Five Typical Mistakes

Avoiding Common Refinance Pitfalls

By Wendy Silver-Hale, President, and David WalkerSouthland Regional Association of Realtors®

Mortgage interest rates are at historic lows and large numbers of homeown-ers are refinancing even with today’s tough qualification standards, but many more owners would win a refi if they avoided these five common mis-takes. Donna DeZube, writing for HouseLogic.com, said owners would boost their chances of landing a refi by taking these actions:

1. Get a quote from the current lender — Owners should start shopping for a refi by contacting their current lend-ers. Assuming there is a good relationship, the lender probably will be willing to issue a refi. The current lender could be the fast-est, easiest trip through underwriting.

home equity loan if you can’t afford it. A borrower’s combined home loan payments shouldn’t exceed 28 percent of gross income.

• Phantom help — Watch out for unsolicited offers to refinance from compa-nies claiming government affiliations. An owner never needs to pay to find out about legitimate government programs.

• Balloon payments — Balloon pay-ments, which come due at the end of a loan term, can also catch borrowers off-guard. A lender may offer a low monthly payment

on an equity loan, but only because the payment is interest-only. The principal is due in one lump sum. Surprised homeown-ers must scramble to refinance again, tap other assets, or sell. Disclosure rules that went into effect Jan. 1, 2010, and new forms make spotting these types of deceptions easier. Don’t do business with a lender who fails to provide the new forms.

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The Voice FoR Real esTaTe in The san FeRnando and sanTa claRiTa Valleyswww.sRaR.com | Real Estate Questions? E-mail Wendy Silver-Hale, SRAR 2012 President, c/o DavidW@SRAR.com

Wendy Silver-Hale2012 SRAR President

Free Program Settles R.E. Disputes QuicklyParties to real estate transactions can settle disputes quickly and infor-mally by using a unique and free Ombudsman Program provided by the Southland Regional Association of Realtors.“Anyone in a real estate dispute with a member of the Association who has not yet or does not want to file an official complaint can take advantage of our free program,” said Wendy Silver-Hale, president of SRAR. “An ombudsman will help resolve disputes in a timelier and less formal fashion. That benefits all parties.”

With the Ombudsman Program, individuals seeking assistance can expect to be con-tacted by their assigned ombudsman within two business days. The Ombudsman Pro-gram uses trained volunteers who will work with the parties from the start to the finish of a dispute. An ombudsman will contact the other party on the complainant’s behalf in an attempt to resolve the issue without the need to file a formal complaint.

“The role of the ombudsman is not to take sides or determine who is in violation,” Silver-Hale said, “but rather to facilitate proper communication among the disputing parties and find a resolution agreeable to all sides.”

Volunteer ombudsmen are trained in and familiar with the Realtors’ Code of Eth-ics, California real estate regulations, and current real estate practices.

They can respond to a wide variety of inquiries and complaints. In the event an issue proves to be too complex, a party can decide against using an ombudsman, or if the ombudsman is unable to facilitate a resolution of the dispute, any of the parties can file a formal complaint through SRAR’s Professional Standards Department.

Best of all, the Ombudsman Program is free and completely confidential. For more information, contact Michelle Gerhard, SRAR’s Professional Standards

administrator, at 818-947-2226 or via email at michelleg@srar.com.

Low Rates Fuel Surge of Refis … and FraudToday’s low interest rates on home loans has fueled a wave of refinancing for owners lucky or wise enough to have equity in their home.

Unfortunately, every surge in loan activity also attracts scam artists eager to rip off owners. Sometimes it’s just money con artists snag. Other times, trusting owners sign over the deed to their property and lose everything!

Here are a few of the red flags to look for to avoid being a victim:

• Loan flipping — Loan flipping is a scam targeted at homeowners looking to get money back when they refinance a mortgage, typically called a cash-out refi, which taps the equity in a home to pay for things the homeowner couldn’t otherwise afford. The first step in a typical scam comes when a lender contacts the borrower a few months after the refi with an offer of yet another refinance. This, too, may be legitimate, yet proceed very cautiously.

Many borrowers don’t realize how much they’re paying in fees to refinance. Loan flippers often charge much more than the typical 3 percent to 6 percent of the loan amount, plus they may quietly roll the settlement costs into the loan to disguise the total charges. Get quotes from several lenders and compare terms. When the equity finally dries up, the owner might be unable to afford the higher monthly payments and another refinancing will be impos-sible, thus forcing a sale of the home.

• Equity stripping — At the heart of an equity stripping scam is a con artist who gains owner-ship of the home, borrows against it or sells it, pockets the proceeds, and disap-pears. The owner is often left with a hefty mortgage balance and no place to live. Homeowners with low incomes but a good amount of equity are prime targets. Don’t agree to a

Wendy Silver-Hale, left, president of the Southland Re-gional Association of Realtors, presents a $2,000 check to Melita Azarian, one of multiple recipients of the Associa-tion’s highly popular First-time Homebuyer Grant Program. The grants, which need not be repaid, help pay the clos-ing costs in the purchase of a home. They are available through the Association’s charitable foundation and the California Association of Realtors Housing Affordability Fund. Azarian was represented by Realtor Vahe Ohanes-sian in the purchase of her Valley home.

Realtor Grant awarded

Sometimes it’s just money con artists snag. Other times, trusting owners sign over the

deed to their property and lose everything!

2. Reduce bills. Increase savings — Lenders look at how much income a bor-rower makes and how much money goes toward bills each month. A lot of debt and high monthly payments, might convince the lender that there’s not enough cash left over to pay for the new mortgage — even if the new payment is lower than the current payment. The remedy? Pay off as

many outstanding bills before seeking a refinance.

3. Avoid maxing out credit — A portion of each borrower’s credit score is calculated by comparing the total credit available with the credit actually being used. Maxing out total credit is a huge red flag. Ideally, use only a portion of the total credit available. If possible, pay down debt

before seeking a refinance. 4. Avoid using credit to make big

purchases before applying — Don’t buy a new car, don’t finance new appliances, and don’t take out a student loan between applying for a refinance and the day the loan funds. Any sudden changes in a borrower's financial situation might make the lender decide there’s too much debt or

too little income to cover the refinance.

5. Finish remodeling projects — A half-finished remodeling project most likely would scare the lender’s appraiser and derail the

chance of a refinance. Lender will only refinance if they think they can sell the house if the borrower fails to make mort-gage payments. A half-finished remodel-ing project would bring only half-hearted purchase offers at a foreclosure sale. So, finish the job!The Southland Regional Association of Realtors® is one of the largest local trade associations in the nation with more than 9,000 members serving the San Fernando and Santa Clarita valleys.

Homeowner Equity Rises to 4-Year HighData released Oct. 5 indicated that the nation’s housing market, while still fragile, shows continued signs of strengthening.“As the September housing scorecard indicates, our housing market is show-ing important signs of recovery – with homeowner equity at a four-year high and summer sales of existing homes at the strongest pace in two years,” said Erika Po-ethig, acting assistant secretary of the Dept. of Housing and Urban Development.

Rising home values have brought homeowner equity to its highest level since the third quarter of 2008 and helped lift 1.3 million families above water.

Homeowner equity jumped $406 billion, or 5.9 percent, to $7,275 billion in the second quarter of 2012. After a sharp first quarter rise, total equity has grown to $863 billion, or 13.5 percent, since the end of 2011.

The number of underwater borrowers has declined by 11 percent since the end of last year, from 12.1 million in the 4th quar-ter of 2011 to 10.8 million in the second quarter of 2012.

Many more owners would win a refi if they avoided these five common mistakes