Treasury Proposes Plan to Help Borrowers
The U.S. Treasury Department is considering a plan to improve the chance that distressed home owners will get help from federal programs.
Among other things, Treasury proposes to give borrowers 30 days to respond when they are denied a loan modification under the Home Affordable Modification Program (HAMP). During that time, the lender couldn’t auction off the property or even put it up for sale.
The proposal would demand that lenders consider all requests and even contact all borrowers who are 60 days delinquent to determine if they qualify for HAMP. Their contact efforts would have to include multiple telephone and written notices. Lenders would also be required to certify in writing that the borrower isn’t eligible.
Lenders say these guidelines would further slow the foreclosure process past the year that it takes now.
A Treasury spokesperson says the guidelines are only in the proposal stage and haven’t been approved.
Source: The Wall Street Journal, James R. Hagerty, and Associated Press, Alan Zibel (02/22/2010
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Foreclosure Prevention Has Aided 116,000
The federal foreclosure prevention program has helped about 12 percent of borrowers who applied for help since the plans were announced a year ago, the Treasury Department says.
About 1 million borrowers initiated the application process, and as of January, about 116,000 home owners–12 percent–had their loans modified. But administration officials say another 76,000 applications have been approved and are awaiting signatures.
Another 830,500 home owners are currently in a trial modification review period during which banks make sure payments are feasible for the borrower and ensure the qualifications of the assistance program are met.
For those who qualify, the Home Affordable Modification Program brings monthly loan payments down to 31 percent of home owners’ pre-tax income.
Nearly 60,500 people have been denied permanent modifications.
Source: CNNMoney, Tami Luhby (02/17/2010) and USA TODAY, Stephanie Armour (02/17/2010)
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Luxury Homes in Foreclosure Go to Auction
An increasing number of homes with multi-million dollar price tags are going into foreclosure and that’s driving desperate owners to sell at auction.
In 2009, 18,817 properties worth at least $1 million faced foreclosure. That’s up 162 percent from 2008, reported foreclosure marketer RealtyTrac.
Prices of $1 million-plus properties are down about 25 percent since 2007 with an increasing number of desperate home owners choosing auction sales over waiting for years for the right buyer to come along.
“Any home owner selling in this economy is on the market because they have to be,” says John Brian Losh, CEO of LuxuryRealEstate.com, a Web site that specializes in high-end properties. “If they’re frustrated and they can’t figure out why they haven’t gotten any offers, they might think an auction will generate some interest.”
Source: Forbes, Francesca Levy (02/11/2010)
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More Home Owners Walk Away
A growing number of home owners in Arizona, California, Florida, and Nevada—where prices have fallen the most—are walking away from their properties.
They are leaving the deal behind not because they can’t pay but because they don’t want to. A study by researchers at Northwestern University and the University of Chicago concludes that as many as 25 percent of defaults are driven by strategy, not necessity.
If many other people follow suit, “It’s going to be really difficult to prevent a cascade effect,” says Paola Sapienza, a professor of finance at Northwestern.
Brent White, an associate law professor at the University of Arizona, points to actions by banks themselves to avoid staying in bad business deals as an example of why homeowners should make a decision “unclouded by unnecessary guilt or shame.”
For instance, on Thursday, financial services firm Morgan Stanley announced that it is turning five San Francisco office buildings back over to its lender two years after it purchased them when the market was at its priciest. The buildings are estimated to be worth about half of what Morgan Stanley paid.
“This isn’t a default or foreclosure situation,” spokeswoman Alyson Barnes told Bloomberg News. “We are going to give them the properties to get out of the loan obligation.”
Morgan Stanley is apparently current on the loan, so this is what is known as a “strategic default.”
Some might ask: If strategic defaults are OK for banks, why aren’t they OK for ordinary homeowners?
Source: The Wall Street Journal, James R. Hagerty and Nick Timiraos (12/17/2009) and Bloomberg, Emily Friedlander (12/17/2009)
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Treasury Urges Banks to Fix Foreclosure Problem
Unemployed Americans need more help escaping foreclosure, Assistant Treasury Secretary Michael Barr said Thursday.
“We are looking at a wide range of tools to help people who are unemployed,” Barr said. “We need to look at a process, if we come to this point, that is fair to everyone, that is cost effective, that protects the taxpayers and that gives responsible home owners a chance to stay in their homes.”
Barr said it was the responsibility of the banks to get their troubled borrowers into modification plans. “We are examining their performance every day … soon to be twice a day,” he said.
Source: Reuters News (12/03/2009)
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Distressed Sales Remain a Concern
Twenty-nine percent of recent buyers purchased a home in foreclosure or through a short sale, according to the latest REALTORS® Confidence Index. REALTORS® who participated in the survey are also concerned about a growing number of foreclosures and the hurdles buyers face in short sales.
The RCI is a key indicator of housing market strength based on a monthly survey of more than 50,000 REALTORS®; in a typical month there are more than 3,000 usable responses. Practitioners are asked about their expectations for home sales, prices, and market conditions; they also share their insights regarding buyer preferences and financing options and how those factors are influencing real estate markets nationwide.
“REALTORS® are on the front lines with buyers and sellers in today’s market and have valuable insights into real estate trends,” NATIONAL ASSOCIATION OF REALTORS® President Charles McMillan said. “The volume of distressed sales that our members are reporting underscores the importance of the recent tax credit extension. By putting cash in the hands of financially healthy home buyers, the credit will continue to help draw down inventory and stabilize home prices to encourage a strong and sustainable housing recovery.” Full details..
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Distressed Sales Remain a Concern
Twenty-nine percent of recent buyers purchased a home in foreclosure or through a short sale, according to the latest REALTORS® Confidence Index. REALTORS® who participated in the survey are also concerned about a growing number of foreclosures and the hurdles buyers face in short sales.
The RCI is a key indicator of housing market strength based [...]
Owners Still Try to Price Homes High
Real estate practitioners in the heart of foreclosure hotspots are talking turkey about pricing to their clients.
“I don’t sugar-coat anything. I don’t tell people what they want to hear. I tell them what they have to hear,” says Mike Aubrey, an associate with RE/MAX Metropolitan Realty in North Potomac, Md.
“[Setting the initial price too high] is not only a waste of time, but you stigmatize your property,” says Joe Manausa, president of Century 21 First Realty in Tallahassee. “People wonder why nobody bought it, why it’s been on the market so long.”
In fact, setting a price too high is “downright willful negligence,” Manausa declares.
Source: Inman News, Mary Umberger (10/14/2009)
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Buying a Foreclosure Is No Picnic
Buyers seeking a foreclosed property should realize that not every foreclosure is a good deal.
Urge would-be buyers of foreclosures to have the property thoroughly inspected, says Dan Steward, president of the Tampa-based inspection firm, Pillar to Post. Lenders are not held to the same disclosure requirements as sellers.
Steward says damage isn’t always obvious. While it doesn’t take an expert to see that a toilet has been ripped out, it does require someone with knowledge to know that ripping it out damaged a pipe 20 feet down the line.
The best way for the buyer to get the property is to follow the bank’s instructions closely, says Ryan Melvin, co-owner of More Realty Group in Las Vegas, which specializes in foreclosures.
Another quirk that sometimes surprises buyers of real-estate-owned properties, or REOs, is the scrutiny that banks place on the buyers’ credit, even though they are using a different lender.
Source: The Wall Street Journal, Amy Hoak
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Examine Paperwork Prior to foreclosure
A Florida real estate consulting company specializing in mortgage forensic research, warns homeowners near or in foreclosure that legal violations are increasingly common in complex mortgages and urges them to examine their paperwork carefully.
Consumer Mortgage Audit Center, many of whose members are also members of the American College of Forensic Examiners Institute, works with attorneys nationwide to help them identify mortgage violations and instances of predatory lending that can offer options to save homeowners from foreclosure.
CMAC urges homeowners facing foreclosure to:
* Compare their HUD-1 document, which buyers get at settlement outlining most costs, with the same lender’s good-faith estimate. If the figures on the HUD-1 and the good faith estimate are different, this may signal that there is a problem.
* To further investigate the issue, the homeowners should consider consulting an attorney who handles foreclosure defense cases. Most foreclosure attorneys don’t charge for an initial consultation.
Source: Consumer Mortgage Audit Center
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Some Foreclosure Buyers Feel Guilty
Foreclosure guilt is affecting some people who can afford to buy low-cost properties even though friends and family haven’t been so lucky.
As Anya Sanko who bought a foreclosure in Las Vegas says, there’s a hard-to-shake worry that “you’re capitalizing off of somebody else’s misfortune.”
Some people dismiss this as unwarranted drama, but Santa Fe psychologist Sylvia Lafair thinks that “there is a guilt of survivorship that is real.”
Lafair has provided counseling for real estate practitioners who say clients express this concern.
Lafair recommends that people ease their pain by doing something kind for those less fortunate. “My recommendation is that when you’re moving, take (your) old stuff and say, ‘Do I really need this?’ and give it to a shelter or the Salvation Army. One way to balance the guilt is to do something to be gracious,” she says.
Source: USA Today, Steve Friess
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Why Rent When Buying is Cheaper?
The foreclosure crisis has knocked down prices so much in some parts of the country that it’s cheaper or only slightly more expensive to own than it is to rent.
BusinessWeek, with help from research firm Reis, calculated ownership costs assuming a fixed-rate, 30-year mortgage for 100 percent of the purchase price with no down payment. [...]
Countrywide Offers Help to Former Customers
Bank of America, which acquired Countrywide Financial Corp., one of the most active of the subprime lenders, has begun issuing checks to its borrowers who are eligible for foreclosure assistance under an agreement with attorneys general in 40 states.
Borrowers most likely to be eligible for assistance must have experienced a foreclosure, short sale, or deed-in-lieu of foreclosure after taking out a Countrywide mortgage.
Rust Consulting, a third-party administrator, is managing the program, and notifying and paying eligible customers.
Source: Reuters News, Steve Eder
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Faulty Appraisals Harming Housing and the Economy
Twenty-six percent of builders are seeing signed sales contracts fall through the cracks because appraisals on their homes are coming in below the contract sales price, according to a nationwide survey conducted by NAHB.
“Home builders are increasingly concerned that inappropriate appraisal practices are needlessly driving down home values. This, in turn, is slowing new home [...]
Court halts thousands of foreclosure sales
COLUMBIA — South Carolina’s highest court on Tuesday temporarily stopped thousands of pending foreclosure sales in the state to give homeowners more time to take advantage of a new federal program to help them refinance mortgages.
The injunction – which mortgage experts said appeared to be the nation’s first court-ordered stop for an entire state – prevents judges in South Carolina from finalizing foreclosure sales on properties guaranteed by Freddie Mac, Fannie Mae or any other mortgage company that has signed on to a federal assistance program.
RealtyTrac Inc., a foreclosure listing firm, says the ruling could affect 5,000 S.C. homes facing foreclosure.
The ruling was in response to a request from a Columbia attorney representing Fannie Mae, who had argued that it was necessary to keep homeowners who might be eligible for federal assistance from being shut out of the process.
“Absent the injunction, mortgagors eligible for relief … could be denied their right to participate because their property was sold at the foreclosure sale,” lawyer Ronald Scott wrote in his three-page motion. “This qualifies as irreparable injury for which the court should provide redress in the form of a temporary injunction.”
Fannie Mae said the ruling was necessary because of a South Carolina law meant to ensure that foreclosures sales are conducted in a timely fashion. Under the law, judges can cancel a foreclosure case and start over if the sale is delayed for too long.
The company argues that South Carolina’s law gives lenders an incentive to speed up foreclosure cases because of the threat the process could be restarted, which would cost lenders more money. More Details
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Some homeowners see giving up as best option
In decision balancing stress and credit score, an Atlanta couple walks away.
Teresa Bondora and her family abandoned their two-story brick home in Atlanta rather than fall behind on their mortgage and $30,000 worth of home renovation debt.
The decision was tough for Bondora, a home-schooling curriculum developer raised to believe that preserving good credit and paying bills on-time were key adult responsibilities.
“I was willing to walk away and live with someone else while we get out of debt,” Bondora says. “I’m not worried about anything anymore.”
Bondora isn’t the only homeowner making an about-face in her approach to the stigma of foreclosure; if anything, homeowners like her see that efforts to prevent foreclosure may make them more financially vulnerable than succumbing to it and starting anew.
Despite new refinancing and loan modification programs made available under the Obama administration, mortgage experts say that many homeowners still face difficult choices in the short run. The latest options may not affect the market for a few more quarters, they say.
When the real estate market first showed signs of weakness in fall 2006 — right when the Bondoras listed their home for $170,000 — the family faced tough circumstances. They watched at least a dozen seemingly qualified buyers fail to secure financing, and as Bondora’s husband, a contractor, began to see work evaporate. Full Story.
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Buyers Say Foreclosure Deals Taking Too Long!
Banks are quickly accepting bids and writing contracts for foreclosed homes, but buyers are complaining that settlements are taking too long.
Real estate pros say purchasing a bank-owned property is different than dealing with a regular home owner, considering that banks have to check claims on the property and problems can arise at closing. Plus, in some states, banks also need court approval of the foreclosure.
Although banks are swamped by the record number of foreclosures, the bank-owned homes will have to be sold to help stabilize residential prices and boost the housing market.
Source: Washington Post, Dina ElBoghdady (04/13/09)
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Tread Carefully When Making a Low-Ball Offer.
These days, it’s easier to make a low-ball offer than it used to be, but still it’s important to be smart. Here are some things that a real estate practitioner and would-be buyer should consider when contemplating such an offer:
? Use foreclosures as comps carefully. Look realistically at the prices foreclosures in the neighborhood brought. Foreclosures aren’t good comps if the homes were stripped of appliances, pipes, HVAC, etc.
? Examine details of short sales critically. How many liens were there against low-selling short sales? If there were no secondary liens, the lender had considerable flexibility.
? Establish realistic time frames. Even in the best of circumstances, foreclosure takes a long time. Will the seller play the waiting game? How long have houses whose owners have equity stayed on the market? Is the buyer in a hurry?
If your buyer makes a low-ball offer, the bank probably won’t be in any rush to take it. They’ll likely just keep soliciting offers without coming back with a counter. Ultimately, the property is likely to sell for a higher price and, chances are, you and your buyer won’t know it until the deal is done.
Source: ThinkGlinck, Ilyce R. Glink (03/30/2009)
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How Will Foreclosure Affect Credit Scores?
The amount of damage to a credit score caused by foreclosure, deed in lieu or a short sale during 2008 and 2009 may be mitigated by the slower economic times, say some credit and legal experts.
FICO may have to adjust its credit scores to lessen the impact of a foreclosure in the last two years, says Todd J. Zywicki, a professor of law at George Mason University.
”It just seems obvious that a foreclosure in 2008 or 2009 doesn’t have as much information value as a foreclosure five years ago,” he says. ”To the extent that foreclosure doesn’t predict future behavior as much as it did in the past, you’d expect that the FICO algorithm would change to adjust for that.”
One of the country’s largest credit unions Golden 1 has already figured out a way to lend to people with a foreclosure on their record by offering a mortgage repair loan specifically for those who have lost a home to foreclosure and who want to buy a new one.
BECU, another large credit union based in Washington State, is about to present a program to fellow lenders, ”How to Lend to the Newly Credit Impaired.”
Source: The New York Times, Ron Lieber (03/14/2009)
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