Do it All Right, Still Get the Shaft

For those of you who thought my last post on a rogue mortgage company wasn't bad enough...

What if you listened to my advice, chose a supposedly reputable major mortgage company, made every payment on time...

AND STILL WERE TOLD THAT YOU WERE GOING TO LOSE YOUR HOME TO FORECLOSURE.

Bad things do happen to good people. We don't want to believe it because it means we're all vulnerable.

I wish I could tell you how to protect yourself. I'll mention again that I'm a big believer in a strong relationship with a good, local bank. Will you always get the absolute best rate? Probably not. Will they likely foreclose on a house that you've made all the payments on? Probably not! (It's very bad business to show up on the front page of the local paper!)

Tax Credit Local Impact

I could take a look in detail at the October numbers for Culpeper, Fauquier and Prince William Counties. But they don't show any shockingly different results or trends. And, I thought it'd be more interesting to take a look at the impact of the First Time Home Buyer Tax Credit in our area.

Obviously, without interviewing every buyer it's impossible to know the precise impacts. But I think it's fair to compare the pace of home buying in each county over the past few months and see how we were doing a year ago without the tax credit and how we've done this year with the credit.

Culpeper is first up. Here are the total sales May through October both in 2008 and in 2009:

Hmmm...if anything the volume of sales is lower in 2009 with the tax credit available.

How about Fauquier?

The evidence is more mixed here. Was the increase in August, September and October because of the tax incentives?

Here's how Prince William looked:

Clearly there was no help from the tax incentive in Prince William County.

I'll do Rappahannock County, just to be consistent, but I'd tell you the results there without even looking:

This is Rappahannock County. Trust me, there weren't many first time home buyers in that lot!

The overall picture is not one that suggests the tax credit had any appreciable impact at all. Were a few extra homes sold? Probably. Was it enough to make any appreciable difference in the market? It seems unlikely. The only argument you could make for that would be that the market would have declined significantly without the tax credits. I'd be hard pressed to find data to support that argument. We'd likely have been in the same relatively flat pattern we've seen for some time now.

So, how do you feel about the extension and expansion of the home buyer tax credit now? Is it worth your tax dollars?

Tax Credit Extended and Expanded

In case you haven't heard, President Obama signed the law extending and expanding the home buyers tax credit into law today. Here's what it means for you:

Short Sale Approval Info

Been trying to get an answer from the banks for weeks or months on whether or not your short sale has been approved?

Are you a buyer trying to buy a short sale? Or a seller desperately waiting for that "yes" or "no" that will make all the difference?

Maybe you're an agent tearing your hair out over the hours you spend on hold with banks.

There's help at hand, finally! No matter where you live in Virginia, there's information here for you.

http://hasmyshortsalebeenapprovedyet.com

This site will get you the straight scoop on whether or not your short sale has been approved in seconds.

Loan Servicers

The Kansas Supreme Court recently ruled in a case that will likely have national implications.

The ruling effectively seems to say that loan servicers have no authority to foreclose on behalf of the lender.

If the ruling gets appealed to the Supreme Court and stands, given the number of foreclosures happening, it could mean tremendous changes in the industry and, in the short term, a real mess.

Of course, first the ruling has to get appealed. Then the Supreme Court has to agree to hear the case. Then it has to get on the calendar.

Maybe the real estate market will be so improved at that point that it has little impact.

A girl can dream!

What if That's All There Is?

If you're selling your home or thinking about selling your home, your biggest question is probably "when will prices get back to where they were?"

According to a new study by Moody's and Fiserv the answer, in Virginia, is after 2023. They recently published a study showing, by state, when housing prices would rebound to their 2005-2006 peaks. Virginia is in the worst category in this study with prices not rebounding for over 12 years. If they're right we likely won't even see any sizeable increases over the next five years.

Note that I'm not saying they've got it right. None of the financial institutions or economists did a very good job of predicting what's happened to the economy or real estate in the last few years.

But you should ask yourself, what if...

What if they're right? How does that change the decisions I'm making for myself and my family? If you've been staying in place assuming that a return to higher prices was just a year or two away, do you now just go ahead and sell?

My two cents, for what it's worth, is that appreciation will be miniscule for at least the next three years.

By the way, in case you're wondering, Maryland beat us. Prices there are expected to return to their peak between 2018 and 2022. (If you're curious about any other states, let me know and I'll get you the numbers.)

Let it Expire

I am going to annoy, anger and irritate a lot of my fellow real estate agents with this.

Let the $8000 first time home buyer tax credit expire at the end of November. Congress should not vote to extend it.

It is not that I want the market to slow further, prices to drop more or the real estate market overall to get worse than it currently is.

I do have several reasons for my belief that we should let it go...for  now.

1. Deadlines are good!

The credit was out there a long time before people really started to focus and pay attention. What got them to pay attention was a deadline! An indefinite tax credit does very little to help the market. Human nature is to procrastinate. Deadlines give them a reason to stop procrastinating.

2. Fraud

Apparently there have been a fair number of people claiming the credit who are not eligible for it. These are people who are either not first time home buyers, or who never actually even bought a house. The IRS is not requiring proof that you qualify for this tax credit and so there are some people taking advantage. If you're tempted, be aware that there are now over 100,000 tax returns flagged for an audit because of this and one tax preparer is already headed to jail!

Let them work out these issues before they give another tax credit or extend this one.

3. Assess

There are a multitude of arguments both for and against extending this tax credit. Each side has their economists with their data. Let's take some time to assess how much good this is doing and whether to extend it and what form that extension should take. Should it be more or less than $8000? Should it apply to more than first time home buyers? The current guidelines are not because data showed this was the best solution. It was a political compromise. Why not look at actual data now, analyze it and determine what makes sense?

I'm not anti-credit. I'm pro a thoughtful approach to this.

Another Opinion on VA Real Estate

You've heard what I think about the area's real estate market. Here's the view from 30,000 feet from a real estate investor.

He's definitely also optimistic, with some mid-term concerns about Northern Virginia.

A Really Bad Mortgage Company

I've posted here several times about the importance of choosing a good lender. If this story doesn't convince you, nothing else I could say will!

I've cut and pasted this from another blog. The writer is a real estate broker who wanted to remain anonymous for professional reasons. Hey, it can happen to anyone!

After an exhausting fight with Taylor, Bean, & Whitaker my mortgage has been sold to Bank of America.

The year leading up to this event has made me an emotional mess. Never have I felt so helpless and small. I was so distraught I sought out comfort from other victims of TBW scams. Some of those new found friends had lost their homes in foreclosure. The rest of us were holding on by a thread for our dear lives.

Now, for a real estate broker, foreclosing on your home is simply embarassing. Seeing my name in the legal section was my worst fear. People would automatically think I was in financial trouble or irresponsible. So my husband hugged me every day and told me there was nothing more I could do. The lawyer in my said otherwise.

So I went in search of others who were facing problems with TBW and found a class action lawsuit against them for effectively forcing people into foreclosure. The stories sounded eerily similar to mine.

1. The online bill pay site was down almost 24/7. When you did happen to find the website running they made it virtually impossible to pay online by hiding their payment system somewhere within the site. After 4 hours one day I managed to find it. I tried to pay and the system would not process the payment due to technical difficulties.

           Because online bill pay was down we tried to mail our payment in.

2. I keep immaculate payment records. So I sent my payment through the mail.

25% of the time TBW claimed they never received the payment(even when mailed in their own envelope) and it never was seen again.

50% of the time TBW claimed they never received the payment and it showed up as being cleared on my bank statement. They refuse to use bank statements as proof of payment and marked my mortgage as late.So who was cashing my checks then?

25% of the time they received the payment but took 45-60 days to process it. Because their billing system took that long they tacked on late fees.This happened even if my payment was received weeks before the due date.

Now I am three months behind on my mortgage and receiving demand letters from TBW. I write them a long letter begging them to TAKE MY &**$% MONEY. I have been sending the payments but no one will process them or acknowledge ever receiving them.

3. I send by certified mail a payment for all that is currently and past due. I receive verification that they have my letter.

4. I receive a foreclosure notice because I have not paid(according to them). My credit is ruined at this point. I call them and am put on hold for 4 HOURS until their business is closed. I get a message that says to call back tomorrow.

5. I call back every day and wait on hold. My maximum record was 7 HOURS.  I pressed the operator buttons, trying to trick the system into giving me a live person. No luck.

6. Even though I have verification of them receiving my payment it has not been processed yet.

7. I try the Pay-By-Phone option. They have a live version(supposedly) so maybe they will talk to me if I offer to throw more money at them. No such luck. The operator told me my account was in "Lockdown Status" and I needed to contact their attorneys in order to pay.

At this point I was pulling out my hair, drinking every night, and my temper was flaring. I wrote them one more nasty note before I intended on joining the lawsuit. They responded: You're mortgage has been sold to Bank of America. All payments received by us will be forward to BOA as required by law.

BANK OF AMERICA SAVED ME! I have contacted them and they have no records of any forwarded payments from TBW. So TBW has approximately $4800.00 in complimentary payments from me that disappeared from my bank account but was never credited to my account. And yes, I did verify the mailing address because at one point I thought I was being scammed by a private individual.

I wanted my story to be told because there are still at least 100 people that I know of who were forced into foreclosure or on the brink by Taylor Bean & Whitaker. And no, they were not doing this randomly or to everyone.  Being a real estate agent I instructed other individuals to get a BPO or appraisal done on their house just in case they needed to sell fast. I presented their findings to an anonymous banker who knows the costs of foreclosures. He noted that TBW stood to make a sweet profit on each of properties if they foreclosed and sold themselves. Whether or not that is what they were planning I don't know.

I haven't followed the class action suit. From what I heard the majority of them were suing because TBW refused to take their monthly payments and forced them into foreclosure. But TBW has received a cease and desist order for FHA loans and are under investigation for fraud.

Just remember when you talk to people who are foreclosing, it  isn't always their fault.

Now I'm with a new mortgage company so hopefully I don't get screwed again and this is all behind me. And I hope this never happens to any other person.

A Good Laugh

This video is hilarious, mostly because there's so much truth here!

Now someone needs to do this for short sales. Now there's a subject so painful it's got to be ripe for humor.

Short Sale Help?

Word is that the federal government will soon be coming out with guidelines meant to standardize and streamline how short sales work.

For the record, nothing could make most real estate agents (and short sale buyers and sellers) happier than a better process.

Unfortunately, I have absolutely no faith that it will happen. The guidelines, like most of the government plans around foreclosures thus far, is going to take a carrot approach, with incentives for banks to cooperate. I'd be willing to wager a fair amount of money that the banks could care less about any incentive offered. The money involved is likely to be miniscule from the banks' perspective.

Let me also say that I'm a little offended by the concept. So these banks have billions of our tax dollars to save them from their own stupidity (and to keep us from going over the cliff with them) and now we have to bribe them to play nice?!

Seems to me California has a better idea here. They've passed new regulations that a bank that has gotten all the documents on a short sale, including the draft HUD1, must produce an answer in four days! And, if they don't there are penalties.

To give you some sense of perspective, if I get a response from a lender within 6 weeks, I do a dance of joy! Everyone has stories of banks that didn't respond for well over four or five or six months!

There has to be a better way. And I'd love to believe that the Federal Government is about to roll that out. I'm just not that gullible any more!

Property Management Dilemna

I was talking to another agent about a potential property management opportunity this week. The potential client has seen an ad for another agency here in Virginia that guarantees to pay them rent, whether they actually rent out the property or not! What a deal! She wanted to talk about how I would compete against that kind of offer.

It's an interesting question both on a macro and a micro level.

First of all, I really thought that one of the lessons we've all learned over the last year or two of the markets melting down, is that things that seem too good to be true probably are. Seriously, if someone is giving you money without receiving anything in return, there's a problem!

Looking at this particular case, here is what I'd be concerned about.

First of all, trust me, there's some fine print here. You should read very carefully anything you sign. Specifically you should look at who decides what the rent will be. Can they cut the rent so they can get someone in there quickly and they can stop paying you without any income coming in? Who decides whether a tenant gets accepted, you or the property management company?

Think for a minute about the incentives that are now driving this property management company. When I help my clients find tenants it is definitely in my best interest to get them a tenant who will pay the rent every month and take good care of the property. Because if those things don't happen, they're going to be my headaches.

But if this company is paying out rent every month without a tenant paying anything, their biggest incentive is to get someone, anyone in there as quickly as possible. They need to stop the bleeding. No business survives with a negative cash flow for any length of time.

I believe it also shifts the property management company's focus off of their clients. It's hard to be focused on protecting your clients when you're bleeding red ink.

I don't like this business model and suspect it's not really in anyone's best interest. But they've created a nice, shiny, pretty package if you're a property owner looking to rent out your property.

Again, if it looks too good to be true, be very, very careful! A lot of people who have lost their homes to foreclosure in the last few years would echo that advice.

Don't Take No For an Answer

As this story today on NPR's Morning Edition makes clear, the banks still don't seem to have the hang of this whole loan modification, even after a couple of years.

The key take away for me is that you should never assume that the answer is "no" until you've heard it multiple times.

If you're in danger of losing your home, fight and then fight some more! You never know when the person at the other end of the phone simply got it wrong or was too lazy to do the work to get it right.

Keep asking, escalate to a supervisor, ask for help from other organizations.

Don't give up!

Starting Over

In a year when there is so much hardship, personally and financially, it's good to be reminded that failure is just a temporary state of affairs. I ran across this blog post and had to share it with you all!

I hope it lifts and encourages you!

The Bad Old Days

Once upon a time, if you could fog a mirror a lender would give you a pre-approval letter. Heck they'd probably even give you an approval letter. Now that letter wasn't worth the paper it was written on. But that didn't stop anyone.

No one is a fan of the real estate collapse, certainly not me. But I was very glad to see the end of worthless lender letters.

But...they're back! I've experienced this first hand myself and also started to hear the stories again from other agents.

So, if you're a buyer, be careful who you're doing business with! A lender who leaves you standing at the altar within a few days of closing can cost you serious money or even lose you the house you're trying to buy!

Call me if you want some help with a list of good, local lenders. (I have a strong preference for local so I can hunt them down if something goes wrong!)

We're in The Money!

I wish I was writing to tell you all I won the Mega Millions this last week. No such luck! But Fauquier & Culpeper county are a little richer thanks to the Neighborhood Stabilization Program. Fauquier County was awarded $1.5 million. Culpeper got $1.2 million. The money will be used to buy, rehab and resell foreclosures in neighborhoods hard hit by the real estate downturn.

In Fauquier that means the southern end of the county. In Culpeper think Lakeview for sure.

I got one thing wrong in my earlier blog about this. I thought it would be too late in the process for them to get the money. They met the deadline but given the money already awarded and the competition I really didn't think Fauquier & Culpeper would get any.

It's too soon to know if I was right about my other reservation. The foreclosures are getting fewer and fewer and almost always involve bidding wars these days. It'll be interesting to see what the counties are actually able to purchase with this money.  There are plenty of short sales, just not so many foreclosures these days.

Tick, Tick, Tick

No, it's not another tribute to Don Hewitt who founded "60 Minutes". I'm talking about the end of the first time homebuyer tax credit.

The $8000 one time incentive expires at the end of November. That may seem like a long time away, but for a lot of people it's almost too late to jump on this bandwagon.

Here are some scenarios where you're running out of time on this:

New Construction: Sorry! On this one you probably are way too late. You have to close on the house before the end of November and most builders, in most communities have little or no inventory that can be delivered before then, barring a cancellation. If you're set on buying new construction, you may have to do it without the incentive.

Short Sales:  The typical short sale is still taking 120 days. That's four months! Do the math, that puts settlement at the end of December, a month too late. You could get lucky, some of them are closing closer to 90 days, but you'd better rush out there now if you're buying a short sale!

Foreclosures: Foreclosures are taking 45-60 days to settle. This means you have a little cushion here. But first you have to find a house you want to buy. And, given the shortage of inventory, especially in the lower price ranges, you'll probably need to write several offers on several houses. There went your cushion.

If you're only interested in buying a home that doesn't fall into any of these categories, you can be a little less pressured, theoretically. Of course, if you exclude these three categories of homes, you may have a heck of a time finding a house you want to buy!

Remember, that $8000 is taken directly off of what you owe in taxes! That's a great deal. (Wish I was eligible!)

If you're looking to beat the deadline and get that tax credit, let me know if I can help. And, if you need more details on the tax credit and whether you qualify, give me a call or send me an e-mail.

Tick, tick, tick!

The Appraisal Mess

If you're involved in the real estate business or are a buyer or seller right now you probably are well aware of the appraisal mess. If you haven't gotten a taste of this yet, here's what all the fuss is about.

In an effort to make appraisals more objective and keep lenders from twisting the arms of appraisers to get higher values, new rules were rolled out this year from Fannie Mae and Freddie Mac. Instead of a local lender calling a local appraiser, they must now call a clearinghouse who will then subcontract to an appraiser.

While the idea of keeping arms length relationship sounds good, there have been some big hiccups with this new process. Appraisers are coming from far, far away to appraise in neighborhoods they know nothing about. Just today I met an appraiser at a listing I have in Culpeper. The appraiser drove several hours from Maryland to do the appraisal.

This has resulted in wildly inaccurate appraisals. And it's slowed the process down, because there's now an extra layer there.

The other thing an extra layer does is add extra cost. The new clearinghouses want to make money off of the appraisal too. So they raise the fees they charge, increasing the cost of the appraisal to the buyer. But at the same time they've lowered what they pay the actual appraiser. Guess how many of the best appraisers want to work for these clearinghouses?

There's a movement in Congress right now to suspend these rules temporarily until some kind of fix can be found for the more egregious problems. Meanwhile, if you're waiting on an appraisal, whether you're a seller or a buyer, be prepared for bad news! And, remember that if there are issues with the appraisal, there are also potential remedies.

2009 Predictions Updated

At the end of 2008 I made some predictions about what the real estate market would likely look like for this year.

We've now got enough data from the first half of the year to take a look at how accurate I've been.

First of all, I predicted that the Obama administration would intervene in the housing markets and that this intervention would make a difference in the real estate market locally.

I got this one partially right. They did intervene almost immediately with a moratorium on foreclosures. You could argue about how much it helped, but we did see some let up on the loads of foreclosures coming on the market in the 1st quarter. And I would argue that it gave some mortgage holders time to rethink their strategy. Some of them decided dumping large numbers of foreclosures in the same market at the same time was not all that smart!

But I also anticipated that the adminstration would use that extra time to put in place a real plan to reduce the number of foreclosures. Unfortunately, this administration's plans, like those of the Bush administration before it, have proved inadequate to the challenge at hand.

The one measure that I would say has made a considerable difference in this market is the $8000 first time homebuyer tax credit. There are homebuyers out there buying homes purely because of this incentive. Between that additional demand and the reduction in the dumping of scores of foreclosures, we have indeed, seen some bottoming.

I was partially right and partially wrong on the inventory question as well. I anticipated that while the overall trend would be down, year over year, that we'd see a rise in inventory briefly in early spring, 2009. This is a seasonal pattern and I expected to see what we've normally seen. I was wrong and the decrease in inventory continued, even through the early spring. There was a blip of an increase in Fauquier County. And Rappahannock continued it's tradition of bucking the trend with an inventory that continues on an upward trajectory. But overall, inventories have declined steadily throughout the year.

I suggested prices would stabilize during the summer months. I may still get that right, we'll see. What it looks like right now is price appreciation at the lower price ranges, price stabilization in the mid range and continued price declines in the upper price ranges. The average sold price is down 31% year over year in Culpeper County thus far. The median sold price is down just 11% (close to my prediction of 10%). In Fauquier the average price is actually up an astonishing 45%, with the median sold price down 8.69%. In both of these instances I'd pay a lot more attention to the median number. The average is too easily skewed by large transactions. In Prince William county the average price is down about 5% and the median down 6.67%. But anyone trying to buy a home in Prince William under $400K knows how tough the competition is. Prices are definitely increasing in that market segment.

The number of homes sold for the year looks like it will slightly beat my projections. We're slightly ahead of where I thought we'd be right now. Barring a large drop off, we'll beat my projections, probably by 5-10%.

At this point, nothing I said makes me look like an idiot, always a good feeling! But it's only August!

Want to go out on that limb with me? What are your projections for the rest of the year?

Why Mortgages Aren't Being Modified

It's no secret to most people that the majority of homeowners are unable to get their mortgages modified and eventually lose their homes. And, in fact, even those who do get modifications, end up with a monthly payment that is HIGHER than the original. That's why you hear about so many modifications that still end with the homeowner losing the home.

Now there's new reporting about why those modifications aren't happening. There has been plenty of speculation, but now there are some facts to look at.

Baseline Scenario, in my mind the best blog out there on the economic turmoil we've been experiencing, has a new post talking about what's actually been happening.

Loans are not being modified because there is a financial incentive in many cases, to NOT modify them. Until that changes and the job market improves, it's hard to see how the foreclosures stop.

That said, the picture here looks rosier than the one depicted in the chart shown in the blog post on Baseline Scenario. Remember that all real estate is local!

So, how do we change the financial incentives for the services and mortgage companies?