Archive for the ‘Financial Crisis’ Category
Housing Crash Robs Senior Citizens
The worst housing market since the Great Depression is taking a huge toll on senior citizens in this country. The crash in housing values, especially in retirement haven’s such as Nevada, Florida, California and Arizona, is robbing these long, hard working Americans of their retirement and adequate health care.
While most people believe that seniors have no mortgage on their homes, the reality is that hundreds of thousands of retiree’s owe money on their homes. Even for those lucky enough to own their house outright, the unprecedented drop in home values means they have less equity to live on or exchange for a move to retirement housing or health care facilities.
- According to the AARP, 25.5 million people over the age of 50 have a mortgage on their home. More than 680,000 (which represents 30 percent of all distressed property) baby boomers are deliquent on their mortgage or are in the process of foreclosure.
- Many seniors have little saved, other than the equity in their homes. 36 percent of all retiree’s state that their savings and investment nest egg is less than $25,000, excluding home equity and benefit plans.
- Seniors banked on rising home prices and leveraged their primary asset through equity loans and reverse mortgages. Those that leveraged assets to afford retirement owe an average of $150,000 on their houses.
- Retirement communities and long term care facilities are suffering from the housing market, too. Seniors usually sell their homes to finance admission into senior housing facilities. Dire market conditions often mean no sale at all, or one at substantially discounted prices. Many people are left with no choice or options, forcing them to cancel plans to move to housing that fits their changing needs.
Although seniors and retiree’s are often overlooked in the news, the housing and stock market crash have taken a huge toll on their lives and well being. Most have worked all their lives to build secure nest eggs for their golden years, only to discover that half a lifetime of work and savings vanished in the blink of an eye.
Click Here to Read More from USA Today
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City Boards Foreclosed Owner Up Inside Home
As if being foreclosed upon isn’t traumatic enough, one man from Minneapolis can attest that being homeless might not be the worst thing that can happen to you, if you lose your home.
When the city of Minneapolis evicted Joe Poetsch from the home he had lived in his entire life, they actually boarded the poor owner up inside the home, then drove away. Mr. Poetsch, like millions of other Americans, admited he made a few mistakes that caused him to lose the roof over his head. But, talk about kicking someone when they are down…Imagine losing the only home you ever had, and then suffering the humiliation of being boarded up inside, then abandoned.
Although hard to believe, it’s all true. Read the story from the Star Tribune Newspaper below.
Cane in hand, he lurched around, throwing a few things in bags, putting Kitty in the carrier. He heard the contractor outside starting to drill into the door frame.
Poetsch made his way down his narrow stairway, resigned to the end he had resisted for three years, through personal financial missteps, the false promise of a foreclosure“rescue” and a court victory that gave him short-lived hope.
He came to the door and realized that he was too late. A truck had driven away from the house, prompting those outside to think the tenants were gone. Poetsch had been boarded up inside his house.
City officials say Poetsch had ample warning that they were coming that day, but they say his brief incarceration was an unprecedented mistake. In many ways, Poetsch’s experience is emblematic of the forces that have fastened plywood over so much of the North Side and urban neighborhoods across America.
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Appraisal Problems Hurt Homeowners and Kill Sales
Low home appraisals are becoming a huge obstacle for homeowners and sellers.
After years of succumbing to pressure to inflate appraisals for greedy lenders, anxious to make loans, it seems that appraisers have done an “about face”. Now, the biggest obstacle to selling a home or refinancing one is the appraisal. Like with all back lashes, it seems that the recently lax appraiser has now “over corrected” the problem to the determent of the housing market.
To read more about how to address low appraisal issues, Click HERE.
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Sellers Should Lower Price Expectations
In light of a new wave of foreclosures and distressed property sales, home seller’s may need to lower their expectations about home asking prices.
Recent reports find that nearly one in every four current home sellers (not seller’s of bank owned property) have dropped asking prices an average of 10.6 percent from their original listing price. In dollar terms, that is equal to another $27.4 BILLION, yes BILLION, slash in the equity of US homes. Ouch!
The good news for home seller’s is that higher interest rates and a rapidly approaching deadline for an $8000 tax credit is creating urgency among buyers. A recent uptick in sales proves that homes priced aggressively are selling very fast. But, homes priced above the competition continue to sit and languish on the market for months on end. Simply put, there is great demand in the market now…at the right price. Seller’s may need to sharpen their pencils, but buyers are actively purchasing homes.
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New Programs Help Homeowner’s Avoid Foreclosure
On Thursday, the government announced two programs that may help thousands of homeowners that are sinking in debt avoid foreclosure.
Treasury Secretary, Tim Geithner, said “Today we are announcing a new program component to help homeowners obtain modifications in areas suffering from price declines. If a modification is not possible, we are announcing steps to encourage the quick private sale or voluntary transfer of property, which will save homeowners money and protect their financial future.” Geithner went on to say that, “These are critical steps in stemming the foreclosure crisis and stabilizing the housing market, both of which are critical to your economic recovery”
The Program in a Nutshell:
- Foreclosure Alternatives: The program increases the odds of closing a short sale by streamlining the process and offering incentives to lenders for participation. The program is designed for homeowners who are eligible for a loan modification, but can not qualify for one. Under the new program, lenders may receive compensation up to $1000 for completing a short sale. Borrower’s may receive up to $1500 for relocation expenses. Holders of 2nd mortgages will receive up to $1000, if they agree to the terms of a short sale.
Why This New Program May Help:
- A short sale is the last step before foreclosure, and is far less costly for lenders and borrowers. Selling short is less damaging to the homeowners credit and they are less costly for banks and lenders. Survey results show that losses from short sales average 19 percent versus losses of 40 percent in the case of foreclosure.
- Currently, more than 75 percent of short sale contracts fall apart, despite sometimes heroic efforts on the part of the borrower. Lenders have for the most part been uncooperative when responding to offers on short sales, which means the properties sit vacant and pull down values in the entire area.
- The new program may provide a much needed boost to the current Making a Home Affordable program. Despite good intentions, the program has only helped 55,000 homeowner’s modify their loans. In comparison, there were 342,000 foreclosure filings in the month of April, alone.
Stop The Sinking Feeling. If you are struggling to pay your mortgage or you are falling behind on your payments…CALL YOUR LENDER TODAY!! Don’t procrastinate, the problem will only become larger if you wait. You may also waste valuable time in stopping a foreclosure on your property, which is the worst case scenario for borrower and lender alike.
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Facts about the 2009 Housing Crisis
With all the housing and finance related news these days, it is hard to stay focused on where the real problems are and what specific issues affect the real estate market.
Today, we outline the issues and target in on facts about the specific problems in housing and real estate in the U.S.
- Real estate markets are Local: The University of Virginia studied foreclosures in all 50 states; 35 metro area’s and 236 counties. They found that 85 percent of the lost value in homes occured in only 4 states – Arizona, California, Florida and Nevada.
- Nevada, California, Arizona and Florida rank 1,2,3 and 4 in all foreclosure activity. Combined together, these 4 states account for 55 percent of all foreclosures in the U.S.
- The 4 sunbelt states, representing 55 percent of all foreclosed property, were also the playing grounds of investors, second home buyer’s and “flippers” who rode the out the bubble in search of riches.
- 19 million homes are now vacant in the United States.
- Lenders forecast another 2.5 million home foreclosures before the end of the year.
- The average value of a home today has fallen to less than $170,000, which is now well within the budget of the majority of workers in the country. At the top of the bubble, the average home price in the US was $220,000, and hit $300,000 in California.
- Uptrends: Home sales have increased dramatically in California and Nevada in recent months. Discounts of 50 percent or more are bringing the inventory of unsold homes to their lowest levels since the crash began.
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Warren Buffett Says Inflation is Coming.
In the annual Berkshire Hathaway shareholder’s meeting, Warren Buffett, the oracle of Omaha, predicted that inflation will hit the US economy due to the financial crisis. Buffett told shareholders, “I haven’t had my taxes raised. My guess is the ultimate price will be paid by a shrinkage of the value of the dollar”.
If Warren is right, and he usually is, the average person can use his wisdom to profit with a smart real estate investment.
- To invest safely, a home buyer should put 20 percent down and take out a 30 year fixed rate mortgage, locking in an interest rate around 4.5 percent. If you haven’t owned a home over the past 3 years, you can cash in immediately with the $8000 tax credit. When inflation hits, your mortgage costs will remain the same, as your salary increases. This means that you have even more money to save and invest later on.
- If you are currently renting, there is another compelling reason to invest. During periods of inflation, rents will rise. If you don’t own a home, your monthly rent obiligations will soar.
- Another reason to invest in real estate is that during times of inflation, home prices appreciate, if even at a slower pace. History shows that during inflationary periods, real estate appreciation tends to beat inflation by 2-3 percentage points.
- Leveraged assets, such as real estate, outperform other asset classes. Leverage magnifies gains because as your income rises, your debt payments will not. You’ll be able to pay off the mortgage with money that is worth less than it was when you borrowed it.
- With home prices and interest rates hovering at historic lows, now may be the perfect time for investor’s to withdraw the cash they have sitting in savings accounts that is paying only a 2-3percent and buy a piece of property. If you buy a property where the tenant covers the expenses and costs of ownership, then the investor can relax and wait for inflation to move up rents and home prices.
InfoTube.net and Warren Buffett agree that inflation, over the next 5 years, is a sure bet. And, when we get rampant inflation, real estate is the perfect hedge. Throw in low prices, cheap money, ridiculously low returns on cash investments and thousands of dollars in tax savings, and you have a powerful case for buying a home now.
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Don’t be Duped by Real Estate Loan Scams
In a bad economy, housing con’s, scams and fraud are on the rise. The increase in real estate related scams is up so much this year that the Obama administration is involved, and promises “We will shut down fraudulent companies more quickly”.
Here are some of the most common scams seen in the housing industry and tips about how to protect yourself and your family.
Promise to Stall or Halt Foreclosure
Foreclosure scammers are the worst of the worst. Like vultures, they swope down to pick at the flesh and bones of weak and vulnerable. These companies promise to stall, avert or stop the foreclosure process. Many families which are facing the loss of their homes interupt their “pitch” as an answered prayer. Don’t Fall for It.
Homeowner’s can identify these companies because they always ask for an upfront fee for their service. In addition to losing thousands of dollars to these con men, the victims also waste precious time in working with their lenders, which means that this scam can actually speed up the foreclosure process.
Homeowner’s are advised to check with the Better Business Bureau, their lender and the Hope Now organization, before doing business with any company promising the stop a Foreclosure.
Loan Modificiation
The state of California issued permits to real estate agents for loan modifications. The state now has almost 600 Realtors, so far, that can collect upfront fee’s for negotiating loan modifications and short sales with lenders on behalf of the homeowner.
We have heard reports that some of these companies charge $2500-$3000 to negotiate with lenders, saying they provide more service and expertise than overworked non-profits do.
Consumers should ALWAYS be on High Alert if they are ask to pay upfront fee’s to anyone, especially when the service provider can not guarantee results. There are a lot of starving real estate agents out there, so beware and always verify credentials before paying for any upfront service.
Where to go for Real Help.
- Homeowner Preservation Foundation. 1-888-995-4673
- Hope Now Website Link
- Making Home Affordable. gov Website Link
- Your Lender
- Beware: Don’t be fooled into working with companies because they have official sounding names and copy cat websites. The government recently shut down 5 companies and issued warning letters to 71 others who are operating under names that sound legit, but aren’t.
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Condo and Homeowner Associations in Trouble
Foreclosures and loan delinquency’s wreck havoc on the budgets of Homeowner’s Associations (HOA’s) across the country.
Many condominium communities are glutted with nonpaying units that swamp their operating budgets, force cutbacks on promised services and increase monthly dues for owners who are paying their mortgage and association dues.
Crisis In Florida:
In Florida, the land of the condo dweller, things are spinning out of control for HOA’s and property owners. As a result, Florida constituents are turning to legislators for an help they can provide.
Under the current system in Florida and other states, lenders can avoid paying homeowner’s fee’s until they foreclose and become the owner of the unit. Lenders face a continuing avalanche of foreclosures and loan defaults, which means that up to 2 or more years can pass before the property transfer gets through the court system.
During the lengthy legal process, homeowners often continue living in the units, using the ammenities and facilities for free. Some even rent the units for income, after they have stopped making payments on the property. Many associations are forced to cover the costs of water, cable, laundry, lawn and pool maintenance and garbage collection for paying and non-paying owner’s alike. To make up for the added expenses, paying unit owner’s have to foot the bill or the entire association goes down.
And, things get even more complicated. Some banks stall on taking title to units because they have a cap that limits the amount of past-due fee’s they have to repay to 6 months or 1 percent of the original loan amount. Some luxury condo associations report that some units have as much as $50,000 in unpaid fee’s by the time the bank takes ownership.
Downward Spiral:
Lenders are also denying financing for financially unstable buildings, which essentially means the property can not be sold, even if a buyer is found. In January, mortgage giant Fannie Mae said it would no longer fund loans in buildings if more than 15 percent of the units were 30 or more days past due with their association fee’s.
The problem has reached a crisis point for many HOA’s that are struggling to cover basic utilites such as water and electricity. If they raise fee’s on paying owners for the shortfalls, they risk pushing even more residents into delinquency. Most owners are already upside down on the property and they simply can not afford a higher payment.
Renting out units could offset loses, but rentals are usually prohibited or they are limited to a very small percentage of the number of units in the complex. Furthermore, lenders such as Fannie Mae also deny funding for buildings that are less than 51 percent owner occupied. So, raising money with rent income does not appear to be a viable solution, nor does it maintain the quality of life for the paying residents.
The housing crisis has uncovered many problems that we have never encountered before, but the number of failing HOA’s is an imminent crisis. Unfortunately, it isn’t simple 
and if solving it isn’t done correctly, more permanent damage may occur.
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Buyers Learn It is Often Impossible to Buy a Foreclosure
As bargain hunters everywhere turn their attention to foreclosures, many buyers discover that for all the hype, the homes can not be purchased. Banks are so overwhelmed by the sheer numbers of REO (Real Estate Owned) properties, that they hold up sales and leave buyers stuck with thousands of dollars in extra costs.
Distressed properties now make up 25 percent of all homes for sale. Many foreclosed homes have been vandalized, neglected and cause a blight on otherwise good neighborhoods. Selling these properties would help stabilize house prices and remove inventory from the market, but the banks simply can’t keep up with the paperwork.
Take the case of the Collins family, who in January, rushed to buy a foreclosure on a picuresque, tree lined street in southern California. They immediately obtained their financing, paid for inspections, appraisals and completed other paperwork the lender required from them. It is now mid-April and the Collins family finds themselves still sitting in limbo. They have yet to receive confirmation of a closing date or signed paperwork.
While common sense tells us that the housing market can not recover until the foreclosures are sold, the reality is that the banks can not keep up with the paperwork required to transfer the property. There are a lot of layers and people, with varying degree’s of work ethic, that are involved with the sale of any bank owned property. Further frustrating to “would be” buyers, is that they can’t just call the bank and ask what is going on. There is no one to ask for help, as there is when buying from a real owner.
As the nation’s banks anticipate owning another 1.5 million foreclosed homes in 2009, things will likely get worse in terms of getting rid of them quickly. Maybe outraged buyers, and the neighbors who tolerate these blights on our communities, should all cry out to their congressmen for help. Perhaps, they can force the banks to step up their management of foreclosed homes, and force the agents and servicers to do their jobs.
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Loan Modification Loophole Leaves Taxpayers on the Hook
While I am sure that all Americans appreciate the efforts being made in Washington to save us from ourselves… they have again overlooked a simple requirement for loan modifications which could cost taxpayers billions of dollars.
Much like the “overlooked” loopholes that allowed bonus payments, in excess of $160 million, to be paid to employee’s of Goldman Sach’s and AIG, the Obama loan modification program sets up the same windfall profit situation, without regulation, for the financial institutions who modify loans.
Under the guidelines for the loan modification program, lenders are being offered taxpayer incentives (money) to modify loans. These cash incentives provide a huge Boom to the mortgage lending business, but unfortunately for taxpayers, some crucial regulations are missing. Does this sound familiar?
One immediate loophole that needs to be closed is the issue of how the borrower will qualify for their new, reduced loan. The Obama plan gives lenders incentives (ie: taxpayer money) to bring a borrower’s monthly payments down to 31 percent of their gross income. However, the plan totally ignores the amount of other debt that the borrower can have.
Why is a borrower’s debt important? If a homeowner has excessive credit cards, car notes, college loans or other debt, with substantial monthly payments, they may not be able to afford even 31 percent of their income for a modified mortgage payment. Under the present program guidelines, lender’s would be still be paid to modify a loans for borrower’s who would not qualify for a loan, if their debt was considered.
In order for the Obama housing plan to work, changes must be made. If not, taxpayers should expect another fiasco, like the ones we a discovered after AIG, Goldman Sachs and the automakers used their taxpayer bailout money for bonuses, trips, jets and office remodeling.
To date, over 50 percent of all modified loans have fallen back into default and the foreclosed homes are showing up on the market. Before the taxpayer’s pay out billions of dollars to unregulated lenders, as an “incentive” to modify loans to keep people in their homes, let’s make darn sure the borrower doesn’t have so much debt that they can’t repay their loan, again. After all, how much debt a borrower has is a standard measure used to qualify for a typical loan. Why is the borrower’s debt ratio being overlooked, when taxpayer’s are on the hook?
If you agree, write to your congressional representative. There is still time to “modify” our guidelines for lenders. Hopefully, with a little public outcry, this loophole will be eliminated before we hear that billions have been paid for modified loans that fall back into default in record time.
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Stop AIG from Giving Themselves $450 Million in Bonuses
Dear Home Owner, Home Buyer and InfoTube customer:
If you had to find one single group of people to blame for our economic crisis, you’d definitely have to consider the financial products division of AIG.
They made huge, bad bets on the housing market that have cost taxpayers $170 billion…so far.1
But get this: The Washington Post just reported that these people are receiving $450 million in bonuses—and they got their first installment on Sunday.2 They destroyed our economy, and now they’re being rewarded for it with our bailout money!
President Obama has instructed Treasury Secretary Geithner to use “every single legal avenue to block these bonuses and make the American taxpayers whole.” But AIG isn’t budging—they claim that even after hundreds of billions of dollars and a direct request from the President, their “hands are tied.”
We need to turn up the heat.
Tomorrow, AIG’s executives are appearing before a House subcommittee, and we’ve got a chance to give them a piece of our minds.
Can you sign our petition and submit a question for the heads of AIG? Or better yet, an idea for how we should get our money back? If you do before 5 p.m. ET today, we’ll make sure it gets to the committee in time for tomorrow’s hearing.
Click HERE to add your name and submit your comment. Thank you for participating. It is our money!!!!
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Tax Perks and Tips for Homeowners and Buyers
Tax Perks of Homeownership
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100 percent of the mortgage interest you pay is tax deductible, which can add thousands of dollars to your bottom line each year. Click Here to FIND OUT HOW MUCH YOU CAN DEDUCT, if you own a home.
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Property taxes (real estate taxes) paid to state and local governments are 100 percent deductible on your federal income tax return.
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Up to $500,000 ($250,000 for singles) in profit is tax free when you sell your home.
2009 Housing Stimulus Increases Tax Savings of Ownership
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Deduct $8000 from Your Tax Bill. To qualify for the $8000 tax savings you must be a first-time (have not owned in the last 3 years)homebuyer earning less than $150,000 (married, filing jointly) per year. You must live in the home for 3 years after purchase.
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Go Green and Take a $1500 Tax Credit. The requirements for energy tax credits have eased. Take advantage of a $1500 Tax Credit for home improvements such as energy-efficient windows, doors, insulation, appliances and mechanical systems.
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Save 30 percent on Alternative Energy for your Home. Earn a 30 percent tax credit for each dollar spent on things like solar heating, heat pumps or fuel cells.
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Save up to $2 million on foreclosures and short sales. Taxpayers get a free pass on mortgage debt forgiveness until 2012. Filers can exclude up to $2 million in forgiven mortgage debt, where the home sold for less than the amount owed on the loan.
Owning a home certainly has its privileges, both emotional and financial. And, real estate is still the granddaddy of tax deductions. Buy a home and save thousands of dollars, or rent and pay thousands to Uncle Sam. If in doubt, ask your landlord why they own???
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Countrywide Executives Profit From Housing Crash
Stanford Kurland
If you aren’t bothered by morals or ethics, it is so easy to make money. If you don’t think so, just ask the executives who ran Countrywide Financial.
Countrywide, in case you forgot, is one companies responsible for the financial crisis. The huge, subprime lender, that was once a Wall Street darling, made billions of dollars by putting people into home loans that they knew the borrower could not afford, then resold these bad loans to unsuspecting investors.
It seems that Stanford L. Kurland, former President of Countrywide, along with his ex-Countrywide team of executives, are back to making money in the lending and real estate business. They opened a brand new company called PennyMac. PennyMac is located in spacious headquarters, in the same Los Angeles suburb where Countrywide once flourished. (Obviously, these smug operators don’t even feel the need to leave town…)
So you ask, what kind of business is Kurland and PennyMac into now?? Surely, they would never be allowed to profit from the slimy mess they helped create??? Wrong. Their new business buy’s delinquent home mortgages for ”pennies” on the dollar, that the US government took over from failed banks and lenders. They are also busy snapping up foreclosures at cents on the dollar, and then reselling them for big profit.
In case you are wondering how well PennyMac and the old Countrywide team are doing… Mr. Kurland is happy to inform you that his new business is “off-the-charts good??”, as he leaned back in his leather executive chair, while the financial markets plummeted.
Are you mad? We sure are. I would love to give Kurland and his team a “A Penny of our thoughts!!! If you have something to say, you can send an email to service@pennymacusa.com or call Toll-Free (866) 545-9070.
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