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Robo Signings in Prince William

This article in the Washington Post talks about "hundreds" of robo signings in Prince William County over the past few years. The truth is, I'd be surprised if it were only in the hundreds given the number of foreclosures there. I suspect they've hit the tip of the iceberg.

I'm happy to see organizations like VOICE (Virginians Organized for Interfaith Community Engagement) working on this problem. Wall Street has plenty of lobbyists. Who's speaking up for the homeowner caught in the middle of this mess?

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Emergency Homeowners Loan Program

Date: Jul. 21, 2011
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IMPORTANT information about the Emergency Homeowners Loan Program.

 

 

THE DEADLINE FOR PRE-APPLICATION SUBMISSION BY HOMEOWNERS AT RISK OF FORECLOSURE IN VIRGINIA AND WEST VIRGINIA IS TOMORROW, JULY 22, 2011.

 

 

 

EMERGENCY HOMEOWNER LOAN PROGRAM (EHLP)

 

 

HUD is administering $1 billion Emergency Homeowners Loan Program to provide assistance -- for up to 24 months-- to homeowners who have experienced a substantial reduction in income due to involuntary unemployment, underemployment, or a medical condition and are at risk of foreclosure.  The EHLP offers a forgivable, deferred payment "bridge loan" for up to $50,000 to assist eligible borrowers with their mortgage arrearages and payments on their for mortgage principal, interest, mortgage insurance premiums, taxes and hazard insurance for up to 24 months.

 

 

HUD has delegated key program administration functions to NeighborWorks America - an experienced and highly regarded national network of affiliated housing counseling agencies. Those functions include coordinating intake counseling, document preparation, and outreach.

 

 

 

West Virginia has $8,339,884 and Virginia has $46,627,889 to help struggling homeowners through EHLP.

 

 

Homeowners’ best course of action is to contact www.FINDEHLP.org or 855-FIND-EHLP (346-3345) to be connected with a local housing counseling agency assisting to administer the program. 

 

Housing counseling agencies funded through the Emergency Homeowners' Loan Program can provide information and assistance needed  to apply for the program. Pre-Applicant Screening Worksheets are due July 22, 2011.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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Who Ya Gonna Call?

We had a shock recently when a home in our neighborhood here in Amissville went up for sale as a foreclosure. It's not all that common around here and the price was jaw-droppingly low.

South Poes Road

Given that we have almost identically sized acreages I needed to know more. Was the number I carry around in my head on what our home is worth way off?

So, I went to take a look.

The moral of this story is, you should do the same thing. Clients worry that they're bothering their real estate agent if they ask to go see a house for sale in the neighborhood. Trust me, if your agent's worth a dime they're going to be happy to get that call. Some day you may want to sell your home and the more educated you are about the local market the easier those conversations are going to be for your agent.

I'd argue all of my clients ought to be calling me at least once a year to see something for sale in the neighborhood.

And, how did it work out for us? The house has no central air and needs lots of work. I don't think that number in my head is wildly crazy. And, apparently the market thinks that house was priced pretty competitively as well since there were multiple offers almost immediately.

I'm feeling a lot calmer now!

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Foreclosure Prevention Efforts Fail

Elizabeth Warren testified in front of a Congressional Committee today about the government's efforts to stem the flow of foreclosures. She may not have been quite this blunt but the gist of her testimony was that those efforts have failed. And, as far as I can determine they've failed on almost every front, every corner of this country. Virginia set up a state commission to work on foreclosure prevention. I'm sure all of those people were well-intentioned. I'm sure they tried really hard. But I don't believe you could point to any evidence that they had a significant impact.

Here are some of the measurements by which the federal plan has failed:

  • Expected to help up to 4 million homeowners.
  • Only 347,000 homeowners received permanent modifications.
  • Less than 1/2 of 1% of the money allocated for the program has been spent.
  • Real estate market remains depressed in much of the US, hurting the overall economic recovery.

Unlike others, I don't believe that this result was inevitable. Elizabeth Warren talked about some very specific reasons this hasn't worked. One of those is that the program never really had a good plan to deal with homeowners who owe more than their home is worth. The HAMP program is meant to help people in financial difficulty stay in their homes. But a lot of those people are upside down on their mortgages. If you don't address that part of the problem, the program is likely doomed to failure.

The congressional testimony didn't mention another reason I believe HAMP has failed. Every program the government has offered has made bank participation completely voluntary. The government offered financial incentives, yes. Those incentives might work well if the homeowner is not upside down on the mortgage. But if you owe $400K on the house, it's now worth $200K, no small financial incentives will get the bank to take that hit and adjust the entire loan amount.

The result is that the real estate industry across the country is still not in good shape. It's one of many factors impacting this recovery; slowing it down.

Elizabeth Warren said Treasury (who administers HAMP) has now lost the opportunity to get in front of the foreclosure crisis. I suspect that was lost a few years earlier when Ben Bernanke decided the real estate market didn't need any federal help to stabilize.

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Dates Matter, Kind of

There is a clause in the real estate contract that says "Time is of the essence". It means that dates and deadlines in a real estate contract are important and are to be treated as such.

So, what happens when reality conflicts with the contract?

Let's take a current transaction as an example. And, by the way, it's a pretty ordinary situation.

It's a short sale with Bank of America holding the lien on the property. They have insisted that the contract contains language saying that once they get around to taking their time and approving the deal, it must go to settlement within 30 days.

With the changes in lending in the last 24 months, increased paperwork and scrutiny on loans, very few are settling in 30 days any more. Bank of America is, a mortgage company and surely knows this.

So, what will happen when/if we finally got BOA approval and ask the lender for the buyer's to rush to meet that 30 day commitment?

Everyone will try really hard, it will likely take slightly more than 30 days. And, in the end, BOA will not walk away from a deal in hand because it's a couple of days late.

One thing to watch for is contract language that would allow BOA to charge per diem late fees for every day beyond 30 days it takes to get to settlement. But I'm seeing this less these days and haven't had one enforced against a buyer client yet.

Dates do matter, but putting time frames you know to be highly unlikely to be met seems senseless. The bottom line message BOA is trying to send is that "time is of the essence".  Guess they didn't read the contract and notice it already says that!

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HAFA Rolled Out

Date: Apr. 7, 2010
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HAFA, the government's program to streamline short sales officially rolled out this week. I'm not a big fan and expect this to be largely ineffective.

It's another voluntary program. And, even with the newly increased incentives seems unlikely to be attractive to most lenders.

The revised incentives are:

$3000 for homeowners to relocate

$2000 for 2nd lien holder

$1200 for servicers

The homeowner's incentive is something that will surely be much appreciated. However, $2000 is nothing for most 2nd lien holders. I haven't seen a second lien holder take less than that on any short sale I've done in the last three years. So, hard to see how this improves things.

The $1200 may partially compensate servicers for the loss of income from servicing the loan. However, as long as they would still make more from servicing it, why would they choose this?

I hope I'm dead wrong and this is wildly successful. I'm just not betting the farm on it!

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The Problem With Voluntary

The government has once again announced a big plan to help struggling homeowners. It will feature principal reduction on mortgages and, once again, relies on voluntary compliance by lenders.

Whoop-de-doo!

Forgive my lack of enthusiasm.

I believe in the ability of government to do good things for and on behalf of its citizenry.

But I've looked at every program the government has rolled out to address the foreclosure issues, both in this administration and the previous one and they've all been pretty pathetic.

What they have in common is that they are all voluntary. Lending institutions have the ability to participate if they choose. There are some token "carrots". But really, the effort is to use moral suasion to persuade them to do the right thing.

News flash: For any corporate entity profits mostly triumph over doing the right thing. Actually, I'd suggest for many people as well.

If the IRS said: "Pay your taxes if you want. If you don't we'll shake our finger at your but there are no real consequences." My hunch is most people would not pay their taxes.

If the mortgage company told you when they made the loan that there were really no consequences for not paying your mortgage every month, even though it'd be really nice if you did, would you do it? You'd have the best of intentions. You'd probably pay sometimes. But a month would come when you would probably say, I've got better things to spend that money on this month.

The lenders don't want to see that red ink on their books. Voluntary programs aren't going to change that. Well, not until pigs fly anyway.

 

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BOA Writes It Down

The "IT" in this case is the principal amount you owe on your mortgage.

This is a very big deal, in one sense, because no bank has publicly announced they're willing to do this. And, Bank of America is the largest mortgage holder since they acquired Countrywide a couple of years ago.

So, here's how the program is supposed to work. If you owe the bank more than 20% more than what your home is actually worth, you may qualify. Keep in mind that this is a pilot program and will only initially be offered to 45,000 homeowners. For the homeowners chosen, up to 30% of the principal would simply be wiped out.

So, let's say that you owe BOA $300,000. But you could only sell your home for $220,000 in this market. Bank of American could, theoretically, reduce your loan balance by $100,000. Your mortgage payments would presumably be lowered to match this new lower loan amount.

Let's say, for the record, that I'm skeptical. Partly we'll blame that on having seen too many programs announced that did little or nothing to help most homeowners. Partly it's having had too many ugly dealings on short sales that involved Bank of America, an institution that has a well-deserved reputation for being among the worst to deal with.

But there's also some reason for optimism. If Bank of America is willing to take this step, we may see movement from other banks. And I honestly believe that reducing the principal on mortgages will mean more homeowners will get to keep their homes.

Let me also be clear as to why Bank of America is likely taking this step. An increasing number of borrowers have proven that they're willing to walk away from their homes and mortgages. This is a new phenomena and a very troubling trend if you're a lending insitution. The more this happens and the less stigma that surrounds those who take this action, the more other homeowners will see this as a viable option. That equates to a lot of red ink on the balance sheet!

I hope this is the beginning of a trend among banks. I hope this is the beginning of the end of the foreclosure crisis. And, I hope my skepticism is proven wrong!

Washington Post has a story with more details.

NPR's Morning Edition has an interesting analysis as well.

 

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Short Sale Success Stories

Admit it. You saw the title of this blog and thought "no way"!

I understand that kind of thinking! Short sales are hard. I talk about that all the time on this blog. But it's time to look at some success stories. Hard doesn't mean impossible. And, it doesn't mean you should avoid a short sale like the plague.

Here are the stories of three sellers and their successful short sales.

Note: Success is defined here as the clients believe it was successful and they achieved what they wanted from the short sale.

The first story is a young couple with a house in Bealeton. They were upside down on the house and their interest rate was about to reset. They would be unable to afford the new payments. They wanted to preserve their ability to rebuild their credit and buy again in the future as their family grew. They were one of the early short sales in this area. It took time, but the short sale was approved. They had great credit before the short sale and did everything they could to maintain that afterwards. Now, nearly three years later they're once again in a position to talk to a lender about buying a home.

Another young couple owned a townhouse in Remington. They bought it just before they got married. Their growing family had made the townhouse much too small for them. They initially rented out the townhouse. But when the renter stopped paying, decided it was time to try a short sale. Not only did the short sale get approved and the deficiency forgiven. The lender in this case actually gave the sellers a small check after the sale. Even more important to this couple, their credit has been almost unaffected. I can't guarantee it'll work this way for everyone. But they saw only a 1 point reduction in their credit score.

The third short sale is a townhouse in Culpeper. The owners were transferred out of state. They initially rented the townhouse out. But the rent they received didn't begin to cover the mortgage. When the tenants moved on, they decided to try a short sale rather than go to foreclosure. Their goal was to avoid a foreclosure and it's greater damage to their credit. This one took almost a year. It featured four different buyers, six different lenders and required the patience of Job! But in the end, these sellers also succeeded.

If you are upside down on your mortgage and don't know what to do, you owe it to yourself to at least discuss the possibility of a short sale.

 

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Indymac and Bank Math

Date: Feb. 15, 2010
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You've probably heard the horror stories from families trying to get their loans modified so they can afford to stay in their homes. And a lot of us keep scratching our heads wondering why the banks aren't doing more to help with this. Why would they want the loss of either a foreclosure or a short sale on their books?

Here's the answer!

I don't know about you, but I've just about run out of outrage. And, I'm getting a little tired of hearing about bankers preaching that homeowners need to do the moral thing. Even when they try, many of them are getting shafted by the banks, and, indirectly by their government.

And people wonder why there's so much anger out there!

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The Joke That is HAFA

Date: Jan. 27, 2010
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This was not the blog post I intended to write today but I just couldn't help myself.

I looked at the HAFA guidelines when they came out and after a quick review laughed ruefully and knew I'd never need to worry about them.

But Sarah Stelmok took the time to detail the problems with the program and whether you're a homeowner who might do a short sale or a real estate agent who works with them every day, you need to read this!

You may want to read parts 1 and 2 as well laying out the details of the program. Personally, I think part 3 tells you everything you need to know!

 

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To Stay or Walk Away

Date: Jan. 26, 2010
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NPR's Morning Edition today carried a story of a family in Arizona and their struggle to save their home.

They've successfully gotten a loan modification through HAMP. However, the home that they owe $300,000 is now only worth $120,000. The terms of the loan mod require an eventual balloon payment of $100,000.

The home will clearly never be worth that $300,000.

So, when this family eventually sells their home, they're now looking at a short sale. Either way, their credit is trashed.

Do they take the hit now by going into foreclosure or postpone it indefinitely?

There are no easy answers.

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Ethics in Short Sales

Date: Jan. 18, 2010
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Recently, five area REALTOR associations (Greater Piedmont Area Association, Dulles Area Assocation, Fredericksburg Area Assocation, Northern VA Association and Prince William Association) got together to try to find some common standards of ethics that could apply to short sales.

There are a number of areas in the short sale process where questions regarding the most ethical practice has been an issue. Some of these are how do you handle the earnest money deposit/escrow, what do we tell clients about the likely impact to their credit of a short sale vs. a foreclosure and how do we handle short sales in the Multiple Listing Service in light of our need to protect our clients' privacy.

The document the associations came up with is a good start. Short sales continue to evolve and advice you'd give a client 2 years ago is likely different than what you'd tell them today. Hopefully this document will continue to evolve as well.

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No Apologies Necessary

Date: Jan. 18, 2010
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I got a call this week from a former client about selling their home. They owe the bank more than the home is worth so this will be a short sale.

The amazing thing is that this client apologized to me for asking me to take on a short sale. Wow!

I love my clients and I love how they look out for me. It's a humbling thing.

But in this particular instance, no apology is necessary! In this market, if I didn't work on short sales, I'd have very little work! It's very rare for me to get a call to list a house that isn't a short sale. And, it's rare to work with a buyer who isn't buying either a foreclosure or a short sale.

So, please, when you call me about your short sale listing, even if it's just to pick my brain, don't apologize. If it wasn't for short sales I'd have to find something else to do for a living! (Do you remember that old song "If it weren't for bad luck I'd have no luck at all")

Think of me as Short Sales R Us!

Seriously, I'm well suited for short sales. I've been told I've got the patience of a saint and that's true. (I think it's in my genes!) Patience may well be the number one attribute any agent needs for dealing with banks in a short sale! I'm a great listener and most sellers who are going through a short sale need a good listener. And, I'm cool in a crisis, good at keeping my head when things get emotional.

So, to all the sellers who have contacted me about a short sale, thank you! And, to those of you who will call me this year, thanks to you too! Keep those phone calls coming!

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Wells Fargo - Great! BOA - Lousy!

I've always been a huge Jim Collins fan. So a recent Agent Genius blog post caught my eye.

Wells Fargo was picked by Jim as an example of great in the banking arena. Bank of America/Countrywide - not so much.

Read the blog post to find out how that's still true today, in reference to short sales.

 

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Short Sale Help - HAFA

Date: Dec. 21, 2009
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As you may have heard by now, the Federal Government has come up with guidelines that are designed to simplify the process of short sales.

Simplify may seem an odd choice of words given that the document explaining this program is 43 pages!

You can read all about HAFA for yourself. But if you're not inclined to dig into those 43 pages, here's a short version.

HAFA will provide incentives to lenders to make the short sale process easier. The steps the lenders are asked to take include:

  • Approve short sale terms prior to listing.
  • Standardize processes, documents and timeframes.
  • Requires borrowers must be fully released from all future liability.
  • Prohibits servicers or lenders from intervening to ask for real estate commission reductions.
  • Allows use of data already collected in the course of examining eligibility for loan modification.

In return, servicers and lenders get financial incentives:

  • $1500 for borrower relocation assistance
  • $1000 for servicers to cover processing costs
  • $1000 for investors for allowing up to $3000 in short sale proceeds to be distributed to subordinate lien holders.

The program begins April 5th, 2010.

I can't tell you if this program will work. I imagine there will be successes, but my hunch is that the number is small. Once again, this is a voluntary program. Lenders overall haven't shown much inclination to jump into anything that's voluntary and that isn't favorable to their bottom line. If this program is different, I haven't yet seen why.

Still, I applaud any effort by anyone to make the short sale process less painful. Short sales seem likely to be a large percentage of transactions for the foreseeable future. Or, you could see more homeowners decide it isn't worth the hassle and just walk away.

Clearly there's an incentive for everyone to fix this process!

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Short Sale or Foreclosure

If you're having trouble making your mortgage payments should you go the foreclosure or short sale route?

The conventional wisdom has been short sale for some time now. The thinking was that it better protects your credit making it easier for you to buy a home again in the future.

New evidence suggests that there may not be enough difference to matter.

This recent article in the North County Times does a good job of laying out the options, risks and rewards. (I'd add that renting the property is another viable option that ought to be explored.)

I've also been reading a paper by Brent T. White from the University of Arizona that argues homeowners who are significantly underwater are not acting in an economically rational fashion (read: in their own best interests) when they continue to make mortgage payments on a home that's value is way below the mortgage owed, with no recovery in sight. I agree with his analysis that the only way to explain this behavior is societal pressures/mores.

The commonly held wisdom has been that real estate professionals should be advising their clients to go the short sale route rather than foreclosure. The sole justification for this was the difference in impact to the credit score.

If this isn't true; other than the fact that the short sale is better for the individual real estate agent's bottom line, can and should anyone be advising a client to go through the long, excruciating process of a short sale?

For now, it's clearly not as black and white as we had thought. Going forward I'll be laying out what I know and advising clients to talk to an attorney to weigh their options.

While the only real reason being put forward for going the short sale route is the moral one, that doesn't hold true, apparently for lending institutions. No one argues about the moral burden that a bank must bear. No one argues that they can't foreclose because it's immoral to put families out in the street. Why is all the moral responsibility on the shoulders of the individual mortgage holder?

 

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Do it All Right, Still Get the Shaft

Date: Nov. 17, 2009
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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!)

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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.

 

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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!

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