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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