The Real Estate Settlement Procedures Act (RESPA) began 2010 with various changes in its lending policies, most of which are intended to curb mortgage fraud and prevent more homeowners from falling into default. But as with any other change, experts are seeing a mix of pros and cons in the new RESPA policy. Some of them are particularly of concern to Laguna Beach real estate, as it can affect the way financing is assessed and granted for luxury homes. Read on to learn more about how RESPA rules can affect Laguna Beach realty in 2010.
Lender disclosure
The most significant change in the policy has to do with transparency the root cause of most mortgage fraud issues today. Under the new rules, real estate Laguna Beach lenders and brokers are required to give clients a Good Faith Estimate (GFE) disclosing the terms of the loan, including the closing costs. The closing agent will also have to provide the borrower with a Settlement Statement, issued by the HUD, which allows the latter to compare estimated and final costs.
The changes were actually put in effect in January 2009. However, the HUD decided to set a one-year transition period to allow mortgage servicers to implement them. The time is now up and the rules are in practice, but whether or not it has benefited Laguna Beach real estate remains to be seen.
More work for lenders
The RESPA change puts much of the responsibility on real estate Laguna Beach lenders, who must provide the paperwork to their borrowers. This means that the financing process, as well as the purchase itself, may be slowed down. As a borrower, you will also have more terms to read through and understand to make sure you are getting your moneys worth. This is why experts highly recommend working with an experienced realtor: not only will they offer more prospects, they will also have the Laguna Beach realty knowledge to help you get the financing you want.
Truth in Lending statement
Lenders are also required to provide a truth in lending statement before collecting any money from the borrower, whether it is for loan processing, appraisals, or other steps in the purchase process. Credit report fees may be charged only after the first TIL is delivered. Borrowers are given a time frame, usually around seven days, to read through the document and make sure it complies with Laguna Beach realty standards. If there are any discrepancies, the lender usually has 30 days to correct it and issue a different TIL.
The “Personal Property Trust” agreement is basically the same as a land trust in that the trustee is essentially a nominee title–holder acting at your direction. Like the land trust, the paper trust is a revocable, living trust. The same rules for tax reporting apply — there is no gift tax or income tax consequence of placing title to your paper in the paper trust.You still retain full control of your trustee, so no fiduciary tax return is required.
Like the land trust, the primary purpose of using the personal property trust is to keep your name off the public records. Let’s examine a few documents that are generally recorded and how we can use them with the personal property trust:
Purchase Option
A purchase option is often recorded in the public records to give notice to the world that you have first crack at the property. Again, using a trust as the named “optionee” will protect your anonymity. Furthermore, it may be an excellent tool for confusing potential creditors; you record options a gainst your property in favor of the name of a trust. To the outside world, your property looks less valuable, because, after all, who would purchase a property subject to the recorded options (nobody but you has to know that your are the beneficiary of the trust and thus the “true” option holder!)
Mortgage or Deed of Trust
One of the most practical uses of a trust is for holding a mortgage or deed of trust. A mortgage is an asset, like any other, that can be found by searching the public records. Using separate trusts for each mortgage will help you keep a low profile. As in the above example, you could record mortgages against your properties in the name of a trust to make your property appear encumber-ed. Make certain that there is at least some consideration for the mortgage or you may be found guilty of filing a fraudulent document.
Auto or Mobile Home
Essentially any asset that is recorded in public records can he held in the name of a nominee–type trust. Department of Motor Vehicle records are often public information and will let everyone know where you live. Holding your car or mobile title in the name of a trust with a post office box or business address will help protect your privacy.
LLC Interest
The names of the members of a limited liability company are public record for everyone to see. Consider forming your LLC using a personal property trust as the member (you being the beneficiary of the trust).
Tags: Mobile Home, real estateFor many different reasons, most people are eyeing the real estate market right now for potential 2010 purchase. Some people simply want to move their family up to a larger home with less cost, while others are considering going into business flipping houses or taking on additional rental properties.
The year 2010 will bring about many changes in the real estate world. One of the questions you may want to think about is whether or not investing in real estate is a wise decision for you. Here are a few things to consider:
On one hand, this is the perfect time to make a purchase since the value and selling price of homes is set to rise in the future. This means you can buy a new home for your family without its value dropping a short while later. This also means you can pick up a cheap rental house and make higher profits in time, or buy cheap prices to flip for substantial profits.
With the economy still unstable, many more homeowners will find themselves unable to pay their mortgages. It is said that 1 out of every 4 homeowners owe more on their mortgage than their home is worth. With many people losing their jobs, their mortgages will go unpaid and their homes will be lost.
With hundreds of billions of dollars in adjustable rate mortgages set to recast next year, the new payments can end up being more than twice what their original monthly payments have been. This also will see more people losing their homes due to nonpayment of their mortgages.
Another consideration is the expiration of a critical federal program in March. This was a program to help homeowners that allowed the government to purchase debt and mortgage backed securities from Fannie Mae and Freddie Mac. It has kept mortgage rates lower, but when it expires you can expect to see mortgage rates rise back up. Rates could go from 4.88% to 6% easily.
The Department of Housing and Urban Development (HUD) is also considering some other big changes for the real estate market in the upcoming year which might make securing real estate more difficult in the future. For instance, the required credit score could be much higher, you may be required to put down a substantially larger down payment, and insurance premiums could skyrocket.
Finally, consider the value of the tax cuts currently being offered by the federal government. If you purchase your first home (the rules are lax on what \”first\” means) before July, you could receive up to $8,000 in tax breaks. If you decide to purchase a second property, you could receive up to $6,500 in tax breaks. Of course, you want to make sure you can afford your payments long term and not get sucked in by the temptation of this offer.
It is important to keep all of this in mind if you do purchase real estate in the upcoming year, but also be prepared for whatever may happen with the economy. Make sure that you are financially secure and that you can handle whatever changes may be coming in the next year as the economy fits to normalize once again.
Karen Lissack has been reporting about real estate and home related topics for almost 15 years. She will help you with information in any aspect in real estate from buying to selling, even investing. She is fully informed about chapel hill real estate and has aided people in finding the best chapel hill homes the market can offer.
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