Where are all the bank owned homes?

This article is by Rick Sharga of RealtyTrac, Inc.

Certain things in life are simply meant to be mysteries. There are ages-old philosophical questions that have kept philosophers busy for millennia: What is the sound of one hand clapping? If a tree falls in the forest and no one is there, does it still make a sound? Other mysteries hang heavy with intrigue: What really happened to Amelia Earhart? And who really kidnapped the Lindbergh baby? And still others simply defy logic: If Denny’s is open 24 hours a day, 365 days a year, why are there locks on the doors?

Now we can add another question to the list of ongoing mysteries: With foreclosure activity breaking records nearly every month, where are all the REOs?

It’s a fair question. In normal market situations, a bank will repossess a home and usually process it through to a listing agent to put on the MLS within 30 days. In a relatively short period of time, virtually every marketable REO property finds itself listed for sale on the local MLS. Today, that’s simply not the case; it’s likely that between 450,000 and 500,000 properties repossessed over the past year are still not on the market. And with buyers hungry for housing bargains, and agents and brokers chomping at the bit ready to sell the properties, it begs for a reasonable answer.

Lenders and servicers admit that it’s taking longer to process REOs than it has in the past, and they offer a number of legitimate reasons:

-Many of the properties have title issues that need to be resolved.

-Many of the properties are in states of utter disrepair.

-A number of states have strict redemption-rights periods, which prevents the lender from reselling the property.

-A few states have extended the length of eviction proceedings.

-The sheer volume of REO activity has created a “pig in the python” phenomena, (to put this in perspective, there will be roughly 10 times the number of REOs this year as in the last “normal” year, 2005).

What else could be slowing things down? A popular theory is that many banks are holding the properties off the market in order to defer losses. There is some accounting logic to this theory, as in most cases, banks aren’t required to adjust asset prices until the actual resale of the property. Another idea is that the industry is holding back the inventory to create leverage with the government in order to force the creation of a “toxic bank” or RTC-like entity that would buy the distressed assets at 50 to 60 cents on the dollar rather than the 30 to 35 cents available on the market today. This theory suggests that, seeing the threat of a massive inventory of distressed homes being released all at once, the government would “blink” rather than risk another housing market meltdown.

Whatever the reason—process issues or conspiracies—we’re going to continue to see record-breaking numbers of REOs for at least the next year, and we’ll all be watching to see when these sought-after homes finally make their way to the market.

2:37 PM - Nov. 10, 2009 - comments {0} - post comment

When is a foreclosure not a foreclosure?

This article is by George W. Mantor who is known as “The Real Estate Professor” for his wealth building formula, Lx2+(U²)xTFP=$? and consumer education efforts.


 

The latest chapter in the mortgage meltdown is being written in court, as one by one, judges are putting a halt to foreclosures. The latest was a recent Kansas Supreme Court case. In Landmark National Bank v. Kesler, the court held that a nominee company called MERS had no standing to bring a foreclosure action.

Nor was Kansas the first. In August 2008, Federal Judge for the U.S. Bankruptcy Court for the District of Nevada ruled MERS had no standing. ”Indeed, the evidence is to the contrary, the Note has been sold, and the named nominee no longer has any interest in the Note.”

In September of 2008, A California Judge ruling against MERS concluded, “There is no evidence before the court as to who is the present owner of the Note. The holder of the Note must join in the motion.”

On March 19, 2009, the Supreme Court of Arkansas determined that MERS was not the true beneficiary because the Note had been sold. Alabama and Florida have made similar rulings.

In each case, the reason stems from a fundamental misstep in the handling of Notes and Trust Deeds that runs contrary to established court policies which require that the real parties identify themselves to the court. Each of these cases involved MERS and, in each case, the courts’ rationales were almost identical.

First, a little background. Over the last 40 years, mortgage lending has evolved from a bank holding the mortgage to the mortgage being bundled and sold as part of an investment pool, usually in the form of a bond.

As a registered security, the Note is a negotiable instrument, like money or a cashier’s check, and under securities law that Note must be given to the investor. In this case, mortgage backed securities, (MBS) were bundled together in a pool and shipped to…well, we don’t really know.

One of the impediments to an MBS is the need to file assignments for the beneficiaries in each county each time the mortgage is resold. And apparently, no one holds them for very long because most have been passed around several times.

In order to avoid the logistical nightmare of trying to maintain a public chain of title, the biggest lenders joined MERS, Mortgage Electronic Registration Systems, Inc.

MERS was created with the sole intent of evading the recording fees due to the county in which the security is located.

In so doing, in my opinion, they also destroyed the age-old practice of making a public record of information concerning real property in general, and legal interest specifically. The chain of title is a vital record produced to resolve many a dispute.

Now, that’s gone. I believe, erased simply so they themselves, MERS, could siphon off the recording fees for themselves. They sold their business model to lenders as a better way to track mortgages that were being sold and resold all over the world.

But, as there often is with a BIG IDEA, there were also unintended consequences. Only now are they coming to light. Until MERS was challenged in a foreclosure proceeding, no one had taken a look at the law.

The law, according to a Nevada Judge, is that for purposes of foreclosure, both the Note and the Deed of Trust must be assigned. When the Note is split from the Deed of Trust, the Note becomes unsecured. A person holding only a Note lacks the power to foreclose because it lacks the security.

MERS lost track of the Notes. In some cases, according to my research, they deliberately destroyed them.

Every thing was fine until the economy contracted. MERS began foreclosing on delinquent home loans and then one day; someone said “show me the Note.”

In reviewing the judge’s rulings in the above matters, several key points have been determined:

• MERS is not the beneficiary of the Notes and has no skin in the game. It did not lend any money, collect any payments or do anything more than track the sale of the securities.

• Judicial procedure requires that parties identify themselves and prove their standing.

• Splitting the Note and Trust Deed leaves no party with standing to foreclose. The true holder of the Note, the security, paid the lender so the lender is covered. The true holder of the Note was insured by AIG so they are covered. AIG and the banks were bailed out by taxpayers. So, unless the American tax payer can produce a “blue-ink” original Note, no one has standing to foreclose.

• Allowing a foreclosure to proceed without the original Note places the homeowner in double jeopardy. If the original Note were to surface, the holder of the Note would be entitled to payment, but from whom? The borrower is still on the hook.

MERS currently holds 50 to 60 million loans so this is no small matter. And, just because they have lost repeatedly doesn’t mean they will give up. They will keep right on foreclosing in hopes that the homeowner won’t fight back and, in most cases, they won’t be stopped.

2:12 PM - Nov. 4, 2009 - comments {0} - post comment

Buying time against foreclosure

This article is by Mildred Wilkins, founder and president of Home Ownership Matters, LLC. She is the trainer for the (FIS) Foreclosure Intervention Specialist certification program. Visit her blog: HomeOwnershipMatters.blogspot.com or call toll free (866) 507-5105.

Never before has the expression “If I could just buy some time” meant so much to people. When you are facing foreclosure you need time to discover your options, analyze your situation and implement an action plan. Your most precious commodity is time…And it’s running out. 

When your money is running out…

You don’t have time to wait for the trickle down effect of the stimulus package to make a difference in your personal situation. While the package will make a significant difference over the long haul for thousands of Americans, anyone who thinks it is going to quickly make a difference for EVERY American is kidding themselves. Facing reality is hard, but necessary. As a country, we have ignored hard truths with disastrous consequences for too long. Nothing will be gained by continuing to point fingers. However, we must immediately recognize that each of us has a role to play in correcting the serious housing problem we face as a country. (Even if your home is paid off, FREE and CLEAR). The housing market holds the key to stabilizing our country, so anything we can do to keep people in their homes is a step in the right direction.

First thing’s first...

DO NOT ABANDON YOUR HOME. Even when you are behind on your mortgage, no matter how far behind you are, DO NOT abandon your home until the entire legal process has been played out. You can stay in YOUR house until your right to possession has ended. Exactly when that time is will be determined by three (3) factors:

1.  Type of foreclosure in your state: judicial or non-judicial
2.  Whether you have a mortgage or a deed of trust
3.  State statutes regarding sheriff or trustee sale and possession timeframes

Find out the answers to items 1, 2 and 3, and then abide by them. Make sure your lender abides by them as well. Things could improve while you are holding out. Hold on.

Things are changing radically and very quickly because of the magnitude of the housing problem. Your local courts could dramatically change the way they process pending foreclosures so that you have a chance to work things out with the lender. Stay in our home and fight for the chance to work things out. More banks are willing to work with borrowers today simply because they really can’t manage the huge backlog of homes which have already been lost to foreclosure. If you can present a viable plan, your chances of retaining home ownership are pretty good.

Second thing’s second…

I know you know that, but I needed to get your attention. Probably the second most valuable thing anyone will ever tell you to do to save your home from foreclosure is to:

1.  Demand the lender or servicer who is threatening to sue you for foreclosure produce the original note/deed of trust which says you owe them. In legal terms you are asking them to demonstrate that they are the “real party of interest.” In common language that means, prove I owe you. Prove you have the right to demand payments from me. (This has been discussed on our blog, which can be found at homeownershipmatters.blogspot.com).

2.  The most effective way to demand this documentation is with a “qualified written request”. You are entitled to request that and any other information you want which is related to servicing on your loan (any mortgage loan in the United States) under federal RESPA regulations.

What Choices do I have?

Let’s consider the answer to that question.   It is critical that you start with an honest inventory of your situation. How far behind are you? Do you have the resources to resume payments? If not now, when will you be able to do so? What do you want to do? What are you ABLE to do? Why should the bank consider your proposal? You’ll need to able to defend it as being reasonable, based on your current circumstances.

Space in this article will not allow me to go into detail but I will provide you with the options you can consider. Do further research on each of them, online, in the library, on websites such as HomeOwnershipMatters.com Or at the blog: HomeOwnershipMatters.blogspot.com.

a.  Options to keep the house—special forbearance, loan modification or a partial claim. You need to learn what each of these means and how it works

b.  Options to let the house go—short sale, assumption or deed-in-lieu. All of these options are better than foreclosure but you need to know exactly how they work to avoid creating yet another problem for yourself down the road.

c.  Reverse mortgage could be considered, it could be your solution. Be sure to use a government backed reverse mortgage if you decide to use this option.

d.  Receiving disability payments (if you have a claim pending) could make the difference. Hold on until you know what you will be receiving

e.  Acquiring a roommate could change your finances—get started working on it (I mean a roommate who will PAY—not one who will add to your expenses)

f.  Selling unnecessary items in order to cover the gap until you get a permanent solution. Ebay or Craigslist could bring in some immediate cash. (Stop crying—we are trying to save your home and Buy “T I M E”).

g.  Some other solution which has not even occurred to me

“Answer” the summons

The summons is your official notification that the lender has moved to legal action. The court notifies you via the “summons”. Your response should be to the clerk of the courts, the lender/servicer and their attorney. It is critical that your answer be received within the legally stipulated timeframe in your state. It is strongly recommended that the answer be sent by certified mail, with a signature required. This is a task which you can handle on your own, with a little coaching.

Basically, an answer should acknowledge that you are aware of your situation and that you are working with the lender on a plan. Specify what that plan entails. If you are challenging whether or not the lender has the legal right to foreclose (due to failure to produce the original note or demonstrate that they are the “real party of interest”) this is your time to say so. The foreclosure is likely to be stalled based on the quality of a timely, well prepared “answer”.

3:21 PM - May. 22, 2009 - comments {0} - post comment

What to look for in a real estate agent

This article is by George Mantor who is known as “The Real Estate Professor” for his wealth building formula, Lx2+(U²)xTFP=$? and consumer education efforts.

If you are a recent seller of real estate, you may have had some difficulty dealing with the gap between your selling price and your actual net proceeds, as reflected in your final check. Hopefully, you knew what to expect and factored that into your decision to sell. But, all too often, in the blizzard of activities involved in transferring real property, the costs of selling are often overlooked or underestimated.

Once all loans and liens are satisfied, the next largest cost is often real estate brokerage fees. Despite recent declines, property values having did rise rapidly in many markets and that fractional six or seven percent can equate to some serious coinage. It does cause one to ponder, where does all the money go?

As is often the case, the best value isn’t always the lowest price. Those looking for real value are more than willing to pay top dollar for top quality. But, the question arises, how does one determine the elements of full value in real estate services? What should one expect from a professional real estate practitioner?

A competent, knowledgeable real estate practitioner gets paid for their time and their knowledge.

Everyone’s time is limited. At some point, in the development of a personal service business, a practitioner can work no more hours. And, as they build their business, enhance their skills, and improve their knowledge, they can only increase their compensation by increasing their fees or adding additional revenue streams. Remember, the very best in every profession are always the highest paid.

Given the flood of inexperienced newbies who enter the field each year, a strong argument can be made that they should be paid what they’re worth.

Understanding the value of a real estate practitioner is made more difficult by what the consumer sees and doesn’t see.

From what I gather, a common perception of a real estate practitioner is someone who drives around in an expensive car, holds open houses, has a list of “for sale” properties and a special key, puts up sold signs, talks incessantly, demonstrates few social graces, scans the room over your shoulder looking for someone better to go get pushy with, and gets paid millions for doing the above.

Essentially, the work of a real estate practitioner can be broken down into three main categories: functionary duties, compliance duties, fiduciary duties.

Functionary duties

Most of what the public sees the practitioner doing could be described as functionary activity. Measuring a house, hanging a lock-box, canvassing a neighborhood, and designing flyers are examples of things that could be done by an agent of any level and, arguably, do not rise to the value of several thousand dollars.

Compliance duties

Behind the scenes, the trends toward consumerism and government regulation have placed burdensome responsibilities on sellers of real property to such an extent that most sellers have no idea what disclosures are required of them or what the consequences are for failing to provide them.

Many sellers incorrectly believe that their agent is responsible for providing these disclosures, but the legal onus is upon the seller. Among the practitioner’s compliance duties, would be a risk reduction strategy that directs the seller to be in compliance with all legally mandated requirements.

Over the course of my nearly 30 years in real estate, I have watched a standard real estate contract swell from a couple of pages to a three-pound bundle of disclosures, addenda, inspections, affidavits, disclaimers, waivers, reports, indemnifications, acknowledgements and amendments, all woven together in a labyrinth of time frames, receipts, authorizations, approvals, all with their unique ramifications and consequences for buyers and sellers of real estate.

The fact that consumers do not see all this doesn’t make it any less binding upon them.

For a real estate broker, these increasing compliance issues increase the cost of training, processing, filing, paper, toner, equipment, and long term storage. It either gets paid for by the consumer or it doesn’t get done. The consumer not in compliance is the one at risk, not the agent who cut corners.

Fiduciary duties

This brings us to what the public often doesn’t see; the top professionals in any field exhibit qualities that come at a price. Often, they are very selective regarding the clients they accept. Experience and longevity create an existing clientele.

The fiduciary relationship is based on trust. There is an absolute duty of fairness and honesty. And, in my view, there is a duty of competence as well.

That means education, training, and a commitment to mastering all of the technical and legal nuances of the business.

Here is what to expect from a top professional:

1. Courtesy

With privileged athletes and rock stars as our role models, boorish behavior has become mainstream. I’m old school. I still believe in something called “professional conduct.” I don’t need a code of ethics or Dr. Phil to tell me how to conduct myself in my myriad of daily encounters with people.

You should expect, at minimum, that a true professional will always be well-mannered, polite, relaxed, patient, and empathetic. These are more than niceties; they are valuable assets that benefit the client. These attributes foster effective communication, which is the heart of better negotiation.

Don’t think twice, just be nice. Years ago, I heard a very popular real estate sales trainer say that the worst thing that people could think of you was that you were nice. I don’t agree, but then I’m a country boy and I was reared to be polite and considerate.

Courtesy extends to being on time, returning phone calls promptly, and fulfilling commitments.

2. Thorough needs analysis

Any professional will want to meet you in their offices for the purpose of an initial consultation. Among the reasons are to determine if your situation fits their expertise, to conduct a thorough analysis of your circumstances and options, and to make sure you fully understand the process.

3. Strategy

Once you understand what your options are, you can begin to form a plan for achieving the one best option for you and your circumstances. Your best option could be doing something entirely different than your original plan, or even nothing at all. The strategy is the step-by-step process of achieving your best option.

4. Advice and Counsel

It can be hard to appreciate the value here but, in my view, it’s probably of greatest value to the client. I once asked the agent representing the buyer of my listing, “What did you advise your client to do?”

His response was, “I don’t give my clients advice.”

In my view, he is worth less than full value.

5. Prior inspections

Most real estate professionals hate surprises. They understand that it is far better for the seller if all property defects are determined prior to bringing the property to market. Those defects will be discovered by the buyer’s inspection which is likely to trigger protracted and needlessly acrimonious renegotiation and often cancellation.

6. Comparable Market Analysis

The key to selling quickly for the highest possible price is to place the property in the marketplace at exactly the right price. If the price is too high, the best qualified buyers won’t get to see it because they’ll be looking at homes priced in their spending range. This is where your home should have been listed, in the first place.

Two sets of data help to determine what is known as current market value: what others have recently paid for nearby properties which posses similar attributes such as square footage and amenities, and what is currently available to compete for buyers.

7. Mortgage Review

Is there a prepayment penalty or are there other fees associated with paying off the mortgage at this time? A prepayment penalty is deductible but should also be reflected in the plan.

8. Title Review

You could have a lien on your property and never know about it until you go to sell. Considering that even a mistake will take time to unravel, this should be learned early in the listing period.

9. Estimate of Net Proceeds

When you list your home for sale, the only thing that matters to you is your net proceeds, not the selling price or the agent’s commission. You should expect that any professional real estate practitioner would provide you with a breakdown of all the known and anticipated costs associated with selling real estate.

10. Review Escrow Instructions

You should expect that your escrow instructions have been fully reviewed to make sure there are no surprises, and the instructions to the escrow company reflect the meeting of the minds of the parties. Usually, more than one party is contributing information to escrow and they don’t always get it right.

If those 10 elements are missing then, in my view, you didn’t get full value. On the other hand, if your real estate professional behaved as I have described; upbeat, on the ball, honest, caring and laser-efficient, you can be confident that, in my judgment, you received high quality, professional service. If you feel that you got a trusted advisor instead of a salesperson, you got your money’s worth.

I’ve never advocated against those business models whose value proposition is discounted fees. Discounting brokers are hardly new to the marketplace, as much as they’d like you to believe otherwise. They often serve as valuable training grounds for new licensees who are willing to work for less to offset their inexperience. In a few years, if properly tutored, they will have built enough value in themselves to justify top tier compensation. My bet is that they won’t continue discounting once they’ve achieved mastery.

The real estate business has become so complex and legal that a meaningful apprenticeship ought to be required. But, the failure rate is so high and the turnover so rapid that it can be difficult to build much of a foundation of knowledge of real estate fundamentals while driving the salesperson to be a good closer. At least the argument can be made that, “I don’t know much about real estate, but I can save you thousands in fees.”

I know it can sound trite to say “you get what you pay for.” And, we all know from our own first hand experiences, with all manner of things, including real estate professionals, it isn’t always true. But, one thing is obvious, the best and the brightest will go where they are rewarded commensurate with their talent.

The skills required to master the real estate profession are easily transferable to other arenas. If the dumb-down factor becomes so great that masters cannot earn a living in real estate, they’ll just switch to another business.

The consumer may save money but the service level will fall as well. And, a handful of the very best will increase their fees in recognition of their higher level of service.

3:13 PM - May. 20, 2009 - comments {0} - post comment

Foreclosure moratorium means more short sales

This article is by Tom Gordon is Executive Vice President of Business Solutions for DepotPoint, Inc., which brings greater efficiencies and cost savings to mortgage lenders, loan servicers, foreclosure attorneys and REO asset management firms

The national foreclosure moratorium imposed by Fannie Mae and Freddie Mac, major banks such as Citibank and Bank of America, and a host of state governments has created a “breather” for homeowners in default. By working with loan servicers, some homeowners will be able to modify their loan terms and stay in their homes. But many won’t.

Not all borrowers will qualify for modified loans. Lenders are keenly aware of this, as well as the fact that foreclosing on a home is an expensive proposition: It can cost a bank $30,000 to $50,000 to foreclose on a home, plus carrying costs that equate to 1.0% to 1.25% of the value of each home per month. There is little enthusiasm for increasing bank-owned (REO) inventory in markets already saturated with foreclosed homes and falling prices.

As an alternative, lenders have new enthusiasm to ramp up the volume of short sales.

Short sales, as most know, are when the lender allows a distressed property to be sold at a price lower than the homeowner’s mortgage indebtedness, with the difference forgiven. This relieves the homeowner of their ownership and debt burden without marring their credit report the way a foreclosure would. It also typically allows the new purchaser to buy into the neighborhood at a substantial discount … much more in line with the property’s true, current market value. In other words, short sales facilitate efficient clearing of the market.

Historically, short sales have not been very appealing to lenders. The short sale is a complex process that requires an agreement by all the lien holders to accept the lesser amount owed by the original borrower. The paperwork and number of players involved in short-sale transactions can easily overburden a servicer who is already dealing with hundreds of thousands of loan modifications, REO dispositions, etc.

But now with over four million new loans in default in this cycle and six million more expected in early 2009 due to coming interest-rate resets, lenders such as Citibank, Bank of America and Wells Fargo are fired up for short sales.

As they see it, if just 25% of current loans in default could be sold through short sales it would stave off one million foreclosures (good for homeowners) and replace one million nonperforming borrowers with one million performing borrowers (good for lenders).

The industry’s challenge to accomplish this is two-fold: Evaluating their portfolios to determine which homes are well suited for short sales, and processing the high volume of bulk sales.

So lenders are now assessing a distressed borrower’s situation early in the loan modification process, calculating the sensibility of modifying the loan versus offering the property in a short sale or letting it likely roll into foreclosure. In cases where short sales are the best route, lenders are proactively assigning loans in bulk to be put through the short-sale process. (This phenomenon is strangely new to homeowners; in the past it was incumbent on them and their agents to initiate the short-sale process, not the other way around).

12:51 PM - Feb. 21, 2009 - comments {4} - post comment

The Housing and Economic Recovery Act

President Bush recently signed the "Housing and Economic Recovery Act of 2008" into law. This $300 Billion rescue plan is aimed at helping struggling homeowners avoid foreclosure, as well as boost confidence in the housing market. Although the bill is several hundred pages long and contains a number of far-reaching provisions, here are a few of the major provisions in the legislation that impact homeowners and homebuyers:

1. Tax credits. First-time homebuyers who purchase their primary residence on or after April 9, 2008 and before July 1, 2009 are eligible for up to $7,500 in tax credit, provided they haven't owned a home in the last three years and fit certain income parameters. The credit is generous, but it is actually an interest free loan, paid back over 15 years at $500 per year when taxes are filed.

Special note: Some types of seller-paid down payment assistance programs are being eliminated as of October 1st as well - so purchasing a home before then may gain you a double benefit of tax credits AND seller-paid down payment assistance while it is still available.

2. Larger loans at lower rates. There have recently been provisions in place that have allowed loans larger than $417,000 to qualify for better financing rates than normally would be available for "jumbo" loan amounts of that size, thanks to Fannie Mae and Freddie Mac. Although these provisions were set to expire, they are being extended...however, the top end of the loan size that will be allowed under these programs will be dropping down from $729,750 to $625,500 as of January 1, 2009.

3. FHA Hope for Homeowners. This provision is designed to help homeowners who are "upside down" on their mortgages--that is, they owe more on their house than they can sell it for in today's market. Essentially, this plan allows homeowners who meet the requirements and are upside down to refinance their mortgage to a new 30-year Fixed FHA mortgage. There are a number of qualifying details that must be met and requirements to be agreed to -- including agreeing to split the equity in your home with the government in the future. Still, if you're upside down on your mortgage and struggling in today's economy, this is an option worth exploring in more detail.

2:00 PM - Aug. 28, 2008 - comments {1} - post comment

Fannie Mae has the "Keys to Recovery"

The initiatives are geared toward helping struggling borrowers stay in their homes, assisting prospective home buyers with home purchases, and stabilizing impacted communities. Here is a summary from Fannie Mae: 

Keys to Recovery Initiatives

Fannie Mae’s Keys to Recovery^TM initiatives are geared toward providing liquidity, stability, and affordability to the housing and mortgage markets for the long term, and includes steps to keep struggling borrowers in their homes, assist prospective home buyers with home purchases, and stabilize communities impacted by the mortgage market downturn.

The initiatives include:

1.) A new refinancing option for Fannie Mae “underwater” borrowers that will allow for refinancing up to 120% of a property’s current value;
2.) A renewal and expansion of the company’s partnership with State Housing Finance Agencies (HFAs) to provide $10 billion in financing for qualified, first-time home
buyers;
3.) In partnership with Self-Help, a new initiative that allows families in hard-hit communities to reside in foreclosed properties on a rent-to-own basis; and 4) pricing for new jumbo-conforming loans that will be flat to conforming for portfolio asset acquisition through the end of the year.

Refinancing “Underwater” Borrowers

With home prices declining in many areas of the country and lending standards tightening as a result of the ongoing turmoil in the housing finance system, many borrowers find themselves with mortgages that exceed the value of their homes and are locked out of refinancing into safer loans that would allow them to sustain their mortgage payments.

In order to assist borrowers whose home equity is “underwater,” reduce foreclosures, and support sustained homeownership, Fannie Mae will purchase refinanced loans the company owns for up to 120% of the current property value provided the borrower is current with their mortgage payments.

HFA Investment

HFAs exist to provide affordable homeownership and rental housing opportunities within their states. The majority of HFA single-family business is for first-time home buyers who have received borrower counseling and down payment and/or closing cost assistance from the government.

Fannie Mae has maintained a long-term agreement with the National Council of State Housing Agencies (NCSHA) to purchase loans generated by the HFAs. The company is renewing and expanding its agreement with NCHSA to purchase up to $10 billion in HFA loans by the end of 2009. In addition, the company will provide access to low down payment mortgage products at competitive prices, resulting in more advantageous financing opportunities for first-time home buyers.

Neighborhood Stabilization

In order to minimize the neighborhood impact of foreclosed properties, Fannie Mae will support an initiative with Self-Help in partnership with local nonprofits to purchase foreclosed homes in hard-hit neighborhoods.

The nonprofits would acquire and rehab the properties, and then sell them to qualified borrowers or enter into a customized lease-purchase agreement. The initiative will be geared toward borrowers who have the income to qualify for the home purchase, but need additional time to improve creditworthiness. Participants choosing the rent-to-own option would be granted up to five years to qualify for the mortgage and receive extensive credit counseling during the lease period.

Jumbo-Conforming Loans

Following passage of the Economic Stimulus Act of 2008, Fannie Mae is temporarily able to purchase loans greater than the conventional-conforming loan limit of $417,000. In certain high-cost areas as designated by HUD, the company is able to purchase jumbo-conforming loans up to $729,750 in the continental U.S. The company is now accepting deliveries of 15-year and 30-year fixed-rate (FRM), and certain adjustable-rate (ARM), jumbo-conforming mortgages.

In order to bolster liquidity in the jumbo-conforming market and help reduce rates for jumbo-conforming mortgages in high-cost areas, the company will now:

• Price new jumbo-conforming loans flat to conforming for portfolio asset acquisition through the end of the year. This means that although jumbos are not TBA-eligible, we will be pricing them as if they were.

• Allow for cash-out, jumbo-conforming loan refinancings.

• Expand loan-to-value (LTV) criteria for jumbo-conforming purchase loans and limited cash-out refinancings.

• Offer expanded jumbo-conforming FRM and ARM options.

HomeStay

The company’s Keys to Recovery^TM efforts build on Fannie Mae’s HomeStay® initiative announced last year.

The company is working with lenders, loan servicing companies, and policy makers to respond to the housing and mortgage market crisis with a goal to minimize the impact on families and communities by preventing foreclosures, supporting counseling efforts, and providing market stability.

Through HomeStay®, since the beginning of 2007, the company has:

• Helped more than 200,000 at-risk homeowners refinance into safer loans or work out their loans, including nearly $28 billion in refinancings for subprime borrowers.

• Provided more than $10 million in grants - and hundreds of employee volunteer hours - to support foreclosure prevention counseling and workshops since the housing crisis deepened last year.

• Worked with loan servicers to emphasize work-outs for delinquent loans, instituted attorney incentive fees for workouts, provided HomeSaver Advance^TM loans that allow borrowers to catch up on their delinquent mortgage payments, deployed staff to work on-site with our largest servicers, and made dozens of operational changes and enhanced servicer authorities to allow for easier modifications and work-outs.

• Supported HOPE NOW initiatives and public policies to give at-risk and delinquent borrowers a better chance to afford their mortgages.

National Down Payment Policy

On May 16, 2008, the company announced a new, single down payment policy in all communities across the nation for conventional, conforming mortgages the company will purchase or guarantee. Starting with loan applications taken on June 1, 2008, Fannie Mae will accept up to 97% loan-to-value ratios for conventional, conforming mortgages processed through its Desktop Underwriter® automated underwriting system, and 95% loan-to-value ratios for loans underwritten outside of Desktop Underwriter, in all geographic locations in the United States.

This new national down payment policy will supersede the “Maximum Financing in Declining Markets Policy” Fannie Mae adopted in December 2007, which required higher down payments in markets where home prices are declining. The new policy now equalizes down payment requirements across the country, regardless of local market conditions.

2:17 PM - Jul. 11, 2008 - comments {0} - post comment

Buy smart in today's market

With interest rates at a 35 year low, affordable financing, and abundant inventory, it’s a buyer’s market. “There are plenty of great opportunities that make the American dream of homeownership more affordable today if you know where to look and how to make the right deal,” says McGee, also author of “The ForeclosureS.com Guide to Advanced Investing Techniques You Won’t Learn Anywhere Else” (Wiley) and “The ForeclosureS.com Guide to Investing in Pre-foreclosures Without Selling Your Soul” (Wiley).

A recent survey from Trulia.com by Harris Interactive® indicated that more than half of Americans would consider purchasing a foreclosed home. “It sounds like those Americans recognize a good deal,” adds McGee. “So what are you waiting for? It’s bargain time. Buy now.”

McGee offers a few tips to help you buy right in today’s markets:

- Do your homework before you buy. That means know the local market, the going price in a specific neighborhood, and what kind of financing is available. You can get free information and guidance online at sites like ForeclosureS.com (www.ForeclosureS.com) and the National Association of Realtors (www.Realtor.org). But beware those websites that promise instant riches for “no effort and no money down.”
- Open your eyes to the opportunities that surround you. Even cities with high foreclosure rates have motivated sellers in sought after neighborhoods — where well-priced homes resell quickly.
- Make sure you know the current prices for comparable properties in the area. With markets in flux, prices from three months ago no longer are good enough.
- Don’t be afraid to ask for a discount. To figure your offering price don’t forget to deduct the costs of necessary repairs and rehab and your profit. If you’re buying a property with plans to turn around and resell it, deduct from your offering price the cost of buying, holding and selling the property until you find a buyer - and don’t forget to pencil in your profit!
- Don’t be derailed by marketing come-ons, gimmicks, and “insider secrets”. If it sounds too good to be true, it is.
- Beware the “great deals” at the auctions. Competitive bidding drives up prices. Instead of buying a house at discount, you could end up paying full market price or more if you factor in auction commissions and fees.
- Consider FHA as a low-cost, safe financing alternative. With new higher loan limits, interest rates at 35 year lows, and home buyer tax incentives still being ironed out in Congress, this is an excellent opportunity for you to buy low.

1:12 PM - Jun. 29, 2008 - comments {0} - post comment

Foreclosure solutions

Do you remember when the iPhone first came out?  About a week before it hit store shelves, an on-line sports book published odds claiming that 1 in 20 shoppers would be trampled to death while trying to get one.  Coincidentally, those are also the odds in any given week that someone will be behind on their mortgage payments.  There are solutions according to Scot Kenkel, President and CEO of Success Learning Institute, LLC, a training company.

 Are you one of them? 

 If you are, you realize that the stench of fear permeates your being, as you approach the unfamiliar territory of foreclosure.  You don't have to be a bum or a deadbeat to get into this position.  It can be as simple as missing a few days of work or having a mortgage payment or two wind up in the Dead Letter File at the post office.  Either way, your payment’s late or you're in deep doo-doo with your lender.  Now your lender's threatening you with the Big “F” -- foreclosure.

 The last thing you want or need is to face the stigma of foreclosure, so you're seeking any port in a storm.  The best way to get out of this mess – if you can come up with the cash – is reinstatement.  The concept is simple:  Pay your lender what you owe. In return, your lender will call off the hounds and allow you to continue with your mortgage contract as if nothing has happened.  This could be a practical and doable option if your problem is a short term financial hiccup.  

 In practice, however, it could be a pretty tall order because you'll be required to catch up your payments – with late fees – in one single lump sum payment.  Most lenders stipulate in your contract that partial payments won't be accepted.  While it's possible to pay less than the full balance of your back payments, it isn't as likely an outcome.  If you can work this out, you'll need to get it in writing and the only chance you have of making it happen is if you can satisfy the lender that the conditions that led to your being late won't be repeated.  If you're able to convince your lender to accept a lesser amount, it will likely take an act of Congress and your first born child.  In addition, this sort of an arrangement will take some time to negotiate – time you probably don't have.

 When you're in this precarious financial position, you're at your lender's mercy.  It's just you and your lender.  Instead of being intimidated or bullied into making a rash decision that could have a dramatic impact on your financial future, you should enlist the help of a trained professional, someone who will be in your corner, looking out for your best interests – not the bank's. 

 I'm talking about a real estate professional.

 By calling a trained real estate professional, you'll get sound advice from an objective advocate that will act as a counterbalance to the power of your lender.  This advice won't cost you an arm and a leg.  As a matter of fact, it won't cost you a thing.  Then you can decide for yourself whether reinstatement of your mortgage is the best course of action for you.  Then maybe you can consider getting an iPhone – but only if you're willing to run the risk!marketing.

3:10 PM - Jun. 17, 2008 - comments {0} - post comment

Foreclosure 101

Foreclosures are hitting record numbers across the country. To assist homeowners, FrontDoor.com, a new real estate website powered by HGTV, is offering a foreclosure guide that provides much needed resources to successfully navigate and understand today’s complex real estate market.

1) Foreclosure is a process, not a thing.

People often misuse the term “foreclosure.” Foreclosure is a series of events, not a state of being. Lenders don’t foreclose on homeowners; they foreclose on property.

2) The foreclosure process has four phases. The terms and length of each phase vary by state.

Your rights and options as a homeowner vary depending on the stage your home is in and the state you live in. Know what laws apply to you. For instance, if you’ve missed three mortgage payments or less, you typically have a little time to work with your lender to “cure” the default. In many states, you have until the auction date to get your payments up-to-date.

3) A difficult financial situation doesn’t have to lead to foreclosure.
There are several steps you can take to avoid foreclosure if your loan is about to adjust, you lose your job or otherwise anticipate that you might miss mortgage payments. For instance, if your ARM reset will double your mortgage payments, show your lender documentation of your income and debts to make a convincing case for a loan modification.

4) The mortgage lender is not eager to take your house away.

Lenders are not in the business of managing real estate, so they would rather work with homeowners to keep them in the house. And with the growing number of defaults across the country, your lender may be more open to cutting a deal.

5) You can sell your home immediately when foreclosure is looming.

Even if you live in a tough market, being aggressive and keeping your home in good condition can help you get a speedy sale.

6) All is not lost once you get a notice of default.

If you’ve missed more than three mortgage payments, you still have some alternatives for stopping the foreclosure process.

7) A short sale is better than going through foreclosure.

Lenders don’t typically forgive mortgages, but in a market with lots of inventory, they would rather see the house sold for less than the mortgage, than deal with trying to sell it themselves.

8) Foreclosure has major legal, tax and credit consequences.

Foreclosure will heavily impact your ability to borrow money in the future, so make sure you’ve exhausted all other options first.

9) Buying a foreclosure property doesn’t always mean you’ll get a bargain.

Your buying strategy depends on the stage of foreclosure the property is in and the state you live in. Finding a turnkey property in the foreclosure market is rare. Oftentimes, the home will need some renovation. Crunch the numbers first to make sure you really are getting a deal.

10) Understanding your mortgage can help you avoid foreclosure.

Many homeowners who end up in foreclosure say they were unaware of some crucial pieces of information about their mortgage. Read all the loan documents, ask questions and consult with an attorney if you can.

6:58 PM - Apr. 6, 2008 - comments {1} - post comment

Foreclosures up 30% in Q3

RealtyTrac publishes the largest and most comprehensive national database of foreclosure and bank-owned properties, with over 1 million properties from nearly 2,500 counties across the country, and is the foreclosure data provider to MSN Real Estate, Yahoo! Real Estate and The Wall Street Journal's Real Estate Journal.

"August and September were the two highest monthly foreclosure filing totals we've seen since we began issuing our report in January 2005," said James J. Saccacio, chief executive officer of RealtyTrac. "Although not all areas are being hit as hard as others, the rise in foreclosures is quite widespread, with 45 out of the 50 states documenting year-over-year increases in the third quarter. Given the number of loans due to reset through the middle of 2008, and the continuing weakness in home sales, we would expect foreclosure activity to remain high and even increase over the next year in many markets."

Nevada, California, Florida post top foreclosure rates.

Nevada posted the nation's highest foreclosure rate for the quarter, one foreclosure filing for every 61 households. A total of 16,817 foreclosure filings on 12,982 properties were reported in the state during the third quarter, up 23% from the previous quarter and more than triple the number reported in the third quarter of 2006.

California's third-quarter foreclosure rate of one foreclosure filing for every 88 households ranked second highest among the states. A total of 148,147 foreclosure filings on 94,772 properties were reported in the state during the third quarter, up 36% from the previous quarter and nearly quadruple the number reported in the third quarter of 2006.

Florida documented a third-quarter foreclosure rate of one foreclosure filing for every 95 households, the nation's third highest state foreclosure rate. A total of 86,465 foreclosure filings on 60,992 properties were reported in the state during the third quarter, up more than 50% from the previous quarter and more than double the number reported in the third quarter of 2006.

Other states with foreclosure rates among the top 10 included Michigan, Ohio, Colorado, Arizona, Georgia, Indiana and Texas.

California and Florida registered the top two state foreclosure filing totals for the quarter, followed by Ohio, which came in third with 46,818 foreclosure filings on 35,242 properties. With 44,092 foreclosure filings on 26,773 properties, Texas documented the nation's fourth highest total.

Michigan's total of 43,786 foreclosure filings on 29,655 properties was the fifth highest total.

Other states with foreclosure filing totals among the top 10 included Georgia, Arizona, Illinois, Colorado and Nevada.

12:58 PM - Dec. 4, 2007 - comments {0} - post comment

Maybe there aren't as many foreclosures as we think

“But don’t be fooled by the numbers. The overall economy is sound, and markets will turn around,” says Alexis McGee, president of ForeclosureS.com and author of the upcoming book, “The Foreclosures.com Guide to Investing: Making Huge Profits Investing in Pre-Foreclosures Without Selling Your Soul” (John Wiley, September 2007).  “Even the Mortgage Bankers Association’s just-released Mortgage Delinquency Survey reported that except for several key states, overall mortgage delinquency rates dropped in first quarter 2007 over fourth quarter 2006 numbers,” says McGee.

“In fact, MBA’s chief economist Doug Duncan, in releasing the survey, pointed out that ‘the percentage of loans in foreclosure would be well below the average of the last ten years were it not for Ohio, Michigan, and Indiana, and the rate of foreclosures started nationwide would have fallen were it not for the big jumps in California, Florida, Nevada, and Arizona,” adds McGee, also president of ForeclosureS.com the California-based real estate investment advisory firm and publisher of foreclosure and property information.  On a per capita basis, Nevada has been hardest hit state so far this year for all stages in the foreclosure process, according to ForeclosureS.com.

The stages of the foreclosure process include:

- Stage 1 Pre-foreclosure filing: The initial notice that the property is now in foreclosure for an unpaid secured lien or loan.
- Stage 2 Auction filing: The notice that the public court house auction sale date has been set because the unpaid secured lien or loan remains unpaid. Some states, like Arizona, combine Stage 1 & 2 into one notice, and are reported Stage 2 only.
- Stage 3 REO (real-estate/bank owned) filing: The notice that the foreclosure has gone to auction and the property has transferred to the winning bidder or reverted to the lender. The home owner has lost their house to foreclosure.

Other states feeling the worst of the foreclosure pinch include Florida, Michigan, Ohio, Colorado, Texas, Georgia, Arkansas, and much of the rest of nation’s Southwest region, according to the numbers and analysis of the more than 2.5 million property listings available at ForeclosureS.com.

“Looking at just pre-foreclosures, before a homeowner actually loses his or her home, nationally 4.2 homeowners out of every 1,000 households faced a pre-foreclosure filing so far this year. That’s double the number last year at this time,” says McGee. “And those numbers will go even higher before they come down.”

Among the reasons, approximately $567 billion of subprime adjustable rate mortgages (ARMs) are scheduled for rate reset this year. That’s according to John M. Reich, head of the U.S. Office of Thrift Supervision (statement to the U.S. House Subcommittee on Financial Institutions and Consumer Credit of the Committee on Financial Services, March 27, 2007). Those rate resets mean significantly higher monthly mortgage payments for those homeowners, too.

“The end result will be less mortgage affordability for many and more foreclosures,” adds McGee.

The MBA’s recent survey also reported that new foreclosures hit a new record in first quarter 2007. But Duncan, also tempered those numbers.

“…Most of the increase was due to only four states, California, Florida, Nevada, and Arizona. Without these four states, foreclosure stats would have declined. Twenty-four states saw a decline in foreclosure starts while the rest of the states saw negligible increases…” added Duncan.

“As I’ve said many times,” adds McGee, “it’s about people buying homes they really can’t afford with creative financing and banking on rapid price appreciation. Now that prices have deflated and interest rates reset, those homeowners are left with little alternative but foreclosure.”

Looking at actual filing numbers from ForeclosureS.com, year-to-date, there have been a total of 343,745 pre-foreclosure and auction filings (both prior to a homeowner actually losing his or her home), and 185,369 REO filings (indicative of a property lost to foreclosure). That compares with 178,492 pre-foreclosure and auction filings, and 126,889 REO filings for the same period a year ago. Those raw foreclosure filing numbers combined are up 92.6% and 46% respectively year over year.  However, keep in mind when analyzing the number of filings only, that the same property can account for multiple filings-one at each stage in the foreclosure process. That is why our per-capita analysis is so much more accurate.

“I truly feel for these homeowners facing foreclosure,” says McGee. “Their numbers are a cause for concern, but not the hysteria some would have us believe amid the recent financial markets shakeout. Our nation’s housing market has not and will not collapse long term because of this increase in foreclosures, just like it did not collapse in the mid-1990’s during our last real estate correction. Literally millions of other homeowners in the United States still meet their mortgage obligations every month. Approximately 75.6 million people in the United States-69% of the population–own the home they live in, according to Census data.

“The reality is that foreclosures account for a small portion of the $10 trillion in total U.S. mortgage debt, and not everyone with a subprime mortgage (those issued to people with poor or no credit) defaults on their loan,” says McGee.

Fed Chairman Ben Bernanke agrees. In a speech last month at a conference by the Federal Reserve Bank of Chicago (Annual Conference on Bank Structure and Competition, Chicago, Illinois, May 17) Bernanke also cautioned of further increases in delinquencies and foreclosures this year and next as ARM interest rates and payments reset.

But, Bernanke added, “…we believe the effect of the troubles in the subprime sector on the broader housing market will likely be limited, and we do not expect significant spillovers from the subprime market to the rest of the economy or to the financial system. The vast majority of mortgages, including even subprime mortgages, continue to perform well.”

The lesson in all the numbers and hype around foreclosure numbers is that consumers must learn to make more informed mortgage decisions, says McGee.  “That goes for before a home purchase–if you can’t afford the full monthly payment after a rate reset, don’t buy the home. And after you buy, too, if for some reason you run into financial difficulty that puts your mortgage obligation at risk, no matter what anyone says contact your lender immediately. Too often, too many homeowners don’t contact their lender until it’s too late and ultimately are forced into foreclosure. Remember, it’s usually in the lender’s best interests to help a homeowner work out their mortgage difficulty. It’s lots cheaper for them than foreclosure.”

2007 year-to-date foreclosure filing numbers, according to ForeclosureS.com data:

- In pre-foreclosure filings, Nevada led the nation per capita with 17 out of every 1,000 of its homeowners in the first stage of the foreclosure process. A year ago that state had just 7.2 filings for every 1,000 of its households.
- The rest of the top five states per capita so far this year include Colorado (10.8 filings per 1,000 households), Florida (9.4 per 1,000 households), California (7.7 per 1,000 households), and Utah (6.4 per 1,000).
- Texas topped the nation by per capita in filings of notices of foreclosure auction, stage 2 in the foreclosure process, with more than 9 of every 1,000 households facing difficulties to date this year. That’s up more than 33% from the same time period last year. The state also leads the nation in total number of auction filings so far this year-32,011.
- Rounding out the other states in the top five auction notices: Nevada (7.7 filings per 1,000 households); Arizona (5.8 filings per 1,000 households), Arkansas (4.5 filings per 1,000 households), and Oregon, 4.4 filings per 1,000).
- Colorado led the nation per capita in REO filings, stage 3 bank foreclosed homes, with just over 9 homeowners out of every 1,000 losing their property as a result of foreclosure.
- The rest of the top five per capita in REO filings, bank owned homes include Michigan (6.3 properties lost out of every 1,000 households); Nevada and Georgia tie (5.4 filings of every 1,000 households), and Indiana ties with Ohio (4.8 filings out of every 1,000 households.
- Even though Indiana’s per capita REO filings ranked high nationally, they’re actually down 3% per capita year to date over 2006 numbers, according to ForeclosureS.com.
- Indiana joins 7 other states of the 45 (including the District of Columbia) reporting REO filings that also dropped year to date 2007 over the same period last year.
- Those other states with reduced REO filings include Massachusetts (off 97%), Oklahoma (off 16%), South Carolina (down 31%), Utah (down 55%), New Mexico (down 25%), Oregon (off 23%), and Hawaii (down 10%).

10:28 AM - Jul. 13, 2007 - comments {0} - post comment

Surrounded by foreclosures? Here's how to protect your home

Having lots of foreclosed homes in an area can spell trouble for homeowners in the neighborhoods in which they are located. In addition to the potential for dragging down the values of surrounding homes as lenders try to unload, vacant foreclosures also present an inviting target for vandals and squatters.  "When there are a lot of foreclosures in a neighborhood that will put downward pressure on other homes. The banks will try to get foreclosures off their balance sheet as fast as they can, and they will be aggressive at pricing them," said Celia Chen, director of housing economics at Moody'sEconomy.com.

Even when priced below the competition, foreclosed homes can linger on the market. In the current market it could take up to four months to sell a foreclosed property, particularly those that appeal to "low-ballers" and "bottom-feeders" willing to wait in order to pressure lenders into taking just 50 cents to 75 cents on the dollar for the homes.  Although Moody's Economy.com sees home prices overall declining through 2008 due to excessive inventory, individual owners can take steps to make their property more attractive, Chen said. She recommended home improvements such as fresh paint and landscaping to ward off the impacts of falling prices due to a great number of foreclosures in a neighborhood.

Keeping Watch

For those homeowners fearing that the "low-ballers" and banks trying to unload foreclosed homes will sap the value of their own properties, residents could band together to watch out for a property.

Try forming a little neighborhood watch where people watch over that house to make sure there's no vandalism, no squatters trying to move in, and to avoid people from stealing the fixtures of the home.  Banks will board up houses that are vandalized or that people break into.  Making sure that doesn't happen can keep banks from dumping problem homes at fire-sale prices.

Homeowners who have to sell in an area where foreclosures are numerous might want to follow the lead of home builders, which are throwing in extras in to attract buyers while keeping up the selling price.  "One thing that the builders do is to offer to put all kinds of things into the house at no extra charge, like granite countertops," said David Seiders, chief economist for the National Association of Home Builders. "That gives the buyer more house for the money."

Also, paying your buyer's closing costs is an option that some home builders take, Seiders said. Those strategies "help hold the price up, but they do come out of the builder's margins," he said, as they would cut into home sellers profits.

More than two million households in the subprime market have already either lost their homes to foreclosure or hold subprime mortgages that are likely to fail in coming years, according to consumer groups. According to a recent survey from Yahoo Real Estate and Harris Interactive, 22% of homeowners are at least somewhat concerned about the possibility of foreclosure due to their inability to meet monthly mortgage payments. But even more Americans think there is opportunity in the situation: 37% of all U.S. adults would be at least somewhat interested in buying a house in foreclosure.

Don't Sell in a Panic

It's important to think of homeownership as a long-term investment, said David Berenbaum, executive vice president with the National Community Reinvestment Coalition. "People have been in an environment where they're flipping homes. We need to look at homeownership as promoting intergenerational wealth."

Berenbaum added that owners should remain calm rather than panicking and trying to sell now. Owners don't actually lose money on a home until they sell at a discount to the purchase price, he pointed out.  "We will weather this storm," he said. "At some point the housing market will come around. What we don't want to see are homes that are empty, home that create a destabilizing environment."

2:36 PM - May. 22, 2007 - comments {3} - post comment

If you're facing foreclosure

Some commentators blame the crisis on lax credit guidelines over the past few years; others fault Wall Street bankers and mortgage-backed securities. Either way, one thing seems abundantly clear: millions of Americans are, or soon will be, overextended and at serious risk of losing their homes. Are you, or someone you know, one of them?

If you're currently struggling to make your monthly mortgage payment, the decisions you make today could make or break your financial future. Remember, even though most lenders would much rather have the money and interest that your mortgage can generate as opposed to actually taking your home, the foreclosure process can begin immediately after a single mortgage payment is past due, and you've breached the agreement. Therefore, don't wait for this to happen. Even if you're already late on a payment, there may still be a number of options available to help you keep your home. The key to avoiding foreclosure is enlisting a mortgage specialist to help analyze your financial situation.

The following are a few possible short- and long-term options that could help you avoid foreclosure, depending upon your particular goals and needs.

Refinance
If you have an Adjustable Rate Mortgage and you're currently struggling to make the monthly payment, then ask yourself this: can you really afford an increase of up to 50% or even 100% of your current payment when your loan resets? Fixed rates are currently near historic lows, and refinancing may provide the stability you need to get through the tough end of this changing real estate market. Even if you have a prepayment penalty, you may still have attractive options that, in the long run, could save you a lot of money. The key is to act now. As more and more subprime lenders collapse and foreclosures increase, credit standards will tighten further, and, depending upon your credit, you may not qualify to refinance in the future.

If you're an ARM borrower who is not struggling with current mortgage payments, are you prepared for a potential increase when your loan resets? Do you know exactly how much your increase will be? Do you know your index and margin? One of the biggest problems ARM and Negative-Am ARM consumers will face is simply not being aware of and prepared for the changing nature of their mortgage instrument. Don't let foreclosure sneak up on you. Can you afford a $700 a month increase in your mortgage payment? If you have an ARM, look six to twelve months down the road. What if you lose your job? What if your child's tuition increases? Will you be able to handle the increased monthly mortgage payment? These are important questions and issues that should be addressed by an expert who has your best interests in mind.

Sell Your Home
If you do have some equity built up, selling your home could be the quick fix you need. Ask a real estate agent for a comparative market analysis to see if your home can be sold before your payment resets at a higher rate. Sure, you may not get the price you could've gotten for your home a few years ago, but you may be able to avoid foreclosure and even walk away with some profit.

For many borrowers, however, an increased mortgage payment is not their biggest problem right now. In parts of the country where home values have significantly decreased, some borrowers actually owe more on their mortgage than their house is currently worth. And while this is a terrible position to be in, it does not mean that a house can't be sold or that foreclosure can't be averted. Ask your mortgage specialist about the possibility of a short sale, a common strategy that allows you to sell your home at a loss.

Some consumers may want to consider a hard-money refinance. A last resort, this is a more expensive "private money" loan that is not advisable for all borrowers. When it comes to private-money loans, however, be careful. There are scammers out there who prey on people trying desperately to save their homes. Always seek professional advice before taking on any mortgage or refinance. Remember, your goal in refinancing is not to put yourself in a worse position than you're already in.

Communicate with your Lender
If you don't have a lot of equity built up, and homes all over your neighborhood are up for sale, foreclosure is not necessarily inevitable. If you simply can't afford your mortgage and you seem to have no other options, talk to your lender before you get behind. To avoid the expense of a foreclosure, some lenders may be willing to work with you.

If you do get behind in your payments, your lender may provide a forbearance agreement, but lines of communication must be kept open. This type of arrangement will allow you to make back payments and avoid foreclosure. If, however, you run out of options and there seems to be no hope, you could always offer to give up the deed in lieu of foreclosure. To avoid legal costs, some lenders may accept this gesture without initiating foreclosure proceedings.

The subprime collapse is in full swing and, one way or another, millions of borrowers are going to be negatively affected. With the enormous wave of foreclosures expected in the coming years, it's important to know exactly where you stand with the biggest investment you'll likely ever make: your home. If you are concerned about possible increases in your monthly payment, get a mortgage check-up today. You'll be glad that you did.

2:12 PM - Apr. 28, 2007 - comments {0} - post comment

Foreclosure "rescue" scams

Large parts of the country are just now seeing the large numbers of foreclosures that we in Colorado have experienced for the past two years.  As always, it seems where people are in trouble, there are predators out there waiting to pounce.

Convinced that home foreclosures will rise dramatically in the next two years, the chief economist for the Real Estate Center at Texas A&M University warns that a new scam threatens home buyers desperately looking for a way out of financial stress.

"Predatory lenders now offer what they call ‘rescue loans,'" said Dr. Mark Dotzour, "but home buyers are neither rescued nor do they actually receive loans."

Home buyers who purchased homes with subprime loans are especially vulnerable, he said. Predatory lenders are targeting subprime borrowers who have some equity built up in a home but who are having difficulty meeting monthly mortgage payments.

Home buyers with impaired or nonexistent credit histories often turn to subprime loans despite the higher interest that comes with them. According to Dotzour, many are about to discover that their "American dream" has turned into a nightmare.

Here is how the scam works. The home buyer gets behind on mortgage payments. The predatory lender offers a "loan to get caught up" on the delinquent mortgage payments. In exchange for the rescue, the homeowner signs over the title to the predator, who promises that the home buyer may remain in the home while paying rent. The predator then sells the house to someone else, and the original homeowner gets an eviction notice.

About a dozen states have passed laws designed to deter rescue loan fraud, but Texas is not one of them.

"The scam is called a loan, but it is not," says Dotzour. "It really is a buy-out with a leaseback."

Dotzour fears the problem is going to get much worse. As of Oct. 31, some 4% of borrowers who obtained subprime loans in 2006 were 60 days or more behind on payments. He said the delinquency rate is running twice that of a year ago.

"Foreclosures are up 27 percent in the last 12 months," said the noted economist, "but that's still low in my books. I'm betting 2007 U.S. foreclosures will double last year's total."

Subprime mortgage volume has increased fivefold in five years. The Mortgage Bankers Association estimates that $1.1 trillion to $1.3 trillion in subprime loans are due to adjust to higher interest rates in 2007.

Remember that old adage, it if seems too good to be true, it probably is.

1:04 PM - Mar. 1, 2007 - comments {0} - post comment

Behind on your payment? FHA will work with you.

Colorado had the highest rate of home foreclosures in the nation during April and May of this year.  The largest number were caused from people who had adjustable rate mortgages that they couldn't afford when payments rose.

FHA (Federal Housing Authority) has 4 percent of all Colorado mortgages.  The goal at FHA is to keep people in their homes if at all possible.

To that end, they will work out a payment schedule with the borrower to more closely match the current need.  They call this a loss-mitigation program.

Truth is, it is cheaper for any lender to keep you in your home than to foreclose on the property.  Other lenders will also work with you if you fall behind on your payments.  The key is to contact them first - before you fall too far behind - and work out a plan.  They are actually eager to talk to you.

If you have an FHA mortgage and are having trouble making your payments call the federal loan help line at 1-888-297-8685. If you have a non-FHA mortgage, call your lender.  Their phone number is on your payment book or monthly statement.

There are things you can do. Please don't wait til it's too late.

6:23 PM - Jun. 7, 2006 - comments {0} - post comment

HUD Homes

We get lots of calls from buyers wanting to know about HUD homes.  Sometimes these are good deals and sometimes they are not. Some HUD homes are in good condition and some are not.  All bids must be submitted on specific forms and must have exact information.  If not, HUD will reject your bid!

Only brokers who have registered as HUD vendors can show HUD homes and can submit bids on your behalf.  We are registered HUD vendors.

One of our favorite brokers, Fran Flynn Thorsen, has written an e-book about the HUD home process.  If you have an interest in bidding on a HUD home, we urge you to check out Fran's book.  It's an excellent guide.

3:14 PM - May. 31, 2006 - comments {0} - post comment

Foreclosure properties

We closed two foreclosure or REO (stands for Real Estate Owned) properties today.  We list properties that have been foreclosed on and sell them for the lending institutions that hold the mortgage.

Buying foreclosure properties is a little different because the seller is a bank and is usually out of state.  It takes time to get responses from the bank and they are usually not big negotiators. 

Both of the houses today were in very bad condition and the bank did not want to fix them up.  They did make some price concessions because of condition, but the buyers understood that they were purchasing the property in "as-is" condition.  That is usually the case with foreclosure properties.  A buyer can still have an inspection, but the seller is not going to fix anything.

Because the banks are out of state, they are typically unfamiliar with our closing practices and can be very unsympathetic if problems arise that call for the closing to be delayed.  We have seen them void the contract rather than sign an extension of the closing date.  On the other hand, we have also seen them extend the closing for several days to a couple of weeks if they thought the deal was worth the wait.

We are thankful that both of these homes closed and they have two new families to fix them up.

5:45 PM - May. 25, 2006 - comments {0} - post comment

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