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Coronavirus: Mortgage and Personal Finance FAQs

January 19th, 2021: On December 21, 2020, Congress struck a deal on a nearly $900 billion coronavirus relief bill for a new round of support. President Trump signed the bill on December 27, 2020. Read a short summary of the bill here. Congress has passed three relief packages to respond to COVID-19. Bank regulators have also adopted many new policies in light of needs resulting from the COVID-19 crisis. See below for those provisions and actions that are designed to address homebuying, homeowner/landlord, and personal finance issues:

-I’m worried about my credit score. What should I do if a miss a few payments due to the crisis?

The CARES Act implemented provisions to protect credit scores from January 30, 2020 through 120 days after enactment of the national emergency. If customers are making payments, or made arrangement to not make payments, customers must be reported as being current. If a customer was delinquent, but was able to make an arrangement with the servicer and is now current, then their account must be reported as current. The important thing is to reach out to your servicer, bank or credit card company if you are having trouble making your payments.

-My lender indicated that the IRS has shut down and they cannot process loans without an income verification document that only the IRS can generate. Is this true?

Luckily, there is precedence for an IRS shutdown based on several recent government shutdowns. Some lenders may require this document, but Fannie Mae, Freddie Mac, and FHA do not so this is a lender overlay.

Fannie and Freddie both issued guidance in January 2019 following the previous  government shutdown to note that they do not require the 4506T IRS tax transcripts at closing. Rather, they only require a request for the document be signed by the borrower. However, they do require the tax transcript be submitted as part of their post-closing review. NAR has asked both Fannie and Freddie to clarify and publish updated guidance given the unique challenges posed by COVID-19.

Furthermore, the IRS recalled critical staff to process tax transcript request on April 27th. The tax transcript issues appears to have eased.

-I’ve been told that I won’t be able to refinance or get a new mortgage if I take forbearance or even look into it or that I would have to wait for 12 to 18 months. Is that true?

No. If your mortgage is backed by Fannie Mae or Freddie Mac and you take forbearance you can refinance or get a new mortgage immediately, if you are current on your payments. If you took forbearance and stopped making payments, but are on a repayment plan and make 3 consecutive payments on that plan, you are eligible for credit to refinance or purchase another home.

The FHA has not clarified its position on this issue, but has indicated that it will come to a decision in the near future. Private lenders may or may not allow a homeowner who took forbearance to get mortgage credit in the future. You should check with your lender.
While Fannie Mae and Freddie Mac do allow for owners who took forbearance to get credit, a lender can place their own restrictions and choose not to refinance the loan or provide a mortgage. In such a case, the consumer can work with a different lender.

-I have heard that the FHA, Fannie Mae, and Freddie Mac have raised rates and fees on borrowers with lower credit scores or smaller down payments?

These claims are not true. To date, neither the FHA nor Fannie Mae and Freddie Mac have made any changes to credit scoring or down payment requirements. The only change they have made for borrowers is to allow MORE flexibility in how a lender can verify employment.

However, some individual lenders are adding their own, higher standards on these products. The rational is that the cost of servicing these loans has surged due to the widespread forbearance that is taxing servicers’ resources. Under forbearance, the servicer must continue to pay PITI to the investor, but the sheer volume of forbearance to deal with the COVID-19 response is unprecedented. Since lower-credit borrowers are more likely to take forbearance and servicing is harder to get, lenders are less willing to extend this credit regardless of the FHA or GSEs’ standards.

NAR sent a letter to the Treasury, Federal Reserve, and the Federal Housing Finance Agency requesting help for servicers dealing with the unprecedented demands on funds due to broad forbearance requests. Improving servicing is one key to improving the flow of funds to borrowers and homeowners.

Ginnie Mae has announced the creation of a new program, that should help alleviate lender concerns and improve access to mortgage financing. The program will provide cover for lenders by advancing them the money so they can make the required pass-through payments to investors during the forbearance period.

-In my area, appraisers have stopped appraising; Now what?

FHFA has directed Fannie Mae and Freddie Mac to utilize appraisal alternatives to reduce the need for appraisers to conduct interior property inspections for eligible mortgages through January 31, 2021. Fannie Mae and Freddie Mac have provided detailed appraisal alternative guidance, including directions on using desktop appraisals and exterior-inspection only appraisals with specific language that appraisers are to use in their reports.

FHA and the Rural Housing Service of the USDA are allowing exterior-only appraisals. The VA is allowing exterior-only appraisals with enhanced assignment conditions, or in limited instances a desktop appraisal to complete the VA loan requirements in light of the COVID-19 crisis.

-What are the federal requirements related to an eviction moratorium?

The CARES Act requires all housing providers with a federally-touched mortgage (including FHA, VA, RHS, Fannie Mae, Freddie Mac), as well as federally-assisted properties (FHA, Freddie Mac, Fannie Mae, RHS, Low-income Housing Tax Credits, etc) to provide 120-days moratorium on evictions, along with 30-days notice before an eviction filing.

-Are rental housing providers eligible for mortgage forbearance?

Multi-family (properties with more than 5 units) housing providers with federally connected –backed mortgages (mortgages insured by federal agencies or held or securitized by Fannie Mae or Freddie Mac) are eligible for up to 90 days forbearance (in an initial 30 day period, one-month increments, with two 30-day extensions upon request). However, if you accept the forbearance, you are also subject to the prohibition on eviction for the length of the forbearance. Multifamily owners with federally-backed mortgages are also subject to a separate 120-day eviction moratorium (plus 30 days’ notice) that expires on March 31, 2021.

Single-family rental providers with federally backed mortgages are eligible for the 180-day forbearance (with another 180 days extension) provided to single-family mortgage holders. They are also required to place a moratorium on evictions for 120 days, up until March 31, 2021 (plus 30 days’ notice). However, they are not required to extend that prohibition throughout their forbearance.

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Contract Signings Surge to Record HIGH for November

January 5th, 2021 – Looking back to the year 2020: Real estate pros are quickly submitting offers for clients as the buyer frenzy, unusual for the winter season, continues.

Sales have slowed slightly from the high levels recorded this fall. Pending home sales slid in November by 2.6% compared to those in October, according to the National Association of REALTORS®’ Pending Home Sales Index, released on Wednesday. November’s decline marked the third consecutive month for monthly decreases in pending home sales.

“The latest monthly decline is largely due to the shortage of inventory and fast-rising home prices,” says Lawrence Yun, NAR’s chief economist. “It is important to keep in mind that the current sales and prices are far stronger than a year ago.”

BUT: Pending home sales are still up 16.4% compared to a year ago. All major regions are posting double-digit year-over-year increases.

“The market is incredibly swift this winter with listed homes going under contract on average at less than a month due to a backlog of buyers wanting to take advantage of record-low mortgage rates,” Yun says.

NAR’s Pending Home Sales Index reached a reading of 125.7 in November—an all-time high. An index reading of 100 is equal to the level of contract activity in 2001.

Yun predicts home sales to continue to perform strongly in 2021. He expects existing-home sales to increase about 10% and new home sales to surge by 20% in the new year.

“Economic growth is guaranteed from the stimulus package and from vaccine distribution, but high government borrowing will put modest upward pressure on interest rates,” Yun says.

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Property Ownership: Bedrock of the Economy

December 08, 2020: Property Ownership: A Bedrock of the Economy in Troubled Times

It’s been a rough few months for the economy, and we could all use a little good news. For America’s millions of home and property owners, here is some: While retirement accounts and the stock market may have cratered, property values are hanging tough.

The National Association of REALTORS® (NAR) reported in May that the median existing-home price for all housing types was up eight percent. And with a proper recovery and the right policies, there is a great chance that home values will remain fairly stable even as home sales temporarily fall while Americans shelter-in-place.

The pandemic also hasn’t stopped business activity outright like in many other sectors. A recent NAR survey of members found that one-quarter of REALTORS® had at least one client go under contract during the second week of April without physically seeing the property. Deals are proceeding with the growing use of new technology like remote notarization. Even those pausing their real estate transactions still plan to buy and sell once again within a few months.

Property ownership is turning into a financial pillar for many Americans during this crisis, and in a surprising show of alacrity and bipartisanship, Congress went to great strides to help protect that investment. For those who can no longer pay their mortgage, new mortgage forbearance rules allowed them to put off payments for up to a year without impacting their credit. Other new benefits like forgivable small business loans and unemployment assistance not normally available to the self-employed or independent contractors are helping them weather the storm. Congress deserves credit for responding in a bipartisan and lightning-fast way even if the rollout of those programs was less than perfect.

If real estate is still viable, land real estate may be in an even better position to take advantage of changing social trends and shifting demographics. Increased time inside close quarters during the coronavirus pandemic is causing some urbanites to consider moving toward the suburbs and even further, a recent survey shows. A survey from the Harris poll showed that nearly 40 percent of U.S. adults living in urban areas indicated they would consider moving “out of populated areas and toward rural areas,” compared to 29 percent of overall respondents. Anecdotal evidence from agents in Seattle and along the West Coast indicates that smaller cities in the region like Boise, Idaho, are becoming increasingly attractive. This demographic movement could encompass the development of new communities that cater to telecommuters and to new resort developments.

. . . it has never been clearer that property ownership is still one of the best and safest investments an American family can make.

Russell Riggs

Developers will be searching for land that will enable them to build properties that enhance “community” but also cater to a buyer’s desire to spread out. Virtual tours of neighborhoods, homes, and land are among the new tools that are helping to facilitate the interest.

Of course, the pandemic may also create unknown economic dynamics that could negatively impact land and real estate markets in the future. Fears of COVID-19 could exacerbate the trend towards online commerce and away from greenfield brick and mortar developments. This could reduce the demand for large, new commercial developments.

There could also be severe long-term impacts on the agricultural sector. As we see growing levels of concern, recommendations for social distancing, reduced travel, avoiding crowds, and other protective practices to slow the spread of COVID-19, consumers will be making tough choices about food, eating away from home, and overall spending. This will likely have an impact on markets and prices. Concerns about the impact of the virus on the broader economy may have an even larger impact on dairy prices. Many countries of the European Union were already hovering just above a recession prior to the viral outbreak and this event is likely to push them over the edge.

As supply chains and logistics are disrupted, the agricultural sector will continue to be impacted. We have already seen livestock euthanized and crops plowed under because of the inability to get these commodities to market. All of these trends could disrupt the farm economy for the long-term.

Despite the possible adverse impacts on land real estate markets, it has never been clearer that property ownership is still one of the best and safest investments an American family can make. Economic downturns and public health crises—no matter how severe— will never change this fundamental fact. But what has become even more apparent is that, during this crisis, home has become more important than ever.

If you are looking for properties or need help selling your piece of land, Talk To Tammy 636.931.9100