Blown Mortgage » Foreclosure

Housing prices sink as underwater number rises

Constantine von Hoffman — Tue, 11 Aug 2009 14:24:38 +0000

Two reports out say if you’re thinking of buying, wait. The prices are going to continue to drop. The reason they offer are the same: Continuing increases in the number of homes worth less than their current mortgages.

Zillow reports that 23% of US mortgage holders owed more than their homes were worth in the second quarter of this year. This number is challenged, but not in a good way, by Deutsche Bank which says it’s actually 26%.

Both numbers are a stark contrast to recent upbeat spins on real estate news. National Association of Realtors report that pending home sales rose for a fifth straight month in June. (Remember, the NAR’s last chief economist admitted lying about his numbers.) And the most recent Case-Schiller numbers which were widely misreported as showing a price increase in May.

While the Zillow report makes the relatively sure prediction that underwater mortgages will increase to 30% by mid-2010, DB goes all in and says it will be 48% by 2011.

This will further decrease prices as it increase the amount of housing for sale. There were 3.8 million homes for sale in June which take 9.4 months to sell at the current pace of transactions, and those numbers are from the ever-optimistic NAR.

The number of homes for sale doesn’t (and perhaps can’t) include the huge number of shadow homes out there. These are homes being kept off the market by banks, investors and individual owners waiting for prices to improve before putting them on the market. “If” prices continue to descend look to these folks to hit the market in a big way as they try to get anything back on their investments. This, of course, will further depress the price of homes. That’s a helluva catch, that Catch-22.

Share At:

Hide Sites

Mortgage Scams: How To Avoid Them

Andrew — Tue, 04 Aug 2009 23:03:03 +0000

Mortgage Scams have been on the headlines of the news as the nationwide raid on mortgage consultants arrested high profile loan modification consultants and firms. This has created a panic among homeowners that need a loan modification creating insecurity among those that need the most help.

In response to this situation the Federal Trade Commission has teamed with local and state authorities in a nationwide crackdown on conmen consultants and loan adjustment scams.

The biggest challenge authorities have is actually reaching the people at risk from these scams before the scammers knock on their door and dupe them to pay for services and loan adjustments they never provide.

One avenue the Federal Trade Commission (FTC) and local authorities have embraced is providing videos under the theme “Real People, Real Stories” in Spanish and English. See at www.ftc.gov/YourHome.

These videos illustrate the steps homeowners can take to either save their home from foreclosure or save on their monthly payments without being taken for a ride by unscrupulous “consultants”

The FTC and the California Attorney General’s office has also put together a list of tips of how to avoid scams here is an excerpt from the the release that is worth reading:
• The first thing anyone seeking to modify an existing loan should do is call his lender.

• Lenders want to hear from homeowners and will probably be more willing to work directly with them than with a foreclosure consultant. Do not ignore letters from your lender. Many lenders are willing to work with homeowners who are behind on their payments.

• Contact housing counselors approved by the U.S. Department of Housing and Urban Development, who may be able to help you for free.

• It is illegal for foreclosure consultants to demand money before they give you a written contract and before they actually perform all the services described in the contract, such as negotiating new monthly payments or a new mortgage loan.

• However, an advance fee may be charged by an attorney, or by a real estate broker who has submitted the advance fee agreement to the California Department of Real Estate for review.

• Do not transfer title or sell your house to a “foreclosure rescuer.” Fraudulent foreclosure consultants often promise that if homeowners transfer title, they may stay in the home as renters and buy their home back later.

• Fraudulent foreclosure consultants claim that transfer is necessary so that someone with a better credit rating can obtain a new loan to prevent foreclosure. Beware — this is a common scheme so-called rescuers use to evict homeowners and steal all or most of the home’s equity.

• Do not pay your mortgage payments to someone other than your lender or loan servicer, even if he or she promises to pass the payment on. Fraudulent foreclosure consultants often keep the money for themselves.

• Do not sign any documents without reading them first. Many homeowners think that they are signing documents for a new loan to pay off the mortgage they are behind on. Later, they discover that they actually transferred ownership to the “rescuer” who is actually a scammer.

Share At:

Hide Sites

Avoid Foreclosure By Calling Your Bank Early Says HOPE

Andrew — Sat, 01 Aug 2009 20:51:30 +0000

Mortgage modifications are the only hope for millions of Americans that cannot continue paying their monthly payments. One of the typical reactions when people are behind in their payments and cannot see a way out is to simply ignore the bank or mortgage lender. This is a terrible idea that only makes things worse.

HOPE NOW the government run free mortgage counseling program explains the reasons why you must contact your mortgage provider as soon as possible in a new Video narrated by Queen Latifah. The video explains the consequences of not contacting your bank when you are behind in your payments or fear you will be in the near future.
The video illustrates this point through various real life cases of people that initially were reticent to calling their bank but were able to face their fears and solve the situation.
Another issue that the video deals with is that many banks are completely overwhelmed with the volume of borrowers that are calling to ask for loan modifications. Hope provides a way out by advising borrowers to head to theHUD.gov website to find advice and help when lenders cannot (or will not) reply to their calls.

This video deals with two serious issues that are causing many to lose their homes unnecessarily:

1) Borrowers not contacting their banks and finding a negotiated solution to the debt and

2) The apparent inability of banks and lenders to deal with the great number of borrowers in need of help.

Borrowers don’t contact their banks for various reasons. As illustrated in the new HOPE NOW video many borrowers don’t contact their bank about their late payments because they don’t have a good payback plan to present to their lender and feel embarrassed to contact them. Other’s have little understanding of the options at their disposal and simply ignore the efforts of the bank to contact them. Still others are not even sure who their lender is or how to contact them. The video illustrated how to find out by checking one of the mortgages payment slips which carries the lender’s name and telephone on the back.

The speed at which banks are dealing with customers loan modifications has caused many to feel that banks are not committed to providing loan modifications and are dragging their feet going through the motions. Although loan modifications can in many cases be beneficial to both the bank and the borrower, allowing the homeowner to keep his home while the bank can make more money on the same loan, in some cases they are not cost efficient for lenders that would do better foreclosing the loan.

The government has recently committed extra funds to incentivize banks into accelerate their mortgage modification programs in order to help the millions of Americans that risk foreclosure on their mortgages this year.

Share At:

Hide Sites

Banks Dirty Secret Of Profitable Foreclosures

Andrew — Tue, 28 Jul 2009 20:51:52 +0000

Despite the governments efforts to provide loan modifications for individuals and families in financial difficulties that are at risk of foreclosing on their loans the mortgage aid seems to be moving too slow for all the families to benefit from it.

This has made many experts to question why banks are moving so slowly to take advantage of a program that is designed to help both the borrower and the lender. The idea is that mortgage modifications benefit both borrowers and lenders as they allow banks to receive payments they would not get if the mortgage foreclosed in a buyers market where the security (normally the house itself) is in negative equity.

However recent research quoted in today´s Washington Post indicates that this only holds true with a certain kind of borrower, the type of borrower that truly can´t pay the monthly mortgage payments at the current level but would be able to pay them if the monthly payments were reduced. This is only one of three types of borrowers though. It seems that with the other two types of borrowers, loan modifications are just not cost effective.

These two types comprise:

1) Borrowers that are in such financial strife that no loan modification or mortgage refinance is going to help in the long run, ultimately they are going to have foreclose their loan.

2) Borrowers that can meet the payments even though this might mean serious financial difficulties, even losing their life savings.

Banks and lenders have little incentive to help either of these demographics of borrowers.

To illustrate imagine if you were a lender, a bank or even a private company that provided loans for a profit. Obviously you demand some sort of security to protect your investment in case the borrower cannot or will not pay, this could be jewelry, thee deeds of a property or a car. Then one day the borrower tells you he is going through financial hardship and needs a break in his payments, a reduction in his debt or his monthly payments. However you realize that this borrower is not going to be able to pay his loan whether you help him now or not. Negotiating with him now is just going to cost you money in time, work and whatever reduction or break you provide for his loan. On the other hand you could simply foreclose his loan and claim the security without losing nearly as much. What would you do?
Even the kindest philanthropic can see the negative incentive that such a lender would have to actually negotiate a solution with the borrower.

Could this explain why loan modifications are moving so slowly despite the huge incentive programs the government is providing to encourage loan modifications on mortgages that risk foreclosure.

It seems that Obama´s administration has also seen this flaw in their system and is currently negotiating with banks for further incentives for the provision of loan modifications to the most vulnerable borrowers.

Share At:

Hide Sites

What Is A Foreclosure?

Andrew — Tue, 28 Jul 2009 03:45:58 +0000

Sometimes the things that scare us the most are the subjects we know less about, death, darkness, losing someone we love and foreclosure are just a few examples. There is a reason we know little about the things we fear, not knowing is often worse; we always imagine things are worse than they really are. Learning about our fears and finding ways to deal with them is the best policy. This article will aim to shed some light on the issue of foreclosures and what they really are, that way we will hopefully fear them less and learn how to avoid them.

Foreclosure is a legal term to describe the termination of a mortgage or loan. Foreclosure occurs when the mortgagee (the lender) gets a court order that terminates the mortgage and allows the mortgagee or lender to redeem the mortgage’s security, nearly always the home itself. This occurs when the borrower fails to pay the mortgage principal and interest payments; the lender has then the right to force the borrower to either pay the payments he is behind in plus costs or sell the house or some other asset to meet his responsibility of paying the mortgage. When the borrower sells the property and uses the proceeding to pay the lender it is said that he has foreclosed the mortgage.

This rather dry definition we worked through provides some interesting points.

1) A foreclosure is a legal process that must be approved by the courts of equity. 2) Losing the house is not the only way to deal with the situation. The government is trying its best to avoid foreclosures and is willing to help most people that are willing to work hard to find a way around a foreclosure through loan modification and other types of financial aid. Do your homework and make it your job to jump through the necessary hoops to save our home.

Share At:

Hide Sites

Avoid Foreclosure, There Is Always HOPE

Andrew — Mon, 27 Jul 2009 22:12:41 +0000

There are few things scarier than losing your home and seeing your family on the street. Unfortunately many Americans and people worldwide are facing this problem due to the worldwide crisis. As we know most governments are doing their best to protect poor families that are at risk of losing their home because they are unable to meet the mortgage payments. One of the measures the American government has provided is the HOPE program. This program began under the Bush administration and the current administration has just expanded the availability and extent of the mortgage protection program for families.
Sadly many families don’t understand or know about the program and how they can benefit, if you fit this profile what can you do make the most of the helping hand the government is trying to provide. Information is as usual the most powerful weapon whether you are trying to fight a war or pay your home loan. If you are having trouble paying your mortgage and need aid to avoid foreclosure you need to get working on solving your situation.
1) Find out what your situation is exactly. This means working out how in debt you are, what your interest rate on each loan is, what your prepayment penalty is on your current mortgage and compare it with your current income. You would do well to get all the paperwork you are going to need together. Contact your mortgage provider and ask for an up-to-date review of your mortgage and the details of the contract.

2) Once you know how bad things are you can start making productive steps towards solving the situation. For instance you should get a feel for the value of your home and compare the current value with the outstanding principal on your mortgage. Once you have this information you should contact your lender. You should contact your lender before you are behind in your payments; this will show you are acting in good faith and want to solve the situation. Lenders can often provide breaks and good re-financing deals to customers that make the “right” decision. If your lender will not work with you, you might need to look to other lenders before your credit rating starts to suffer.

Share At:

Hide Sites

Why the increase in housing starts means trouble

Constantine von Hoffman — Tue, 21 Jul 2009 16:08:06 +0000

Last week the Commerce Department announced an unexpected 3.6% increase in housing starts in June. The 582,000 units started last month is a solid gain from May’s 562,000 and much more than the 532,000 analysts had been expecting. The increases were concentrated in single-family homes which were up 14% — the biggest rise since December 2004. Housing permits were also up; the 8.75% increase was the largest gain in a year.

This would seem to be good news. A sign that more people are buying or commissioning homes and that developers expect this trend to continue. However, developers have guessed very wrong in the very recent past. (See Florida, Phoenix, Las Vegas and the Case/Schiller index for examples.)

Many economic indicators suggest developers haven’t suddenly become a lot better in predicting the economy:

The nation currently has more housing stock than it needs. That is why the price of existing houses is going down. More stock continues to be placed on the market at lower prices each month by investors desperate to get anything back on their investments.
While the increase in the number of people claiming unemployment benefits nationally has slowed slightly (up only .1% in June) it is difficult to see that as a reason to build more homes.
Mortgage delinquencies have continued to increase. The most recent FHA numbers showed approximately 71,700 more loans became 60 days or more delinquent in April. Loans 60-plus-days delinquent increased approximately 7% that month to 1.2 million.
Commercial real estate prices dropped 7.6% in May. So it hardly seems that businesses are about to expand or staff back up.
Companies that sell to the construction trade are not optimistic about the coming year. Caterpillar announced dealer inventories had been cut $1.5 billion in the first half of 2009 and the company expects that to continue. The reasons: “Factors depressing construction included high inventories of unsold homes, lower selling prices and continued stringent standards for mortgage qualification.”

So why the increase? As with so much economic activity these days the cause seems to be wishful thinking. Developers think first time home buyers are going to flood the market before the Dec. 1 end to a federal program offering first-timers an $8,000 tax credit.

While there are undoubtedly a number of wise families who have kept their financial powder dry and will be able to take advantage of the federal aid, why would they buy a house that has either just been completed or is about to be? They are understandably going to want to get the most for their money. Why would they choose brand new construction over very recently brand new – for less money?

Housing starts are frequently referred to as a leading economic indicator. Perhaps we should change that to a leading economic prayer.

Share At:

Hide Sites

Avoid Foreclosure With A Personalized Home Loan Modification

Andrew — Thu, 16 Jul 2009 16:03:09 +0000

Avoid Foreclosure With A Personalized Home Loan Modification

Foreclosure has turned from being a four letter word so taboo it was barely mentioned to a common feature of life we have nearly got used to. Can we avoid foreclosure? Or is the common household doomed to foreclose and buy again depending on the economic climate?
Well although economic pressures can sometimes cause irreversible damage to a family’s income and resources making foreclosure the only way out this does not have to be the general rule. There are steps we can make at every stage of economic hardship to try to avoid the “f word”.

The first fact that we must understand is that nobody likes a foreclosure, banks don’t like them, the government hates them and you and I certainly don’t want anything to do with it. All this begs the question; if everyone hates a foreclosure why have them? The same question could be applied to wars, famine, violence and the answer may be similar. Often one or more of the parties involved simply don’t have the will to continue working towards a positive outcome.

Well, enough generalities and poetic comparisons what can a real family or individual do to avoid foreclosure.

Step 1. Don’t buy a house outside of your means. Obviously if you already own the house this advice comes a little late but for any new home buyers it is great advice to not be swallowed up by the temptation of paying more than you can afford for a house. A good rule of thumb is to not pay more than 30% of your income on your home. This gives you a little bit of a safety net if things go bad and the opportunity of saving a portion of your income for a rainy day.

Step 2. Control spending. Be ruthless. If income and expenditure are not tallying take control of your budget and keep to it.

Step 3. Talk to your bank as soon as possible. Banks hate foreclosures because they more often than not lose money and it is not what they prefer to be doing. They are not estate agents they are banks that want to be making money by lending and investing not sweating the details with a bad house sale. If you approach them before your credit is in the dirt and you provide them with a plan they will try and work with you.
Options open to your bank you might apply for are payment holidays for a determined amount of time if you have evidence that your income situation will change in the future, or a full on loan modification. Remember these modification actually make more money for your bank. What do you think they will prefer, foreclosure or a making more money on your mortgage?

Loan modifications come in a large variety of colors and shades. You can modify your loan to last longer which will make your monthly payments lower. Imagine you owe your bank $1,000 and you need to pay it in three months, $333 and you can’t afford it, so you ask the bank if you can pay the same amount in ten months making it a much more affordable monthly payment of $100. The only glitch with this option is that you end up paying more interest. Another option is to change your mortgage provider to one that is willing to charge you a lower interest. This is a great option that is often combined with a larger mortgage (not a good idea in most cases) and a lengthening of the loan’s tenure (also expensive in interest), the only problem is that changing mortgage providers or even just changing interest rates if your bank is willing to renegotiate terms is often a lengthy process.
The thing to remember is that there are options, the ones we have discussed are just a sample. Talk to your bank or even with a financial adviser and study what options you have, just don’t give up.

Share At:

Hide Sites

How Cities & States are coping with foreclosure

Jay Hammond — Fri, 10 Jul 2009 18:24:25 +0000

The July 17 deadline for cities and nonprofits to apply for their share of nearly $2 billion in Neighborhood Stabilization Program funding. A new report from PolicyLink, a national research and action institute advancing economic and social equity, detailing how some states and cities are dealing with foreclosure may provide some inspiration for those who have still not applied and hope for communities suffering from blight or plummeting property values.

“As foreclosed properties fester, communities are reeling from blight, crime, and property value decline,” said Kalima Rose, co-author of the report and Director of the PolicyLink Center for Infrastructure Equity. “Thankfully, some proven strategies are showing communities how to reclaim their housing stock and get their cities back on track.”

The report, “Reclaiming Foreclosed Properties for Community Benefit,” features several of the most promising practices and stories from communities around the nation including:

Creating Community Land Trusts

Land trusts have been very successful at securing vacant properties and ensuring they remain affordable for years to come. For instance, in Providence, RI, city and state leaders acquird foreclosed properties in two of the hardest-hit areas and put covenants on their sale to ensure they remain affordable for decades.

Marketing Foreclosed Homes and Offering Tax Incentives to Buyers

Some cities whose housing markets are still functioning have been able to attract new buyers to foreclosed properties. Boston offer potential buyers a trolley ride tour of foreclosed properties while Los Angeles has hired marketers to tour the benefits of buying foreclosed homes. Other cities offer low-interest loans or tax incentives to attract buyers.

Increasing the Cost for Owning Vacant Foreclosed Properties

Owners of foreclosed properties are often large investors waiting for the market to revive. Meanwhile, their properties fall into disrepair. By imposing taxes or fines on properties remaining vacant for more than a year, some cities and towns can change the incentive structure making it easier to sell the property to someone willing to fix it up and live in it.

Rehabbing or Demolishing Vacant Properties

In Cleveland, OH, community leaders have started a pilot program to identify properties in six neighborhoods that can be rehabbed and demolish ones that cannot. Getting new homeowners into salvageable properties and saving the upkeep and repair money on non-salvageable properties reduces the burden for local government. Other cities having excess housing stock and low demand are following suit.

In addition to the new report, PolicyLink’s “Equitable Development Toolkit” is a key resource for community leaders, advocates and residents advocating for more equitable communities.

Share At:

Hide Sites

Freddie Mac educates borrowers via YouTube

Jay Hammond — Thu, 09 Jul 2009 10:19:27 +0000

A new video posted on YouTube on Wednesday shows borrowers how taking the time to gather a few financial documents before calling a mortgage servicer can speed the process of determining eligibility and applying for loan modification under the Making Home Affordable program or Freddie Mac’s other workout initiatives.

“America’s servicers are handling an extraordinary volume of calls from distressed borrowers seeking an Home Affordable Modification under the President’s program,” said Ingrid Beckles, senior vice president of default asset management at Freddie Mac. “By taking a few moments to gather these documents borrowers can help their servicer understand their financial situation and reduce the need for repeat calls.”

The 2-minute video, “Stop Foreclosure: Documents Your Lender Needs to Help You,” walks late-paying borrowers through which documents they should have on hand when they call a servicer to discuss loan modification. According to the video the key documents borrowers should have when calling their servicer include:

Most recent monthly mortgage statement;
Pay stubs or other documents showing their household’s monthly pre-tax income;
Most recent tax return;
Second loan or home equity line of credit statements;
Account balances and minimum monthly payments on credit cards, car loans, student loans or other debt;
A short, concise description of the financial hardship that is causing or leading to a mortgage delinquency.

“Stop Foreclosure: Documents Your Lender Needs to Help You” can also been viewed on Freddie Mac’s YouTube channel, here it is:

Share At:

Hide Sites