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 sales, causing more workers to lose their jobs and putting a drag on the economic recovery,” said NAHB Chairman Joe Robson.
The survey showed that nearly 60% of the builders are reporting that inadequate appraisals are causing serious problems in the market, with the biggest problem being comparables of new single-family homes that are too often based on foreclosures and distressed sales.
“Lost home sales are killing jobs, deepening the housing slump and hurting local economic activity,” said Robson, who noted that construction of 100 single-family homes generates 324 local jobs, $21.1 million in local income and $2.2 million in taxes and other revenue for local governments in the first year.
Of those who are reporting appraisal problems, 54% said that the appraisal amount was actually less than the cost of building the home. Full Story.
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Strapped Condo Boards Initiating Foreclosures
Strapped condo boards are foreclosing on units whose owners have failed to pay monthly assessments.
Because banks that hold defaulted mortgages don’t owe condo dues until they actually take title of the property, many condos are facing serious shortfalls and as a result face difficulty paying operating expenses.
Condos and the attorneys who represent them say banks are deliberately slowing foreclosure proceedings to avoid paying monthly assessments.
“It’s become common practice to delay foreclosure,” says Eric Glazer, a condo-association lawyer in Hallandale Beach, Fla., which is between Fort Lauderdale and Miami. “Banks are forcing the associations to take them the distance.”
To combat this, condo boards, which can attach liens just like banks do, are stepping up and forcing foreclosure sales. After collecting back assessments, they pay out what’s remaining to the bank and rent out the unit until the bank gets around to deciding what to do next.
Lenders say they aren’t deliberately slowing foreclosure sales, but are facing political pressure to allow time for loans to be modified. “There’s no generalized delay in foreclosure on either condominiums or anything else. Unfortunately, the courts are clogged with these things,” says Thomas Cardwell, general counsel for the Florida Bankers Association.
Source: The Wall Street Journal, Nick Timiraos (06/18/2009)
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Low-Ball Appraisals Cause Problems
Real estate practitioners in Nevada, one of the areas hit hardest by foreclosures, say low-ball appraisals are slowing sales and preventing recovery.
Mark Stark, CEO of Prudential Americana Group in Las Vegas, says he thinks appraisers are too focused on projecting how much prices could fall rather than reflecting what values really are.
“The appraisers are being very conservative,” Stark says. “They are trying to cover themselves.”
Mark Madsen, communications director for Raintree Mortgage Services, says appraisers are just doing what they’ve been told. “I think appraisers are scared to get blacklisted,” he explains. “If the appraisals are too high, then banks may no longer accept appraisals from that person.”
Source: Brian Wargo, Las Vegas Sun (06/05/09)
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More Buyers Lured to Foreclosed Properties
Many households say that foreclosures are a bargain and are increasingly eager to buy them, according to a Harris Interactive survey conducted for Trulia.com and RealtyTrac.
The survey found that 55 percent of U.S. adults are at least somewhat likely to consider purchasing a foreclosed home, up from 47 percent who answered the same question in November 2008.
But buyers aren’t naïve about the hassles involved with purchasing foreclosed property. About 85 percent said that they could identify negative aspects, up from 80 percent who felt the same way last November.
* 71 percent were concerned about hidden costs;
* 46 percent believe the process is risky;
* 31 percent fear the property will lose value.
Buyers of foreclosures also expect hefty discounts – at least 25 percent.
Source: RealtyTrac.com and Trulia.com (05/20/2009)
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Mortgage fraud reports up 26 percent!
WASHINGTON – The mortgage industry, applying far more scrutiny after a tidal wave of defaults, reported a record number of mortgage fraud incidents last year, with Rhode Island making its first appearance as the nation’s top fraud hot spot.
The number of mortgage fraud reports among loans made last year grew 26 percent from a year earlier, according to a study released Monday by the Mortgage Asset Research Institute.
The increase came as lenders dramatically tightened their standards, making it more difficult for borrowers to qualify for home loans without large down payments, solid credit and proof of their incomes. With credit far tighter, about $1.4 trillion in home loans were made last year, down about a third from a year earlier, according to trade publication Inside Mortgage Finance.
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‘Produce the note’ has not had big local impact.
It’s almost one of those things that’s too easy to be true – staving off home foreclosure by simply demanding that your lender produce the original note.
As the economy goes down foreclosures go up. Hard-working people are finding themselves being forced out of their home when they can’t make their mortgage payments. But one simple request to a lender has in many cases slowed down the foreclosure process and given some homeowners a little breathing room.
It’s a little trick that goes back to the heart of how this whole banking mess got started.
During the real estate frenzy of the past decade, mortgages were sold and resold, bundled into securities and peddled to investors. In many cases, the original note signed by the homeowner was lost, stored away in a distant warehouse or destroyed, according to the Associated Press. Full Story.
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Homeowner Affordability and Stability Plan: Key Components.
1. The Home Affordable Refinance Program. Under this program, eligible borrowers may refinance loans that Fannie Mae or Freddie Mac (the government sponsored enterprises, or GSEs) own or guarantee. The program can help homeowner-occupants who are current in making loan payments and have loan-to-value ratios (LTVs) above 80 percent but not more than 105 percent. Cash out refinancings are not permitted. The program ends in June 2010.
2. The Home Affordable Modification Program. This is a $75 billion program with lender, servicer, investor, and borrower incentives to make it work. The program is limited to homeowner-occupants who are at risk of default or already in default and who have loans at or below the maximum GSE conforming loan limit of $729,750 (or higher for 2-, 3-, and 4-unit properties). Loan modifications under the program may be made until December 31, 2012.
Gov’t expands national program to buy foreclosures.
Tucked into the economic stimulus package signed by President Barack Obama last week was $2 billion to expand a nascent and controversial program to help cities and states buy and fix up foreclosed homes.
Last month, the Department of Housing and Urban Development signed off on hundreds of grants to all 50 states totaling almost $4 billion. The Neighborhood Stabilization Program, as it’s known, was passed last year as part of a housing rescue plan that was regarded at the time as the most significant housing legislation in a generation. Full story.
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Obama’s foreclosure fix on the way.
The president is set Wednesday to unveil plans to stem foreclosures and stabilize housing. Loan modifications and help for those near default are expected.
NEW YORK (CNNMoney.com) — Obama administration officials are hammering out the details of a $50 billion foreclosure prevention program that the president is set to unveil Wednesday in Arizona, sources said.
Details remain scarce, but officials are looking to help homeowners who are in danger of defaulting on their mortgages, as well as those already behind, according to sources close to the discussions. Until now, most government and industry efforts have centered only on the delinquent. Full Story.
Steps to take to prevent Forclosure!
One of their educator’s Cindy Tesch says there are some steps you should take if you fall behind on your mortgage – most importantly you need to devise a payment plan. But to do that Tesch says you have to confront your problem and that means confronting your mortgage company.
“Most consumers are scared or afraid because they don’t know what their mortgage company is going to tell them. So you want to stay in contact with the mortgage company,” Tesch said.
Tesch says mortgage companies are very willing to work with you. Something that’s really important to keep in mind — once your payment plan is set up you must make cuts to your budget because each month you will be paying your regular mortgage plus your back mortgage.
“If you really want to keep the home, look at the budget, see what is absolutely necessity and then cut out what isn’t. For just the time so you can get caught up on that mortgage,” Tesch said.
You may even consider selling certain assets — like a car if your family has two cars but can survive on one.
“If you really want to keep the home, look at the budget, see what is absolutely necessity and then cut out what isn’t. For just the time so you can get caught up on that mortgage,” Tesch said.
You may even consider selling certain assets — like a car if your family has two cars but can survive on one.
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Obama pledges mortgage help.
WASHINGTON (REUTERS) — U.S. President Barack Obama promised Saturday to help lower Americans’ mortgage costs with a new plan, coming soon, that would revive the financial system and “get credit flowing again.”
Obama, who has made fighting the country’s economic and financial crises the top priority of his young administration, called on the U.S. Senate to approve an economic stimulus bill that the House of Representatives passed this week. Full story.
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3 things sellers must know about Short sales.
Underwater on your mortgage? A short sale may be an option, but you first have to convince the bank to erase part of your debt – and your credit will still suffer. 1. You have to prove hardship. To get the lender to forgive the balance of your mortgage, you’ll have to prove that you [...]
Fed moves to help distressed homeowners.
WASHINGTON (AP) — With home foreclosures spiking, the Federal Reserve is taking steps to try to keep some distressed borrowers in their homes.
Under the program, the Fed has a number of options to provide relief, including lowering the amount the homeowner owes on the mortgage, reducing the interest rate or lengthening the term of the loan. Full story
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Fannie Mae won’t evict renters in foreclosures Will sign new leases with tenants while properties are up for sale
WASHINGTON – Mortgage finance company Fannie Mae said Tuesday it has adopted a policy allowing renters to remain in their homes even if their landlord enters foreclosure.
Full story.
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Foreclosures up a record 81% in 2008
Filings continued to soar through the end of the year – and there’s no relief in sight for 2009. more
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Could it happen to me??
CNNMoney: Protecting your home’s value
Foreclosures can affect the value of your property even if you’ve been paying your mortgage faithfully. Here are some ways you can protect your home’s worth if your area is hit hard by foreclosures.