama and 19 federal agencies and offices that form the U.S. Interagency Council on Homelessness (USICH) launched the nation’s first comprehensive strategy to prevent and end homelessness. Opening Doors: Federal Strategic Plan to Prevent and End Homelessness serves as a roadmap for how the federal government will work with state and local communities to confront the root causes of homelessness, especially among former servicemen and women. To support communities as they progress towards the goal of ending veteran homelessness, USICH has identified strategies that increase collaboration and coordination among programs serving veterans experiencing homelessness.

Since 2008, more than 79,000 vouchers have been awarded and approximately 111,000 homeless veterans have been served through the HUD-VASH program. Rental assistance and supportive services provided through HUD-VASH are a critical resource for local communities in ending homelessness among our nation’s Veterans.

In the HUD-VASH program, VA Medical Centers (VAMCs) assess veterans experiencing homelessness before referring them to local housing agencies for these vouchers. Decisions are based on a variety of factors, most importantly the duration of homelessness and the need for longer term, more intensive support in obtaining and maintaining permanent housing. The HUD-VASH program includes both the rental assistance the voucher provides and the comprehensive case management that VAMC staff offers.

Veterans participating in the HUD-VASH program rent privately owned housing and generally contribute no more than 30 percent of their income toward rent. VA offers eligible homeless veterans clinical and supportive services through its medical centers across the U.S., Guam, Puerto Rico and the Virgin Islands.

For more information, visit www.hud.gov.