Posts Tagged ‘foreclosures’
New Program Pays Owners to Sell for a Loss
With more than 5 million households currently behind on their mortgages, the Obama adminstration is rolling out a new program to encourage lenders to accept a short sale. A short sale is one in which a property is sold for less than the outstanding mortgage owed to the lender. The administration hopes the program will prevent more foreclosures, which further depress property values and harm good neighborhoods.
The program, which takes effect April 5, 2010, pays lenders and borrowers to complete a short sale. Key points of the program are as follows.
- 1. The program compels lenders to accept a short sale offer and forgive the difference they are owed between the market value and the outstanding mortgage balance.
- 2. The lender will receive $1000 for every short sale they participate in.
- 3. The program encourages millions of borrowers to get serious about getting rid of their homes. It pays homeowners $1500 in walking away cash for finding buyer for their property and closing the sale.
- 4. The lender will utilize real estate agents to determine the present market value for a home. That value will set the minimum acceptable price. The estimated value will not be shared with the homeowner. If an offer is submitted that is equal to or higher than the estimated value, the lender MUST take it.
Pro’s and Con’s
- 1. For the investment pools which own most of the home loans, there is the hope of getting more money from a short sale than a foreclosure proceeding.
- 2. For the lender, $1000 will help offset the labor intensive short sale process.
- 3. For the borrower, their credit will suffer less damage. They have the lenders assurance that they won’t be sued down the line for their unpaid balance. And, they get $15oo to assist with their relocation.
- 4. For the community, short sales mean fewer empty houses sitting around waiting for the bank sale. It is estimated as many as half of all vacant properties are ransacked, neglected, vandalized and depress the value of neighboring homes.
- 5. The downside is that short sales are “tailor made” for fraud. House values are inherently subjective, which provides a wide latitude for potential conflicts.
- 6. Another problem is that bankers hate the very idea of accepting an offer short of what they are owed. By nature, they don’t want to sell anything at a discount. If they loan $200,000 …they expect to be repaid $200,000, not $150,000.
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Mortgage Rates Jump over the Holidays
Mortgage Rates jumped nearly one-half percent during the week ending January 1, 2010. The average rate climbed to 5.18 percent, up from 4.92 percent one week earlier.
Overall demand for home financing has also fallen dramatically. Loan applications were down 23 percent the last week of December. Even worse, applications for refinancing were down a whopping 30 percent.
Through the grapevine… I continue to hear from brokers, loan officers and buyers that loans and appraisals are very difficult to obtain. Apparently, our lenders don’t want to loan any of their money for real estate these days.
Side note… The banks are also sitting on 2 million foreclosed homes, apparently waiting and praying they’ll make more money later on…hmmmm…. I guess we’ll take their position as a positive sign. Since they are willing to set on these non-performing assets, I assume they expect less competition later in the year or firmer pricing…
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Mortgage Giant Cuts a Deal with Homeowners
Mortgage giant Fannie Mae announced that it is willing to play “Let’s Make a Deal” with homeowners who are behind on their mortgage payments.
According to CNBC, Fannie Mae will give homeowners, who are in default on their loan, the option of renting the home and staying put for up to one year. To be eligible, the homeowner must sign over the deed to the property.
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Latest Home Sales Data and Predictions for 2010
Case Shiller just released its latest report on the state of the residential estate market. The good news is that home prices are falling more slowly. The bad news is that that we have a little ways to go.
What the Numbers Show:
- Through August, 2009, the price of an average home sold in the US fell approximately 13 percent, year over year, from 2008 levels.
- Home prices have now dropped to 2003 valuation levels, wiping out 6 years of home appreciation.
- Since the peak in 2006, average home prices are down 33 percent.
What Do the Numbers Say About the Future??
- Prediction: The “average” home price will likely fall more than 13 percent by year end. Reason: Home prices are always at their highest in the spring and summer. Families move during this time of year and they buy the largest, most expensive properties. As a result, Summer home sales skew the “average” price upward in the fall, but only temporarily.
- Prediction: Home Sales will suffer a downturn due to the expiration of the $8000 First Time Buyer’s Credit. So far this year, 350,000 buyers have been persuaded to purchase because of this incentive. To read more about the success of the 1st Time Home Buyers Tax Credit, CLICK HERE.
Our Crystal Ball: The pace of the fall is slowing, but the expiration of the tax credit and the ”shadow inventory” of another 1.5 Million foreclosures will continue to put downward pressure on the market in 2010. As a result, we predict that 2010 home prices will decline 6-7 percent. The upside is that nearly all buying risk is out of the market. Interest rates are at historical lows. Any increase in rates would erase the possible gain a buyer would achieve from correctly timing the exact bottom…even if the timing were perfect.
Bottom Line: If you plan to buy a home within the next year, now is a great time. Chose the best home, in the best location and the one that you can easily afford. Live and enjoy the home for at least 5 years and you will likely be patting yourself on the back for a job well done.
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Foreclosures Up. Home Prices Predicted to Fall Further
In August, InfoTube warned its readers about the New Wave of Foreclosures that would be pounding the market, further driving up inventory and eroding prices. Today, we learn that the Wall Street Journal agree’s with our accessment of the future market conditions for real estate.
Excerpt from the Wall Street Journal:
“The size of this shadow inventory is a source of concern and debate among real-estate agents and analysts who worry that when the supply is unleashed, it could interrupt the budding housing recovery and ignite a new wave of stress in the housing market . . . Analysts who track the shadow market have focused primarily on the gap between the number of seriously delinquent loans and the number of foreclosed homes for sale by mortgage companies. A loan is considered seriously delinquent, which typically means it is headed to foreclosure, if it is 90 days or more past due.
As of July, mortgage companies hadn’t begun the foreclosure process on 1.2 million loans that were at least 90 days past due, according to estimates prepared for The Wall Street Journal by LPS Applied Analytics, which collects and analyzes mortgage data. An additional 1.5 million seriously delinquent loans were somewhere in the foreclosure process, though the lender hadn’t yet acquired the property. The figures don’t include home-equity loans and other second mortgages.
Moreover, there were 217,000 loans in July where the borrower hadn’t made a payment in at least a year but the lender hadn’t begun the foreclosure process. In other words, 17% of home mortgages that are at least 12 months overdue aren’t in foreclosure, up from 8% a year earlier.”
What this means for Home Seller’s: Time is not your friend. The shadow of inventory of distressed property will continue to place downward pressure on home prices. Based upon our years of experience, we predict that home prices will fall an average of 7 percent in 2010.
If you need to sell your home, DO NOT chase the market down. Price your property aggressively, then market the home to as wide an audience as possible. To learn about the best way to reach the mass buying market, CLICK HERE.
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Pleco Fish Eat Algae in Abandoned Swimming Pools
The large number of foreclosed homes have become a blight on the residential landscape. But, swimming pools in abandoned, foreclosed homes, with no electricity, pose special problems. Swimming pools become stagnate and unsantitary due to a lack of chemicals, then quickly grow thick with algae that is unsightly, and expensive to get rid of.
Enter the pleco algae eating fish, which are commonly found and abundant in fresh water lakes. Only 15 pleco fish, placed in an abandoned pool, quickly eat away the algae and keep it away.
The environmentally smart solution leaves pools more sanitary, makes the homes more attractive to prospective home buyer’s and saves thousands of dollars in upkeep. After the new owner moves in, they can return the fish to the lake or leave them in the pool for backyard fishing fun.
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5 Tips for Smarter Home Buying
Record low interest rates, combined with deeply discounted home prices, have bottom fishers swimming frantically, in search of the perfect deal on the perfect home. But, before you strike, beware. Read our 5 Tips to Avoid Getting Hooked in a bad way.
- 1. Think Long Term: This is a market for smart bottom fishers, not flippers. In this market, our advice is that you should plan to buy a home to live in, then hold it for 3-5 years, at the minimum. Our reasoning, first, prices have not fully stabilized at these levels. Secondly, there is no indication that prices will rise any time soon. Last of all, we are still facing a rise in foreclosures in 2010, which will keep downward pressure on the market.
- It’s All About the Local Market: We have all heard the golden rule of successful real estate investing…Location, Location, Location. In other words, if you have a choice between a bigger home in an ‘iffy’ area, or a smaller home in a better one, always pick the the Good Location. Remember, when comparing locations, real estate markets are entirely a Local matter. There are big differences within neighborhoods, zipcodes, school systems and suburban towns. Focus on the hottest area’s and the ones that are conveniently located near major employment centers. In rough sea’s, these area’s will always rebound the fastest and appreciate the most.
- Be Wary of Foreclosures: While some foreclosures may be a great buy, many of these properties are “cheap” for good reasons. Many of the homes weren’t great to begin with and most have been terribly neglected. Carefully look for mold, water penetration, structural problems, missing appliances, soiled carpets and flooring underlayments, broken windows and glass, strange odors and any evidence of illegal drug trade. Also, never get emotionally attached to a foreclosure home. Banks are notoriously hard to deal with and they can take forever to respond to offers. Some buyer’s report a wait of several months before the bank approved an offer, or not.
- Get Pre-Qualified for a Loan: Submit your letter of loan approval with any offer you make on a home. Banks always require a letter of pre-qualification before considering a bid, as will any serious seller. With proof of funds in hand, you will be taken much more
seriously by all seller’s, and you will in the end, get a much better deal on the house. Getting Pre-Approved for financing is no lose proposition. - Don’t Take Chances. Buyer’s are in the drivers seat and a lot of great values are available, but please don’t overspend. The job market and general ecomony are uncertain. Make sure you can afford the property, even if you find yourself in a bad or unexpected situation. Even the perfect property can turn into a nightmare, if you can’t reasonably afford it.
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What is the Shadow Inventory of Homes?
A recent news article by Reuters states that “The percentage of U.S. homeowners who owe more than their house is worth will nearly double to 48 percent in 2011.”
Meaning? Half of us will be upside down, underwater, or whatever you want to call it over the next 2 years? Pretty scary. How do they know that? One indicator they use may be the Shadow Inventory of Homes, which will eventually enter the market place over the next 3 years.
So, what is a Shadow Inventory of Homes and How Does it Affect Future Home Values? Technically, a property is not in foreclosure until the lenders files against a deliquent loan. Lenders are purposefully not filing to foreclose, in order to control the present inventory by keeping homes off the market. This creates a Shadow Inventory of Homes in Default. Why do they do this? Simple economics, really. Less supply creates more demand (ie: higher prices) for the property they already have for sale.
Since, we know lenders are holding back the number of homes that should be in foreclosure, how many “shadow” distressed properties will come into the market in the future? Truefully, we can’t know the exact number. That is the reason it is referred to as a Shadow Inventory. We can all see that the problem is lurking out there, but we can’t identify the exact numbers or the amount of future damage because “only the shadow knows…”.
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Fraud Alleged in REO and Short Sales
An accusation of fraud is a serious matter, but some home buyer’s and their agents are accusing the listing agents of bank owned property exactly that.
In a traditional sale, which is a rare event these days, the buyer’s agent presents an offer to the listing agent. The listing agent, in turn, presents the offer to the seller, who can reject, accept or make a counter offer to the buyer.
In contrast, REO (Real Estate Owned by the bank) contract negotiations take place with a bank, lender, or a representative hired to represent the lender. In contrast to a “normal” seller to buyer transaction, neither buyer or agent has the opportunity or ability to meet with the seller. Therefore, the buyer and their agent have no way of knowing whether their offer was actually presented to the lending institution, at all.
So you ask, “Why would a listing agent hide offers from the bank?” The answer is sadly cliche…”follow the money”.
Buyer agents allege that often, listing agents for the banks are also working with their own own buyers. If their buyer’s offer is accepted, the agent is paid two commissions, one as the selling agent, another for listing the property. So, if the listing agent holds back a higher offer in order to leave their client in the number one position, the agent “double dips” and earns double the money.
What can you do? Unfortunately, not much. The bank is unaware that other offers have been presented. Other buyer’s and their agents have no way of knowing if their offers were really presented, either. Usually buyers and agents are just told that their offer was rejected. Only after the closing can they see that their offer was better than the one the bank accepted and that the listing agent was also the selling agent.
If you suspect that you have been a victim of fraud or underhanded dealings, you can try to contact the lender. But, be prepared that most lenders want no contact with the public and even their own fraud departments show little interest in helping “would-be” buyers or their agents. And, as for the “listing agent for the bank”, it is highly unlikely that the of the fraud will suddenly get a change of heart and confess.
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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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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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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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