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Matt's Take on the News


New Short Sale Proposal out of Ohio!

World Now & WOIO bring us an article from Ohio. Senator Sherrod Brown is trying to move forward a proposal that involves short sales. To quote from the article, “Brown’s legislation, the Prompt Notification of Short Sale Act, addresses the lengthy closing process that often comes with a short sale—which can last months—by requiring banks to respond in a timely manner when prospective buyers are attempting to purchase such homes. Brown’s legislation requires a written response of an acceptance, rejection, counter offer, or the need for an extension of time within 75 days of a request from a homeowner—thereby providing both buyers and sellers of short sale properties with predictability during a real estate transaction.”

There have been similar proposals made throughout the years. A glaring difference here, is that Senator Brown includes a more realistic time frame (75 days) for response. What isn’t included in the article are the ramifications when the 75 day time frame is not adhered to. I see this as a big issue with any of these proposals due to the fact that a HIGH percentage of the notes are being SERVICED by the banks. As a result, the bank (or servicing company) has no say as to whether the price and the terms and conditions of the short sale are acceptable to close. Only the investor who owns the note (and sometimes private mortgage insurance companies) can make this call. This, in my opinion, is where the delays are rooted.

News Article

Senator Sherrod Brown unveils new plan for home “short sales”

NORTHEAST OHIO (WOIO) -

With nearly 25 percent of Cuyahoga County homeowners underwater on their mortgages, U.S. Sen. Sherrod Brown (D-OH) unveiled a new plan Sunday to improve the housing market by addressing “short sale” home sales.

Short sales are real estate transactions that must be approved by the bank because the seller owes more on their mortgage than the proposed sale price. Brown’s legislation, the Prompt Notification of Short Sale Act, addresses the lengthy closing process that often comes with a short sale—which can last months—by requiring banks to respond in a timely manner when prospective buyers are attempting to purchase such homes.

“For most buyers, short sales are anything but. The seemingly endless waiting game associated with short sales represents a dangerous drag on our housing market,” Brown said. “If we’re going to recover from the housing crisis, we need to make it easier for qualified candidates to purchase homes. This commonsense legislation helps prospective home buyers and distressed homeowners alike, while helping to rebuild our neighborhoods and to foster long-term economic growth.

“Too often during the short sale process, there is a lengthy break in communication between the loan servicer and the buyer of the short sale property. This breakdown deprives buyers notice of whether or not their offer has been accepted, rejected or countered—and that means that homes aren’t being sold, even when there is a demand,” Brown continued. “This lapse in communication makes it harder for families to move to Cleveland and help us build our community, and potential buyers are left waiting or even walking away in frustration. This bill is aimed at improving communication between banks and homebuyers—and keeping homes in our neighborhoods occupied. Our economic recovery depends on our housing recovery.”

The goal of The Prompt Notification of Short Sale Act is to improve the process for buyers considering a “short-sale” home. Presently, it can take many months to get any kind of response from banks or other loan servicers to short sale offers. Brown’s legislation requires a written response of an acceptance, rejection, counter offer, or the need for an extension of time within 75 days of a request from a homeowner—thereby providing both buyers and sellers of short sale properties with predictability during a real estate transaction.

Brown was joined by Victoria Machor, a former homeowner in Lorain County who struggled to resolve the short sale of her home with her bank for more than a year; with the assistance of Brown’s office, she ultimately sold her home, albeit at a lower price than she had been originally offered by a buyer. Brown, Machor, and Cleveland-area realtor Seth Task outlined how The Prompt Notification of Short Sale Act would improve the process for both sellers and buyers involved in “short sale” transactions and bolster the housing market and our economic recovery.


Foreclosures Effect Buyers and Sellers

Marcie Geffner from Bankrate.com brings us an article which discusses, full circle, the effect that foreclosures have on buyers and sellers. She starts off by stating what I believe to be true.....the foreclosure crisis is far from over. The shadow inventory is building. When these homes are released for sale, the low prices (average discount of 36% to retail) can only put downward pressure on surrounding home prices.

Ms Geffner does a very nice job of breaking down her expectations (from buyer and sellers perspective) of how foreclosures will effect both parties. Rather than me paraphrase, it's worth a read on your part. Click on the link below to get to the article

News Article

How foreclosures affect buyers and sellers

Overview of a subdivision of single family homes in San Marcos, Calif. The nation's banks own more than 600,000 single-family homes, according to RealtyTrac.

By Marcie Geffner, bankrate.com

If anything is certain about the foreclosure crisis, it's that it isn't over. That fact has important implications, not only for people losing their homes, but also for those planning to sell or buy a home this year.

As of January, about 3 million properties were in foreclosure, headed that way or already owned by banks, according to CoreLogic, an information, analytics and business services company in Santa Ana, Calif.

Approximately 1.6 million of those homes were believed to be within the so-called shadow inventory, a supply of foreclosure properties not yet listed for sale. It's a major stumbling block to a housing recovery, says Mark Fleming, chief economist of CoreLogic.

"It puts downward pressure on home prices, which hurts home sales and building activity," Fleming said in a statement.

Given that prelude, here's what sellers and buyers can expect.

Price

Foreclosures and short sales have widened the gap between sellers' and buyers' perceptions of prices. Sellers "think their home is worth more than it really is" and buyers "think the prices are too high," says Louis Cammarosano, general manager at HomeGain, a real estate information website in Emeryville, Calif.

One cause of that gap is realty brokers' tendency to scrub foreclosures and short sales from comparable sales data used to set sellers' asking prices. While sellers might feel a moral justification for that approach, Cammarosano says it's "disingenuous" because the status of the seller's mortgage isn't important to buyers.

"(Just because) you happen to be paying your mortgage, that doesn't mean the buyer has to step into your shoes and pay your inflated price," he says.

Interest rates

Traditionally, mortgage rates have been something of a wild card for homebuyers. But that's not the case today because the Federal Reserve has announced its intention to keep rates low at least through late 2014. That's not a guarantee, but it has taken some of the urgency out of homebuying and put more buyers into a wait-and-see pattern.

"The perception that prices could go lower, a lot of foreclosures in the pipeline and (the expectation) that rates will remain low -- that's certainly keeping some people on the sidelines," Cammarosano says.

Location

Buyers might be reluctant to purchase a home in a neighborhood plagued by foreclosures and short sales. But Stephen Israel, president of Buyer's Edge Co., a real estate brokerage in Bethesda, Md., says buyers can take a clue from real estate investors who are looking at areas that have been hard hit, yet might be prime for a turnaround.

"Investors are interested in neighborhoods that were beat up by foreclosures and that have other redeeming features that they then believe will be the first to bounce back," he says.

Those redeeming features might include easy access to public transportation, well-regarded schools, attractive shopping centers and other positive infrastructure elements. Neighborhoods that have such amenities can be "really interesting pockets, where there could be some very good values," Israel says.

Condition

Foreclosure and short sale homes are often, though not always, in worse shape than other homes on the market. That's especially problematic for buyers if a home has been vacant a long time because neglect can result in problems in plumbing, heating, cooling, electrical and other systems.

"There is a big difference," Israel says, "between a property that has been vacant a few weeks and one that has been vacant a year or more."

A home that's in poor shape might not be a bad buy if the buyer understands the risks, he adds.

Sometimes, though, those risks can be difficult to assess if the term of vacancy isn't known or the water, sewer, electricity and gas have been shut off. The utilities not being in service is "an interesting part of this equation that people miss all the time," Israel says.

Buy or sell

The bottom line for buyers is that they need to "buy smart," to use Israel's term, researching neighborhoods and being aware of a home's actual condition beyond its cosmetic appearance.

The bottom line for sellers, Cammarosano says, is that they need to get serious about pricing, cleaning, decluttering, staging and improving the value and desirability of their home.

"That's getting real," he says. "And if that's not what you want, don't sell it."


Is the Housing Market on a Road to Recovery?

Doug Kass from The Street Certainly thinks so. Mr. Kass points to several data points that seem to point to a recovery. According to Mr Kass research, the unemployment rate is going down, the shadow inventory is going down, the affordability index is going up and the mortgage rates are remaining at historically low levels.

Here’s hoping that his analytics hold up!

News Article

Residential Real Estate Is Ready to Recover

By Doug Kass

A complimentary preview of Real Money

NEW YORK (Real Money) — The housing market’s shadow inventory of unsold homes is starting to clear, certain areas of the country are experiencing signs of more robust activity, and, despite low levels of new-home production (based on historical data), homebuilders are even regaining pricing power in several geographic regions.

Stated simply, the U.S. residential real estate market is about to launch a broad and sustainable multiyear recovery. And, from my perch, the share price strength in housing-related equities is telling the real story of an improving and self-sustaining home market that could continue through the balance of this decade.

As proof of my emerging optimism, I would suggest listening to Toll Brothers’ (TOL) last two earnings conference call presentations and the recent observations made by CEO Doug Yearley in the media.

Spring selling season is strong. Over the past five years, Toll’s early-spring selling season had sputtered out in late February/early March. In 2012, however, its sales activity is getting stronger as the year progresses.

Homebuilder pricing power is returning. In fact, Toll Brothers is having its best selling season since 2007. Orders are up “significantly” and nearly 30% of the company’s communities have increased home prices. (A year ago, none had pricing power.)

The sun shines in Florida. Miami, Florida, one of the epicenters of home speculation in the last cycle, which had been previously inundated with foreclosures two to three years ago, has turned around meaningfully, thanks to an inflow of South American and Northeast U.S. buyers. This turnaround has been in place for nine to 12 months.

Shadow inventory is clearing. Surprisingly, even some areas of the country that have been adversely impacted by the weight of a large shadow inventory of foreclosed or soon-to-be-foreclosed homes, have improved measurably and are turning the corner. A good example is Phoenix, Arizona, which had over 15 months of supply for sale 12 months ago but now has a developing shortage of inventory (under three months of supply).

West Coast land prices are soaring. In certain areas of northern and southern California, the raw land market is regaining a speculative tone as prices have risen dramatically. The strength of land prices, while well ahead of the health of the home price market, is typically a leading indicator of industry pricing and activity.

To refresh everyone’s memory, one month ago, I made the case that the foundation of the housing market was firming and the runway for a recovery is lengthy.

It is my expectation that both new- and existing-home prices, which suffered price declines of close to 34% from 2007 to 2011, face a better year ahead in 2012 and over the balance of the decade.

While the housing recovery of 2012 to 2020 will likely start out slowly, owing to the large inventory of unsold homes, still-restricted mortgage credit and the current preference for renting, there is now ample evidence that residential real estate markets have already turned in a national market that has grown bifurcated. Areas of the country that are unencumbered by a large supply of foreclosed properties — for instance, the Washington, D.C.-to-Boston corridor — are doing better. Cancelation rates are down dramatically, and some pricing power is returning for the homebuilders. By contrast, areas such as inland California, Nevada and the like continue to suffer in price and in sluggish transaction activity as a result of the indigestion of the last cycle.

In other words, the weaker regions are masking a developing national recovery in housing that has the potential to be more durable and healthier than the past cycle. (The Case-Shiller index results this week belie the improvement because it is an index of all home prices, not a regional study.)

With a hat tip to Jim Paulsen at Wells Capital Management for providing some charts as evidence, here are the seven main reasons why (in conjunction with the Toll Brothers comments) I expect a durable recovery (in demand, activity/transactions and in prices) in the U.S. housing market


Principal Reductions

Peter Goodman brings us an article that describes what the government’s position is on principal reductions for distressed properties. The bottom line is that they don't like the idea when they own the note!

In fairness, the article doesn't deal with a mortgage write down in the traditional sense. What it deals with is Freddie Macs (or maybe its Bank of America who services the loan?) rejection of the buyers requirement that they (the buyer) be allowed to rent the property back to the original homeowner (everyone has seen the affidavits).

What was not mentioned in the article was that Freddie is part of a major movement to sell homes that they have foreclosed on to investors to allow them to rent them out. Makes sense doesn't it.....DON'T accept a short sale at 20% discount to market, but accept a bulk purchase of homes at an ungodly tbd discount (my guess is a MINIMUM of 60% discount to market) by an investor who must rent the home out! Depress the market even further while booting the owner to the curb!

News Article

Fannie Mae, Freddie Mac Resistance To Principal Reduction Costs Taxpayers

Peter S. Goodman

SPRINGFIELD, Mass. -- After two years of bewildering futility, John and Linda DeCaro thought they had finally found a way to hang on to their home.

They could no longer afford their mortgage payments and had slipped into delinquency. They could not refinance to take advantage of low-interest rates because they were among the nearly 11 million American homeowners who are "underwater," meaning that they owed the bank more than their house was worth. Bank of America had already initiated foreclosure proceedings.

Then in the spring of 2011, a nonprofit lender, Boston Community Capital, presented a potential fix, one it has used to aid some 200 underwater borrowers in Massachusetts over the last two years. The bank would buy the DeCaros' home at market value -- about $87,000, which was barely half of their mortgage balance -- and then sell it back to them for a little more, providing a manageable loan. Bank of America affirmed the sale price as fair value.

But one powerful obstacle stood in their way: Freddie Mac, the government-controlled mortgage giant, owned the DeCaros' loan. Freddie has a policy of refusing to approve so-called short sales -- those where the purchase price is lower than the mortgage balance -- unless the buyer signs a legal document promising not to resell the property to the original homeowner. The document bars the buyer from even renting the home to the initial owner.

In short, the deal could proceed only if the DeCaros gave up the very point of the transaction. They would have to surrender their home.

Linda DeCaro, 46, absorbed this turn of events as if she were being asked to renounce her identity. More than a financial asset, her home was the center of her existence. She and her husband had bought it from her brother almost a decade ago. Her sister lives around the corner. They all grew up in a house two doors down -- the same place where her parents still live, where the family gathers for dinner every Sunday evening, and where her 6-year-old daughter often plays while she is at work.

"This is my neighborhood," Linda DeCaro said. "This is all I know. I would never want to leave here. Everything that I have is here. The church that I was baptized in -- that's the church I belong to. My daughter's going to the same school that I went to. I don't sleep because I'm wondering, 'Where are we going to go?'"


Foreclosures Hit Rich and Famous

Craig Karmin and James Hagerty from the Wall Street Journal report on a trend that is spreading across the countryside. Houses with mortgages of $5M or more have seen a dramatic rise in mortgage defaults. People used to make money and could afford these gargantuan money pits but, with job cuts and a struggling economy these properties are going down the tubes, like their lower cost brethren. The article states, “In February alone, 352 homes nationwide in this category were scheduled for foreclosure auction, the final step before a bank acquisition. That is the largest monthly number of these so-called notices of sale since the financial crisis began. By comparison, in all of 2009, there were 1,312 such notices.” Astonishing numbers!

I think that this is the beginning of a trend. Why? Because wealthy people have the means to pump good money after bad to keep a house out of foreclosure. But, the money will eventually run out. Either that, or the home owner will make a business decision and engage in a strategic foreclosure. Either way, there may be opportunity heading your way

News Article

Foreclosures Hit Rich and Famous

By CRAIG KARMIN & JAMES R. HAGERTY

The rich and famous now have something in common with hundreds of thousands of middle and lower-class Americans: The bank is about to take their homes.

Houses with loans of $5 million or more will likely see a sharp rise in foreclosures this year, according to a RealtyTrac study for The Wall Street Journal.

Just this week, a Tudor mansion in Bel-Air belonging to film star Nicolas Cage was in foreclosure auction and reverted to the lender. On Wednesday, Richard Fuscone, a former top Wall Street executive, declared personal bankruptcy, forestalling a foreclosure auction that had been scheduled this week on his 14-acre Westchester mansion. Last month a Manhattan condominium owned by Italian film producer Vittorio Cecchi Gori was sold in a foreclosure auction for $33.2 million.

In February alone, 352 homes nationwide in this category were scheduled for foreclosure auction, the final step before a bank acquisition. That is the largest monthly number of these so-called notices of sale since the financial crisis began. By comparison, in all of 2009, there were 1,312 such notices.

Economists say the super-wealthy are among the last to lose their homes in a mortgage crisis because they usually have high savings, better access to credit and other means for staving off foreclosure. But many of them work in financial services and other industries hit especially hard by the crisis, and have seen their wealth shrink in the market crash.

While the numbers are modest compared with foreclosures at other income levels, they suggest the possibility of a sudden spike in bank takeovers of the wealthiest Americans’ property. Typically half the notices of sale result in homes being turned over to creditors, though the figure could be slightly lower for the richest Americans who have more financial options, according to Daren Blomquist at RealtyTrac.

Big borrowers are more likely to default than ordinary people, according to data from First American CoreLogic. Its loan database, reflecting more than 80% of the overall home-loan market, includes 1,700 loans with balances of $4 million or more. About 14.8% of those loans were 90 days or more overdue at the end of January, compared with 8.7% for all home loans tracked by First American. Sam Khater, a senior economist at First American, said the bigger borrowers may be more prone to stop making payments when they have lost all their home equity.

Mr. Fuscone, Merrill Lynch’s one-time head of Latin America, put his mansion up for sale in November, asking $13.9 million. But he couldn’t find a buyer.

The court had scheduled a foreclosure auction for Thursday for the 18,471-square-foot mansion—with two swimming pools, two elevators, six fireplaces, 11 bathrooms and a seven-car garage. The personal bankruptcy filed in U.S. Bankruptcy Court Wednesday temporarily freezes the foreclosure process.

Reached by phone, Mr. Fuscone declined to comment. Brokers and real estate tracking companies say that his home is one of the most expensive properties to face foreclosure proceedings yet.

The phenomenon is not limited to the New York area. Banks have taken over homes with loans of $5 million or more in Georgia, North Carolina and Colorado, RealtyTrac says.

Mr. Cage had tried to sell his 11,817-square-foot Bel-Air property for $35 million but failed to get any offers, said James Chalke, a real-estate agent who had the listing. At a foreclosure sale Wednesday, the property attracted no bids from investors and so was acquired by the foreclosing lender. Annett Wolf, a spokeswoman for Mr. Cage, said he had no comment.

A representative of Mr. Cecchi Gori, producer of more than 200 films including “Il Postino” and “Life is Beautiful,” said his financial situation is improving.

In Florida’s Miami-Dade County, the three largest foreclosure filings initiated against homes in the past six months involved a 4,655-square-foot home in Sunset Islands; a 8,443-square-foot house in Coral Gables; and a condo in Miami Beach, according to Peter Zalewski, a principal of Condo Vultures. All three had mortgages of $3.5 million to $4 million.

Mortgage defaults began to surge in late 2006, mostly among borrowers with subprime mortgages, those for people with weak credit records or high ratios of debt to income.

Over the next few years defaults spread rapidly to better-heeled borrowers, especially those who got loans without documenting their income. At the end of 2009, nearly eight million households, or 15% of those with mortgages, were behind on mortgage payments or in the foreclosure process.

Wealthy people have the means to stretch out the distress process, sometimes for years.

“It’s very, very difficult for these people to believe they’ve had such a severe reversal of fortune,” says Maggie Navarro, a real-estate agent in Pasadena, Calif.

Marc Carpenter, a San Diego-based foreclosure specialist, adds that while it’s much harder for potential buyers to get loans, there are also fewer buyers who can pay for top-dollar properties. “The upper end is definitely a lagging indicator,” he says.

In his bankruptcy filing, Mr. Fuscone provided a list of his debts, including ones to the Greenwich Country Day School, American Express, Mercedes-Benz, a local hardware store, a pet store, and Richards of Greenwich, a fine-clothing store.

“My background is in the financial-services industry and I have been personally devastated by the financial crisis which came to a head in March 2008,” Mr. Fuscone said in his bankruptcy declaration. “I have been sued by Patriot National Bank” as part of a foreclosure action. “I currently have no income for the 30-day period” following his bankruptcy petition.

C.W. Kelsey, owner of Greenwich Hardware, was among the local merchants owed money by Mr. Fuscone, though he wouldn’t say how much.

“Traditionally, the majority of our credit problems were contractors,” he said. “Now there are people you’d never expect two or three years ago to have problems, who live in multimillion dollar homes.”


Auditors Strike!

Clea Benson brings us an article that discusses the results on an audit that was done on FHA's 5 largest servicers. The results aren't pretty!

The article states, "According to reports released today by the inspector general of the Department of Housing and Urban Development, banks including Bank of America Corp. and Wells Fargo & Co. (WFC) violated the federal False Claims Act when they improperly foreclosed on homes insured by the FHA.

The audits, spurred by revelations in 2010 that mortgage servicers were seizing homes using improper paperwork, were forwarded to the Department of Justice last year. They formed part of the basis for a $25 billion settlement with five banks filed in U.S. court in Washington yesterday."

There is mention that this behavior contributed to the recent $25B settlement with several lenders and the state’s attorney generals. I wonder what is left to uncover?!

Auditor Uncovers Failures in Bank Foreclosure Practices

By Clea Benson on March 13, 2012

Bloomberg News

An audit of foreclosure practicesat the Federal Housing Administration’s five largest mortgageservicers uncovered widespread failures to ensure the banks hadproper legal documents.

According to reports released today by the inspectorgeneral of the Department of Housing and Urban Development,banks including Bank of America Corp. and Wells Fargo & Co. (WFC)violated the federal False Claims Act when they improperlyforeclosed on homes insured by the FHA.

The audits, spurred by revelations in 2010 that mortgageservicers were seizing homes using improper paperwork, wereforwarded to the Department of Justice last year. They formedpart of the basis for a $25 billion settlement with five banksfiled in U.S. court in Washington yesterday.

“I believe the reports we just released will leave thereader asking one question: How could so many people haveparticipated in this conduct?” the inspector general, DavidMontoya, said in a statement accompanying the reports. “Theanswer: simple greed.’”

Other banks included in the review were Ally FinancialInc. (ALLY), Citigroup Inc. (C), and JPMorgan Chase & Co. (JPM)

Ally Financial regrets the deficiencies in the foreclosureprocess, said Gina Proia, a spokeswoman for the lender. Still,she said, “there was no evidence of someone being foreclosed onwithout being in significant default of their loan.”

Efforts to Improve

Mark Rodgers, spokesman for Citigroup, said the bank hadalready improved its procedures and “is making every effort toensure that no foreclosure goes forward based on an inaccurateor defective affidavit.”

Spokesmen for Bank of America and Wells Fargo noted thatthe audit focused on activities that took place several yearsago. Wells Fargo has made “significant strides” in improvingits procedures, said Vickee J. Adams, a spokeswoman for thebank.

“We do all we can to modify loans when possible and toensure foreclosures are fair when they are unavoidable,” saidBank of America spokesman Richard G. Simon.

Patrick Linehan, a spokesman for JP Morgan, said the bankhad no comment.

Servicers failed to ensure that their employees andcontractors verified the content of affidavits before signingthem as they churned through thousands of foreclosures, thereview found. The banks also eliminated quality controldepartments.

The inspector general will issue recommendations to correctthe problems once the settlement agreements are approved by thecourt, the reports said.


Loose Credit Standards

Krista Franks Brock from DSNEWS brings us an article that will brighten the day for real estate professionals. She reports that banks are loosening their credit standards which will open up money for people to purchase homes. My only question is, "How loose?" Will these standards come back to haunt us the way the lenders lending practices from yesteryear have hurt us? What do you think?

Housing Crisis to End in 2012 as BanksLoosen Credit Standards

DSNEWS.COM

Capital Economics expects the housing crisis to end this year,according to a report released Tuesday. One of the reasons: loosening credit.

The analytics firm notes the average credit score required toattain a mortgage loan is 700. While this is higher than scores required priorto the crisis, it is constant with requirements one year ago.

Additionally, a Fed Senior Loan Officer Survey found creditrequirements in the fourth quarter were consistent with the past threequarters.

However, other market indicators point not just to astabilization of mortgage lending standards, but also a loosening of creditavailability.

Banks are now lending amounts up to 3.5 times borrowerearnings. This is up from a low during the crisis of 3.2 times borrowerearnings.

Banks are also loosening loan-to-value ratios (LTV), whichCapital Economics denotes “the clearest sign yet of an improvement in mortgagecredit conditions.”

In contrast to a low of 74 percent reached in mid-2010,banks are now lending at 82 percent LTV.

While credit conditions may have loosened slightly, somepotential homebuyers are still struggling with credit requirements. In fact,Capital Economics points out that in November 8 percent of contractcancellations were the result of a potential buyer not qualifying for a loan.

Additionally, Capital Economics says “any improvement incredit conditions won’t be significant enough to generate actual house pricegains,” and potential ramifications from the euro-zone pose a threat to futurecredit availability.


It doesn't apply to Fannie and Freddie!

Michael Hiltzik from the LA Times brings us an article that discusses why the recent $25B "settlement" doesn't apply to mortgages owned by Fannie Mae or Freddie Mac. So there is a settlement that was sponsored by the government but the government refuses to participate in it? It's not that simple.

It appears that the big hold up involves the potential for principal reductions. The $25B settlement has this as a component yet, according to Mr. Hiltzik, "The chief regulator and conservator of Fannie Mae and Freddie Mac is adamantly opposed to principal forgiveness" The article further states that, "(Edward) DeMarco (the chief regulator) contends that forgiveness saddles lenders with bigger losses on restructured loans than any other form of relief except foreclosure, and therefore he'd be violating federal law if he gave Fannie and Freddie the green light. In a nutshell, that's why Fannie and Freddie aren't in the national foreclosure settlement."

The article does a very nice job of "disproving" Mr DeMarcos theory or position. It does a nice job of comparing the effects of write downs to foreclosures and concludes that write downs (in the end) would save the tax payer money when compared to foreclosures.

There is some thought that Mr Demarco's position is ideological i.e. why "reward" people who aren't paying their mortgages by lopping off a portion of what they owe? What about the people that do pay their mortgages? When you look at that reasoning, I can truly understand Mr Demarcos position. What is not mentioned in the article is the possibility of people purposely defaulting in order to get their principal balance reduced. What effect would that have on the bloated government debt?

Faulty reasoning keeps Fannie and Freddie out of foreclosure deal

By Michael Hiltzik

LA TIMES

The chief regulator and conservator of Fannie Mae and Freddie Mac is adamantly opposed to principal forgiveness, a key element of the foreclosure settlement. But analyses show he's wrong.

You can love or you can hate the recent $25-billion federal-state mortgage foreclosure settlement, but there's no getting around one simple fact: There's a huge, gaping hole right in the middle of it.

The hole is that if your home loan has been bought from your lender by Fannie Mae or Freddie Mac, you're not eligible for the mortgage relief encompassed by the deal.

Since Fannie and Freddie control well more than half of all outstanding mortgages, this shortcoming looks to be what engineers would call "non-trivial."

This is curious, because the settlement, announced last week, had a sizable head of steam behind it. It was endorsed by the Obama administration, including the departments of Justice and Housing and Urban Development, and 49 of the 50 state attorneys general. By my count, the latter group breaks down as 24 Republicans and 25 Democrats; you can't get more bipartisan than that, unless you cut one Democrat in half and cede a piece to Team GOP.

What gives?

The answer is that the participation of Fannie and Freddie has been blocked by a career civil servant named Edward J. DeMarco.

As acting director of the Federal Housing Finance Agency, DeMarco is the chief regulator and conservator of Fannie and Freddie, which were chartered by the federal government to buy up mortgages, thus encouraging lenders to make home loans.

He has very firm ideas about a key element of the settlement, which would cut the principal balance for some homeowners who owe more on their loans than their homes are worth: He dislikes this sort of write-down so much that he's forbidden Fannie and Freddie to do it. (Experts refer to the homeowners' distance beneath the waves as their "negative equity" and the write-down of loan balances as "principal forgiveness.")

DeMarco contends that forgiveness saddles lenders with bigger losses on restructured loans than any other form of relief except foreclosure, and therefore he'd be violating federal law if he gave Fannie and Freddie the green light. In a nutshell, that's why Fannie and Freddie aren't in the national foreclosure settlement.

But what about DeMarco's argument that principal forgiveness is the biggest loser among restructuring alternatives? The truth is that it doesn't seem to hold even a nutshell's worth of water. In fact, his own agency's analysis, which he provided last month to Rep. Elijah E. Cummings (D-Md.) and other Democrats on the House Committee on Oversight and Government Reform, contradicts it. And independent analyses, including one from the Federal Reserve Bank of New York, blow it to smithereens.

Let's look at the record.

If you're trying to keep financially strapped underwater homeowners out of foreclosure, there are really only three ways to do it. All are aimed at reducing the homeowner's monthly payment:

•You can cut the interest rate on the loan.

•You can defer payments on part of the principal owed, often by tacking the unpaid obligation to the end of the loan or reamortizing it over a longer period; this is known as principal forbearance.

•Or you can write down all or part of the excess principal to bring the balance closer in line with the home's value (forgiveness).

Interest rate cuts alone don't do much — cutting the rate to 4% from 5% on a balance of $100,000 saves a borrower about $60 a month. Principal modifications can be more effective, especially when combined with an interest-rate cut.

But the Holy Grail in restructurings is to prevent homeowners from re-defaulting after a modification, and the record shows that forgiveness is much better than any other option in achieving that.

The reason should be obvious. The most important factor in a borrower's likelihood of default is the loan's negative equity. Put simply, if you think you're so deeply underwater that you won't have equity in your home by the time you're ready to sell it, or ever, then default looks more rational the more your ability to pay comes under strain.

The closer you are to breaking even or going positive, the more you'll fight to keep the house. Forbearance doesn't get you any closer to that point (you still owe the original principal, one way or another), but forgiveness does.

Real-world experience supports these assumptions. In an August 2010 study, the New York Fed calculated that a principal write-down of a mortgage with 18% negative equity would cut the probability of re-default 40% within a year of the modification. That's four times as effective as any other restructuring format, even when the alternatives produce the same reduction in the monthly payment.

DeMarco acknowledges that forgiveness reduces re-default rates more than forbearance; he just doesn't believe that the difference is enough to make forgiveness worthwhile. But the New York Fed analysis says he's wrong — the net present value of the restructured mortgage, which takes into account losses from defaults and foreclosures as well as the lower balance being paid by the borrower, is much higher than that of alternative restructurings, not to mention no restructurings at all.

All this makes DeMarco's adamantine opposition to principal forgiveness mysterious. In November, he told Cummings' subcommittee that he didn't think the law permitted him "to use taxpayer money for a general program of principal forgiveness."

But a "general program" is not what Fannie and Freddie are being asked for. Housing reformers want them to consider forgiveness as "one of several tools" to extricate the country from the mortgage overhang, in the words of Wade Henderson, chief executive of the Leadership Committee on Civil and Human Rights, a Washington group that will be meeting with DeMarco next week.

DeMarco's agency says that doing no modifications at all on the $300 billion of the Fannie and Freddie loan portfolio that is at least 15% underwater would cost taxpayers $102 billion through foreclosures. In other words, the taxpayer is already on the hook for that much. Offering forgiveness to borrowers, however, assuming that the offers are limited to loans that would have enhanced net present value as a result, would cut that loss by at least $28 billion — and the recovery would be nearly $400 million greater through forgiveness rather than forbearance. (The agency's calculations were based on reducing the balances so that no loan was more than 15% underwater.)

So how does forgiveness entail the use of taxpayers' money? The truth is, forgiveness reduces the taxpayers' bill.

Cummings, in a letter to DeMarco last week, hinted that he thought DeMarco's position was ideological. Yet it's hard to put one's finger on DeMarco's ideology, and indeed the Washington establishment has never known quite what to make of him.

In 2010, after he issued 64 subpoenas to Wall Street banks and other financial firms for information about the mortgage securities, many of them very smelly, that turned up on Fannie's and Freddie's books, DeMarco became a darling of progressives and a bane of conservatives. Sen. Richard Shelby (R-Ala.) and former Sen. Christopher J. Dodd (D-Conn.), the ranking member and chairman of the Senate Banking Committee, both called for his head in a letter to President Obama.

His cause was taken up promptly by Democrats in the House, who asked that, even if Obama were to replace DeMarco, he make sure that DeMarco's campaign "will continue to be pursued vigorously."

Now the shoe is on the other foot, and rather than lionize DeMarco as a "bank scourge" (pace the Huffington Post, circa August 2010), it's liberals who are calling for his head.

The real problem is that DeMarco can't easily be dislodged. He's "acting" head of the Federal Housing Finance Agency because he can't be forced to leave until a replacement is nominated by Obama and confirmed by the Senate. The last attempt to do so failed when Obama's candidate, former North Carolina Banking Commissioner James A. Smith, was threatened with a filibuster by none other than Sen. Shelby, who complained that he would be a "tool" of the White House. Smith, as it happens, has just been appointed as independent monitor of the new foreclosure settlement agreement.

Solving the housing crisis is going to require that a lot of moving parts in government and the private sector work together. When one agency can keep the most important cogs, Fannie and Freddie, from moving in sync with the rest of the pieces, what are the chances of moving the machine forward?


"No Bottom In Sight"

Douglas Hanks from the Miami Herald brings us a article that discusses the free fall that the South Florida Real Estate market is experiencing. A recent Case Shiller report shows that values in 2011 were down by 5% when compared to 2011 (51% off the peak in 2006). Houses would have to double in value to be even with values from 2006! That said, there are many Realtors in South Florida who feel that the market is stabilizing. Many site that the inventory level is decreasing. My question is whether the decreasing inventory level has anything to do with the glut of inventory that banks have yet to put on the market

Time will tell which camp is on target!

Case-Shiller: No bottom for housing in South Florida

BY DOUGLAS HANKS

Values off almost 5 percent from late 2010 levels, wiping out more than half of the gains South Florida property owners enjoyed in the boom days. Consumers still feeling more optimistic, though.

Here’s a scary thought for homeowners: what if South Florida’s worst year for real estate has only just begun?

New numbers from the Case-Shiller housing index dashed hopes for an official bottom to an historic crash in real estate prices, a downturn that now threatens to enter its sixth year. The November Case-Shiller report released Tuesday showed South Florida’s housing prices are off nearly 5 percent from 2010, dropping extremely close to all-time lows set earlier in the year.

The latest readings from the closely watched index leave home values off 51 percent from their peak in November 2006. With banks expected to dump tens of thousands of foreclosed home onto the resale market at bargain prices in the coming months, some experts say the long-awaited floor on values will have to wait at least another year.

“I think we still have a ways to go,’’ said Jack McCabe, CEO of McCabe Research and Consulting in Deerfield Beach. He predicted the real estate crash at a time when others dismissed fears of a pricing bubble as overblown.

“This is not going to be a year of stabilization,’’ McCabe said. “It’s going to be sometime in 2013, but not before.”

Other forecasters and real-estate trade groups see that kind outlook as too grim, citing an improving economy, healthy home sales and pent-up demand from buyers who have opted to rent throughout the downturn.

Another dive in home prices could prove a major blow to a recovery that appears to be gaining steam, both in Florida and across the country.

On Tuesday, the University of Florida reported consumers statewide are feeling more upbeat than they did for almost all of 2011, with outlooks on their personal finances and the national economy both surging. The UF index hit 77 in January, the highest since January 2011, when the national economy also seemed ready to move from a halting recovery to something with more momentum.

Chris McCarty, director of the survey, said the readings reflect national surveys that also show consumers feeling less timid and more optimistic. But he cautioned the numbers haven’t improved enough to demonstrate that Florida is truly ready to come out of its bunker.

“The question is was this some sort of euphoric bump, or are we getting some real traction here?” McCarty asked. He noted consumer spending remains iffy, with gains in income landing in savings accounts rather than cash registers.

Sales tax collections remain well above where they were a year ago — up 4 percent in Broward and 9 percent in Miami-Dade. Home sales also are up even after surging in 2010, according to Realtor groups. In December, resales of single-family homes rose 9 percent in Broward and 16 percent in Miami-Dade, according to the Florida Association of Realtors.

“Our numbers are already showing recovery,’’ said Ron Shuffield, president of Esslinger-Wooten-Maxwell, a top South Florida brokerage. “We’re selling some properties for more than we’re asking. There’s just more interest out there.”

Shuffield acknowledged that banks’ foreclosure inventory remains a concern, but he predicts pent-up demand and a declining supply of homes for sale will let the market absorb the distressed properties without hurting the recovery. Other market watchers predict a rough year ahead.

Moody’s sees a 12 percent drop in South Florida’s Case-Shiller index for 2012, followed by another 4 percent drop in 2013. That would roll back property values to where they were in June 2001. In early 2009, during the worst days of the global financial crisis, South Florida’s home values were only down to 2003 levels. (November’s report landed values back to where they were in late 2002.)

But the dire outlook doesn’t mesh with the market that brokers describe as having already turned a corner. The December Realtors report showed the median home price up 7 percent in Broward (to $189,600) and 5 percent in Miami-Dade (to $182,300) over the prior year.

“The inventory levels are really declining,’’ said Lynda Fernandez, spokeswoman for the Miami Association of Realtors. “Optimism has been building. Now there is a lot of excitement because we see the market recovering faster and stronger than we expected.”


Buyer Beware!

Mary Sanchez from the Kansas City Star brings us a story that all of you would be REO buyers should pay attention to. In my travels, I frequently hear how hot the REO market is. When a property goes on the market it oftentimes has multiple offers. Frenzied buying similar to the mid 2000's. The article demonstrates that you don't always get what you bargain for when you purchase a bank owned property.

Email me your stories that describe how you or a friend have been burned with the purchase of a bank owned home (for an example, read the article!)

Buyer finds trouble with purchase of foreclosed home

By MARY SANCHEZ

By MARY SANCHEZ The Kansas City Star

On Friday, Jack Douglas checked the roof of the foreclosed Agnes Avenue home that he bought in December

To say Jack Douglas got the runaround when he tried to pay cash for a foreclosed house is a huge understatement.

He got ripped off.

Literally, by the vandals who stripped out the furnace, water heater and most of the water pipes. And indirectly by others involved in the sale through the U.S. Department of Housing and Urban Development. Thieves had time to kick both the back and front door in during repeated break-ins while bureaucracy dawdled.

It’s a saga that astounded members of a committee concerned with foreclosures and vacant properties in Kansas City.

How indicative it is of similar dealings with low-income foreclosures is up for debate. The right people, including HUD’s regional administrator, are paying attention now.

But Douglas’ new home in the 3700 block of Agnes Avenue is unlivable. The 50-year-old man is on disability, unable to drive or work due to seizures.

In late December, he bought the house outright, plunking down $8,000 cash. One would think cash would talk. It took some shoving.

The first real estate agent tried to steer him to a higher-priced home, refusing to handle the sale of the two-bedroom house he wanted. Other agents wouldn’t return his phone calls. “I guess the commission would be too low for them,” Douglas surmises.

Douglas finally connected with real estate agents Ron and Joan Yaffe, who aided during the next two months of negotiations on the price.

HUD, through a company that handles its foreclosure properties, made numerous counter-offers. The Yaffes were told several times that counters can come back higher than the list price on low-priced foreclosures. The original asking was $8,000. Douglas offered $5,000 cash, then $6,000. One counter would have made the sale $9,300.

Then came the disputes about buying “as is.” The sale hadn’t closed when the break-ins occurred. Eventually, Douglas got a $750 credit, which isn’t even close to the $3,000 to $5,000 estimate to replace the furnace, pipes and water heater.

Ron Yaffe wrote up a four-page account of Douglas’ troubles. It’s in the hands of HUD officials in Washington now.

Locally, Neighborhood Housing Services will try to aid with repairs.

It appears a series of gaffes played out, bungling the deal through bureaucracy, miscommunication and probably a bit of classism. Counter offer policies that work for higher-priced properties might need adjusting for lower-priced homes, given the current market.

Douglas represents what such homes, often in blighted areas, need. He was highly motivated and wanted to be the owner/occupier of a foreclosed house.

A cash-in-hand buyer like him should find the way paved.


Loan Mods are on the Decline!

Take the time to read this article. The number of loan modifications that are being approved is going down. According to the article, this is a result of lenders/servicing companies doing more short sales and deed in lieu's. While this fact is not a real shocker to me, the rate of "re-defaults" is alarming.

A re-default is defined as when an individual obtains a loan modification and then re-defaults on the loan modification. Typically the cause of this is the unsavory terms and conditions the lenders/servicing companies offer the consumer. The consumer can hang in there for a period of time, but are susceptible to re-defaulting once the "teaser period" expires.

I would suggest that another reason the lenders/servicing companies are approving less loan modifications is due to the re-default rate (this exceeds 50% with some servicing companies). They may not see the value in spending the time and money to approve and manage a loan modification, if owners are going to default on the modification.

The message is..buyer beware. If a loan modification allows you to restructure for the long term, then it may be worthwhile pursuing. If it is simply delaying the inevitable, you may consider a different tactic.

Loan Mods are on the Decline!

As robo-signing reviews reach completion, servicers are beginning to work through some of their foreclosure backlogs, according to a third-quarter report from Moody’s Investors Service.

Moody’s reports that as servicers work through the bulk of their delinquencies, modifications are on the decline. Servicers are now turning to loss mitigation alternatives, including short sales and deeds in lieu, Moody’s says.

Moody’s calculated a decline in “total cure and cash flowing,” measuring successful loss mitigation efforts in the third quarter. The decline “resulted from servicers having worked through significant portions of their eligible 60-plus delinquencies,” according to Moody’s.

Citi, GMAC, and Chase experienced the greatest decreases in cures.Among subprime loans, Ocwen posted the highest cure rate – 44 percent. The high cure rate at Ocwen is linked to high numbers of modifications relative to its peers.

Moody’s notes that the high cure rate includes “a significant number of re-modifications,” which occur when an initial modification fails.

Ocwen saw re-defaults among 54.5 percent of its subprime modifications, the highest rate among its peers.

Ocwen was followed by Bank of America with a 50.5 percent re-default rate on modifications of subprime loans.

BofA also posted the highest rate of re-defaults of ALT-Aloans (42.3 percent) and the second-highest re-default rate for jumbo loans (35 percent).

Consistent with its high re-default rate, Ocwen ranked highest for re-modifications of subprime loans. Ocwen’s re-modification rate for the third quarter was 24.8 percent. The second-highest re-modification rate was seen at Wells – 6.8 percent.

The high re-default and re-modification rates at Ocwen “calls into question Ocwen’s process in evaluating borrowers for a modification,” Moody’s states.

However, Moody’s also concedes, “not all of the first modifications were necessarily completed by Ocwen due to servicing acquisitions prior to the analysis period.”

Moody’s also reports foreclosure sale to REO liquidation timelines are little changed from the second to third quarter. However, Moody’s forecasts longer timelines throughout the year.


Buy Back

Sean Maher from the Contra Costa Times brings us an article that describes how an investor group is offering some hope to families that have been foreclosed on. Waypoint Homes in California purchases 30 homes per month at auction according to their founder Doug Brien. While this in itself is not unique, the unique program revolves around a rent to own program for the PREVIOUS owners.

Simply put, Waypoint approaches the previous owners with a rent to own model. A portion of their rent is applied to a reduced (as compared to what the owners previously paid) purchase price. It helps the previous owners by keeping them in the home, lowering their monthly payments and it also gives them an opportunity to own the property.

What remains to be seen is whether this will turn out to be a wide spread success. According to Mr O'Brien only 1 individual has been able to purchase their house after being foreclosed on. Only 10% of Waypoints renters are in this program.

Time will tell

Program allows East Bay family to buy back foreclosed home

By Sean Maher

Contra Costa Times

Posted: 01/16/2012 07:16:55 PM PST

Updated: 01/17/2012 07:41:57 AM PST

With the help of an Oakland-based company that is buying up hundreds of bank-owned properties in Contra Costa and Solano counties, an Antioch family is the new owner of the same home it lost to foreclosure almost two years ago -- and at less than half the price it originally paid.

"We're so lucky. I mean it's the kind of thing, you tell it to the guy on the next bar stool, he thinks you did something illegal," said Darren Gates, a 40-year-old contractor and father of four.

Gates and his wife, Zelena, are the beneficiaries of a program started by Waypoint Homes, which was founded in 2009. Among its partners is former National Football League placekicker Doug Brien, who played football at Concord's De La

Salle High School and Cal, where he earned a bachelor's degree. He began investing in real estate in 1997, three years into a pro career that started with the 49ers' 1994 Super Bowl championship team.

Brien says one of Waypoint's top goals is getting foreclosure victims back into stable homeownership, a business model that appears new to the Bay Area, according to mortgage experts.

Waypoint bought the Gates' home when it went into foreclosure in 2009 but made a deal with the family: It could continue living there as renters and, under a special program, could start earning credit toward buying a home again.

Although Brien cautions this is a rare outcome, and a first in the company's history, the Gates family succeeded in buying back the home they'd lost, closing escrow near the end of last year.

Fewer than 10 percent of Waypoint renters are in that program, Brien said, though the company is pursuing another

model in a similar spirit. More than half of Waypoint's renters are former homeowners, many having lost their homes to foreclosure, and under a "lease with rewards" program, the company is grooming those renters into a second customer base that can use Waypoint as their agent to get back into homeownership.

Waypoint is focused primarily on Contra Costa and Solano counties, where home prices are lower, though the partners say they plan to spread into Alameda County this year.

Foreclosures remain high throughout the Bay Area, according to census information and foreclosure data website ForeclosureRadar.com:

Contra Costa County recorded more than 11,000 notices of default in 2011, or about one for every 95 residents.

Alameda County recorded about 10,700 default notices, or about one for every 141 residents.

Solano County, with less than a third the population of Alameda County, still registered more than 5,300 defaults, or about one for every 78 residents.

In all three counties, the notices were down about a third from the previous year but remain a severe problem for many residents -- and possibly an opportunity for local investors.

Waypoint started off buying about 900 foreclosed homes, Brien said, mostly in East Contra Costa County and in Solano County, and hopes to maintain most of them as rentals. But under the special leasing program, tenants in good standing can get free counseling to improve their credit and earn 10 percent of what they pay in rent to put toward the purchase of any home at the end of their lease, as long as they use Waypoint as the buying agent.

The partners tout the program as the first of its kind in a new, quickly growing housing market for single-family rentals in the wake of the nation's mortgage crisis.

GI Partners, a Menlo Park-based equity firm, announced Wednesday it will be investing at least $100 million in Waypoint's efforts, which Brien said will allow it to leverage as much as $250 million in buying power to acquire foreclosed housing.

John Holmgren, a mortgage broker with Oakland-based firm Holmgren & Associates, said he's not familiar with Waypoint and has not yet seen the model the company proposes elsewhere in the local market.

"I haven't heard of it, but it's a very ingenious idea in this market," he said.

Oakland real estate broker Paul Valva -- who agreed he hasn't seen the model applied anywhere in the Bay Area so far -- said investing in rentals is a good idea right now, with rents going up across the Bay Area as former homeowners flood the rental market.

Brien says the "lease with rewards" model is preferable to the one the Gates family used, because it provides flexibility to both parties and offers a better chance for a strong return on Waypoint's investment in the houses.

Partner Gary Beasley said the ideal time frame to hold on to a property is about five to seven years. The company expects housing values to begin recovering in about two years.

Darren Gates said he and his wife bought their house in Antioch's Mira Vista Hills development in 2005, near the height of the housing boom, after a long struggle to compete with other buyers.

"We looked at 30 or 40 houses," he said. "We would offer $5,000 or $10,000 over the asking price, and somebody else would offer $20,000 more."

Though modest in size, the home they found is close to a charter school the children attend, as well as a park for them to play in.

The home cost $455,000, and when the market went badly south a few years later, Gates says he was paying as much as $3,400 a month -- in interest only -- for a house that had plummeted in value. Compounded with a drastic drop in work for his self-owned contracting business, the family decided that "walking away was the only choice that made sense," Gates said.

So the family did what thousands like them have done: They stopped making payments and waited for the notice of foreclosure to arrive. It took almost a year.

"We'd boxed up our important stuff and put it in storage in case we had to get out on one day's notice," Gates said.

But when the Waypoint partners visited their home and spelled out the plan -- allowing the family to rent it with an end-goal of repurchasing it -- it was a no-brainer.

"It was a relief, a blessing, luck, anything you can call it," Gates said.

The purchase price this time around? About $180,000.

In 2009, Waypoint paid $143,000 for the house at auction, which is where it pays cash for most of its properties.

"We're buying about 30 houses a month right now and plan to be at about 100 a month by the end of the year," Brien said.

"It's hard to see during a recession how things can turn around," Beasley said. "But on a regional level, we've seen booms and busts even more drastic than what we're going through now on the national level."


The Power of the Short Sale

Mark Puente from the St. Petersburg Times brings us an article that highlights the prevalence of short sales. While the article speaks to the Tampa Bay area, I would suggest that the same message can be conveyed about most metropolitan areas around the United States.

According to Mr. Puente, "A spike in the number of homes sold through short sales in the Tampa Bay area is driving down prices — and that may be good news. Short sales — when a bank takes less than what is owed on a home — have climbed nearly 25 percent in the last five months when compared to the same period in 2010. Median prices on those deals fell 24 percent."

The good news is that the areas inventory of distressed homes is slowly being purged at prices that ARE GREATER than bank owned prices (On average banks are saving 20% when they agree to settle debt as a short sale versus when they sell the property as a bank owned transaction (also known as a REO).

In the short term, the volume of short sales can be bad for the housing market because they depress prices. The reality, however, is that things aren't going to get better until they get worse. Think of it as tough love. The properties will either get shorted or they will go into foreclosure (for the most part) and sell at even lower prices. When they sell at lower prices (i.e. as a REO sale), the housing market will continue to be depressed. The banks are also exposing themselves to title issues when they sell a REO.

Take the time to read the entire article. It's a worthwhile read.

Short sales increase in Tampa Bay area

By Mark Puente, Times Staff WriterTampa Bay Times

A spike in the number of homes sold through short sales in the Tampa Bay area is driving down prices — and that may be good news.

Short sales — when a bank takes less than what is owed on a home — have climbed nearly 25 percent in the last five months when compared to the same period in 2010. Median prices on those deals fell 24 percent.

Those numbers hardly sound like reasons to jump for joy. But experts say the housing market cannot recover until thousands of local homeowners get rid of their underwater mortgages, clearing a big backlog of distressed properties.

"This is good for the economy," said University of Central Florida economist Sean Snaith. "It helps get us to the other side. These houses have to go through this process."

Of course, there are downsides to all this. In the short run, falling values put downward pressure on asking prices as sellers compete for buyers. In the longer run, though, buyers might actually find it harder to afford their dream home. As short sales move more houses, the best of them will get more offers, forcing buyers to pay more. Ultimately, the very definition of a recovered housing market is higher prices.

From July 2010 through November 2010, Tampa Bay lenders recorded 2,971 short sales with a median price of $112,000. In the same period this year, banks recorded 3,700 short sales with a median price of $89,900 in Pinellas, Hillsborough and parts of Pasco and Hernando counties, according to My Florida Regional Multiple Listing Service data.

"We're seeing enough positive growth (in the economy) that we'd expect to see these gains," said Scott Brown, chief economist with Raymond James in St. Petersburg. "It's still going to be a long recovery, but we'll take anything we can get at this point."

There's another sliver of good news from the rise in short sales. It shows banks increasingly are turning away from the more time-consuming process of paying thousands of dollars in legal fees to evict people through foreclosure. Critics have slammed lenders all year for not working faster to clear the backlog.

"This make more sense," said Chris Hounchell, a short sale specialist with Keller Williams Realty in St. Petersburg. "Banks are realizing that economic benefit to short sales. It's a quicker resolution than foreclosures."

Foreclosures in the Sunshine State must be approved by judges and take about two years.

"In Florida, foreclosures end up being big losers for banks because of the judicial process," Snaith said. "This is an evolution in the banks' thinking. It's a good thing."

Experts have been predicting that a tsunami of houses from the ''shadow inventory'' would decimate the market. That inventory includes homes with mortgages 90 days late and nearing foreclosure or homes already seized by a lender but not listed for sale .

Increasing short sales decrease the inventory.

While short sales have risen, foreclosure sales in the bay area plummeted from their peak of 1,549 in March to 505 last month, a 67 percent drop. The 505 sales last month is 23 percent lower than November 2010.

Hungry investors are now entering bidding wars on short sales because the supply of bank-owned homes is so low.

"The investors are all over these," said Craig Beggins, owner of Century 21 Beggins Enterprises in Apollo Beach. "They have no choice. This is going to cause the average prices to go up. The cheap houses are going away."

And short sales, experts say, are better for neighborhoods. Houses listed as short sales tend to remain occupied until sold and hold higher values than those sold as a bank-owned foreclosures. Short-sale owners typically leave houses in better shape than people who are evicted. That helps maintain the value of neighboring properties.

Beggins, whose agents close 20 to 25 short sales a month, said the deals help homeowner associations clear delinquencies when the properties sell.

It's better for the housing recovery and the banks' bottom line if lenders don't flood the market with foreclosed homes, Beggins said, adding: "The lenders really have the control."

Lower prices could force home­owners who are not financially distressed to not list their homes for sale until the market improves. Currently, the region has about a six-month supply of homes. The lower the supply, the stronger the market.

Peter Murphy, president of Tampa's Home Encounter, a full-service real estate firm, said the short-sale increase is a double-edged sword for sellers.

"This sounds like a good idea for the banks," he said. "If they want to sell, they have to drop their price. Short sales are good for banks, but they're not really good for the housing market."

Brian Lamb, Fifth Third Bank's Tampa Bay president, said his bank would rather sell houses in short sales than seize them in foreclosure. "Our goal is to be fair to our customers," he said. "We absolutely want to work with our borrowers."

Although short sales are a more favorable option to foreclosure, lenders must approve them for hardship reasons and they typically take longer to complete than conventional sales. Agents says some lenders are starting to close in 45 to 60 days instead of a year or longer. Some offer cash to homeowners for moving expenses and waive the unpaid balances on their loans.

And not every owner has to be in default. Many lenders are allowing homeowners to be current on their payments while being approved for a short sale. Bank of America recently rolled out a program in Florida that offers between $5,000 and $20,000 to sellers who dump their houses in short sales.

For borrowers, the damage to a credit score is less severe with a short sale than a foreclosure. Borrowers can usually buy a new home within two or three years after a short sale whereas it can be longer with foreclosure, said Andy Wood of American Mortgage Services in Tampa.

He added: "A short sale sends a message that the owner worked with the lender to mitigate the loss to the bank."


A Holiday Reprieve

Seems like this is an annual event! The lenders start to play nice and stop foreclosing on people during the holiday season. While I think this is admirable, I've always wondered why they don't help people stay in their homes throughout the year.

I know there are those of you out there that think that I am sympathetic to people who have clearly defaulted on their notes.....well...you are right. I would prefer to see a bank put forth a better effort to help these folks out rather than bonusing their executives 10s of millions of dollars while fleecing the tax payers by accepting bail outs.

The bottom line is that if a lender can convert a non performing note into a performing note, why won’t they?

"Foreclosures and evictions on hold for the holidays

By Christopher Quinn

The Atlanta Journal-Constitution

Families in foreclosed homes are getting a holiday reprieve again this year, as government sponsored mortgage giants Fannie Mae and Freddie Mac, along with major banks such as Wells Fargo are holding off on foreclosures and evictions until 2012.

Like last year, the Thanksgiving and Christmas moratorium dropped metro Atlanta foreclosure notices in December to one of the lowest monthly totals for the year with 7,454. Only June 2011 was lower at 7,374. That is still more than twice the number of monthly foreclosure notices in the years leading up to the housing crisis.

The total for notices in 2011 dropped to the lowest level since 2008 -- 109,548 in metro Atlanta. There were 127,140 notices last year and 117,107 in 2009.

A notice does not always end up in foreclosure, as the homeowner can work out a deal with the bank, sell the home or find a few other escapes.

Many factors are helping depress the total in 2011 -- from federal regulators requiring more careful paperwork to a push by banks and nonprofits for refinancings, and the effects of the "robo-signing crisis," where lenders stopped foreclosures because forged or illegal real-estate documents were found in many cases.

Still, no U.S. housing market has ever experienced the many pressures and changes like those of today, local experts say, That makes it difficult to interpret what the shifting numbers mean.

"We had this ridiculous amount of foreclosures for all of 2009 and 2010 and it carried into the first quarter of 2011," said Barry Bramlett, the CEO of Equity Depot's Foreclosure Report.

"We are definitely going to be down in the number of properties advertised for foreclosure this year. If the only criteria is that less foreclosures are good, then that is a good thing," he said.

But the dropping number in 2011 means homeowners in shaky situations and ripe for eviction are just being put off to another day, it will slow the process by which the market is clearing itself of bad loans, Bramlett said.

"If your criteria is we are just going to continue stagnant because we won't allow the situation to weed itself out, then it is bad," Bramlett said.

"And all these influences which are influencing us downward are still there. It makes you think it is not going to change quickly.


Be Aware of the Wrath of the Credit Union

Mark Puente from the St. Petersburg Times brings us a VERY important article that everyone needs to pay attention to. If you are late on a mortgage payment (or any other payment on an unsecured note) to a credit union and you hold other loans with the same credit union (let’s say a car loan), the credit union can repossess your vehicle! Even if you are current on your car loan, the credit union can repossess the car!

Why is this so important? Many people have taken advantage of lower interest rates that are offered by credit unions. Whether they take out a mortgage, a home equity line or a car loan, individuals are oftentimes attracted to very low interest rates. What people don't do is....you guessed it... read the fine print.

According to Mr. Puente, "The tactic is called cross-collateralization. Clauses in loan agreements transform secured loans, like cars, boats or recreational vehicles, into collateral for unsecured loans like credit cards.

Credit unions can even block customers from selling a paid-off vehicle if the client has other outstanding debts with the institution.

The cross-collateralization clauses are disclosed in loan contracts, but the language is buried in the documents."

If you or one of your clients has defaulted on a mortgage held by a credit union, make them aware of what you just read. It may save them a world of hurt.

Surprise: Credit union can take car, boat, RV if you walk out on unsecured loans

By Mark Puente, Times Staff Writer

Using a little known tactic, credit unions are repossessing customers' cars after they default on credit card payments or other unsecured loans.

With their customers battling declining wages and unemployment, credit unions increasingly employ the perfectly legal maneuver to stem financial losses.

"It's happening more than we know," lawyer Shawn Yesner said. "I don't see banks doing this, but credit unions do it a lot."

The tactic is called cross-collateralization. Clauses in loan agreements transform secured loans, like cars, boats or recreational vehicles, into collateral for unsecured loans like credit cards.

Credit unions can even block customers from selling a paid-off vehicle if the client has other outstanding debts with the institution.

The cross-collateralization clauses are disclosed in loan contracts, but the language is buried in the documents.

"Nobody ever reads that fine print," said Sami Thalji, a lawyer.

Some consumers first hear of the agreements in bankruptcy proceedings. A person who declares bankruptcy but wants to keep a car is surprised when the credit union adds the balance of an unpaid credit card or other credit lines to the auto loan from that credit union.

Suncoast Schools Federal Credit Union is the largest credit union in Florida and the 13th largest in the country. Jim Simon, senior vice president of loss and risk mitigation for Suncoast, said the lender is obligated to enforce the agreements and will freeze or seize accounts to cover losses.

"It's our members' money," Simon said. "Every member is an owner. Sometimes we have to do unpopular things."

Unlike banks, credit unions are member owned and return profits to members, not investors. The institutions have built a reputation on customer service and by charging lower interest rates on loans.

Suncoast is one the top automotive financiers in Tampa Bay. After taking a car or money from an account, Suncoast will likely return them when the default is cleared, Simon said.

Suncoast has repossessed only about 2 percent of cars in its portfolio of 70,000 car loans this year, Simon said. That would amount to about 1,400 repossessions. Freezing accounts, seizing money or repossessions is the last option, he added, stressing that the worst thing a consumer can do is avoid calling his lender when financial troubles arise.

"Your financial institution is here to help," Simon said. "We don't know what is going on in their lives. At the end of the day, it's best to communicate with the financial institution."

Officials with Grow Financial Federal Credit Union and GTE Federal Credit Union did not return calls for comment.

Keith Leggett, vice president and senior economist at the American Bankers Association, estimates that more than 70 percent of all credit unions use cross-collateral clauses in loan documents. He urges the institutions to be more transparent to customers.

"It's a rude awakening," he said. "Consumers need to understand this."

As a convenience to customers, lenders typically dangle lower interest rates to those who open checking and savings accounts and then take on mortgages, credit cards and car loans.

Lawyers warn that consumers shouldn't give one lender all their business. Holding multiple accounts with one credit union is not good since the lender has control over everything, Thalji said.

"Don't bank where you borrow," he said. "When credit unions freeze the accounts, bad things happen. Checks bounce; people can go into financial turmoil overnight."


Foreclosure Review

An interesting article just came out of the state of Connecticut. Apparently the state is encouraging residents who feel that they have been "wronged" by banks (read due to foreclosures) to apply for a "foreclosure review." In reading the article the foreclosure review appears to be a grievance process that may allow some homeowners to collect damages from a laundry list of banks.

According to the bank, "The federal agencies (Office of the Comptroller of the Currency and the Board of Governors of the Federal Reserve System) have ordered independent firms to evaluate whether individual borrowers suffered financial injury as a result of their loan servicer's errors, misrepresentations, or other deficient foreclosure practices; and to determine the appropriate amount of financial remediation that the loan servicer must provide to individual borrowers."

I will keep an eye out for any similar articles that are relevant to other states.

Residents encouraged to participate in foreclosure review

Easton Courier

Attorney General George Jepsen and state Banking Commissioner Howard F. Pitkin are encouraging Connecticut borrowers who believe they suffered financial injury because of harmful mortgage loan servicing and foreclosure practices to participate in an Independent Foreclosure Review and claims process.

"This presents an opportunity for Connecticut borrowers to receive some compensation for damages they suffered as a result of harmful practices by the loan servicing companies during foreclosure," Mr. Jepsen said. "I would encourage them to take advantage of this program."

Mr. Pitkin added, "This is an important program and I encourage anyone who was involved in the foreclosure process and is eligible to participate in this review."

Eligibility

To be eligible for review and financial remediation, borrowers must have had a mortgage in the foreclosure process between Jan. 1, 2009, and Dec. 31, 2010. In addition, the property securing the loan must have been the borrower's primary residence, and the loan must have been serviced by one of the following loan servicers:

America's Servicing Company

Aurora Loan Services

Bank of America

Beneficial

Chase

Citibank

CitiFinancial

CitiMortgage

Countrywide

EMC

Everbank/Everhome

GMAC Mortgage

HFC

HSBC

IndyMac Mortgage Services

Metlife Bank

National City

PNC

Sovereign Bank

SunTrust Mortgage

U.S. Bank

Wachovia

Washington Mutual

Wells Fargo

The Independent Foreclosure Review and claims process was ordered by the Office of the Comptroller of the Currency and the Board of Governors of the Federal Reserve System — the federal agencies with responsibility and authority to regulate and supervise the loan servicers.

The federal agencies have ordered independent firms to evaluate whether individual borrowers suffered financial injury as a result of their loan servicer's errors, misrepresentations, or other deficient foreclosure practices; and to determine the appropriate amount of financial remediation that the loan servicer must provide to individual borrowers.

Many Connecticut borrowers have already received letters from the independent firms approved by the federal regulators. Those and other eligible borrowers are advised to complete the forms and mail them to the address provided by the April 30, 2012, deadline. Borrowers who have questions regarding the Independent Foreclosure Review and claims process should call the program administrator at 888-952-9105 or visit independentforeclosurereview.com.

Connecticut homeowners experiencing difficulty making their mortgage loan payments currently should contact the state Department of Banking's Foreclosure Assistance Hotline (877-472-8313). The department assists homeowners who are attempting to achieve loan modifications and prevent foreclosure.


Occupy This!

By now everyone has heard of the Occupy Wall Street movement. While the movement hasn't changed policy....yet....it sure has brought awareness to the games that are being played on Wall Street. Justin Elliott, a Salon reporter, brings us an excellent article that high lights a new movement by, presumably, the same group.

The new campaign is called Occupy Our Homes which targets, "...foreclosure crisis and protest “fraudulent lending practices,” “corrupt securitization,” and illegal evictions by banks." The article points out, "Occupy Our Homes organizer Abby Clark tells me protesters are planning to “mic-check” (i.e., disrupt) foreclosure auctions as well as launch some new home occupations.

“This is a shift from protesting Wall Street fraud to taking action on behalf of people who were harmed by it. It brings the movement into the neighborhoods and gives people a sense of what’s really at stake,” said Max Berger, one of the Occupy Our Homes organizers and a member of Occupy Wall Street’s movement-building working group."

What will be interesting to me is to see what effect this campaign has on the 2012 Presidential election. It's a known fact that the shadow inventory of foreclosed homes continues to bulge at the seams because of the election. Obama doesn't want the American public to see the true state of this crisis. What will also be interesting is to see if any candidate embraces Occupy Our Homes. What are your thoughts?

Occupy’s next frontier: Foreclosed homes

A campaign to defend families from evictions and protest foreclosure fraud launches next week

Occupy Wall Street is promising a “big day of action” Dec. 6 that will focus on the foreclosure crisis and protest “fraudulent lending practices,” “corrupt securitization,” and illegal evictions by banks.

The day will mark the beginning of an Occupy Our Homes campaign that organizers hope will energize the movement as it moves indoors as well as bring the injustices of the economic crisis into sharp relief.

Many of the details aren’t yet public, but protesters in 20 cities are expected to take part in the day of action next Tuesday. We’ve already seen eviction defenses at foreclosed properties around the country as well as takeovers of vacant properties for homeless families. Occupy Our Homes organizer Abby Clark tells me protesters are planning to “mic-check” (i.e., disrupt) foreclosure auctions as well as launch some new home occupations.

“This is a shift from protesting Wall Street fraud to taking action on behalf of people who were harmed by it. It brings the movement into the neighborhoods and gives people a sense of what’s really at stake,” said Max Berger, one of the Occupy Our Homes organizers and a member of Occupy Wall Street’s movement-building working group.

The backdrop for all this is a new study suggesting the foreclosure crisis is only half over, with 4 million homes in some stage of foreclosure. Meanwhile, reports of illegal or questionable behavior by banks and mortgage lenders continue to stream in.

Like many of the Occupy actions that have focused on specific policy questions, this one is being organized by established progressive and labor-affiliated groups along with their allies in the movement. Among the allied groups listed on Occupy Our Homes’ website, for example, are the New Bottom Line and New York Communities for Change. On the Occupy Wall Street side of things, members of the direct action working group and the movement-building group in New York have been involved in the project.

Occupy Our Homes’ website (which was registered by a former SEIU official staffer) has the trappings of a slick professional campaign, with videos featuring the stories of families facing foreclosures and a pledge visitors are encouraged to sign stating:

… that until the banks do their part to help homeowners and to fix the economy, by writing down mortgage principal to current home values, I will:

I will support homeowners resisting wrongful foreclosure evictions.

I will resist any attempt by the bank to take my home.

If they come to foreclose, I will not go.

A network of groups organized as Take Back the Land has been doing eviction defenses and related actions around the country for five years, according to organizer Max Rameau.

“Now with this Occupy movement ramping up, I think we have a significant chance to keep large numbers of people in their home,” Rameau told Democracy Now earlier this month. “[The goal is to] not only force the banks to allow the family to stay in the home. But also then force policy changes that would help thousands of other people for whom we’re not doing eviction defenses.”

We saw a similar dynamic in the preexisting campaign to extend the millionaire’s tax in New York, which has benefited from new energy and a new banner offered by the Occupy movement.

Will the new Occupy push on foreclosures pick up any steam? I’ll be covering whatever happens on Dec. 6, so stay tuned to find out.


Sad Fallout of Robo Signing

MSNBC brings us an article that reports on the untimely death of an individual that was caught up in the robo signing debacle. While I don’t agree with what she did, it’s still sad to see the effects. The article does bring up excellent advice from the Nevada Attorney General:

“I would suggest you review your documents and bring them to an expert and an attorney,” said John Kelleher, chief deputy attorney general for Nevada’s fraud unit.

Foreclosure fraud whistleblower found dead

By msnbc.com staff

A notary public who signed tens of thousands of false documents in a massive foreclosure scam before blowing the whistle on the scandal has been found dead in her Las Vegas home.

NBC station KSNV of Las Vegas reported that the woman, Tracy Lawrence, 43, was scheduled to be sentenced Monday morning after she pleaded guilty this month to notarizing the signature of an individual not in her presence. She failed to show up for her hearing, and police found her body at her home later in the day.

It could not immediately be determined whether Lawrence, who faced up to one year in jail and a fine of up to $2,000, died of suicide or of natural causes, KSNV reported. Detectives said they had ruled out homicide.

Lawrence came forward earlier this month and blew the whistle on the operation, in which title officers Gary Trafford, 49, of Irvine, Calif., and Geraldine Sheppard, 62, of Santa Ana, Calif. — who worked for a Florida processing company used by most major banks to process repossessions — allegedly forged signatures on tens of thousands of default notices from 2005 to 2008.

Trafford and Sheppard were charged two weeks ago with 606 counts of offering false instruments for recording, false certification on certain instruments and notarization of the signature of a person not in the presence of a notary public. You can read a .pdf version of their indictment here.

Police said at the time that the alleged scam had thrown into question the legality of most Las Vegas home foreclosures in the past few years, leaving many people living in foreclosed-upon homes that they unknowingly don’t actually own.

“I would suggest you review your documents and bring them to an expert and an attorney,” said John Kelleher, chief deputy attorney general for Nevada’s fraud unit.


A Politician that really cares?

It's like sitting a unicorn...or Bigfoot...or...well maybe it's not that bad but finding a politician that actually cares is a rare site. Amanda Mole from the Hernando Independent Examiner reports on a "home foreclosure prevention workshop" that was sponsored by Congressman Rich Nugent. The workshop attracted hundreds of people on a a crisp Saturday morning.

According to Ms Mole, "The event, which took place from 9:00am to 1:00pm, included three panel discussions with advice on consumer protection, legal process, and credit management and debt reduction. Additionally, 30 vendors, including banks, legal service providers, and debt counselors, were available on-site to provide assistance to the attendees free of charge."

If the workshop helps one person, it was a success. My hope is that it will help many more!

Hundreds attend home foreclosure prevention workshop

Amanda Mole, Hernando County Independent Examiner

Drivers jockeyed for a parking space in Central High School’s parking lot. Hundreds of people carrying pencils and notebooks flooded the hallways. Nervous chatter permeated the air. One would think it was the first day of school.

But it was not the first day of school. It was an early Saturday morning, and the people crowding the hallways were desperate homeowners, not high school teenagers. Over 300 people pre-registered for this morning’s home foreclosure prevention workshop sponsored by Congressman Rich Nugent. Hundreds more arrived and registered on-site.

Congressman Nugent, clearly moved, welcomed participants in the auditorium. “One person told me he was afraid that he’d register and be the only one here,” he told the crowd. “What’s important is that we understand that no one is alone in this, and that we talk to each other and come up with ideas and solutions.”

The event, which took place from 9:00am to 1:00pm, included three panel discussions with advice on consumer protection, legal process, and credit management and debt reduction. Additionally, 30 vendors, including banks, legal service providers, and debt counselors, were available on-site to provide assistance to the attendees free of charge. Dozens of people waited in long lines to take advantage of the opportunity.

Chai Mookdasanit, a self-employed small business owner facing home foreclosure, expressed appreciation for Congressman Nugent’s efforts. “Things like this need to take place more often,” he stated. “The county needs to be more aware of resident issues besides just enforcing the law… and giving out traffic violations,” he added with a laugh. “All of us are people. We all want to take care of our children. We all want to give them food, clothes, good education, you know? We all want the same thing.”

Are you facing home foreclosure? If so, here are some tips to protect yourself:

Beware of foreclosure rescue scams. Remember that if it sounds too good to be true, it probably is. Never send your mortgage payment to anyone other than your financial service provider. Any service that demands an up-front payment is in violation of the law.

Always have a written contract, and always know what you are signing.

BE PERSISTENT when communicating with your bank or mortgage lender. When you fail to connect with someone via phone or email, request an in-person meeting.

Contact reputable non-profit housing or financial counselors, such as the U.S. Department of Housing and Urban Development or the Homeownership Preservation Foundation.

If you think you are stuck in a foreclosure scam, consider contacting the following agencies immediately:

Federal Trade Commission

State Attorney General

State, County, and City Protection Offices


It's Not Just Florida!

It's not just in Florida where law firms (that represent lenders) are getting blasted by the government. Thom Weidlich from Bloomberg reports on a law firm in New York that has been banned by Fannie Mae and Freddie Mac.

The article points out that, "Last month, Steven J. Baum PC, one of the largest foreclosure law firms in New York State, agreed to pay the U.S. $2 million and change its practices to resolve a probe of its foreclosure filings. The agreement concluded an investigation into whether the firm filed misleading pleadings, affidavits and mortgage assignments in courts, according to a statement by U.S. Attorney Preet Bharara in Manhattan. The settlement didn’t constitute a finding of wrongdoing. Steven J. Baum PC, located in Amherst, New York, just north of Buffalo, has attracted lawsuits and fines for its actions during the housing crisis. It has been accused of overcharging, filing false documents and representing parties on both sides of a mortgage transfer. On Oct. 28, a New York Times column reported that the Baum firm held a Halloween party last year during which employees dressed as foreclosed-upon homeowners."

They sound like classy people don't they?

Fannie Mae, Freddie Mac Ban Steven Baum Law Firm From New Foreclosures

By Thom Weidlich

Bloomberg

Fannie Mae and Freddie Mac, the mortgage-finance companies operating under U.S. conservatorship, dropped Steven J. Baum PC from their list of law firms eligible to handle foreclosures.

“After Nov. 15, 2011, servicers may not refer any new Fannie Mae foreclosure or bankruptcy cases in New York to Steven J. Baum PC,” Fannie Mae said in servicing notice that day.

Freddie Mac announced its ban Nov. 10. Both companies said the Baum firm would continue to work on matters referred before the effective dates. Neither said why the firm was being suspended.

Last month, Steven J. Baum PC, one of the largest foreclosure law firms in New York state, agreed to pay the U.S. $2 million and change its practices to resolve a probe of its foreclosure filings. The agreement concluded an investigation into whether the firm filed misleading pleadings, affidavits and mortgage assignments in courts, according to a statement by U.S. Attorney Preet Bharara in Manhattan. The settlement didn’t constitute a finding of wrongdoing.

Earl Wells, a spokesman for Baum, didn’t immediately return a call seeking comment on Fannie Mae and Freddie Mac’s actions.

Brad German, a spokesman for McLean, Virginia-based Freddie Mac, said the company doesn’t comment on why it drops law firms from its list.

“We add and subtract designated counsel all the time,” he said in a phone interview today.

Amy Bonitatibus, a spokeswoman for Washington-based Fannie Mae, said that, beyond the servicing notice, she could only say that “Fannie Mae has permitted servicers to transfer existing cases from the Baum firm to new counsel.”

State attorneys general and federal regulators are negotiating with banks including JPMorgan and Bank of America to try to reach a settlement over faulty foreclosure practices.

Accusations

Steven J. Baum PC, located in Amherst, New York, just north of Buffalo, has attracted lawsuits and fines for its actions during the housing crisis. It has been accused of overcharging, filing false documents and representing parties on both sides of a mortgage transfer. On Oct. 28, a New York Times column reported that the Baum firm held a Halloween party last year during which employees dressed as foreclosed-upon homeowners.

New York Attorney General Eric Schneiderman is investigating the Baum firm, two people familiar with the matter said in May. Danny Kanner, a spokesman for Schneiderman, declined to comment on the investigation.

Home Seizures

Earlier this year, Florida foreclosure firm Law Offices of David J. Stern ceased processing home-seizure cases after Fannie Mae, Freddie Mac and home-loan servicers, including the largest U.S. banks, dropped it.

“GMAC Mortgage no longer uses the Steve Baum law firm and began suspending its activity with that firm in September,” Gina Proia, an Ally Financial Inc. spokeswoman, said in an e- mail.

Thomas Kelly, a JPMorgan Chase & Co. (JPM) spokesman, said the bank doesn’t comment on vendor relationships and wouldn’t say whether it continues to use the Baum firm.

“We have terminated that relationship,” Lawrence Grayson, a Bank of America Corp. (BAC) spokesman, said in a phone interview. That occurred before Fannie Mae’s and Freddie Mac’s announcements, Grayson said.

“We are evaluating and monitoring the firm and we will respond in the best interest of our customers and investors,” Vickee Adams, a Wells Fargo & Co. spokeswoman, said of the Baum firm in an e-mailed statement.

Mark Rodgers, a Citigroup Inc. spokesman, declined to comment on the Baum firm.


Squatting...on a different level!

Eric Goldshein from The Business Insider reports on several interesting uses for foreclosed homes. In Nevada, industrious drug dealers, are turning abandoned, foreclosed homes into grow houses.....rent free! College students in California (and I’m sure in the other 49 states as well) are able to rent houses at a fraction of the market rate. My assumption is that the "landlords" are the current owners (if they have not been foreclosed on) or previous owners (if they have been foreclosed on). These folks aren’t paying their mortgage, but they are collecting rent.

So if there is a smoke with a funny odor coming out of the foreclosed house next to you, call the cops!

Foreclosed Homes Are Now Being Used As College Dorms And Pot Farms

By: Eric Goldshein

The Business Insider

There’s no reason to be happy about the housing market nowadays — unless you’re a college student in California, or a pot farmer.

These two demographics are taking advantage of high foreclosure rates, with varying levels of success.

University of California students are renting foreclosed homes in the city of Merced, which has the third-highest foreclosure rate in the country, for around $250-$300 a month per student, according to the NY Times (via Curbed).

Living alongside neighbors who are paying $3,000 a month on their mortgages, Merced students are living a lifestyle most college kids could only dream about, complete with granite counter tops and marble baths.

Meanwhile, Nevada’s pot growers are turning foreclosed homes into greenhouses, according to the LA Times (also via Curbed). Entire houses have been turned into grow rooms, which can help farmers turn a massive profit (the DEA puts a pound of hydroponically grown marijuana at about $3,000).

This year alone, authorities have busted 130 indoor sites in Nevada, up from 18 in 2005. That’s still a way to go to catch California’s numbers, but in both cases a trend has certainly developed.


The Easy Way Out

Several Months ago I commented on an article that involved a government proposal to liquidate government owned housing inventory (read Fannie and Freddie owned properties) in bulk. The idea is to get rid of it in one fell swoop. This article, written by Diana Olick, suggests that people may be waiting to purchase houses due to the fear that a glut of houses (that hit the market at one time) will further depress prices.

It would stand to reason that if the government sold the REO properties in bulk; all buyers would require an extreme discount. Such a discount would conceivably crush the real estate market...at least in the near term. Maybe that’s the idea?

Investors Raising Cash to Buy Government Foreclosures

By: Diana Olick

CNBC Real Estate Reporter

If only all the confidence swirling around the stock market todaycould find its way to potential home buyers across the nation; unfortunately it will take more than a little Greek bounce to right what's wrong in housing.

Contracts to buy existing homes fell in September, according to a new report from the National Association of Realtors, and the culprit is confidence. More Americans are staying where they are more than ever before, and even Baby Boomers, once expected to fuel an active adult market, are stagnant.

What's weighing on confidence are still-falling home prices, and what's pushing those home prices down are foreclosures. That's why the Obama Administration is pushing a potential plant to auction off foreclosed properties in bulk to investors, specifically the quarter of a million properties currently on the books of Fannie Mae, Freddie Mac and the FHA. As demand for single family rental properties rises, so too do potential investor returns.

"There is a hope that we'll be able to do a pilot in the near future, perhaps by the end of 2011 or early 2012. However, there hasn't been any decision on timing yet," according to an administration source.

The hope is there, and apparently the cash is there as well.

"Many investors are out there raising billions of dollars to buy these properties," says Jaret Seiberg of MF Global. "It's a great idea, and it's one of the few things that we've heard in several years now that could really help housing in a meaningful way."

Seiberg likens it to the Resolution Trust Corporation, which liquidated assets (primarily real estate assets) during the Savings and Loan crisis in the 1980's.

"The idea is not just to reduce supply but to reduce the fear that there's going to be this massive flood of foreclosed homes into many markets, and it's that fear of this foreclosure inventory that's really keeping prices down," adds Seiberg.

There were takers back then, and will likely be many takers now.

"The beginning of the rentership society is upon us," say analysts at Morgan Stanley. "Singe family rental total returns offer lower volatility and outsized returns vs. other major asset classes, even when accounting for the housing bubble and subsequent declines."

Investors would need some incentives, however, like perhaps a tax break or low-interest-rate loans. Currently Fannie Mae caps the number of loans it makes to investors in single family properties at 10. Any program would of course have to go through Fannie and Freddie's regulator, the Federal Housing Finance Agency (FHFA), which is still, shall we say, mulling:

"Before moving forward with individual asset sales, we're working hard to ensure that we have engaged appropriate private sector financial expertise. For any given locality, market conditions may dictate one or another type of transaction," says an FHFA spokesperson.

Well I guess that's a start.


What is Veterans Day?

Tomorrow is Veterans Day. Many people equate Veterans Day to a day off of work, a day at the beach, an opportunity to throw a party.....everything that Veterans Day DOESN'T represent!

Wikipedia defines Veterans Day as, "an annual United States holiday honoring military veterans. It is a federal holiday that is observed on November 11. It is also celebrated as Armistice Day or Remembrance Day in other parts of the world and falls on November 11, the anniversary of the signing of the Armistice that ended World War I. (Major hostilities of World War I were formally ended at the 11th hour of the 11th day of the 11th month of 1918 with the German signing of the Armistice.)"

While Veterans Day honors those that have served us, to me it is a reminder of all soldiers that have fought and continue to fight for our freedom. Thank a soldier today for what they do to keep us safe and free.


Same Old Same Old!

Gretchen Morgenson form the New York Times reports on the proposed "settlement" between the robo signers (I mean banks!) and our illustrious government. It is being touted as a $25B settlement that is supposed to slap the guilty lenders silly. As Ms. Morgenson points out, one must really read between the lines to understand the mechanics of the deal.

The actual cash outlay from the banks will be in the neighborhood of $3.5B - $5B. The balance of the funds, "....would consist of credits to banks that agree to reduce a predetermined dollar amount of principal owed on mortgages that they own or service for private investors. How many credits would accrue to a bank is unclear, but the amount would be based on a formula agreed to by the negotiators. A bank that writes down a second lien, for example, would receive a different amount from one that writes down a first lien." Ms. Morgenson points out that, "Sure, $5 billion in cash isn’t nada. But government officials have held out this deal as the penalty for years of what they saw as unlawful foreclosure practices. A few billion spread among a dozen or so institutions wouldn’t seem a heavy burden, especially when considering the harm that was done.

I would encourage you to read the article. Gretchen points out where the $3.5-$5 B will go (you will be surprised).....she also points out that the folks at MERS will be given a free pass after the settlement (not surprised!). She also points out that the program may not apply to notes owned by Fannie and Freddie (this will affect the high percentage of the notes that are out there).

What I'm looking forward to is the new acronym that the government will think up. HAMP is taken...HAFA has been used...HARP is the new kid on the block....any guesses as to what the government will call this one!??

A Deal that Wouldn't Sting

The New York Times

Published: October 29, 2011

By GRETCHEN MORGENSON

After months of back and forth, a deal that is supposed to punish large financial institutions for foreclosure misconduct may be nigh.

While the exact terms remain under wraps, some aspects of this agreement — between banks on one side, and the federal government and a raft of state attorneys general on the other — are coming into focus.

Things could change, of course, and the deal could go by the boards. But here’s the state of play, according to people who have been briefed on the negotiations but were not authorized to discuss them publicly.

Cutting to the chase: if you thought this was the deal that would hold banks accountable for filing phony documents in courts, foreclosing without showing they had the legal right to do so and generally running roughshod over anyone who opposed them, you are likely to be disappointed.

This may not qualify as a shock. Accountability has been mostly A.W.O.L. in the aftermath of the 2008 financial crisis. A handful of state attorneys general became so troubled by the direction this deal was taking that they dropped out of the talks. Officials from Delaware, New York, Massachusetts and Nevada feared that the settlement would preclude further investigations, and would wind up being a gift to the banks.

It looks as if they were right to worry. As things stand, the settlement, said to total about $25 billion, would cost banks very little in actual cash — $3.5 billion to $5 billion. A dozen or so financial companies would contribute that money.

The rest — an estimated $20 billion — would consist of credits to banks that agree to reduce a predetermined dollar amount of principal owed on mortgages that they own or service for private investors. How many credits would accrue to a bank is unclear, but the amount would be based on a formula agreed to by the negotiators. A bank that writes down a second lien, for example, would receive a different amount from one that writes down a first lien.

Sure, $5 billion in cash isn’t nada. But government officials have held out this deal as the penalty for years of what they saw as unlawful foreclosure practices. A few billion spread among a dozen or so institutions wouldn’t seem a heavy burden, especially when considering the harm that was done.

The banks contend that they have seen no evidence that they evicted homeowners who were paying their mortgages. Then again, state and federal officials conducted few, if any, in-depth investigations before sitting down to cut a deal.

Shaun Donovan, secretary of Housing and Urban Development, said the settlement, which is still being worked out, would hold banks accountable. “We continue to make progress toward the key goals of the settlement, which are to establish strong protections for homeowners in the way their loans are serviced across every type of loan and to ensure real relief for homeowners, including the most substantial principal writedown that has occurred throughout this crisis.”

Still, a mountain of troubled mortgages would not be covered by this deal. Borrowers with loans held by Fannie Mae and Freddie Mac would be excluded, for example. Only loans that the banks hold on their books or that they service for investors would be involved.

One of the oddest terms is that the banks would give $1,500 to any borrower who lost his or her home to foreclosure since September 2008. For people whose foreclosures were done properly, this would be a windfall. For those wrongfully evicted, it would be pathetic. Roughly $1.5 billion in cash is expected to go into this pot.

The rest of the cash that would be paid by the banks is expected to be split this way: the federal government would get about $750 million, state bank regulators about $90 million. Participating states would share about $2.7 billion. That money is expected to finance legal aid programs, housing counselors and other borrower support. If 45 states participated, that would work out to about $60 million apiece.

OBVIOUSLY, the loan modifications would make up a majority of the deal. And this is where real questions arise. For example, how can we be sure this plan won’t reward banks for modifications that they would have agreed to or should already have done absent the deal?

Perhaps most important, will the banks change the terms of loans enough to ensure that borrowers can actually meet their obligations over time? Or will these modifications default again, as is often the case? If so, the banks will have received a lucrative credit, even though borrowers fall back into trouble.

Such concerns are justified because past settlements promising big help to borrowers have failed to live up to their hype. An example is the 2008 settlement with Countrywide Financial that was struck by Illinois and California. Characterized as providing $8.7 billion in relief to troubled borrowers, it turned out to generate nowhere near that benefit.

The deal being discussed now may also release the big banks that are members of MERS, the electronic mortgage registry, from the threat of some future legal liability for actions involving that organization. MERS, which wreaked havoc with land records across the country, was sued last week by Beau Biden, Delaware’s attorney general, on accusations of deceptive trade practices.

The MERS registry was also subpoenaed last week by Eric Schneiderman, the attorney general of New York, as part of his investigation into the fun-while-it-lasted mortgage securitization fest. If he were to sign on to the settlement, his investigation into MERS could not move forward.

“Rules matter,” Mr. Biden said in announcing his suit. “A homeowner has the obligation to pay the mortgage on time and lenders must follow the rules if they are seeking to take away someone’s house through foreclosure.”

Abiding by the rules has not been the modus operandi in the foreclosure arena. That’s why any settlement must be tough, truly beneficial to borrowers and monitored for compliance. Otherwise, the deal would be another case where our government let the big banks win while Main Street loses.


News Rewind: Waiver OK'd on flipping houses

Leslie Berkman from the Press Enterprise reports on a recent development with the FHA. Effective February 1, 2010 (with a tentative end date of February 1, 2011), the FHA has eliminated the 90 day seasoning requirement for people that purchase homes that are financed with FHA mortgages. Prior to the change, individuals who purchased homes, could not sell them to buyers with FHA mortgages for 90 days. This effectively shut out many a home owner from purchasing properties that were acquired by investors.

The 90 day seasoning requirement discouraged people from purchasing properties in areas that were typically funded by FHA mortgages. Why? When a person purchases something (whether it be a house, a car or grandfather clock) they want the right and the flexibility to sell it when they want. Pure and simple. So, don’t be a hater! If it helps the economy and helps people, support it! Who knows, maybe Bank of America will get a clue!

Waiver OK'd on flipping houses

10:00 PM PST on Monday, January 18, 2010
By LESLIE BERKMAN
The Press-Enterprise


In a move that could make foreclosed properties more attractive to investors and increase the number of homes available to first-time buyers, the federal government is temporarily lifting a prohibition against providing FHA mortgage insurance for homes that are resold within 90 days.

The Department of Housing and Urban Development designed the regulation to discourage the flipping of houses by investors that drove up prices during the housing market boom of a few years ago. But critics say its unintended effect has been to reduce the options of first-time buyers who already are competing for a shrunken supply of homes for sale.

Last year banks slowed the flow of properties headed to foreclosure, possibly in an effort to modify troubled mortgages to make them more affordable or to avoid posting losses when the homes are sold.

The waiver on the purchase of flipped houses with FHA mortgages, which begins Feb. 1 and is effective for one year, "will give FHA borrowers access to a broader array of recently foreclosed properties," HUD said Friday in announcing the change.

Conditions attached to the waiver are expected to prevent what HUD called "predatory practices" by investors. For instance, when a house is resold within 90 days of purchase at a price that is 20 percent higher, the seller would have to justify the increase, such as by showing how much was spent on repairs and renovation.

Some real estate experts complain that investors who come into the foreclosure market with cash have an unfair advantage over first-time buyers who are less attractive to the banks because they frequently can afford only minimum down payments.

Other experts argue that investors perform a community service by buying and fixing up the most distressed and vandalized foreclosed houses that otherwise would be uninhabitable and ineligible for FHA financing. But they add that in many cases investors have not been able to sell the refurbished houses to FHA buyers because they could not wait 90 days to recoup their purchase, rehabilitation and holding costs.

So instead of first-time buyers with FHA mortgages getting such houses, they often have been sold to investors who have converted them to rentals or to people who could afford the larger down payments required for conventional financing.

Rich Cosner, president of Prudential California Realty with nine offices in Orange, Riverside and San Bernardino counties, said because of the FHA restriction against insuring loans on houses bought from flippers, many first-time buyers "were locked out of some of the best houses."

Investor-owned houses that are "flipped" represent "a small but growing percentage of the resale market," said Andrew LePage, a spokesman for DataQuick Information Systems, which tracks housing sales and prices. LePage said absentee buyers, most of whom are investors, in December accounted for 24 percent of sales in Riverside County and 28 percent in San Bernardino County.

In November homes resold after being owned no more than 180 days represented 3 percent of sales in Riverside County and 4 percent in San Bernardino County, LePage said.

More investors

Nicholas Manfredi, president of the Corona-based Inland Empire Investors Forum, said HUD's waiver was greeted with joy by his investor colleagues.

"They were high-fiving me in the gym this morning," he said Monday.

Manfredi said he is certain the change will attract more investors who will buy houses in neighborhoods dominated by FHA buyers. He said previously some investors shied away from these lower-price neighborhoods, which he said had the effect of perpetuating community blight.

However, Manfredi said the future of the Inland foreclosure market is too murky for him to recommend that investors dive into flipping. His biggest worry, he said, is that the change in federal policy may mean that the government expects banks to start allowing their backlog of delinquent loans to rush to foreclosure. If that happens, he said, home prices will fall and harm anyone needing to quickly sell investment properties.

Several local real estate agents, including Joyce Aragon, a sales agent for All National Realty in Ontario and president of the Inland Valley Association of Realtors, say in recent weeks they have seen an uptick in the volume of repossessed homes coming to market.

Pete Nyiri, owner of Top Producers Realty in Corona, a major broker of repossessed houses, said the number of foreclosures that banks assigned to him last month increased 40 percent and many of those have yet to be listed.


Triple Dip?

No we are not talking about ice cream! As the article below states, Barclays expects a continuation of the recession with a corresponding drop in home prices. While this may be old news to everyone, the most interesting part of the article touches on the effect of REO's and the shadow inventory which is lurking.....you guessed it .....In the shadows!

Some very telling quotes from the article include, "Barclay’s notes that delays associated with foreclosures have, for the moment, prevented an overcorrection in home prices by limiting the amount of REO inventory on the market.......As foreclosure to REO roll rates improve, the number of distressed homes placed on the market will increase. Barclays says although REO supply and demand are currently evenly matched, the glut of foreclosed homes in the pipeline should eventually cause REO supply to far exceed REO demand.

This supply-demand imbalance could remain well into 2013 and 2014, according to the research firm.

Barclays says price gains will be constrained by the amount of REO supply that will be placed on the market in the next few years."

Read between the lines.

Barclays Expects ‘Triple-Dip’ With Another 7% Drop in Home Prices

By: Carrie Bay

DSNews.com

The analysts at Barclays Capital say a “triple-dip” in home prices will likely materialize by early next year.

The term “triple-dip” emerged in a Clear Capital report a couple of weeks ago, and Barclays says its analysis corroborates the idea.

The research firm warns that home prices will likely slip another 6 to 7 percent over the coming winter months. That would put median prices at a new low for this cycle, in fact about 3 percent below the double-dip measurement of last spring.

Following the probable “triple-dip” in the first quarter of next year, Barclays says home prices will “rise very gradually.”

“While the likelihood of a negative tail scenario in housing has increased, the probability of a 15-20 percent decline from current levels is still low, in our view,” Barclays’ residential credit analysts said in their report.

“Long-run home price measures suggest that prices are close to equilibrium,” they added.

Barclays notes that delays associated with foreclosures have, for the moment, prevented an overcorrection in home prices by limiting the amount of REO inventory on the market.

Still, REO inventory levels have remained elevated, and Barclays says close to 4 million homes are seriously delinquent or in foreclosure and will eventually need to be sold.

“We expect 90+ to foreclosure and foreclosure to REO roll rates to improve in the coming quarters. That said, the timelines of defaulting loans should continue to ramp up,” Barclays said.

As foreclosure to REO roll rates improve, the number of distressed homes placed on the market will increase.

Barclays says although REO supply and demand are currently evenly matched, the glut of foreclosed homes in the pipeline should eventually cause REO supply to far exceed REO demand.

This supply-demand imbalance could remain well into 2013 and 2014, according to the research firm.

Barclays says price gains will be constrained by the amount of REO supply that will be placed on the market in the next few years. At the same time demand for these homes will be “highly dependent” on the state of the economy, the firm stressed.


Let's Be Hopeful...

By now, everyone has probably heard about Bank of America's trial short sale program. if you haven't, Mark Puente from the St. Petersburg Times does a nice job of laying out the specifics behind the program. What is confusing is that their is no method to who BOA chooses for this program. If the program helps even one person, its a step in the right direction I would suggest that you read the article.

Bank of America Offers Short-Sale Program Through End of November

By: Mark Puente

ST. Petersburg Times

The clock is ticking on homeowners who want to take advantage of Bank of America's recently announced short-sale incentive program.

To collect up to $20,000, qualified sellers must get their homes listed for sale by the end of November.

The bank, which services 1.1 million Florida mortgages, says it is not limiting the offer to delinquent borrowers. Homeowners with good payment histories could also qualify, said Christina Beyer Toth, a Tampa-based Bank of America spokeswoman.

When the nation's largest lender announced the program offer last week, it didn't specify which homeowners would qualify or whether the bank wanted to only dump toxic loans it acquired from Countrywide Financial in 2008.

The program will save the bank attorney fees, court costs and property taxes by avoiding foreclosure. It also speeds the process of getting bad loans off its books and gets the properties back on the market faster.

Here's what else Bank of America mortgage holders need to know about the program:

Q. How will homeowners know if they qualify?

A. Bank of America will send them a solicitation mailer. Home­owners can also call the bank to see if they qualify, and real estate agents will notify eligible homeowners already listed for short sale. Either the homeowner or agent can call the short-sale specialists for further information and to determine eligibility. Government-backed loans and lot loans are excluded.

When do the homes have to be listed for sale?

Between Sept. 26 and Nov. 30. The deal must close by Aug. 31, 2012. Sales already under contract are not eligible for the cash assistance.

Q. Can homeowners with good payment histories qualify if their loans are under water?

A. Yes. Bank of America selected Florida for the test-and-learn program to determine whether the additional incentive increases the use of short sales instead of other more expensive, and perhaps less dignified, transitions like foreclosure. If it works in Florida, the bank might roll it out in other parts of the country.

Q. How will the payouts be determined?

A. Qualified homeowners will get 5 percent of the unpaid balance as of August 2011, with a minimum payout of $5,000, Bank of America says. For instance, a homeowner who owes $100,000 as of August would get $5,000 (5 percent of $100,000). A homeowner who owes $200,000 would get $10,000. And so on up to a maximum of $20,000. The sales price does not impact the payout.

To sweeten the deal further, Bank of America will consider waiving the deficiency on the loan, which allows homeowners to sell the house for less then they owe without having to make up the difference to the bank. That can save homeowners thousands of dollars and enable them to buy another home quicker.

Q. Will the program impact a homeowner's credit rating?

A. It depends on whether the loan is delinquent or current when the home is sold. The short sale will be reported as any other short sale is reported, in line with national credit reporting standards, Bank of America says. If "short sale" is listed on a credit report, the score will drop by at least 100 points, experts said. But some short sales are being listed as " paid in full," which wouldn't have the same detrimental impact on a credit rating.

Q. Are the cash payouts government funded?

A. No. Bank of America will pay all incentives.

Q. How much money does Bank of America plan to spend on the cash assistance?

A. "We cannot provide an answer," Toth said.

Short sale specialist Steve Capen of Keller Williams Realty in St. Petersburg cautioned that homeowners shouldn't get overly excited because many of these plans have restrictions.

Two of his clients applied for the program, and each learned immediately that they qualify for more than $12,000 if the homes sold. Both clients have been delinquent on their mortgages for more than a year, Capen said.

On the other hand, the banks told two other clients, who are current on their loans, to apply for the offer but did not specify if they would get any money, he said.

"They're not giving any answers on the payout," he said.


The Long Sale...

I liked the headline so much I had to borrow it from the author of the article, Greta Guest from the Detroit Free Press. While the article points out the obvious that short sales can and do take a tremendous amount of time to complete, the article also points out the role the private mortgage insurance plays in further delaying short sale approvals. Be aware if PMI is included on loans that you are currently involved with. Ms. Guest also points out the need to involve an attorney in this process...why wouldn't you?

Also, a reputable investor that is involved in a short sale transaction can also minimize the time to close. Call me and ask me how.

The following quote from the article is a bit misleading (no fault of the person quoted), "Klorinda Hibbert, a real estate agent at Michigan brokerage Re/Max in the Hills, spends most of her day working on short sales and has 14 in progress now. She's noticed changes in the past year — and they aren't for the better.

She said lenders and servicers are requesting more than one broker's price opinion. The lender works with real estate brokers who put together a valuation on the property based on what similar properties are selling for. They're also requesting formal appraisals. They are good for only 90 days.

"The banks are willing to go into foreclosure rather than do a short sale," Hibbert said. "They want to get paid in full."

The reason I say it is misleading is due to the use of the word banks. The reality is that 90% (give or take) of mortgage notes are being serviced by the "banks". What that means is that the longer they can draw out the short sale process, the more they get paid. If the servicers drive the property into foreclosure, guess what? They get paid.

The Long Sale...

By: GRETA GUEST

DETROIT FREE PRESS

Buyers and Sellers Find Short-Sale Process Frustrating

DETROIT | Short sales are among the most arduous real estate transactions, often taking six months or more to close — if they get done at all.

Facts

CONSIDER THIS:

Most experts agree that it is wise to hire a Realtor who is experienced in short sale transactions and a lawyer, if possible.

A short sale is less onerous to one’s credit than a foreclosure. For instance, Fannie Mae allows people with a short sale on their record to get another mortgage after two years while those with a foreclosure have to wait seven years.

Once the seller has negotiated a deal with the bank about how much, if any, money to bring to the closing table, the bank usually issues a deficiency waiver that would protect the seller from being sued later on for the balance.

Keep the lines of communication open with lenders/servicers.

Keep detailed records.

Send everything to the lender/servicer by certified mail.

Source: Free Press research

They can be a life raft for distressed homeowners who owe more on their houses than what they’re worth, but the experience depends on a variety of factors, such as the number of lenders involved and whether there’s a hardship, mortgage insurance attached or whether the buyer has the patience to stay with the process.

A short sale occurs when a lender agrees to accept less than what the homeowner owes. The transaction requires that the homeowner has a financial hardship.

Homes with more than one mortgage and mortgage insurance tend to take the longest, said Ellen Mahoney, president of Complete Title Services’ loss mitigation division in Birmingham, Mich. A growing reason short-sale deals fall through or take longer is because of mortgage insurance purchased after the homeowner closes on the deal and the loan is later sold to other lenders and investors.

Unlike private mortgage insurance required for sellers who put less than 20 percent down, these lenders and investors buy insurance to minimize risk. It is known in the real estate industry as pool insurance because it covers a group of loans that have been purchased.

Premiums are paid by the lender or investor, and the homeowner isn’t aware of it.

When the loan defaults, such as in a short sale, the mortgage company may demand that the seller pay part of what is owed to minimize its losses.

“That’s a mess. They are the worst,” Mahoney said. “It is usually the lender mortgage insurance that nobody knew about, and it is usually on the second mortgage. It is real disruptive.”

Often, the bank holding the first mortgage isn’t made aware that the second mortgage had been insured until the end of the process, even if both loans are with the same lender. If the mortgage insurance company doesn’t sign off on the deal, the process starts over again.

These kinds of delays mean buyers walk away because of the time and frustration involved.

Brian Pannebecker, 52, of Shelby Township, Mich., made an offer on a home in his neighborhood only to have the bank reject it.

“I would never, ever look at a short sale,” he said. “I would go right to a foreclosure, which I eventually did. It was much, much easier.”

Instead of buying in Michigan, Pannebecker bought a two-bedroom condo in Fort Myers, near where his father retired. He made an offer that was accepted within 24 hours during the holidays. The whole deal closed in six weeks.

Buyers don’t typically ask to see short sales unless they have the luxury of waiting for an undetermined length of time to move, said Renee Reyer, a Realtor with Clients First Realtors in Canton, Mich.

Reyer does her homework on short sales. She checks the property history and finds how many mortgages the seller has to determine how difficult the deal might be to close. Based on that information, she works out the percentage of risk that the property won’t close and presents that to her clients.

Banks say they’ve been working harder to make the short-sale process easier, but they acknowledge the delays.

At Chase, the average response is 30 days from request to approval, said spokeswoman Mary Kay Bean in Detroit. Chase has completed 120,000 short sales using its own process nationwide since June 2009 and is now averaging 5,000 a month.

Klorinda Hibbert, a real estate agent at Michigan brokerage Re/Max in the Hills, spends most of her day working on short sales and has 14 in progress now. She’s noticed changes in the past year — and they aren’t for the better.

She said lenders and servicers are requesting more than one broker’s price opinion. The lender works with real estate brokers who put together a valuation on the property based on what similar properties are selling for. They’re also requesting formal appraisals. They are good for only 90 days.

“The banks are willing to go into foreclosure rather than do a short sale,” Hibbert said. “They want to get paid in full.”

Even the federal government’s program to streamline short sales — known as the Home Affordable Foreclosure Alternatives Program — has yet to gain traction because it doesn’t allow the lender to collect on the home’s deficiency.


Who Says Politicians Can’t Be Bought!

Massimo Calabresi from Time reports on how Iowa’s Attorney General Tom Miller recently accepted $15,000 in campaign contributions from (2) individuals who have vested interest in the government and the attorney generals NOT coming down on lenders for their bad deeds. You might ask who Miller is. Miller, “.... took the lead on the investigation by all 50 state attorneys general into the “robo-signing” foreclosure scandal, where several big banks allegedly approved taking away people’s homes without adequately verifying the facts in court, as required by law in some states.”

Instead of recognizing the conflict of interest, Miller made excuses justifying the contributions. Why wouldn’t he simply return the money?

Bank of America Lawyer, Consultant Gave Foreclosure Probe Chief $15,000

By MASSIMO CALABRESI

Iowa’s Democratic Attorney General Tom Miller is known for taking on big business. Elected to eight four-year terms, he led a multi-state anti-trust case against Microsoft in 2001 and filed a suit against 79 drug companies in 2007, alleging they illegally profited by inflating prices for drugs purchased through Medicaid.

Most recently, Miller took the lead on the investigation by all 50 state attorneys general into the “robo-signing” foreclosure scandal, where several big banks allegedly approved taking away people’s homes without adequately verifying the facts in court, as required by law in some states.

Last fall, just after he made the announcement that he would look into the foreclosure mess, contributions to Miller’s campaign coffers for November’s election soared, thanks in large part to out-of-state lawyers who make a living representing big banks, a new report from the National Institute for Money in State Politics finds. “Nearly half of the money Miller raised in 2010,” NIMSP reports, “was donated after the October 13 announcement that he would be coordinating the 50-state attorneys general investigation.”

Two Miller contributors have become directly involved in defending the banks in the probe. One, Meyer Koplow of Wachtell Lipton in New York, gave Miller $5,000 and is representing Bank of America in direct negotiations with Miller, the attorney general tells TIME. Another, Elizabeth McCaul of Promontory Financial Group, gave Miller $10,000 and is consulting Bank of America in the negotiations, Miller says. Bank of America was one of the first and most prominent institutions accused in the foreclosure investigation. It gave more than $80,000 to the Democratic Attorney Generals Association, which spent more than $200,000 on Miller’s campaign, Miller says.

Miller says Kaplow and McCaul are old friends and professional associates, and that they were not working for Bank of America before election day. He says neither has discussed the campaign contributions with him since they began work for the bank.

The NIMSP report and revelations of campaign contributions by those working for Bank of America come at a sensitive moment, as Miller is in the thick of far-reaching negotiations with the banks. Though the case started as an investigation into robo-signing, it has broadened. The talks are aimed at a settlement that could set the terms by which banks service current and future home loans, and determine how they foreclose on properties. That could complement, or supercede, a settlement between banks and federal regulators reached earlier this year.

Talks over monetary aspects of a potential settlement between the AGs and the banks are just getting under way. New rules for banks writing down mortgage principal and the establishment of a bank-paid fund to help with loan modification are on the table. Some reports have potential bank payments reaching $20 billion but sources on both sides suggest that number is high. The breadth of the negotiations has caused seven Republican attorneys general to split with the 43 other AGs.

In early March, American Banker published a 27-page term sheet that Miller and the other attorneys general had presented to the banks in the talks. “We’ve had negotiations and have agreement on some of the terms but no overall agreement,” Miller says.

Miller objects strongly to the NIMSP report. “It is extremely false and misleading,” Miller says. He disputes the report’s assertion that many of his campaign contributors have a “vested interest in the final terms of the settlement.” Other than Koplow and McCaul, none of the other lawyers named as campaign contributors in the report are involved in the case and none has an interest in the settlement, Miller says.

Miller also says the report commits “an omission of material fact” in its description of his fundraising by comparing 2010 fundraising to prior races. “This race was unlike any race I’d been in before,” Miller says. “It was a race where the other side had $2.2 million. The most any of us ever spent in this race before was $300,000 or $350,000,” he says. Miller says he didn’t have a competitor in 2006 and that in 2010 he and his supporters eventually raised and spent around $1 million.

Kevin McNellis, the author of the report, says the fact that he compared 2010 to 2006 without mentioning that there was no competitor in that race was “an oversight on my part.” Though the report argues that the campaign contributors’ interest in the outcome of the settlement of the foreclosure investigation is “vested,” which means “guaranteed” or “unconditional,” McNellis says he does not know which individuals or firms are directly involved in negotiations.

But McNellis asserts that, “When they were contributing last fall, I’m sure that it was something they were very keenly aware of, that Miller was leading the investigation.” They would have an interest in the outcome, McNellis says, “even if they weren’t directly involved in the negotiations.”

Neither McCaul nor Koplow would comment for this story.


News Rewind: Helping Out Our Military

As most of you know, I am a big supporter of our military. Without them, you wouldn’t have been able to complain about that cold cup of coffee that you returned to Starbucks yesterday! While I typically provide commentary on articles, this article is one that you will want to read if you have a friend, family member or client that is active duty military and in danger of losing their home. Freddie Mac has made arrangements to delay foreclosure proceedings for active duty military. For more details, read the entire article.

Freddie Mac Military Foreclosure Prevention Programs–Service Members Get Nine Month Foreclosure Delay

By Lee McFarland

Freddie Mac recently offered the opportunity for military service members to delay foreclosure for nine months as many military personnel returning from active duty are struggling to make their mortgage payments, which has been common among homeowners across the nation. In a recent press release, Freddie Mac stated that servicers will not initiate foreclosure for at least nine months for financially troubled service members as this should give these financial institutions opportunities to find mortgage solutions for military homeowners suffering from financial difficulties in their personal life.

Obviously, there are home loan modification programs which maybe available to homeowners in the military, but it’s hoped that these efforts to suspend foreclosures by Freddie Mac can offer particular service members more opportunities to find the affordability they need in their monthly mortgage payment. There have been many cases both with military homeowners and nonmilitary homeowners where traditional modifications have simply been unhelpful in delaying or preventing foreclosure for their personal situation.

While there are also VA loan modification opportunities for those who qualify, this effort by Freddie Mac is hoped to, again, offer an extension on the time a servicer has to find an affordable solution to a homeowner’s predicament when these individuals who are returning from active service duty. This assistance opportunity which is provided to homeowners in a Freddie Mac mortgage will run through the end of 2011, which again, should offer foreclosure prevention options for military personnel in a troubling mortgage predicament.

Understandably, not all military personnel who are offered the opportunity to delay foreclosure on their home loan will benefit even if their servicer seeks out an assistance plan which may help them avoid foreclosure, but additional time to find modification programs, alternative mortgage payment assistance, or even a foreclosure alternative option through short sales or deed in lieu of foreclosure opportunities could be beneficial for military personnel in need of immediate mortgage assistance.


Life After Modifications

This an interesting article with a simple twist. The article points out that a high volume of people that are denied loan modifications are being offered short sales and or deed in lieu. On the outside, it would appear that the bank is making an effort to help homeowners by offering alternatives to foreclosure. For those that can’t afford the house (no matter what modification amount is), short sales can make sense. Rarely, will a deed in lieu help (which is one of the many reasons why foreclosure defense attorneys are essential for seller representation………if the fine print in deed in lieu is not read correctly, it functions as a foreclosure…it’s just cheaper than a foreclosure for the bank).

The twist involves people that can actually afford their house if their mortgage is modified. A deed in lieu or a short sale won’t help these folks. Instead of focusing on solutions that don’t work, why don’t lenders focus on solutions that do work?

Short Sale And Deed In Lieu Of Foreclosure Plans After Mortgage Assistance Denials See Increase For Distressed Homeowners

Homeowners who are in a situation where they have attempted to find lower payments on their mortgage may find that some options for mortgage assistance is not available, as we have seen in monthly Treasury Department reports showing that there are homeowners who are denied assistance through the federal modification program, but in cases where homeowners may be facing negative equity as well, or may simply not qualify for these modifications, short sale and deed in lieu of foreclosure plans have been offered after a denial. Yet, questions have arisen over how beneficial these alternatives to foreclosure may be, despite the fact that there are some homeowners seeking out these options for their situation.

However, according to reports from the federal modification program, the program total for the top servicers within HAMP saw an increase in the deed in lieu of foreclosure plans and short sell options between May and June as homeowners whose trial modification was canceled saw an increase of almost 3,000 of these offers made available, while homeowners not accepted for a trial modification saw an increase of almost 10,000 in terms of the totals being tracked in this area.

Understandably, some homeowners feel that these options are more beneficial than resigning themselves to foreclosure, simply because it could help some families transition from a situation that is unaffordable, in terms of their home loan obligation, and by selling their home at a loss will be free and clear of any money owed to their lender. This can be helpful during times where distress like negative equity or even unemployment had arisen, but some arguments are still being made that homeowners should avoid turning to these options primarily, as there are still ways to avoid the loss of one’s home entirely.

Homeowners do need to be aware that there could be adverse effects on their credit score as well simply because this may be seen in a similar light as someone who settles the debt for less than they had originally owed. While there are some servicers who are working with homeowners to help them complete options like short sales, homeowners do need to keep in mind this could negatively impact their credit.

It has been the case though, some homeowners are simply not in a position where they are primarily concerned about their financial life, in terms of their credit score, as some men and women are simply trying to make ends meet, payoff multiple debt obligations, or overcome joblessness and may feel that getting an opportunity to participate in a short sale or a deed in lieu program will be best for their current situation. Yet, homeowners do need to understand that there are resources available to help them look at their financial situation, as housing counselors and similar assistance resources are still being stressed to homeowners in the hopes that troubled homeowners will use this assistance opportunity to look at how they may not only benefit from mortgage aid currently available but potentially find debt relief in other areas and avoid the loss of their home.


Protesting Foreclosure

What effect will a protest have on Fannie Mae's ability to foreclose? Not much (as the article points out). What it does do is add a voice to those who feel that their home was taken away in an unjust fashion.

9 arrested in Pasadena protest over home foreclosure

By Nicole Santa Cruz /Los Angeles Times

Nine people were arrested Wednesday afternoon in Pasadena after protesting the foreclosure of a La Puente woman’s home.

A group of about 70 people supporting Rose Gudiel and her disabled mother began protesting outside Pasadena City Hall, then moved to a Fannie Mae building nearby. Fannie Mae owns the loan on Gudiel’s house.

The building’s management determined that the protesters were being disruptive to business. After several warnings, the crowd dispersed and after a third warning nine people were arrested, said Lt. Pete Hettema of the city’s Police Department.

“Everyone was pretty cooperative,” Hettema said. “Obviously, the people in there were attempting to make a statement.”

Protesters held signs and chanted phrases such as “Shame, Shame Fannie Mae.” The group was associated with the Alliance of Californians for Community Empowerment and the Service Employees International Union.

Amy Schur of Los Angeles attended the protest. She called Gudiel’s actions courageous and said the woman’s situation is an “unfair, wrongful foreclosure.”

“This is about families across the city and across the country who are having their homes wrongfully taken away from them,” she said. “There are a lot of preventable foreclosures out there.”

Gudiel, 34, said she just wants to sit down and talk with representatives who might be willing to negotiate instead of foreclose.

“Every corner of that house is part of my American Dream,” she said.

A court date on the arrests is set for Dec. 7.


Old Habits Never Change!

Pallavi Gogoi reports on a a recent finding that should, but isn’t. Shocking. Robo signing has been going on for years. Studies done show that the deliberate falsification of mortgage documents date back to the late 1990's.

"Because of these bad titles, property owners can't prove they own the properties they think they bought, and banks can't prove they had the right to sell them," says Jeff Thigpen, the registrar of deeds in Guilford County, N.C.

What does this mean to the average American Citizen? Your guess is a s good as mine. I would suspect that this doesn't bode well for the housing market. If additional mortgage documents are put under scrutiny, the bank’s ability to foreclose will be more limited. I would also suggest that old habits never die. This "practice" will rear its ugly head sometime in the future

Here is what the "experts" think:

Widespread robo-signing that stretches back a decade or more could create problems for homeowners. Regulators have so far not asked lenders to clean up the potentially millions of suspect documents filed in the past decade or earlier. That troubles some banking experts, including Sheila Bair, who until early July was chairwoman of the Federal Deposit Insurance Corp.

"We do not yet really know the full extent of the problem," Bair said in written remarks to the Senate Banking Committee. She and others have called for a comprehensive study on the extent of the fraudulent signatures in mortgage documents.

If documents with robo-signed signatures are challenged in court, judges could question the ownership of the properties, says Katherine Porter, a professor at University of California Irvine School of Law and an expert on consumer credit law. The consequences extend to homeowners in good standing when they try to sell.

IIf invalid documents are discovered in the chain of ownership, it could delay the sale or make it difficult for buyers to get a mortgage because title insurers won't write a policy for the property, says Justin Ailes, vice president of government affairs of the American Land Title Association, a trade association representing the title insurance industry. Banks and other mortgage lenders won't write a home loan without title insurance.

Robo-signed mortgage docs date back to late 1990s

By PALLAVI GOGOI

NEW YORK (AP) — Counties across the United States are discovering that illegal or questionable mortgage paperwork is far more widespread than thought, tainting the deeds of tens of thousands of homes dating to the late 1990s.

Already, mortgage papers are being invalidated by courts, insurers are hesitant to write policies, and judges are blocking banks from foreclosing on homes. The findings by various county registers of deeds have also hindered a settlement between the 50 state attorneys general who are investigating big banks and other mortgage lenders over controversial mortgage practices.

The problem of shoddy mortgage paperwork, which comprises several shortcuts known collectively as “robo-signing,” led the nation’s largest banks, including Bank of America Corp., JPMorgan Chase & Co., Wells Fargo & Co., and other lenders to temporarily halt foreclosures nationwide last fall.

At the time, “robo-signing” was thought to be contained to the affidavits that banks file when a mortgage is issued and somebody buys a house. The documents are used to prove they have the right foreclosure if the homeowner isn’t making mortgage payments. Companies that process mortgages said they were so overwhelmed with paperwork that they cut corners.

The suspect documents could create legal trouble for homeowners for years.

But now, as county officials review years’ worth of mortgage paperwork, in some cases combing through one page at a time, they are finding suspect signatures — either signed with the same name by dozens of different people, improperly notarized or signed without a review of the facts in the paperwork — on all sorts of mortgage documents, dating as far back as 1998, The Associated Press has found.

“Because of these bad titles, property owners can’t prove they own the properties they think they bought, and banks can’t prove they had the right to sell them,” says Jeff Thigpen, the registrar of deeds in Guilford County, N.C.

In Guilford County, where Greensboro is located, a sample of 6,100 mortgage documents filed since 2006 turned up 74 percent with questionable signatures. Thigpen says his office received 456 more documents with suspect signatures from Oct. 1 through June 30.

The suspect signatures found by Thigpen and other registrars around the country were on documents from the banks involved in the temporary foreclosure halt and others.

Widespread robo-signing that stretches back a decade or more could create problems for homeowners. Regulators have so far not asked lenders to clean up the potentially millions of suspect documents filed in the past decade or earlier. That troubles some banking experts, including Sheila Bair, who until early July was chairwoman of the Federal Deposit Insurance Corp.

“We do not yet really know the full extent of the problem,” Bair said in written remarks to the Senate Banking Committee. She and others have called for a comprehensive study on the extent of the fraudulent signatures in mortgage documents.

If documents with robo-signed signatures are challenged in court, judges could question the ownership of the properties, says Katherine Porter, a professor at University of California Irvine School of Law and an expert on consumer credit law. The consequences extend to homeowners in good standing when they try to sell.

If invalid documents are discovered in the chain of ownership, it could delay the sale or make it difficult for buyers to get a mortgage because title insurers won’t write a policy for the property, says Justin Ailes, vice president of government affairs of the American Land Title Association, a trade association representing the title insurance industry. Banks and other mortgage lenders won’t write a home loan without title insurance.

Among the findings shared with The Associated Press by county officials from several states:

— An investigation of mortgage documents in the county that includes Salem, Mass., found that more than 25,000 had suspect signatures. The earliest date to 1998, says John O’Brien, the registrar of deeds there.

— In Michigan, the state attorney general has sent criminal subpoenas to three companies that processed mortgage paperwork after 24 local recorders of deeds looked through their files and found rampant robo-signing.

— An Illinois county, Kankakee, pulled a sample of 60 documents filed since 2007 to look for suspect signatures. All 60 were “signed” by people who have been identified as robo-signers. At least 12 county officials in Illinois have sent their findings to the state attorney general.

The results of these reviews are troubling to the registers of deeds in counties across the country. It’s the job of these officials to record documents on property transfers, and they say, they need to be able to trust that notarized paperwork is legitimate.

“I want papers that come into our office to be clean,” says Lori Gadbois, the recorder of deeds in Kankakee County, whose office handles more than 15,000 mortgage documents in a typical month.

Many banks began outsourcing paperwork at the beginning of the housing boom around 1998. That’s when an increasing number of home loans were being packaged into securities on Wall Street and sold off to global investors. As demand skyrocketed, lenders and mortgage processing firms hired entry-level employees to sign hundreds of mortgage documents a day.

Sometimes they forged the signatures of executives who were qualified to sign. Other times, actual executives signed the documents without verifying their accuracy. Many of the documents were stamped by notaries even though the people who had signed the documents weren’t present when the papers were notarized, a requirement by law. All are instances of robo-signing, and are potentially illegal.

Meanwhile, federal bank regulators have focused on getting banks to clean up their act in the future, not on fixing the potentially millions of tainted documents that have been filed in land record offices in counties across the country.

Robo-signing came to light last fall, when the largest banks halted foreclosures for several months to clean up their paperwork problem. The lenders promised last fall to stop the practice. But The Associated Press reported in July that robo-signing has continued. Officials in at least four states say mortgage documents with suspect signatures have been filed with counties in recent months. The revelation led to calls for Congressional hearings.

On Thursday, the mortgage unit of Goldman Sachs Group Inc. agreed to stop robo-signing and other controversial mortgage practices under an agreement with New York state’s banking regulator. The Federal Reserve, meanwhile, launched a formal enforcement action against the unit, Litton Loan Servicing, ordering it to review foreclosure proceedings from 2009 and 2010.

“The banks are playing with the integrity of the land record system,” says John O’Brien, the recorder of deeds from Salem, Mass.

The documents that are filed in county deed offices are legal affidavits that transfer loans from one bank to another in a sale, refinancing, or foreclosure and certify if a loan has been paid off. They verify that there are no claims against the property.

Robo-signing could ultimately invalidate tens of thousands of home ownership documents, say legal experts.

In addition to delaying regular sales, banks could be blocked from foreclosing even if the homeowner falls behind on mortgage payments for the same reasons.

That’s already happening.

Judges who handle foreclosures in Maine, California, Arizona, New York and other states have thrown out foreclosure cases if documents contain signatures of known robo-signers.

On July 1, a state judge in Brooklyn ruled that HSBC lacked the legal authority to foreclose on homeowner Ellen Taher because the mortgage documents that accompanied the filing were signed by at least three known robo-signers.

In May, a Maine judge dismissed another foreclosure involving HSBC, calling mortgage documents presented in a case untrustworthy because they contained signatures of one person posing as three different people. HSBC spokesman Neil Brazil says another company handled the mortgage paperwork in the New York case, and the bank is working with regulators to address and resolve issues related to robo-signing.

Registrars like Thigpen in North Carolina and O’Brien in Massachusetts say they have taken their findings to federal authorities. Except for a call from the North Carolina attorney general’s office, though, Thigpen says he has been ignored for months.

Deed offices in North Carolina and Massachusetts have stopped recording documents if they contain signatures of names known to be part of the robo-signing scandal. Such actions could delay new sales. O’Brien, the recorder of deeds from Massachusetts, says he’s only responsible for one county out of more than 3,000 in the U.S.

“Federal regulators with a lot more authority than me have to step up to the plate and help correct this,” he says.

The 50 state attorneys general have been negotiating a settlement with major lenders over robo-signing and other bad mortgage practices. Analysts say it could top $20 billion. But the attorneys general of some states, including New York, Massachusetts, Illinois, Delaware and California, have balked because banks have demanded a release from all future liability on past mortgage practices or the mortgage-backed securities they sold to investors.


You Elected Them!

Politicians….you can’t live with them and you can’t…….I’ll stop here….I can live without politicians! As most people know Florida is a judicial state meaning that lenders/investors have to go through the court system in order to foreclose. Some of our genius politicians are proposing that lenders be allowed to go through a non judicial foreclosure process meaning that home owners will have no real legal rights to stop lenders from foreclosing. Why would politicians lobby for this? IMO because of the effect that lobbyists have in their bid to get reelected…read MONEY!

According to the bankers, “Bankers see it as a speedy and efficient way to manage foreclosure cases and get tens of thousands of Florida properties in ownership limbo back on the market, helping pull the state out of its economic doldrums.” That’s a great idea. Let’s let the banks screw over the consumers, fraudently sign documents and then foreclose at will. This goes all the way to the governor’s office. “But the Florida Bankers Association (AKA LOBBYISTS!!!), which has pushed the plan over the past few years, has key allies. Scott voiced support for the proposal at a Florida Bar convention this summer and told reporters Wednesday he is still interested in it. Some lawmakers have already jumped on board

“Well, I want to make sure that we have an efficient process, so we don’t create a reason for banks or whoever lends money not to lend money in Florida,” Scott said. “When you talk to people that are in the system now they say it’s 600 days to get through foreclosure. All that does is create another incentive for people to not lend money when we want people to lend money to our state.

“I don’t know the answer yet, but I want to look at the process,” Scott said. “I want to get more information before I make a decision.”

Attorneys, obviously, beg to differ with the banking lobby. “But defense attorneys say the existing system needs more oversight by the courts, not less. Lawyers in the past few years have reported numerous cases where documents used to support foreclosures were missing or forged. The result has been a process that is not always fair to the homeowner, they say.

“Anything that takes away oversight isn’t necessarily a good thing, not necessarily for homeowners in foreclosure or the market in general,” said Chris Immel, a foreclosure lawyer in Palm Beach County. “We routinely see documents that just don’t add up.”

A banking lobbyists rebuttal to this was, “…that with reputable financial institutions, that shouldn’t be a problem. Most cases, even when going through the courts, result in foreclosure, he said, but a non-judicial route would get to that end result quicker.

Show me a reputable financial institution!!

Floridians facing foreclosure could lose their homes faster under plan making rounds in Tallahassee

By Kathleen Haughney

Floridians facing foreclosure could be stripped of their homes faster and have routine access to the courts limited under a proposal likely to come before Gov. Rick Scott and the Legislature in the coming months.

Bankers see it as a speedy and efficient way to manage foreclosure cases and get tens of thousands of Florida properties in ownership limbo back on the market, helping pull the state out of its economic doldrums.

In contrast, foreclosure defense lawyers and consumer activists see the plan as removing judicial oversight from a system that has proven to be riddled with fraud and abuse, and leaving ordinary homeowners defenseless before some of the state’s most powerful financial interests.

“Obviously there’s a lot of fraud being perpetrated by the banks in these cases,” said Michael Redman, a Palm Beach County resident who founded the Website 4closurefraud.org to chronicle Florida’s ongoing foreclosure crisis. “At this point in the game, it’s almost ridiculous to take it out of the court system.”

But the Florida Bankers Association, which has pushed the plan over the past few years, has key allies. Scott voiced support for the proposal at a Florida Bar convention this summer and told reporters Wednesday he is still interested in it. Some lawmakers have already jumped on board.

“Well, I want to make sure that we have an efficient process, so we don’t create a reason for banks or whoever lends money not to lend money in Florida,” Scott said. “When you talk to people that are in the system now they say it’s 600 days to get through foreclosure. All that does is create another incentive for people to not lend money when we want people to lend money to our state.

“I don’t know the answer yet, but I want to look at the process,” Scott said. “I want to get more information before I make a decision.”

According to RealtyTrac, a foreclosure tracking firm, Florida had the third highest foreclosure rate in the nation and was second in the number of foreclosure cases filed in 2010. On average, the firm said, the foreclosure process takes 676 days.

Usually the lender reclaims possession; other times, homeowners get to keep their property.

Currently, Florida is one of only 20 states to handle the foreclosure process through the courts. In California and Nevada, which have also been plagued by high foreclosure rates, foreclosure proceedings are primarily conducted outside court in about four months, though a judge can get involved if one of the parties deems it necessary.

Typically in states using a non-judicial system, the mortgage contract is based on a deed that includes a clause allowing banks to begin foreclosure proceedings without going to court. The bank gives notice to the homeowner and if the homeowner did not respond, the bank can reclaim the property.

Lawmakers and the Florida Bankers Association have pushed in the past for Florida to become a non-judicial foreclosure state but have come up short, with concerns about rampant fraud by some lending institutions trumping other arguments.

Legislation has not been filed yet this year on the issue, but legislative leaders inTallahassee seem interested. Legislative economist Amy Baker gave a presentation on the issue this week to the House Civil Justice Subcommittee and Katie Betta, a spokeswoman for House Speaker Dean Cannon, said that Cannon, R-Winter Park, has said he is open to it, but cautioned that the “devil is in the details.”

“That’s going to be a big issue this year. It’s already shaping up to be,” said state Rep. Darren Soto, D-Orlando, a member of the civil justice subcommittee who is opposed to taking judges out of routine foreclosure proceedings. “When we’re talking about the property right being paramount, we need to make sure due process is exhibited,” Soto said.

Anthony DiMarco, a lobbyist for the Florida Bankers Association, which represents more than 300 banks and financial institutions, said the association has not finalized its legislative agenda for 2012, but that it has generally supported the change in the past because it believes the faster homes can be repossessed by lenders, the better off the economy will be.

New buyers will move into the houses and apartments and start paying taxes, plus condo or homeowners association fees, he said.

“We have to get to the bottom to get out of this recession and the sooner we can do this the better,” DiMarco said.

But defense attorneys say the existing system needs more oversight by the courts, not less. Lawyers in the past few years have reported numerous cases where documents used to support foreclosures were missing or forged. The result has been a process that is not always fair to the homeowner, they say.

“Anything that takes away oversight isn’t necessarily a good thing, not necessarily for homeowners in foreclosure or the market in general,” said Chris Immel, a foreclosure lawyer in Palm Beach County. “We routinely see documents that just don’t add up.”

DiMarco argues, however, that with reputable financial institutions, that shouldn’t be a problem. Most cases, even when going through the courts, result in foreclosure, he said, but a non-judicial route would get to that end result quicker.

In states that already settle matters outside of the courts, homeowners are still given notice and time by lenders to settle the issue. If there is a mistake, they should be able to notify their bank and straighten out the problem, DiMarco said.

But if the bank is acting irresponsibly, DiMarco added, lawyers and judges should become involved.

“I think the end result is going to be the same and it will just be done a little quicker,” he said. “Other states have not seemed to have had a problem.”


Slow Sales = Stabilization?!

In this article, Courtney Edelhardt comments on an observation that slow sales of bank owned homes (presumably made by economists that were employed by the local real estate board) is stabilizing the local real estate market. The only way that slow sales of bank owned properties can stabilize the market is if the number of houses sold out weigh the number of homes being foreclosed on. In most areas of the country this is simply not the case. The bottom line is; that bank owned homes don't disappear. They have to be dealt with sometime. Bank owned homes are certainly not appreciating value they are depreciating in value. While a sudden flood of bank owned homes will further depress the real estate market, they can be dealt with at once versus' over an extended period of time.

Slow sales of bank-owned houses helps stabilize prices

BY COURTENAY EDELHART Californian staff writer

Bakersfield’s disproportionate number of lender-owned houses may be helping insulate the local real estate market from price fluctuation.

That was the assessment of two California Association of Realtors economists, who on Tuesday issued the group’s annual California housing market forecast.

Banks have been selling off their considerable inventory of foreclosed homes slowly in Kern County and other areas with high foreclosure rates, and that has helped to stabilize prices in regions hardest hit by the real estate crash, said deputy chief economist Robert Kleinhenz.

“You’re probably going to see more price stability in those areas than some of the other areas with more equity sales,” he said.

In Kern County, more than half of sales are distressed in some way, with the bulk leaning toward short sales, Kleinhenz said.

A short sale is an agreement between a seller and a lender to sell a property for less than the balance of the mortgage.

If a short sale can’t be worked out, often the house goes into foreclosure. At that point, the home is defined as a real estate owned, or REO, property.

In the Bakersfield area, 41 percent of existing single-family home sales in August were REOs, and 19.1 percent were short sales, according to the Crabtree Report, a monthly report on the local housing market produced by Affiliated Appraisers.

That’s an improvement over August of 2009, the year local home prices bottomed out. Back then, 60 percent of local home sales were REOs and 14 percent were short sales.

It’s a good sign that short sales are increasing and sales of lender-owned properties are falling, Kleinhenz said.

“When you see more short sales than REOs, that is indicative of a market that is further along in the healing process than some areas of the state,” he said.

Crabtree Report author Gary Crabtree cautioned that there is a large disparity between the number of short sales on the market compared with the number of short sales that have actually closed, however.

Even after a buyer and seller have reached an agreement, the bank has to sign off, and many lenders are either rejecting offers or taking a very long time to respond, he said.

“I’ve seen properties that have two to three buyers before they finally get an offer accepted by the bank,” Crabtree said.

In a Lender Satisfaction Survey the California Association of Realtors conducted over the summer, more than half of Central Valley Realtors characterized short sale transactions as “difficult” or “extremely difficult” to close.

“Despite assurances by lenders in recent months that they would improve their short sale processes, clearly, not enough is being done,” association treasurer Don Faught said in a statement.

In spite of that, the California Association of Realtors is forecasting that the state’s median home price next year will be $296,000, up less than 2 percent over this year and well below the 2010 median price of $303,100.

Sales should grow about 1 percent to 496,200 next year, the association predicted.

“We have a market that is moving forward very sluggishly, bouncing along the bottom with the understanding that there’s a whole closet full of wild cards that could change things,” said the association’s chief economist, Leslie Appleton-Young.

One of the biggest factors is the unemployment rate, which is holding back the entire state but is especially pronounced in the Central Valley, where so much job growth was tied to real estate and construction.

That situation isn’t likely to change any time soon, Appleton-Young said.

Kern County’s unemployment rate was 14.4 percent in August, compared with 11.9 percent statewide and 9.1 percent nationally.


HAMP Decides To Foreclose

This is the latest example of how a government acronym (I mean foreclosure prevention program) has failed the American consumer. Kara Johnson reports on how HAMP applicants have been foreclosed on.

Ms. Johnson reports,”

Fannie Mae has been directing mortgage servicers to proceed with foreclosure when mortgages are more than 12 months overdue, even when the homeowners were being considered for loan modification under the federal Home Affordable Modification Program (HAMP). That’s according to an investigation by the Detroit Free Press, which published the results in a three-part series beginning Sunday.

According to the Free Press investigation, Fannie Mae directed lenders to proceed with foreclosure against homeowners who were actively seeking HAMP loan modifications, contrary to Fannie Mae’s own declared policies and the government’s rules for HAMP. The paper cited confidential records it obtained that detailed correspondence between Fannie Mae and lenders responsible for servicing the mortgages in question."

No matter how you cut it, the government talks out of both sides of their mouth. On one hand they claim to be saviors. On the other hands they are amp’ing up the foreclosures on people who are trying to play by their rules.

Report: Hamp Applicants Foreclosed On

By Kara Johnson

Hoping for a government-backed loan modification on a Fannie Mae mortgage? Better do it before you fall more than 12 months behind on your mortgage, according to a recent report.

Fannie Mae has been directing mortgage servicers to proceed with foreclosure when mortgages are more than 12 months overdue, even when the homeowners were being considered for loan modification under the federal Home Affordable Modification Program (HAMP). That’s according to an investigation by the Detroit Free Press, which published the results in a three-part series beginning Sunday.

According to the Free Press investigation, Fannie Mae directed lenders to proceed with foreclosure against homeowners who were actively seeking HAMP loan modifications, contrary to Fannie Mae’s own declared policies and the government’s rules for HAMP. The paper cited confidential records it obtained that detailed correspondence between Fannie Mae and lenders responsible for servicing the mortgages in question.

In the correspondence, Fannie Mae cited a newly implemented “delay initiative” requiring that all mortgages more than 12 months past due must be on an active payment plan with monthly payments coming in order to avoid foreclosure. Requests for postponement in the absence of such a plan were denied.

The report on the investigation did not address how a homeowner might go about arranging such a payment plan while pursuing a HAMP loan modification; a loan modification is in itself a type of alternate payment plan.

One of the ongoing problems with the HAMP initiative has been that many homeowners have reported that their lenders have told them that they must be delinquent on their mortgage to be considered for a HAMP loan modification, contrary to the government’s rules for the program.

Fannie Mae officials contacted for the report declined to comment on the cases of specific homeowners. However, representatives of mortgage servicers said that in at least some cases, homeowners had failed to submit necessary documents or missed deadlines for filing requests or submitting documents. Homeowners, on the other hand, complained of getting the run-around from their mortgage servicers despite submitting requested information.


Time to Resume Where They Left Off!

David Wells brings us an article that highlights the inevitable. Several of my previous articles have commented on robo signing. "Robo SIgning" is, "... a process in which company employees or contractors, inundated with foreclosures, sign off on documents so fast that they don’t know what they are signing". In many states judges halted foreclosures until the banks unwound their mess. In New Jersey, the time has come!

According to Mr. Wells. "A California bank can follow through with foreclosures on New Jersey homeowners who have defaulted on their mortgages, a state judge ruled Wednesday.

OneWest Bank, formerly failed IndyMac Federal Bank, was the fifth big bank given the go-ahead this week by General Equity Judge Mary C. Jacobson. On Monday, Jacobson ruled she was confidant Bank of America, Citibank, JPMorgan Chase and Wells Fargo will no longer engage in so-called robo-signing and can resume foreclosures. The companies were found in compliance seven months after state Supreme Court Chief Justice Stuart Rabner essentially placed a moratorium on foreclosures until it was clear that lenders weren’t robo-signing documents."

Mr. Wells effectively outlines the fallout from the judge’s decision, "The possible restart of foreclosures has loomed over the slumping real estate market. Thousands of foreclosed homes could come on the market at a time when home prices continue to fall.

“As both the economy and the market are leaking, this is poor timing because it will put additional strain on the economy, the banking system and on the housing market,” said Jeffrey Otteau, president of the Otteau Valuation Group in East Brunswick. A sharp increase in the rate of foreclosure actions is now expected, he said. “And to the housing market, that means additional distressed inventory being added to the mix of home sales,’’ he said.

It also will cause additional declines in home prices, he added."

In the end everyone knew that this time would come. Hopefully the homeowners that were affected used the breathing room to their advantage.

Bank Allowed to Resume Forclosures on NJ Homeowners

Written by

David P. Willis | Staff Writer

A California bank can follow through with foreclosures on New Jersey homeowners who have defaulted on their mortgages, a state judge ruled Wednesday.

OneWest Bank, formerly failed IndyMac Federal Bank, was the fifth big bank given the go-ahead this week by General Equity Judge Mary C. Jacobson.

On Monday, Jacobson ruled she was confidant Bank of America, Citibank, JPMorgan Chase and Wells Fargo will no longer engage in so-called robo-signing and can resume foreclosures.

The companies were found in compliance seven months after state Supreme Court Chief Justice Stuart Rabner essentially placed a moratorium on foreclosures until it was clear that lenders weren’t robo-signing documents — a process in which company employees or contractors, inundated with foreclosures, sign off on documents so fast that they don’t know what they are signing.

Judges overseeing the foreclosure process said the practice meant there was no way for them to know if an affidavit or certification was, in fact, true.

Jacobson appointed Richard Williams as “special master” to oversee the banks’ plans. Williams has yet to submit the plans for the last lender, Ally Bank, formerly GMAC Mortgage, said Winnie Comfort, a spokeswoman for the state judiciary.

The six big banks had experienced some robo-signing problems in the past. They also account for a large majority of the foreclosure actions in New Jersey, Williams said in his report. OneWest has pending foreclosures against 3,800 mortgage loans in the state.

Through a spokesman, OneWest Bank declined to comment Wednesday on the court’s action.

Rabner’s order gave homeowners some breathing room; The number of foreclosures filed in New Jersey fell from 58,000 in 2010 to 6,000 through July 2011.

The possible restart of foreclosures has loomed over the slumping real estate market. Thousands of foreclosed homes could come on the market at a time when home prices continue to fall.

“As both the economy and the market are leaking, this is poor timing because it will put additional strain on the economy, the banking system and on the housing market,” said Jeffrey Otteau, president of the Otteau Valuation Group in East Brunswick.

A sharp increase in the rate of foreclosure actions is now expected, he said.“And to the housing market, that means additional distressed inventory being added to the mix of home sales,’’ he said.It also will cause additional declines in home prices, he added.

Otteau said he expects the areas of Ocean County and south, Warren and Sussex counties, and the state’s larger cities to bear the brunt of the foreclosure actions.

Before Jacobson’s ruling Wednesday, OneWest, which is based in Pasadena, Calif., had to detail how it handles foreclosures throughout the company and describe its procedures.In his report, Williams said OneWest showed that its internal processes will make sure that paperwork is processed by a bank representative with knowledge gained by a personal review of the records.

The judge’s order calls for Williams to monitor OneWest as it resumes processing mortgage foreclosure cases.


Have They Seen the Light!?

Shanthi Bharatwaj from The Street reports on a trend that I hope sticks. He reports that some lenders finally have realized that short sales make more sense than foreclosures. My hope is that the trend is being pushed by the investors that actually own the notes versus’ the “banks” that are simply servicing the loans. I say this because the servicing companies have a vested interest to drive properties into foreclosures. The investors that own the notes have little to gain (except being able to prolong the reporting of the bad debt until the house is actually sold).

From the article, “Lenders often consider short sales as the lesser of two evils when compared to foreclosures," Core Logic noted in a May 2011 report on short sales. "While significant losses may be incurred in both foreclosure and short sale scenarios, the overall negative financial impact of short sales is typically less than that of foreclosure. In many cases short sales represent the best way for lenders to minimize their overall losses. In general, all parties fare better when a foreclosure is prevented."

So, why are some servicing companies still making it painfully difficult to complete a short sale? I think its stupidity and greed.

Short Sales Become Bank Foreclosure Shortcut

By Shanthi Bharatwaj

NEW YORK (TheStreet) -- Banks dealing with lengthy, complicated and frequently messy foreclosures are starting to see "short sales" as a quicker and cheaper way of getting bad loans off their books.

The nation's biggest mortgage servicers- Bank of America(BAC), JPMorgan Chase(JPM) and Wells Fargo(WFC) - are beginning to step up their efforts to ease the short sale process for borrowers who are unsuccessful in getting loan modifications and face the threat of foreclosure.

Servicers are attempting to reach out to borrowers and are paying out more incentives to those suffering financial hardship to help proceed with a short sale. They are also cutting down the time taken to approve short sales, although realtors still complain that the process takes too long.

JPMorgan has processed 120,000 short sales through its proprietary program since June 2009 and now averages 5,000 short sales a month. The bank says its average response time to approve a short sales transaction is 30 days.

"We think the short sale is a good solution for many struggling homeowners and we let them know that it's an option," said Christine Holevas, spokesperson for JPMorgan in an email. "Our outreach efforts have increased in the past year or so. Foreclosure can be an expensive and lengthy process for all parties. It's a good deal for the homeowner and a good deal for us (a cheaper way to get a bad loan off the books.)"

A short sale is seen as a more palatable alternative to foreclosure for borrowers. In its simplest form, borrowers with underwater mortgages sell their homes to a buyer at a price that is approved by the lender. The lender normally forgives the difference between the loan and the sale proceeds- in essence the bank is being shorted for the loan amount.

Previously, lenders were said to prefer foreclosures to short sales because they -- or the investors in the loans -- figured that more money could be made from the former.

But the average time for the foreclosure process- from the time of notice to the completed foreclosure- is now 318 days in the U.S., according to RealtyTrac.

The foreclosure process in the state of New York, which follows a judicial process, took 966 days on average for properties foreclosed in the second quarter. New Jersey and Florida followed with an average processing time of 944 days and 676 days respectively.

The longer it takes for a foreclosure to be approved, the longer bad loans stay on banks' books.

Why foreclosures take so long?

Foreclosures are also more expensive, because of the legal expenses involved as well as the expenses for maintenance and upkeep while the property is in foreclosure.

Wells Fargo, for instance, incurred expenses on repossessed homes to the tune of $305 million in the second quarter and $408 million in the first quarter, according to data from SNL. Data for the other big banks wasn't available.

But at a time when analysts are paying more attention how well expenses are managed, banks might be more willing to look at other alternatives.

According to real estate analytics firm CoreLogic, the number of short sales in the market have tripled in the last two years and transactions are anticipated to grow by 25% in 2011. The markets with the largest short sale volume are California, Arizona, Colorado and Florida.

"Lenders often consider short sales as the lesser of two evils when compared to foreclosures," Core Logic noted in a May 2011 report on short sales. "While significant losses may be incurred in both foreclosure and short sale scenarios, the overall negative financial impact of short sales is typically less than that of foreclosure. In many cases short sales represent the best way for lenders to minimize their overall losses. In general, all parties fare better when a foreclosure is prevented."

JPMorgan is now paying certain types of borrowers- such as those with infamous option-arm mortgages as much as $35,000 to help them out with a short sale, the Herald Tribune reports.

JPMorgan spokesperson Holevas told TheStreet that the incentives vary and that they are available only for certain kinds of borrowers. She would not share specifics about the incentives.

CitiMortgages, the mortgage servicing arm of Citigroup(C_) is paying an average $12,000 in incentives, up from between $3,000 and $5,000 in 2010 for short sales on its own loan portfolio, HousingWire reported in June, citing a senior real estate management executive.

Again these incentives are paid out by servicers on the short sales of their own loan portfolios. In cases where loans have been sold, investors often dictate how much is paid out. But it suggests that servicers are beginning to push short sales more aggressively.

J.K. Huey, a senior vice president at Wells Fargo Home Mortgage- REO and Short Sales says transactions through the bank's proprietary program have been fairly stable. But the bank has seen a pickup in short sales through the government's HAFA (Home Affordable Foreclosure Alternatives) program, which loosened restrictions in February.

Most of the short sales executed by Wells are in the harder-hit housing markets such as California and Florida, which is also where they service more loans. The borrowers in these transactions are fairly late in their delinquency stage, although Wells does engage with borrowers who reach out to them earlier in the process.

Investors too are willing to consider short sales as a first option.

"Short sale is considered a positive alternative to foreclosures," said Huey. "Investors for the most part will do a short sale over a foreclosure provided the net present value shows it that way. Investors have been very attentive to this, as has the Treasury."

Still, the short sale process is not easy and industry observers say sellers and buyers of short sale properties must set realistic expectations.

For one, borrowers should realize that their credit scores aren't any less affected under a short sale than it is in the case of a foreclosure. In both case, the borrower is considered in default.

However, in a short sale, the borrower's debt is often forgiven, at least on the first lien. Also, a borrower who does a short sale might be able to apply for another mortgage sooner than he or she could in the case of a foreclosure, where the wait can be as much as 7 years.

For buyers interested in bidding for short sale properties, the process can be frustrating. P/>Jeff Lischer, managing director for regulatory policy at the National Association of Realtors says banks are trying to do improve the process, but realtors still complain that the process is chaotic.

Most still say there is a lot of back and forth in the documentation process as well as disagreements over valuation of the property. Short sale contracts often fall through because there are multiple parties involved. And the process varies significantly from one servicer to another.

"It is hard to know what the rules are," says Lischer. "You can have a house with two loans serviced by two different servicers. You need to get four parties to sign off on your short sale, instead of one."

Wells' Huey says that servicers are now using workflow processes that have shortened the processing time considerably.

In the simplest of cases, where loans are owned by the bank and there are no junior liens or mortgage insurance companies involved, a short sale transaction can be approved in as little as five days, provided all the documentation is in order, she says.

It gets more complicated when there are more parties involved. Investors, junior lien holders and mortgage insurers often want more documentation to prove financial hardship of the seller, proof of funding for the borrower and they usually want to negotiate the price. That adds to the processing time, which takes Wells on an average 15 days.

She also adds that the short sale process can go a lot more smoothly when the real estate agent is someone who understands how to do a short sale. "This is not a regular sale where there is just one contract between a buyer and a seller," she said.

--Written by Shanthi Bharatwaj in New York


 Foreclosures of Expensive Homes Take Longer

Julie Schmit from USA Today brings us an article that validates what I have been saying for years. Ms. Schmit writes, “Foreclosures are taking longer for more-expensive homes than for less-expensive ones...... From January through May, almost 400,000 homes were repossessed by lenders or sold to others at foreclosure auctions. By the time they were repossessed or sold, mortgages on the more-expensive homes were delinquent an average of 647 days, almost four months longer than the less-expensive homes, data from national mortgage tracker LPS Applied Analytics indicate. The longer time frames occurred in 45 states and ranged from days to months.”

Rather than me paraphrasing the findings from the research, read the article. The many reasons given amplify why we purchase high end short sales. There are other reasons that deal with the well being of homeowners. These reasons are often overlooked by realtors and investors alike. Let us know if you have higher end short sales that we can evaluate. I will shed some light on my comments and observations.

Foreclosures of expensive homes take longer

By Julie Schmit, USA TODAY Updated

Foreclosures are taking longer for more-expensive homes than for less-expensive ones, giving those homeowners more time in homes without mortgage payments, new research analyzed for USA TODAY shows.

From January through May, almost 400,000 homes were repossessed by lenders or sold to others at foreclosure auctions. By the time they were repossessed or sold, mortgages on the more-expensive homes were delinquent an average of 647 days, almost four months longer than the less-expensive homes, data from national mortgage tracker LPS Applied Analytics indicate.

The longer time frames occurred in 45 states and ranged from days to months.

LPS broke the homes into categories of those valued under $417,000 and those from $417,000 to $999,999.

Longer foreclosure times may seem to favor owners of more-expensive homes, but banks say loan size “doesn’t dictate the foreclosure process,” says Wells Fargo spokesman Tom Goyda. Lenders aren’t showing favoritism to wealthier people — they’re just doing what makes the most business sense,” says Sean O’Toole, CEO of foreclosure tracker ForeclosureRadar.

Industry analysts say other factors are likely affecting time lines, including the type of:

•Loan. Loans below $417,000 are generally owned by mortgage giants Freddie Mac and Fannie Mae. Their processes lead to quicker resolution than if loans are held by others. “It’s a much simpler process,” says Jason Kopcak, mortgage loan expert at Cantor Fitzgerald.

Bigger loans, often found on pricier homes, tend to be held by lenders or investors. Banks are “moving the stuff they don’t own first,” to satisfy others and limit litigation, says Paul Miller, analyst at FBR Capital Markets.

•Home. Lower-priced homes have a larger pool of buyers. More may be exiting foreclosure via short sale, says Kyle Lundstedt, LPS managing director. Short sales occur when lenders sell for less than what’s owed on the home.

•Homeowner. Those who can buy expensive homes may have more resources to delay foreclosures, says Richard Bove, banking analyst with Rochdale Securities.

Lenders may also be delaying having to take bigger losses that tend to occur with pricier homes, O’Toole says. He recently assessed 155,000 California foreclosures and found that foreclosures took longer for loans over $417,000 than for smaller loans.

Miller says lenders are “not managing their losses that closely.” Foreclosure time lines are mostly driven by investor owners and state laws, says Bank of America spokesman Dan Frahm.

In California, which led in foreclosure sales January through May, more-expensive homes averaged 78 more days delinquent than the others at the time of the sale, LPS’ data show. In Arizona, another big foreclosure state, the pricier homes were 65 more days delinquent at time of the sale. In Florida, that spread was 97 days.


Rental Update

The press release (see below) just came across my desk. I commented, several weeks ago, about the government’s plan to rent out foreclosed properties (you know my opinion). What’s interesting is that they are soliciting advice from “investors”. It’s interesting that the government is reaching out to “investors” when it comes to houses that they already own……why won’t they do the same with respect to pre foreclosures? Solve the problem before it becomes a problem.

FHFA, Treasury, HUD Seek Input on Disposition of Real Estate Owned Properties

Range of Ideas Sought, Including Transition to Rental

Washington, DC — The Federal Housing Finance Agency (FHFA), in consultation with the U.S. Department of the Treasury and Department of Housing and Urban Development (HUD), has announced a Request For Information (RFI), seeking input on new options for selling single-family real estate owned (REO) properties held by Fannie Mae and Freddie Mac (the Enterprises), and the Federal Housing Administration (FHA).

The RFI’s objective is to help address current and future REO inventory. It will explore alternatives for maximizing value to taxpayers and increasing private investment in the housing market, including approaches that support rental and affordable housing needs.

“While the Enterprises will continue to market individual REO properties for sale, FHFA and the Enterprises seek input on possible pooling of REO properties in situations where such pooling, combined with private management, may reduce Enterprise credit losses and help stabilize neighborhoods and home values,” said FHFA Acting Director Edward J. DeMarco. “Partnerships involving Enterprise properties may reduce taxpayer losses and meet the Enterprises’ responsibility to bring stability and liquidity to housing markets. We seek input on these important questions.”

“As we continue moving forward on housing finance reform, it’s critical that we support the process of repair and recovery in the housing market,” said Treasury Secretary Tim Geithner. “Exploring new options for selling these foreclosed properties will help expand access to affordable rental housing, promote private investment in local housing markets, and support neighborhood and home price stability.”

“Millions of families nationwide have seen their home values impacted as their neighbors’ homes fall into foreclosure or become abandoned,” said HUD Secretary Shaun Donovan. “At the same time, with half of all renters spending more than a third of their income on housing and a quarter spending more than half, we have to find and promote new ways to alleviate the strain on the affordable rental market. Taking steps to encourage private investment in REO properties and transition them into productive use will help stabilize neighborhoods and home values at a critical time for our economy.”

The RFI calls for approaches that achieve the following objectives: reduce the REO portfolios of the Enterprises and FHA in a cost-effective manner; reduce average loan loss severities to the Enterprises and FHA relative to individual

distressed property sales; address property repair and rehabilitation needs; respond to economic and real estate conditions in specific geographies; assist in neighborhood and home price stabilization efforts; and suggest analytic approaches to determine the appropriate disposition strategy for individual properties, whether sale, rental, or, in certain instances, demolition.

FHFA, Treasury and HUD anticipate respondents may best address these objectives through REO to rental structures, but respondents are encouraged to propose strategies they believe best accomplish the RFI’s objectives. Proposed strategies, transactions, and venture structures may also include: programs for previous homeowners to rent properties or for current renters to become owners (“lease-to-own”); strategies through which REO assets could be used to support markets with a strong demand for rental units and a substantial volume of REO; a mechanism for private owners of REO inventory to eventually participate in the transactions; and support for affordable housing.


 "Justice Foreclosed"

Andrew Cohen from the Atlantic reports on a legal case out of Massachusetts that pits Wells Fargo against a home owner. The article is lengthy (but worth the read) so I will break it down into a few short sentences.

The crux of the article revolves around a family from Massachusetts trying to modify their mortgage which was being serviced by Wells Fargo (while the article doesn’t clearly state that Wells was servicing the loan (80% of Wells loans are owned by other investors) it stands to reason that they were a servicer). Wells told the family that they would have to stop making mortgage payments in order to qualify for a loan modification. The family did just that.

Fast forward 18 months, and Wells Fargo gave the family 30 days to get out of their home. They chose not to grant a loan modification. The family sued and eventually won a victory that is forcing Wells to continue negotiating a loan modification (they can appeal the courts ruling if they see fit).

There are 2 important lessons that can be learned from this article. In my opinion homeowners must have an attorney representing their interest when dealing with foreclosure, short sales, loan mods etc. Also, when a servicing company such as Wells requires an individual to stop making payments, they do so for a reason. When a person becomes late on a loan that the “bank” is servicing, the bank now has something to service! When they service a defaulted loan, they get paid!

If you are a person that is in foreclosure or a realtor with short sale listings, get a QUALIFIED foreclosure defense attorney involved immediately.

Justice Foreclosed

By: JUL 25 2011

Financially battered state courts simply cannot keep up with rising mortgage defaults


 In many ways, Frank and Deana Dixon's saddening, maddening story is the story of America's ongoing (and oft-forgotten) home foreclosure crisis. It's not just about bad loans, venal banking practices, and desperate borrowers. It's also about state court systems, addled by budget shortfalls, which cannot remotely keep up with the pace of foreclosure lawsuits. These two lamentable trends, speeding trains headed in opposite directions, have created a terrible mess that is hindering the nation's economic recovery.

The Dixons live in Scituate, Massachusetts. In 2009, like millions of other American homeowners that year, they sought to modify the terms of their home loan. They verbally agreed with their lender, Wells Fargo, to take certain steps toward such a modification. The bank told the Dixons to stop making their payments on the loan (funds that would later be added to the modified loan amount) and to provide loan officers with certain financial information. The Dixons complied and began to work with bank officials.

Eighteen months later, however, instead of modifying the loan, Wells Fargo told the Dixons that they had defaulted upon their payment obligations -- because they hadn't made their monthly payments. The bank told the family it intended to foreclose upon their house. The notice from Wells Fargo, which arrived 17 days before Christmas 2010, gave the family roughly 30 days notice. The Dixons sued to stop the foreclosure and their case wound up in federal court, before Chief U.S. District Judge William Young of Massachusetts.

Last Friday, Judge Young issued a ruling that gives the Dixons an opportunity to win their case (the family sought merely to bring Wells Fargo back to the negotiating table to discuss the loan modification). Here is the text of the ruling in Dixon v. Wells Fargo. In it you can assess not just how difficult the law has made it for families like the Dixons to vindicate their rights in court (thank you, banking lobby) but also how swamped the nation's court systems have become in handing the flood of foreclosure cases brought on by the sub-prime lending scandal.

When the Dixons sued Wells Fargo to stop the foreclosure of their home, they argued that they had reasonably relied upon the oral promises of bank officials who had told them to stop making their monthly payments. The Dixons were damaged by this reliance, they told Judge Young, because their failure to make their payments for month after month while they negotiated with the bank made them vulnerable to default and foreclosure, which of course is precisely what happened.

Wells Fargo, meanwhile, argued that the oral promises of its banking officers was not sufficiently "definite as to be binding" and that the Dixons' reliance "on its promise was neither reasonable nor detrimental." The bank also argued that the family's claim was preempted by the Orwellian-titled "Home Owners Loan Act," a Depression-era federal statute that has been amended over the decades to help lenders far more than borrowers. The failure of the parties to reach a loan modification, the banking giant told Judge Young, was none of the court's business.

Although it received tens of billions in federal bailout money, Wells Fargo evidently has made a habit of stringing its borrowers along before refusing to agree to loan modifications. And its foreclosure practices already have been blasted by the Supreme Court of Massachusetts. For his part, Judge Young first determined that the Dixons and the bank had not made an oral agreement to agree, which would have been more difficult to enforce under the ancient doctrine of promissory estoppel, but rather an "agreement to negotiate" further on the loan modification. And then he came to the core of the case:

In the present case, Wells Fargo convinced the Dixons that to be eligible for a loan modification they had to default on their payments, and it was only because they relied on this representation and stopped making their payments that Wells Fargo was able to initiate foreclosure proceedings. While there is no allegation that its promise was dishonest, Wells Fargo distinctly gained the upper hand by inducing the Dixons to open themselves up to a foreclosure action. In specifically telling the Dixons that stopping their payments and submitting financial information were the "steps necessary to enter into a mortgage modification," Wells Fargo not only should have known that the Dixons would take these steps believing their fulfillment would lead to a loan modification, but also must have intended that the Dixons do so.

Where's George Bailey when we really need him? Judge Young then determined that "no consensus" has yet emerged from the courts about the extent to which the Home Owners Loan Act precluded state law claims like the Dixons'. So he concluded that the family could proceed toward trial to see if they could prove their clams against the bank. The family's claim, Judge Young wrote, legitimately seeks "... to hold the lender to its word." The bank now may appeal the ruling to the 1st U.S. Circuit Court of Appeals or it may work out a loan modification with the Dixons.

Few civil cases are more important to individuals than those which affect their right (or lack thereof) to live in their own homes. Yet while the worst of the foreclosure epidemic appears to be over -- largely as a result of increased regulatory and judicial pressure put on banks to ease their aggressive approaches -- state court systems from sea to sea have been financially battered to the point where they simply can't keep up with those foreclosure cases which still are pouring through. As Judge Young put it in his opinion:

Clogging the operation of the mortgage foreclosure system with court delay simply will not work. Either individual rights will be submerged, and people will lose their homes unlawfully, or home mortgage liquidity will atrophy, the larger economy will suffer, and potential home buyers will be denied homeownership, although financially able to support mortgage payments.

In Massachusetts, where both Judge Young and the Dixons live, budget shortfalls have resulted in chaos. Earlier this month, two of the Commonwealth's Supreme Court Justices, reacting to budget figures offered by Gov. Deval Patrick, said that 11 state courts would likely have to close. In California, a state ravaged by foreclosures, dozens of courthouses have been (or soon will be) closed, hundreds of court workers have been laid off, and thousands of others have been furloughed as a result of budget cuts. "It has never been worse," California Supreme Court Chief Justice Tani Cantil-Sakauye recently told the San Jose Mercury News.

Pick a state, any state, and you can see how bad the problem is. For example, how would you like to be a homeowner fighting your foreclosure case in Florida? Here's how the Sun-Sentinel described the problem last summer:

Statewide, more than 700,000 foreclosure cases have been filed in the past two years, one out of four in Broward and Palm Beach counties. In South Florida, the number of foreclosure cases has increased tenfold in five years. In Broward, about 52,000 cases were filed last year, up from 5,300 in 2004. In Palm Beach County, about 30,000 foreclosure cases were filed last year, up from about 3,200 five years earlier. "It's overwhelming the courts," said Broward Circuit Judge Jack Tutor. He estimates he and the other circuit civil judges are each juggling 5,000 to 6,000 cases at one time. Two of three are foreclosures.

Judge Young cited me in Dixon v. Wells Fargo (Footnote 11) for the proposition that the legislative and executive branches are abandoning the judicial branch just when people need their judges and courthouses most. The Dixons got lucky. They were randomly assigned a judge who was willing to quickly move on their case and to speak out about the larger problem. But for every family like the Dixons there are thousands more whose lives are in limbo while they wait for their foreclosure cases to wend their way through court. It's yet another sign that America is slouching toward third-world justice for its citizens. Surely we can do better for these other families, if not for their own sake then for the sake of the nation's real estate market.



 Let's Demolish the Houses

 

Lindsey Rupp from Bloomberg News reports on yet another brilliant idea that has been hatched by Bank of America. Ms. Rupp writes, “Disposing of repossessed homes is one of the biggest headaches for lenders in the United States, where 1,679,125 houses, or one in every 77, were in some stage of foreclosure as of June, according to research firm RealtyTrac Inc. The prospect of those properties flooding the market has depressed prices and driven off buyers concerned that housing values will keep dropping. “ BOA takes bull dozers to the “decrepit” houses!

The move can make sense. Meaning, if the property is in such a state of disrepair, BOA argues that it costs them less to demolish a property that they can’t sell when compared to the cost of upkeep, taxes, insurance etc. This, however, is a very reactive position to take. A more proactive position would be to approve short sales before the houses become blighted and turned into REO’s.

 

Hit with foreclosures, Bank of America donating, demolishing homes

By: Lindsey Rupp


 TNEW YORK — Bank of America Corp., faced with a glut of foreclosed and abandoned houses it can’t sell, has a new tool to get rid of the most decrepit ones: a bulldozer.

The biggest US mortgage servicer will donate 100 foreclosed houses in the Cleveland area, and in some cases contribute to their demolition in partnership with a local agency that manages blighted property. The bank has similar plans in Detroit and Chicago, with more cities to come, and Wells Fargo & Co., Citigroup Inc., JPMorgan Chase & Co. and Fannie Mae are conducting or considering their own programs.

Disposing of repossessed homes is one of the biggest headaches for lenders in the United States, where 1,679,125 houses, or one in every 77, were in some stage of foreclosure as of June, according to research firm RealtyTrac Inc. The prospect of those properties flooding the market has depressed prices and driven off buyers concerned that housing values will keep dropping.

“There is way too much supply,” said Gus Frangos, president of the Cleveland-based Cuyahoga County Land Reutilization Corp., which works with lenders, government officials, and homeowners to salvage vacant homes. “The best thing we can do to stabilize the market is to get the garbage off.”

Bank of America had 40,000 foreclosures in the first quarter, saddling the lender, based on Charlotte, N.C. with taxes and maintenance costs. The bank, which unveiled the Cleveland program last month, has committed as many as 100 properties in Detroit and 150 in Chicago, and may add as many as nine cities by the end of the year, said Rick Simon, a spokesman.

The lender will pay as much as $7,500 for demolition or $3,500 in areas eligible to receive funds through the federal Neighborhood Stabilization Program. Uses for the land include development, open space, and urban farming, according to the statement. Simon declined to say how many foreclosed properties Bank of America holds.

Ohio ranked among the top 10 states with the most foreclosure filings in June, according to RealtyTrac. The state has 71,617 foreclosed homes, Cuyahoga County 9,797, and Cleveland 6,778, RealtyTrac said.

The tear-downs are in varying states of disrepair, from uninhabitable to badly damaged. Simon said some are worth less than $10,000, and it would cost too much to make them livable.

“No one needs these homes, no one is going to buy them,” said Christopher Thornberg, partner at the Los Angeles office of Beacon Economics LLC, a forecasting firm. “Bank of America is not going to be able to cover its losses, so it might as well give them away.”

Donating a house may create an income tax deduction, said Robert Willens, an independent accounting analyst in New York. A bank might deduct as much as the fair market value if a home was not acquired with the intent of knocking it down, he said.

Wells Fargo and Fannie Mae already started donating houses and demolition funds in Ohio. San Francisco-based Wells Fargo, the biggest US home lender, gave 26 properties and $127,000 to the Cuyahoga land bank, said Russ Cross, Midwest director for Wells Fargo Home Mortgage.

Fannie Mae, the mortgage-finance company operating under US conservatorship, made its first deal with the Cuyahoga land bank in 2009, and sells houses to the organization at a “very nominal value,” or about $1 and an additional $200 in closing costs, said P.J. McCarthy, who heads alternative disposition programs.

Fannie Mae sold 200 foreclosures to the Cuyahoga organization in 2010 and has similar programs in Detroit and Chicago. Cleveland is the only city where Washington-based Fannie Mae contributes $3,500 toward demolition, McCarthy said.

JPMorgan Chase, the second-largest US bank, has donated or sold at a discount almost 1,900 properties valued at more than $100.million in more than 37 states since late 2008, including 22 in Cleveland, said Jim O’Donnell, manager of community revitalization. The majority aren’t demolished.

The knockdowns are not likely to outpace foreclosures, said Rick Sharga, RealtyTrac’s senior vice president. Foreclosures may accelerate as banks clear a backlog caused by soft real estate markets and legal disputes over tactics used to seize homes. “These sorts of programs will basically only be nibbling on the edges,” Sharga said.


How High Can You Jump?!

Nick Timiraos from the Wall Street Journal brings us an interesting article that describes another problem child the lenders/investors that own notes (or think they own the notes) have. By now, everyone has heard of robo signing....the process by which lenders/servicing companies fraudulently signed mortgage documents. While the industry is still trying to recover from that debacle, they also have to prove ownership of the notes that they claim they own.

Borrowers that are delinquent (sometimes for years) are employing attorneys that are challenging the chain of title for the notes. Bill Dallas puts it plainly by stating, “Loans with botched assignments or no assignment are "really problematic" because "the person that originated the loan is gone, the person that funded it is gone, and your servicers are confused," he says.”

The net effect is a prolonged foreclosure crisis. Don’t you think that lenders and their servicing companies should be jumping head over heels to approve short sales? By doing so they avoid these long protracted legal battles that will most certainly cost them money (and bad press) in the long run.

 

Banks Hit Hurdle to Foreclosures

By: Nick Timiraos

Banks trying to foreclose on homeowners are hitting another roadblock, as some delinquent borrowers are successfully arguing that their mortgage companies can't prove they own the loans and therefore don't have the right to foreclose.

These "show me the paper" cases have been winding through the courts for several years. But in recent months, some judges have been siding with borrowers and stopping foreclosures after concluding that banks' paperwork problems are more serious than previously thought and raise broader ethical questions.

This year, cases in California, North Carolina, Alabama, Florida, Maine, New York, New Jersey, Texas, Massachusetts and others have raised questions about whether banks properly demonstrated ownership.

During the fall, banks temporarily suspended foreclosures to address so-called robo-signing problems, where employees were approving legal documents without properly reviewing them. They said that in weeks they could fix what they considered to be simple clerical errors. But borrowers are uncovering new types of document problems, further delaying banks' efforts to get foreclosures back on track.

In some cases, borrowers are showing courts that banks failed to properly assign ownership of mortgages after they were pooled into mortgage-backed securities. In other cases, borrowers say that lenders backdated or fabricated documents to fix those errors.

"Flawed mortgage-banking processes have potentially infected millions of foreclosures, and the damages against these operations could be significant and take years to materialize," said Sheila Bair, chairman of the Federal Deposit Insurance Corp., in testimony to a Senate committee last month .

Last month, the Maine Supreme Court reversed the foreclosure of Dana and Robin Murphy of Auburn, Me., after concluding that the mortgage company, a unit of HSBC Holdings PLC, filed "inherently untrustworthy" documents. An HSBC spokesman declined to comment.

The case began in 2008 when HSBC filed to foreclose on the Murphys, who hadn't made a mortgage payment in two years. A trial judge initially rejected HSBC's foreclosure because the bank couldn't show it owned the promissory note—in effect, the borrower's IOU. The court later granted the foreclosure after HSBC submitted new paperwork.

However, the Murphys found discrepancies and alleged that the documents were backdated. The court voided the foreclosure and sent the case back to the lower court to determine potential penalties.

Attorneys for borrowers reject the view that they are using arcane legal rules to secure free houses for clients who aren't paying their bills. Efforts to gloss over incomplete or falsified evidence "can't be tolerated by a free society," says Thomas Ice, an attorney in Royal Palm Beach, Fla., who has a similar case before the Florida Supreme Court. "This is a huge assault on our legal system" that risks "turning us into a banana republic."

Laurence E. Platt, a banking-industry lawyer at K&L Gates in Washington, concedes that banks may have been sloppy. But he says "the real assault on the legal system" are efforts by judges and local officials to strip lenders of their rightful ownership and make foreclosures impossible.

In March, an Alabama court said J.P. Morgan Chase & Co. couldn't foreclose on Phyllis Horace, a delinquent homeowner in Phenix City, Ala., because her loan hadn't been properly assigned to its owners—a trust that represents investors—when it was securitized by Bear Stearns Cos. The mortgage assignment showed that the loan hadn't been transferred to the trust from the subprime lender that originated it.

Specific deal agreements required Bear Stearns to assign the loan within three months of the securitization. Because it failed to do so, Alabama Circuit Court Judge Albert Johnson determined, the trust didn't own the mortgage. "The court is surprised to the point of astonishment that the defendant trust did not comply with the terms," of the securitization agreement, he wrote.

The ruling is one of the first in the nation to strip a mortgage trust of an asset it thought it owned. A similar case earlier this year was decided in the bank's favor when it held that the borrower wasn't a party to the securitization agreement.

Nick Wooten, the lawyer for Ms. Horace, says the case won't necessarily influence other decisions unless it is upheld by a higher court. But he says it is "another brick in the wall of trial-court-level cases that clearly show the wheels fell off the bus in the securitization industry during the bubble."

J.P. Morgan Chase hasn't appealed the case. A bank spokesman declined to comment.

Curing incomplete mortgage assignments can be tricky because many lenders that originated subprime loans are still listed as the owner but have gone out of business.

Bill Dallas, former chief executive of subprime lender Ownit Mortgage Solutions Inc., receives between 200 and 300 pieces of mail every month at his former company's California headquarters from companies looking to correct ownership flaws. "Am I surprised? Absolutely not," says Mr. Dallas, who founded and ran the subprime lender until its collapse in late 2006. "I knew this assignment problem was going to be an issue."

Loans with botched assignments or no assignment are "really problematic" because "the person that originated the loan is gone, the person that funded it is gone, and your servicers are confused," he says.


Florida Pulls Funding

Carrie Bay from DSNews reports on funding cuts that will prolong the foreclosure process in Florida. Last year, the state approved $14M to bring in case managers and judges to clear the foreclosure backlog. Some judges were “reviewing” 100 cases per day in an attempt to clear the backlog. Foreclosure defense attorneys saw that this method oftentimes produced questionable results. While the program was designed to expedite the foreclosure, the time to complete a foreclosure rose from 470 days to 619 days (Q12010 compared to Q12011).

The band aid is gone. Only time will tell how this will affect foreclosure delays in Florida.

 

Florida Legislators Pull Funding for Foreclosure Courts

By: Carrie Bay

The already clogged foreclosure system in Florida could come to a near standstill this summer after state legislators voted not to extend a special round of funding approved last year to bring in additional case managers and judges to help clear the backlog of foreclosure cases.

After much lobbying from the Office of the State Courts Administrator last year, lawmakers awarded $6 million to the state court system to increase personnel and resources for handling foreclosure actions.

It was a one-time allocation, and that line item didn’t make it into the budget for the new fiscal year, which for the state and the courts begins in July.

The money helped to fund the so-called “rocket dockets” in certain jurisdictions. These courts have been highly criticized by consumer advocacy groups who say they ignore procedural safeguards in order to rush through foreclosures and deny homeowners the opportunity to present a defense.

According to the local paper, the Palm Beach Post, since June 2010, these courts have whittled the state’s backlog – which stood at 462,339 cases at that time – by just 139,615 cases, leaving more than 322,700 pending foreclosures still stuck in the system and likely to remain there as the courts lose funding.

The Circuit Court in Palm Beach County has already started cancelling scheduled foreclosure hearings. Judge John Hoy issued a court order last week which said, “Because of the lack of funding by the Florida Legislature, judges are unavailable to preside over foreclosure trials beginning July 1, 2011.”

Craig Waters, a spokesperson for the Office of the State Courts Administrator, says there was never any expectation that the one-time funding would be renewed, especially in light of Florida’s severe budget shortfall.

“Foreclosure cases will continue to be heard in the Florida state courts just as they were before the 2010-11 fiscal year,” which benefited from the extra $6 million in funding, Waters said.

After robo-signing delays and the institution of a statewide pre-foreclosure mediation program that gives court mediators 120 days from the filing of a foreclosure to schedule a mediation session, RealtyTrac reports that Florida’s foreclosure timeline has continued to lengthen, even with the additional resources and judges hired.

The tracking firm says the full foreclosure process in Florida took an average of 619 days during the first quarter of this year. That’s up from 470 days in the first quarter of 2010, just before the special funding was allocated, and nearly four times the average of 169 days it took in the first quarter of 2007.

Local market participants are concerned that any additional delays caused by the funding cuts for the upcoming fiscal year will mean that homes sit vacant longer, further contributing to neighborhood blight and weighing on already depressed property values.


A Belated 4th of July Greeting!

I hope everyone had a great 4th of July!  My family and I relaxed by the pool in the morning and then went to a friend’s house in the afternoon where we had a great meal and enjoyed lively conversation.  We were also able to watch several “home grown” fireworks shows that entertained the masses!

It wasn’t until the next day that I asked myself what the 4th of July really means.  Wikipedia defines it as, “Independence Day, commonly known as the Fourth of July, is a federal holiday in the United States commemorating the adoption of the Declaration of Independence on July 4, 1776, declaring independence from the Kingdom of Great Britain.”   

What sometimes gets lost is how we achieved our independence.  Without going into a long, drawn out history lesson, our freedom was made possible by the hardworking men and women who fought and won our independence from Great Britain.  So, I associate the 4th of July with our soldiers that allow us to live our lives the way we choose to.  Give thanks to the soldiers in our ranks.  I’d rather live in the United States with all of our “problems” as opposed to living in Kabul, dodging sniper fire as I travel to the well to fetch dirty water.

What does the 4th of July mean to you?


Why Foreclosure Filings Have Dropped

Lisa Shapiro from the Huffington Post clarifies why foreclosures have fallen to a 40 month low.  Many want you to believe that it is due to the success of this program or that program...or that the economy is making a miraculous recovery.  While all of this would be great, it’s just not the case.

“This slowdown continues to be largely the result of massive delays in processing foreclosures rather than the result of a housing recovery that is lifting people out of foreclosure," said James J. Saccacio, chief executive officer of RealtyTrac, in a press release.”   An indicator is the average time to foreclose.  Nationwide this number rose from 340 days to 400 days (Q1 2010 vs. Q1 2011).  In judicial states this time frame can be higher (In Florida, the average time to foreclose is 619 days.)  According to the report, the cause of these delays revolves around delays in paperwork processing.

As the article points out, “With home prices still falling, a slowdown in foreclosures driven by paperwork delays is bad news for the overall housing market recovery. Home prices hit their lowest point in two years in April, falling 0.7 percent below March 2009 levels, according to a recent report by Clear Capital. Housing experts say the data from RealtyTrac's report does not indicate a reversal of this trend will be quickly forthcoming.

"As the servicers sort out their processing issues and staff up a little that means these homes will end up on the market as a distress sale and that will cause home prices to fall further," said Celia Chen, a housing market analyst for Moody's Analytics. "It delays the problem. It extends the recovery in the housing market."

 

Foreclosures Fall To 40 Month Low- Due to Paperwork Delyas, Not Recovery

Foreclosure activity has fallen to a 40-month low, but not because of any recovery in the housing market, a new report finds. Rather, the slowdown comes from massive delays in processing foreclosure paperwork.

In April, overall foreclosure filings -- including default notices, scheduled auctions and bank repossessions -- declined for the seventh month straight to 219,258, a 9 percent decrease from March and a 34 percent decrease from April last year. Banks seized 69,532 homes last month, a 5 percent drop from March, according to data provider RealtyTrac.

“This slowdown continues to be largely the result of massive delays in processing foreclosures rather than the result of a housing recovery that is lifting people out of foreclosure," said James J. Saccacio, chief executive officer of RealtyTrac, in a press release.

Nationwide, foreclosures completed in the first quarter of the year took an average of 400 days from initial default notice to conclusion, up from the 340 days the process took last year and more than twice the average time -- 151 days -- it took to complete a foreclosure in the first quarter of 2007. In some states, that number soared higher. In New Jersey and New York, the average timeframe in the first quarter of this year was 900 days. In Florida, it was 619.

With home prices still falling, a slowdown in foreclosures driven by paperwork delays is bad news for the overall housing market recovery. Home prices hit their lowest point in two years in April, falling 0.7 percent below March 2009 levels, according to a recent report by Clear Capital. Housing experts say the data from RealtyTrac's report does not indicate a reversal of this trend will be quickly forthcoming.

"As the servicers sort out their processing issues and staff up a little that means these homes will end up on the market as a distress sale and that will cause home prices to fall further," said Celia Chen, a housing market analyst for Moody's Analytics. "It delays the problem. It extends the recovery in the housing market,"

Last fall, many of the nation's largest lenders voluntarily halted home repossessions when flawed foreclosure practices came to light. On Wednesday, the Huffington Post reported that HSBC North America Holdings, the 12th-largest mortgage servicer in the U.S., will continue its moratorium on home seizures in some jurisdictions. According to the bank's filings, the bank will not fully resume foreclosing on defaulted borrowers for a number of months. The Obama administration is now pushing for the creation of a federal account to help distressed borrowers and settle ongoing probes into faulty mortgage practices, the Huffington Post reported on Wednesday.

There is still a large stock of homes in distress -- at least 3.7 million homes are in a late stage of the foreclosure process, according to the report -- and housing experts stress that processing these properties as quickly as possible is critical to the recovery of the housing market.

"This is what frees up the economy to make forward progress and allows home prices to rise," said Michael Englund, chief economist at Action Economics. "It will probably take about another year to work our way through the foreclosure mess."


Illinois home foreclosure activity rose more than 5 percent in May

For those of you who live in Illinois, your foreclosure count just went up.  Foreclosure activity increased more than 5% in May (as compared to April).  Not that this is international headline news, but it is important to note that Illinois ranks in the top 5 states nationwide for foreclosure activity.  My opinion this has a lot to do with the state of the economy in Illinois.  For those real estate professionals in Illinois, get ready!

Illinois home foreclosure activity rose more than 5 percent in May

Illinois home foreclosure activity rose more than 5 percent in May compared to the previous month.

A report released Thursday by Irvine, Calif.-based RealtyTrac shows Illinois with 10,574 foreclosure filings last month. Filings include default notices, auction-sale notices and bank repossessions.

The filings represent one in every 500 housing units in the state. That rate is almost 30 percent lower than in May of last year and ninth-highest nationally.

Foreclosures had fallen more than 16 percent in April compared to March, but RealtyTrac attributed decreases in many states to paperwork processing delays rather than a housing recovery.

Nevada continued to have the nation's highest foreclosure rate -- one in every 103 housing units.

Other states with foreclosure rates higher than Illinois are Arizona, California, Florida, Georgia, Idaho, Michigan and Utah.


Do You Facebook?!

Sam Debord brings us an interesting post that involves one of the most visited websites in the world...Facebook. A couple in Australia defaulted on their mortgage. Presumable they were playing hide and seek with the bank because the bank couldn’t find them ... The bank was trying to serve them foreclosure papers. Some industrious little Ninja from the bank took a gander at Facebook...low and behold guess who they found? Yep...the sellers! The sellers were served their papers over Facebook! According to Mr. Debord, Australian courts upheld the process!

Don’t “Like”: Couple Receives Foreclosure Notice on Facebook

Another reminder that your public Facebook profile is being viewed by more than just your friends:

A couple in Australia has received the worst kind of wall post. After they defaulted on their mortgage, the bank who owned their loan couldn’t locate their current address or email address. After searching extensively, the couple’s public profiles were found on Facebook.

Since the Facebook users had posted their birthdates on their profiles and friended one another, the bank investigators could verify that these were, indeed, their defaulting borrowers. Realtor.org reported that bank officials served the couple with a foreclosure notice, and Australian courts upheld the process.

This just may be the day that you finally review your Facebook profile and its privacy settings.


“No end in sight to foreclosure quagmire”

NBC Channel 11 reports on how we continue down the rabbit hole of foreclosures. The government has introduced program after program that had great intentions but have delivered minimal results. The blame game is always played but never finished. Unemployment continues to rise while our economy plummets. The banks hold back the inventory of houses that they own. Servicing companies stretch out the process for endless periods of time. Some buyers are being ostracized in this market...I could go on and on........rather than you listening to my rants, read the article and let me know your thoughts.

“No end in sight to foreclosure quagmire”

MSNBC) -- Four years after a wave of rogue mortgage lending sent the U.S. housing market into the worst collapse since the Great Depression, the devastating flood of resulting foreclosures shows no sign of abating. In some ways, the problem is getting worse.

House prices are falling again, forcing more homeowners "underwater" -- owing more than their house is worth. Lenders' shoddy document practices have brought widespread court challenges, slowing the process and leaving millions of homeowners in limbo.

And the foreclosure crisis continues to weigh heavily on the fragile economy.

"Right now, it's the second-biggest drag on the economy after the surge in oil prices," said Moody's Analytics chief economist Mark Zandi.

Already some 5 million homes have been lost to foreclosure; estimates of future foreclosures range widely. Zandi, who has followed the mortgage mess since the housing market began to crack in 2006, figures foreclosures will strike another three million homes in the next three or four years.

Congress and the White House have run out of ideas to save those homes, he said.

"There's no political appetite to do anything," he said. "So we're on our own."

There were many causes of the foreclosure crisis -- and plenty of blame to go around among mortgage lenders, regulators and, in some cases, the borrowers themselves. But as the crisis has accelerated it also has swept up families who, through no fault of their own, have lost or are in danger of losing their homes.

The government's efforts to stem the crisis are widely viewed as a failure. Its flagship foreclosure relief program, the Home Affordable Modification Program, has been hampered by confusion over its terms, lenders' widespread refusal to forgive loan principal and a "trial modification" process that, in some cases, leaves homeowners worse off than when they entered the program.

"The biggest problem with the program is that noncompliance is still rampant, and it's not improving," said Alys Cohen, an attorney with the National Consumer Law Center, which is lobbying for more effective foreclosure prevention programs.

Despite the heavy toll on families, communities and the economy, the response from Congress, the White House and an alphabet soup of federal and state agencies has been a piecemeal approach that hasn't fixed the problem.

"This is an industry that was simply not prepared for this crisis, hasn't had the procedures in place, hasn't had the people to deal with it," said Tim Massad, who oversees HAMP as acting assistant secretary for financial stability at the Treasury Department. "And we've seen that over and over again. I think they're better, but they're not nearly where they need to be."

The government has repeatedly tried to offer effective solutions. Recent federal budget cuts have made matters worse by eliminating funding for frontline housing counselors, who are already spread thin in their efforts to help homeowners.

Federal bank regulators, citing widespread "unsafe and unsound practices," recently announced a series of new regulations for lenders to follow to try to fix the problem. Critics argue the new rules don't go far enough and merely codify changes the industry already is making.

Bankers have agreed to review their practices and report back to regulators with a plan to fix them, for example, but those reports won't be made public. They also agreed to hire their own auditors to look into cases where homeowners were wrongly foreclosed.

The House recently voted to scuttle HAMP, which has dispersed only a fraction of the $50 billion Congress authorized in 2009. There are no signs the Senate plans to follow suit, although the program officially ends next year.

In the Senate, Jack Reed, D-R.I., has reintroduced a bill that died last year which would toughen requirements on lenders to modify loans. Democratic Sen. Sherrod Brown of Ohio has introduced a bill that would include a range of consumer protections for mortgage borrowers. Neither bill has made it out of the Banking Committee.

Other agencies are pressing mortgage lenders to break the logjam. Attorneys general from all 50 states -- along with the Justice Department, the Federal Trade Commission and the new Consumer Financial Protection Board -- are in talks with major lenders that would require them to follow steps that are currently voluntary, including modifying loans by writing down the principal owed. Bankers have raised numerous objections to the initial proposals.

The Treasury continues to tweak the HAMP program. It recently introduced a requirement, for example, that lenders assign a single point of contact to help homeowners cut through a thicket of red tape.

Yet families continue to lose their homes at a pace not seen in decades. Last year set a record for foreclosures, according to RealtyTrac. The pace slowed in the first quarter but is expected to pick up again as banks work through a thicket of legal challenges to faulty document practices.

The glut of unsold homes and the overhang of foreclosures are weighing on the housing market. Construction of new homes has fallen to levels never recorded. Government tax credits for home buyers briefly helped stabilized home prices, but prices have begun falling again as those incentives have expired. Falling home prices chip away at household wealth, dampening consumer spending.

Each new foreclosure brings another distressed property on the market, pushing prices lower. The greatest risk, said Zandi, is a downward spiral that becomes difficult to unwind.

"Prices decline, that pushes people underwater," he said. "There's 14 million people now underwater. Half of those are underwater by more than 30 percent. That's the fodder for (more) default."

The depression in the housing industry, which accounts for up to 20 percent of U.S. employment in good times, has stalled economic growth and contributed to a stubbornly high jobless rate of 9.0 -- far higher than is typical this far into a recovery.

With effective solutions in short supply, attorneys and housing advocates say the ranks of distressed borrowers continue to swell.

"I've never seen a flood like this," said Gary Klein, an attorney at Roddy, Klein and Ryan in Boston who has spent 25 years defending homeowners facing foreclosure. "There are so many people that need help at this point that we can't even begin to handle all of the phone calls."

The companies tasked with collecting payments from borrowers are just as overwhelmed. More than four years after the housing bubble burst, the mortgage servicing industry is grappling with its own dysfunctional thicket of red tape, missing documents, false affidavits and conflicting guidelines.

"We are finding that the documents themselves are manufactured," said James Kowalski, an attorney in Jacksonville, Fla., who handles foreclosure defense and prevention. "We're finding that the affidavits, which are the pieces of paper by which the servicer testifies in court, are not true. Once you get underneath the surface of all those made-up documents, you find homeowners that shouldn't be in foreclosure."

In many cases, homeowners who were granted a "trial" modification under the HAMP program wound up worse off. Unless they won final approval, the lower monthly payments during the "trial" period placed them in default and speeded the path to foreclosure.

"I've seen homeowners that have everything that they need in order to qualify for that modification," said Chris Wyatt, a former vice president at a major mortgage loan servicing company who has worked in the industry for 20 years. "They meet all the criteria for that modification, yet were denied. So the customer actually gets caught into this kind of Catch-22, and at the end of the day the servicer says, 'Sorry, I can't do them all, and so I'm going to foreclose.'"

Government officials compounded the problem by setting overly aggressive targets for the program and then pressing mortgage servicers to show quick results.

"They would do anything to get trial modifications on the board," said Caroline Herron, a former Fannie Mae official who worked as a consultant to HAMP. "Nobody made it a priority to figure out what the real problem was, and what needed to get fixed to make sure the program could work. Instead, it was pressure to report on findings and pressure servicers to bring the numbers up."

For their part, mortgage servicers say they were stymied by repeated revisions in the rules once the HAMP program started, which made it harder to follow shifting guidelines.

Treasury's Massad admits the system was flawed and created frustration on both sides.

"We certainly acknowledge we haven't done as much as we would like, he said. "But I think the fact remains that people have a lot more options because of this program than they did before we started. And the program has changed the way the industry approaches modification so that we're seeing a lot more modifications than we otherwise would have."


Going to the Well!

Once upon a time, Wells Fargo was a joy to deal with when purchasing short sales. They were responsive, timely and reasonable in their request. As of late, they have caught BOA it is…..or maybe they hired some genius from BOA! Either way, they have become a very cumbersome company.

On a recent short sale, Wells was in second position. They denied the short sale because “they didn’t like the buyer”! WTF! I can’t wait to see how much they like the buyer when the property is sold at auction for a 36% discount to retail versus 9-15%……oh…..I forgot….Wells is servicing the loan so they WAN’T the property to go into foreclosure so they can bilk the investor who owns the note for even more money!

Read the article below. According to Mark Calvey of the San Francisco Business Times; there was a posse at the annual Wells Fargo get together (aka their annual meeting) who expressed their disgust as to how the company is being run. I’d love to know how many buyers of short sale properties with portfolios owned by Wells are turned away. Compare this figure to the same stat involving mortgages that are being serviced by Wells. I’ll bet the numbers are dramatically different.

Wells Fargo CEO hears from angry America at annual meeting

The Business Journal - by Mark Calvey, San Francisco Business Times

Wells Fargo & Co. ’s annual meeting routinely draws protesters and shareholders advocating a range of social issues. But Tuesday’s gathering was more intense than in previous years, with shareholders calling for the bank to adopt an immediate foreclosure moratorium and waive principal on troubled mortgages.

At one point, five shareholders were escorted by San Francisco police officers out of the meeting, arm in arm, with one shouting as she left, “Profit over people isn’t good for the United States.”

The chants of protesters, which included “You owe us,” could be heard from 15 floors below the Julia Morgan Ballroom on California Street in San Francisco, where the meeting was held. The Service Employees International Union and other public employees’ unions, along with several housing and faith-based groups, were prominent in the protest that greeted arriving shareholders.

Wells Fargo is the parent of Wachovia Bank, which is second in Triad market share behind only BB&T.

The two-and-a-half-hour meeting at times took on overtones of angry voters attending a school board or city council meeting rather than the usually more sedate gathering of bank stockholders.

Some said they would not step away from the microphone until Wells Fargo agreed to a foreclosure moratorium. Turning off the mic did not deter them.

The bank was equally persistent in rejecting a foreclosure moratorium.

“No. We’re not going to agree to a moratorium. It doesn’t help the process,” said Wells Fargo Chairman and Chief Executive John Stumpf. “A moratorium only puts off the inevitable.”

He said when Wells (NYSE:WFC) moves to foreclosure, the borrower is typically 16 months behind on payments and a fourth of the troubled homeowners have already abandoned their properties.

Those attending the meeting went through the usual metal detectors in addition to being required to hand over tape recorders to the coat check and get their hands stamped before proceeding into the main ballroom.

Stumpf defended his $19 million pay package last year, saying 70 percent of his compensation is based on corporate performance.

Those speaking at the annual meeting in favor of a shareholder proposal calling for a review of the bank’s foreclosure practices captured the impact of the nation’s housing crisis.

An Oakland, Calif., resident shared her experience in trying to save her home, Milwaukee residents sought the bank’s help in fighting foreclosure blight, a Nebraska man said he’s unable to refinance because his home has lost too much value, and a pastor said his church is suffering as parishioners lose their homes and move away.

“Maybe we just need to pray,” the pastor said.

All shareholder proposals opposed by the bank’s board failed. The proposal calling for the foreclosure review received 22 affirmative votes, while the ability to call a special shareholders meeting with a 10 percent stake, down from 25 percent, won 44 percent support; cumulative voting for directors won 29 percent of the shareholder vote; a measure calling for an independent chairman won 30 percent support and another on board compensation won 5 percent.

The shareholder give-and-take included questions on the validity of the bank’s book value while some admonished Wells to stop blaming the former Wachovia Corp. for its problems. Wells bought Charlotte-based Wachovia in late 2008.

“There is much suffering,” Stumpf told those attending. “And at the heart of that suffering is a lack of employment opportunities.

“We forgave $4 billion of shareholder capital to keep these families in their homes,” Stumpf said, noting that the bank has helped 700,000 borrowers through loan modifications. He said 80 percent of those modifications were done outside the federal Home Affordable Modification Program.

“I get it. There’s a lot of pain, and we’re doing our level best to help,” Stumpf said.

As if those attending needed any reminders that America is in a world of hurt, Stumpf went into overview on the bank’s performance. Although 2010 was a good year for Wells Fargo’s bottom line, revenue took a hit as loan demand from consumers and businesses waned.

“It’s not that we’re approving fewer loans,” Stumpf said. “It’s that we’re seeing less demand.”


Robo Signers Attack Illinois

Sounds like a science fiction movie! Unfortunately it’s more akin to a horror flick. While Florida has been in the headlines over the last few months due to “robo signing”, other states, such as Illinois, are not immune to the practice.

Mark Huffman reports that 2 Florida based (go figure!) corporations are under investigation by the Illinois Attorney General’s office. “(Attorney General) Madigan said she is looking into reported allegations that LPS and NTC engaged in the practice of “robosigning” legal documents filed with the court to foreclose on borrowers. Robosigning occurs when an individual has no knowledge of the information contained in the document and often doesn’t even read or understand the document that he or she is signing.

The use of robo signed documents was pervasive as lenders foreclosed on borrowers’ homes. The probe will also include a complete review of the accuracy of the systems and services that LPS and NTC provide to the large lenders including servicing platforms, foreclosure attorney interaction with these platforms and the assignment of mortgage process.”

The fallout of this practice and other devious deeds will keep the housing market where it is for years to come.

Illinois Widens Robo-Signing Probe

Attorney General appeals to whistle-blowers

Mark Huffman | ConsumerAffairs.com

We haven't heard much lately about robo-signing of foreclosure documents in the mortgage industry, but the issue is still on the radar screen in Illinois.

Illinois Attorney General Lisa Madigan has expanded her investigation, issuing subpoenas to two national mortgage servicing support providers. The subpoenas were issued to Lender Processing Services Inc. and Nationwide Title Clearing Inc., two Florida-based corporations that provide “document preparation services” and other loan management services to mortgage lenders for use against borrowers who are in default, foreclosure or bankruptcy.

“Foreclosure became a rubber-stamping operation that robbed many homeowners of the American Dream without a fair and accurate process,” Madigan said. “I will not relent in my investigation into the fraudulent practices by lenders and others that caused and exacerbated the mortgage crisis and the resulting massive foreclosure crisis.”

Major players

Madigan said Lender Processing Services (LPS) provides loan servicing support for more than 50 percent of all U.S. mortgages. More than 80 financial institutions use LPS to service more than 30 million loans. These loans have an outstanding principal balance exceeding $4.5 trillion.

Nationwide Title Clearing (NTC) provides a range of mortgage loan services to eight of the top 10 lenders and mortgage servicers in the country. NTC specializes in creating, processing and recording mortgage assignments, which are often needed for a lender to foreclose on a borrower.

Madigan said she is looking into reported allegations that LPS and NTC engaged in the practice of “robosigning” legal documents filed with the court to foreclose on borrowers. Robosigning occurs when an individual has no knowledge of the information contained in the document and often doesn’t even read or understand the document that he or she is signing.

The use of robosigned documents was pervasive as lenders foreclosed on borrowers’ homes. The probe will also include a complete review of the accuracy of the systems and services that LPS and NTC provide to the large lenders including servicing platforms, foreclosure attorney interaction with these platforms and the assignment of mortgage process.

Looking for whistle-blowers

Madigan also took the unusual step of publicly appealing to former employees of LPS, NTC, or former employees of any residential mortgage servicer or bank who have knowledge of any unlawful practices relating to mortgage servicing or the execution of documents, to contact her office.

The robo-signing scandal first came to light last year when a Florida attorney, deposing a GMAC Mortgage official, learned that the official, who was required to read and affix a notarized signature to thousands of foreclosure documents, employed a robo-signer.

It was later determined that several large mortgage servicers, to cope with the crush of foreclosure documents, did the same thing.


The Military Prevails!

Our friends at Bank of America and Morgan Stanley are at it again! They decided to foreclose on 178 military members while the military members were on active duty. It’s not only morally wrong but it’s also against the law! “The Service members’ Civil Relief Act offers protections to military personnel to prevent foreclosures. It bans evictions or creditors trying to repossess their property while on active duty.”

While the lenders ponied up a few sheckles there is no way that they can pay back the family members for the pain and anguish that was caused. These clowns need to get their act together!

Banks to Pay $22 Mil for Military Foreclosure Errors

May 28, 2011 11:03 AM EDT

Bank of America and Morgan Stanley have agreed to pay more than $22 million combined to settle federal civil charges on improperly foreclosing on military personnel, The Associated Press reports.

Between 2006 and 2009, the mortgage lenders foreclosed on 178 military members in 22 states without getting court approval. The military members affected will each receive $125,562, on average. The banks will also continue to investigate whether improper foreclosures occurred in 2009 through 2010.

The settlement is "easily the largest amount recovered" in a case of improper military foreclosures, ThomasE. Perez, an assistant attorney general, told The Associated Press.

The Servicemembers’ Civil Relief Act offers protections to military personnel to prevent foreclosures. It bans evictions or creditors trying to repossess their property while on active duty.

JPMorgan Chase earlier this year admitted to overcharging about 4,000 military personnel on mortgages and wrongly foreclosing on 14. It paid $2 million in settlement charges originally and last month paid more than $60 million to settle a class-action lawsuit regarding the overcharges.


Dual Track Foreclosures

Alejandro Lazo from the Los Angeles Times report on a common practice called dual track foreclosures. To quote the article, “Financial institutions commonly pursue foreclosure even if a borrower has requested a loan modification, a two-track process the lending industry has argued is necessary to protect its investments. But dual tracking is under fire from regulators and lawmakers in the wake of last year's "robo-signing" scandal, which revealed widespread foreclosure errors.”

What's interesting is that the proposed law has been in front of state legislators several times before. In my opinion, the reason this bill is not passing (and probably won’t pass) is because of the bank lobby. Bankers enjoy wasting money but they don’t like wasting time. They know that getting a loan mod approved is a small miracle so they don’t want to stall the foreclosure process. Sounds kind of silly but it’s true.

SO my question is, if you can run a foreclosure and a loan mod in parallel, why won’t the banks allow a loan mod and a short sale to run simultaneously? They say that the seller must choose 1 path or the other but not both. Why?

Take the time to read the entire article. It’s quite interesting.

California bill ending 'dual track' foreclosures faces key vote

Pursuing foreclosure even if a borrower has sought a loan modification has faced criticism. The Senate measure would require a lender to fully evaluate a homeowner for a loan modification first.

By Alejandro Lazo, Los Angeles Times

A proposed law facing a key vote in Sacramento on Wednesday would require lenders in California to make a decision on mortgage modifications for delinquent homeowners before beginning the repossession process, in effect ending "dual track" foreclosures in the state.

Financial institutions commonly pursue foreclosure even if a borrower has requested a loan modification, a two-track process the lending industry has argued is necessary to protect its investments. But dual tracking is under fire from regulators and lawmakers in the wake of last year's "robo-signing" scandal, which revealed widespread foreclosure errors.

The California Homeowner Protection Act, authored by state Senate President Pro Tem Darrell Steinberg (D-Sacramento) and Sen. Mark Leno (D-San Francisco), is one of the furthest-reaching efforts to limit the practice. Several other states have passed requirements for third-party groups to oversee mediations between mortgage servicers and homeowners.

The California bill, SB 729, would require a lender to fully evaluate a borrower for a loan modification before filing a notice of default, the first stage in the formal repossession process, and a significant change in the way foreclosures are conducted in the Golden State.

The law would give delinquent homeowners the right to sue their lenders to stop foreclosures if they believe the requirement to properly evaluate their loan modification requests had not been followed. If the sale occurs without the proper evaluation, homeowners would also be given the right to sue for damages or to void a foreclosure sale for up to a year after the sale.

Such a change is necessary in the state because the two-track process often leads to unintended foreclosures by mortgage servicers that "don't know what they are doing" and often bungle the loan modification process, Leno said in an interview.

"We know of folks not only entering the loan modification process, but folks who have already been accepted, and are making timely loan modification payments, and then getting a knock on their door and being told 'your home will be sold,'" Leno said. "The stories are many and horrifying."

Groups representing lenders said the legislation overreaches and would only inhibit the state housing market's recovery by slowing down an already drawn out foreclosure timeline. California's comparatively streamlined foreclosure system, which allows for a home to be taken back without a court order, has helped the state work through a foreclosure glut relatively quickly and recover faster than other hard-hit states.

"It is just not good for the housing market, which is not good for the state economy, especially when we are at 12% unemployment," said Dustin Hobbs, a spokesman for the California Mortgage Bankers Assn. "It is a reaction, an overreaction, to procedural mistakes," he continued, "and this doesn't really get at solving any of those problems."

The bill also would make it more difficult for investors to purchase, renovate and resell bank-owned properties to first-time buyers because it gives foreclosed-on homeowners a year to sue after a foreclosure sale, critics said. Home buying by investors has been a significant driver of California home sales since the housing market hit bottom two years ago.

"It's unlikely that any prospective home buyer would want to buy these properties with that lingering uncertainty hanging over their heads," said Beth Mills, a spokeswoman for the California Bankers Assn. The bill also would require mortgage servicers to:

•Prove they have a right to foreclose;

• Adhere to new timelines when evaluating borrowers for possible loan modifications;

•Provide an explanation letter detailing why a mortgage modification was not granted if a borrower is denied;

•Make a declaration of compliance with the law each time a notice of default is filed.

The bill also would allow a state banking regulator or the state attorney general to take action against lenders if the law isn't followed.

Major mortgage servicers are under increased scrutiny since it was revealed last year that they employed so-called robo-signers. These bank employees signed off on legal documents needed in foreclosure cases without reading them or, in several cases, understanding what they were signing.

There were widespread complaints of botched loan modifications that left delinquent borrowers worse off, and foreclosures made without documentation of who owned loans that had been sold and resold in the secondary market where mortgage securities are created and traded. Mortgage servicing operations were shown to be understaffed and employees were poorly trained.

In response, federal regulators this month ordered the nation's biggest banks to overhaul their procedures and compensate borrowers hurt financially by wrongdoing or negligence. The agreement between the regulators and banks requires mortgage servicers to stop foreclosure once a homeowner is approved for a temporary mortgage modification.

But consumer advocates criticized those orders as watered down and not going far enough. A wider-ranging investigation conducted by a coalition of state attorneys general and other federal agencies is continuing.

Consumer advocates and lawmakers are hoping that the California bill will have momentum following revelations of the foreclosure paperwork debacle. The proposed law is similar to a bill that passed the state Senate last year but was defeated in the Assembly.

The bill faces a hearing and vote in the state Senate's Banking and Financial Institutions Committee on Wednesday. The committee is headed by Sen. Juan Vargas (D-San Diego), who isn't completely sold on the legislation, said his chief of staff, Jim Anderson.

"My understanding is that Sen. Vargas has some concerns with the bill, but prefers to ask questions of the author and discuss the bill in the public hearing tomorrow before making his final decision," Anderson said. Vargas wasn't available for comment Tuesday.

The bill has been endorsed by a slew of consumer advocacy groups including the Center for Responsible Lending. Many of these groups have slammed federal banking regulators, saying they failed to stop unsafe lending during the housing boom and preempted state attempts to rein in predatory lending.


Who Says Politicians Can’t Be Bought!

Massimo Calabresi from Time reports on how Iowa’s Attorney General Tom Miller recently accepted $15,000 in campaign contributions from (2) individuals who have vested interest in the government and the attorney generals NOT coming down on lenders for their bad deeds. You might ask who Miller is. Miller, “.... took the lead on the investigation by all 50 state attorneys general into the “robo-signing” foreclosure scandal, where several big banks allegedly approved taking away people’s homes without adequately verifying the facts in court, as required by law in some states.”

Instead of recognizing the conflict of interest, Miller made excuses justifying the contributions. Why wouldn’t he simply return the money?

Bank of America Lawyer, Consultant Gave Foreclosure Probe Chief $15,000

By MASSIMO CALABRESI

Iowa’s Democratic Attorney General Tom Miller is known for taking on big business. Elected to eight four-year terms, he led a multi-state anti-trust case against Microsoft in 2001 and filed a suit against 79 drug companies in 2007, alleging they illegally profited by inflating prices for drugs purchased through Medicaid.

Most recently, Miller took the lead on the investigation by all 50 state attorneys general into the “robo-signing” foreclosure scandal, where several big banks allegedly approved taking away people’s homes without adequately verifying the facts in court, as required by law in some states.

Last fall, just after he made the announcement that he would look into the foreclosure mess, contributions to Miller’s campaign coffers for November’s election soared, thanks in large part to out-of-state lawyers who make a living representing big banks, a new report from the National Institute for Money in State Politics finds. “Nearly half of the money Miller raised in 2010,” NIMSP reports, “was donated after the October 13 announcement that he would be coordinating the 50-state attorneys general investigation.”

Two Miller contributors have become directly involved in defending the banks in the probe. One, Meyer Koplow of Wachtell Lipton in New York, gave Miller $5,000 and is representing Bank of America in direct negotiations with Miller, the attorney general tells TIME. Another, Elizabeth McCaul of Promontory Financial Group, gave Miller $10,000 and is consulting Bank of America in the negotiations, Miller says. Bank of America was one of the first and most prominent institutions accused in the foreclosure investigation. It gave more than $80,000 to the Democratic Attorney Generals Association, which spent more than $200,000 on Miller’s campaign, Miller says.

Miller says Kaplow and McCaul are old friends and professional associates, and that they were not working for Bank of America before election day. He says neither has discussed the campaign contributions with him since they began work for the bank.

The NIMSP report and revelations of campaign contributions by those working for Bank of America come at a sensitive moment, as Miller is in the thick of far-reaching negotiations with the banks. Though the case started as an investigation into robo-signing, it has broadened. The talks are aimed at a settlement that could set the terms by which banks service current and future home loans, and determine how they foreclose on properties. That could complement, or supercede, a settlement between banks and federal regulators reached earlier this year.

Talks over monetary aspects of a potential settlement between the AGs and the banks are just getting under way. New rules for banks writing down mortgage principal and the establishment of a bank-paid fund to help with loan modification are on the table. Some reports have potential bank payments reaching $20 billion but sources on both sides suggest that number is high. The breadth of the negotiations has caused seven Republican attorneys general to split with the 43 other AGs.

In early March, American Banker published a 27-page term sheet that Miller and the other attorneys general had presented to the banks in the talks. “We’ve had negotiations and have agreement on some of the terms but no overall agreement,” Miller says.

Miller objects strongly to the NIMSP report. “It is extremely false and misleading,” Miller says. He disputes the report’s assertion that many of his campaign contributors have a “vested interest in the final terms of the settlement.” Other than Koplow and McCaul, none of the other lawyers named as campaign contributors in the report are involved in the case and none has an interest in the settlement, Miller says.

Miller also says the report commits “an omission of material fact” in its description of his fundraising by comparing 2010 fundraising to prior races. “This race was unlike any race I’d been in before,” Miller says. “It was a race where the other side had $2.2 million. The most any of us ever spent in this race before was $300,000 or $350,000,” he says. Miller says he didn’t have a competitor in 2006 and that in 2010 he and his supporters eventually raised and spent around $1 million.

Kevin McNellis, the author of the report, says the fact that he compared 2010 to 2006 without mentioning that there was no competitor in that race was “an oversight on my part.” Though the report argues that the campaign contributors’ interest in the outcome of the settlement of the foreclosure investigation is “vested,” which means “guaranteed” or “unconditional,” McNellis says he does not know which individuals or firms are directly involved in negotiations.

But McNellis asserts that, “When they were contributing last fall, I’m sure that it was something they were very keenly aware of, that Miller was leading the investigation.” They would have an interest in the outcome, McNellis says, “even if they weren’t directly involved in the negotiations.”

Neither McCaul nor Koplow would comment for this story.


Yet Another Scam!

Cynthia Roldan from the Palm Beach Post reports on a growing scam that is becoming more and more prevalent throughout the country. People are renting out abandoned homes as if they owned the home.....the only problem is that they don’t own the home!

The message here is pretty clear. If you or one of your clients is renting (or about to rent) a home, make sure that the person that is renting it to you/them is the rightful owner of the property. I would suggest that you take the extra step of determining whether the house is in pre foreclosure. If it is, the owner is probably not paying the mortgage. The last thing that you or your clients need is to get an eviction notice on the door because the property that they have been renting has been foreclosed upon.

Palm Springs man charged with bilking renters with foreclosed home

FDLE allows you to search by county, city, ZIP code and/or pattern for a last name.

By CYNTHIA ROLDAN

A 47-year-old Air Force veteran faced a judge this morning, after being arrested for allegedly stealing utilities and for "acting as the proprietor" of a foreclosed home in the Village of Palm Springs.

Glenn Garlington Dewey, whose last known address was in Palm Springs, was taken into custody after a Palm Springs Public Safety investigator determined Dewey had been collecting $600 in rent from at least five people, who were living in the spare rooms of 2903 Appalachee Road, according to the arrest report.

That house, however, was determined to have been foreclosed on in 2010. The investigator also discovered that the last owner of the house, who now lives in Texas, was Cobb Scott - not Dewey, the report stated.

The investigator noted in the report that Dewey had also replaced the house's water and electrical meters with that of a neighboring home in foreclosure.

During his first appearance hearing this morning, Palm Beach County Circuit Judge Krista Marx ordered Dewey be held in lieu of $5,000 bond.

Marx scheduled a Veteran's Court hearing for Dewey for Thursday.


Wrongful Foreclosures

A recent OpEd from the New York Times commented on a recent draft agreement between regulators and banks. The interesting part of what they uncovered is that there was much to do regarding paperwork, processing, manpower and processes but very little to do with wrongful foreclosures.

A quote from the article says it all, “Because so few files were examined, the regulators’ report says, “the reviews could not provide a reliable estimate of the number of foreclosures that should not have proceeded.” So much for the burning question of the extent of wrongful foreclosures. The reviews also did not look at potential abuses outside the foreclosure process, including unreasonable loan fees and misapplied loan payments. Such faulty charges can precipitate default by making it impossible for borrowers to catch up on late payments.

Nor did the reviews focus on faulty loan-modification processes, like instances in which bank employees wrongly told borrowers they needed to be delinquent to qualify for new loan terms.”

Looks like the banks hired guns are paying off! It reminds me of the OJ Simpson case. Even though Simpson was guilty (and still is), a slew of highly paid attorneys got him off because they were competing with less than competent government employees.

Wrongful Foreclosures

We were worried recently when we saw an advance draft of legal agreements between federal regulators and the nation’s big banks to address and correct foreclosure abuses. The actual deals were as bad as we feared.

Related

It turns out that the inquiry that preceded the agreements was limited to reviews of “foreclosure-processing functions” — things like paperwork handling and work-force supervision. The reviews found big processing problems — no surprise there — and the agreements call for more staff and better management.

What was not looked for is far more significant. Because so few files were examined, the regulators’ report says, “the reviews could not provide a reliable estimate of the number of foreclosures that should not have proceeded.” So much for the burning question of the extent of wrongful foreclosures. The reviews also did not look at potential abuses outside the foreclosure process, including unreasonable loan fees and misapplied loan payments. Such faulty charges can precipitate default by making it impossible for borrowers to catch up on late payments.

Nor did the reviews focus on faulty loan-modification processes, like instances in which bank employees wrongly told borrowers they needed to be delinquent to qualify for new loan terms. Delinquency subjects borrowers to late fees, damaged credit and an increased risk of falling hopelessly behind. It also harms mortgage investors who are stuck with the loan losses. But it can be profitable for banks that service loans; they can extract late fees from the borrower or upon the foreclosed home’s sale.

To add insult to injury, the agreements leave it largely up to the banks to investigate themselves on those issues. They require banks to choose, hire and pay independent consultants to check a sample of pending foreclosures; banks are then supposed to reimburse wronged borrowers. The regulators pledge to ensure that the reviews are comprehensive and reliable. We’re not holding our breath.

The agreements do not include monetary penalties, though regulators say fines are coming. Regulators appear divided over whether the agreements should preclude efforts by the states to correct and punish foreclosure abuses. The Federal Reserve and the Federal Deposit Insurance Corporation have stated clearly that the agreements do not stop other enforcement actions. The Office of the Comptroller of the Currency has not ruled out such interference. Over all, an important opportunity has been missed for real reform, redress and accountability.


THE REGULATORS ACT!

Victoria McGrane, Alan Zibel and Robin Sidel report on on US regulators passed down foreclosure penalties for improper foreclosure processes. The current rulings deal with process change and not penalties. It is said that “civil money penalties” are on the way. Sounds like the check is in the mail!

It’s noted that this has no effect on what the attorney generals are trying to accomplish with penalizing the major banks. To amplify this, note the following from the article, “Mark Zandi, chief economist at Moody's Analytics, said the agreement appears to require only "modest changes" to banks' foreclosure process and is unlikely to have a big impact on the housing market or broader economy. Still, Mr. Zandi added, "the foreclosure process will remain bogged down and a true bottom in the housing market elusive" until the banks reach a complete settlement with the state attorneys general.”

The crux of the ruling is, “.......banks have 60 days to establish plans to clean up their mortgage-servicing processes to prevent documentation errors.

The orders also direct banks to take steps to ensure they have enough staff to handle the flood of foreclosures, that foreclosures don't happen when a borrower is receiving a loan modification and that borrowers have a single point of contact throughout the loan-modification and foreclosure process.

Banks must hire an independent consultant to conduct a "look back" of all foreclosure proceedings from 2009 and 2010 to evaluate whether they improperly foreclosed on any homeowners and require each company to establish its own process to consider whether to compensate borrowers who have been harmed.”

Big Banks Get Foreclosure Orders

Regulators Detail Steps Lenders Must Take to Revamp Processes; Fines Are Still to Come

By VICTORIA MCGRANE, ALAN ZIBEL and ROBIN SIDEL

U.S. regulators hit the nation's largest banks with a first round of sweeping penalties for improper home-foreclosure practices, issuing detailed orders to revamp the way they deal with troubled borrowers.

The orders issued on Wednesday to 14 financial institutions didn't include fines. Officials said they are coming.

"There will be civil money penalties; the question is timing and amount. But we're not letting that clock run forever," Acting Comptroller of the Currency John Walsh told reporters. The orders were issued by his office, the Federal Reserve and the Office of Thrift Supervision.

The bank regulators' action came as Obama administration officials and representatives of state attorneys general met with the bank representatives in an ongoing effort to reach a broader deal over alleged mortgage-servicing abuses, which brought foreclosures to a near halt last fall. All sides want a settlement that can resolve the issue so foreclosures can proceed again, which could help the sickly housing market.

Some attorneys general and administration officials have pushed for banks to pay more than $20 billion in civil fines or to devote a comparable amount to modifying mortgages held by distressed borrowers.

Several officials said the regulators' action wouldn't undermine the broader settlement talks. "This doesn't change what we are doing," said Iowa Attorney General Tom Miller in an interview. Mr. Miller, who is spearheading the 50-state investigation, said, "We are moving ahead full speed."

Outside observers said the orders could make it harder for state attorneys general to extract greater concessions from the banks.

"The biggest stick in this fight just settled, so there's going to be a lot less pressure on the banks to agree to a radical resolution to resolve the state complaints," said Jaret Seiberg, an analyst in Washington with MF Global.

Mark Zandi, chief economist at Moody's Analytics, said the agreement appears to require only "modest changes" to banks' foreclosure process and is unlikely to have a big impact on the housing market or broader economy. Still, Mr. Zandi added, "the foreclosure process will remain bogged down and a true bottom in the housing market elusive" until the banks reach a complete settlement with the state attorneys general.

Bank executives said the changes ordered would be anything but modest. "It's very demanding and there is a lot that we have to do," said one bank official. "It will be fairly expensive and a big resource drain."

The regulators issued the orders to the nation's four largest banks—Bank of America Corp., Wells Fargo & Co., J.P. Morgan Chase & Co. and Citigroup Inc. Also receiving orders were Ally Financial Inc., HSBC Holdings PLC, MetLife Inc., PNC Financial Services Group Inc., SunTrust Banks Inc., U.S. Bancorp, Aurora Bank, EverBank, OneWest Bank and Sovereign Bank.

Bank of America, Wells Fargo, J.P. Morgan and Citigroup were ordered to revamp mortgage-lending practices.

Under the orders, banks have 60 days to establish plans to clean up their mortgage-servicing processes to prevent documentation errors.

The orders also direct banks to take steps to ensure they have enough staff to handle the flood of foreclosures, that foreclosures don't happen when a borrower is receiving a loan modification and that borrowers have a single point of contact throughout the loan-modification and foreclosure process.

Banks must hire an independent consultant to conduct a "look back" of all foreclosure proceedings from 2009 and 2010 to evaluate whether they improperly foreclosed on any homeowners and require each company to establish its own process to consider whether to compensate borrowers who have been harmed.

Critics, including other regulators, believe this process and other aspects of the orders leave too much discretion to banks.

J.P. Morgan, in a statement, acknowledged that the consent orders "are targeted directly at weaknesses in our processes and controls." The New York bank took a charge of $1.1 billion in the first quarter to reflect higher mortgage-servicing costs that resulted from a string of new regulations enacted after the financial crisis.

Other banks said many of the required changes already are under way. "This is an unprecedented measure and a tough message to take, but it will make mortgage servicing practices better across the board," Wells Fargo said. The San Francisco bank said it already has taken numerous actions to address the issues, including hiring 10,000 employees since 2009 to deal with foreclosure issues.

PNC Financial Services sought to distance itself from the industry's mess, saying that it represents just 1.5% of the mortgage-servicing business. A spokesman for the Pittsburgh bank said that its internal review had determined that the bank didn't foreclose on customers without a "valid reason or appropriate documents."

Even before the orders became public, critics charged that the bank regulators were letting servicers off too easy and were undercutting the broader talks.

The OCC, which has been the target of most criticism, defended the enforcement orders. "They require substantial corrective actions," Mr. Walsh said. "The banks are going to have to do substantial work, bear substantial expense to fix the problems that we identified" as well as to identify and compensate homeowners that suffered financial harm.

The Federal Deposit Insurance Corp. in a statement called the orders "only a first step" and declared its full support for the broader talks. "The enforcement orders announced [Wednesday] complement, rather than pre-empt or impede, this ongoing collaboration," it said.


Why Can't They Just Get Along?!

Maxwell Strachan from the Huffington Post brings us an article that epitomizes politics. The (50) Attorney Generals from around our nation have been trying to reach a consensus with our government as to how to “overhaul the foreclosure process and penalize servicers” that have contributed to this mess. There is some indication that this rift could lead to each state implementing their own penalties.

The government is apparently allowing too much discretion to the serving companies. The article points out that, “America's five largest mortgage firms have saved over $20 billion since the start of the housing crisis by shortcutting the home loan process of struggling borrowers.” This lack of cooperation will continue to lead us down the path of destruction that we have been experiencing for years.

State Officials, Federal Regulators Could Issue Separate Orders For Foreclosure Reform

The Huffington Post Maxwell Strachan First Posted: 04/12/11 12:41 PM ET Updated: 04/12/11 12:50 PM ET

The rift continues to widen between state and federal officials over foreclosure reform.

Since the 50 state attorneys general first issued their proposal to aggressively overhaul the foreclosure process and penalize servicers, the two sides have clashed over the specifics, with states reportedly advocating for stricter measures than federal regulators.

Disagreements have now become pronounced enough to leave open the prospect that the states could eventually issue their own orders for reform, independent of the Comptroller of the Currency and Federal Reserve -- two government agencies charged with reforming the foreclosure process, according to the Wall Street Journal.

In a letter sent on Monday to the Federal Reserve, the WSJ reports, 22 current and former board members of the Fed's Consumer Advisory Council said federal regulators' potential proposal appears to be "profoundly disappointing," leaving "too much discretion" to mortgage companies without imposing strict enough penalties for foreclosure abuses.

America's five largest mortgage firms have saved over $20 billion since the start of the housing crisis by shortcutting the home loan process of struggling borrowers, HuffPost's Shahien Nasiripour reported earlier this month.

In a report last month that drew the ire of housing and consumer advocates, the Fed found no evidence of wrongful foreclosures.

Still, other regulators have advocated hitting the 14 largest mortgage firms with upwards of $30 billion in penalties for past abusive practices.

Amid the debate, a new paper entitled "The Economics of the Proposed Mortgage Servicer Settlement," funded in part by the financial services industry, disputes the notion that the state attorneys generals' proposal will protect homeowners, arguing that it would instead "generate significant unintended negative consequences" by raising "the number of defaults and servicing costs."

Reuters blogger Felix Salmon doesn't agree, calling the paper "ridiculous" and emphasizing the conflict of interest. "Even bankers," Salmon notes, "aren’t making these arguments with a straight face any more."

The federal debate over the foreclosure process has heated up in recent weeks, with the Obama administration backtracking on an earlier, more dramatic proposition more in line with that of the states attorneys general. The president's earlier proposal would have required mortgage lenders to reduce monthly payments for millions of U.S. homeowners.


Be Boundary less!

When I worked for a Fortune 5 corporation we were always encouraged to be boundary less. What that meant was to be aware of the other business units that the corporation owned and promote their services. We were financially rewarded if we could introduce and help close an opportunity that involved a business outside of our own. This made sense and was a very effective strategy to differentiate us from our competitors (that is until our competitors caught on and started doing the same thing!)

So, when I first started reading an article about Bank of America that involved similar behavior it brought up memories from a previous career. But, when I dug a bit deeper, I saw where the stories deviated tremendously!

Kate Berry from American Banker brings us an article about how Bank of America “suggests” that those realtors, that are having difficulties with getting their short sales processed, contact a local retail BOA branch for a little help! Many people label this as steering which is illegal.

To borrow several quotes from the article, “Homebuyers have been scarce this spring selling season, and banks are looking for every opportunity to get their retail staff to close loans. So it's only logical that Bank of America, the second-largest originator, would want to finance the buyers in distressed sales — and develop relationships with the agents who broker them. According to the National Association of Realtors, distressed transactions made up 40% of all sales of existing homes in March. Short sales alone accounted for 13%.

But Bank of America is also the largest servicer of home loans, with the power to approve or reject many short sales. So some real estate agents, as well as competitors of B of A, are interpreting pitches like the one Seelenbinder has been making as a subtle way of telling agents to send lending business to B of A if they want to get a short sale done for an existing, distressed B of A borrower.

"It's a clandestine steering to say, 'Go to our loan officer, and your deal will get done faster,' " said Charlie Christensen, a branch manager and senior loan officer at Equitable Mortgage Group in San Rafael, Calif. "The loan officer just has the inside track at B of A, and they're not going to offer that to an outside lender. It flies in the face of the spirit of the deal."

I had lunch with a broker last week and brought this article up. He laughed! He said, just 2 weeks earlier, he attended a “work shop” help by a BOA executive. The workshop emphasized the fact that ALL buyers for properties that were owned by BOA, HAD to get approved by a BOA loan officer before moving forward!!!

I thought another passage from the article was quite interesting, “Still, George Kenner, a broker at Keller Williams Realty in San Diego who has 14 short sales pending with B of A, said he was incensed by the suggestion that agents like him go to a retail loan officer to get their short sales resolved. Kenner claims to have made hundreds of calls to B of A, written dozens of letters to the bank's executives and industry officials, and received no responses to his inquiries.

He too interpreted Seelenbinder's pitch as "steering" real estate agents to B of A's own retail branches to get new business while failing to offer a single point of contact for borrowers or agents to resolve short sales.”

Could this behavior contribute to our poor state of the economy? Read the article and judge for yourself!

AMERICAN BANKER ARTICLE:

By Kate Berry

The event was billed as an opportunity for San Diego real estate agents to get some pointers on hard-to-close short sales.

"Learn How to Escalate Your Short Sales from a local branch, Get Your REO Pre-Approval Letters Faster, and much more," read a flier for the April 14 luncheon sponsored by the local chapter of the National Association of Hispanic Real Estate Professionals.

By "local branch," the trade group's flier meant a local branch of Bank of America Corp. And the featured speaker was Alan Seelenbinder, B of A's vice president of portfolio retention, real estate owned and short sales.

Seelenbinder told the 200 agents in attendance that one of the most common complaints he hears from brokers handling short sales is, " 'I lose buyers because it takes so long.' " Pointing to a table of B of A loan officers, he said, "If you keep the people involved and you have your buyer working with a loan officer that understands the process, the buyers will stay interested."

Homebuyers have been scarce this spring selling season, and banks are looking for every opportunity to get their retail staff to close loans. So it's only logical that Bank of America, the second-largest originator, would want to finance the buyers in distressed sales — and develop relationships with the agents who broker them. According to the National Association of Realtors, distressed transactions made up 40% of all sales of existing homes in March. Short sales alone accounted for 13%.

But Bank of America is also the largest servicer of home loans, with the power to approve or reject many short sales. So some real estate agents, as well as competitors of B of A, are interpreting pitches like the one Seelenbinder has been making as a subtle way of telling agents to send lending business to B of A if they want to get a short sale done for an existing, distressed B of A borrower.

"It's a clandestine steering to say, 'Go to our loan officer, and your deal will get done faster,' " said Charlie Christensen, a branch manager and senior loan officer at Equitable Mortgage Group in San Rafael, Calif. "The loan officer just has the inside track at B of A, and they're not going to offer that to an outside lender. It flies in the face of the spirit of the deal."

Explicit steering would potentially violate the Real Estate Settlement Procedures Act, which forbids promising anything of value in exchange for referring business.

B of A said there is no correlation between a short sale being approved (which is done at a central office) and the buyer obtaining financing from a Bank of America loan officer. The company says it is simply suggesting retail branches as a place that short-sale brokers can turn to if they hit a wall dealing with the short-sale department. The retail loan officers would help them talk to the right people in the central office.

Matt Vernon, B of A's head of short sales, said the company is "utilizing our mass distribution of loan officers across the country to educate realtors" about the short-sale process. "If they have a good experience, we expect them to have the opportunity to give us business in the future. We would certainly like that opportunity as we would in any mortgage transaction."

When asked if retail loan officers can clinch a short sale, Vernon said, "They can do absolutely nothing." Typically, the loan officer would "escalate it to their management and over to the short-sale business," he said. "We would have no interaction with the specialist in short sales on the loan officer side."

Sergio Moreira, president of the San Diego chapter of the NAHREP, seconded that view.

"This is just good customer service," Moreira said. "What they said is, if you have a relationship with a B of A loan officer, go to them and they might help you on that short sale. The word 'expedite' means to help. It doesn't say they're going to solve the short sale at the branch, and I don't see how B of A is trying to keep the business."

Michael Byrd, the owner of SLO Homestore in Grover Beach, Calif., which represents buyers in short sales, said he has advised some clients to go to bank retail branches "just to get help cutting through the bureaucracy."

"There's a lot of frustration on the agent side because there's not a lot we can do to try to expedite things with the short sale," Byrd said.

The situation would indeed create an opportunity for the loan officer to make a sales pitch for the new loan, he said. But seizing that opportunity is not inherently objectionable, unless getting the short sale closed is a condition of that bank's getting the loan.

"Business logic says that if there's a loan to be had, try to get it," Byrd said. "It's just a question of whether you cross Respa."

Banks have long required when selling repossessed properties that a buyer get prequalified with the original lender even if they make it clear that the person does not have to use that bank to get the loan, Byrd said. "In the back of their minds, they're thinking, 'By the time the consumer has gone to all this trouble, they'll just stick with us.' "

If a broker having a hard time getting a short sale done goes to a branch for help, "technically the loan officer can't do anything on a short sale other than go to the bank directory and try to get the agent a better contact."

Still, George Kenner, a broker at Keller Williams Realty in San Diego who has 14 short sales pending with B of A, said he was incensed by the suggestion that agents like him go to a retail loan officer to get their short sales resolved. Kenner claims to have made hundreds of calls to B of A, written dozens of letters to the bank's executives and industry officials, and received no responses to his inquiries.

He too interpreted Seelenbinder's pitch as "steering" real estate agents to B of A's own retail branches to get new business while failing to offer a single point of contact for borrowers or agents to resolve short sales.

"They're doing everything they can to capture the new loan but nothing to help with the actual short sale," said Kenner, who posted a video of Seelenbinder's presentation on his blog. "It's a silent quid pro quo where there's no explicit demand for the borrower to get a loan through B of A, but it's very clear how beneficial a good relationship with B of A is."

Vernon said that real estate agents have told B of A that they want mortgage loan officers to know the basics of default, loss mitigation and alternatives to foreclosure.

"That's part of our strategy to differentiate ourselves with the real estate community," Vernon said. "If it gets to a [short-sale] transaction with specificity, that's when we have to pull in the experts to talk with the realtor."


Classic Government

JEFF CLABAUGH FROM THE WASHINGTON BUSINESS JOURNAL BRINGS US A TIDBIT THAT EXPLAINS WHY WE ARE WHERE WE ARE! In a recent posting, I shared the fact that when a property is sold as a bank owned property; they are sold at an average discount of 36% below retail. When a short sale is purchased, they are sold at an average discount of 15% below retail. Well, the government has decided to bring back a much lauded program...with a twist.

DO you remember when 1st time home buyers were given an incentive to purchase a house last year? Based on everything that I heard, the program was a resounding success (shocker that our government actually introduced a successful program that helped the recovery!) Well....instead of bringing this program back, the government is encouraging buyers to wait until a house is foreclosed on before buying! You see, when someone buys a house that is owned by Fannie Mae, the government will give the purchaser a 3.5% (of the final selling price) credit to pay for closing costs!

I don’t know about you but simple math tells me this: If a house is worth $100,000, I can buy it for $85,000 as a short sale and pay for closing costs. However, if I can wait a little longer I can buy a similar house for $64,000 AND get a $2240 credit for closing costs! This is so stupid that it belongs on SNL!

Fannie Mae offers buyer incentives

Washington Business Journal - by Jeff Clabaugh

Fannie Mae is reviving buyer incentives first offered last year as it tries to unload all the foreclosed houses it is sitting on.

If you buy a house Fannie Mae is holding as a result of a foreclosure, Fannie Mae will give you up to 3.5 percent of the final selling price to be applied toward closing costs. The sale must closed by June 30.

Fannie Mae already offers lower rate mortgages and renovation financing to buyers who buy one of its foreclosed homes.

Last year, Fannie Mae (OTC BB: FNMA) gave real estate agents and brokers $1,500 bonuses for bringing buyers to the table.

Read more: Fannie Mae offers buyer incentives | Washington Business Journal


What Would Happen If Everyone Did This?!

Laura Bassett from the Huffington Post brings us a very thought provoking article. According to Ms Bassett the Village of Hempstead New York pulled all of their money out of JP Morgan Chase as a sign of protest. The village was protesting the banks poor record of implementing mortgage modifications. The Village is trying to start a precedent. Laura reports that they are the 1st community in the country to withdraw money from a bank in protest of the banks poor modification record.

What would happen if individuals and communities alike followed suit? I’ll bet that the banks would take notice. I’ll bet that the banks that receive the deposits will continue to work to improve their loan modification track record.

What do you think?

Largest Village In New York Closes Chase Account To Protest Foreclosures

The Village of Hempstead, a relatively low-income, minority-heavy municipality on Long Island, pulled its money out of JP Morgan Chase bank on Tuesday as part of a statewide campaign protesting the bank's dismal mortgage modification record.

"It's important that Chase and all the big corporate banks start to heed the minority communities," Hempstead Mayor Wayne Hall said in an interview. "There's a lot of power in the minority communities. If we all stick together and start withdrawing our money out of these big banks and start putting it into more favorable banks, Chase will review its procedures for modifications."

Nearly one in every four U.S. homeowners with mortgages -- or 10.8 million people -- currently owe more on their home than it's worth. In Hempstead, almost 4 percent of homes are in the foreclosure process, according to Dealbook, a rate four times Nassau County average. While data on Chase loans in Hempstead are hard to come by, in nearby New York City, only six percent of the 1,027 borrowers with Chase mortgages who asked for help in the past year were granted a permanent modification, according to a report released recently by the Center for New York City Neighborhoods. Moreover, a full 80 percent of these homeowners have not even received an offer for a loan modification.

Chase's national modification record is not much better. Of 233,653 trial modifications started by Chase under the Obama administration's Home Affordable Modification Program (HAMP) launched in 2009, the bank now has just 71,657 active permanent modifications, according to the latest data from the Treasury Department.

One Hempstead homeowner, Maribel Toure, said she has been trying and failing to modify her mortgage loan with Chase bank for two and a half years.

"It has been an unhealthy experience, with bad communication and no response," she told NY Communities for Change, a coalition of working families in low- and moderate-income communities. "I have to work 16-hour shifts in the hospital to make extra money, and I've asked for a modification three times, but have gotten no straight answer -- I'm stuck in limbo."

A Chase spokesperson said the bank has "served the financial needs of the Village of Hempstead well" for more than 30 years.

"In New York, Chase has offered 50,000 modifications to struggling borrowers and has prevented seven foreclosures for every one foreclosure here," he said. "This past weekend, we met face-to-face with 2,200 borrowers in Brooklyn to help them stay in their homes."

The Village of Hempstead is the first municipality in the country to close a bank account due to foreclosure policies. But a spokesperson for NY Communities for Change said many local governments throughout the state are planning to close their Chase accounts in the coming months. New York City Councilman Jumaane Williams marched into a Park Avenue Chase bank in February to close his account, and major unions have also announced their intention to pull their pension-fund money out of JP Morgan Chase.

"Banks like Chase should be ashamed of themselves," Hempstead Deputy Mayor Henry Conyers said in a press release. "They were bailed out with taxpayer money - now look what they are doing to the taxpayer: foreclosing instead of modifying."


Bite the Bullet: Waiting and You Can’t Handle The Truth!

(Barbara Rehm from American Banker does a nice job of boiling our housing problems down to a few simple facts. Today our government is applying band aids to patch a gaping flesh wound. Their efforts, as they stand today, simply won’t work. Program after program, meeting after meeting, committee after committee have had little effect on curing our housing ills.

I will draw an analogy with the corporate world (I was in the corporate world for 20 years, so I have a little bit of back ground in this space). In most cases, the corporate world is full of mid level managers struggling to get to the next level (sounds a little like Angry Birds, doesn’t it!?) In order to advance to that coveted level 4 job, they need to come up with a program. The program usually has a very fancy name....it comes complete with very lofty goals....and it MUST have a series of exotic PowerPoint's in order to be complete. The program is pitched based on lofty unobtainable goals to Level 5 managers who are hoping to get that coveted level 6 job. Everyone gathers around the table, slaps each other on the back and says lets proceed (this, of course comes with several rounds of CYA emails in case the program fails and emails that take credit for someone else's work if it succeeds). The program is implemented....the level 4 manager who came up with the idea is promoted to level 5...the level 5 manager that supported the idea is promoted to level 6....so on and so forth. The problem lies in the execution. Rarely are these ideas executed. They become failures, but their “authors” are rewarded for “a job well done.”

Think about it....the government behaves in the same exact way. Rather than drawing my own conclusions (which are obvious), I’m going to quote Ms. Rehm from the article, “The Obama administration is going to have to bite some political bullets. Borrowers who don't deserve help are going to get it. Speculators will cash in. Lenders with lousy underwriting standards may avoid some losses (though they will still absorb plenty). Servicers with lax controls may be left off some hooks. Taxpayers will get stuck with some of the bill.

It won't be politically popular, but the alternative is another decade or more of a real estate market strangled by foreclosures.”

What are your thoughts?

Hoping Won't Cure What Ails Housing

American Banker

By Barbara A. Rehm

The negotiations between mortgage servicers and state and federal officials are a distracting sideshow to the serious debate we should be having about how to solve the nation's chronic housing problems.

Endless meetings, drafts of dueling documents, hand-wringing, finger-pointing solve nothing.

The sad fact is millions of people have mortgages they can't afford, no matter how much their monthly payment is reduced. It may sound harsh, but the national interest is not served by policymakers' hatching yet another bad idea for how to keep those people in their homes.

"Everybody has been obsessed since the crisis began on preventing foreclosures. Everyone keeps coming up with these magic bullets, some scheme that is going to prevent 1 million foreclosures at little or no cost to anyone," said Paul Willen, a senior economist and policy adviser in the Federal Reserve Bank of Boston's research department. "But there is no cheap, easy way to fix this."

Policymakers don't want to admit that.

Most government officials have adopted a wait-and-hope approach, and those who do talk about housing make earnest statements about keeping hardworking people in their homes. That's a worthy goal, for sure, but it's ignoring reality: from 2007 to 2010 there were 8.6 million foreclosures. Another 2 million foreclosures are in the works now, according to William R. Emmons, an assistant vice president and economist at the Federal Reserve Bank of St. Louis, and another 4 million mortgages are so underwater that they are headed toward foreclosure.

"And if house prices keep falling, then you just keep replenishing the pipeline," Emmons said in an interview Monday.

But rather than own up to that, the federal government is, once again, standing by while the states step in.

Innovation at the state level would be nice, and that's exactly what the billions pledged to the Hardest Hit funds more than a year ago were supposed to accomplish. But the state AG settlement has hijacked center stage, commanding more than its fair share of everyone's attention.

The AGs started out with an admirable goal: establish mortgage servicing standards so we never have another mess like this. But then they pivoted to the more controversial idea of reducing borrowers' principal. Rather than being a silver-bullet solution, principal reductions have derailed the settlement. Lenders balked because they consider principal reductions an invitation to anyone who has ever considered walking on their mortgage to grab their running shoes.

It doesn't matter which side is right.

Say the servicers agreed to cough up the $20 billion that's been suggested, and say that leads to $20,000 being written off the mortgages held by 1 million people. That would hardly make a dent in the problem.

The other big "solution" is a hodgepodge of loan modification programs that haven't worked. Redefault rates are high and no one wins when a modified loan goes into default again. All that does is postpone pain and weigh down the market and the economy.

The government's wait-and-hope strategy hinges on an upswing in home prices, and that's not happening.

The S&P Case Shiller home price index reversed its upward trajectory and has been slumping for six months now.

"The housing market recession is not yet over, and none of the statistics are indicating any form of sustained recovery," David M. Blitzer, the chairman of the Index Committee at Standard & Poor's, said last week in a statement. "At most, we have seen all statistics bounce along their troughs; at worst, the feared double-dip recession may be materializing."

Plenty of smart people think the mortgage mess could drag on for decades. Some even wonder, given how protracted the foreclosure process is, why we haven't seen a surge of strategic defaults. "More people are going to say, 'I am not going to try to solve this. It's going to be in my best interest, with the average time for foreclosures being 525 days, I am just not going to pay,' " said Ricardo Byrd, executive director of the National Association of Neighborhoods. "We are getting close to the tipping point where the stigma of not paying is being reduced."

Asked what he thinks should be done, Byrd said, "The president needs to bring everybody in a room and say we are going to figure this out today."

At a minimum, someone in the federal government — I nominate HUD Secretary Shaun Donovan — needs to get to work on a comprehensive strategy.

Stop trying to not offend anyone and impose some pain on all sides. Servicers, investors and borrowers all have varying interests in seeing the foreclosure mess cleaned up. But only the federal government has the incentive and the capacity to craft a comprehensive solution that can work.

The government should shift its focus from trying to keep current borrowers in homes at all costs to figuring out how to get people who can afford it to live there.

"We have to come to the realization and stop fooling ourselves that for some people there is no solution," said Cliff Rossi, who has worked in both government and the industry and is currently an executive-in-residence of the Center for Financial Policy at the University of Maryland's business school. "There are borrowers who are so underwater and have no capacity to repay, and as unfortunate as it is, we are just going to have to move those people through the foreclosure pipeline fast."

Willen, who holds a PhD from Yale and has intensively studied the mortgage market for years, agrees the federal government has to find a way to make the foreclosure process easier and faster.

"We need to get these properties back into the hands of long-term, sustainable owners," he said.

Short sales and some sort of cash-for-keys plan are two more essentials to clearing the backlog of troubled mortgages.

Say you took that $20 billion and you gave 2 million people who can't pay their mortgages $10,000 to walk away. Seems smarter than the principal-reduction alternative outlined above. The borrower would have enough money to rent a new place and the lender would have the title without the hassle or cost of foreclosure.

The Obama administration is going to have to bite some political bullets. Borrowers who don't deserve help are going to get it. Speculators will cash in. Lenders with lousy underwriting standards may avoid some losses (though they will still absorb plenty). Servicers with lax controls may be left off some hooks. Taxpayers will get stuck with some of the bill.

It won't be politically popular, but the alternative is another decade or more of a real estate market strangled by foreclosures.


The True Cost of Foreclosure!

The nationwide statistics tell of the train wreck that our government has created. When a house is foreclosed on and then resold, the “bank” gets 36% of the retail value. When a house is short sold, the “bank” gets 15% of the retail value. So why is the government putting up such a fuss over short sales? Why are they wasting time and money trying to put a halt on short sales? The government owns roughly 50% of the notes that are distressed. They are horrible real estate investors, but they are also horrible mathematicians! Do the math. If the “bank” or the government approves a short sale they will save, on average, 21% versus if they foreclosed on a property.

The article itself paints a more reckless picture in Florida. The numbers are even worse. I won’t bore you with why the author feels foreclosures sell at such a discount, because it’s not relevant. What is relevant is that they do and that they cost tax payers an ENORMOUS amount of money. The funny thing is that these numbers are conservative. They don’t take into account the cost of upkeep, taxes, insurance, etc. etc. etc. that saddle foreclosures but don’t saddle short sales.

Median price isn't necessarily your price

Average home worth more than foreclosure

The median sales price of a single family home in Brevard County in 2010 was $120,000. You own an average home, so your house would fetch that price, right?

Actually, an “average” owner-occupied home in Brevard is worth quite a bit more, a FLORIDA TODAY analysis of property sales records found. Try nearly $25,000 more.

The median sales price — half sold for more, half for less — has been the standard way to chart the change in home values for decades. But in recent years, these figures have been distorted by a trend not seen since the Great Depression: Foreclosures now account for a substantial portion of all homes sold.

One out of every four houses sold last year was a foreclosed property, and the median sales price was just $70,000.

The median price for all of the other houses? $143,000.

The discrepancy is even greater for condos. The median price for foreclosed condos was $45,700. For all other condos it was $118,750.

Despite some buyers’ wishful thinking, the price difference isn’t because lenders will accept very low prices just to get rid of unwanted properties. It’s because, in general, foreclosed properties are in much worse condition than other homes.

Back to Brevard

When Renee and Jack Angel returned to Brevard County last year after spending a few years in Virginia, they went house shopping.

The couple put in an offer on a short sale but gave up on it months later when there had been little progress toward closing.

In the following weeks, the couple looked at about 30 other houses in Port St. John and southern Titusville, all foreclosures. Renee Angel said all of them were trashed. While the prices were good for some of them, she said she wasn’t interested in doing major home repairs.

Finally the couple came upon a foreclosed house in Port St. John that was in pristine condition. They closed on the home in December.

“We actually were able to move in and not have to do anything,” Angel said.

The poor condition of foreclosed properties like the majority the Angels looked at is more the norm than the exception for foreclosures, say real estate agents and home shoppers.

In some cases, foreclosed houses have been stripped by their previous owners, either out of anger or in efforts to make money on the sale of appliances and fixtures. It is not uncommon that by the time a lender reclaims a home, it no longer has appliances, cabinets or flooring, said Gary Altizer, a real estate agent who specializes in selling foreclosed properties.

“I see everything. .¤.¤.¤places without toilets even,” said Altizer, who works at Re/Max Alternative Realty in Indialantic. “They’ll steal everything.”

Even in cases where the previous owners have left homes in pristine condition, vandals often break in and take anything of value.

Banks sometimes will pump money into fixing up a home, but more often than not, they won’t. For them, there is little incentive to spend time and money on repairing a house unless they can get a significant return on their investment.

“It really just depends if it makes sense to them,” Altizer said.

Market influences

Few doubt that foreclosures — and their kissing cousins, short sales — will play a dominant role in the Space Coast real estate market in 2011.

Lenders already own thousands of homes in the county, not all of which have been put on the market. Thousands more foreclosures are working their way through the courts. Lenders reclaimed 4,100 properties through foreclosure in 2010, up from 2,200 in 2009. And with a third or more of homeowners owing more than their house is worth, lenders will be under increasing pressure to approve short sales, where they agree to a sales price less than they are owed.

But the process of selling a foreclosed or otherwise distressed home isn’t easy.

Jeremy “Deano” Chaple and his wife, Ann, decided last year was the right time to buy their first home. “Everything was going down. I had the money. And I was tired of renting,” said Jeremy Chaple, promotions director for Clear Channel Radio Brevard.

Like the Angels, the Chaples looked at more than 30 homes, mostly foreclosures, in Palm Bay. And like the Angels they found most of them in terrible disrepair — until they finally ran across the southwest Palm Bay home they ended up buying.

“This one was immaculate,” he said.

But the house was a short sale, which meant it took six months before the couple could finally close on the house. But it also means they paid $102,000 for a house that sold for $175,000 in 2008.

Lenders are encouraging real estate agents to find more buyers like the Chaples, folks who plan to move into the home they are buying, rather than investors who plan to fix houses up, rent them out and perhaps resell them in the future. The feeling is owner-occupied homes add to a neighborhood’s stability and lead to higher home values. And that helps lenders two ways: First, it means they can sell subsequent properties for more money. And higher home values make it less likely that other homeowners will let themselves slide into foreclosure.

“All the banks are wanting to push for stabilization of a neighborhood by getting homeowners in there, not just investors,” Altizer said.

Absent owners

But the FLORIDA TODAY analysis found that about 48 percent of the people who bought foreclosed homes in the county last year were having the tax bills sent to another address, an indication that they were not living in the properties they bought.

Investors do have somewhat of an advantage in that they pay cash for houses and can close quickly while others generally have to get a mortgage, a process that can add weeks, if not months, to the sales process.

On the other hand, in the interest of neighborhood stabilization, lenders will accept an owner-occupied offer over a similar investment offer, Altizer said.

One problem, though, is that while investors typically have a pretty good idea of the actual value of a home and what a lender will sell it for, too many potential buyers who want to move into a house mistakenly think they can buy foreclosures for as little as half the listed price.

“Buyers seem to think they can steal the property,” Altizer said. “That isn’t really true.”


How Does Foreclosure/Short Sale Affect My Score?

This is one of the most frequently asked questions in my business. Unfortunately there is not an exact science to make this determination. However, Jeanine Skowronski from Main Street reports on a study that was recently completed by FICO. They simulated various types of delinquencies and related them to (3) consumer types each with different starting FICO scores (prior to going delinquent).

They concluded that a short sale WITH deficiency balance has the same effect on your credit score as a foreclosure. They also concluded that a short sale WITHOUT a deficiency judgment has less of an effect on a consumers credit score. What this means to you realtors out there is that you need to do everything in your power to eliminate the chance of a deficiency judgment. If there is a home equity line involved, this will be virtually impossible....without me.

Call your attorney and ask them what effect there will be when you accept a commission in short sales where your client eats a deficiency judgment.

Call me to find out how we tackle this predicament: 813-495-4321

Credit Q&A: How Does Foreclosure Affect My Score?

By Jeanine Skowronski

Q. How will a foreclosure affect my credit score? And how long will it take to recover?

A. The answer all depends on your score at the time of foreclosure.

Fortunately, FICO, the company responsible for our current credit score model, just completed a study that simulates how various types of mortgage delinquencies can affect one’s credit. FICO was nice enough to let us publish the study as part of this week’s Credit Q&A.

To complete the study, FICO simulated five types of mortgage delinquencies – 30 days late, 90 days late, deed-in-lieu settlement, short sale and foreclosure – on consumers scoring 680, 720 and 780, respectively. Prior to the delinquency, all consumers had an active currently-paid-as-agreed mortgage on file.

Other facets of the consumers' profiles (e.g., utilization, delinquency history and age of file) were typical for the three score points considered.

As you can see, the higher your score, the harder it falls and the longer it takes to get back to where it was before delinquency.

“You can start to see improvement before then, but it takes longer for a higher score to fully recover,” Joanne Gaskin, who wrote about the study on FICO’s Banking Analytics Blog earlier this month, tells MainStreet.

According to Gaskin, the study was done because FICO wanted to clear up a common misconception consumers have about how mortgage delinquencies affect their credit score.

“People try to persuade consumers to believe that a short sale will have significantly less impact on their score than a foreclosure will,” she says, but “there’s very little difference from a FICO perspective.”

As the chart illustrates, both types of delinquencies cause each prospective consumers’ score to plummet the same amount of points. Consumer A, who has a 680 credit score, will take around an 85-point hit. Consumer B, with a score of 720, will take around a 150-point hit. Consumer C, who is among the credit elite, will see his score drop around 160 points in either instance.

It will take about three years following either a short sale or foreclosure to return to your score of 680, and seven years to get up in the 700s—if you don’t incur more delinquencies.

As Gaskin explains, delinquencies include more than just missed payments on a mortgage. You can’t start defaulting on your credit card bills or start ignoring your auto loan.

“Your profile would have to go back to being what it was [before foreclosure],” she says.

http://www.mainstreet.com/article/moneyinvesting/credit/debt/credit-qa-does-foreclosure-affect-my-score?page=1


Fannie Is At It Again!

A friend of mine (her name is Diana) recently sent me an article on Fannie Mae and private mortgage insurance. The government can’t get out of their own way! She did a very nice job of giving her take on the article. Her comments appear in quotes.

“Mortgage Insurance (MI) companies must approve the short sale as the lender makes their claim immediately upon receipt of the offer to purchase. In the past, the lenders have worked out independent agreements with MI companies to allow the sale to go forward. Now, the effect is the limiting or preventing some of these solutions leaving the MI company with no alternative but to demand contributions by way of cash or prom note thereby killing many short sales.”

This new policy will kill most realtor assisted short sales (that involve MI) due to the buyers, sellers and realtors inability to contribute money to settle prom notes and or deficiency judgments (It’s not that they can’t contribute (as long as it is disclosed) it’s that they WON’T contribute. Wouldn’t it be great if you could work with a buyer that could solve these issues?

Fannie: Servicer side agreements with mortgage insurers prohibited

By: KERRY CURRY

Fannie Mae told mortgage servicers Friday that any deals that would compromise mortgage insurance on loans delivered to the government-sponsored enterprise are strictly prohibited.

Fannie issued a servicer policy update clarifying its prohibitions on loss sharing, indemnification and settlement agreements with mortgage insurers.

"Fannie Mae reminds servicers of their contractual obligation and responsibility to ensure that any mortgage insurance coverage required at the time a loan is delivered to Fannie Mae is maintained and remains in force to protect Fannie Mae’s interests in its mortgage loans at all times, unless the conditions that Fannie Mae imposes for replacing or canceling the coverage are met," the guidance stated.

Fannie Mae clarified that arrangements that compromise mortgage insurance coverage are generally inconsistent with protecting the GSE's interests in mortgage loans.

"Effective immediately, Fannie Mae is prohibiting servicers from entering into any agreement that modifies the terms of an approved mortgage insurance master policy on loans delivered to Fannie Mae."

Prohibited agreements include, but are not limited to, agreements that directly or indirectly:

Modify master policy provisions for settling of claims

Limit the right of a mortgage insurer to conduct file reviews or investigate claims

Limit the right of a mortgage insurer to rescind coverage

Rescind or modify coverage,

Restrict notice to Fannie Mae of changes in coverage status.

Fannie said servicers must also disclose any such agreements previously enacted with mortgage insurers.


The Government Supports Short Sales??

Jim Puzzanghera and Alejandro Lazo from the Los Angeles Times report on a proposed settlement with banks that has some merit. The proposal would force banks/servicing companies to allow short sales which are less costly to tax payers in the long run. Short sales command higher prices than bank owned properties. Foreclosures also cost the banks (thus tax payers) more money than short sales. In fact, in 2010 the average bank owned property sold at a 36% discount to retail. The average short sale sold at a 21% discount to retail. Do the math! Which is better for our economy???

Take the time to read the balance of the article. It is a very good article that discusses solutions...solutions that are being opposed for political and economic reasons. As quoted, “Banks often resist such sales because they are difficult to execute, particularly when multiple creditors and other parties are involved. In addition, short sales lock in losses for the lender that might be reduced if the sale is delayed until the market improves.”

Proposed settlement would force banks to allow short sales for delinquent homeowners

The proposed deal among banks and government officials is aimed at stabilizing the real estate market and helping underwater borrowers who are months behind on mortgage payments avoid foreclosure.

By Jim Puzzanghera and Alejandro Lazo, Los Angeles Times

Reporting from Washington and Los Angeles

Major banks may be forced to let severely delinquent homeowners sell their houses for less than the loan amounts owed as part of a broad settlement of federal and state investigations into botched foreclosure paperwork, according to government officials involved in the negotiations.

The requirement to allow so-called short sales would be in addition to forcing mortgage servicers to reduce the amount some homeowners owe on their loans, said two officials, who spoke on the condition of anonymity because negotiations are ongoing.

The goal of short sales would be twofold: provide a quicker and more economical way for banks to dispose of distressed real estate and to help stabilize the real estate market by clearing out a backlog of defaulted mortgages that are poised for foreclosure.

They would be used in situations in which borrowers were so underwater that the more costly and time-consuming process of foreclosure would seem to be the only option.

“Short sales just command a better premium than foreclosures,” said Glenn Kelman, chief executive for online brokerage Redfin. “It’s like day-old bagels. They never sell for the same price. If they sit there for a while, nobody wants them because houses just break down when they are left alone.”

Foreclosures continue to drive down housing values, with prices in 20 major U.S. cities down an average of 3.1% in January compared with the same month a year ago, according to new data from a Standard & Poor’s/Case-Shiller index. Prices in Los Angeles were down 1.8%.

The latest proposal is among those to be discussed when executives from the top five mortgage servicers meet Wednesday in Washington with state and federal officials working on a settlement that could range from $5 billion to $25 billion.

Those servicers are Bank of America Corp., JPMorgan Chase & Co., Wells Fargo & Co., Citigroup Inc. and Ally Financial Inc.

It will be the first face-to-face meeting since attorneys general from all 50 states, along with federal officials from the Justice Department and other agencies, presented the banks with 27 pages of demands calling for sweeping changes to mortgage servicing, including how homeowners are treated when they try to modify their loans.

The banks have given officials a counterproposal on some of the mortgage servicing requirements that includes a single point of contact for distressed homeowners, timelines for considering modifications, an online system for checking the status of applications and a third-party review of rejections, one of the officials said.

Short sales would help accelerate the turnover of homes from borrowers who are months behind on their mortgage payments, Kelman said.

Some sellers are not eager to complete a short sale because it would force them out of their home. And lenders can withhold approval of a short sale if they don’t like the price.

Banks often resist such sales because they are difficult to execute, particularly when multiple creditors and other parties are involved. In addition, short sales lock in losses for the lender that might be reduced if the sale is delayed until the market improves.

Requiring banks to allow short sales could fuel further opposition from some Republican attorneys general and members of Congress who already have criticized the broad scope of the proposed settlement.

Some House Republicans have derided possible payments of $20,000 to encourage distressed homeowners — dubbed by some as “cash for keys” — as a bailout for irresponsible behavior.

Seven Republican attorneys general recently wrote to Iowa Atty. Gen. Tom Miller, a Democrat who is leading the negotiations for the states, saying the proposals go beyond resolving damages from foreclosure paperwork problems. Those problems include robo-signing, the practice of bank employees’ signing sworn documents without reading or understanding them.

“I think it’s morphed into something that’s bigger and different than what we talked about in the beginning,” said Oklahoma Atty. Gen. E. Scott Pruitt, a Republican who organized the signing of one of the letters.

Pruitt said he might not join the settlement if it is too broad. And with 24 Republican attorneys general nationwide, opposition could limit the size of a settlement and how many people it covers.

Miller has been in contact with some of the attorneys general who have raised concerns, said spokesman Geoff Greenwood.

“We’ll do the best we can to reach a comprehensive agreement that is in everyone’s best interest,” Greenwood said. “At the end of the day, an attorney general must decide for himself or herself whether to sign on to this, assuming we get a settlement.”

In Southern California, short sales made up an estimated 19.8% of the market for previously owned homes last month. That was up from an estimated 18.4% in February 2010 and 12% in February 2009, according to DataQuick Information Services of San Diego.

Combined with foreclosures, these so-called distressed sales made up more than half of homes sold in the Southland last month.

Though struggling homeowners escape weighty mortgage debts quickly under a short sale, they don’t get away unscathed.

Their credit scores are damaged enough to limit their borrowing capability for years, though the damage is perhaps less severe than in foreclosure. Money for down payments and renovations would be lost, and there may be tax consequences.

The California Assn. of Realtors has been pushing for short sales to be made simpler. Earlier this month, in an open letter in the Los Angeles Times and six other California newspapers, the group called on banks to approve more short sales and for regulators to streamline the process.

The real estate agents argued that short sales are better for consumers and banks.


Foreclosure and Taxes...How They Relate

Tanya Marsh from the Huffington Post reports on yet another side effect of the foreclosure debacle. While most people, including myself, hate paying taxes, taxes do have a purpose. They help pay for our roads, our police officers, our firemen, our teachers, our sanitation works, our....well, you get the point.

As a result of this foreclosure mess, property values continue to fall. Because property values continue to fall, tax rolls fall. When tax revenue decreases something must give. Typically they are jobs. When jobs are cut, guess what? You got it…People can’t afford their houses so they go into foreclosure...starting the cycle all over again.

The longer our government allows this cycle to continue, the longer we will stay in this cycle.

One More Casualty of the Foreclosure Crisis: Property Tax Revenues

The Home Defenders League, a community activist organization in California, released a report last week with the provocative title of "Home Wreckers: How Wall Street Foreclosure are Devastating Communities." The report makes a simple but powerful point that has not been widely appreciated. Property tax revenues, which many municipalities use as a primary source of funding for education, police, fire, and other essential functions, are tied to real property values. Since the height of the market in 2007, on a national basis, it has been commonly reported that commercial real estate values have dropped at least 40% and residential real estate values have dropped at least 30%.

Of course, the concept of "real estate value" is pretty fuzzy. The fair market value of a thing is normally determined by a willing buyer and willing seller. But in the current market, there are a number of complications. First, there are a large number of unwilling sellers pricing their homes in light of a pending foreclosure, or because of a loss of employment or similar crisis. Second, both the residential and commercial real estate markets continue to be hampered by the unavailability of debt. Yes, the most credit worthy commercial and residential borrowers, with sufficient money for a healthy down payment, can obtain financing. But many other borrowers cannot. As a result, the market has way too many unwilling sellers and not nearly enough willing buyers (with adequate financing). So "real estate values" are significantly depressed. But if capital begins to flow more freely and employment rates rise, the number of willing, financeable buyers will increase and push values up.

That's how markets work. If the market thinks that my house is worth 30% less today than it was three years ago, that makes me sad, but doesn't actually hurt me until I'm forced to internalize that drop in value by selling the house at a reduced price. But one of the problems with the current crisis is that the policy response is forcing widespread internalization of depressed values, in both the commercial and residential real estate markets, by encouraging distressed sales and foreclosures. Many analysts in the commercial real estate world believe that this is a good thing, because the market can't begin to improve until it hits bottom. But by capturing the temporarily depressed values and translating those into lower property tax assessments, this activity will have significant effects even after values begin to improve.

The property tax assessment method varies by state, but changes in value for a specific property are generally captured when a property is sold. In periods where significant changes are experienced in the larger market, an assessor may also increase or decrease the assessed value of a neighborhood or entire community by applying a particular formula. For a variety of reasons, assessed values normally lag "real time" values. For example, Maryland assesses real property every three years and recently issued a reassessment reflecting a 22% drop in value since 2008, the largest decline in the history of the Maryland Department of Assessments and Taxation. Other states may reassess on an annual basis, but use a prior year's assessment in calculating current taxes. For example, in Washington State, 2011 property tax bills reflect 2009 assessments.

Many municipalities have reported that property tax assessments began to fall two years ago for the first time since the Great Depression, and have continued to fall since. These reduced assessments can have significant consequences for state and local government, particularly if there is a property tax cap in place. For example, the Home Defenders League estimates that California property tax revenues are expected to decline by $3.8 billion because of residential foreclosures.

There are no easy answers here. But it is clear that we shouldn't compound the problem by forcing more homeowners, commercial real estate borrowers, and, by extension, taxing authorities, to internalize temporarily depressed values by encouraging sales into a distressed market or completing foreclosures. The real estate bubble burst and "value" was lost. Understood. But perhaps we should focus on trying to restore some of that value and mitigating the problems that will inevitably be caused by steep drops in property tax revenue.


Party Lines!

Alan Zibel from the Wall Street Journal reports that the house voted Wednesday, “..... to end a government effort to revitalize neighborhoods blighted by the recession and housing crisis.” It is said that the house will also vote to end HAMP, HAFA and one of the other dreamy acronyms that the government has thought up.

Here’s the problem. We have inmates running the asylum. The House will vote these program out, but it’s unlikely that the Senate will. Even if the Senate (that is controlled by the Democrats) voted to abolish the programs, Obama will veto them. This is typical partisan politics where the clones that we send to Washington vote on party lines versus’ voting for what is in the best interest of the country.

Sad but true.

Party Lines!

By Alan Zibel

The House voted Wednesday to end a government effort to revitalize neighborhoods blighted by the recession and housing crisis, with Republicans calling the program unnecessary and wasteful.

The 242-182 vote, mostly on party lines, was the third of four planned this month to end Obama administration initiatives to ease foreclosures and mend troubled neighborhoods. The measures are likely symbolic, as the Democratic-led Senate is unlikely to take them up and President Barack Obama has threatened a veto.

The vote Wednesday would cut off funding for the Department of Housing and Urban Development’s $7 billion Neighborhood Stabilization Program. That effort, created in a bipartisan housing bill passed in 2008, is likely to help fix up 100,000 properties in areas hard-hit by foreclosures, according to HUD.

Republicans called it wasteful and not subject to thorough oversight. Taxpayers are not repaid when blighted homes are fixed up and sold, said Rep. Judy Biggert (R., Ill.). Instead, “the money is treated like a slush fund…it is never returned to the taxpayer,” she said. “We need to stop funding programs that don’t work with money we don’t have.”

Democrats noted that the program is supported by city and local officials around the country. In one part of Indiana, “new businesses have opened and an area in decline has now blossomed again,” said Rep. Andre Carson (D., Ind.).

The vote comes after the House voted last week to end a yet-to-be-launched program to help unemployed homeowners and one to help borrowers refinance if their property values have plunged.

Republicans also plan to vote by the end of the month to eliminate the Obama administration’s flagship foreclosure-prevention program, the Home Affordable Modification Program. They argue that the administration’s housing programs are costly to taxpayers at a time when budget cuts are needed to get the U.S. economy back on track. Republicans also say that the government has failed to prevent many foreclosures and has, in some cases, left homeowners worse off.

Launched nearly two years ago, HAMP has assisted about 540,000 homeowners, far short of initial expectations that it would aid up to 4 million. A congressional panel estimates it will eventually reach as many as 800,000 homeowners.

While GOP lawmakers call the program a waste of money, the Obama administration says it is still benefiting tens of thousands of new borrowers every month.


Do You Want to Play Hide and Seek??!!

Bank of America never ceases to amaze me! Chris Nicholson from Dealbook reports, “A hacker organization known as Anonymous released a series of e-mails on Monday provided by a former Bank of America employee who claims they show how a division of the bank sought to hide information on foreclosures.

The bank unit, Balboa Insurance, was acquired by Bank of America when it bought the mortgage lender Countrywide Financial in 2008. Balboa deals in so-called force-placed insurance coverage on mortgages. The e-mail messages concern the removal of information linking loans to other documentation. The e-mails dating from November 2010 concern correspondence among Balboa employees in which they discuss taking steps to alter the record about certain documents “that went out in error.” The documents were related to loans by GMAC, a Bank of America client, according to the e-mails.

The following GMAC DTN’s need to have the images removed from Tracksource/Rembrandt,” an operations team manager at Balboa wrote. DTN refers to document tracking number, and Tracksource/Rembrandt is an insurance tracking system.

The response he receives: “I have spoken to my developer and she stated that we cannot remove the DTNs from Rembrandt, but she can remove the loan numbers, so the documents will not show as matched to those loans.”

According to the e-mails, approval was given to remove the loan numbers from the documents.”

Bank of America denies the assertions. Oh...by the way...BOA has agreed to sell Balboa! I wonder why????!!!!

Bank of America Unit Tried to Hide Foreclosure Information, Hackers Say

BY CHRIS V. NICHOLSON

A hacker organization known as Anonymous released a series of e-mails on Monday provided by a former Bank of America employee who claims they show how a division of the bank sought to hide information on foreclosures.

The bank unit, Balboa Insurance, was acquired by Bank of America when it bought the mortgage lender Countrywide Financial in 2008. Balboa deals in so-called force-placed insurance coverage on mortgages. The e-mail messages concern the removal of information linking loans to other documentation.

A Bank of America spokesman told Reuters on Sunday that the documents had been stolen by a former Balboa employee, and were not tied to foreclosures. “We are confident that his extravagant assertions are untrue,” the spokesman said.

The e-mails dating from November 2010 concern correspondence among Balboa employees in which they discuss taking steps to alter the record about certain documents “that went out in error.” The documents were related to loans by GMAC, a Bank of America client, according to the e-mails.

“The following GMAC DTN’s need to have the images removed from Tracksource/Rembrandt,” an operations team manager at Balboa wrote. DTN refers to document tracking number, and Tracksource/Rembrandt is an insurance tracking system.

The response he receives: “I have spoken to my developer and she stated that we cannot remove the DTNs from Rembrandt, but she can remove the loan numbers, so the documents will not show as matched to those loans.”

According to the e-mails, approval was given to remove the loan numbers from the documents.

A member of Anonymous told DealBook on Monday that the purpose of his Web site was to bring attention to the wrongdoing of banks. “The way the system is, it’s made to cheat the average person,” he said.

He had set up a Web site to post bank data that WikiLeaks has said it would release, and was subsequently contacted this month by the former Balboa employee. It has been speculated that the documents, which have yet to be released, would focus on Bank of America. The spokesman for Anonymous said he had no direct ties to WikiLeaks, which is run by Julian Assange.

Balboa describes itself as providing “mortgage and auto lender-placed insurance tracking services.” Lender-paced insurance is another term for force-placed coverage.

Mortgage lenders require that homes be insured. In the event that mortgage holders let insurance lapse, lenders may take out their own insurance on the property, which protects the lender’s interest but is paid for by the mortgage holder.

Bank of America agreed last month to sell Balboa to QBE of Australia, which is set to pay $700 million up front and take on $1.2 billion in liabilities. A representative of QBE was not immediately available for comment.



This Cycle Is NOT Meant To Be Ridden!

Floyd Norris from the New York Times reports that the number of house sales has stabilized below the boom years of 2005-2006. The issue is that the majority of these sales are of distressed property. People can buy gently used distressed property for significantly less than what it takes to build a comparable home. With the geniuses that are running the banks with holding inventory from the market (aka the shadow inventory) prices are continuing to drop.

Key excerpts from the article are, “But there are a large number of used homes available. The National Association of Realtors estimates that almost two of every five used homes sold in February were on the market because the previous owner was in trouble. It says 26 percent of sales were from foreclosures, and an additional 13 percent were “short sales,” in which the lender agrees to allow the homeowner to sell the home for less than the outstanding balance of the loan. Sellers often have little say in the timing of such sales, and are in a poor bargaining position.

The percentage of forced sales rose to nearly half of all sales in early 2009, at the height of the credit crisis, but fell to around 30 percent as the economy began to improve and banks imposed moratoriums on foreclosures. Now it is on the rise again, producing new pressures on prices and increased competition for home builders still trying to sell homes built in more optimistic times.”

A Housing Markey Cycle Diffrent From Others

By FLOYD NORRIS

TO judge by the overall level of home sales in the United States, the housing market has stabilized at a level well below the peak period of 2005 and 2006 but still higher than the sales rates that characterized prosperous periods in the 1980s and 1990s. Still, few of those sales are of new homes and a rising proportion are forced sales of homes no longer worth the amount that was borrowed.

The sales rate for existing homes — about 4.9 million over the last 12 months — is virtually the same as in mid-1999. Yet sales of newly built single-family homes have plunged to the lowest levels seen since the government began collecting statistics on such sales in 1963. The Census Bureau reported this week that only 17,000 new homes were sold in February, for an annual rate of 250,000 after taking seasonal factors into account. Both of those numbers are the lowest on record.

The February sales pace was undoubtedly depressed by harsh weather in the Northeast, and a rebound in March or April is possible. But the total number of homes sold over the 12-month period — 349,000 — is lower than in any comparable period.

As a result, this cycle has been very different from previous ones. Home sales plunged in the early 1980s, when a combination of severe recession and high interest rates devastated the housing business, and they also suffered in 1990 and 1991, another recessionary period. But in each of those recessions, sales of new and existing homes declined at about the same pace.

It was decreased demand that hurt sales in previous downturns. Now demand is down, in part because some would-be buyers cannot qualify for mortgages that would have been available during the boom. But oversupply is also a major problem now.

Too many houses were built in many areas during the boom, and now housing starts have plunged, as can be seen in the bottom chart. There are fewer newly built homes available, and in some areas, buyers complain that builders have not been willing to cut prices to meet the prices available on used homes in the same area.

But there is a large number of used homes available. The National Association of Realtors estimates that almost two of every five used homes sold in February were on the market because the previous owner was in trouble. It says 26 percent of sales were from foreclosures, and an additional 13 percent were “short sales,” in which the lender agrees to allow the homeowner to sell the home for less than the outstanding balance of the loan. Sellers often have little say in the timing of such sales, and are in a poor bargaining position.

The percentage of forced sales rose to nearly half of all sales in early 2009, at the height of the credit crisis, but fell to around 30 percent as the economy began to improve and banks imposed moratoriums on foreclosures. Now it is on the rise again, producing new pressures on prices and increased competition for home builders still trying to sell homes built in more optimistic times.


Yet Another Divide!

Joe Rauch and Dave Clarke from Reuters report on another government divide that will extend the housing mess that we are in for a long time. Up until now, the main regulator for the largest US Banks was working in conjunction with the (50) attorney generals and a dozen federal authorities to reach a global settlement with the lenders that have caused this mess. Mr. Rauch and Mr. Clarke report that the Office of the Comptroller of Currency is pursuing their own settlement. This leaves the others out in the cold. Read the following passages from the article. They are eye opening.

"It's such a political minefield that I could see something like this might cause the inventory of foreclosed homes to remain high for quite a bit longer."

The source said the OCC, impatient with infighting over the structure of a coordinated settlement, is preparing to move on its own set of fines and business-practice fixes for banks.

While a settlement with the OCC would remove one question mark for banks, they could still face myriad suits from investors, homeowners and attorneys general.

Iowa Attorney General Tom Miller, who is heading up the states' probe, issued a statement saying a settlement from the OCC would not derail the AGs pursuit of its own deal with the banks. "While it is unfortunate that the OCC may be heading toward a path of working outside and independently of other federal agencies, state attorneys general, we will continue our efforts to the fullest extent possible," Miller said.

Those threats will keep gumming up the foreclosure process and could keep the housing market's recovery in a holding pattern. Foreclosure tracker RealtyTrac reported that foreclosures in February 2011 were down 27 percent from the same month last year, in large part due to legal uncertainty.

An independent settlement from the OCC would likely be smaller in scope than a deal envisioned by other U.S. authorities that would have forced banks to pay about $20 billion -- which would be used in part to help struggling homeowners -- and agree to reduce loan balances to keep borrowers in homes.

The OCC settlement is expected to do little to help struggling homeowners, millions of whom are facing mortgages worth more than their homes.

The banks, the regulators and the attorneys general are all in a big piddling contest and that leaves consumers in the middle getting wet," said Tony Plath, a banking professor at the University of North Carolina at Charlotte.

Analysts said multiple settlement agreements issued by federal and state authorities would also be the worst-case scenario for the largest U.S. banks, which would have to deal with a deluge of legal threats and reforms.”

It’s comical what our government continues to do to our economy. No wonder real businesses continue to move offshore!

Sure doesn’t look like it pays to take short cuts! What do you think?

Mortgage probe talks split, clouds market recovery

By Joe Rauch and Dave Clarke

CHARLOTTE, N.C./SAN DIEGO |

(Reuters) - - The main regulator for the largest U.S. banks is preparing to break from state authorities and move first to settle with lenders over their foreclosure practices, according to a source familiar with the process.

The settlement from the Office of the Comptroller of the Currency could come in the next couple weeks, the source said and would dash hopes for a comprehensive settlement that could help heal the housing market.

About a dozen federal authorities and 50 state attorneys general have worked for months to reach a coordinated settlement over allegations banks foreclosed with improper documents and cut corners on repossessing homes.

The authorities were working to structure a settlement that would have let banks contain their litigation risk, help homeowners mistreated during foreclosures and remove a cloud of uncertainty hobbling the housing market's recovery.

"It's never great news when there's no coordinated response to the greatest challenge in the economy," said Adrian Cronje, chief investment officer at Balentine, an Atlanta-based wealth management firm.

"It's such a political minefield that I could see something like this might cause the inventory of foreclosed homes to remain high for quite a bit longer."

The source said the OCC, impatient with infighting over the structure of a coordinated settlement, is preparing to move on its own set of fines and business-practice fixes for banks.

The exact details of an OCC proposal are not yet known. OCC spokesman Bob Garsson declined to comment.

Bank of America Corp, Citigroup Inc and Wells Fargo & Co are among the banks in settlement talks.

While a settlement with the OCC would remove one question mark for banks, they could still face myriad suits from investors, homeowners and attorneys general.

Iowa Attorney General Tom Miller, who is heading up the states' probe, issued a statement saying a settlement from the OCC would not derail the AGs pursuit of its own deal with the banks. "While it is unfortunate that the OCC may be heading toward a path of working outside and independently of other federal agencies, state attorneys general, we will continue our efforts to the fullest extent possible," Miller said.

Those threats will keep gumming up the foreclosure process and could keep the housing market's recovery in a holding pattern. Foreclosure tracker RealtyTrac reported that foreclosures in February 2011 were down 27 percent from the same month last year, in large part due to legal uncertainty.

CONSUMERS CAUGHT IN MIDDLE

An independent settlement from the OCC would likely be smaller in scope than a deal envisioned by other U.S. authorities that would have forced banks to pay about $20 billion -- which would be used in part to help struggling homeowners -- and agree to reduce loan balances to keep borrowers in homes.

The OCC settlement is expected to do little to help struggling homeowners, millions of whom are facing mortgages worth more than their homes.

The banks, the regulators and the attorneys general are all in a big piddling contest and that leaves consumers in the middle getting wet," said Tony Plath, a banking professor at the University of North Carolina at Charlotte.

Analysts said multiple settlement agreements issued by federal and state authorities would also be the worst-case scenario for the largest U.S. banks, who would have to deal with a deluge of legal threats and reforms.

"The banks would rather their multiple regulators come together and coordinate, but it just seems like that's not happening," said Jefferson Harralson, a bank analyst with Keefe, Bruyette & Woods Inc.

GROWING TENSIONS

The OCC's potential split is the latest symptom of the contentious, politicized debate about how best to fix the U.S. mortgage market and who should bear the losses for millions of foreclosed homes nearly five years after the housing market began to collapse.

In a sign of growing tensions among the authorities, on March 3, state attorneys general sent banks aspects of a proposed settlement endorsed by some federal agencies, but not the OCC or the Federal Reserve, the main banking regulators involved in the discussions.

The 27-page document proposed changes to how the mortgage servicing industry operates and advocated reducing loan balances for struggling borrowers as a way to help them avoid foreclosure.

Republican lawmakers and some state attorneys general have slammed that 27-page document, calling it an abuse of power.

A separate settlement from the OCC is also an example of the tense history between state attorneys general and the national bank regulator.

In 2005, the OCC sued then-New York Attorney General Eliot Spitzer, alleging Spitzer's office was interfering with the regulator's oversight of banks after he attempted to request bank records for review of potential anti-discrimination law violations.

At the time, Spitzer called the suit "shameful" and one that was designed to shield banks from state scrutiny.

Later that year, a New York federal court judge issued an injunction barring Spitzer from reviewing banks' records.

Analysts said the possible settlement is the latest step in that regulatory fight.

"This is the OCC trying to take this issue back into Washington and take some of the steam away from the states," Plath added.

(Reporting by Joe Rauch and Dave Clarke; editing by John Wallace, Gary Hill and Andre Grenon)


Stern Gets Flushed!

Jonathan Stempel from Reuters reports on the demise of David Stern. Over the last several months, he has slowly booted his employees to the street and unloaded the fruits of his evils. To be clear, his law practice will shut down, but the processing company (DJSP) that he sold a few years back (that resulted in a $50M+ payday for Stern), is still hanging on (their stock has dropped from $13.65 in April of 2010 to 17 cents (yes that’s CENTS!!!) recently.

Sure doesn’t look like it pays to take short cuts! What do you think?

Florida lawyer David Stern ends foreclosure law practice

(Reuters) - A prominent Florida lawyer accused of mishandling many foreclosure cases in that state is shutting down his foreclosure law practice at the end of the month, a regulatory filing shows.

The decision by the lawyer, David Stern, was announced by DJSP Enterprises Inc, a company he once ran and which calls itself the main customer of the Law Offices of David J. Stern PA.

DJSP said it expects to receive no further referrals from Stern. The company, whose businesses have included processing, servicing and title operations, has already laid off much of its workforce.

A lawyer for Stern did not immediately respond to a request for a comment on Monday.

DJSP shares traded down 7 cents, or 29.2 percent, at 17 cents in morning trading on the Nasdaq, after falling as low as 15.5 cents. They traded as high as $13.65 last April.

Stern's firm is among several being investigated by the office of Florida Attorney General Pam Bondi over whether documents they submitted in foreclosure cases were defective.

Major mortgage companies, including Fannie Mae and Freddie Mac, stopped doing business with Stern.

Florida media last month said Stern was trying to sell some luxury assets, including homes and a yacht, worth millions of dollars. He resigned as chief executive of Plantation, Florida-based DJSP in November.

(Reporting by Jonathan Stempel in New York, editing by Maureen Bavdek and John Wallace)


It’s Time To Pay The Piper!

Vicki Needham from The Hill reports on massive fines that Wells Fargo and Bank of America may face as a result of improper foreclosures. Ms. Needham reports that regulators may seek over $20B in damages. The basis behind the proposed fines revolves around improper paperwork and “whether banks violated fair-lending laws.” It’s unfortunate that these banks simply didn’t do the right thing in the beginning. Short cuts will always catch up to you!

Banks could face billions in fines over foreclosures

By Vicki Needham

Two of the nation's largest banks may face billions in potential fines or enforcement actions from state and federal regulators over allegations of improper foreclosure paperwork.

Wells Fargo & Co. and Bank of America say they're being investigated by several government agencies over their foreclosure practices.

Regulators could seek upward of $20 billion in penalties for problems with the foreclosures, which would come from the Treasury Department and Department of Housing and Urban Development, is still in the works, according to several news reports.

In a filing with the Securities and Exchange Commission, Wells Fargo said the investigations are centered around whether the bank violated fair-lending laws and followed proper procedures with its foreclosure affidavits.

"With regard to the investigations into foreclosure practices, it is likely that one or more of the government agencies will initiate some type of enforcement action against Wells Fargo, which may include civil money penalties," the company said in its filing. "Wells Fargo continues to provide information requested by the various agencies."

The bank also said there are seven class-action suits and several individual-borrower actions have been filed against it, which focus on problems with foreclosure paperwork, which could lead to losses as high as $1.2 billion.

"Specifically, plaintiffs allege that Wells Fargo signers did not have personal knowledge of the facts alleged in the documents and did not verify the information in the documents ultimately filed with courts to foreclose," Wells Fargo said in the filing.

Bank of America also said the investigations could lead to “significant legal costs,” according to its annual report to the SEC.


I Knew There Were Some Smart People in Our Government!

Phil Mattingly from Bloomberg reports on what I believe to be a fresh start to recovery. That start involves the proposed elimination of anti foreclosure programs that President Obama has put in place. The article goes on to say, ““In an era of record-breaking deficits, it’s time to pull the plug on these programs that are actually doing more harm than good for struggling homeowners,” Representative Spencer Bachus of Alabama, the chairman of the panel, said today. “These programs may have been well-intentioned but they’re not working and, in reality, are making things worse.”

The bottom line is that the programs have not met the expectations that were set forth by their sponsors. So, it’s time to move on.

U.S. House Republicans Move to End Foreclosure Aid Programs

By Phil Mattingly

U.S. House Republicans plan to move forward with bills that would end anti-foreclosure programs put in place by the administration of President Barack Obama, saying they are doing more harm than good.

The House Financial Services Committee will consider bills next week to terminate four mortgage assistance programs, including the Treasury Department’s Home Affordable Modification Program, or HAMP.

“In an era of record-breaking deficits, it’s time to pull the plug on these programs that are actually doing more harm than good for struggling homeowners,” Representative Spencer Bachus of Alabama, the chairman of the panel, said today. “These programs may have been well-intentioned but they’re not working and, in reality, are making things worse.”

While the Treasury Department reported that more than 30,000 homeowners permanently lowered their mortgage payments in December as participation in HAMP accelerated, the program has failed to reach Obama’s goal of helping 3 million to 4 million homeowners avoid foreclosure. Troubled borrowers continue to fall out of the program at a faster rate than they join. A total of 58,020 loan modifications had been canceled through December, according to the Treasury.

“While we cannot prevent every foreclosure, it is important to remember that these programs have helped to create more options for affordable and sustainable assistance than have ever been available before,” Tim Massad, the acting assistant Treasury secretary for financial stability, said in a Jan. 31 statement on the program.

‘Anemic’

The results have been criticized by housing advocates, lawmakers and watchdog groups, including Neil Barofsky, special inspector general for TARP, who in a January report, called the results “anemic” and “remarkably discouraging.”

Republican Representatives Jim Jordan of Ohio and Patrick McHenry of North Carolina last month introduced the bill to terminate HAMP.

The panel also will mark up bills that would terminate the Federal Housing Authority Refinance Program, funding for the Emergency Homeowners Relief Program and the Neighborhood Stabilization Program.

Lawmakers in the Democrat-controlled Senate have not introduced companion legislation.


The Farce Called "Mediation"

Kimberly Miller from the Palm Beach Post reports on what I believe to be another case of our elected officials checking a box so they can report back to their superiors that they gave it the good ole college try!

The Florida Supreme Court felt that mediation could be used as tool to settle pending foreclosure lawsuits. The problem that Ms. Miller points out is that “..... Lenders and their attorneys are stifling the system by pressuring negotiations to end in a stalemate.” In other words, lenders are going through the motions (when they show up) of mediating pre foreclosures but not taking any action.

Ms. Brown reports, “In some cases, mediators report that deals were struck for trial payment plans or to seek a loan modification, but that banks or their attorneys asked for the meeting to be recorded as an impasse.

The motive for a deadlock, homeowner advocates say, is money. Declaring a different outcome stalls the process and could mean a return to mediation if an agreement falls through. At the same time, several of the state's large foreclosure law firms also run title companies, which can pick up business when a home is repossessed.”

The purpose of mediation is for two parties in dispute to reach a mutually agreeable and beneficial solution to a problem. Mediations only work when both parties are open minded and willing to compromise. When you have lenders that participate in mediations just to say that they did, there is little chance for success.

Foreclosure Mediators: Banks Pushed Us to Fail

By KIMBERLY MILLER

Palm Beach Post Staff Writer

Florida's Supreme Court sought a foreclosure lifeline in forcing banks and borrowers to mediation. It was hoped a judicial referee could help unclog court dockets and free struggling borrowers.

But in documents obtained by The Palm Beach Post and described in a recent court order, mediators complain lenders and their attorneys are stifling the system by pressuring negotiations to end in a stalemate.

In some cases, mediators report that deals were struck for trial payment plans or to seek a loan modification, but that banks or their attorneys asked for the meeting to be recorded as an impasse.

The motive for a deadlock, homeowner advocates say, is money. Declaring a different outcome stalls the process and could mean a return to mediation if an agreement falls through. At the same time, several of the state's large foreclosure law firms also run title companies, which can pick up business when a home is repossessed.

An estimated 350,615 foreclosures clog Florida courts. Many experts argue it is not until those cases clear that Florida's economy and real estate market will rebound. The mediation program, which is only for homesteaded properties, was designed to reduce judicial workload and give borrowers a chance to save their homes.

More than a year after mediation became a required step, however, barriers including the impasse complaints and trouble contacting borrowers have limited the program's success.

A December report on seven of Florida's 20 circuit courts found just 6 percent of homeowners referred to mediation left the negotiating table with an agreement. One mediation management company says that agreement rate is lower than reality because of how mediations are tallied.

The program has seen similar results in Palm Beach County. Between July and September, 1,949 foreclosures were referred to mediation. Of those, 152 mediations were conducted, with 27 ending in a written settlement.

"Settlement in these cases is not in the economic interest of the foreclosure law firms or servicers handling the foreclosures," said Boca Raton foreclosure defense attorney Ron Kaniuk of Ricardo, Wasylik & Kaniuk. "The law firms not only do the foreclosure work, they do the evictions and the bank-owned home sales and the title work, so if they modify a loan, if they come to a settlement and the foreclosure case ends, their work ends."

According to state business records, at least three of the law firms facing inquiry or investigation by the Florida Attorney General's Office are directly tied to title companies. Kahane & Associates in Plantation, the Law Offices of Marshall C. Watson, and the Law Offices of David J. Stern have title agencies with the same registered agents and same operating addresses.

The attorney representing Stern said he had no comment for this story. The other firms did not respond to messages.

In November, the state Supreme Court changed the reporting form used by foreclosure mediators by removing the option for impasse. The new form allows for three endings : a partial or full agreement, no agreement or adjournment. An adjournment leads to a follow-up mediation, which is scheduled on the spot at no extra cost. Mediations cost $750 and are paid for by the lender.

Because mediations are confidential, detailed accounts of the meetings are forbidden.

The court gave no explanation for the change, noting only that "some managed mediation programs have reported that mediators have been pressured to report an impasse of mediation when an adjournment would be appropriate."

Similar concerns also were included in a September memo to Chief Justice Charles T. Canady from the state courts administrator. She wrote there had been complaints of bank attorneys halting mediations by requiring documents beyond what is required in the Supreme Court order.

Shari Olefson, a Fort Lauderdale real estate attorney who represents banks, agreed that it's in the best interest of the bank to get an impasse if a written agreement can't be reached.

"The lender knows unless they are actively foreclosing that time is on the side of the borrower," Olefson said. "The borrower will ask for another six months to sell the property, but they're not paying the mortgage in those six months."

Olefson blames disorganization and lack of communication between lenders and their attorneys for some of the problems with mediation. Paperwork gets lost, young attorneys who aren't handling the daily dealings of the case are assigned to mediate it, and bank representatives may not have authority to do much negotiation. But borrowers are also culpable, she said.

"The whole mediation system is so people feel they are being given a shot to be heard," Olefson said. "Not all banks are horrible, and maybe the homeowner made mistakes and shouldn't stay in the house."

Lisa and Mitchell Glogower of Jupiter know they've made financial missteps. Mitchell, a chiropractor, retired in 2000 and later lost big in the stock market. A refinanced mortgage put them further in the hole, and now Mitchell is having trouble finding a well-paying job. Lisa's salary as a second-grade teacher isn't enough to pay the mortgage.

The couple had hoped a September foreclosure mediation would lead to a loan modification. They were wrong.

"We figured OK, finally, people want to help the homeowners, but that was not the case," said Lisa Glogower, whose foreclosure was handled by the Marshall C. Watson firm. "I got the impression the mediation was just a set of questions they had to ask and we answered. It was not individualized. It was cut and paste."

And it was declared an impasse.

The Glogowers' home is scheduled to sell at foreclosure auction March 14.

Mediation numbers

Palm Beach County's required foreclosure mediation program began in July, although judges could order cases to mediation before that.

1,949 cases referred between July and September

453 borrowers were reached

212 mediations scheduled

152 mediations held

14 borrowers failed to appear at mediation

3 lenders failed to appear at mediation

27 written agreements were made at mediation

125 mediations closed without agreement

217 cases still pending

Source: Palm Beach County Bar Association


The Valley is Still Hot!

Pete Carey from the San Jose Mercury News reports on what we all knew was coming. The government types took pleasure at reporting that the housing market had “turned the corner” during January stating that the number of foreclosures had dropped. As Mr. Carey reports, foreclosures are back with a vengeance in the Silicone Valley!

The “blip” that the government hung their hats on resulted in the robo signing (i.e. Falsification) of foreclosure documents. This scenario caused banks to stop foreclosing for a small window of time. Mr. Cary reported that the foreclosures are at 2008 levels. He also expects the volume of foreclosures to continue to rise.

My guess is that this trait is prevalent throughout the US especially in the harder hit markets.

Silicon Valley real estate: Foreclosure lull ends in Santa Clara County

By Pete Carey

After a two-month lull because of a national paperwork scandal, foreclosures in Santa Clara and San Mateo counties in January returned to levels that have prevailed since 2008, indicating the crisis will continue this year but also putting more low-priced homes on the market.

Last month's increase in foreclosures may be followed by bigger increases in the next few months, according to some real estate professionals.

In Santa Clara County in January, 398 home were either repossessed or sold by lenders to third-party buyers, a nearly 70 percent jump from the month before, according to real estate information service ForeclosureRadar. San Mateo County had 160 foreclosures in January, a 75 percent jump from December.

But the slide into foreclosure can be a long one. According to ForeclosureRadar, it takes an average of 292 days from the time a bank files a notice of default to the actual sale of a home on the courthouse steps.

Ingeborg Dale, 77, an artist who is dealing with diabetes, heart problems, cancer, arthritis and an impending foreclosure, said her son hasn't been able to make a payment on her Santa Clara townhouse for a year and a half. She let him take out a loan on her home, which she has lived in since 1963 and which was paid off at the time.

"He lost his job, got a heart attack and four ulcers. With no job, he can't afford to pay. They tell me they are selling it March 18," she said.

'Very frightening'

"It is very frightening when you are my age," she added. "I have quite a few friends willing to give me a room, but I have two little dogs. They are my children."

Dale said she is working with Project Sentinel, a nonprofit housing counseling agency in Sunnyvale. "It was supposed to be foreclosed on Jan. 12, but they got it stopped until March 18," she said.

While foreclosures come with the pain of someone losing their home, the houses that end up on the market can offer first-time buyers a crack at homeownership.

"This will give us some fresh inventory of low-cost homes come this spring," Sean O'Toole of ForeclosureRadar said of the January increase. "That's good and could help home sales. It's not going to be a lot, because the volumes aren't that high, but this back-to-bank inventory tends to be pretty popular among buyers."

According to ForeclosureRadar, in January there were 2,420 bank-owned homes in Santa Clara County and 3,900 others in which the banks have told the owners the home is to be auctioned. In San Mateo County, 1,116 homes are owned by banks and 1,459 others are scheduled for sale. More than 5,500 homeowners in the two counties have fallen three or more months behind on their mortgage payments.

For auctioned homes, the winning bid was an average $400,000 in Santa Clara County and $458,000 in San Mateo County, according to ForeclosureRadar.

The increase in foreclosures brings them back to about where they were at the end of last summer, before "robo-gate" -- a scandal over bank paperwork -- caused major lenders to halt foreclosures. O'Toole said an expected backlog of two months of delayed sales has not materialized.

"I wouldn't sound an alarm over these increases," O'Toole said. "It's really just stuff returning to normal."

Homes to hit market

Even so, thousands more homes are waiting to hit the market. "There is a crazy number of people we're talking to that are over 12 months behind on their mortgage payments that have not been foreclosed on yet," Dominic Nicoli of Intero Real Estate said. Nicoli does foreclosure sales for several major lenders, including Bank of America.

"We had not gotten any new listings in three months and we got two last week," Nicoli said. "They are definitely accelerating evictions."

While banks are foreclosing on properties again, it's still a smallish part of the overall market for homes, said Richard Calhoun of Creekside Realty in San Jose.

Calhoun said foreclosure resales are normally about 15 percent of homes sold in Santa Clara County, although that increased to 24 percent in January.


Can You Say, "FUTURE LAWSUITS!!!???”

Peter Franceschina from the Orlando Sentinel reports on how attorney David Stern is unloading real estate and a multi million dollar super yacht. This implosion is due to issues with his law firm.

While most of the article details the perceived value of the “assets” that Stern is unloading, a bigger message is present. That message is, “If you try to take shortcuts in life, you may prosper in the short term but will eventually fail in the long run.” I run into real estate agents who try to take short cuts by simply handing over their short sale negotiations to title companies. Title companies do short sales in order to get the the title work (plain and simple). The issue is that by following this path, realtors may get short sales processed....and they may collect their commissions (these are all short term gains)....the long term fallout of NOT having an attorney involved in the negotiations AND representation of the seller will be lawsuits.

It’s my opinion that brokers and realtors who are not using attorneys in this fashion will get sued. Just like law firms are popping up everywhere to provide foreclosure defense, as the volume of foreclosures drops off these same law firms will setup shop suing brokers, realtors and title companies. This may sound harsh to those realtors and brokers that are reading this, but it is reality (in my opinion).

If you are not using attorneys in this fashion, call me or email me. I will let you know how we buy short sales.

Foreclosure attorney Stern selling Hillsboro Beach estate properties - and perhaps a super yacht

Luxury assets are worth tens of millions

By Peter Franceschina, Staff Writers

In yet another sign that times are tougher for Plantation foreclosure attorney David Stern, he is looking to unload luxury assets worth tens of millions, including two estate properties on Hillsboro Beach that stretch from the Intracoastal to the blue waters of the Atlantic and what is believed to be his Italian-built super yacht.

Stern, 50, made a fortune by building Florida's largest foreclosure legal practice, with an army of attorneys and more than 1,000 employees processing paperwork for repossessions throughout the state.

He received a $58.5-million payout last January when he took his paperwork operation public and the new company, DJSP Enterprises, began trading on the Nasdaq stock exchange. He collected expensive properties, Ferraris and other luxury cars, and two jets.

But his law firm and DJSP have been battered in recent months by reports that his firm relied on fraudulent documents generated by the paperwork processors, and the firm is one of seven currently under investigation by the Florida Attorney General's Office for alleged document irregularities.

Major banks stopped doing business with him, lawyers quit his firm and DJSP laid off its workers by the hundreds. The company had only approximately 50 employees remaining as of last notice.

What is reported to be Stern's 130-foot yacht, Misunderstood, is listed for sale for $18 million at The Yacht & Brokerage Show on Miami Beach. The side-by-side properties on Hillsboro Beach are listed for a total of nearly $20 million. And a vacation chalet outside the ski-resort town of Vail, Colo., has been for sale for $6.9 million since last year.

Miami attorney Jeffrey Tew, who represents Stern, said he had no knowledge about the assets being listed for sale. "I can't comment on it," Tew said Friday. "It's private business, not a legal matter."

Even if Stern sells those assets, he still will own a $15-million, 16,000-square-foot mansion on the Intracoastal in Fort Lauderdale and a 9,000-square-foot penthouse condominium valued at $5.9 million atop the Ritz Carlton on Fort Lauderdale Beach.

The Mangusta yacht, which used to be berthed at Stern's Intracoastal mansion in Fort Lauderdale, was built in 2009. An online listing reads: "Immaculately maintained by a careful owner, this superyacht accommodates eight guests in four cabins and cruises at 32 knots, powered by twin 4610hp MTU engines. Available to view at the Miami Yacht Show, Misunderstood is asking $18 million."

The Misunderstood is the centerpiece of the opulent sales pavilion at the yacht show for Overmarine, the Italian company that produces the Mangusta line, even though her sale is being handled by brokerage company Camper & Nicholsons International in Fort Lauderdale, which has its own space at the show. Overmarine has placed white, modern sofas on the dock immediately behind Misunderstood, and requires guests to check their bags and take off their shoes before boarding for a tour.

Inside, the boat features four staterooms paneled in finely grained wood, each with its own marble trimmed bathroom. There is an exercise room, with two treadmills, and a separate marble-topped bar on the rear deck. Two large compartments in the stern, flanked by twin staircases that descended to the rear platform, house cinnamon-colored personal watercraft.

One of the Hillsboro Beach properties is vacant land, but it is listed for more than the neighboring property with an oceanfront home because the empty lot is significantly larger. The land is listed for $9.9 million,about $1 million more than Stern paid for it in September 2008, records show.

Its listing online reads, "The trophy of all South Florida! Deep lot on Hillsboro Mile, the most amazing ocean-to-intracoastal estate property. No wake zone at the mouth of Hillsboro Inlet, a yachtsman's dream. Build your dream estate!"

The two-story home next door meaasures 5,300 square feet and has four bedrooms and four bathrooms. The listing says the owner will consider offers between $8.9 million and $10.5 million. Stern paid $8 million for the home two days after buying the neighboring property, records show. Taxes on both properties run more than $120,000 a year apiece, and they were both listed for sale in late November.

The listing calls the home, "One of the Largest & Most Amazing Ocean to Intracoastal Estates in All of South Florida! Hampton-like oceanfront home with 100 ft. on the beach and buildable guest house on the Intracoastal. Spectacular private tennis court, resort-style pool, patio with pavilion. Private dockage for large yacht on ICW NO-WAKE Zone."

The home outside Vail is owned by Stern's wife, Jeanine, and the listing price was dropped by $1 million in September. It is 8,300 square feet and has six bedrooms and seven bathrooms. The master bath has a stone fireplace. Jeanine Stern bought the home for $5.9 million in December 2001, records show.

Its listing reads, "The time is now and it's priced to sell! Ideal location, floor plan, and slope views. The perfect meshing of mountain rustic charm and family function. The main level is wonderfully open from the kitchen & hearth room to the great room and dining area. An extraordinary master bedroom suite includes two fireplaces, expansive his/her vanities & closets and a deck with slope views."


The Truth About Servicing Companies

Prashant Gopal and Lorraine Woellert from Bloomberg have written an article about how loan servicing companies play a role in the “oh” so popular foreclosure crisis. There are changes looming for servicing companies. According to the article, “Changes being studied include a new fee structure for servicers, independent reviews of rejected requests to ease loan terms and a fund to compensate victims of improper foreclosures, according to Bair and other federal and state regulators. Lawmakers have proposed reining in the privately run Merscorp Inc., even as the company says it could serve as a national mortgage registry.”

To be clear, “Servicers collect monthly mortgage payments, and may modify or foreclose on a loan in a default. They often don’t own the loans they are servicing. Servicers have an incentive to push for foreclosure, which can generate additional fees, and they also can charge borrowers when they are late making payments, giving them a reason to delay loan modifications. Accounting rules allow banks that foreclose to hold off writing down any loss until the home is sold. They must take the loss immediately when allowing a sale by the owner for less than value of the mortgage.”

While the rest of the article is very good, real estate professionals must fully understand the last paragraph in its entirety. People will complain about the length of time it takes to get a short sale approved...guess what…the longer it takes the more servicing companies get paid. People complain about “banks” being unreasonable in the valuation of short sales...guess what...the longer they drag out the inevitable (even if its a foreclosure) , the longer they can put off the write down. In fact, they don’t have to write down the bad asset until the house is sold. This is the reason that lenders are holding such an enormous inventory of foreclosed homes (aka the shadow inventory)....they don’t want to absorb the bad debt.

U.S. Regulators Target Loan Servicers to Fix Foreclosures

By Prashant Gopal and Lorraine Woellert

TMortgage modification events may be held more often as loan servicers try to cut the number of foreclosures.

U.S. mortgage servicers face a new era of tighter oversight as regulators seek to cut the number of botched foreclosures and increase loan modifications for struggling borrowers.

The industry, which oversees $10.6 trillion in loans, has been overwhelmed by more than 3 million foreclosures since 2006. The housing-market collapse exposed failures — in the way servicers are paid, track loans and process property seizures — that threaten to stall a fledgling rebound in prices and sales.

“If we fail to act decisively now to deal with the foreclosure crisis, we risk triggering a double-dip in U.S. housing markets,” Sheila Bair, chairman of the Federal Deposit Insurance Corp., said in a Jan. 19 speech to mortgage-industry executives in Washington. “The problem is serious, and the need for action is urgent.”

Changes being studied include a new fee structure for servicers, independent reviews of rejected requests to ease loan terms and a fund to compensate victims of improper foreclosures, according to Bair and other federal and state regulators. Lawmakers have proposed reining in the privately run Merscorp Inc., even as the company says it could serve as a national mortgage registry.

While regulators are in the early stages of their work, any changes probably will raise the cost of servicing loans, which would mean higher costs for homeowners. The reforms are in part a response to a long list of court cases that showed banks trying to foreclose using shoddy documentation or without being able to demonstrate they had the standing to do so.

Competing Foreclosures

Until last week, Jacqueline Yulee was defending her Jacksonville, Florida, home against foreclosure by two banks, each claiming it owns the $213,750 mortgage she signed on Halloween in 2003.

Wells Fargo & Co., based in San Francisco, filed its complaint against the 58-year-old insurance agent on April 14, more than a year after Minneapolis-based U.S. Bancorp started its proceedings. The companies are trustees for investors in two separate mortgage pools, and her loan couldn’t be held by both at the same time. Last week, after being asked about the dueling foreclosures, Wells Fargo withdrew its lawsuit.

The second suit shouldn’t have been filed, said Ron Bendalin, general counsel at Irving, Texas-based Vantium Capital Inc., whose Acqura Loan Services business is servicing the mortgage for Wells Fargo. The loan was sold to the Wells Fargo trust on Feb. 3, 2010, and the trust should have replaced the plaintiff in the first case, he said.

“I think we put too much trust in banks,” said Yulee, who stopped paying her mortgage two years ago after losing a previous job. “We assume they know what they’re doing.”

Overreaction Feared

The Mortgage Bankers Association, the industry’s Washington-based trade group, is seeking a role in developing new rules and has put together a panel of executives to study proposals, Chief Executive Officer John A. Courson said.

“Anytime you see a situation like this it will typically result in regulation and oversight,” Courson said in an interview. “All of us agree the process would need improvement, but what you don’t want to do is overreact.”

Servicers collect monthly mortgage payments, and may modify or foreclose on a loan in a default. They often don’t own the loans they are servicing. The four biggest companies by portfolio size — Bank of America Corp., Wells Fargo, JPMorgan Chase & Co. and Citigroup Inc. — service about half of home loans by value, according to data from news website Mortgagedaily.com.

Industry revenue is based on the size of the loan, not the cost to manage. That means servicers make less money on delinquent or defaulted loans, which are more expensive to administer.

Foreclosure Incentives

Servicers have an incentive to push for foreclosure, which can generate additional fees, and they also can charge borrowers when they are late making payments, giving them a reason to delay loan modifications. Accounting rules allow banks that foreclose to hold off writing down any loss until the home is sold. They must take the loss immediately when allowing a sale by the owner for less than value of the mortgage.

While the flat-rate fee system worked when the market was rising, it failed during the meltdown, Federal Housing Administration Commissioner David Stevens said in an interview. One alternative would be to impose fees that vary with the cost of servicing a loan, he said.

“Servicers’ lack of reserving appropriately and not creating infrastructure to manage nonperforming markets like the kind we’re in is inexcusable,” Stevens said. “You cannot overstate the concern” among regulators that the industry doesn’t have enough capital, he said.

The FHA can impose triple damages on servicers that violate its rules on handling foreclosures.

Bair’s View

The FDIC’s Bair is also calling for variable fees.

Banks, which are typically paid 0.25 percent of the principal balance to service a loan, “created perverse incentives to automate critical servicing activities and cut costs at the expense of accuracy, reliability and currency of loan documents and information,” she said in written testimony for a Senate hearing last month on housing.

Bair this month proposed giving borrowers the right to an independent, third-party appeal of requests to modify loan terms when they have been denied. She also suggested that servicers fund a foreclosure commission — modeled after the one formed to distribute money to victims of BP Plc’s Gulf of Mexico oil spill last year — to resolve borrower complaints.

Disagreement on Timing

Edward DeMarco, acting director of the Federal Housing Finance Agency, on Jan. 18 directed Fannie Mae and Freddie Mac to work with the Department of Housing and Urban Development to consider alternatives to flat servicing fees.

Fannie Mae and Freddie Mac,the two largest mortgage- finance companies, were taken over by the government in 2008 and are overseen by the FHFA. New rules wouldn’t be implemented until mid-2012 at the earliest, DeMarco said in a statement.

The U.S. Treasury Department endorsed DeMarco’s approach, while Bair said more rapid change is required. She wants to include new mortgage-servicing standards in risk-retention rules required by the Dodd-Frank Act that are being written now, a position that puts her at odds with the mortgage industry. She has support from consumer groups and state regulators including New York Banking Superintendent Richard H. Neiman.

Flawed Files

Regulators stepped up their scrutiny of the industry after evidence emerged in court cases of bank employees and contractors submitting hundreds or thousands of affidavits weekly to support foreclosures without proper review. The so- called robo-signers were papering over a bigger problem: loan files marred by erroneous, incomplete or missing information, according to Thomas Adams, a partner at New York-based law firm Paykin Krieg & Adams LLP and former executive at bond insurers Ambac Financial Group Inc. and FGIC Corp.

Shortcomings have included promissory notes or mortgages that are missing or not properly assigned or endorsed as securitized loans are bought and sold. Maintaining an accurate chain of title is crucial because it shows who has the right to foreclose when the loan goes into default, Adams said.

“They didn’t bother to document all the traveling,” Adams said. “To foreclose they had to fill in all the steps that happened three years earlier.”

Agencies including the Federal Reserve and FDIC began investigating the industry in September, more than three years after foreclosures started to surge. All 50 state attorneys general announced their own probe the following month.

Iowa’s Miller

The attorneys general, who initially began investigating the use of robo-signers, have said they plan to address the loan-modification process in settlements with major servicers. They may push to bar foreclosures when borrowers are already seeking modification and to create a fund to compensate victims of wrongful foreclosures.

Iowa Attorney General Tom Miller said in an interview this month that additional issues, such as whether borrowers are being charged appropriate fees, may be included in any settlement.

Michael Waldron, a partner at Washington-based lobbying firm Patton Boggs LLP, which has represented mortgage companies in meetings with the attorneys general, said state officials will get the most immediate and “impactful reform” because they can seek sanctions such as fines.

“There will be reform through investigation and findings,” Waldron said. “Some of those will result in settlement agreements with monetary penalties of significance.”

MERS Role

While regulators are focused on servicers, U.S. Representative Marcy Kaptur has proposed legislation to curb the role of Merscorp, the Reston, Virginia, company formed in the mid-1990s by the industry to track servicing rights and beneficial ownership of loans. Many large servicers log the changes on the private database run by its Mortgage Electronic Registration Systems Inc. unit rather than filing mortgage assignments with county records offices. The system has allowed the industry to save at least $2 billion in filing fees.

Kaptur, a Democrat from Ohio, introduced a bill in November to prohibit Fannie Mae, Freddie Mac and Ginnie Mae from owning or guaranteeing any mortgage for which MERS is the mortgagee of record. The House didn’t act on the legislation, and Kaptur plans to push it again this year.

Diverging Views

Consumer advocates have said that MERS, which has 60 percent of newly originated loans on its system, masks the real owner of a loan and is subject to lapses and mistakes because it isn’t authoritative or transparent. Judges nationwide have issued diverging opinions on whether MERS can act as the nominee, or agent of the lender on the mortgage.

“For the first time in the nation’s history, there is no longer an authoritative public record of who owns land in each county,” Christopher Peterson, a University of Utah law professor, wrote in a recent paper on the electronic-tracking system.

In a statement, MERS said there has never been a requirement that assignments be filed with local land offices and that its system shows the beneficial owner of loans.

MERS was designed to “build upon and supplement, but not displace, the existing public land-record system,” the company said in the e-mailed statement. “The MERS process creates accountability and transparency, helps keep costs low, reduces the risk of errors in record-keeping and makes it easier to keep track of the lien if a loan is sold to other banks and investors.”

National Registry

Kaptur’s bill includes a proposal for a HUD study of changes including the feasibility of a federal title-recording system for property transfers. MERS says it could provide such a national system.

MERS could be “harnessed by Congress and the industry to improve the mortgage finance system,” R.K. Arnold, its president and CEO, told a House subcommittee in November. Arnold retired this month.

All residential home loans should be tracked on a national database that would include the name of the borrower and servicer, the location of the property and the owner and physical location of the promissory note, he said.

Regulators waited too long to address the servicing industry’s failures, said Julia Gordon, senior policy counsel in Washington for the Center for Responsible Lending, which seeks to prevent abusive financial practices. The volume of foreclosures, the dual role of banks as servicers and lenders, and complaints by consumer advocates should have prompted an investigation years before the robo-signing scandal, she said.

Consumers or Banks

The Office of the Comptroller of the Currency, which has long had full-time examiners onsite at large banks, relied on the firms’ internal controls and audits to ensure federal and state foreclosure laws were being followed, Bryan Hubbard, a spokesman for the agency in Washington, said in an e-mail.

“The dependence on internal audits and controls failed to identify these issues as the volume of foreclosures increased rapidly during the past few years,” Hubbard wrote.

Kurt Eggert, a professor at the Chapman University School of Law in Orange, California, said it isn’t clear whether regulators will make changes that benefit consumers.

“My fear is they’re going to see how they can fix this to save the banks rather than fix it so borrowers aren’t abused by servicers,” he said.


More Foreclosures Headed To Market In 2011

Mark Huffman from ConsumerAffairs.com reports on another blockbuster year for the foreclosure departments at our friendly neighborhood bank! Over 2.9M houses were foreclosed on in 2010, even after there were foreclosure moratoriums during the last month of the year (due to the robo signing debacle). 2011 is shaping up to be an even bigger year for foreclosures. As a result, the investors that are foreclosing will continue to suck up a massive inventory of foreclosed homes which will continue to hammer the housing market.

If you really think that we are nearing the end, think again! Simply look at the facts!

More Foreclosures Headed To Market In 2011

Fannie Mae and Freddie Mac have a huge inventory

Mark Huffman | ConsumerAffairs.com

The recent report that foreclosure filings hit a record high 2.9 million last year might lead you to believe that the worst is over. Especially since the monthly foreclosure totals began to fall late in the year.

But that might be a misreading of the data, analysts say. Foreclosure actions fell late in the year, in large part, because banks slammed on the brakes in the wake of the robo-signing scandal. The pace could pick up again in 2011 -- with a vengeance.

RealtyTrac, the private firm that tracks and markets foreclosures, predicts buyers will have plenty of opportunities to snap up bargain-priced foreclosures in the coming year. The reason?

A large number of foreclosed homes, owned by Fannie Mae, Freddie Mac and HUD, are headed to market. Not only are the prices low, but the owners are also throwing in incentives, like preferred financing.

"The cherished account right now is Fannie and Freddie," said Tom Moon, a Fannie Mae and Freddie Mac approved broker with Pacific Moon Real Estate in Orange County, Calif. "Any broker would like to have Fannie and Freddie because they seem to have the most properties right now."

Fannie and Freddie properties tend to be lower-priced, entry-level housing that, when it goes up for sale in a foreclosure, is priced even lower. RealtyTrac notes that, in the hard-hit housing market of Orange County, Calif., that's what is attracting the bulk of active buyers.

Second quarter reports from Fannie and Freddie show the two government sponsored enterprises (GSEs) are acquiring real estate owned (REO) properties through foreclosure at a significantly faster pace than overall growth in REO activity based on RealtyTrac data.

Fannie Mae took ownership of 68,838 REO properties in the second quarter of 2010 -- an increase of 114 percent from the second quarter of 2009 -- and Freddie Mac took ownership of 34,662 -- a 58 percent increase from the previous year.

That compares with a 38 percent in REO activity during the same timeframe, according to RealtyTrac.

Then there's HUD, which acquired more than 23,000 foreclosed properties through sour FHA loans. The result, analysts say, is a large inventory of homes with a very motivated seller -- the U.S. Government or a GSE.

If the foreclosure tsunami hasn't yet peaked, it could mean another tough year for those trying to sell a home, but even better selection of bargains for buyers.


Foreclosures Boost Commercial Real Estate Sales!

Carlton Procter from PNJ.com reports on the effect that foreclosures have had on commercial real estate sales. Specifically, he discusses how foreclosed commercial properties have amped up the overall sales of commercial properties in Pensacola Florida. That said, it is the authors opinion that sellers (banks or distressed owners) are still valuing their properties at a higher price than market. As a result, buyers are sitting on the side lines until prices become more realistic. Does this sound familiar? Sounds like residential real estate a few years ago.

Foreclosures Boost Commercial Real Estate Sales

With tighter credit demands from lenders and an oversupply of available properties, sales of commercial real estate in Pensacola continue to be sluggish at best.

Still, in overall dollar value, the top 10 commercial sales in 2010 doubled those of 2009 — totaling about $60 million compared to the previous year's $27 million.

Leading the way in commercial sales are properties that have been foreclosed upon.

"We are doing a lot of work in that area, with multi-family residential leading the way," said Justin Beck of Beck Property Co. "It's easiest to get financing these days for multi-family properties."

Three entities of J.I. Kislak Inc., of Miami Lakes, paid a total of $11.5 million cash for three apartments that went into foreclosure last year and were owned by Miami-based Ocean Bank.

The three, with a total of 481 units, are:

• Villas at Jasmine Creek on East Nine Mile Road. It was purchased for $6.5 million, down from $14 million at the last sale in 2006.

• Villas at Jasmine Park on North Ninth Avenue. The cost was $2 million.

• Villas at Jasmine Fields on West Fairfield Drive. It was purchased for $3 million, less than half of the $6.5 million purchase price in 2006.

"We own the Ashley Club and Arbor Club apartments in Pensacola and have been operating them successfully," said Thomas Bartelmo, the president and CEO of J.I. Kislak. "So, we are very familiar with the market there and had been looking for opportunities to buy distressed properties. We feel like we got the three properties at a price where we can make some money."

Two of the three apartment complexes only are 50 percent occupied, Bartelmo said. But he believes with renovations, effective marketing and management, those numbers will improve.

He also said the company's investment in Pensacola will be a significant shot in the arm to the area's economy.

"We have all types of work to do there at those three properties, including roofing, asphalt, interior renovations," he said. "We're negotiating with various local vendors now, and at the end of the day, we will be putting a lot of people to work."

Market Still Struggling

Despite the investments made over the past year by J.I. Kislak Inc. and other national firms, commercial market sales still have a long road to recovery, according to local brokers.

Eight of Escambia County's 10 largest commercial sales in 2010 were to companies based in South Florida, Minnesota, Georgia, New York and Washington, D.C.

"There is still very little liquidity in the commercial marketplace," said John Griffing, owner of NAI Halford in Pensacola. "We are continuing to have some success with the leasing end of our business, but sales are different."

He said banks are generally lending only to those borrowers who actually are using at least half the property they intend to buy, not to investors.

"Users are the only buyer types who we are seeing have any success in borrowing money," Griffing said. "As far as speculative buyers, they are finding it very difficult to get the money to leverage deals."

He said the market also still is hamstrung by buyers waiting for already depressed commercial property prices to decline even further.

"We are seeing some interest in vacant commercial land, but the potential buyers are not quite pulling the trigger," he said.

Foreclosures CarrySales

Metro Market Trends President Al Muller said the commercial sales market over the past 12 months has been similar to the residential market — dominated to a large extent by foreclosures and short sales.

"The commercial guys I've talked to lately are doing many more leases than sales," he said. "These days, you can negotiate a lease for commercial property, and if you're not certain where the market is headed, it's a good way to go."

Beck said the Pensacola market must work its way through the inventory of distressed commercial properties before the overall market regains momentum.

For the commercial market to really get rolling again, he also said, sellers must start putting more attractive numbers on the table for investors.

"On the buy side of commercial properties in Pensacola, there is still an enormous chasm between buyers and sellers. Sellers have got to get more realistic on prices," he said.

"Nobody I talk to these days thinks there is going to be a major ramp-up or fast recovery in the market. I think we're going to see slow growth for a long time, and this will be the 'new normal' for the commercial market."


Massachusetts Foreclosure Ruling Threatens Mortgage Handling

The Supreme Judicial Court in Massachusetts made a pivotal ruling on Friday against U.S. Bancorp (NYSE: USB) and Wells Fargo (NYSE: WFC) in a mortgage foreclosure case. The higher court confirmed the lower court's ruling which invalidated several foreclosure sales because proof of mortgage ownership was not clear.

"This decision is going to raise serious problems in hundreds of thousands of foreclosure cases," said homeowner-defense attorney Thomas Cox, a Maine attorney. "It has the potential to require that foreclosures be done over, and I think there's going to be significant turmoil nationally. There's going to be major uncertainty."

Offering another view, American Home Mortgage Servicing, based in Coppell, Texas, said that the "decision is of limited applicability because it is based on law that is unique and specific to Massachusetts. The decision does not extend to foreclosures in other states." Perhaps not yet, but perhaps a precedent has indeed been set.

The confusion of ownership is a result of the transference of assets into mortgage-backed securities. Wells Fargo and U.S. Bancorp argued that securitization documents provided sufficient evidence proving that they owned the mortgages before the foreclosure sales occurred. The court deemed this insufficient. As foreclosures are rampant, implications of this ruling are widespread. What will happen to those who purchased homes in foreclosure?

The ruling in the case dictates that "any mortgage foreclosure which was initiated by a securitized trust at a time when the trust had not obtained a mortgage assignment which gave it the lawful right to do so is void," according to Paul Collier III, an attorney representing a homeowner in the case. The homeowner who was evicted still technically owns the home, according to the ruling.

Today, traders will be looking at Financial Select Sector SPDR (NYSE: XLF) to see the market impact of this ruling. XLF already took a dip early Friday from $16.42 to $16.04, before a correction to $16.22 at close. Of further interest will be individual banks, such as Bank of America (NYSE: BAC), which is down almost 1% in pre-market trading. JP Morgan Chase (NYSE: JPM), U.S. Bancorp (NYSE: USB), Goldman Sachs (NYSE: GS), took a similar dip alongside the financial ETF XLF.

Neither Benzinga nor its staff recommend that you buy, sell, or hold any security. We do not offer investment advice, personalized or otherwise. Benzinga recommends that your own due diligence and consult a certified financial professional for personalized advice about your financial situation.


FORECLOSURES ARE DOWN.....FOR NOW...

Brendan McLaughlin reports on a deceiving statistic reported recently from Tampa. In January there was a downward trend in foreclosures in the Tampa area. This is deceiving in that many lenders instituted foreclosure moratoriums during this period of time. In addition, banks are holding a tremendous number of foreclosed homes in their inventory (i.e. they have not been put on the market).

You may say, “So what?” The “what” is that as these foreclosed properties are released for sale, they will be released at depressed prices. Depressed prices while lower the market value of existing homes. Lowered market value will lead to decreased property value which will eventually lead to increased short sales and/or foreclosures.

I would suggest that this scenario is playing out throughout the US.

Home foreclosures are down, but people are still struggling to make their mortgage payments

Bank owned homes still pile up

S, foreclosures are rampant. But Florida and the Bay Area saw a sharp drop in new foreclosure filings by banks in January. It sounds like good news…until you talk to the experts.

Eddie Serralles is a jack-of-all real estate trades. He’s a real estate broker and agent, a mortgage broker and a general contractor working mostly in Ybor city and Tampa Heights.

“When I came to this market 20 years ago, there were so many abandoned homes and homes sitting vacant. It was a depressed market. It wasn’t good at all,” remembered Serralles. And he says it may be worse today, in part because banks are so slow to sell homes that are in foreclosure.

“The price keeps dropping, we keep on submitting offers and deals keep falling through and we keep making more offers and trying to cooperate with the lender. By the time they accept the deal, the buyer’s already gone and found another piece of property”.

Florida is one of five states along with California, Texas, Arizona and Michigan that accounted for more than half the foreclosures last month.

A new report shows the number of foreclosures in the Tampa Bay Area dropping by ten percent, but real estate consultant Peter K. Murphy of Home Encounter in Tampa believes that’s a temporary blip.

“We know for a fact that we have about eight months of foreclosure inventory on the market right now, but when you drive down the street and see a little sticker on someone’s window and no ‘for sale’ sign on the yard, that’s a property the bank is holding on to and not selling yet. And those are all over town,” said Murphy.

Banks are holding on to those properties because they don’t want to flood the market and drive prices down even more sharply. Experts expect a slow, gradual return to normalcy lasting four or five years.

But until then, there’s opportunity.

“When you can buy a piece of foreclosure real estate for a 53 percent discount from what a regular property sells for that’s an opportunity that every one of us should jump on board” said Murphy.


Tenants Rights??

Martin Eichner from the Los Angeles Times brings us an article that taught me something. Everyone knows that tenants have rights during the foreclosure process (see Protecting Tenants at Foreclosure Act). They also have rights after the house that they are living in has been foreclosed on. Where they don’t have as many rights is after a short sale has been completed.

According to Mr. Eichner, “The new owner taking title pursuant to the short sale becomes your new landlord and can decide to continue your tenancy or terminate it pursuant to the usual 30-notice period, or a 60-day notice period if you have been a tenant for more than one year.”

This is good information to have when tenants occupy house that is being sold short.

Tenants don't have foreclosure-act protections in short sales

Such a sale avoids completion of the foreclosure process. The new owner becomes a renter's new landlord and can decide to continue the tenancy or terminate it.

Question: I have rented a house for several years. The current owner told me that he is going through foreclosure. He says that he is about to conclude an agreement to allow a "short sale" of the property, which I understand allows the house to be sold for less than the amount of the mortgage. I thought there were special protections for tenants who are caught up in foreclosures. Are there any special protections for me if there is a short sale?

Answer: There is a federal law, the Protecting Tenants at Foreclosure Act, which gives additional rights to "bona fide" tenants living in a property that changes ownership due to a foreclosure. This law requires a minimum of 90 days' notice to month-to-month tenants after the foreclosure has been completed. Tenants who have a bona fide lease are entitled to remain until the lease expires.

These protections apply only after the foreclosure has been completed. In California, foreclosure is completed when a trustee sale has occurred, resulting in a new legal title to the person or company that purchased the property at the trustee sale auction. The current owner has no standing to control the trustee sale.

A short sale occurs as a result of a voluntary agreement among the current owner, the new owner and the lender, whose permission is required. The purpose of the short sale procedure is to avoid the trustee sale and find a new owner before the old owner's rights are extinguished by the trustee sale.

Unfortunately for you, this means that the additional protections of the foreclosure act will not be available to you because the foreclosure was never completed. The new owner taking title pursuant to the short sale becomes your new landlord and can decide to continue your tenancy or terminate it pursuant to the usual 30-notice period, or a 60-day notice period if you have been a tenant for more than one year.


Let’s Add More Layers!

Looks like Bank of America’s solution to their never ending foreclosure problem is to add more layers! The Los Angeles Times reports that BOA has named a foreclosure “Czar” (don’t you just hate that over used name........reminds me of our government.....we know where they have gotten us!) to head up this new unit. The article points out that analyst feel that the move clearly demonstrates that we are nowhere close to resolving foreclosure related issues.

BofA creates new unit, names foreclosure czar

Creation of a division to oversee problem home loans indicates that Bank of America, the largest U.S. mortgage servicer, is attempting to be more aggressive in resolving its portfolio of troubled loans.

Bank of America Corp appointed on Friday a new foreclosure and loan modifications czar, and created a new unit to oversee problem home loans in a bid to sort out its ongoing foreclosure issues, becoming the first large U.S. bank to do so.

The new unit creates a seventh major division at the bank reporting directly to Chief Executive Brian Moynihan, an indication that the largest U.S. mortgage servicer is attempting to be more aggressive in resolving its problem loan portfolio.

Analysts said the move is a signal that major U.S. mortgage lenders have not yet turned the corner on dealing with the problem home loans on their books.

"This is a significant step. If Bank of America has these issues, what kind of problems does everyone else have?" said Matt McCormick, a Cincinnati-based portfolio manager at Bahl & Gaynor Investment Counsel Inc.

The change splits the bank's mortgage business into two parts: one focused on current and new mortgages, and another dedicated to foreclosures and workouts.

Bank of America, the largest U.S. bank by assets, named Terry Laughlin to oversee the new unit, called legacy asset servicing. The division will have roughly 30,000 employees.

Laughlin, 56, is a former FleetBoston executive who joined the bank in July 2010 as a credit loss mitigation executive in the mortgage division.

The new unit will manage foreclosures and loan modifications, and will work to resolve mortgage repurchase claims from investors.

Last fall the bank temporarily suspended foreclosures after critics alleged the industry cut corners on foreclosure paperwork and used so-called robo-signers, employees who signed thousands of foreclosure notices without reviewing the documents.

Separately on Friday, the bank announced it was exiting the reverse mortgage lending business.


Pull Out Your Crystal Ball!

Don’t you just love when “experts” throw around silly predictions?! Alejandro Rajo of the Los Angeles Times polled 5 so called “experts” regarding what they felt the housing market would do in California in 2011. Some said it would go lower, some higher and others flat! Go figure! Foreclosures and unemployment are up while housing values and housing sales are down. What do you think will happen in California? I think California, and the rest of the US, are in for many years of trouble. The question is, what are you doing about it?

When will housing come back in California?

Five experts offer their views

Foreclosures in the state are still high. Sales of new homes are at historic lows. And millions of homeowners are underwater on their mortgages. So what's the outlook for 2011 and beyond?

As housing recoveries go, this one is in need of a cure.

Homeownership — and the buying and selling of residences — is an economic keystone that carries overwhelming weight in Californians' personal sense of financial well-being.

But the momentum of the state's housing rebound has faltered, with sales falling and prices softening despite bargain-basement interest rates. Foreclosures in California are still high. Sales of new homes are at historic lows. The construction sector is in the doldrums. And millions of the state's homeowners owe more on their mortgages than their properties are worth.

Real estate historically has helped give a boost to economies exiting a recession, but the severity of this bust is nearly unprecedented: Californians have lost $1.73 trillion worth of equity in their homes since prices peaked in 2007, according to Moody's Economy.com.

Although California's housing market free-fall ended in spring 2009, the weakness after the expiration of federal tax credits for buyers last year has called into question the sustainability of the recovery.

The Times asked five California experts for their take on the state of real estate and what they think is needed to get the housing market moving again. They range from the pessimism of a foreclosure specialist to the decidedly more upbeat view of a Realtor association economist.

• Richard Green, director of the USC Lusk Center for Real Estate, predicts home prices will remain flat in 2011.

California's recovery will hinge on location, said Green, who held professorships at several universities and worked as a principal economist at Freddie Mac before becoming director of the Lusk center.

"Draw a line from El Centro up to Sacramento and think of all the towns up and down that line. Unless we have hyperinflation in general in the economy — prices going up a lot — I would guess that in my lifetime we will not see a return to the prices that we had at the peak," Green said.

"Now, places like La Jolla, Malibu, Laguna, Huntington Beach, Atherton, Palo Alto, the city of San Francisco, Marin County, those are places where within the next five years I could easily imagine prices returning to their peak."

"The markets in the Central Valley were much more bubbly than the markets on the coast," he said. "You have very few people who make a lot of money in these places."

"Whereas a place like Silicon Valley, or a place like West Los Angeles, there is a critical mass of very high-income people.… That means you have a large number of people who can afford to spend in the neighborhood of $1 million on a house, and these are desirable places."

"The more a property is a commodity that you can easily substitute for something else, the less the chance it will ever come back to its peak. The rarer a property is, the more likely it's going to come back quickly."

• Leslie Appleton-Young, chief economist for the California Assn. of Realtors, predicts home prices will rise 2% in 2011.

There are few professionals who would like more to see the housing market bounce back to the heady days of old than Realtors. Real estate agents made a killing when the housing market soared and then took a pounding when it tanked.

During the boom years, Appleton-Young said, she espoused the theory that rising prices mattered more than making solid loans. That theory appeared correct as long as values kept rising.

"What happened this time was prices plummeted and everyone was in trouble," she said.

These days, the economist sees little chance of the market returning to its previous heights anytime soon.

"We are in a very slow-moving recovery with prices stabilized at the moderate and low end," Appleton-Young said. "We are still seeing price attrition and price softening at the upper ends of the market."

2011 will be lackluster, she said, but that does not mean California is not improving.

"We are almost two years into a price recovery. The problem is not to look at 2007 as the normal market that you are moving back up to, because it wasn't a normal market. We are back in an underwriting environment that actually makes sense."

"You are seeing prices recovering throughout the state," she added. "It is just going to take time."

• Bruce Norris, president of Norris Group in Riverside, expects home prices to fall 5% in 2011.

The real estate slump has been good to Norris, an investor in foreclosed homes. But he believes the market is being artificially boosted by government programs and is set to fall further this year.

"We are in an artificial recovery," Norris said. "It's government controlled and manipulated. We have extremely favorable interest rates that we really should not have, based on our debt. We have supported real estate with tax rebates, and we have prevented inventory from showing up by allowing people to be two and three years behind on their mortgages."

Foreclosed homes, in particular, are being kept off the market through loan modification attempts and other policies.

"You've had a slew of programs trying to prevent inventory from showing up, and that prevents reality from happening," Norris said. "It's definitely standing in the way of the natural process."

What does the housing market need most?

"Demand for houses," Norris said. "Somebody able to qualify for a loan and actually being able to get it. And that's why it is not going to happen."

• Emile Haddad, chief executive of FivePoint Communities Inc., expects home prices to "stabilize" in 2011 but declined to make a specific price prediction.

Determining whether the housing market is on steady footing is essential to developers such as Haddad, the former chief investment officer for Lennar Corp. Haddad, along with Lennar, is now part owner of FivePoint, which is managing the development of the Valencia community in Los Angeles County and other high-profile projects. He believes a recovery has yet to take hold in California.

"We are bumping along the bottom," Haddad said. "And that is a good thing, because that is the first thing that you need in order to start seeing a housing recovery. You need to have a period where values are not going down and the trend is moving in a different direction."

California's coastal markets will come back once the job market returns, he said, lifting consumer confidence. But California's inland areas are more likely to lag behind, and builders will have to reconsider the kind of product they offer in such places.

"In the Central Valley, values have changed a lot," Haddad said. "You are not going to be able to really have enough depth in the market to sell large, expensive homes, because the ceiling of value is way down."

"If you pick on a market like Orange County," he said, "it is still a place that once people feel confident.... I believe people will be out buying homes."

Affordability is working in the market's favor.

"We have a mortgage environment that is more favorable — the rates are down — but people are not able to get mortgages, and that is not helping. The most important thing we need is jobs and job creation."

"Affordability is something I look at, and obviously that is a very attractive metric right now.... There is a value proposition out there right now that is very attractive, that we haven't seen in four decades."

• Christopher Thornberg, founding principal of Beacon Economics, predicts home prices will remain flat in 2011.

Once a senior economist for the UCLA Anderson Forecast, Thornberg was one of the first to predict the housing crash, pointing to prices that were way out of line with what people earned.

In that vein, he views the plunge in home values as its own recovery of sorts "because that is when prices went from stupid-high levels to levels that made sense again," Thornberg said. "Now we are in a post-recovery recovery, if you will."

"This is not the bust. A bust implies that prices have fallen to levels that are too low. And I would argue that prices today are relatively high. It's interest rates that have given us this degree of affordability, and from that perspective that is why I don't expect prices to come down."

Since helping found Beacon in 2006, Thornberg has become chief economist for state Controller John Chiang and chair of the Controller's Council of Economic Advisors. He serves on the advisory board of New York hedge fund Paulson & Co. He has been a forceful critic of the Obama administration's policy attempts to right the market.

"The administration has tried, through a variety of policy methods, to try and spike the market," he said.


How Did We Get Here?

AWhile the article by Robbie Whelan of the Wall Street Journal is intended to give you a snapshot of 6 very different people that have gone through foreclosure (it’s worth a read), it also does a nice job of summarizing how we got where we are today. Some interesting facts from the article are quoted as follows:

*The foreclosure crisis that erupted four years ago has claimed more than five million American homes—about 10% of all homes with a mortgage.

*When interest rates on the adjustable-rate mortgages finally climbed, many borrowers began falling behind on their payments, leading to the first wave of delinquencies and defaults.

*At the start of 2008, with the U.S. economy weakening and job losses multiplying, the defaults began to spread as millions of Americans with plain-vanilla prime mortgages also ran into trouble making their payments.

*Borrowers, even those with stable jobs, began to see such negative equity as a reason to stop making their payments. That triggered the third wave of the foreclosure crisis: the strategic default.

*The Obama administration is working with banks to head off future defaults and stanch the foreclosure wave by modifying mortgages. The federal programs have so far disappointed.

*The crisis looks set to continue. Another four million people are in danger of losing their homes, according to the Mortgage Bankers Association. And until foreclosures are cleared, the housing market is unlikely to recover.

*The foreclosures have had a silver lining for one group of Americans: Many families locked out of the housing market during the boom can now afford to buy.

These are some crazy facts and figures! Are you involved?

Faces of the Home-Foreclosure Crisis

The Tidal Wave of Defaults and Delinquencies That Began Four Years Ago Has Hit Individuals at All Levels of Society

The foreclosure crisis that erupted four years ago has claimed more than five million American homes—about 10% of all homes with a mortgage. It began in lower-income neighborhoods and has spread to some of the most exclusive addresses in the U.S.

The seeds of the crisis were planted a decade ago when banks, discovering the high returns from selling bundles of securitized mortgages, relaxed lending standards and originated millions of adjustable-rate subprime mortgages. Such loans were designed to allow just about anyone to get a home loan.

When interest rates on the adjustable-rate mortgages finally climbed, many borrowers began falling behind on their payments, leading to the first wave of delinquencies and defaults.

At the start of 2008, with the U.S. economy weakening and job losses multiplying, the defaults began to spread as millions of Americans with plain-vanilla prime mortgages also ran into trouble making their payments. In some cases, borrowers found they had paid inflated prices for homes they could no longer afford. Others got into trouble by or borrowing against the equity in their homes. According to the Federal Reserve, Americans withdrew more than $1.1 trillion of equity from homes in 2006 and 2007.

By the end of 2008, with home values plunging, one in six homeowners found themselves underwater—owing more on their homes than they were worth. Borrowers, even those with stable jobs, began to see such negative equity as a reason to stop making their payments. That triggered the third wave of the foreclosure crisis: the strategic default.

The Obama administration is working with banks to head off future defaults and stanch the foreclosure wave by modifying mortgages. The federal programs have so far disappointed. The Home Affordable Modification Program, for example, was launched in the summer of 2009 with the intention of modifying three million to four million loans. So far, it has provided permanent help to fewer than 450,000 struggling borrowers.

Here are six stories of people caught in the foreclosure crisis, by circumstance or choice—from those who fell victim to hard times to others who squandered equity on cash purchases.

The crisis looks set to continue. Another four million people are in danger of losing their homes, according to the Mortgage Bankers Association. And until foreclosures are cleared, the housing market is unlikely to recover.

The foreclosures have had a silver lining for one group of Americans: Many families locked out of the housing market during the boom can now afford to buy.


Helping Out Our Military

As most of you know, I am a big supporter of our military. Without them, you wouldn’t have been able to complain about that cold cup of coffee that you returned to Starbucks yesterday! While I typically provide commentary on articles, this article is one that you will want to read if you have a friend, family member or client that is active duty military and in danger of losing their home. Freddie Mac has made arrangements to delay foreclosure proceedings for active duty military. For more details, read the entire article.

Freddie Mac Military Foreclosure Prevention Programs–Service Members Get Nine Month Foreclosure Delay

By Lee McFarland

Freddie Mac recently offered the opportunity for military service members to delay foreclosure for nine months as many military personnel returning from active duty are struggling to make their mortgage payments, which has been common among homeowners across the nation. In a recent press release, Freddie Mac stated that servicers will not initiate foreclosure for at least nine months for financially troubled service members as this should give these financial institutions opportunities to find mortgage solutions for military homeowners suffering from financial difficulties in their personal life.

Obviously, there are home loan modification programs which maybe available to homeowners in the military, but it’s hoped that these efforts to suspend foreclosures by Freddie Mac can offer particular service members more opportunities to find the affordability they need in their monthly mortgage payment. There have been many cases both with military homeowners and nonmilitary homeowners where traditional modifications have simply been unhelpful in delaying or preventing foreclosure for their personal situation.

While there are also VA loan modification opportunities for those who qualify, this effort by Freddie Mac is hoped to, again, offer an extension on the time a servicer has to find an affordable solution to a homeowner’s predicament when these individuals who are returning from active service duty. This assistance opportunity which is provided to homeowners in a Freddie Mac mortgage will run through the end of 2011, which again, should offer foreclosure prevention options for military personnel in a troubling mortgage predicament.

Understandably, not all military personnel who are offered the opportunity to delay foreclosure on their home loan will benefit even if their servicer seeks out an assistance plan which may help them avoid foreclosure, but additional time to find modification programs, alternative mortgage payment assistance, or even a foreclosure alternative option through short sales or deed in lieu of foreclosure opportunities could be beneficial for military personnel in need of immediate mortgage assistance.


BOA Does it Again!

Picture yourself coming home from a long day at work...just waiting to sit down and watch that brand new 60” flat screen TV only to find your house cleaned out! At first you might suspect that a band of thieves carted your belongings off......well you would be part right and part wrong! In this case the neighborhood thugs didn’t steal your stuff....Bank of America did!

Ron Schenone reports on an incident where BOA did just that...they foreclosed on the wrong house! They sent a cleanout crew in who removed all of their belongings (including the ashes of the dead husband of the owner!) In retrospect, maybe BOA’s inability to approve a short sale in timely manner isn’t the end of the world!

B Of A Foreclosure Mistake – Dead Husband’s Ashes Missing

The foreclosure mess has claimed another victim, this time in Truckee, California. It seems that Bank of America foreclosed on the wrong home and sent in its goon squad of contractors to remove the owner’s contents. Along with all of the furniture, clothing, and other personal items, were the ashes of the dead husband of the owner. After finding out that the bank had erred and subsequently revoked the foreclosure, the husband’s ashes are nowhere to be found.

Needless to say the family is upset about the incident and have filed a lawsuit against Bank of America. In one recent article it also stated that:

In an era when millions of homes have received foreclosure notices nationwide, lawsuits detailing bank break-ins like the one at Ms. Ash’s house keep surfacing. And in the wake of the scandal involving shoddy, sometimes illegal paperwork that has buffeted the nation’s biggest banks in recent months, critics say these situations reinforce their claims that the foreclosure process is fundamentally flawed.

Identifying the number of homeowners who were locked out illegally is difficult. But banks and their representatives insist that situations like Ms. Ash’s represent just a tiny percentage of foreclosures.

Many of the incidents that have become public appear to have been caused by confusion over whether a house is abandoned, in which case a bank may have the right to break in and make sure the property is secure.

Some of the cases appear to be mistakes involving homeowners who were up to date on their mortgage — or had paid off their home — but who still became targets of a bank.

I love the statement that these types of mistaken foreclosures make up a small amount of all foreclosures. It is only a small amount if you are not one of the victims. I am sure Bank of America will settle this case out of court, but if it chooses not to, I would love to be on the jury.


A Noble Cause!

Why can’t lenders and their investors think the same way that Habitat for Humanity does?! Michelle Vu from the Christian Post Reporter brings us an article that shows how Habitat for Humanity (HFH) makes housing affordable for those in need.

When I think of HFH, I picture a crew of 50 people building homes, from the ground up. This takes a tremendous amount of time, effort and money. Because of our ailing economy, HFH has been purchasing foreclosed homes in various cities throughout the US, fixing them when required and selling them to needy families. A fraction of the number of people that is required to build a new house can now be used to refresh an existing house. I would suggest that the amount of money spent is less when compared to building a new home. The net effect is that more people can and will be helped.

While some banks (Citi, BOA and Wells) have provided discounted purchase prices to HFH (they have had a long standing relationship), why can’t all banks take the extra step? What a way to clear some of the inventory!

FHabitat Works to Put Foreclosed Homes with Needy Families

By Michelle A. Vu|Christian Post Reporter

Habitat for Humanity, known for building homes for those in need, is “aggressively” working on providing affordable shelter by buying foreclosed homes and selling them at low cost to poor families.

For about a year and a half now, the ecumenical Christian ministry has worked in local markets across the United States buying foreclosed homes in cities such as Miami, Boston, New York, Charlotte and Atlanta. HFH is also considering buying homes across the state of Michigan where there is a “huge opportunity,” said Mark Crozet, senior vice president of resource development for Habitat for Humanity International.

Crozet noted that it is oftentimes cheaper to provide a family with a foreclosed home than to build a new house.

“In many new markets, we don’t need to build new homes when there are existing housing there that may just be sitting empty or be sitting in foreclosure that we can help get back on the market and start re-populating communities,” said Crozet to The Christian Post on Tuesday.

The HFH official highlighted that the “real win” in the situation of buying foreclosed homes is working with banks that try to give it to the ministry at a discounted rate or at a rate that is not available on the open market. In particular, he said Habitat is having a “significant amount of success” working with Citibank, Wells Fargo, and Bank of America, which had existing partnerships with the ministry before these deals.

In addition to special rates, these banks also help Habitat to get the properties within blocks of each other so that whole neighborhoods can be revitalized.

Helping the effort is Thrivent Financial for Lutherans, a non-profit organization helping its members achieve financial security while giving back to their communities. Thrivent has committed $10.4 million for the year 2011 to build Habitat homes. Crozet said Thrivent and other companies help provide the capital necessary to buy foreclosed homes.

Over the course of six years - the past five years and 2011- Thrivent Financial will surpass $150 million in contributions to Habitat towards building homes for poor families.

Since its founding in 1976, Habitat for Humanity International has built, rehabilitated, repaired or improved more than 350,000 houses worldwide, providing affordable shelter for more than 1.75 million people.


Bankruptcies Fuel the Fire!

Nadia Vanderhoof from TCPalm brings us an article that exposes the aftermath of our governments failed band aids. In English, there is a high volume of people that either attempt to enter or enter a mortgage modification program only to be flushed out of the other end in bankruptcy court.

When families go through a loan modification program their goal is to save their house. They typically follow the rules and regulations of the program in an effort to stay in their house. These folks are late on their mortgage payments. Most (if not all) of our governments programs have a requirement that payments must be missed in order to qualify for a modification. As the application period progresses, the homeowners are not only getting deeper and deeper into hole they are also getting closer and closer to foreclosure.

Statistics show that only a small percentage of PERMANENT modifications are approved. In order to stay in their homes and to eliminate the possibility of a deficiency judgment after their house is foreclosed on, more and more people are turning to the bankruptcy courts. Bankruptcies also prolong the inevitable......it prolongs foreclosure but it also prolongs the recovery of our housing market. When the banks foreclose, they will eventually put that property on the market.

A quote from the article tells it all, “Flawed modification programs will continue to undermine Florida's economic recovery until they are overhauled, said Sean Snaith, director of University of Central Florida's Institute of Economic Competitiveness.

"I think by and large they (modification programs) are largely viewed as a failure ... just a lot of smoke and mirrors without any substance," Snaith said. "Really, they reach out to the fringe that were likely to default anyway. What would have worked is doing something in terms of principal write-downs to reflect current values because it's not helping the economy when all these folks paying for underwater mortgages continue to loss equity in their homes. That's where all your discretionary spending is going."

Flawed mortgage modification programs fueling Treasure Coast bankruptcies

By Nadia Vanderhoof

Federal mortgage modification programs aimed at keeping financially at-risk Treasure Coast homeowners from being foreclosed on are instead fueling consumer bankruptcies, according to several housing experts.

Some Treasure Coast homeowners who were denied mortgage modifications through President Obama's Home Affordable Modification Program say bankruptcy was the only way they legally could get out of their homes and protect future assets from mortgage servicing companies and lenders.

After nightmare experiences and enormous frustration with the modification program, they feared lenders might go after their assets to recoup losses years after a foreclosure or short sale, which is selling a home for less than the remaining balance on the loan.

While there are success stories of the program — which has kept some Treasure Coast residents in their homes and out of foreclosure, the number of people helped is small.

As of October, lenders had granted a meager 2,156 permanent modifications to Treasure Coast homeowners — 384 in Indian River County and another 1,772 in Martin and St. Lucie counties combined.

According to RealtyTrac, foreclosure filings were reported on 11,880 homes in the tri-county region through this year. Another 18,998 were recorded in 2009 and 15,631 in 2008.

Meanwhile, bankruptcies on the Treasure Coast continue to pile up.

In 2008, there were 1,723 consumer bankruptcies filed in Martin, St. Lucie and Indian River counties. That spiked to 2,562 in 2009. This year, the Treasure Coast is on track to surpass those numbers with a staggering 2,202 local consumers already filing for bankruptcy through September alone.

"Some people are being put into a position of bankruptcy because their modification did not take place," said Richard Peek, president of the Florida Association of Mortgage Brokers. "Not everything is being done as far as assisting people in being able to maintain their homes."

RESIDENTS STRUGGLE WITH LENDERS

Karen Lehmann is one of those people.

She vacated her Vero Beach home in September and filed for bankruptcy after nearly a two-year modification struggle with Litton Loan Services, the company servicing her mortgage owned by banking giant JPMorgan Chase & Co. With two part-time jobs as proof of income, Lehmann said a modification was approved on her $188,000 mortgage, bringing it down to $146,000 in 2009. The modification was later revoked by Litton despite on-time mortgage payments, months of repeated phone calls, mounds of paperwork, court hearings and mediations.

The reason? She no longer fit the modification guidelines of the loan's investor.

"When they reneged, that was it. I was so tired, I didn't have any fight left in me," Lehmann said. "I had done everything I could. Bankruptcy was my last resort. It was not something I took lightly."

Lehmann, who paid a reduced monthly mortgage of about $700 before the modification was revoked, said shortly before she moved out of her home of 11 years, Litton and Chase wanted her to agree to a short sale for $94,000.

"I thought, this is never going to stop. They wanted me to sign a quit claim deed and if the house didn't sell by December, they wanted me out by January," Lehmann said. "On top of that, they were trying to come after me for more insurance and property taxes. They wanted almost $5,000 more to insure (the home)."

Out of desperation and to prevent further monetary demands from Chase and Litton — Lehmann turned to bankruptcy to protect her finances.

"I wanted to get on with my life. I didn't want them to try and get back at me later," Lehmann said. "No doubt, they would have come after me for the balance of the mortgage after the short-sale. With everything that happened, everything I went through, there was no guarantee it was going to end there."

TREASURE COAST CASE EXEMPLIFIES THOUSANDS

Some financial experts say the events leading up to Lehmann's bankruptcy aren't unique. Her ordeal is likely shared by thousands of homeowners nationwide.

Michael Larson, a real estate analyst with Jupiter-based Weiss Research, described Lehmann's experiences as an unforeseen consequence of the Treasury's failed modification program.

"The government was overselling this program, over-promising and under-delivering. It was not designed to take care of the key problem and fix the problem of upside-down homes and the structure of those loans," Larson said. "There's a fundamental problem with these modification programs and many more people will foreclose, go bankrupt or both as long as there is no long-term change to its design."

Barbara Bradley-McLeod said her lender, Bank of America, strung her along for about a year, promising a mortgage modification on her Port St. Lucie home after her work hours were cut in 2009.

"Every time I tried to talk to them, they said I was missing something else. Send us this paperwork. We need some other papers," Bradley-McLeod said. "Then they said that we didn't qualify because we had a Freddie Mac loan or a Fannie Mae loan. This was after one whole year. And I never missed one mortgage payment."

Bradley-McLeod filed for bankruptcy earlier this year.

"It seems like the banks, the big companies all got bailed out, but what about the little people? Nothing trickled down to us," Bradley-McLeod said.

Treasury spokesman Mark Paustenbach said the agency is aware there are problems with the program, but "breaking a contract between a borrower and a servicer would be illegal."

"We talk to families every day that are at risk of losing their homes and are terribly frustrated by their inability to communicate with their lender and get the help they need," Paustenbach wrote in an e-mail. "We have worked tirelessly for 18 months to stand up a ground-breaking program that has given half a million of these folks permanent mortgage relief. But we know that we have only begun to address the problem. We will not stop until we make mortgage modifications easier, shorten decision time, reduce paperwork and give homeowners greater peace of mind."

BANKRUPTCIES CONTINUE TO RISE

In 2009, the Treasury Department announced the Home Affordable Modification Program, a $50 billion Troubled Asset Relief Program program aimed at helping up to 4 million at-risk homeowners avoid foreclosure by reducing their monthly payments. Experts say the program has failed to live up to its promises.

"Many families encounter an incompetent or even predatory mortgage servicing system once they apply to the program, experiencing delays or denials that are inconsistent with the promise of the program guidelines," said Julia Gordon, senior policy counsel at the Center for Responsible Lending, during her Oct. 27 Congressional testimony. "Hundreds of thousands of people who received trial modifications during HAMP's initial phase have ended up in a worse financial situation as a result of their participation in the program."

Other experts say bankruptcies, already on the rise because of the recession, will continue to spike until the avalanche of foreclosures slows down and more pressure is placed on lenders to engage in massive principal reductions.

"In past business cycles, we looked to housing to bring back the economy because of how multifaceted it is," Metrostudy's Chief Economist Brad Hunter said. "I don't think there's a solution to stimulating the economy without solving the housing problem and getting (gross domestic product) growing again. It isn't growing fast enough, at this point, because of the unemployment rate, which is tied to housing."

Flawed modification programs will continue to undermine Florida's economic recovery until they are overhauled, said Sean Snaith, director of University of Central Florida's Institute of Economic Competitiveness.

"I think by and large they (modification programs) are largely viewed as a failure ... just a lot of smoke and mirrors without any substance," Snaith said. "Really, they reach out to the fringe that were likely to default anyway. What would have worked is doing something in terms of principal write-downs to reflect current values because it's not helping the economy when all these folks paying for underwater mortgages continue to loss equity in their homes. That's where all your discretionary spending is going."


Remember the Children!

Dina Elboghdady from the Washington Post brings us an article about the casualties of foreclosures....our children. "This foreclosure crisis is the largest forced relocation event we've had in this country since the Great Depression. In the modern educational environment, we've never seen anything come close to this," said Dan Immergluck, a housing policy professor at the Georgia Tech.

While the adults have other things that occupy their lives (i.e. Jobs, job searches etc), our children are powerless. They have no control over what happen to them as a result of a foreclosure. A quote from the article puts it into perspective, “About a year into the mortgage crisis, First Focus, a group that advocates for children and families, released a study in May 2008 projecting that 2 million children would lose their homes to foreclosure by 2010. This was a conservative estimate because it was limited to families that defaulted on sub prime loans and did not include conventional loans or children evicted from rental units, the group said.”

As the article points out, the children that are displaced are not just limited to the children of homeowners. A high percentage of displaced children come from houses that are rented by their parents that end up in foreclosure because the landlord/owner has stopped paying the mortgage. An interesting fact brought out in the article is, “Under federal law, students who lost their homes to foreclosure can remain in their schools until they find permanent housing even if they moved from their original school districts. If they find a fixed-living arrangement during the academic year, they can stay in their schools until the year ends.”

So, what does this mean to you? Be aware that there is a human toll in the foreclosure process. Do what you can to ease the strain.

Foreclosure takes toll on increasing number of children

By Dina ElBoghdady

Washington Post Staff Writer

Three years into the mortgage crisis, the public debate over how to stem the unprecedented tide of foreclosures and the damage they are doing to the housing market has largely overshadowed any discussion of the human toll. But researchers have begun to examine what happens to people after they lose their homes and are becoming especially concerned about the harm to children.

The number of children displaced has climbed steadily in recent years, with nearly 40 percent of U.S. school districts surveyed citing foreclosure as the top reason for the surge in homeless students, according to a report this summer by First Focus and the National Association for the Education of Homeless Children and Youth.

Children who are forcibly uprooted from their homes and schools tend to suffer emotionally, socially and academically, studies preceding the mortgage meltdown show. Researchers suspect the same might be happening with children who have been dragged through foreclosures and they are urgently exploring the consequences.

"This foreclosure crisis is the largest forced relocation event we've had in this country since the Great Depression. In the modern educational environment, we've never seen anything come close to this," said Dan Immergluck, a housing policy professor at the Georgia Tech.

Susan Brooking never imagined her family would get tangled up in a mortgage crisis when she and her husband, Robert Brooking Jr., started building a home just north of Charlottesville nine years ago.

But the family's finances collapsed after her husband was laid off from his job working for a home builder in early 2008. In August, the couple received a foreclosure notice and moved out a few weeks later, soon after their 5-year-old son, Connor, began kindergarten.

Susan Brooking settled in at her sister's house with Connor and his 19-month-old brother. Her husband lives nearby with his parents. Neither home was large enough to accommodate the family, but they were able to stay close to Connor's school.

"My son keeps asking why, why, why at every step," Susan Brooking said. Why did they have to move? Why can't he visit his bedroom at the old house? Why are his toys in storage? Why do they have to live apart? Why did he have to leave behind the playground that he and his father had just started building?

"Now he's acting up in class," she said. "All we think about is renting a house in the same school district so we can get some normalcy back into our lives. We don't want to deal with another school and another transition."

Mindy Thiel, a private therapist in Rockville, said she's seen more and more families in the same situation over the past two years. Their kids often express a "feeling of powerlessness," she said. "Even 5-year-olds conceptually get the idea of loss, and they get extremely sad and frustrated that they can't do anything to change the situation."

The longer the foreclosure process drags on, for years in some cases, the more likely children are to lapse into hopelessness and internalize feelings of insecurity that can linger into adulthood, she said.

"They're wondering where their next home, their next school, their next set of friends are going to be," Thiel said. "A poignant issue that's often overlooked is: 'Where will my dog go? What will happen to my fish or my rabbit?' . . . It changes their world view."

About a year into the mortgage crisis, First Focus, a group that advocates for children and families, released a study in May 2008 projecting that 2 million children would lose their homes to foreclosure by 2010. This was a conservative estimate because it was limited to families that defaulted on subprime loans and did not include conventional loans or children evicted from rental units, the group said.

In the District, the Urban Institute found that about one quarter of homes in foreclosure had a public school student living in them in the 2008 school year. The number of public school students affected by foreclosure more than doubled in 2008 from the previous two school years, the study said.

This research, funded by the Open Society Institute, is also looking into foreclosure patterns in New York and Baltimore, examining in part the impact on schools and children. In New York City, the number of students directly affected by foreclosure in the 2006 school year rose to 18,525, 59 percent more than the number affected in the 2003 school year, according a study released this fall by the Institute for Education and Social Policy and New York University.

In a study this year of 25 Latino families, many parents reported that foreclosure-related problems strained their relationships with their children and their partners, in part because they often ended up living in cramped quarters with relatives or friends.

Some of the parents in the study, conducted by the National Council of La Raza and the University of North Carolina at Chapel Hill, said their children blamed them for losing the home. Eight families reported increased conflict among siblings. Fourteen parents said their relationships suffered and 10 said they considered leaving their spouses or partners. Two spouses had separated when the interviews took place last year.

Nor is the fallout limited to people who own their homes. About 40 percent of families facing eviction were renters whose landlords were foreclosed upon, according to an estimate by the National Low Income Housing Coalition.

Valeria Jones of Rockville was among the many renters caught unaware when an eviction notice arrived, leaving her family little time to prepare a move.

"Every time I turned around, someone was knocking on the door and talking about foreclosure," Jones said, "and the landlord still kept telling me to ignore it and still kept asking for his rent and threatening that he'd put me out on the street."

Jones said her teenage grandchildren and niece, all of whom live with her, were rattled. They answered doors and read letters and heard the neighbors whisper, she said. "They made themselves crazy with worry."

Then, on moving day in March, Jones was transporting boxes into the family's new rental home when the eviction crew changed the locks on their old home. The kids came home from school to find their belongings in a trash bin.

"They lost the kind of stuff you can't replace, like the journal my granddaughter used to write in all the time and artwork from first grade," Jones said.

The family is uncertain whether they will stay in their new home. It's in a new school district, and she says her granddaughter, a straight-A student, keeps saying, "Grandma, I'll kill myself if you send me to that school."

Under federal law, students who lost their homes to foreclosure can remain in their schools until they find permanent housing even if they moved from their original school districts. If they find a fixed-living arrangement during the academic year, they can stay in their schools until the year ends.

Still, with all the issues the foreclosure crisis raises about the social and emotional development of children and the stability of the schools they are entering and leaving, the issue has not yet attracted the kind of public-policy response it deserves, experts say.

The problem might be the division of labor in government, said Amy Ellen Schwartz, director of New York University's Institute for Education and Social Policy.

"The housing thing is a housing department issue. The education thing is an education department issue," she said. "It's become an 'It's not my turf, it's not your turf' kind of issue, and it's fallen through the cracks a bit."


Records are Meant to be Broken!

The Associated Press reports on the state of foreclosures in Arizona. Through November, AZ has experienced a year over year increase in foreclosures of 12%. This set yet another record for the state. An interesting take from the article is that this number SHOULD have been much higher.

The number of foreclosures were held down by the recent spat of “robo signings”. Banks/servicing companies stopped foreclosing for a period of 4-6 weeks due to paperwork issues. Guess what? The banks are now foreclosing on these houses. This will pump up the number of houses that are foreclosed on.

The article points out that the median value for houses in Phoenix fell from $260,000 in 2007 to $140,000 in the 3rd quarter of 2010! And...they are still dropping. The spat of foreclosures will continue due to price erosion, mortgage resets, job loss and a very poor economy. As most of you know, these problems are not limited to Arizona. No area is immune to these issues.

What does this mean to you? If the buying and or selling of over leveraged properties are NOT part of what you are doing as a real estate professional, you are missing the boat!

Arizona sets another foreclosure record in 2010

by Associated Press

PHOENIX - Arizona will close out 2010 with a record number of home foreclosures, marking the third straight year of staggering growth for bank repossessions.

From January through November, 65,911 Arizona homeowners lost their houses to the mortgage holder, 12 percent more than were taken in all of record-setting 2009, according to foreclosure listing firm RealtyTrac Inc. Banks and loan companies were on track to take thousands more homes in December.

The coming year doesn't look much brighter for homeowners, as Arizona's unemployment rate remains stubbornly high and more adjustable rate mortgages come off low teaser rates. A 50 percent drop in home values from the 2007 peak, and tighter lending standards, are preventing many homeowners from refinancing.

But efforts by the federal government to push banks to modify troubled loans should keep the numbers from soaring too much higher, said Daren Blomquist, communications director for Irvine, Calif.-based RealtyTrac.

``We don't see it a lot worse, but we also don't see it getting a lot better,'' Blomquist said. ``We don't see it getting a lot worse because there are a lot of fail-safes in place to try to keep foreclosures from getting worse. You have all the foreclosure prevention programs, which are having some effect, you have lenders who for whatever reason are much slower to foreclose and aren't just slamming the market with foreclosures as soon as they get them.''

Other experts who watch the state's housing market aren't so sure that the worst is over for the foreclosure mess. One of those is Jay Butler, an Arizona State University real estate studies professor.

Several major lenders temporarily halted foreclosures this fall after criticism that they had taken shortcuts in legal documents, leading to a dip in repossessions last month. But those delayed foreclosures are expected to start reappearing soon. Butler said an increase in foreclosures is virtually certain early in 2011, for that reason and others.

``I think a lot of people have used all the resources they had to keep their home and they've just grown tired of the whole process and will plan to move on,'' Butler said. ``They thought by now maybe they'd be more secure in their jobs, or have a job. But we're still talking about potential furloughs and layoffs. A lot of the economic issues in the environment have not been cleaned up and people are going very frustrated.''

Much of the pain is in the Phoenix area, which accounts for about two-thirds of the state's foreclosures. But Tucson and smaller cities and towns are also suffering.

The U.S. is on track to have more than a million homes lost to foreclosure in 2010, and RealtyTrac's Blomquist said another million could come in 2011.

The foreclosure crisis hit the nation and Arizona with a vengeance starting in 2007, when the mortgage markets froze and exotic subprime mortgages led to widespread lender failures. Foreclosures soared and the price of an average resale home in the Phoenix market slid from $260,000 in 2007 to $140,000 in the third quarter of 2010, according to ASU studies.

Phoenix-area home prices, after stabilizing in mid-2010, slid again starting in August. What's more troubling is that banks are taking longer to begin the foreclosure process. Bank of America Corp.'s CEO said recently that in the third quarter, homeowners were delinquent an average of 560 days before his bank began foreclosure proceedings. Normally, 90 days delinquency starts the process, Blomquist said. Also, RealtyTrac's database shows only about 30 percent of the homes taken by banks this year have been put on the market, leaving a large 'shadow inventory' that could hamper price appreciation.

The collapse brought Arizona's once-booming home construction industry to a virtual standstill. Thousands of foreclosed tract homes are now boarded up, and there's an inventory of more than 60,000 vacant homes.

RealtyTrac's foreclosure numbers for Arizona tell the story: In 2006, just 1,196 homes were taken by banks, but that soared to 12,107 in 2007, 50,608 in 2008, and 58,552 in 2009.

If December's foreclosures reach the monthly 2010 average of about 6,000, more than 70,000 Arizona homes will have been lost to foreclosure this year.

The foreclosure mess also led to a widespread loss of homeownership, with an estimated 80,000 Phoenix-area homes now being rented by former homeowners, said Elliott Pollack, who runs a respected economic and real estate consulting firm in Scottsdale.

For many who have managed to keep their homes, there is more bad news: More than 50 percent of the homeowners in the Phoenix area owe more than their home is worth and are ``underwater'' on their mortgages.

For those homeowners, economic forecasts that show the economy slowly improving in the coming years may bring little relief. They're either going to lose their homes to foreclosure or a short sale, or be stuck in them because they can't sell them for enough to pay off the mortgage.

``By the time the housing market is back to normal, which I think is 2014 or '15, ... housing prices I think have to go up 60 percent from where they are today,'' Pollack said. ``Now, that 60 percent from where they are today, as outrageous as that sounds, still leaves you 30 percent below the peak. So if you bought in 2005-2006, and you had a large mortgage, you're still underwater, you're still not moving, or you're sending your keys back to the bank.''


Why Follow the Rules?

Carolyn Said from the San Francisco Chronicle reports on a not so uncommon bait and switch performed by Citi Bank. A California family applied for and received a trial mortgage modification. After making 11 on time payments, they tried to make a 12th payment. Citi denied the payment and sent a foreclosure notice instead! In this case, the family had equity in their house. Their attorney feels that Citi accelerated the foreclosure because they knew if the house was taken to sale they would recover what was owed to them.

What's the lesson here? In my opinion, when people are in this position, they need to start treating their home as a house. What I mean is that people have emotional attachments to homes, they don’t to houses. In this specific case, the property could have been sold by the owners. The sale would have gotten them out of the predicament that they were in AND it would have put money in their pocket. Would they have had to rent a house to live in? Yep. There are worse things in life than renting....like losing your equity filled house to foreclosure.

The great agents that I work with on a daily basis DON’T tell the homeowners what they want to hear. They paint a very realistic picture and hold the homeowner accountable. If the homeowner is being unrealistic in their expectations, it’s not worth your time to try to “convince” them to do something that they are not ready to do. It’s important that you educate them.......don’t get in the habit of trying to convince.

Family faces foreclosure after following the rules

Carolyn Said, Chronicle Staff Writer

After struggling with medical crises and recession-related lost income, Susan and Robert Gerke thought they had jumped through every hoop that their bank, CitiMortgage, required for them to get a loan modification.

They made 11 trial payments on time, sent in paperwork as requested and stayed in close touch with Citi. So it came as a rude shock when they received the foreclosure notice on the San Rafael home they've owned for 15 years.

"We were so sure we could keep it and that they were really working with us, I just feel blindsided," Susan Gerke said.

The house is scheduled to be foreclosed upon on Dec. 29, leaving the family of four - the Gerkes, their 22-year-old autistic daughter and Susan's 86-year-old father, who has Alzheimer's disease - without a place to live.

Their story mirrors those of thousands of other homeowners who've been denied long-term relief under the government's Home Affordable Modification Program. The pace of conversion from trial plans to permanent modifications has slowed dramatically, dropping from about 55,000 a month early this year to just 28,000 in September, government records show.

What sets the Gerkes' situation apart is that as longtime homeowners, they have significant equity in their home.

Penalized for equity

In fact, their attorney, Marilyn Sullivan, said the couple are being penalized for that equity.

"Citibank gave them a HAMP loan modification and took it away from them - because the house is worth more than the loan, so Citi will financially benefit from foreclosure," she said.

Citi spokesman Mark Rodgers wrote in an e-mail discussing the typical approach to equity, not the Gerkes' case: "In general, a borrower with positive equity in their property has the ability to refinance or sell their property and pay off the loan in full to avoid foreclosure. A modification is still an option if the borrowers' income can support a payment that passes the (net present value) test when compared against liquidation."

Net present value is a formula banks use to determine whether foreclosure or loan modification would be better for them financially. Under HAMP, banks may pick the option that nets them more money.

The Gerke family's difficulties escalated in 2008, when Robert Gerke began using a wheelchair because of multiple foot and leg injuries and neuropathy. Around the same time, Susan Gerke became gravely ill with an intestinal disorder that required major abdominal surgery. Both health crises racked up large medical expenses.

Even earlier, Robert Gerke's business as a consultant and writer in advertising and marketing had suffered as the economy crumbled. He is the family's sole breadwinner, as Susan stays home with her father and their daughter. The couple exhausted their retirement savings to stay current on their mortgage payments.

The Gerkes received a loan modification in September 2009. A month later, Robert Gerke's income improved thanks to a long-term consulting contract, something they said Citi ignored when it later denied them a permanent modification.

In July, Susan Gerke said, she attempted to make her 12th trial modification payment by phone and Citi told her it would not accept it because they had been "tracked for foreclosure."

Sullivan, the attorney, said the bank committed several errors in the process, including not complying with the California rule that lenders must discuss loan modification 30 days before filing a notice of default.

Modifications hard to get

Studies show that getting a permanent HAMP modification is increasingly difficult.

Neil Barofsky, the special inspector general who oversees HAMP and the Troubled Asset Relief Program, issued a scathing report to Congress last month, detailing how HAMP trial modifications frequently backfire.

"Many HAMP borrowers, already contending with other hardships ... end up unnecessarily depleting their dwindling savings in an ultimately futile attempt to obtain the sustainable relief promised by the program guidelines," he wrote. "Perhaps worst of all, ... they may face back payments, penalties and even late fees that suddenly become due on their 'modified mortgages' and that they are unable to pay, thus resulting in the very loss of their homes that HAMP is meant to prevent."

After being contacted by The Chronicle, Citi's Rodgers said the bank would review the Gerkes' situation to see whether a foreclosure-prevention program might still be applicable. Late Wednesday, Sullivan said she had been informed that the family had been conditionally approved for a loan modification.

For the Gerke family, such a solution would be a lifesaver.

"My biggest concerns are my dad and my daughter," Susan Gerke said. "If we lose our home, then I'm going to have to put my dad in a (residential care) home. I know he'll decline very quickly from that. My daughter's birthday is in December, and she keeps asking if we will be home on her birthday. We love this house. It's not just my husband and I losing a place to live; it would have some very serious repercussions for my dad and my daughter. I'm so afraid of that."


The Magic Number!

While it’s not really a magic number, the Wall Street Journal recently reported on the number 492. What is the significance of this number? It is the number of days since the average borrower in foreclosure last made a mortgage payment! The significance of this statement is, “....... people who default on their mortgages can reasonably expect, on average, to stay in their homes rent-free more than 16 months. In some states such as New York and Florida, the number is closer to 20 months.”

Banks can’t foreclose fast enough so people are staying in their homes for well over a year without making a payment. In some states (my guess would be the judicial states like Florida), the number is even higher. While I can draw my own conclusions, the author puts it best by stating, “Millions of Americans still are paying their mortgages even though they owe more than their homes are worth. The more banks’ backlog grows, the more likely they are to join it, adding to the already giant pile of foreclosures weighing on the housing market.”

Number of the Week: 492 Days From Default to Foreclosure

492: The number of days since the average borrower in foreclosure last made a mortgage payment.

Banks can’t foreclose fast enough to keep up with all the people defaulting on their mortgage loans. That’s a problem, because it could make stiffing the bank even more attractive to struggling borrowers.

In recent months, the number of borrowers entering severe delinquency — meaning they missed their third monthly mortgage payment — has been on the decline, falling to about 700,000 in October, according to mortgage-data provider LPS Applied Analytics. But it’s still more than double the number of foreclosure processes started.

As a result, banks are taking progressively longer to foreclose. The average borrower in the foreclosure process hadn’t made a payment in 492 days as of the end of October, according to LPS. That compares to 382 days a year ago and a low of 244 days in August 2007.

In other words, people who default on their mortgages can reasonably expect, on average, to stay in their homes rent-free more than 16 months. In some states such as New York and Florida, the number is closer to 20 months.

That’s a meaningful incentive, and it’s likely to grow unless banks manage to boost their throughput. Speeding up the process won’t be easy, as demonstrated by the banks’ continuing legal troubles related to robo-signers, bank employees who signed foreclosure affidavits without properly checking the required loan documentation.

Millions of Americans still are paying their mortgages even though they owe more than their homes are worth. The more banks’ backlog grows, the more likely they are to join it, adding to the already giant pile of foreclosures weighing on the housing market.


It's Prime Time!

Michael Kraus pointed out that during the 3rd quarter of 2010 the percentage of PRIME mortgages rose as compared to the previous quarter. What’s significant about this is that prime mortgages are/were considered to be safe investments for their owners. What they didn’t count on is the continued deceleration of our economy and the continued price depression in the housing market.

When people lose jobs, they can’t afford their homes. When properties lose value, many people CHOOSE to walk away from their payments. As a result, all mortgage classes/types are being hit very hard by our economic crisis. The abundance of bank owned properties being sold at fire sale prices will, in my opinion, continue to depress prices for years to come.

Be proactive on your approach to this market, not reactive.

Foreclosures on Prime Mortgages Hit Record High

By Michael Kraus

The housing market set an ignominious record in the third quarter. According to a study from the Mortgage Bankers Association, foreclosures on prime mortgages hit a new record high in the third quarter of 2010 as the U.S. economy continues to decelerate and housing prices continue to drop. The percentage of prime mortgages in foreclosure rose to 2.45 percent, up from 2.36 percent the prior quarter according to a report from the Mortgage Bankers Association.

Michael Fratantoni, VP of Research and Economics for the Mortgage Bankers Association commented:

“Most often, homeowners fall behind on their mortgages because their income has dropped due to unemployment or other causes. Although the employment report for October was relatively positive, the job market had improved only marginally through the third quarter, so while there was a small improvement in the delinquency rate, the level of that rate remains quite high. As we anticipate that the unemployment rate will be little changed over the next year, we also expect only modest improvements in the delinquency rate.”

Currently unemployment is at 9.6 percent, and when marginally attached workers and the underemployed are included, the unemployment rate jumps to 17 percent. In addition to this, home values are about down about 25 percent from their peak in late 2006. This has resulted in a situation where about 25 percent of borrowers are underwater on their mortgages, and another 25 percent are at risk of being underwater if prices decline further. It is no wonder that foreclosures are up even amongst those who took out prudent mortgages.


The Worst Is Yet To Come!

Dave Clarke and Corbett Daly from Reuters bring us an article that discusses the potential fallout of the infamous “robo signing” fiasco. There is indication that some of the major banks may be required to buy back bad mortgages that they sold off to investors. This could result in $52 Billion worth of losses. Whether the banks will have to eat these losses or whether the government bails them out again is unknown at this time.

What is known is that this problem is not going to simply vanish. There are alot of eyes and ears monitoring this problem. In my opinion the effect on the housing market is going to be widespread and long lasting. As a result, foreclosures and short sales will be around for some time. Knowing this, you need to ask yourself if you are involved with a solution. If you are not involved, why aren’t you?

UPDATE 1-Panel sounds foreclosure warning, industry downplays

* Oversight panel gives range of possible outcomes

* Bank industry faces $52 billion mortgage put-back risk

* BofA, JPMorgan to face Senate Banking panel on Tuesday

(Adds Treasury, ASF and Moynihan comments)

By Dave Clarke and Corbett B. Daly

WASHINGTON, Nov 16 (Reuters) - Widespread problems in how U.S. lenders documented foreclosures could spark a wave of legal challenges resulting in massive losses to banks and serious new troubles for the housing market, a federal watchdog warned on Tuesday.

The Congressional Oversight Panel, the overseer of the government's Wall Street bailout, in its latest report laid out a range of possible outcomes for the foreclosure paperwork mess that emerged in September.

In the best-case scenario, the watchdog said, concerns about the paperwork mess are "overblown" and banks would be able to proceed with foreclosures as soon as invalid court documents were replaced with proper paperwork.

But in the worst-case scenario, it warned that banks could face billions of dollars in losses.

Banks are accused of having used "robo-signers" to sign hundreds of foreclosure documents a day without proper review, a fiasco that reignited public anger with banks that received billions of dollars in taxpayer aid in the financial crisis.

Bank of America (BAC.N), Ally Financial and JPMorgan (JPM.N) were among banks that temporarily suspended foreclosures pending internal reviews of their practices, but have since begun to resume sales of foreclosed properties.

Bank of America and JPMorgan officials are due to testify before a Senate panel later on Tuesday. [ID:nN14285999]

In the worst-case scenario, the panel said banks may be unable to prove that they own the mortgage loans they claim to own, legal challenges could call into question the validity of 33 million mortgage loans -- many of which were then securitized and sold to investors -- and banks could face billions of dollars in unexpected losses.

"If such problems were to arise on a large scale, the housing market could experience even greater disruptions than have already occurred, resulting in significant harm to major financial institutions," the 125-page report said. "At present, the reach of these irregularities is unknown."

The American Securitization Forum on Tuesday pushed back against claims that mortgage servicing problems could pose problems for the mortgage backed securities market, saying it has conducted its own study of the issue.

"We are confident that the process in which market participants assign and transfer mortgage notes and mortgages is valid, sound and legally binding," ASF Executive Director Tom Deutsch said in a statement.

The panel, created to oversee the $700 billion bank rescue approved by Congress in 2008, also said banks could end up losing $52 billion from so-called mortgage put-backs, or loans that were sold to other investors but would have to be bought back due to problems that have turned up.

Those losses would be borne predominantly by Citigroup (C.N), JPMorgan Chase, Bank of America and Wells Fargo (WFC.N), the panel said.

LAWMAKER SHOWDOWN

Banks have been eager to downplay the impact of the mess over foreclosure paperwork, saying evictions through foreclosure have been "materially accurate."

Bank regulators and all 50 state attorneys general are investigating bank foreclosure practices. On Tuesday Bank of America Chief Executive Brian Moynihan said a quick settlement with the states is best for all involved. [ID:nN16104232]

"It is in everyone's best interest to get this settled and behind us," said Moynihan, speaking at the Bank of America Merrill Lynch Financial Services conference in New York.

He also said the bank was working through its mortgage repurchase requests from private investors. While the costs for buying back bad mortgages, or put-backs, will be manageable, Moynihan said such disputes could drag on for years.

Banks face lawmaker scrutiny later on Tuesday in hearings by the Senate Banking Committee, and then another hearing on Thursday before the House of Representatives Financial Services Committee.

A top Bank of America executive acknowledged problems in the bank's foreclosure practices in testimony prepared for the Senate hearing and said Bank of America is working to replace previously filed affidavits in as many as 102,000 pending foreclosure cases.

"Thus far, we have confirmed the basis for our foreclosure decisions has been accurate. At the same time, however, we have not found a perfect process," said BofA home loans chief Barbara Desoer in the prepared testimony.

David Lowman, chief executive for home lending at JPMorgan Chase, also laid out missteps in foreclosure paperwork and said the bank is cleaning up errors.

The banks are not the only ones under fire. Regulators are facing criticism from lawmakers for not picking up on the paperwork problems earlier. Many of these regulators -- including officials from the Federal Reserve, the Office of the Comptroller of the Currency and the Housing and Urban Development Department -- are scheduled to appear at Thursday's House hearing.

Obama administration officials have said they are taking the issue seriously.

"We strongly believe that the reported behavior within the mortgage servicer industry is simply unacceptable, and servicers who have failed to follow the law must be held accountable," Treasury spokesman Mark Paustenbach said in a statement. "That's why the Administration has led a coordinated interagency effort to investigate misconduct, protect homeowners and mitigate any long-term effects on the housing market." (Reporting Corbett B. Daly and David Clarke in Washington; Additional reporting by Joe Rauch in Charlotte, N.C.; Editing by Leslie Adler and Chizu Nomiyama)


Happy Holidays From Matt & Randy

December 23, 2010

I’m a very big proponent of giving back to the less fortunate. This week, we had the pleasure of giving back to two families in need and to a daycare center that was in need of supplies.

Our assistant, Ashley, came to us with an idea of giving gifts and food to two families that wouldn’t have enjoyed a nice holiday season. Don’t get me wrong, they probably would have appreciated each other, but they simply didn’t have the means to provide their children with a very Merry Christmas season. We also loaded up a daycare center with supplies that they desperately needed. It’s a good feeling when you give back.

Our business is very successful which affords us the ability to buy gifts and supplies for people in need. My challenge to you is to do the same.....not necessarily with your money but with your time. You don’t have to spend money to give back to the less fortunate. You can volunteer your time to a soup kitchen....you can volunteer your time at an old age home....you can volunteer your time, as I do, as a coach to kids trying learn to to play sports.

If you are like many in this world you are in the process of setting your New Years resolutions.....make this one of them.....to give back (in a concrete and measurable way) to those that are less fortunate. Have a GREAT holiday season!

PS Check out the video at the day care center and let me know what you think.

http://www.youtube.com/user/MattandRandyonline#p/a/u/0/oo21Tixu--I


Sterns Follies!

Kim Miller from the Palm Beach Post reports on the continued implosion of the Law Offices of David Stern. Apparently Sterns office is transferring thousands of files without doing the necessary reporting and notifications...shocker! As a result, houses that are supposed to go to foreclosure aren’t.

Fannie and Freddie are no longer utilizing his services. I wonder if Stern will sell his $20M Yacht to keep the electric on! If anyone hears that any of his multi million dollar houses are sliding into foreclosure, have him give me a call....I may be able to help him out!

Sterns Follies!

WEST PALM BEACH — The transfer of thousands of files from the deposed David J. Stern law firm caused not just a foul-up in recent Palm Beach County foreclosure auctions, but is shutting down cases to the point that one defense attorney called the lack of action "malpractice."

Between Nov. 29 and Friday, there were 110 foreclosure sales in Palm Beach County in which the bank made no bid for the home, according to the Palm Beach County Clerk's office.

Unwitting investors put in winning offers as low as $200 for homes they'll probably never get because the auctions were not properly advertised, likely lost in the shuffle from Stern's office to other firms.

Foreclosure defense attorneys said hearings are being canceled, they don't know who is representing the banks in their cases, and that motions for Stern to withdraw from cases aren't being filed, leaving the firm as attorney of record.

The problems led Broward County Chief Judge Victor Tobin to issue a temporary administrative order outlining how Stern cases should be handled and requiring legal evidence be shown that the firm was terminated and new counsel hired.

"It appears that Stern has not made arrangements for the orderly transfer of cases from him or his firm to new counsel for pending cases," Tobin wrote.

And Palm Beach County Clerk of Court Sharon Bock said the transfers are "just adding to the misery that is already happening" in the foreclosure courts.

"As you try to solve one problem, you get another problem," Bock said.

Attorney Jeff Tew, who is representing Stern and his firm, declined to comment Friday.

Stern's Plantation-based company, once one of the largest in the state to handle foreclosure cases, was dramatically downsized this fall as allegations emerged of forged signatures, improperly notarized affidavits and fraudulently filed documents. Last month, mortgage giants Fannie Mae and Freddie Mac both cut ties with the firm, which has laid off at least 50 percent of its staff since October.

Boca Raton foreclosure defense attorney Loretta Bangor said the decrease in staff is likely contributing to the confusion.

In order to change counsel or cancel a sale, a motion must be filed with the court.

"Who is there to actually send these things out?" asked Bangor, who has about 30 cases formerly handled by Stern. "Nothing is happening, nothing is being published, and if that's the case, malpractice is being committed."

Tom Ice, of the Royal Palm Beach-based foreclosure defense firm Ice Legal, said when he calls Stern's office to ask about a case, he's told that the file is no longer there.

"We hate to be jerks about it, but we can't put our cases on hold indefinitely," Ice said.

The most public manifestation of the problem was probably in the foreclosure auctions.

The 110 cases where sales occurred with no bid from the banks will likely have to go back to a judge to either have the sale canceled or verified.

Bock said Friday there are only 15 auctions scheduled in the next two weeks for cases handled by Stern. Because of the low number, she and the court administration decided against canceling all Stern sales.

"We're expecting the new firms will have an opportunity to go through the records and make a judgment on what to do," Bock said.


Bank of America lifts foreclosure freeze

Alejandro Lazo from the Los Angeles Times reports on what most people knew was coming. Bank of America lifted their foreclosure freeze. They have started taking back houses that were sitting on the sidelines. The unfortunate result of their freeze was that many sellers established a false sense of security. Several folks that I spoke with felt that the moratorium was going to last for an extended period of time therefore they let their guard down and frankly did nothing. As a result these people are now fighting an uphill battle. Lesson learned...if it’s too good to be true it probably is. Be proactive and not reactive.

Bank of America lifts foreclosure freeze

December 10, 2010 | 10:02 am

Bank of America lifted its national foreclosure freeze this week and began taking back some 16,000 properties, starting with homes that were either vacant or did not have owners living in them.

The bank, which is the largest financial institution in the U.S., declared a national freeze on foreclosure sales in October, after it acknowledged it had employed people who legally attested to the accuracy of foreclosure documents without reading them.

But just three weeks into the freeze, BofA began resubmitting the legal documents necessary for foreclosure in some 102,000 cases, in the 23 states that require a court order to take back a home -- much faster than most analysts had expected in those states.

Until this week, however, it had kept its freeze on foreclosures in place in the 27 so-called non-judicial states – where a court order is not required - which include California.

The bank said in a statement Thursday that it had completed its review and is comfortable resuming its taking back of homes.

"The review shows the basis for our foreclosure decisions has been accurate,” said Barbara Desoer, president of Bank of America Home Loans. “We have identified areas of our process that can be improved, and while we make these improvements, it’s important that we move ahead with efforts to reduce the number of abandoned properties across the country. These properties can drag down home values in neighborhoods and slow the eventual recovery of the housing market."

BofA said it was taking some steps to improve its foreclosure processes, including better training of its workers and its outside counsel, as well as ensuring that the affidavits the bank submitted to courts in the judicial foreclosure states were "reviewed, properly executed and notarized."

Sean O'Toole, founder of data-tracking firm ForeclosureRadar, said on Thursday that foreclosures by Bank of America had spiked by 10 times this week compared with last week.

O’Toole said that declaring a national freeze -– so as to encompass states such as California, which did not have any high profile cases of robo-signers -- was probably largely a public relations move and that there were likely few problems with the process in the Golden State.

"It was probably more due to political expediency than actual underlying problems in their processes here,” O’Toole said. “I think it was politically popular for them to show an abundance of caution and slow things down.”


Class Action?

In my travels people have often asked why law firms aren’t putting together class action law suits against the big bad banks. Dan Levine from Reuters does a nice job of addressing this issue.

From the article it’s apparent that many law firms have looked into filing class action law suits but have come up empty. The reason being that homeowners can’t demonstrate any economic harm. Because most homeowners are not making mortgage payments, attorneys contend that they can’t demonstrate financial harm. In addition to this, the article points out, “But getting a judge to certify a national class action is difficult, he said, because homeowners have wildly varying circumstances in terms of their relations with servicers.”

So for those of you that have sellers that are banking (no pun intended) on this approach, send them the link to this article.

Banks escaping big foreclosure class actions

By Dan Levine

(Reuters) - Lenders snarled in thelegal thicket over shoddy U.S. foreclosure procedures have so far avoided national class action lawsuits from homeowners, largely because borrowers cannot demonstrate economic harm, according to plaintiff lawyers.

Several large plaintiff firms circled around banks when reports of problems with foreclosure affidavits snowballed in late September.

But as servicers like Bank of America Corp, Ally Financial and JPMorgan Chase attempt to resolve a 50-state probe into their practices -- and other legal challenges -- big class action lawyers have taken a pass on diving into the mess.

"We looked at this up one side, down the other," Joseph Cotchett, of Cotchett, Pitre & McCarthy, said on Wednesday.

Ultimately, the firm decided it would not file suit over the affidavits, Cotchett said, because most borrowers are actually behind on their payments.

That makes it too difficult to make a claim for serious damages, he said. "It's about as basic as that," Cotchett said.

A public furor erupted in recent months over whether banks cut corners in the foreclosure process with so-called "robo-signers" of legal documents used to justify taking homes. Servicers briefly halted foreclosures and evictions as state and federal regulators announced investigations.

Banks have disclosed some legal challenges from homeowners, but the class action lawsuits they are facing have not been national in scope.

In defending one Indiana class action, Bank of America has echoed the conclusion reached by some plaintiff lawyers in arguing that the borrower cannot show harm because they would have lost their home anyway.

Plaintiff attorneys are usually paid a portion of the damages they recover.

Some plaintiff lawyers who have devoted resources to the issue haven't walked away yet. Bruce Simon, with Pearson, Simon, Warshaw & Penny, said this week that his firm still intends to file a national class action.

And Lieff Cabraser Heimann & Bernstein's Eric Fastiff said his firm is still examining the issue. "Investigations take time," he said.

Andrew Friedman of Cohen Milstein said he strongly believes many foreclosures were done improperly.

But getting a judge to certify a national class action is difficult, he said, because homeowners have wildly varying circumstances in terms of their relations with servicers.

That, combined with the damages issue, makes a class action tough.

"I've looked at it pretty seriously, but I keep running into the same buzzsaw," Friedman said.


Mortgage Modifications Aren’t Stopping Foreclosures

Kathleen M. Howley, Dakin Campbell and Danielle Kucera from Business Week bring us an article that highlights the inefficiencies of the lenders and servicing companies that are knee deep in this foreclosure mess.

Another bone that I have to pick, especially with Bank of America, involves short sale “re-approvals”. Does this sound familiar? A short sale is approved for buyer 1....buyer 1 walks.....buyer 2 comes in with the same price, terms and conditions as buyer 1.......Bank of America must “reinitiate” the file, taking months to re-approve the exact same short sale that they had just approved....all because the buyer changed! Buyer 2 gets disgusted with the wait and walks...then the home owner is put in a precarious position. This is the biggest sham and joke that I ever seen! Has this happened to you?

Mortgage Modifications Aren’t Stopping Foreclosures

Programs designed to keep owners in their homes are being upended by lost paperwork and procedural errors

By Kathleen M. Howley, Dakin Campbell and Danielle Kucera

Jill Gray of Mesquite, Tex., says her 3-year-old son, Anthony, often tells her before he goes to bed: “I wanna go to the other house.” Last month Gray, Anthony, and Tiffy, their black Labrador mix, moved about 12 miles to a rental after their one-story brick house in Garland was auctioned in a foreclosure. Gray, 38, tried for almost a year to get her mortgage modified. Bank of America (BAC) initially agreed, only to rescind approval, telling Gray that documents were missing—documents that Gray says she sent.

Gray’s experience of being evicted while participating in a program designed to avert foreclosures is being repeated thousands of times at the biggest mortgage firms, according to groups that aid borrowers. The government’s Home Affordable Modification Program (HAMP) came under fire at hearings late last month for granting homeowners “trial modifications” during which late fees and debts can stack up and documents can disappear, triggering foreclosures.

“Many homeowners end up facing foreclosure solely on the basis of the arrears accumulated during a trial modification,” said Julia Gordon, senior policy counsel at the Center for Responsible Lending, in congressional testimony on Oct. 27. “One incomplete payment or one accounting mistake can land you on an apparently unstoppable conveyor belt to eviction.”

DUBIOUS RESULTS

With as many as 7 million homes facing foreclosure or already taken, according to real estate website Zillow, both the government and companies such as Bank of America and JPMorgan Chase (JPM), the two biggest U.S. lenders, offered programs to forestall seizures by easing mortgage terms. Changes include cutting interest rates for as long as five years and extending repayment to 40 years. About half the 1.4 million temporary or trial modifications granted since the program’s March 2009 inception have been canceled, according to Treasury Dept. data. Only 466,708 borrowers have received permanent modifications. About one in five of the canceled modifications is either in foreclosure or bankruptcy, according to a Treasury survey of the nation’s eight largest mortgage servicers, which handle billing, collections, and foreclosures.

Even borrowers who do win approval and never miss a payment can wind up in foreclosure, the Office of the Special Inspector General for the Troubled Asset Relief Program said in an Oct. 26 report to Congress. “They may face back payments, penalties, and even late fees that suddenly become due on their ‘modified’ mortgages and that they are unable to pay, thus resulting in the very loss of their homes that HAMP is meant to prevent,” according to the report.

Mortgage firms make the problem worse by losing paperwork, according to testimony from Richard H. Neiman, the New York State superintendent of banks. In a May and June survey of 40 counselors representing as many as 14,000 borrowers, the California Reinvestment Coalition found that all of them said servicers had lost or ignored documents, according to Associate Director Kevin Stein, whose San Francisco organization works with low-income communities. “It’s more common to hear that banks have lost paperwork than to hear that they received it and properly handled it,” says Joseph Ridout, a spokesman for Consumer Action, a San Francisco education and advocacy group with a network of 9,000 community organizations nationwide. That leaves HAMP participants vulnerable to foreclosure, a process that has been tainted by allegations of “robo-signing,” in which mortgage firms sign and submit court documents to justify home seizures without verifying they were accurate. Attorneys general in all 50 states are investigating.

HAMP MODIFICATIONS

Under HAMP, homeowners have their mortgage payments reduced to 31 percent of their monthly gross income. The process often results in them owing more money because accrued interest and other charges are tacked onto the mortgage balance. Some HAMP modifications add so-called balloon payments to the loan that are due when a house is sold or the loan paid off. “The program continues to perform well,” says Andrea Risotto, a Treasury spokeswoman. “The target of affordability that HAMP put in place—this idea of 31 percent debt to income, which was far more aggressive than what was done historically—is helping homeowners sustain the modification.”

Spokesman Tom Kelly says JPMorgan is able to track paperwork because it scans every document as soon as it’s received. At Ally Financial, spokeswoman Gina Proia says the lender requires homeowners to submit paperwork at the start of the modification process, leading to a “higher likelihood” of permanent modifications and lower re-default rates. Jumana Bauwens, a Bank of America spokeswoman, declined to comment on matters tied to lost paperwork.

Gray, the former homeowner in Texas, says she fell behind on her mortgage bills last year after paying for medical treatments for her son that weren’t covered by insurance. She says she received the modification offer from Bank of America in December and immediately signed and returned the contract, using the supplied FedEx (FDX) envelope. Bauwens said the bank didn’t receive it by the due date. Gray kept a record of her calls to the bank and printed confirmations of documents she faxed. The log reads, in part: “Sept. 9: Called, was disconnected. Called again. Spoke to Christina. While transferred to supervisor I was disconnected.” When her home was auctioned in September, there were no bidders, so it reverted to the mortgage holder, Freddie Mac (FMCC), which was taken over by the government in 2008. The house is now listed for sale at $55,000.

Gray is again being considered for a modification, and the foreclosure sale may be rescinded, Bank of America’s Bauwens says. Gray, who works in the building-permit department in a city called Fate and is a part-time Avon Products (AVP) saleswoman, says she doesn’t expect to be approved. She’s paying $775 a month in rent, boosting her monthly outlays beyond the program’s guidelines on income and expenses.

The bottom line: Programs meant to prevent foreclosures don’t work for many homeowners who participate, in part because of paperwork errors.


Judges Lowering Boom on Foreclosure Sloppiness, But at a Cost...

Ashby Jones from the Wall Street Journal brings us an interesting article which has an obvious take but also an interesting twist. Judges are elected officials. As a result, judges will do what it takes to get re-elected. Where this surfaces in the housing industry is when the judge challenges a lenders ability to foreclose.

Judges are forcing the attorneys for lenders to jump through major hoops in order to foreclose. Some are threatening penalties of purgery if the attorney attests to the accuracy of documents without personally knowing if they are accurate or not. These actions will continue to prolong the housing crisis, which is the obvious take on the story. The twist is that the actions may cost the tax payers more money in the long run.

A passage from the article explains it best, “Over the long run, borrowers are likely to pay hundreds of dollars in additional fees or slightly higher interest rates, as toughened quality control ripples through the market for new and refinanced mortgages, many experts predict.

“The cost of servicing has gone through the roof, and the legal risks are almost unknowable,” said Dan Cutaia, president of capital markets at Fairway Independent Mortgage Corp. in Sun Prairie, Wis. As a consequence of rising servicing costs for lenders, “there will be higher pricing for the consumer.”

Judges Lowering Boom on Foreclosure Sloppiness, But at a Cost...

By Ashby Jones

The foreclosure mess that erupted about six weeks ago with evidence of widespread sloppiness in foreclosure paperwork is, by some accounts, nearing the beginning of the end.

Still, the push by mortgage companies to accelerate the process is running into resistance from judges who are cracking down on the sloppy methods. Click here for the page-one story in Wednesday’s WSJ.

For instance, inFlorida, a state-court judge has begun forcing lawyers to defend fees charged to borrowers by law firms. Maryland’s state appeals court told judges that they can hire experts to scrutinize paperwork filed in foreclosure proceedings—and make lawyers swear that the documents are accurate.

Since last month, New York has threatened to use “penalties of perjury” against lawyers caught filing bad documents, even if they didn’t know about the problems when the foreclosure process began.

The crackdowns might be justified, even necessary. Still, the moves by dozens of state courts across the U.S. could add to the delays brought about by foreclosure-document crisis. Sales of foreclosed homes have slowed, and mortgage servicers face new expenses as they scramble to shore up their operations.

Over the long run, borrowers are likely to pay hundreds of dollars in additional fees or slightly higher interest rates, as toughened quality control ripples through the market for new and refinanced mortgages, many experts predict.

“The cost of servicing has gone through the roof, and the legal risks are almost unknowable,” said Dan Cutaia, president of capital markets at Fairway Independent Mortgage Corp. in Sun Prairie, Wis. As a consequence of rising servicing costs for lenders, “there will be higher pricing for the consumer.”


Pay those Dues!

Benny Kass from the Washington Post brings us an article that you need to read. The point of the article is that home owners associations are foreclosing to recover past due dues, even though they are in junior lien position. The HOA or condo association typically forecloses, takes title and then rents the unit out to recover past due dues. The interesting aspect of the article involves “reverse foreclosures.”

A reverse foreclosure either forces the 1st lien holder to foreclose and pay off underlying condo dues (most states dictate how many months an HOA must be paid for back dues) OR the lender can be forced to abandon their mortgage thus giving the HOA clear title (assuming there are no other liens senior to the hoa/condo lien). The HOA is then in a position to sell the property.

What does this mean to homeowners? Pay your HOA/Condo dues. HOA boards are becoming more aggressive in their pursuit of recouping past due dues.

Condo groups facing unpaid dues push for foreclosures

By Benny L. Kass

Saturday, November 20, 2010

Foreclose - or else. That's a new message being sent to banks by a lawyer representing condo associations in Florida. Increasingly, the associations are stuck in unpaid-dues limbo when banks delay foreclosure on a unit owner, not wanting to assume the liability for unpaid condo dues and taxes. And this lawyer's strategy could have implications for troubled loans throughout the housing market.

Condominium associations face serious financial problems when unit owners stop paying their condo fees. Association budgets are established on a yearly basis and are based on the assumption that a large percentage of owners will be current with their payments. But as more owners are facing financial problems of their own, they opt not only to stop paying their mortgage but also to skip their condo fees.

When this happens, a condominium generally has a couple of alternative enforcement mechanisms. It can file a lien against the unit, it can demand the balance of the yearly assessment and file suit against the owner, or it can foreclose on the unit.

The first two options might not generate any money for the association. Filing a lien will only assure that if and when the unit is sold, the association will be paid. But in today's market, if the unit is under water, (with the value less than the mortgage amount) there could be no equity in the property to allow the association to be paid.

A court judgment is often meaningless if the debtor does not have any money. There is no cash register at the back of the courthouse.

And if an association forecloses, that action does not eliminate any first mortgages that exist against the property. So the association will often end up owning the unit, since no one else wants to buy it and have to pay off the existing large mortgage.

So, a game of "who will blink first" is played. The mortgage lender does not want to foreclose because it might end up owning the unit - thereby having to pay condo fees, real estate taxes and insurance. And the condo is in the same position.

However, recent developments in Florida may be the solution to this dilemma. It is called "mortgage termination" or "reverse foreclosure."

Ben Solomon is a lawyer with the Association Law Group, and practices community association law in Florida. Through his firm's efforts, his association client foreclosed on Otaime Paez, an owner who was delinquent on her condominium fees. Solomon then filed a lawsuit against Citibank, the lender who held the first mortgage on the Paez unit. The lawsuit basically told the bank "foreclose on the unit or abandon the mortgage."

Solomon's lawsuit pointed out that the existence of the Citibank's mortgage was a restraint on alienation. In legal terms, alienation means the ability to sell or otherwise dispose of property, and restraint on alienation is a concept deeply ingrained in our legal system. This means that if a property cannot be sold because of some impediment, and there is no time limit on when the impediment will be removed, a court may determine that the impediment is an unreasonable restraint on the ability of the property owner to sell.

According to the Solomon complaint, since the mortgage exceeded the fair market value of the property, there were no bidders when the condo association foreclosed. Furthermore, according to the complaint filed in court, "no buyer will purchase the property from the Association with an outstanding first mortgage" held by Citibank. This, Solomon told the court, is unreasonable. "Florida courts have consistently held that the rule disfavoring unreasonable restraints on alienation is based on the principle that the free alienability of property promotes economic and commercial development."

This, of course, raises a more basic issue involving our foreclosure crisis. Unlike the situation with condominiums, banks are often quick to foreclose on single family homes, but take a very long time approving short sales. These delays often force potential home buyers to walk away from their purchase and cancel their real estate contract. Is this yet another example of a "restraint on alienation," thereby impeding-rather than promoting-economic and commercial development?

Solomon and his law firm presented two alternatives to the court. First, they asked to court to remove Citibank's mortgage from the records. Alternatively, they asked the court to force Citibank to foreclose, and in fact the association agreed to waive any and all defenses that could normally be raised against that foreclosure action.

Citi capitulated. It released its mortgage, which allowed the condo association to sell the property for whatever price it could get on the open market. Once a new buyer took title, that new owner would be responsible for paying condo fees and real estate taxes, instead of the association.

Solomon also filed a similar action against HSBC bank on behalf of another association client.

On Jan. 12, a judge in the Eleventh Judicial Circuit of Florida, which covers Miami-Dade County, ordered that title to a condominium unit be turned over to the bank. In effect, this shortcut the foreclosure process, and the bank did not have to comply with the procedural steps normally required under Florida law.

Why is this significant? In the District of Columbia, if a lender forecloses, it has to pay the condominium association up to six months of condo fees that went unpaid before the foreclosure. But if the unit owner has not paid fees for more than six months, the condo will lose a significant amount of money. In Maryland and Virginia, lenders do not have to pay the association any unpaid condo fees.

Accordingly, the Solomon approach forces a lender to "put up or shut up." Start the foreclosure now, or lose your mortgage. "Although this particular legal strategy is for extreme cases," Solomon said, "it demonstrates there is more associations can be doing to collect past-due maintenance assessments from owners and lenders. Associations need to be more aggressive than ever during these difficult economic times, even when traditional collections methods have failed."

This approach worked successfully in Florida, a state plagued with an unbelievable number of condominium foreclosures. If you are on the board of directors of your association, you should confer with your legal counsel to determine its validity in the Washington metropolitan area.

Benny L. Kass is a Washington lawyer. This column is not legal advice and should not be acted upon without obtaining your own legal counsel. For a free copy of the booklet "A Guide to Settlement on Your New Home," send a self-addressed stamped envelope to Benny L. Kass, 1050 17th St. NW, Suite 1100, Washington, D.C. 20036.


Years Upon Years Upon Years!

Jon Prior from NuWire Investors brings us an article that highlights the dire position that our housing market is in and will be in for years to come. There are 7 MILLION properties that must be cleared from the system in order to bring some stabilization to the market. Fitch Ratings estimates that this will take 3 years! And the shocking part is that the inventory grows...daily.

The following passages from the article are very telling, “For the 23 judicial states like Florida, the recovery will take longer while problem inventories in states such as California will be resolved quicker.

As of September, the average liquidated distressed mortgage took 18 months from the last payment to resale, according to Fitch, the highest number on record. While servicers have shifted their strategy from quick liquidation times to putting more emphasis on modifications, the effectiveness of loan modifications in terms of reducing the eventual total number of liquidations has generally been disappointing.

‘To date, the majority of modified loans have re-defaulted after one year,’ according to Fitch.”

Does this mean don’t buy houses? In my opinion it does not. In fact I would suggest that this is a great time to purchase homes. Don’t sit on the sidelines too long or the opportunity will pass you by...quickly.

Foreclosure Inventory Projected To Grow To A 3-Year Supply

Published on: Wednesday, November 03, 2010

Written by: Jon Prior

The 40-month backlog, representing 7 million distressed properties, threatens future US housing prices - while investigations and legal delays only postpone real recovery. Modifications have largely failed to mitigate mounting liquidations, and distressed mortgages are languishing longer than ever on the market. See the following article from HousingWire for more on this.

The shadow inventory of delinquent loans, foreclosures, and REOs stands at 7 million homes, which would take the market more than 40 months to clear, more than three years, according to Fitch Ratings .

And as major banks fix recent problems in the foreclosure process, that number will only grow. Liquidation and resolution timelines were extended because of the affidavit issues. Consumer advocacy groups and state attorneys general offices filed lawsuits, and regulators launched investigations.

All of it, Fitch said, simply prolonged the housing correction underway and will bring about further house price declines and losses on residential mortgage-backed securities .

Fitch analysts looked at the distressed loan inventory in the private-label RMBS market to get the estimate. While those loans represent 25% of the entire mortgage market, trends and issues can be extrapolated to the rest, analysts said.

Before the trouble, the total number of troubled loans peaked in early 2010, driven by fewer delinquencies as well as some stabilization in the economy, but when banks began going back over misfiled affidavits the recovery was put on hold.

For the 23 judicial states like Florida, the recovery will take longer while problem inventories in states such as California will be resolved quicker.

As of September, the average liquidated distressed mortgage took 18 months from the last payment to resale, according to Fitch, the highest number on record. While servicers have shifted their strategy from quick liquidation times to putting more emphasis on modifications, the effectiveness of loan modifications in terms of reducing the eventual total number of liquidations has generally been disappointing.

"To date, the majority of modified loans have re-defaulted after one year," according to Fitch.

Analysts did say it is still unclear how long the foreclosure delay will last, but even before the problems came to light, Fitch believed prices would drop another 10% with the majority of the recovery coming at the end of 2012.


The Truth About HAMP

Michael Kraus wrote an opinion about the governments HAMP program. His opinion is one that is shared by many. HAMP continues to be a dismal failure.

Mr. Kraus points out, “I am not the only one who is down on HAMP.” The Special Inspector General for the Troubled Asset Relief Fund (SIGTARP), Neil Barofsky, released his quarterly report on TARP for Congress at the end of October, and he blasted HAMP for falling “woefully short” of its goal of preserving homeownership. He also accused HAMP of offering “little more than false hope” for many borrowers.

Following on the heels of SIGTARP’s criticism of HAMP, The Congressional Oversight Panel released a report further damning the program, saying: “To date fewer than half a million homeowners have received permanent mortgage modifications through Treasury’s program, and as many as half of these borrowers will ultimately redefault and lose their homes”.

Now there is a report from Freddie Mac via Housing wire that shows 42 percent of the modifications Freddie Mac did during the second quarter of 2009 (a paltry 16,000) re-defaulted within 12 months of the modification. In fairness, only 29 percent of modifications from the third quarter of 2009 ended up re-defaulting. The article says that Freddie Mac has completed 121,000 HAMP modifications since the program began.”

The issue is that the modifications rarely help people for an extended period of time because they DON’T involve principal write-down's. They involve temporary rate reductions and/or extended payment terms. They do nothing to the balance/value equation i.e. the sellers still owe the same amount (actually more) and their property is still underwater. This is the precise reason that almost half of the people with HAMP modifications end up back in foreclosure within 12 months.

Many Freddie Mac HAMP Modifications End Up in Foreclosure

By Michael Kraus on November 4, 2010 Share|

I am hopeful that one of these days I will be able to write a story about the stunning success of a government sponsored mortgage modification program. Today is not that day.

Hopeful is probably not the right word. I see precious little evidence that our elected officials can or will pass any sort of useful legislation to forestall foreclosures unless they fall backwards into it.

I have hammered on government mortgage modification programs in this space over the last several months. I believe they have been expensive, poorly-designed, and largely ineffectual. The Home Affordable Modification Program (HAMP) is the most prominent of these programs and thus receives the most criticism.

I am not the only one who is down on HAMP. The Special Inspector General for the Troubled Asset Relief Fund (SIGTARP), Neil Barofsky, released his quarterly report on TARP for Congress at the end of October, and he blasted HAMP for falling “woefully short” of its goal of preserving homeownership. He also accused HAMP of offering “little more than false hope” for many borrowers.

Following on the heels of SIGTARP’s criticism of HAMP, The Congressional Oversight Panel released a report further damning the program, saying: “To date fewer than half a million homeowners have received permanent mortgage modifications through Treasury’s program, and as many as half of these borrowers will ultimately redefault and lose their homes”.

Now there is a report from Freddie Mac via Housingwire that shows 42 percent ofthe modifications Freddie Mac did during the second quarter of 2009 (a paltry 16,000) redefaulted within 12 months of the modification. In fairness, only 29 percent of modifications from the third quarter of 2009 ended up re-defaulting. The article says that Freddie Mac has completed 121,000 HAMP modifications since the program began.

It is apparent that HAMP is not helping the vast majority of people who need assistance. According to data from Lender Processing Services, there are currently 4.3 million mortgages that are seriously delinquent or in foreclosure. REO inventory is at all-time highs. Still HAMP has only done about a half million modifications. Many of these people will end up redefaulting. This is particularly upsetting, because it means many of those who have been “helped” by HAMP would have likely been better off just defaulting and moving on without even attempting a modification.

The fundamental problem is that this program (and others) provides neither a carrot nor a stick that will incent banks to write down loans. Servicing fee structures are often set up in such a way that a drawn out foreclosure is more profitable than a principal write down. Until somebody comes up with a program that addresses this fundamental issue, the foreclosures will continue.


Should I Stay Current?

“Should I stay current on my mortgage payments?” is one of the most common questions asked when working with short sales. My answer is that the decision rests solely on the shoulders of the home owner. The reality is that lenders (and their investors) will approve short sales whether you are current on your mortgage or not. Servicing companies on occasion will require that the home owner miss a payment in order to process a short sale.

There are jobs that do require you to maintain a good credit rating. Jobs in the financial sector can require this. Employees with security clearances are also required to maintain a good credit rating. As Dina ElBoghdady and Dana Hedgpeth from the Washington Post report, the government sees employees with financial problems as security risks. Why? A person with financial issues is open to bribery and corruption in the eyes of the government.

Don’t get trapped into giving advice to home owners when asked about staying current. The homeowner must make the decision, themselves, based on their specific situation. In fact, don’t get trapped into giving advice to home owners regarding short sales or foreclosures period! Leave this to the attorneys.

Foreclosure freeze could put security clearances at risk

By Dina ElBoghdady and Dana Hedgpeth

Washington Post Staff Writers

The sudden moratorium on many foreclosures across the country has unexpectedly put some federal workers and contractors in jeopardy of losing their security clearances because of the heightened uncertainty clouding their finances, according to lawyers who handle these cases.

Employees with security clearances are monitored by the government for financial problems that would make them vulnerable to bribery or blackmail. And with many financial companies adopting some form of foreclosure freeze in recent weeks, it's taking longer for some delinquent borrowers to resolve their mortgage cases and put their troubles behind them, the lawyers said.

This problem is especially acute in the Washington region, home to nearly a third of the the nation's 854,000 employees with top-secret clearances.

"Resolving debt is more complicated when the lenders are in paralysis," said Dennis Sysko, a national security lawyer in Glen Burnie. "The longer it is unresolved, the longer the cloud remains."

Lawyers in the Washington area said they are starting to field inquiries about foreclosure delays from workers who have security clearances or are trying to get them. Many don't know whether they should be elated or concerned by the turn of events.

"I'm just really confused because nobody has made clear to me what this foreclosure delay means," said Brian Young, a federal employee from Capitol Heights.

Young bought his first home in October 2007 with a first and second mortgage from Bank of America. At the time, he had the interim secret clearance he needed to do his electrical engineering job at a Defense Department agency, he said. He applied for a permanent clearance soon thereafter.

When the permanent clearance did not come through as quickly as he'd hoped, Young said, his pay was cut, and he fell behind on his mortgage in August. He was engaged in talks with his lender to modify his loan when his security clearance was revoked. His supervisors suspended him from his job, citing him as a financial risk, mostly because of his mortgage problems, he said.

Young is appealing the decision. But as he waits, he's fallen further behind on his mortgage and other bills, including child support payments. Bank of America informed him that it would expedite foreclosure and seize his home, but then the lender suddenly announced a halt to all its foreclosure sales nationwide. This week, the bank said that it would restart foreclosures in some states, but not yet in the Washington region.

"This is just dragging everything out, and my credit keeps taking more hits," Young said. "If it helps me in some way, cool. But I just don't know if it does."

The moratorium comes to D.C.

Foreclosure delays started when Ally Financial, formerly GMAC, suspended evictions last month after concerns arose about flaws in court documents used to seize homes. The firm limited its freeze to the 23 states where lenders have to win a court order to initiate a foreclosure. Other major lenders, including J.P. Morgan Chase and Bank of America, also suspended foreclosures in those states.

Virginia, Maryland and the District were not immediately affected by the lenders' actions. But then Bank of America suspended foreclosures nationwide. Others have since selectively halted foreclosures here. And at least two area circuit courts - in Prince George's and Montgomery counties - are reviewing cases for paperwork flaws.

Under government guidelines, the failure of security-cleared workers to live within their means and pay off debt suggests poor self-control, bad judgment and an unwillingness to abide by rules, raising concerns about their ability to protect classified information.

Only a few government agencies make public their decisions to revoke or deny security clearances. Among them is the Defense Department's Office of Hearings and Appeals (DOHA), which reviews cases involving contractors for the Pentagon and about two dozen agencies, according to lawyers.

From January 2006 through June 2010, about 70 appeals involving foreclosures and other distressed sales were considered by that office, and security clearances were revoked or denied in 62 of those cases, according to Sheldon I. Cohen, an Arlington lawyer who recently wrote a paper about the rulings.

"In many cases, they act as a court of morality," Cohen said.

Based on his study of the DOHA appeals cases in the past 41/2 years, Cohen said that the number of security clearance denials and revocations has kept pace with the number of mortgage defaults, foreclosures and other distressed sales in the country.

'Emotionally charged issue'

The number of security-cleared workers who are in trouble with their loans is not public. But John P. Mahoney, a lawyer at Tully Rinckey in the District, said there is no reason to believe that these employees are insulated from the problems that plague the housing market at large.

"Now they are concerned that their clearance will be pulled or they will be fired because their real estate investments have gone bad," Mahoney said. "It's a very emotionally charged issue, because some of these people have had high-level clearances for decades and never dreamed they would face a problem like this."

Two weeks ago, Mahoney was contacted by a government contractor panicked about the payments she's missed on three investment properties she can no longer afford. She can't refinance or sell the homes because each has lost value.

The contractor, who asked not to be named for fear of losing her job, said in an interview that she has had a security clearance for more than 20 years. She is talking to Bank of America, her lender, about modifying the loans to avoid foreclosure.

"I'm hoping the freeze will work for me instead of against me," she said.

But anything that keeps her from resolving the problems leaves her in limbo. And that means it will take that much longer for her to regain her financial footing, reestablish her credit and reassure the government that she's trustworthy.

"If the foreclosure moratorium continues and she is unable to successfully modify her loans, she's left with the financial concerns that could lead to her termination," Mahoney said. He added, "Action needs to be taken, a government-wide approach, so that people who add value to the government's mission and have a long record of trusted service don't lose their jobs for no other reason than an economic downturn.


Sheriff Halts Foreclosure Evictions

Don Babwin from the Associated Press reports on how a Sheriff is mixing it up with the banks. Cook County (Chicago) Sheriff Tom Dart issued a moratorium on foreclosure evictions recently. He has stated that unless he is provided documentation, from Bank of America, JP Morgan Chase and GMAC/Ally, he will not carry out evictions. Whether this is grandstanding or not is not relevant to me. The Sheriff, who is an elected official, is acting in the best interest of his constituents.

I wonder how quickly the banks would get their acts in order if all Sheriffs refused to evict until the banks processes were cleaned up?!

Chicago-Area Sheriff Halts Foreclosure Evictions

Sheriff planning Chicago mayoral run halts foreclosure evictions again over flawed documents

The Associated Press

By DON BABWIN Associated Press Writer

A sheriff considered a leading contender to be Chicago's next mayor after a series of headline-grabbing initiatives announced Tuesday that he has ordered deputies to stop carrying out mortgage foreclosure evictions for the second time in two years.

Cook County Sheriff Tom Dart lashed out at three of the nation's leading lenders, saying he halted evictions after they acknowledged some employees signed off on foreclosure documents without even reading them.

"This is so outrageous and these poor families are being put through this day in and day out by people that don't do their jobs," said Dart, displaying the same disdain he showed when he announced a similar decision two years ago. "It's so hard for me to stomach these people because this isn't just their bike we're taking away or their car. It's their house."

Dart singled out Bank of America, JP Morgan Chase and GMAC/Ally Financial, saying if he doesn't receive affidavits from the institutions verifying the 1,000 to 1,500 eviction orders they've already filed with his office, he won't enforce them.

"I don't think it would take (the banks) a lot of time," he said.

Meanwhile, Dart said his latest moratorium could be expanded to other institutions. He explained he already has asked county and state prosecutors if they have any information about questionable practices by other lenders.

Dart's announcement comes a day after Bank of America announced plans to resume seizing more than 100,000 homes in 23 states, saying it had the legal right to do so despite accusations that documents used in the process were flawed. Ally Financial Inc.'s GMAC Mortgage unit also is resuming foreclosures once documents are fixed.

On Tuesday, a spokesman for JP Morgan Chase declined to comment. A Bank of America spokesman said in an e-mail that the bank already has reviewed the documents in Illinois and several other states. "Our assessment shows underlying information provided as the basis for our past foreclosure decisions is accurate," Rick Simon said.

A spokesman for GMAC/Ally Financial, James Olecki, had a similar statement, saying "the affected files have been reviewed and remediated appropriately."

"We are happy to respond to any questions from the sheriff related to this matter, " Olecki said.

Dart said if the lenders have taken the proper steps then it should be no problem to say so in writing.

"All I'm looking for them is an affidavit saying, 'Sheriff, the cases you have in your system were all reviewed, all the documents were done correctly ... they're all legally done and you are not enforcing illegal orders,'" Dart said.

Two years ago, Dart made national headlines when stopped evictions until banks put procedures in place that ensured his deputies were not putting on the street people who paid their rent and were unaware of their landlords' financial problems. He's also sued Craigslist over ads he said promoted prostitution and headed the investigation into the alleged resale of burial plots at a historic cemetery outside Chicago.

Dart has not announced he will run for Chicago mayor but is going to do so, people close to him have told The Associated Press. On Tuesday, he dismissed the suggestion that his latest move was an attempt to impress voters.

"If this was an issue where this was the first time you folks had heard from me about this, I would suggest you had a reason for skepticism," Dart said. "That was two years ago ... and we have completely revamped the way evictions are done and we have been a leader on it."

Dart also said his refusal to publicly announce an intention to join a crowded field of candidates and potential candidates hoping to succeed the retiring Mayor Richard Daley is not misleading voters who will be asked to re-elect Dart as sheriff on Nov. 2.

"I haven't hidden from them that I'm examining the mayor's race," he said.

Dart also said he wasn't concerned about the highest profile candidate, Rahm Emanuel, getting a head start. Emanuel has been campaigning steadily since quitting his job as White House chief of staff, getting a head start on him.

He instead seemed to enjoy questions about Emanuel, particularly one from a television reporter who wondered about Emanuel's proposal to raise money for schools after serving in an administration that rewarded $3.4 billion in stimulus money for education to nine states and the District of Columbia — but not Illinois.

"You really should ask him that very good question," Dart said.


Judges Fight Back!

By now, everyone has heard of “robo signing” parties at the law firms that are representing the banks. Employees were signing documents in droves having no clue as to the validity of the documents. Surojit Chatterjee reports that the chief judge for the New York State Court of Appeals is holding the lawyers that are representing the lenders accountable for the accuracy of the documents that they are presenting. In concept, this is a great first step. In practice, it will be interesting to see if the court holds the individual lawyers accountable for their actions. While I would like to believe that they will, the proverbial proof will be in the pudding!

NY chief judge orders lawyers to verify foreclosure paperwork

By Surojit Chatterjee | October 22, 2010 11:34 AM EDT

The chief judge of New York has directed lawyers handling foreclosure cases for banks and servicers in the state to verify the paperwork and ensure that the procedure is followed properly.

According to Jonathan Lippman, the chief judge of the New York State Court of Appeals, the courts were appalled to find that big banks were lax in handling mortgage documents and several lenders and servicers had hired staff who did not properly review files or submitted false statements to evict delinquent borrowers.

Lippman said the state courts are concerned that many banks were using 'robo-signers' (dubbed so because of the speed with which they signed thousands of foreclosure affidavits a month without reviewing them carefully), a practice that led to unfair eviction of thousands of homeowners.

The state courts, the judge said, were seeing "systemic structural failings" in the foreclosure process and are concerned about the "nationwide crisis."

Hence, Lippman said, the courts have decided to make lawyers, who represent the plaintiffs in residential foreclosure actions, responsible for the accuracy of the underlying documents.

The lawyers, the judge said, must file signed affirmations ( click here ) that they took "reasonable" steps to verify the accuracy of the documents.

"We cannot allow the courts in New York State to stand by idly and be party to what we now know is a deeply flawed process, especially when that process involves basic human needs - such as a family home - during this period of economic crisis," Lippman said in a statement.

Though in New York, lawyers already have an obligation (under the Rules of Professional Conduct) to ensure that the documents they present to the court are valid, the new rule, Lippman said will hold the lawyers more accountable.

"This new filing requirement will play a vital role in ensuring that the documents judges rely on will be thoroughly examined, accurate, and error-free before any judge is asked to take the drastic step of foreclosure," the judge said, adding that the rule, that was passed on October 20, comes into immediate effect.

In New York, which is one of the 23 states where court approval is needed to foreclose, there are nearly 80,000 foreclosures actions pending in the courts.

Earlier this week, Maryland's Court of Appeals approved a measure that outlines howstate judges can review foreclosures and stop them if documents are invalid.

The measures imposed by New York and Maryland came close on the heels of a scathing criticism launched by the attorney generals of all 50 U.S. states and the District of Columbia who are jointly investigating whether mortgage companies have violated state laws.

The attorney generals said the "corner-cutting and slipshod paperwork (by lenders) are troubling" and may impose financial penalties "where appropriate." They also said they might require lenders to change the way they process mortgages and foreclosures.

The banks accused of hiring "robo-signers" include JPMorgan Chase & Co, Wells Fargo & Co., Ally Financial Inc. (formerly GMAC) and Bank of America. These banks froze all foreclosures nationwide while they reviewed their filings for errors. However, earlier this week Bank of America and Ally Financial Inc. resumed foreclosure proceedings.


Law Firms...Cutting Corners???

Drew Griffin and Jessi Joseph from CNN bring us an article that speaks to the power and money behind lenders, servicing companies and the investors that own all the underwater notes. Rather than handle foreclosures the correct way, they pay attorneys to jam foreclosures down the throats of consumers and courts alike. While measures are being tested to alleviate this, there is only one way to truly fight fire with fire.

In my opinion the only way to battle the banks is with foreclosure defense attorneys. Do you, as realtors, require your sellers that are underwater to be represented by a foreclosure defense attorney? If you don’t, why don’t you? We do! For us to purchase a property we require that the home owner be represented by a foreclosure defense attorney of their choice. We don’t hide behind disclosures that many others might hide behind.

Are some law firms cutting corners on foreclosures?

By Drew Griffin and Jessi Joseph, CNN

Miami, Florida (CNN) -- Tony Louzado is facing foreclosure. He's not alone -- in central Florida, where Louzado lives and works, one in every 56 homes is in foreclosure.

That simple number, from foreclosure data firm RealtyTrac, doesn't tell the whole story, especially in Louzado's case. Two different law firms are pushing the foreclosure -- on the same mortgage.

"I see now that there's two people that are coming after me, that maybe [the bank] hired in this way," he said. "I don't know all the specifics, but there's two people that are coming after me on the same loan number."

Across the country, millions of Americans have lost their homes to foreclosure since the recession began in December 2007, according to RealtyTrac. Increasingly, however, more of those stories are becoming horror tales about a system in chaos with banks pushing people toward foreclosure, sometimes, allegedly, based on error-filled or even fraudulent and illegal documents.

Several of the nation's financial giants, including Bank of America, Allied Financial, JPMorgan Chase and GMAC, have halted foreclosures, although Bank of America and GMAC announced they are resuming the process. While the Obama administration opposes a moratorium on foreclosures so the process can be examined, the federal Fraud Enforcement Task Force has launched a criminal investigation to determine if the banks and their lawyers have done anything illegal.

Louzado's case may or may not have been handled properly, but his story is typical.

"I bought the house 6 years ago. It was something I was happy with. It was $1,500 a month," said the physical therapist and part-time fireman-paramedic. "I'm a prideful man. I take pride in paying all my bills."

But then, there were a series of tragic turns.

His young son needed three open heart surgeries as well as other surgeries to drain fluid. Louzado's health insurance is good, he said, but not good enough to cover $1,800 per month in prescriptions, co-payments and deductibles. He took a loan from his retirement account. The low interest rate on his mortgage -- supposedly fixed for the first five years and variable after that -- nevertheless rose every year, including a $600 jump in Year 4. The bank had no real answers, he said, and wasn't very helpful.

Meanwhile, the bills piled up, and he started to fall behind. Louzado took a 5 percent pay cut at the fire department, necessitated by the struggling economy. But still, he thought he could work his way out until he began calling his bank and realizing, he said, no one wanted to listen.

"They said, 'You are a hard-working American, thank you for paying us. When you stop paying, now we can start working with you,'" Louzado said. "Basically, do something wrong, then we're going to work with you. Go through your savings, go through everything, now you have nothing.

"With my situation it's a little more difficult because of my son's surgeries and the medical bills which I now have to take care of, which I want to take care of,"

His son's medical bills take priority, Louzado says. But that's not easy with a big bank seeking to repossess his modest, three-bedroom townhome in Miami -- and two law firms to deal with.

"In my opinion, these are hired guns. Banks want these non-performing loans off their bottom line. And what do they do? They go out and hire a foreclosure mill who's trying to push it through as fast as possible," said Louzado's attorney, Jose Funica.

Working fast and furiously creates opportunities for mistakes, Funica said, and Florida foreclosure defense attorneys are filing complaints.

Funica's Palm Beach law firm, Ice Legal, has taken numerous depositions where banking officials have admitted under oath they signed thousands of foreclosure-related documents every month without personally verifying them. One employee was signing 10,000 documents a month in some cases, the depositions revealed.

"That's virtually impossible," said Funica. "You have to have an army of people to review the documents necessary to prove the validity of these documents in court."

One of the firms foreclosing on Louzado is the law office of David Stern in Plantation, Florida. Florida's attorney general says Stern's foreclosure business is the largest in the state and accuses the firm of submitting false documents, even making some up, just to speed up the foreclosure process. The state has opened a civil investigation against several firms, including Stern's.

Repeated calls to Stern's office have not been returned. However, he told the New York Times, " ... there has not been submission of fraudulent documents." Stern said the investigation is politically motivated, adding, "We have done nothing wrong."

"I can tell you now that no misconduct is occurring at David Stern's law firm, and the firm works very diligently to make sure that all the processing is done correctly," Stern's attorney, Jeffrey Tew, said in a phone interview.

But in depositions for a lawsuit against the firm, Stern's employees admitted, under oath, they were signing foreclosure documents so fast that they barely had time to even see who the homeowner was.

It's a practice known as "robo-signing." In an excerpt from a deposition of Cheryl Samons, an employee who once worked for Stern, she says she did not read foreclosure documents before signing them.

"How much time do you spend examining each document before you sign them?" asked Ice Legal. "Very little," the employee answered. "Do you read the document?" Ice Legal asked. "No," the employee answered.

"Their mill is the printer, printing off document after document after document and just having people sign them," said Ice Legal attorney Chris Immel.

"They're being paid to serve, to take the foreclosure through the process as quickly as possible," he said. "The servicers actually rate them based on how quickly they move through the process."

And in a "foreclosure mill," time is money.

" ... $1,200 to $1,450 is usually what shows up on uncontested cases for attorney's fees and costs because they're dealing with a pro-se person who's not challenging the different paperwork that they file in the case," said Immel. "I mean, some of these people are making a very good living doing this."

David Stern has made millions. He owns tens of millions of dollars in homes, sports-cars and a recently purchased a 130-foot Mangusta yacht. The yacht alone is estimated to be worth around $20 million.

Judges in numerous states have thrown out thousands of foreclosures. In at least six states, attorneys general are investigating, including the state of Ohio which has also sued Allied Financial. U.S. Attorney General Eric Holder has announced the Department of Justice is looking into the problem, and Congressional leaders are calling for GAO investigations and more.

The investigations and lawsuits will eventually peel back the layers and determine if the foreclosures have been handled properly. Congress may set more rules so that the system operates more transparently.

But that will all come too late for Tony Louzado, who has given up the fight to keep his home and reluctantly is letting it go.


Those Sneaky Politicians!

Jia Lynn Yang and Ariana Eunjung Cha, both reporters from the Washington Post, bring us an article that boggles ones mind! Apparently Rep. Robert B. Aderholt (R-Ala.) introduced a bill that, “… critics say would have made it easier to evict homeowners who missed their payments.” Interestingly enough the bill passed the house and senate with flying colors. It took a veto from President Obama to block the passage into law (note, this was the first bill that Rep Anderholt sponsored that actually passed! Even more shocking, several Aderholt staff members said they more shocked that it passed!)

An excerpt from the article is very telling. “The vetoed bill, which is two pages, would have required local courts to accept notarizations, including those made electronically, from across state lines. Its sponsors said it was intended to promote interstate commerce. Lawmakers saw no problems when the House approved it in April by a voice vote, which leaves no record of votes. The Senate passed the bill unanimously last week.

But as the lack of a proper paper trail in mortgage documents came to light, the idea of relying on electronic notaries triggered protests from real estate lawyers and consumer advocates. Relying more on electronic notaries, they warned, could allow more fraud into the system.

That the White House had to pay so much attention to the two-page bill few had heard of before this week shows just how politically charged the issue of flawed foreclosures has become.”

You can look at this two ways; the glass is half full or the glass is half empty. For fun, let’s look at both. The easy one is the glass is half full. Someone (certainly not Obama) actually read the bill and discovered that it was not in the best interest of the American Public. They notified someone who notified someone who sent smoke signals to the white house and eventually got word to Obama in a nick of time! Kudos’ to whoever picked up on the absurdity of this bill.

The glass is half empty scenario points to our idiotic political system. How can our elected officials let this bill get through the house and the senate without debate? Do they simply not read nor do they simply not care?

Obama vetoes foreclosure bill as anger grows

By Jia Lynn Yang and Ariana Eunjung Cha

Washington Post Staff Writers

President Obama stepped into a growing political furor over the nation’s troubled foreclosure system Thursday by vetoing a little-known bill that critics say would have made it easier to evict homeowners who missed their payments.

The decision to block the measure, which Congress passed without debate, came as members of the president’s own party have urged the administration and federal regulators to more actively address the crisis over flawed foreclosures.

Meanwhile, attorneys general from about 40 states vowed to band together to investigate reports of fraudulent documents and of banks seizing property without having clear ownership of the mortgages.

At least 10 states – with Iowa and Delaware being the latest – are seeking to expand a voluntary freeze on foreclosures by some of the nation’s largest mortgage lenders to include more companies and more regions. And calls have increased for a nationwide moratorium – a move that could deal a blow to the earnings of big banks and grind to a halt the sale of millions of properties in foreclosure.

In the middle of a heated election season, a growing number of politicians have been eager to weigh in on the matter – and are taking pains to rebuke the financial institutions at the core of the controversy.

Rep. Edolphus Towns (D-N.Y.), chairman of the House Committee on Oversight and Government Reform, called Thursday for the national freeze, and Senate Majority Leader Harry M. Reid (D) demanded that big lenders stop foreclosures in his home state of Nevada.

This week, House Speaker Nancy Pelosi (Calif.) and other key Democrats called for federal investigations of allegations that mortgage lenders improperly evicted people from their homes.

But Democrats were trying to figure out Thursday how they allowed a bill to pass that critics say would introduce more fraud into the system, a Pelosi staff member said. It was sponsored by Rep. Robert B. Aderholt (R-Ala.), the first measure he sponsored that passed.

Even he was surprised that it passed, his spokesman said.

“There is absolutely no connection whatsoever between [the bill] and the recent foreclosure documentation problems,” Aderholt said in a statement.

The vetoed bill, which is two pages, would have required local courts to accept notarizations, including those made electronically, from across state lines. Its sponsors said it was intended to promote interstate commerce. Lawmakers saw no problems when the House approved it in April by a voice vote, which leaves no record of votes. The Senate passed the bill unanimously last week.

But as the lack of a proper paper trail in mortgage documents came to light, the idea of relying on electronic notaries triggered protests from real estate lawyers and consumer advocates. Relying more on electronic notaries, they warned, could allow more fraud into the system.

That the White House had to pay so much attention to the two-page bill few had heard of before this week shows just how politically charged the issue of flawed foreclosures has become.

White House press secretary Robert Gibbs said the president does not think the measure was trying to undermine protections for homeowners facing foreclosure.

Said Dan Pfeiffer, White House communications director: “The authors of this bill no doubt had the best of intentions in mind when trying to remove impediments to interstate commerce. We will work with them and other leaders in Congress to explore the best ways to achieve this goal going forward.”

Senate Judiciary Committee Chairman Patrick J. Leahy (D-Vt.) said in a statement that his office heard no objections from inside or outside the Senate and even asked the Justice Department to review the language. His committee then approved the bill and it passed by unanimous consent after every Senate office was notified.

Some lawmakers worried that the foreclosure paperwork issues could become a major threat to the financial system.

On Thursday, Rep. Alan Grayson (D-Fla.) sent a letter to a newly formed council of top regulators asking it to form an emergency task force to determine whether the foreclosure problem poses a systemic risk to the U.S. economy.

“So far, banks are claiming that the many forged documents uncovered by courts and attorneys represent a simple ‘technical problem’ with foreclosure processes,” he wrote. “This is not true. What is happening is fraud to cover up fraud.”

The Treasury Department did not reply to a request for comment. A spokesman for the Securities and Exchange Commission declined to comment. A Justice Department spokeswoman referred to comments made earlier this week by Attorney General Eric H. Holder Jr., who said federal prosecutors are looking into allegations of wrongdoing.

National civil rights groups, including the NAACP, the National Council of La Raza and the Center for Responsible Lending, joined labor unions Thursday in calling for an immediate national moratorium on foreclosures.

“If we don’t take drastic measures now, we can expect millions of additional foreclosures in the coming years, with a disproportionate number of them involving Latino and African American families,” said Wade Henderson, president of the Leadership Conference on Civil and Human Rights.

Sen. Sheldon Whitehouse (D-R.I.) also called for a national foreclosure moratorium on Thursday, while Michigan Democratic gubernatorial candidate Virg Bernero said he would withdraw $1 billion in state money from J.P Morgan Chase banks if they refused to ease up on foreclosures.

On Thursday, Iowa Attorney General Tom Miller asked three large mortgage lenders to freeze foreclosures in the state. His office said Iowa will take the lead in coordinating with about 40 other states investigating allegations of mishandled foreclosures. The coalition has begun to call lenders to ascertain the scope of the problem.

“There appears to be an emerging pattern of careless and perhaps cavalier attitudes by a growing number of lenders when it came to the seriousness of the foreclosure process,” Miller said.

Industry groups plan to mount a defense of the banks’ records and will hold a lunch for Capitol Hill staff members in the coming weeks.

“Industry is correcting the problems, continuing to work with homeowners and communicating with policymakers about the issue,” said Scott Talbott, senior vice president for government affairs at the Financial Services Roundtable, which represents big financial firms.

The nation’s banks, in turn, are beginning to feel pressure from investors.

Chris Katopis, executive director of the Washington-based Association of Mortgage Investors, said securities trustees should “audit and review the resulting losses to hold servicers accountable for negligence in maintaining the assets of trusts.”

“We are afraid that people’s pensions and retirement savings are being impacted,” Katopis said in an interview Thursday. “Investors are deeply concerned about possible documentation inconsistencies related to mortgages. It is vital that trustees promptly address these matters.”


Bring on the Pain!!

Steve Brown from the Dallas Morning News brings us an article that is on point. Politicians from seemingly every state have called for foreclosure moratoriums. While moratoriums stall foreclosures they don’t stop them. It’s kind of like applying a Spiderman Band Aid to a gaping chest wound. It might stop a drip or two, but the blood keeps on flowing!

It’s not just politicians but also lenders. Both sets have tried moratoriums, but they just delay the inevitable. Don’t get me wrong, moratoriums are great for short sales. If a bank can’t foreclose one of the only options they have is to process a short sale. So, in the future, if you hear of a bank/servicing company suspending foreclosures, I can almost guarantee you that their negotiators will suddenly turn cooperative.

Foreclosure moratorium would only put off pain, housing analysts say

By STEVE BROWN / The Dallas Morning News

If Texas Attorney General Greg Abbott is successful in obtaining a moratorium on home foreclosures in the state, don’t expect a lasting change in home defaults.

A moratorium would only delay the foreclosures, housing industry analysts say.

Eventually those homeowners who aren’t able to keep up with the payments on their properties will have to be dealt with.

“This could definitely create some havoc in the market even if it turns out not to have much substance,” said Dr. James Gaines, an economist with the Real Estate Center at Texas A&M University. “It will definitely delay the whole process of cleaning up the market and especially resales for investors.

“This could potentially set the market back a good six months – maybe more.”

This week, the Texas attorney general’s office sent letters to 30 lenders that offer mortgages in the state asking for “a halt on all foreclosures, all sales of properties previously foreclosed upon and all evictions of persons residing in previously foreclosed-upon properties.”

Abbott’s office wants home loan companies to review their foreclosure processes and disclose whether their agents or employees authorized the forced home sales without fully reading and reviewing the documentation.

The practice, called robosigning, is facing criticism from government leaders and consumer advocates in states across the country.

Abbott’s office said its action is “an effort to determine the full harm Texas homeowners may have suffered or could suffer as a result of these business practices.”

The attorney general’s office is asking lenders to respond to its request on or before Oct. 15.

Other states are taking similar actions.

And some big lenders, including Bank of America and JPMorgan Chase, have voluntarily declared stays in foreclosures of up to 90 days.

“We have been assessing our existing processes,” Bank of America said in a public statement. “To be certain affidavits have followed the correct procedures, Bank of America will delay the foreclosure process in order to amend all affidavits in cases that have not yet gone to judgment in the 23 states where courts have jurisdiction over foreclosures.”

Foreclosures are not a court process in Texas, so it’s not included in Bank of America’s process, Rick Simon, a media relations representative with Bank of America, said in an e-mail message.

Moratoriums enacted by lenders early this year to allow borrowers time to renegotiate loans eventually caused a flood of foreclosures when the stays were lifted.

Rick Sharga, senior vice president at RealtyTrac, a California foreclosure research and home marketing firm, said loan companies and mortgage servicers will use the time to double-check their paperwork and processes.

“This will result in some delays in new foreclosures, along with delays in processing foreclosures already in the system,” Sharga said. “But it shouldn’t have any significant effect on foreclosure proceedings in states that do nonjudicial foreclosures such as Texas.

“The most likely scenario is that we’ll see a marginal decrease in overall foreclosure activity during the fourth quarter, followed by accelerated levels of foreclosure filings in the first quarter of 2011,” he said. “From an overall housing market standpoint, there really shouldn’t be any major impact.”

But if the foreclosures freeze drags on, it “would stretch out the housing market problems even further,” Sharga said.

Gaines said the calls for moratoriums may be just state leaders “trying to make political points.”

Home foreclosures nationwide are at record high levels.

In the Dallas-Fort Worth area, lenders have posted more than 53,000 homes for foreclosure in 2010, an increase of 4 percent from a year ago.

Resales of these properties by lenders have not caused a dramatic decline in North Texas home values.

“While no one likes to see foreclosures, from an absorption standpoint it is better if there is an even flow of forced sales for the marketplace to digest,” said Ted Wilson of Dallas-based housing analyst Residential Strategies Inc. “The challenge for the market if foreclosures get lumped together in the future is that too much inventory hitting the market at one time could put abnormal downward pressure on prices.”

The head of a Texas lenders group took a conciliatory tone toward the attorney general’s actions. But Scott Norman, president of the Texas Mortgage Bankers Association, said the questions about foreclosure documentation practices are “individual company issues.”

“We will suspend the foreclosures as long as we can until steps are taken to make sure the foreclosures are accurate and proper,” Norman said. “I am confident that every mortgage lender in the state will continue to do anything they can to avoid foreclosures.

“It’s in the best interest of every mortgage lender to try and keep their [customers'] payments current and keep them in their homes.”

Longtime foreclosure analysts say the action is likely to be pointless.

“It does nothing but just slows the process down,” said George Roddy, president of Addison-based Foreclosure Listing Service. “It puts things off that are going to happen anyway.

“The only way to get over this is to foreclose the bad loans.”


Hot Potato!

Yves Smith reports about an addendum that those purchasing bank owned properties that you need to read before dealing with Wells Fargo Properties. Everyone has heard of the faulty foreclosures that are being reviewed across the US. What you may not have heard are the potential title defects that may sprout up days, months, years after an unsuspecting buyer closes on a bank owned house.

The article points out, “As the number of real estate foreclosures skyrockets, the odds are higher that a home you live in today or at some point in the future may have had a foreclosure in its history. Even if the foreclosure has long since passed, a loophole in the way mortgages are recorded can create a serious title defect for future owners. Title analysis performed this month by AFX Title has detected this error to be common in random samples of properties it reviewed. “This could affect the property ownership of millions of homes nationwide” said David Pelligrinelli, of AFX Title. “The mortgage recording method which created this title flaw did not exist until recently. As title abstractors are just seeing this problem emerge now but a wave of title claims is coming over the next year or so.”

This is a real problem with buying bank owned properties. If you, or any of your associates/buyers are involved with purchasing bank owned properties I would encourage you to click the link below to read the entire article. It is very detailed and very informative.

Hot Potato!

Latest Real Estate Time Bomb: Title of Foreclosed Properties Clouded; Wells Fargo Dumping Risk on Hapless Buyers

Another ticking time bomb in the realm of real estate bad behavior is bound to go off sooner rather than later, and it is likely to impede normalization of values of residential property.

As readers no doubt know, there is a lot of actual and shadow residential real estate inventory in the US. The time from serious delinquency to foreclosure has lengthened considerably, due not just to crowded court dockets, but also bank/servicer disinclination to take possession (reasons include that investors take a dim view of bank real estate holdings; the bank is liable for expenses, most important real estate taxes, once it takes possession; more foreclosures would lead banks to have to write down clearly overvalued second mortgages, leading to losses and lowering bank capital levels).

Most analysts have argued that it would be preferable to accelerate the process of clearing the overhang of housing inventory, since prices need ultimately to return to price level in relationship to incomes and rent rates more in line with long standing historical norms. And the officialdom seems to accept this view, since Fannie and Freddie are pressuring servicers to move faster on foreclosures.

But what if this resolution process has new land mines planted in it? What if there are not widely understood impediement to foreclosed properties ending up with new owners? If there are good reasons buyers will have reason to be leery of buying houses out of foreclosure, we could have a lot of homes sitting vacant, a blight on neighborhoods and a source of even greater losses to banks and investors.

Yet it appears that the very same sort of corners-cutting that led financial firms to shovel money to weak borrowers could impede working through the inventory of seized residential real estate. An article discusses an analysis by AFX Title, a title search company, that shows problems with title on foreclosed properties to be widespread:

As the number of real estate foreclosures skyrockets, the odds are higher that a home you live in today, or at some point in the future may have had a foreclosure in its history. Even if the foreclosure has long since passed, a loophole in the way mortgages are recorded can create a serious title defect for future owners. Title analysis performed this month by AFX Title has detected this error to be common in random samples of properties it reviewed. “This could affect the property ownership of millions of homes nationwide” said David Pelligrinelli, of AFX Title. “The mortgage recording method which created this title flaw did not exist until recently. As title abstractors are just seeing this problem emerge now but a wave of title claims is coming over the next year or so.”….

The problem is created through a break in the chain of mortgage ownership. Until the 1980’s, most mortgages were loans between the homeowner and a bank, who lent the money directly. More recently, the mortgage financing system transformed into an international system of securitization, with mortgage lenders packaging their loans into securities, bought and sold by investors like stocks. These transactions even split individual mortgages into sections, where each loan could have parts owned by different investment banks.

The transfer of ownership in these mortgage backed securities (MBS) was done with contracts on the balance sheets of Wall Street investment banks, such as Morgan Stanley and Goldman Sachs. The company who originally appeared to make the loan was normally a retail lending company such as Countrywide or Lending Tree, who typically acted as a sales company, and sometimes remained contracted to service the loan.

In the event that the loan goes into foreclosure at a later date, the then-current owner of the loan files the foreclosure and sells the property to a new owner, often at auction. The land records would show a deed of transfer from the investment bank to the new owner. This creates a break in the chain of ownership of the mortgage rights. In many cases, the transfer of ownership of the mortgage loan has gone from the original lender, through several owners, and then to the foreclosing bank, none of which is recorded on the property title history. Technically, the foreclosing bank has no recorded title rights to foreclose in the first place…

There are reports that some title insurers are indicating that they will not insure for this title defect.

Yves here. Some readers may take this all to be unduly alarmist. But confirmation that this problem is real and potentially serious comes via a new “gotcha” practice by Wells Fargo on foreclosure sales. Wells is sufficiently concerned about the risks of selling properties out of foreclosure that it is springing an addendum on buyers, shortly before closing, which effectively shifts all risk for any title deficiency on to the buyer.

Now why is this a big deal? Go reread the boldfaced sentence above. If a bank like Wells does not have the right to foreclose, it cannot have clean title to the property. So the bank could conceivably be selling something it does not own.

Let’s say you buy a vase from a store. You open the box when you get home and find out the box is empty. You’d clearly be within your rights to get your money back.

With the Wells Fargo addendum, even if the bank has sold you the equivalent of an empty box, you have no recourse to Wells. Zero. Zip. Nada.

Let’s go back and give a bit of context. Wells is encouraging buyers in foreclosures to use its attorney and title insurers and reportedly offers to split fees. So the bank is taking steps to steer buyers not to get legal advice. This matters because the problems in this document would not be evident to a layperson. And it’s not even evident to lawyers not expert in real estate; I learned about this situation because a lawyer I know who does a fair bit of real estate work had been contacted by a friend of his, a lawyer looking to buy a house over foreclosure. Wells had presented the prospective buyer with this supposed “standard” addendum on the day of closing and said they would not negotiate it (you can read it in full at ScribD). The buyer was advised not to sign it.

On the surface, this document may not seem all that troubling. But what it does, in effect, is say “Warning, warning, you are buying a property out of foreclosure, there is risk here, and you can’t hold us responsible for anything we told you in the sale process.” (see paragraphs 1 and 2). Now the not-trivial problem with that is: how can you possibly evaluate the risk of buying a property out of foreclosure without asking the current owner? And if the current owner isn’t legally responsible for what they say, or more important, what they deny is a problem, they buyer cannot perform effective due diligence. This vitiates a principle that is well embodied in most areas of consumer and business law, that a seller is liable for the representations he makes about his wares.

Now specifically, the potential problem with the deal is the bank in many states will at best be giving the buyer a “quitclaim” deed (the addendum finesses this in paragraph 18, that the buyer only gets a “special/limited warranty deed. As the lawyer who took a dim view of this addendum put it, “This is like the ‘Special Olympics,’ not like ‘You are my special someone’.” That means the bank is merely transferring whatever it interest it has.

But per the AFX article above, the bank may own nothing. It may have foreclosed without having a clear enforceable right to the property (this is the basis of the burgeoning number of cases where borrowers are successfully challenging the bank/servicer’s right to foreclose, because it cannot prove it actually owns the note, which is the IOU between the borrower and the lender; if you don’t own the note, in 45 states, you have no right to enforce the lien on the property).

Now this little problem can be solved by title insurance, right? Well, guess what, some title insurers have exited the business, some others are starting to write policies with meaningful exceptions when they can’t go to the courthouse and find a clear chain of title. Oh, and Wells is trying to steer you towards their title insurer. What do you think the odds are that their title insurance policy doesn’t have exceptions?

So what is the risk? The lawyer explains:

The typical (unsophisticated) buyer thinks that because they have a lawyer at closing (no matter whose lawyer it is), a title policy, etc…….that they are all safe and sound. They struggle through one of these REO transactions for a month or two, finally get in the house, something bad goes wrong, and they find out that 1) the title policy won’t cover them and 2) the land isn’t unique (see the nasty provision in paragraph 27 on “specific performance”), so a refund is all you get – and you are out on your ear. Hopefully, with a refund – and that may be the best outcome. But if somebody comes in, and voids a foreclosure, your title policy doesn’t pay – Wells Fargo has clearly disclosed that this was a foreclosure, so you only got what they had (nothing), and you have no recourse, no insurance, and guess what, an unsecured loan for half a million bucks.

Given how many sales will be done out of REO, and the rising number of problems surfacing with making sure that mortgage securitizations took all the steps to become the real party of interest in a particular property, it is only a matter of time before we see some blowups of the sort the attorney was worried about, of a buyer shelling out hard dollars for a house, or taking a big mortgage, and winding up with nothing. And a few incidents like that getting the press they deserve will put a pall on REO sales.

Think the risk isn’t real? Then why has Wells bothered to insist that REO buyers sign a new type of addendum, when it has been selling REO for decades? This effort to shift all title risks on to the buyer is a tacit admission of problems. And look at the document itself. The buyer has to initial it in eight places as well as sign it. That’s a clear statement of Wells’ intent to shift the risk to the buyer.


The OTHER Part of the Story!

An article from Collections and Credit Risk highlights a fact that astonishes me. The number of properties that were foreclosed on in August of 2010 rose 25% as compared to August of 2009. Contributing factors include (but are not limited to) mortgage resets, rampant unemployment, the elimination of the 1st time home buyer credit and the continued devaluation of properties.

To me the most interesting quote from the story is, “There are concerns that a housing market recovery could stumble amid stubbornly high unemployment, a sluggish economy and faltering consumer confidence. U.S. home sales have collapsed since federal homebuyer tax credits expired in April. According to Rick Sharga, a senior vice president at RealtyTrac, that’s one reason that less than one-third of homes repossessed by lenders are on the market.”

Did you catch it? Only 1/3 of homes that have been repossessed by lenders are on the market! The banks know that if they dump the remaining 2/3 into the market, prices will continue to go down. Guess what? Those other homes are not going away….in fact the shadow inventory grows on a daily basis. What does this mean? This problem will be with us for a long time.

Be part of the solution? What can you do to keep properties out of the banks hands?

Homes Lost To Foreclosure Jump 25%

Collections & Credit Risk | Monday, September 20, 2010

Mortgage lenders repossessed more homes in August than in any month since the start of the housing crisis. The rise occurred as the number of properties entering the foreclosure process slowed for the seventh consecutive month, according to foreclosure listing firm RealtyTrac Inc.

Banks repossessed 95,364 properties in August, up 3% from July and an increase of 25% from August 2009. August marks the ninth month in a row that the pace of homes lost to foreclosure has increased on an annual basis. The previous high occurred in May.

More than 2.3 million homes have been repossessed by lenders since the recession began in December 2007. The firm estimates more than 1 million American households are likely to lose their homes to foreclosure this year.

In total, 338,836 properties received a foreclosure-related warning in August, up 4% from July, but down 5T from the same month last year, according to RealtyTrac. That translates to one in 381 homes.

The firm tracks notices for defaults, scheduled home auctions and home repossessions – warnings that can lead up to a home eventually being lost to foreclosure.

Banks are repossessing more homes to clear a backlog of bad loans, eventually hoping to place the foreclosed properties on the market. But they can’t afford to simply dump the properties on the market.

The number of properties receiving an initial default notice – the first step in the foreclosure process – slipped 1% last month from July, but was down 30% versus August last year, according to RealtyTrac.

There are concerns that a housing market recovery could stumble amid stubbornly high unemployment, a sluggish economy and faltering consumer confidence. U.S. home sales have collapsed since federal homebuyer tax credits expired in April. According to Rick Sharga, a senior vice president at RealtyTrac, that’s one reason that fewer than one-third of homes repossessed by lenders are on the market.


Bank reverses foreclosure for Va. family with very ill child

As of late, banks have been demonized in the press for committing rampant fraud against homeowners for falsifying documents. While that may true, the attached article demonstrates that that is not always the case. Henry Cauvin from the Washington Post brings us an article that describes how Chase reversed a foreclosure of a home owned by family with a gravely ill child. They subsequently offered the family a loan modification that may keep the family in their house. I say “may” because, due an ironic twist, the family hasn’t signed off on the loan modification. They have little trust for the lender therefore they are having all documents reviewed by an attorney

Bank reverses foreclosure for Va. family with very ill child

By Henri E. Cauvin

Washington Post Staff Writer

Wales family faces illness and foreclosure

But Mike and Kathy Wales are waiting until a lawyer can look at the fine print before responding to the bank’s proposal.

The couple, whose 10-year-old son, Alex, was found last year to have a rare and terminal neurogenetic disorder called cerebral adrenoleukodystrophy, fell behind on their payments this year and had been trying for months to have Chase modify the mortgage on their three-bedroom townhouse in Bristow.

But Chase, which was administering the loan for mortgage finance giant Fannie Mae, mishandled the application for assistance under the federal mortgage relief program, a spokeswoman for Fannie Mae said Friday.

Early this month, just days before the house was to be sold in foreclosure, Chase told the Waleses that they had been approved for a modification under the federal Making Home Affordable Program. But the promised documents never arrived, and on Sept. 8, the house was sold back to Fannie Mae.

In fact, the family might not have qualified under the program’s income limits. But under Fannie Mae protocols, Chase should have offered modification options before weighing more drastic options, such as a short sale and foreclosure.

After the family’s plight was described in an article Friday in The Washington Post, Chase and Fannie Mae began investigating and concluded that the case had been botched.

“Fannie is frustrated when we learn of individual cases where servicers do not properly process modification applications, and families . . . pay the price,” Fannie Mae spokeswoman Amy Bonitatibus said.

“In this instance, the situation was not handled properly,” Bonitatibus said.

On Friday, Chase called the Waleses to tell them that the bank was reversing the foreclosure and to propose a modification that would reduce the monthly payment by extending the length of their mortgage to 40 years, with a lump sum of more than $100,000 due at the end of the loan period.

The family, though, is taking a cautious approach to the bank’s proposal, Mike Wales said. The bank’s willingness to reconsider is an encouraging sign and the outpouring of support from friends, elected officials and strangers has been remarkable, said Wales, 47.

Given the Waleses experiences of recent months, they want to carefully study the bank’s offer before signing off on it, he said. So they plan to wait for the loan documents to arrive and then to have a lawyer look them over.

“We don’t want to agree to something that’s going to bite us when all this dies and all the support goes away,” said Wales, who served 21 years in the Air Force and is now a civilian intelligence analyst for the service.

Alex can no longer see or walk. An experimental bone marrow transplant last year appears to have halted the disorder, known as ALD, but Alex’s long-term prognosis is uncertain. His brother, Zach, who is 13, also has ALD, but it has not affected his brain.

Not every family facing foreclosure has such a dire story to tell, but many desperately need the sort of mortgage relief that the federal government, with only limited effectiveness, has been pushing for banks to provide, housing advocates say. And lawyers who work with people facing foreclosure say the frustration the Waleses encountered is not uncommon: Banks often ask again and again for documents that have been submitted, and applicants often receive different answers to the same question, depending on the person they are talking to that day.

Mike Wales said he hopes the story of his family’s ordeal will open officials’ eyes to needs going unmet. “We want this to help other people,” he said.


Foreclosure Mistake?!?

Harriet Johnson Brackey from the Sun Sentinel brings us a story from South Florida that just adds to the comedy of errors that we hear about. Apparently Jason Grodensky purchased a home in Ft. Lauderdale for cash yet Bank of America decided to foreclose on him anyway.....even though he didn’t have mortgage! Fortunately for Mr. Grodensky, the house was sold back to the investor who owned the mortgage. This will make it easier for BOA to unwind the sale.

The article points out that mistakes are made. But, this type of mistake highlights the issues that lenders and servicing companies are having nationwide when trying to manage the foreclosure mess that has presented itself.

For those of you reading this who think your fiduciary duty is to the bank and not the seller, read the following passage from the article, “Mindy Watson-Cintron of Century 21 Tenace Realty said she was unable to stop a foreclosure even though she had a willing buyer for a Coral Springs home last summer. Watson-Cintron had a letter from GMAC Mortgage, agreeing to sell the house in a short sale. The letter indicates the deal would be accepted through Aug. 20.

Watson-Cintron said she called, pleaded and even spent three hours one day in the lobby of the law offices of David Stern in Plantation trying to get someone to agree to put the foreclosure on hold. Stern's office is one of the nation's largest foreclosure firms and, Watson-Citron said, represented GMACin the foreclosure case.

However, the foreclosure continued. The lender took back the home and now has it listed for sale — at a lower price than Watson-Cintron's buyer offered. "The bank's not talking to the attorneys and the attorneys are not talking to the courts," she said.”

Did you naysayers pick up on what happened??? There was a willing ready and able buyer that had an approved short sale yet the lender still foreclosed...AND to add fuel to the fire, after the lender foreclosed on the house, they LISTED the property for less than the short sale offer was!!! This happens, over and over again. So please jump off your high horse when investors present you with legitimate offers.

Lauderdale man's home sold out from under him in foreclosure mistake

By Harriet Johnson Brackey, Sun Sentinel

September 23, 2010

When Jason Grodensky bought his modest Fort Lauderdale home in December, he paid cash. But seven months later, he was surprised to learn that Bank of America had foreclosed on the house, even though Grodensky did not have a mortgage.

Grodensky knew nothing about the foreclosure until July, when he learned that the title to his home had been transferred to a government-backed lender."I feel like I'm hanging in the wind and I'm scared to death," said Grodensky. "How did some attorney put through a foreclosure illegally?"

Bank of America has acknowledged the error and will correct it at its own expense, said spokeswoman Jumana Bauwens.

Grodensky's story and other tales of foreclosure mistakes started popping up recently across South Florida. This week, GMAC Mortgage, one of the nation's largest mortgage servicers and a major mortgage lender, told real estate agents to stop evicting residents and suspend sales of properties that had been taken from homeowners in foreclosure. The company said it might have to "correct" some of its foreclosures, but was not halting those in process.

In Florida courts, which have been swamped with foreclosure cases for several years, mistakes "happen all the time," said foreclosure defense attorney Matt Weidner in St. Petersburg. "It's just not getting reported."

And the legal efforts required to resolve a foreclosure mistake are complicated. "Unwrapping it is like unwrapping Fort Knox," said Carol Asbury, a Fort Lauderdale foreclosure attorney. "It's very difficult."

The process is under increasing scrutiny, as Florida's court system struggles with the mountain of cases that have resulted from the housing crisis.

Grodensky said he spent months trying to figure out what happened but said his questions to Bank of America and to the law firm Florida Default Law Group that handled the foreclosure have not been answered. Florida Default Law Group could not be reached for comment, despite several attempts by phone and e-mail. Grodensky said he has filed a claim with his title insurance company, but that, too, has not resulted in any action.

It wasn't until last week, when Grodensky brought his problem to the attention of the Sun Sentinel, that it began to be resolved.

"It looks like it was a mistake in communication between us and the attorneys handling the foreclosure," said Bauwens.

Court records show Countrywide Home Loans filed a foreclosure case in Broward County civil court against the former owner of the home on Southwest 14th Street in 2008. Bank of America took over Countrywide at the end of that year.

The following year, Grodensky and his father Steven bought the house for cash as an investment property. Jason Grodensky's brother Kenny Sloan lives in the house now. They negotiated a short sale, which means the lender agreed to accept less than the mortgage amount. Documents show the sale proceeds were wired to Bank of America. The sale was recorded in December 2009 at the Broward County Property Appraiser's Office.

But in court, the foreclosure case continued, the records show. There was a motion to dismiss the case in July, followed the next day by a motion to re-open it. A court-ordered foreclosure sale took place July 15. The property appraiser's office recorded the transfer of the title to Fannie Mae the same day.

Bauwens said the lender would go back to court to rescind the foreclosure sale.

Broward Chief Judge Victor Tobin, who set up the county court's foreclosure system, said this is the first he's heard of this type of mistake. "From the court's point of view we have no way of knowing that someone sells a house unless they tell us," said Tobin. "The bank would first have to tell the lawyers and the lawyers would presumably ask the court for an order dismissing the case."

Tobin said the court system is under pressure to clear up its foreclosure backlog. This year, the state court system pumped $6 million into the effort, hiring more temporary judges and staffers.

Some say there's too much effort aimed at simply disposing of the cases.

"The evidence doesn't matter, the proof doesn't matter, due process doesn't matter," said Asbury, the attorney. "The only thing that matters is that they get rid of these cases."

Mindy Watson-Cintron of Century 21 Tenace Realty said she was unable to stop a foreclosure even though she had a willing buyer for a Coral Springs home last summer. Watson-Cintron had a letter from GMAC Mortgage, agreeing to sell the house in a short sale. The letter indicates the deal would be accepted through Aug. 20.

Watson-Cintron said she called, pleaded and even spent three hours one day in the lobby of the law offices of David Stern in Plantation trying to get someone to agree to put the foreclosure on hold. Stern's office is one of the nation's largest foreclosure firms and, Watson-Citron said, represented GMACin the foreclosure case.

But the foreclosure continued. The lender took back the home and now has it listed for sale — at a lower price than Watson-Cintron's buyer offered. "The bank's not talking to the attorneys and the attorneys are not talking to the courts," she said.

Stern could not be reached for comment despite several attempts by phone and e-mail to his office. A spokesman for GMAC Mortgage promised to look into the case.

Florida Attorney General Bill McCollum is investigating Stern's firm, Florida Legal Default Group, based in Tampa, the Law Offices of Marshall C. Watson in Fort Lauderdale and Shapiro & Fishman, which has offices in Boca Raton. Officials have said the investigation centers on whether foreclosure documents submitted by these firms were false, misleading or inaccurate.

In announcing its decision this week to halt evictions and suspend sales in foreclosure cases, GMAC cited a deposition by Jeffrey Stephan in a Palm Beach foreclosure case in which Stephan said he did not verify all the documents and did not sign them all in the presence of a notary. Stephan said he signed as many as 10,000 documents a month.

Some foreclosure defense attorneys have questioned whether similar practices involve other lenders as they push huge numbers of foreclosures through the courts. In one South Florida foreclosure case, Chase Home Finance executive Beth Cottrell said in a deposition in May that her team of eight supervisors signs 18,000 documents a month. Chase's spokesperson did not comment.


Foreclosure Mistake??

Harriet Johnson Brackey from the Sun Sentinel brings us a story from South Florida that just adds to the comedy of errors that we hear about. Apparently Jason Grodensky purchased a home in Ft. Lauderdale for cash yet Bank of America decided to foreclose on him anyway.....even though he didn’t have mortgage! Fortunately for Mr. Grodensky, the house was sold back to the investor who owned the mortgage. This will make it easier for BOA to unwind the sale.

The article points out that mistakes are made. But, this type of mistake highlights the issues that lenders and servicing companies are having nationwide when trying to manage the foreclosure mess that has presented itself.

For those of you reading this who think your fiduciary duty is to the bank and not the seller, read the following passage from the article, “Mindy Watson-Cintron of Century 21 Tenace Realty said she was unable to stop a foreclosure even though she had a willing buyer for a Coral Springs home last summer. Watson-Cintron had a letter from GMAC Mortgage, agreeing to sell the house in a short sale. The letter indicates the deal would be accepted through Aug. 20.

Watson-Cintron said she called, pleaded and even spent three hours one day in the lobby of the law offices of David Stern in Plantation trying to get someone to agree to put the foreclosure on hold. Stern's office is one of the nation's largest foreclosure firms and, Watson-Citron said, represented GMACin the foreclosure case.

However, the foreclosure continued. The lender took back the home and now has it listed for sale — at a lower price than Watson-Cintron's buyer offered. "The bank's not talking to the attorneys and the attorneys are not talking to the courts," she said.”

Did you naysayers pick up on what happened??? There was a willing ready and able buyer that had an approved short sale yet the lender still foreclosed...AND to add fuel to the fire, after the lender foreclosed on the house, they LISTED the property for less than the short sale offer was!!! This happens, over and over again. So please jump off your high horse when investors present you with legitimate offers.

Lauderdale man's home sold out from under him in foreclosure mistake

By Harriet Johnson Brackey, Sun Sentinel

September 23, 2010

When Jason Grodensky bought his modest Fort Lauderdale home in December, he paid cash. But seven months later, he was surprised to learn that Bank of America had foreclosed on the house, even though Grodensky did not have a mortgage.

Grodensky knew nothing about the foreclosure until July, when he learned that the title to his home had been transferred to a government-backed lender."I feel like I'm hanging in the wind and I'm scared to death," said Grodensky. "How did some attorney put through a foreclosure illegally?"

Bank of America has acknowledged the error and will correct it at its own expense, said spokeswoman Jumana Bauwens.

Grodensky's story and other tales of foreclosure mistakes started popping up recently across South Florida. This week, GMAC Mortgage, one of the nation's largest mortgage servicers and a major mortgage lender, told real estate agents to stop evicting residents and suspend sales of properties that had been taken from homeowners in foreclosure. The company said it might have to "correct" some of its foreclosures, but was not halting those in process.

In Florida courts, which have been swamped with foreclosure cases for several years, mistakes "happen all the time," said foreclosure defense attorney Matt Weidner in St. Petersburg. "It's just not getting reported."

And the legal efforts required to resolve a foreclosure mistake are complicated. "Unwrapping it is like unwrapping Fort Knox," said Carol Asbury, a Fort Lauderdale foreclosure attorney. "It's very difficult."

The process is under increasing scrutiny, as Florida's court system struggles with the mountain of cases that have resulted from the housing crisis.

Grodensky said he spent months trying to figure out what happened but said his questions to Bank of America and to the law firm Florida Default Law Group that handled the foreclosure have not been answered. Florida Default Law Group could not be reached for comment, despite several attempts by phone and e-mail. Grodensky said he has filed a claim with his title insurance company, but that, too, has not resulted in any action.

It wasn't until last week, when Grodensky brought his problem to the attention of the Sun Sentinel, that it began to be resolved.

"It looks like it was a mistake in communication between us and the attorneys handling the foreclosure," said Bauwens.

Court records show Countrywide Home Loans filed a foreclosure case in Broward County civil court against the former owner of the home on Southwest 14th Street in 2008. Bank of America took over Countrywide at the end of that year.

The following year, Grodensky and his father Steven bought the house for cash as an investment property. Jason Grodensky's brother Kenny Sloan lives in the house now. They negotiated a short sale, which means the lender agreed to accept less than the mortgage amount. Documents show the sale proceeds were wired to Bank of America. The sale was recorded in December 2009 at the Broward County Property Appraiser's Office.

But in court, the foreclosure case continued, the records show. There was a motion to dismiss the case in July, followed the next day by a motion to re-open it. A court-ordered foreclosure sale took place July 15. The property appraiser's office recorded the transfer of the title to Fannie Mae the same day.

Bauwens said the lender would go back to court to rescind the foreclosure sale.

Broward Chief Judge Victor Tobin, who set up the county court's foreclosure system, said this is the first he's heard of this type of mistake. "From the court's point of view we have no way of knowing that someone sells a house unless they tell us," said Tobin. "The bank would first have to tell the lawyers and the lawyers would presumably ask the court for an order dismissing the case."

Tobin said the court system is under pressure to clear up its foreclosure backlog. This year, the state court system pumped $6 million into the effort, hiring more temporary judges and staffers.

Some say there's too much effort aimed at simply disposing of the cases.

"The evidence doesn't matter, the proof doesn't matter, due process doesn't matter," said Asbury, the attorney. "The only thing that matters is that they get rid of these cases."

Mindy Watson-Cintron of Century 21 Tenace Realty said she was unable to stop a foreclosure even though she had a willing buyer for a Coral Springs home last summer. Watson-Cintron had a letter from GMAC Mortgage, agreeing to sell the house in a short sale. The letter indicates the deal would be accepted through Aug. 20.

Watson-Cintron said she called, pleaded and even spent three hours one day in the lobby of the law offices of David Stern in Plantation trying to get someone to agree to put the foreclosure on hold. Stern's office is one of the nation's largest foreclosure firms and, Watson-Citron said, represented GMACin the foreclosure case.

But the foreclosure continued. The lender took back the home and now has it listed for sale — at a lower price than Watson-Cintron's buyer offered. "The bank's not talking to the attorneys and the attorneys are not talking to the courts," she said.

Stern could not be reached for comment despite several attempts by phone and e-mail to his office. A spokesman for GMAC Mortgage promised to look into the case.

Florida Attorney General Bill McCollum is investigating Stern's firm, Florida Legal Default Group, based in Tampa, the Law Offices of Marshall C. Watson in Fort Lauderdale and Shapiro & Fishman, which has offices in Boca Raton. Officials have said the investigation centers on whether foreclosure documents submitted by these firms were false, misleading or inaccurate.

In announcing its decision this week to halt evictions and suspend sales in foreclosure cases, GMAC cited a deposition by Jeffrey Stephan in a Palm Beach foreclosure case in which Stephan said he did not verify all the documents and did not sign them all in the presence of a notary. Stephan said he signed as many as 10,000 documents a month.

Some foreclosure defense attorneys have questioned whether similar practices involve other lenders as they push huge numbers of foreclosures through the courts. In one South Florida foreclosure case, Chase Home Finance executive Beth Cottrell said in a deposition in May that her team of eight supervisors signs 18,000 documents a month. Chase's spokesperson did not comment.


Cram This!!!

The Palm Beach Post takes a look at what a contributing solution could be regarding underwater mortgages. That solution involves principal reduction, not just interest rate reduction. While Obama has delivered another flavor of the month program, it does give lenders that have mortgages backed by the government the ability to refi underwater mortgages to include principal reductions. The principal reduction is limited to 10%, but it is being construed as a start.

Here's the issue. This ONLY applies to government backed notes. It does not apply to notes owned by other investors. While a bill was put in front of the Senate this year to allow/require principal reductions, it was crushed by lobbyists. Our mighty government simply can’t mandate that investors write down their notes.

Will reducing mortgages stop foreclosure?

By Opinion Staff

Signs in the yard of a house for sale in Port St. Lucie

In Florida, one in nine households with a mortgage was at risk of foreclosure this summer. This week, the Obama administration will begin yet another program aimed at easing the housing crisis. It’s the first that goes to the root of the crisis — underwater mortgages — but it may do no more good than the others.

Starting Tuesday, the Federal Housing Administration will permit lenders to give those homeowners refinanced loans backed by the government. Lenders must forgive at least 10 percent of the principal. In Florida, where 46 percent of home mortgages are under water, a 10 percent principal reduction means little. Home values in South Florida suffered the worst decline of 25 large metropolitan areas in the second quarter of this year.

Because prices have fallen so far, it will take a decade or longer for many borrowers to erase their negative equity. Many will walk away from their mortgages, adding to the glut of foreclosures and further delaying the state’s recovery. In Palm Beach County alone, $18.8 billion in home loans have defaulted since 2007. “The Obama administration’s housing programs have not been successful at all,” said Jack McCabe, chief executive of Deerfield Beach-based McCabe Research & Consulting. “In fact, I think they’ve been flops. People are so far upside down in their homes you will have to pry some of them out feet first before the house ever comes back up in value compared to the boom years.”

Margery Golant is a Boca Raton lawyer who defends homeowners in foreclosure and a former executive at Ocwen, a large mortgage servicing company. The only way for Congress to help homeowners, she said, is to pass legislation allowing bankruptcy judges to reduce the principal. The procedure, called cram down, is allowed for mortgages on second homes and investment property, but not primary residences. “The only way that we’re going to see any help for homeowners,” Ms. Golant said, “is combination of loan modification coupled with mortgage principal reduction.”

The House passed a bill allowing cram down for principal residences, but it died in the Senate. “We tried,” said Rep. Alcee Hastings, D-Miramar, who voted for the bill. He agreed “without question” that lobbyists killed the bill.

Cram down for primary residences would be a drastic step. But lenders, some of which got bailout money, have invited it. Congress should try again to pass it. If Republicans object, let them propose something that would help homeowners and get Florida’s economy moving.


Think Outside of the Box!

Tammy Joyner from the Atlanta Journal Constitution brings us a story about perseverance. Beverly Davis of Atlanta had her house foreclosed upon in August of this year. Most people would have rolled up in a ball and given up. Because Georgia has a redemption period, Ms. Hill decided to sell corn bread and corn bread recipes in an effort to save her house. To date she has collected $54,000! While she was an “employee” her entire life, she was unable to find a job in this economy. As a result she started her own company and is doing quite well.

While I am not suggesting that everyone in financial trouble go out and start their own business, I am suggesting that people persevere. Don’t give up in the face of adversity. Adversity breeds opportunity. It’s whether you seize the opportunity that will determine your future.

Fighting foreclosure: Fairburn woman starts business to save home

By Tammy Joyner

The Atlanta Journal-Constitution

Most people who lose their home might be tempted to have a meltdown. Beverly Davis instead reached for her mixing bowl.

Beverly Davis began selling cornbread mix and recipes on her website in an effort to get her Fairburn house back. It went into foreclosure in June, and is now under contract with another buyer. She raised more than $10,000 in 45 days.

Davis started selling cornbread mix online when she was in danger of losing her house. “The mountain of unemployment caused me to have a thriving business,” she said.

Hoping to repurchase her home, the Fairburn woman launched a website this summer selling homemade cornbread mixes. She also offers cornbread recipes and inspirational bumper stickers such as this one: “When life throws lemons, make lemonade, bake cornbread and sell it.”

Davis’ three-bedroom, two-bath ranch-style home went into foreclosure in June, the last straw in three rough-and-tumble years. The house is under contract with another buyer. But Davis, 48, who also blogs about her efforts to regain her home, is undaunted.

“Trust me, I haven’t lost,” she said. “The fight isn’t over yet. I’m going to stick with it through grace, dignity and faith.”

Davis lost her full-time government job in 2006 — 14 months after buying her home. She began patching together income by selling greeting cards and her own concoction of nail polish, and holding yard sales. She also worked part-time at a furniture store, until her hours were drastically cut.

It wasn’t until she made a pan of cornbread for a group of neighborhood kids that she hit upon the idea of Cornbreadmillionaire.com. She assembled cornbread mixes in friends’ kitchens and even came up with a few recipes like Homegirl’s Sweet Potato Cornbread.

“All of this happened for a reason — to get me out of my comfort zone,” said Davis, who has been living in an extended-stay hotel in Union City. “It lit a fire in me. A good fire.”

That fire — and the cornbread mix — has brought Davis national recognition, more than $54,000 in donations and orders, and admiration from housing experts.

“I can’t say I’ve heard of many interesting things people are doing to get their home back,” said Eugene James, Atlanta director of the research firm Metrostudy. “Kudos to this lady.”

James said he is seeing more people fighting to keep their homes, which in many instances are worth less than the homeowners owe on them.

“The popular perception has been that it’s more savvy for people to give the keys back to the bank because they’re under water,” said Andy Carswell, an associate professor in the University of Georgia’s Department of Housing and Consumer Economics. But, he said, “the further people get behind, the more ingenuity you’ll find.”

Recent data from the Joint Center for Housing Studies at Harvard University shows that the housing slump has sharply curtailed mobility among Americans, especially homeowners.

“The drop in mobility tells you people are staying put,” Carswell said. “Housing slump or not, people still value housing from a personal perspective. They don’t want to lose it.”

The Fairburn house was the first home Davis had bought. “I had excellent credit, a job and savings.”

She said she was “humiliated” when the house went into foreclosure. “I had no money when I walked out of my house.”

Nowadays, Davis spends her days filling and shipping orders. Sales climbed close to $10,000 in the first 45 days after she launched her website.

A California woman recently donated $1,000 after hearing Davis’ story on NPR.

“I wanted to help her. So many people, when times get tough, just roll over and play dead,” said Christine Benninger, who lives in Woodside, Calif. “She said, ‘I’m not going to let this get me down and I’m going to figure out a way to get my house back.’ Even if she doesn’t get her house back, she’s got a business.”

The housing market is ripe with affordable homes due, ironically, to foreclosures, James said. Of the 299 properties for sale in Fairburn, for instance, 82 are listed as bank-owned or foreclosed, James said. The properties range in price from $20,000 to $1.3 million.

“If credit is not an issue, this person will probably have a lot of other nice homes to choose from,” he said. “But then again credit is the big problem today with many people being able to buy a house.”

Davis isn’t ruling out buying another home, but for now her efforts are centered on moving back into her home.

“When a person is unemployed, unable to find a job, some people automatically assume you can’t manage money and will treat you like a failure,” Davis said. “You can’t make somebody hire you. But you can hire yourself. For me, that was the solution.”


Is GMAC The First Of Many?

Everyone has probably heard of the fiasco that GMAC has created for them by rubber stamping affidavits that has allowed/allows them to foreclose on properties. During a deposition, one of the signers admitted under oath that he was not personally familiar with what he signed when completing affidavits. As a result, there has been some indication that GMAC was halting all evictions and post foreclosure closings. GMAC is now saying that they addressed these problems months ago and that people weren't wronged. Despite their claim, GMAC is now the target of state sponsored investigations into their lax practices.

UPDATE 2-GMAC says foreclosure errors addressed months ago

(Reuters) - GMAC Mortgage, one of the largest servicers of U.S. residential loans, on Friday said that its errors in processing foreclosures were addressed months ago, and that it was confident the mistakes did not wrongly turn people out of their homes.

It is the latest word from the Ally Financial unit that has received a firestorm of criticism in the last week as shoddy foreclosure practices came to light. Its errors have raised concerns of an industrywide problem, given the volume of foreclosures that have been completed in recent years.

GMAC earlier this week said it discovered employees submitted affidavits containing information they did not personally verify, casting doubt over how much care was taken in dealing with the highly sensitive U.S. housing issue. The errors also applied to requirements that documents be signed in the presence of a public notary.

The company said it has suspended evictions and post-foreclosure closings in 23 states. It has not halted foreclosure proceedings, it said.

"We believe the defects occurred in some, but not all foreclosures in the 23 impacted states," GMAC said in a statement. "The problem was identified and then addressed a few months ago, and the execution process has been corrected."

Among changes, GMAC has sent employees with signing responsibility through additional training, issued a more robust policy on requirements and boosted the number of people performing the processes.

But the company now faces new challenges.

Illinois Attorney General Lisa Madigan on Friday demanded in a letter that GMAC show that it did not violate the state's Consumer Fraud Act as it foreclosed on homeowners. Madigan said she would act if it is determined GMAC was rubber-stamping affidavits.

GMAC said it is working through affected foreclosures and was confident that its errors did not result in inappropriate losses of homes. Its review has found no factual misstatements on items, such as delinquency and validity of the note, it said.

"We hope to see the vast majority remediated over the next several weeks and before year end without serious consequence to the foreclosure process on the properties which are affected," GMAC said.

Rating companies Standard & Poor's and Moody's Investors Service have said they may lower their assessments of GMAC's servicing, on concern the errors may cause foreclosure delays that are costly to investors.

What's more, if GMAC must refile foreclosures, that may give incentives to borrowers to bring legal challenges, adding to costs and reducing the proceeds when the foreclosed home is sold, analysts at Barclays Capital said in a research note. (Reporting by Al Yoon; Editing by Kenneth Barry)


Florida’s Foreclosure Mills Make National Headlines!

Brady Dennis from the Washington Post reports on how several Florida Foreclosure Mills are the target of several high powered congressional democrats. They are urging Fannie Mae (who hires the firms to foreclose on people) to eliminate them from their payroll. The congressional representatives argue that these firms are not only engaged in fraudulent business practices, but they are employed by a government concern, Fannie Mae. So we foot the bill as tax payers to have private law firms in Florida fraudulently kick people out of their homes......sounds reasonable to me!

Lawmakers question Fannie on 'foreclosure mills'

By Brady Dennis

Saturday, September 25, 2010

A trio of congressional Democrats is demanding to know why government-backed mortgage giant Fannie Mae has entrusted many of its foreclosure cases to Florida law firms that stand accused of fabricating or backdating numerous court documents.

These so-called "foreclosure mills," essentially law firms that specialize in representing lenders while churning out foreclosure suits quickly and efficiently, are under investigation by the Florida attorney general and are running into legal challenges in other parts of the country.

According to the letter from three House Democrats - Financial Services Committee Chairman Barney Frank of Massachusetts and Corrine Brown and Alan Grayson of Florida - several firms facing scrutiny represent Fannie Mae both in foreclosure suits and in the company's pre-filing mediation program, which is designed to help borrowers and lenders talk through possible alternatives to foreclosure.

"In other words, Fannie Mae seems to specifically delegate its foreclosure avoidance obligations out to lawyers who specialize in kicking people out of their homes," the group wrote Friday in a letter to the company's chief executive."The legal pressure to foreclose at all costs is leading to a situation where servicers are foreclosing on properties on which they do not even own the note," they added. "This practice is blessed by a legal system overwhelmed with foreclosure cases and unable to sort out murky legal details, and a set of law firms who mass produce filings to move foreclosures as quickly as possible."

The lawmakers urged Fannie Mae to remove any "foreclosure mills" under investigation for document fraud from its attorney network. In addition, they argued that the mortgage giant should put in place guidelines that allow foreclosures to proceed only when the legal right to do so is clearly documented.

"Why is Fannie Mae using lawyers that are accused of regularly engaging in fraud to kick people out of their homes?" the group wrote. "Given that Fannie Mae is at this point a government entity, and it is the policy of the government that foreclosures are a costly situation best avoided if there are any lower cost alternatives, what steps is Fannie Mae taking to avoid the use of foreclosure mills?"

In addition to the investigation in Florida, other states such as Iowa and Texas have begun their own inquiries. Those actions come as Ally Financial this week temporarily halted evictions on foreclosed homes in 23 states amid questions about whether a prolific document signer had verified the accuracy of court documents.

Asked about the congressional letter, a spokeswoman for Fannie Mae said Friday that "we have received the letter and will respond to the questions raised."


Digging Deep to Save Your Digs!!

Margaret Collins from the San Francisco Chronicle writes about an unfortunate trend involving retirement accounts. Early distributions from 401(k) accounts hit a 10 year high in the second quarter of 2010. The primary reason for the early withdrawals involved the prevention of foreclosure and eviction. What this means to me is that people are busting there way through their retirement savings in an attempt to save their home. The problem is, is that this money will run out. People with bigger homes may have more money in their accounts, but their accounts will eventually run dry. This is proven out by the fact that in January of 2009 the percentage of foreclosures on mortgages of $1M or more was just over 6%. The same stat in June of 2010 was just over 13%. This problem is indicative of problems to come.

401(k) loans hit 10-year high in second quarter

Margaret Collins, Bloomberg News

Saturday, August 21, 2010

The number of people borrowing from their retirement-savings plans reached a 10-year high in the second quarter, according to Fidelity Investments, as Americans grappled with slowing economic growth.

The portion of 401(k) accounts with loans outstanding rose to 22 percent by the end of June from 20 percent a year earlier, the Boston asset manager said in a study released Friday. The number of people taking withdrawals for financial hardship increased to 2.2 percent from 2 percent a year earlier.

"The current economy has really resulted in the need for some individuals to borrow from their 401(k) or take a distribution to pay for some critical living expenses, which puts their retirement savings in jeopardy," Beth McHugh, Fidelity's vice president of market insights, said Friday.

The top reason for withdrawing money was to prevent foreclosure or eviction, she said. A record 269,962 U.S. homes were seized in the second quarter, according to Irvine's RealtyTrac Inc., as economic growth slowed to a 2.4 percent annual rate. Unemployment declined to 9.5 percent in June from a 26-year high of 10.1 percent in October, according to the Labor Department.

Depending on the rules of an employer's 401(k) plan, individuals can take a hardship withdrawal that doesn't have to be repaid if they demonstrate a financial need such as medical expenses or the purchase of a primary residence.

"That money is gone," McHugh said. The distribution is taxed as ordinary income and participants may incur a 10 percent penalty if they are under the age of 59 and a half.

Workers also may borrow from their account and pay the loan back. The average initial loan was $8,650 as of June 30, with a payment period of three and a half years, said Fidelity, which has 11 million 401(k) participants in 17,000 employer plans, making it the biggest provider of the savings accounts.

Participants also cited the need to pay for college and the purchase of a primary residence as reasons for withdrawing money, the firm said. The average 401(k) balance at the end of the second quarter was $61,800, down 7.6 percent from the prior quarter, according to Fidelity. Workers' annual contributions to their retirement accounts remained at about 8 percent of salaries, the firm said.

The findings are based on a study of plans offered by Fidelity, which oversaw investment assets of $1.4 trillion including retirement accounts as of June 30.

Read more: http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2010/08/20/MNU41F0TK4.DTL#ixzz0ymZzkOsl


Double Trouble!

Foreclosure process doesn't stop during short sales

When I started reading the article written by Jason Hidalgo, I was hopeful of its content. It starts off with a case study where a realtor working on a short sale was unaware of the fact that the lender was still proceeding with the foreclosure while a short sale was being negotiated. The agent was socked to find out that while the short sale was approved by the lender and she had a buyer ready to close, the bank foreclosed anyways. The issue was that the “short sale” department didn’t speak with the “foreclosure department” at the lender/servicing company.

Where I deviate from Mr. Hidalgo’s solution is where he recommends that the realtor that the seller hires must be equipped to handle the short sale process , beginning to end. Just like a plumber isn’t equipped to operate on someone's brain, it is my opinion that a realtor is not fully equipped to handle a short sale, beginning to end (especially in states such as Florida which is a judicial state.) Foreclosure defense attorneys are the ones that are fully equipped to handle this process.

While I am a firm believer that realtors should be educated as to the process, they really need to be utilizing law firms when a short sale is presented to them. One quote from a realtor in the article astonished me. It was, “I always tell my clients that foreclosure is still a possibility so they should be ready for it and think of closing as a bonus.” Can anyone say CYA!!!!! A short sale closing is a bonus???? Really???? That statement was amusing...at best!!

Double Trouble: Foreclosure process doesn't stop during short sales

BY JASON HIDALGO • JHIDALGO@RGJ.COM • AUGUST 22, 2010

Seller OK? Check.

Buyer agreement? Check.

Bank approval? Check.

For local real estate agent Jennifer Capurro, one short sale transaction she was working in 2009 was as close to a slam dunk as she was going to get.

But even with approval from the bank for the sale, a foreclosure filing on the property caught all parties involved by surprise -- including the bank. Apparently, someone on the bank's foreclosure team didn't get the memo about the approved short sale.

"The bank actually wanted to do the short sale," Capurro said. "But the wires got crossed, and the attorney handling the foreclosure wasn't contacted properly, even though the bank wanted to hold it off."

Capurro's experience underlines one of the biggest misconceptions seen among distressed homeowners: that filing a short sale staves off foreclosure.

"The foreclosure process does not stop even when you're negotiating a short sale," Capurro said. "And just because a bank gives you approval doesn't mean the short sale is going to close for sure. Until that closing is recorded and the buyer takes possession of that home, you can never really be 100 percent sure that a short sale will go through."

Besides presenting a less severe hit on a seller's credit, short sales allow lenders to potentially recoup more of their investment than they would from a foreclosure sale.

It's no surprise then that short sales have grown in popularity within the past year.

Shorts sales jumped from 18 percent of total sales in Reno and Sparks in the second quarter of 2009 to 38 percent of the market during the same period this year. In contrast, foreclosure sales fell from 48 percent of the market to 22 percent.

But even as short sales enjoy a rise in popularity, many distressed borrowers -- and even real estate agents -- are not adequately informed about the short sale process, said Jim Fitzgerald, a real estate consumer advocate.

"Most people don't look into it," Fitzgerald said. "They just assume, 'Hey, let's cut a deal,' and it's as simple as that. But I tell you what, it's a heck of a lot more complicated than that."

Getting the process started requires plenty of paperwork, including financial statements, hardship letters, pay stubs and tax documents, to name just a few.

Maintaining consistent and adequate communication with lenders also can be a challenge. It doesn't help that a lot of people already are delinquent when they start the process.

"It's not an issue if you're underwater but still current on your payments," Fitzgerald said. "But many homeowners look into short sales after they're already late on their payments. Add the fact that it takes four to six months to get a short sale approved, and there's a chance that a house will foreclose before then."

Meanwhile, banks that work on delinquent mortgages typically do not own those loans. Instead, they act as servicers for the investors who own the mortgages. This adds another layer in the short sale chain of command that has to be cleared before any transaction is approved.

"In most cases, we don't have the authority to do short sale decisions by ourselves," said J.K. Huey, senior vice president of Wells Fargo Home Mortgage. "So, we have to go to the investors and ask them if a foreclosure can be stopped or postponed. In some cases, judges don't even allow us to stop a foreclosure sale."

Seeking Help For Short Sales

Hiring a short sale specialist can go a long way in alleviating the headaches.

But not all self-proclaimed specialists are as knowledgeable as they claim to be.

Before the housing market's collapse, short sales were relatively rare beasts, and only a select number of agents were truly familiar with the process.

Even with the recent increase in the popularity of short sales, finding agents who are knowledgeable about short sales still can be a challenge, Capurro said. Given what's at stake, hiring the wrong person can potentially lead to disastrous results.

"If you hire an agent, that person needs to make sure nothing (foreclosure-related) gets filed," Capurro said. "And if something does get filed -- like a notice of trustee sale, for example -- that person needs to make sure it gets postponed. If an agent does not stay on top of the foreclosure process, a house can still foreclose."

Complicating matters is the absence of a licensing board that regulates short sale specialists, Fitzgerald said.

There are organizations, however, that provide certifications for agents who go through short sale training. One is a Certified Distressed Property Expert or CDPE certification, which offers a list of certified agents at www.cdpe.com. Another is a Short Sale and Foreclosure Resource Certification or SFR, which is offered by the National Association of Realtors.

"Besides education, these groups also provide certified agents with packages that contain exactly what they need for a short sale, including the necessary forms," Capurro said. "Despite having years of experience with short sale closings, I still got a lot of things out of the certification training."

Realistic Expectations About Foreclosure Process

Even with the help of a top notch specialist, no short sale transaction is guaranteed a 100 percent success rate.

Distressed properties with multiple lenders and lien holders can be especially tough to close. Even properties with the most ideal conditions for a short sale aren't immune to failed negotiations.

"I've seen cases where a short sale should've been a slam dunk, but the bank still chose to foreclose," Capurro said. "The I've seen cases where a property had several liens and I think, 'There's no way this short sale is going to go through,' but it actually does. Sometimes, there's just no plausible explanation why some shorts sales go through and some don't."

Short sale decisions, however, are not as simple as they may seem on the surface.

Even situations that look ideal at first glance might have other factors weighing on them in the background. One example involves distressed borrowers coming in with their third or fourth short sale offer to the lender.

"Generally, if a borrower makes a short sale offer for the first time and the transaction can be closed within 30 days of a scheduled foreclosure sale, most investors allow us to postpone the foreclosure," Huey said.

"But if someone is presenting an offer for the third or fourth time because prior offers fell through, then investors may feel that they can't take a chance at another delay. Some of these delinquencies have just gotten so far up that investors don't want to risk ending up with another short sale that does not close."

Because of the uncertainty that surrounds short sales, the best approach is to always hope for the best but also be prepared for the worst result, Capurro said.

"I've worked on a lot of short sales, and I've seen some crazy things happen," Capurro said. "I always tell my clients that foreclosure is still a possibility so they should be ready for it and think of closing as a bonus. Sellers who hear that tend to deal with the process a lot better."


Nearly 50 percent leave!!!

While the article is short, the message is very clear. Martin Crutsinger from the Associated Press reports that nearly HALF of all people that entered into Obama's loan modification program are no longer part of it. Over 630,000 people have been “cut loose” from the program since it started in March 2009. One might say...well that means that 50% of the people in the program re still in it. While this may be true, a staggering 60% of these people will default on their modified loans within 6 months of receiving the modification!

Nearly 50 percent leave Obama mortgage-aid program

By Martin Crutsinger (AP)- Aug 20, 2010

WASHINGTON — Nearly half of homeowners seeking help from the Obama administration's flagship effort to help those at risk of foreclosure have fallen out of the program.

A new report from the Treasury Department says approximately 630,000 people who had tried to get their mortgages modified through the program have been cut loose through July. That's about 48 percent of the 1.3 million homeowners who had enrolled since March 2009.

That's up from more than 40 percent through June.

The report suggests foreclosures could rise in the second half of the year and weaken the ailing housing market.


Why You Will Never Accuse Me Of Being A Politician!

If you want to know why I will never be a politician, read the article written by Robert Selna of the San Francisco Chronicle. A bill that was introduced to the California state legislature is in danger of not passing. The bill is designed to force lenders to fully consider a loan modification prior to starting foreclosure proceedings. Makes sense to me.......see if there’s anything you can do before kicking a family to the curb.

Why is this bill in danger of failing? Because the politicians have succumbed to the lobbying efforts of the banking industry. Bankers hate to be told what to do especially when it may cost them a few sheckles. They are more interested in sucking up our governments handouts versus trying to help the citizens of this once great country.

California foreclosure bill is losing steam

Robert Selna, Chronicle Staff Writer

Friday, August 27, 2010

A state legislative effort to save homeowners from foreclosure that once seemed to enjoy broad support is close to failing in the wake of an intense banking industry lobbying effort in Sacramento.

SB1275 would require lenders to provide homeowners with a fully considered decision on a loan modification prior to starting foreclosure.

The bill addresses what some say has become a far too common phenomenon for homeowners who are delinquent on their mortgages: While negotiating a loan modification, their lender forecloses. The proposed rules would allow the homeowner to sue if that occurs.

The federal government imposed similar rules on June 1 for banks participating in its main foreclosure reduction plan, but did not provide for legal action and uses no formal enforcement mechanism, according to SB1275's sponsors.

The banking industry has opposed the state bill, arguing that lawsuits could be brought against lenders for technical violations and could delay the foreclosure process even if owners were ineligible for a modification. Banking representatives also have said that federal rules have evolved and could change again, potentially making SB1275 outdated and creating a conflict.

The bill's author, state Sen. Mark Leno, D-San Francisco, said his legislation was born of the belief that lenders will continue to mistreat borrowers and handle foreclosures incompetently unless they are forced to change.

"Banks are not being held accountable," Leno said in an interview Thursday. "The result has been devastating to homeowners and neighborhoods, and cities and counties, which have lost tax revenue. ... The banks caused this entire mess; they brought the world down."

Representatives from the California Bankers Association were not available Thursday. In June, a spokeswoman told The Chronicle that the association was "extremely opposed to any sort of private right of action."

The state Senate passed SB1275 on June 3 and all three Assembly committees that reviewed the bill also approved it. But when it surfaced for a full Assembly vote on Tuesday, it did not get enough votes, losing 38-27, with 14 Democrats abstaining and some voting no, according to Leno.

The Assembly granted the bill a reconsideration vote that must occur before the end of business Tuesday, when the legislative session is scheduled to end, Leno said. He noted that the vote was expected to run along party lines and that his office and others were trying to persuade Democrats to get off the sidelines, or if they went against the bill, to change their votes.

"The banks are in full force to kill this bill, which is really intended to prevent avoidable foreclosures and letting lenders know that there are consequences to not doing their job properly."


A Band of Brothers!

The Tampa Bay Business Journal brings us an article that reports on how our government is giving our government the right of first refusal when buying bank owned properties! Have I confused you? HUD will give local communities a 2 day notice when properties are going to be sold at auction by banks. Local communities will have an opportunity to purchase these house prior to the general public.

While this applies to roughly 20% of the foreclosed inventory that goes to auction from participating banks (currently, the participating banks are Bank of America, Chase, Citi, Deutsche Bank, GMAC, Nationstar Mortgage, Ocwen Financial Corp., Saxon Mortgage Services, U.S. Bank, Wells Fargo, Fannie Mae, Freddie Mac and the Federal Housing Administration) it is ironic in nature. The government is using our tax dollars (that have been given to local municipalities to purchase foreclosed homes) to give the local government an unfair advantage over the general public!

So for those of you that buy bank owned properties, you should now that the local governments will be scooping up many of the prime properties before you get a chance to bid. Good luck!

HUD, banks band together to give edge on foreclosed homes

TAMPA BAY BUSINESS JOURNAL Wednesday, September 1, 2010

The U.S. Housing and Urban Development Department is workingwith the nation’s top mortgage lenders to offer select state and local governments and nonprofit organizations a “first look,” or right of first refusal, to purchase foreclosed homes before making these properties available to private investors.

HUD didn’t identify which government and nonprofit agencies would be selected to participate, but Florida is a likely candidate because of the extent of already record foreclosure numbers here. Groups that are part of HUD’s current Neighborhood Stabilization Program, which includes Tampa Bay, are eligible to take part.

Participating institutions include Bank of America, Chase, Citi, Deutsche Bank, GMAC, Nationstar Mortgage, Ocwen Financial Corp., Saxon Mortgage Services, U.S. Bank, Wells Fargo, Fannie Mae, Freddie Mac and the Federal Housing Administration.

The National First Look Program — the first-ever public-private partnership between HUD and the National Community Stabilization Trust — will help governments and nonprofits compete better with private investors for bank-owned properties, which HUD says hinders efforts to stabilize neighborhoods with high foreclosure activity.

“Local communities will now get an exclusive option to buy foreclosed properties in targeted neighborhoods so they can turn the homes into affordable housing, or in some cases, tear them down,” said HUD secretary Shaun Donovan, in a release. “This agreement helps us level the playing field to give communities a better chance to stabilize these neighborhoods.”

The First Look program will allow Neighborhood Stabilization Program participants the exclusive opportunity to purchase available real-estate owned, or REO, properties within the defined boundaries of a foreclosure target area. The participants will have 24 to 48 hours to express interest and then will have up to 12 business days to commit to the purchase, sometimes at a discount provided by the bank.

If the government or nonprofit entity doesn’t purchase the home, the bank would then go through the normal foreclosure auction process.


Why Should Banks Benefit?!

Vicki Needham from The Hill brings us an interesting article about the governments latest stab at helping the market. The newest program will provide $3 billion dollars to help people that can’t pay their mortgages....pay their mortgages. While I have obviously heard of the program, Ms. Needham takes a very interesting look at what this really means. What it means is that the banks will get yet another $3 billion dollars of our money to try to plug a leak. Unfortunately the bank aid will, in most cases, simply stave off imminent foreclosure. Ms. Needham suggests other alternatives that could make the latest offering from the government more effective. In my opinion, it’s worth your time to read the entire article.

Banks to benefit most from White House program to help fight foreclosures

By Vicki Needham

Banks will get the biggest benefit from an Obama administration housing program designed to help unemployed homeowners escape foreclosure.

Housing experts expressed concern that banks, not homeowners, will be helped by the White House's $3 billion funding infusion — $2 billion from the Treasury Department and another $1 billion from the Housing and Urban Development Department — going to those states hit hardest by the housing market crash and unemployment.

"Giving money to the banks isn't what the government should be doing right now," said Dean Baker, co-founder of the Center for Economic and Policy Research.

"I'm not a big fan; it's ill conceived," he said.

The basic principle is to help struggling homeowners, but with so many people underwater on their mortgages, the new funding is unlikely to do much good, Baker said.

"You need to make sure that someone benefits from the program other than banks," he said.

Baker suggested that if the government is going to provide up to $50,000 in loans over the course of two years to those struggling homeowners that the money should be used for any of their needs, not just to pay the mortgage.

He said banks could offer a program that would allow homeowners to rent their home back from the bank at a lower monthly rate than their mortgage payment for up to five years, providing some security for those struggling to make monthly payments.

The arrangement would provide lenders with a real incentive to negotiate with homeowners because they don't want to be landlords.

If the recently announced program is expected to work there has to be a reasonable expectation that at the end of the two-year program homeowners will have some equity in their property.

"If that's not the case, then it's not worth it," he said.

He said he'd be "very surprised" if the vast majority of those who take advantage of the program don't eventually lose their homes.

Foreclosures were up 4 percent in July with 325,229 filings, a nearly 10 percent increase over the same month in 2009, according to a report from RealtyTrac, a group that tracks foreclosure filings.

David Abromowitz, senior fellow at the Center for American Progress, said the main problem with the funding is that lenders will benefit without requiring any concessions or matching of the federal aid.

"My concern is what are we asking from lenders who are going to get the benefits source to pay those loans for 24 months," he said.

Under the program, lenders don't have to make principle reductions on loans or major modifications, he said. Lenders should also be required to make concessions and possibly even match funding.

"Banks also should be required to share in the burden being faced by homeowners," he said.

Despite his reservations with the funding, he emphasized that with millions facing foreclosure, the fragile economy and a slowing economic recovery, "anything that slows or stops foreclosures is good."

"It's targeted well toward people facing a temporary situation when they can't pay their mortgage because of unemployment," he said.

Still, the challenge is difficult as federal officials try to find ways to get the economy to turn the corner and pick up pace.

"No one piece is going to turn the tide," Abromowitz said. "But this certainly could help in the housing market."

Under the federal program, Treasury will direct the $2 billion to the "Hardest Hit Fund" created earlier this year, while HUD will create a new "Emergency Homeowners Loan Program" that will provide zero-interest loans of up to $50,000 for two years. The funding will be divided up among 17 states and the District of Columbia.

The funding allocation announced last week is the third payout for the housing program, pushing the cost of the program to $4.1 billion.

Nevada, Arizona and Florida posted the worst foreclosure rates in July, with Nevada reporting the nation's highest foreclosure rate for the 43rd straight month.

Five states accounted for more than 50 percent of national total — California, Florida, Illinois, Michigan and Arizona.

Four of those states will get part of $3 billion from the Treasury and Housing and Urban Development Department to help unemployed homeowners stave off foreclosure.

At $476 million, California gets the largest share while Florida will receive about $239 million, Illinois gets $166 million, Michigan $129 million and Nevada is set to receive $34 million under the program.

John Weicher, director of the Center for Housing and Financial Markets at the Hudson Institute, said "the most important thing is the strengthening of the economy overall."

"What's happened so far hasn't been very helpful," he said about the administration's past efforts.

The Obama administration had tried several different avenues to stem foreclosures but hasn't made much headway. About 530,000 homeowners, or more than 40 percent, have dropped out of the Making Home Affordable program.

"There's an open question of whether this will work particularly well," Weicher said.

He said just getting money to people to help them make their mortgage payments may be more successful than other programs.

Republicans have argued it puts taxpayer money at risk, and the special inspector general for the $700 billion Troubled Asset Relief Program is auditing the program.

"It’s troubling that just weeks after the SIGTARP assailed the administration for its lack of success and transparency in managing their signature mortgage-relief program, they have ignored the IG’s warnings and are committing even more money in a failed program that ultimately isn’t helping those who need it the most," Rep. Darrell Issa (R-Calif.) told The Hill.

Issa, ranking member on the House Oversight and Government Reform Committee, said, "If the administration were serious about helping the jobless keep their homes, they would be advancing policies that would create jobs and address the root causes of the housing crisis — Fannie Mae and Freddie Mac."


You Know It’s Election Time When....

You know it’s election time when the government continues to boast about how effective their acronyms...I mean programs....are when they really aren’t effective. Alex Veiga from the Huffington Post brings us an article that outlines the true statistics.

Mr. Veiga reports that, “July makes the eighth month in a row that the pace of homes lost to foreclosure has increased on an annual basis.” Eight straight months...even when the governments latest and greatest is firmly in place?! That doesn’t spell success to me.

Another interesting piece of information is that while the number of foreclosures continues to increase, the length of time that people are kept in their house before foreclosure is also increasing. What this means is that the banks are reluctant to take homes back in fear of depressing the housing market even further.

To quote directly from the article, “The latest data reflect a foreclosure crisis that continues to drag on as many homeowners struggle to make their monthly payments amid high unemployment, slow job growth and an uneven rebound in home prices.

Economic woes, such as unemployment or reduced income, are now the main catalysts for foreclosures. Initially, lax lending standards were the culprit, but homeowners with good credit who took out conventional, fixed-rate loans are now the fastest growing group of foreclosures.

Lenders are offering a variety of programs to help homeowners modify their loans, but their success rates vary. Hundreds of thousands of homeowners can't qualify or fall back into default.

The Obama administration has rolled out numerous attempts to tackle the foreclosure crisis but has made only a small dent in the problem. More than 40 percent, or about 530,000 homeowners, have fallen out of the administration's main effort to assist those facing foreclosure.”

So, make sure that you are taking a realistic look at what is happening in today's marketplace. It’s always nice to sit around the water cooler Monday morning (which I no longer do...thank you Generous Electric!) and think about the niceties that our government paints. But reality paints a much different picture. Be prepared.......or start preparing now!

July Foreclosure Rate: Homes Lost Up 6 Percent From Last Year

ALEX VEIGA

LOS ANGELES — The number of U.S. homes lost to foreclosure surged in July, as lenders take back more properties from homeowners who have been in default for months on end.

Lenders repossessed 92,858 properties last month, up 9 percent from June and an increase of 6 percent from July 2009, foreclosure listing firm RealtyTrac Inc. said Thursday.

Banks have stepped up repossessions this year to clear out the backlog of bad loans. July makes the eighth month in a row that the pace of homes lost to foreclosure has increased on an annual basis.

Still, the number of homeowners who have fallen behind on their payments remains high, and these borrowers are being allowed to stay in their homes longer. That's partly because lenders are reluctant to add to the glut of foreclosed homes on the market. They also are swamped with an unprecedented number of defaulting properties and have been overwhelmed by the volume.

The number of properties receiving an initial default notice – the first step in the foreclosure process – rose 1 percent last month from June, but was down 28 percent versus July last year, RealtyTrac said.

Initial defaults have fallen on an annual basis the past six months.

The latest data reflect a foreclosure crisis that continues to drag on as many homeowners struggle to make their monthly payments amid high unemployment, slow job growth and an uneven rebound in home prices.

Economic woes, such as unemployment or reduced income, are now the main catalysts for foreclosures. Initially, lax lending standards were the culprit, but homeowners with good credit who took out conventional, fixed-rate loans are now the fastest growing group of foreclosures.

Lenders are offering a variety of programs to help homeowners modify their loans, but their success rates vary. Hundreds of thousands of homeowners can't qualify or fall back into default.

The Obama administration has rolled out numerous attempts to tackle the foreclosure crisis but has made only a small dent in the problem. More than 40 percent, or about 530,000 homeowners, have fallen out of the administration's main effort to assist those facing foreclosure.

That program, known as Making Home Affordable, has provided permanent help to about 390,000 homeowners, or 30 percent of the 1.3 million who have enrolled since March 2009.

Still, RealtyTrac estimates more than 1 million American households are likely to lose their homes to foreclosure this year.

In all, 325,229 properties received a foreclosure-related warning in July, up 4 percent from June, but down 10 percent from the same month last year, RealtyTrac said. That translates to one in 397 U.S. homes.

The firm tracks notices for defaults, scheduled home auctions and home repossessions – warnings that can lead up to a home eventually being lost to foreclosure.

Among states, Nevada posted the highest foreclosure rate in July, with one in every 82 households receiving a foreclosure notice. The number of properties in Nevada receiving a foreclosure warning last month rose nearly 7 percent from June, but fell nearly 30 percent from the same month last year.

Rounding out the top 10 states with the highest foreclosure rate last month were: Arizona, Florida, California, Idaho, Michigan, Utah, Illinois, Georgia and Maryland.

Las Vegas continued to be the city with the highest foreclosure rate in the U.S., with one in every 71 homes receiving a foreclosure notice in July – more than five times the national average.


Foreclosed On—By the U.S.

Serena Ng and Carrick Mollenkamp from the Wall Street Journal wrote an article about a problem our woeful government has inherited. When our government decided to bail out the thimble heads from Bear Stearns, they inherited a portfolio of commercial and residential real estate. Guess What? The government is about to foreclose on many of these parcels! The authors are quoted, “It is an unprecedented test for the most powerful of 12 regional branches of the Federal Reserve System. In its 96-year history, the Fed hasn't made or controlled loans to U.S. citizens and businesses outside of banking since the 1930s, when it was done on a much smaller scale. Now, under the watchful eye of Congress, the New York Fed must recoup a $29 billion loan secured by the Bear assets.”

For the Fed to come in and foreclose on properties puts it at some reputational and political risk," said Vincent Reinhart, a former senior Fed staffer who is now an economist at the American Enterprise Institute. "If the Fed can't figure out how to recast the terms of these mortgages and work with borrowers—it's emblematic of the problems the government has had with other programs over the last year and a half," he added.

Read the rest of the article. It may add some humor to your day!

Foreclosed On—By the U.S.

With Bear Assets, Fed Balances Preserving Investment and Helping Borrowers

By SERENA NG And CARRICK MOLLENKAMP

James Currell is struggling to prevent his Minnesota home from being foreclosed. But his lender isn't a bank. It is the U.S. government.

The Federal Reserve Bank of New York is facing the prospect of foreclosing on a number of properties in the coming months, from homes to commercial buildings, a result of a souring mortgage portfolio it took over when it helped bail out Bear Stearns in 2008.

As it deals with delinquent borrowers, a team of New York Fed officials and outside advisers are trying to avoid having the U.S. government, along with local sheriff's departments, seize commercial properties and homes as it copes with falling real-estate values. In the process, the New York Fed is getting a hard lesson in the challenges of mortgage lending.

It is an unprecedented test for the most powerful of 12 regional branches of the Federal Reserve System. In its 96-year history, the Fed hasn't made or controlled loans to U.S. citizens and businesses outside of banking since the 1930s, when it was done on a much smaller scale. Now, under the watchful eye of Congress, the New York Fed must recoup a $29 billion loan secured by the Bear assets.

"For the Fed to come in and foreclose on properties puts it at some reputational and political risk," said Vincent Reinhart, a former senior Fed staffer who is now an economist at the American Enterprise Institute. "If the Fed can't figure out how to recast the terms of these mortgages and work with borrowers—it's emblematic of the problems the government has had with other programs over the last year and a half," he added.

The New York Fed faces certain unique issues. It is trying to avoid selling problem assets at discounted prices, which could disrupt markets and hurt banks. And while the regulator is open to modifying existing commercial-property loans, it is less likely than some banks to restructure a loan in a joint-venture situation if it meant the New York Fed couldn't call the shots in a restructuring.

The New York Fed's stance about how to pursue foreclosures is a sensitive balancing act. If it proceeds with numerous foreclosure proceedings in the coming months, particularly on residential mortgages, it could trigger concern among legislators looking to protect homeowners in their districts. The issue is particularly sensitive because taxpayers helped fund the Bear Stearns bailout.

As a lender, the regulator is "a pretty tough negotiator," Helen Mucciolo, a career New York Fed official, said in a recent interview, adding that there is no one-size-fits-all approach to working out each loan as her team seeks to maximize value for U.S. taxpayers.

Overall, the portfolio that acquired the Bear assets for $30 billion in March 2008 had a value of $29.4 billion as of June 30, 2010. The portfolio's value had dropped to about $25 billion during the depths of the financial crisis.

The problem spot is the real-estate holdings. The portfolio's residential and commercial loans were worth about $5 billion recently, compared with $9.6 billion in March 2008, when Bear Stearns collapsed, illustrating the financial pain other U.S. banks are experiencing as they deal with their own souring holdings of home loans, offices, hotels, shopping centers and land. So far, buyers have been found for about $1 billion in commercial loans.

The New York Fed's holdings of commercial-real-estate debt lost 35% of their value over the two years ended March 2010, while a pool of residential loans fell about 60%, according to New York Fed documents and people familiar with the matter.

So far, the regional Fed bank and a company it financed called Maiden Lane LLC have foreclosed on only one commercial property, an Oklahoma City mall it has put up for sale. More commercial foreclosures are expected, a person familiar with the situation says.

Maiden Lane also has been forced to foreclose on homes in California, Illinois, Georgia and Washington, according to public foreclosure records. In addition to working out loans, the New York Fed's team, led by Ms. Mucciolo, is trying to exit from Bear's old trading positions tied to scores of mortgage securities and derivative contracts.

The New York Fed ended up with the portfolio as part of the bailout of Bear Stearns, the Wall Street firm that collapsed amid a cash crunch, an early sign of the 2008 market panic. In the bailout, J.P. Morgan Chase & Co. bought Bear Stearns but didn't want to take $30 billion of its assets, its portfolio of real-estate loans and securities.

To facilitate the deal, the New York Fed set up Maiden Lane as a Delaware corporation and extended to the enterprise a 10-year, $29 billion loan so it could take control of the orphaned Bear assets, which were pledged as collateral for the emergency loan. Now, the New York Fed is trying to unwind the portfolio to recoup the loan. J.P. Morgan put up roughly $1 billion to finance Maiden Lane and will be repaid only after the New York Fed recovers its money.

It could take years. In mid-July, Maiden Lane made its first monthly principal repayment: a relatively modest $30 million.

A 22-person team at the New York Fed's Investment Support Office is overseeing the portfolio at the central bank's building on a street called Maiden Lane in New York's financial district. The team is headed by Ms. Mucciolo, 44 years old, who joined the regulator in 1993 after receiving a graduate business degree at Pace University.

The New York Fed hired investment firm BlackRock Inc. to manage the Bear portfolio and handle negotiations with borrowers while the regulator has a behind-the-scenes role. BlackRock was paid about $35 million in fees for its work on Maiden Lane last year.

More foreclosures could stick the New York Fed with properties it can't sell. Consider the 2009 foreclosure of the Crossroads Mall in Oklahoma City, a move that put the New York Fed in control of the 36-year-old shopping venue. The mall since 2007 has lost big tenants such as department store Dillard's.

Maiden Lane last year took over the mall at a sheriff's auction, to protect the value of the note it held on the property. But in a sign the regulator is struggling to unload properties, an Oklahoma broker has been unable to find a buyer for the mall, which was put up for sale in September for $24 million. "No one is happy about owning a mall, but we have to manage this responsibly and see what we get back," Ms. Mucciolo said.

The New York Fed has suffered other losses. It has exposure to Extended Stay Inc., a hotel chain that filed for bankruptcy protection last year amid a slump in the lodging business. After an investor consortium bought Extended Stay in an auction, the Fed was forced to mark down its $744 million in mezzanine debt to $0.

The New York Fed and Maiden Lane also took control of roughly 50 commercial real-estate loans tied to hundreds of properties and 9,000 home loans that included both first-lien and second-lien mortgages.

As of year-end 2009, the principal amount due from residential borrowers was $1.5 billion, 49% of which was "nonperforming," or not accruing interest. (At the same time, 13% of the principal amount due from commercial loans was nonperforming.) The residential pool had a fair value of $1.6 billion in March 2008 that fell to $604 million at the end of this March.

To better oversee the home loans and help more borrowers modify loans, the Fed recently replaced the pool's legacy mortgage-service companies, Wells Fargo & Co. and Bear Stearns unit EMC Mortgage Corp., with Nationstar Mortgage LLC, based in the Dallas suburb of Lewisville. "It is in our interest for borrowers who qualify for a loan modification to get the help they need," Ms. Mucciolo said.

Among those under stress is Mr. Currell, a 60-year-old real-estate investor. In 2007, he took out a loan from EMC Mortgage for $420,000 to refinance an existing loan on a four-bedroom home in Woodbury, Minn., initially for himself that he later opted to rent out. That loan today resides in Maiden Lane's portfolio.

Mr. Currell fell behind on payments and this year filed for bankruptcy protection. Mr. Currell and Nationstar haven't been able to strike a loan-modification deal. The upshot: Maiden Lane could end up with a home worth significantly less than the value of the loan. Nationstar has offered to lower his rate, currently 7.875%, to 5.5%. But Mr. Currell said he needs an even lower rate, and an extended mortgage period. "Maybe we can make it work," he says.

"I'm not whining. I'm a big boy," Mr. Currell says. "I took chances."

Maiden Lane now owns a large amount of relatively safe securities guaranteed by government-sponsored mortgage operators Fannie Mae and Freddie Mac. Many were bought over the past two years with cash Maiden Lane received from interest and principal payments on assets in the portfolio, and they have helped make up for some of the value declines from soured assets.

The New York Fed and BlackRock also are trying to unwind scores of derivative contracts, including credit-default swaps that act like insurance against defaults. Bear Stearns, a major Wall Street dealer, traded the credit protection on corporate and municipal bonds and mortgage securities, including ones underpinned by subprime loans and bond insurance companies.

To exit from some of the trades, the New York Fed and BlackRock have had to locate the bonds underlying the swaps and hand them over to trading partners that include large Wall Street investment banks. So far they have unwound over half the contracts Maiden Lane originally took on.


The New Face of Foreclosures

AnnaMaria Andriotis brings us an article that highlights the growing problem of foreclosures. While Florida, California, Arizona and Nevada account for 50+ % of the nations foreclosures, the problem is spreading to smaller communities around us.

During the first half of 2010, nearly 75% of all metropolitan areas posted increases in foreclosure filings. An 8.3% increase in foreclosure filings was shown as compared to the same period last year. While nasty mortgages attributed to the first wave, nasty mortgages, unemployment and job cuts continue to bash the markets.

The foreclosure filings , subsequent foreclosures and sales of bank owned properties will continue to depress the market for years to come. If you’re not involved in this market now, you need to be.

The New Face of Foreclosures

REAL ESTATE by AnnaMaria Andriotis (Author Archive)

Move over Las Vegas and Phoenix. The foreclosure crisis is entering a second phase, moving into smaller metropolitan areas.

During the first half of this year, 74% of metropolitan areas posted year-over-year increases in foreclosure activity, according to RealtyTrac. In total, more than 1.6 million properties have foreclosure filings, up 8.3% from the first half of 2009.

Although Sun Belt cities like Las Vegas, San Bernardino, Calif., and Phoenix each recorded foreclosure filings upwards of 50,000, filings have eased in those areas since the first half of 2009.

Instead, areas like McAllen, Tx. and Spokane, Wash. have experienced spikes in foreclosures because of extended high unemployment and pay cuts, says Rick Sharga, senior vice president at RealtyTrac. (He projects that foreclosures will peak next year before they decline.)

In general, these five metropolitan areas experienced a relatively small number of foreclosures compared to the rest of the country, but they have registered the biggest increases so far this year.

McAllen-Edinburg-Mission, Texas

Percentage increase over the first half of 2009: 230%

Number of foreclosure filings from January to June: 1,551

Rising unemployment and widespread subprime lending during the housing bubble are the primary factors contributing to foreclosures in this area. Unemployment is above the national average, at 12.2% as of June, up from 11.2% in June 2009, according to the Bureau of Labor Statistics.

Few industries exist in this area. “A big problem is that they haven’t had a lot of big employers and the manufacturing and construction industries there have been hit,” says Don Baylor, senior policy analyst at the Center for Public Policy Priorities, a nonpartisan, nonprofit think tank in Austin, Texas. Construction jobs have plummeted as permits for new housing units fell to 1,769 year to date, down from 3,397 during the same period in 2007, according to the Census Bureau.

Residents are still grappling with the fallout from widespread subprime lending. In 2006, subprime loans accounted for 26.8% of mortgages in McAllen-Edinburg-Mission, the most popular area for subprime mortgages in the country, according to First American LoanPerformance.

Kennewick-Richland-Pasco, Wash.

Percentage increase: 217%

Number of filings: 206

Kennewick’sunemployment rate stands at 6.2%, down from 6.7% at this time last year and significantly lower than the national rate. Existing single-family home values fell only slightly from a median sale price of $169,200 in 2007 to $167,100 in 2009, according to the National Association of Realtors (NAR).

So, what’s contributing to the rise in foreclosures? “The problem for people who are losing their houses is that their mortgages are haunting them, either because their income has dropped and they can’t handle the mortgage or much more likely the mortgage rate adjusted upward and they can’t afford the mortgage any longer,” says Warren Bland, professor emeritus of economic geography at California State University, Northridge. Builders are reacting to the spike in foreclosures; permits for new housing fell to 508 during the first half of this year compared to 706 from January through June 2006.

Another city in Washington – Spokane – has seen a big increase in foreclosure filings, up 103%, in part because borrowers have been intentionally defaulting on their mortgages once their homes fell underwater, says Bland. Median sales prices for existing homes dropped from $193,800 in 2007 to $170,100, according to preliminary NAR data for the first quarter.


Superman Comic Saves Family Home From Foreclosure

Ray Sanchez from ABC Action News brings us a real life story about Superman! I thought Superman was a fictional character! In this case he (well...maybe the comic book that portrays him) seems to be helping a family save their house from foreclosure.

While packing up to leave their soon to be foreclosed on home, they found a copy of Action Comics No. 1. This comic book was the first time Superman appeared in print. The comic book is scheduled to be auctioned off on August 27th. The foreclosing bank agreed to halt the auction of the home until after the auction of the comic book. Experts agree that it could bring enough money to save the house.

While I am not a real believer in luck, here's a time where luck played out. SO...how many of you are getting up now to look in your basements and attics for something that may be of value?!

Superman Comic Saves Family Home From Foreclosure

Unexpected Find of Action Comics No. 1 Could Fetch Upwards of a Quarter of a Million Dollars at Auction

A struggling family facing foreclosure has stumbled upon what is considered to be the Holy Grail of comic books in their basement – a fortuitous find that could fetch upwards of a quarter million dollars at auction.

A family facing home foreclosure finds a rare Superman comic book.

A copy of Action Comics No. 1, the first in which Superman ever appeared, was discovered as they went about the painful task of packing up a home that had been in the family since at least the 1950s. The couple, who live in the South with their children, asked to remain anonymous.

"The bank was about ready to foreclose," said Vincent Zurzolo, co-owner of ComicConnect.com and Metropolis Comics and Collectibles in New York. "Literally, this family was in tears. The family home was going to be lost and they're devastated. They can't figure out a way out of this. They start packing things up. They go into the basement and start sifting through boxes – trying to find packing boxes – and they stumble on eight or nine comic books."

Most of the comic books in the box were worth between $10 and $30 but one – dated June 1938 and depicting the Man of Steel lifting a car above his head – was extremely rare. That issue, which originally sold for 10 cents, is considered to have ushered in the age of the superhero.

"It's a tremendous piece of American pop culture history," Zurzolo said. The couple learned online that ComicConnect.com had brokered the record-breaking sales of Action No. 1 copies for $1 million in February and then $1.5 million one month later. They immediately texted a cell phone picture to the firm's co-owner, Stephen Fishler.

"You couldn't have asked for a happier ending," Zurzolo said. "Superman saved the day."

Most Americans aren't so lucky. Nationwide, more than 1.6 million properties were in some stage of foreclosure in the first half of the year, according to RealtyTrac, up about 8 percent from a year ago but down 5 percent from the final six months of 2009. The couple had recently taken out a second mortgage on their home to start a new business, which failed in the uncertain economy. Mortgage payments were missed and the bank soon came after their home, which became theirs after the death of the wife's father. Fishler had to get on the phone to convince the bank to back off.

"My partner basically had to explain to the bank, 'You'll have your money soon,'" Zurzolo said. "We sent them information about our previous sales and what this could realize."

In a statement released through ComicConnect, the owner of the prized comic book said the family was still "a little shell shocked" after the unexpected find. "I was so nervous when I realized what it was worth," the owner said. "I know I am very fortunate but I will be greatly relieved when this book finds a new home."

Last Thursday, the couple's copy received a 5.0 VG(Very Good)/Fine rating on a scale of 1 to 10. It could fetch upwards of $250,000 when it goes up for auction on ComicConnect.com from Aug. 27 through Sept. 17.

While many businesses have been hurt by the recession, the comic book collection industry has received a boost. It all started in the spring of 2009, in the bleakest days of current downturn, when ComicConnect sold a copy of Action Comics No. 1 for $317,200 – a record at the time.

"That was at the worst part of the recession," Zurzolo said. "All the publicity we got on that was incredible…From all this publicity people started looking around and they started finding things." There are about 100 copies of Action Comics No. 1 believed to be in existence, with only a handful in good condition. In the last year and a half, about 7 copies have turned up. "You never know," Zurzolo said. "You might have a hidden treasure in your home which can change your life."

Zurzolo said more and more investors are calling ComicConnect looking for ways to make their money grow. One recent caller wanted to invest half a million dollars that he said were sitting in a bank account. "This happens to be the best year we've ever had," he said.

The copies of Action Comic No. 1 that sold for $1 million and $1.5 million earlier this year had been purchased for about $140,000 each more than a decade ago.

"When you tell people they might have more than a million bucks somewhere, it makes people move around and check places," he said. "In terms of the prices we've been able to realize, I do think that ties directly to the economy. You're dealing with a time in history when people are very uncertain about the stock market. They are extremely wary of the real estate market. They're making absolutely no money in their bank accounts."

After discovering their small treasures, many people want to remain anonymous – like many lottery winners. "People don't want people knowing how much money they have," Zurzolo said. "Some people are very paranoid."

Buyer Beware When Buying At The Courthouse Steps!!

Carolyn Said from the San Francisco Chronicle brings us an article that would be humorous if it weren’t so disgusting. Last week I wrote about SunTrust going above and beyond the call of duty to help out the family of a fallen soldier. This week, Wells Fargo takes the cake for ripping off an unsophisticated buyer.

To quote Ms. Said, “Roberta and Randall Strand took $97,606 out of their paid-off house to buy a foreclosed home at a courthouse auction. Five months later, they found out they actually bought the second mortgage, and that the bank planned to foreclose on the first mortgage, leaving them out in the cold. The Strands indicated, “Apparently, unbeknownst to us, Wachovia sold us a worthless second mortgage that was part of a piggyback loan made to the previous owners”, Roberta Strand said. "Both loans were originated, signed and recorded on the same date. Rather than foreclose on both loans at the same time, Wachovia chose to foreclose, market and sell the worthless junior lien, purporting it to be the real property, which is what we purchased."

In typical banker fashion, Jason Menke, a spokesman for Wells, said: "When these properties are sold at auction, they're without covenant or warranty. It's the responsibility of the person bidding at auction to fully understand exactly what they are bidding on and what the implications are. Bidding on property at foreclosure auction is a very different process from a standard home purchase." In the end Wells negotiated an out of court settlement with the Strands.

The purpose of this is not JUST to slam Wells but also to point out the trials and tribulations of buying properties on the courthouse steps. People think that it’s as simple as going to the courthouse steps and bidding. Like anything in life, if you don’t know what you are doing you will get burned. BUYER BEWARE!

Buyer Beware When Buying At The Courthouse Steps!!

Winning bid on mortgage buys family heartache

Carolyn Said, Chronicle Staff Writer

Roberta and Randall Strand took $97,606 out of their paid-off house to buy a foreclosed home at a courthouse auction. Five months later, they found out they actually bought the second mortgage, and that the bank planned to foreclose on the first mortgage, leaving them out in the cold.

The family received and recorded a "trustee's deed upon sale" in November 2009, shortly after the auction, without realizing that they had bought a second mortgage. They showed a locksmith this deed to have the house's locks changed, which they said the auctioneer had suggested. The Strands' daughter, Hayley Strand, and her fiancé, Bryan Janbay, moved into the house, about a mile from her parents in the Santa Cruz County town of Boulder Creek.

They spent more than six weeks and $13,000 fixing up the house, which they described as in terrible shape with broken windows and no plumbing, light fixtures or appliances.

"They were born and raised here, and we bought the house to keep them close," Roberta Strand said. "The plan was that we would float them the cash for the home, then they would get their own mortgage and pay us back."

In April 2010, a notice was posted on the home's front door that it would soon be auctioned at a courthouse sale - just like the one where the Strands had bid.

"Apparently, unbeknownst to us, Wachovia sold us a worthless second mortgage that was part of a piggyback loan made to the" previous owners, Roberta Strand said. "Both loans were originated, signed and recorded on the same date. Rather than foreclose on both loans at the same time, Wachovia chose to foreclose, market and sell the worthless junior lien, purporting it to be the real property, which is what we purchased."

Wells Fargo, which owns Wachovia, said in a statement: "We believe the foreclosure auction of the property on which the Strand family bid was done correctly, and are confident the legal resolution to this matter will bear that out."

How could such a situation happen?

Courthouse-step auctions, also called trustee's sales, are the final step of the foreclosure process in California. Homes sold at these auctions carry no guarantees on their condition or title. The vast majority revert to lenders. A handful are sold to outside investors, who must pay cash, and must accept the property as is.

Jason Menke, a spokesman for Wells, said: "When these properties are sold at auction, they're without covenant or warranty. It's the responsibility of the person bidding at auction to fully understand exactly what they are bidding on and what the implications are. Bidding on property at foreclosure auction is a very different process from a standard home purchase."

The Strands found the house on RealtyTrac, a subscription website that lists foreclosure actions filed with the county. They drove by and looked in the windows. They thought the house was probably worth about $200,000. (This month Santa Cruz assessed the home for tax purposes at $200,000.)

Didn't getting it for half price raise any red flags?

"We thought, this is a good deal, but didn't think it was a great deal," Roberta said. "The house was a mess."

Did they think they had clear title?

"It didn't occur to me that a bank could auction off a worthless piece of paper," Roberta said. She looked up the property's records at the courthouse. Since both loans were recorded at the same time and date, she mistakenly thought it was a single loan.

Why would a bank sell a second mortgage that may have no value?

While Wells declined to directly answer this question, its legal filings in this case said California law adds a 90-day delay to the foreclosure process for first mortgages. Second mortgages can be foreclosed upon more quickly, which presumably is what happened in this case. Wells had to offer the second mortgage in a courthouse-step auction because California requires that as part of the foreclosure process.

The few investors who do bid at courthouse auctions generally are sophisticated enough to research outstanding liens. If no one bids - as happens more than 90 percent of the time - the loan automatically reverts to the lender.

It would be a rare investor nowadays who would bid on a junior lien, so the expected outcome would have been the loan going back to the lender.

A second mortgage could have value if a home were worth more than the two mortgages. For instance, if a million-dollar home had a first mortgage of $500,000 and a second mortgage of $200,000, the second lien would have value. However, in today's market when many homes are underwater - worth less than the loan amount - it would be highly unusual to find a second mortgage at a foreclosure auction that was worth anything.

"It can be a problem when people new to foreclosure purchasing go to an auction and don't really know what they're bidding on," said Rick Sharga, vice president of RealtyTrac. "That's why we strongly counsel people new to foreclosure purchasing to stay away from trustee's sales and sheriff's sales. People will think they're getting a great deal on a property and wind up getting a second mortgage. Or they'll buy properties and find incredible damage or flaws because it's almost impossible to inspect them in advance."

Before they got the notice of the trustee sale, the Strands had received a notice of default for the previous owner and tried to contact Wachovia, but it wouldn't talk to them since their names were not on that loan.

The Strands hired an attorney. A judge said he would only halt the foreclosure sale if they put up a $650,000 bond, which they were unable to do.

In its response to the Strand lawsuit, Wells' attorney wrote: "Plaintiffs failed to investigate readily available public information to determine the nature of the foreclosure sale. ... A simple review of the notice of sale and the recorded trust deeds would have revealed that the sale involved a junior position lien."

The lawyer said - and the judge agreed - that the auctioneer has no obligation to disclose whether loans being sold are first or second liens.

The first mortgage was auctioned on July 22 for $298,000; there were no bidders and the property reverted to Wells.

Wells and the family negotiated a confidential settlement and were finalizing details late last week.

Hayley Strand and Janbay now plan to move to Washington state.

"We bought the house to keep them close," Roberta Strand said. "What's really sad is I feel as if I'm losing my family."

Foreclosure auctions

Auctions called trustee's sales are held daily on courthouse steps throughout California. This is the final step in the state's foreclosure process. Most properties revert to lenders at these sales, but a handful go to investors. Here are tips for people interested in buying a foreclosed property at auction:

-- Engage a real estate attorney and/or a professional investor.

-- Hire a title company to make sure there are no liens.

-- Observe some auctions before bidding.

-- Research the property history at the county recorder's office or subscription websites like RealtyTrac and ForeclosureRadar.

-- Be prepared to pay cash.

-- Understand that the property has no guarantees on title or condition.

-- Consider buying a bank-owned property instead. These come with clear title. They are sold on the open market by real estate agents. Some go on the block at mass auctions in public venues run by professional auction companies.


SOME BANKERS ACTUALLY DO HAVE HEARTS!!

Marcus Garner from the Atlanta Journal-Constitution brings us an article that puts a few check marks in the bankers column. After Jamaal Anderson was killed in combat in Iraq, his mother (who lived with Jamaal and his son) fell behind in payments. The condo was supposed to be auctioned off last week, but attorneys for SunTrust (the foreclosing lender) stepped in and granted an indefinite reprieve to the foreclosure proceedings.

My hat is off to SunTrust for stepping out of the proverbial box to actually do some good for the family of a fallen soldier. It would be nice if they helped others in need as well.

Mother of slain soldier gets indefinite reprieve from foreclosure

"SOME BANKERS ACTUALLY DO HAVE HEARTS!!"

By Marcus K. Garner

The Atlanta Journal-Constitution

Monday, Patricia Roberts faced foreclosure on her Lithonia home.

The mother of Georgia's first soldier killed in combat in the Iraq war was in danger of losing the condo where she and her mother Constance Walcott raised the child of her slain son, Jamaal Addison.

But the family got a reprieve Friday from the Aug. 2 deadline by which they had to move out, Roberts told WSB Radio.

"I do not have to worry about being put out in the street," she said. "I don't have to worry about the Monday deadline."

She said attorneys from SunTrust Bank worked out an indefinite reprieve.

Just knowing that I can concentrate on getting Jamaal ready for school ... I just know that God is working all of this out," she said.

Both Roberts and Walcott had lost their jobs, and after adopting her son's child, Jamaal II, learned they would be forced to move.

But until her lawyer can negotiate a payment plan that can keep her in her home, she won't have to fear being pushed out.

Roberts said military families should at least be looked after when a loved one serving in combat is killed.

"When a soldier gives his life for his country, it's the country's responsibility to check up and look out for the family," she said.

She clarified that the help not necessarily come in the form of money, however.

"It's so much more to this as far as what the families go through," Roberts said. "It's never over for us. We move on and try to stay strong. And just to know that that because that they did what they needed to do for their country that their country still cares the people that they leave behind."


Homes will sell if priced right; foreclosures have impact

Stephanie Armour from USA Today brings us an article that highlights what I have been preaching for years.....Homes will sell if they are priced correctly! In this market where , in most areas throughout the country, the only way to price an over leveraged property correctly is via a short sale. You realtors out there that are not working with sellers are at an extreme disadvantage.

You are forced to chase the market down until you eventually secure an offer (that is assuming that you secure an offer prior to foreclosure). You then package that offer and send it to the bank, all along hoping and praying that the offer is accepted before the buyer pulls up stakes and rescinds there offer (c'mon...you know you have been there and done that many times over!) Buyers have soo many options to choose from, they don’t have to wait for you to get their offer approved. Guess what? When that retail buyer decides to disappear, you have to spend the time and money to secure another offer and start the fun filled process over again. You are wasting time and you are driving the property closer to foreclosure

Why not work with a buyer that discloses everything to everybody AND has an offer that will be presented to the bank and fully negotiate it? You avoid having to chase the market down and manage retail buyers that come and go. It would take a book to really discuss this value proposition. If you want to learn more, call or email me.

Always remember that I house will sell if it is priced correctly.

Homes will sell if priced right; foreclosures have impact

By Stephanie Armour, USA TODAY

Emily Rennie's three-bedroom house in Oakland was a beauty in a sweet location. Walking distance to the lakeshore. Close to shops. A refurbished patio in the back. Inside, a modern kitchen with granite countertops. Listed at $539,000 when she put it on the market, the Excelsior Avenue house was missing one crucial thing: The right price. After a few weeks with no offers, she cut the price to $499,000 in May. Then she cut it to $475,000 in June. She is still hoping for an offer.

Rennie is discovering the cold reality of post-housing-bust prices: No matter what she thinks her house is worth, what matters is what buyers are willing to pay. That can be a lot less in areas where the supply of houses for sale is swollen by foreclosures and short sales, often priced 20% to 30% below the ones being sold by financially healthy owners. Nationally, such properties account for a third of all sales three years after a historic chill blew over an overheated housing market.

Foreclosures "do make it harder to sell," acknowledges Rennie, who works in marketing communications. "People can get a really good deal."

CLOSE TO HOME: Real estate markets across the USA

Real estate professionals say Rennie is in good company. Nationally, 30% of the houses for sale were reduced in price in June, according to Zillow.com, an online real estate site. Plenty of sellers have trouble pricing their home against the foreclosed houses that lenders are trying to unload.

"It's one of the hardest things for sellers to do. They have an emotional attachment to their house," says Amy Bohutinsky, a spokeswoman for Zillow.com. "For sellers to understand how they should price, they should deeply understand their market and competition — what's on the market now, not just what's sold."

Those who do that successfully don't have a problem.

"People who price their homes to the market are selling them in a reasonable amount of time, but people who cling to 2004 or 2005 prices aren't," says Richard Smith, president and CEO of Realogy, the parent company of Century 21, ERA, Coldwell Banker and Sotheby's International Realty. "If you take into account (bank-owned property) pressures, you'll sell pretty quickly."

Competition for bargains

Oakland and nearby San Francisco are two markets where foreclosures have a strong influence

Nearly three of every 1,000 homeowners in Oakland lost their homes to foreclosure in May, according to Zillow. Foreclosure resales made up 36% of all sales in May, although that's down from a peak of 66% in March 2009.

Sellers have had to adjust. In June, 20% of the properties for sale in Oakland made price cuts, according to Zillow.com, compared with 15% in May. Drawn by falling prices, young professionals from San Francisco are coming across the bay to snap up homes in Oakland, and most of the stiffest competition for properties is in the top tier, around $808,000.

At that price, buyers in May paid 0.1% less than the asking price, according to Zillow. In all price ranges, they paid 0.3% less than asking price. Based on the median list price, that's $1,080 less than the last listing price.

But some agents are seeing bidding wars.

"We're seeing multiple offers; we're seeing above asking price," says David Kerr, a ZipRealty agent who represents buyers and sellers in Oakland. "People are buying foreclosures, fixing them up and selling them and getting offers."

Those who do take foreclosures into account and price their homes right cannot only find a buyer, but sometimes one who will pay well above what they're asking.

One such buyer was Rosa Verdin, 40, who bought a restored Victorian in north Oakland from a developer in May. The asking price was $450,000, which was well-priced, she says. She and her partner, Kelly Helms, 32, a nurse, offered $50,000 more, outbidding at least two other parties.

"We had been looking for six to eight months," says Verdin, 40, who works in graphic arts. "The location was centrally located to our work, the house was move-in ready and within our price points. Timing just seemed right, and the decision was relatively easy."

Not all offers go so smoothly. Even when owners find willing buyers, getting their price isn't a sure thing. Lenders generally require appraisals before giving a mortgage, and appraisers often take into account what foreclosed properties in the area sell for when determining how much a home is worth. If a home is being sold at too high a price, the sale can fall apart.

"Every day, sales fall apart," says Leslie Sellers, with the Appraisal Institute. "Smart sellers get appraisals done before they sell the home."

Even in markets where most sellers are getting just below asking price, some are taking a long time to find a buyer. Glen Cox put his sprawling, five-bedroom Oakland home with sweeping views of the bay and Golden Gate bridge up for sale at the end of 2008 for $1.8 million. He's selling it without a real estate agent. He took it off the market for a while after he got no offers. Today, he's offering it for $1.695 million.

The house features vaulted ceilings, nine rooms with French doors, travertine balconies and an oak-arbored entry corridor. "There're not many homes in the $1.5 (million) to $1.6 million range, and mine is nicer than most of them," Cox says. "If you don't have the one buyer right away, it can take awhile. It's a very tough market."

Neighborhoods buck trend

Other neighborhoods also show just how well good prices pull in successful offers.

In the heart of San Francisco, Noe Valley is home to dot-com millionaires and working professionals. The streets are lined with Edwardian and grand Victorian row houses built in the late 19th century, and the neighborhood, flanked by hills, features an eclectic array of coffee shops, sushi restaurants and lively bookshops.

The real estate market in San Francisco is struggling to regain its footing, with home prices down 0.7% from the third quarter of 2009 to the first quarter of this year. But in Noe Valley, most homes are going just above listing price. In May, homes sold for an average of 0.02% more than the last listing price, according to Zillow.com. Based on median list price, that translates into $218 more.

"It's crazy," says Brendon DeSimone, a Realtor with Paragon Real Estate in San Francisco, who represents buyers and sellers in Noe Valley. "I had one house with five offers, and it went from $1.4 million to $1.7 million. The valley has just popped. It's not uncommon for one open house to have 200 people come through."

Nationally, the average property takes eight to nine weeks to sell, down from 10 to 11 weeks a year ago, according to the National Association of Realtors. In Noe Valley in May, there were 25 listings that sold after averaging five weeks on the market.

But Paul McCickard, who put his home on the market in mid-March, is still waiting for a buyer. So far, he's had only one offer. His home, priced at $2.149 million, is a 3,400-square-foot Edwardian with four bedrooms, a two-car garage, marble fireplaces, stream showers and a view of the skyline. He says he had to price it at that amount in part because it was an investment property. He bought in 2005, demolished the home and rebuilt it; he needs to pay back the money he owes on the construction — and hopes to make a little profit.

"We've invested a lot of money into the house, so it's a matter of trying to recoup the money. Hopefully, it will sell," says McCickard, who sells heavy equipment. "There's been a lot of walk-throughs and a few interested parties, but we're still waiting."

Other homes have found buyers, and fast. Charlie Frisbie lost out on his first offer in Noe Valley, so he bid again last year on a two-bedroom Edwardian with an asking price of $998,000. There were a total of 11 offers; he got it at $1.1 million.

"You're getting the best the city has to offer — transportation, good weather, access to parks," says Frisbie, 48, an accountant. "Twice this year, homes came for sale on my block, but they didn't even go on the market — they just sold. Those that do go on the market go substantially over" asking price.

Noe Valley has taken a hit as the overall housing market has tumbled, with home values down 17% from their peak in June 2008, according to Zillow.com. In the neighborhood, about 5% of home sales in March were foreclosure resales.

But Noe Valley remains a hot neighborhood for several reasons. Other neighborhoods such as Pacific Heights and the Marina District have already been in such demand that prices are often out of reach for younger families, DeSimone says. Noe Valley remains more affordable but still has the kind of row houses desired by families.

It's also closer to Silicon Valley than other neighborhoods in northern San Francisco, which shaves off about 20 to 30 minutes of commuting time (Google and Apple both have bus stops in Noe Valley). And many buyers want historic Victorians, so demand for homes in the neighborhood is strong.

That's why, when homes are priced well, they can set off a bidding frenzy — even in an anemic real estate market.


Bank reform brings mortgage aid for the unemployed

Amy Hoak from Market Watch reports on a new program that is designed to help the unemployed avoid foreclosure. $1B has been earmarked to help homeowners make payments after they have lost their jobs. Ms. Hoak reports, “The loss or reduction of income was the primary reason that 58% of homeowners in the National Foreclosure Mitigation Counseling program were facing foreclosure, according to a recent NeighborWorks report.”

"In this economy, getting that next job hasn't been a very quick thing," said Julia Gordon, senior policy counsel for the Center for Responsible Lending. For many, a three-month forbearance period isn't enough, she said.

"For the most part, these are people whose loans are sound, 30-year fixed-rate loans. The person is in a bad situation because they're underwater in terms of equity and they can't make payments. They can't borrow against their house and in many cases can't sell their house," Gordon said of the new group of homeowners who could be helped. "We don't know how many people are paid for with a billion dollars, but it is a great start."

Bank reform brings mortgage aid for the unemployed

New law includes funds for foreclosure prevention, rehab of abandoned homes

CHICAGO (MarketWatch) -- More help is on the way for unemployed homeowners struggling to make their mortgage payments, thanks to funding tucked into the financial reform legislation signed by President Obama on Wednesday.

Although the U.S. Department of Housing and Urban Development hasn't released the details of exactly how the $1 billion emergency homeowners' relief fund will be distributed, legislation dictates that the program start by Oct. 1.

HUD is reviewing the language to determine the best method of implementation, said Lemar C. Wooley, a HUD spokesman.

The bill also includes $1 billion for redevelopment of abandoned and foreclosed homes.

The relief-fund program is similar to a Pennsylvania program that provides financial assistance to out-of-work homeowners so they can keep up with their housing costs, said John Dodds, director of the Philadelphia Unemployment Project. The money has been available to residents since the 1983 recession, he said.

Dodds lobbied for the national funding, and said it's necessary to address what is probably the biggest reason for foreclosure today: the loss of income.

The loss or reduction of income was the primary reason that 58% of homeowners in the National Foreclosure Mitigation Counseling program were facing foreclosure, according to a recent NeighborWorks report. NeighborWorks is a national nonprofit organization created by Congress to provide financial support, technical assistance and training for community-based revitalization efforts. It also serves as administrator of the NFMC program.

"The Home Affordable Modification Program was designed to work for the subprime problem. It was really never designed for the unemployed," Dodds said. Under HAMP, mortgages are modified so that monthly payments are affordable. For those with no income, however, options are limited.

Currently, unemployed homeowners are granted at least three months' forbearance on their mortgage loans through the Home Affordable Unemployment Program. Some states hardest hit by the foreclosure crisis received extra federal funds for foreclosure prevention, and some states offer assistance for unemployed homeowners.

But the new funding in the bank-reform bill extends help for unemployed homeowners to all parts of the country.

"In this economy, getting that next job hasn't been a very quick thing," said Julia Gordon, senior policy counsel for the Center for Responsible Lending. For many, a three-month forbearance period isn't enough, she said.

"For the most part, these are people whose loans are sound, 30-year fixed-rate loans. The person is in a bad situation because they're underwater in terms of equity and they can't make payments. They can't borrow against their house and in many cases can't sell their house," Gordon said of the new group of homeowners who could be helped. "We don't know how many people are paid for with a billion dollars, but it is a great start."

Update on home-loan modifications

The Obama Administration's latest housing scorecard revealed some progress with the government's modification program in June. More than 51,000 trial modifications became permanent last month, raising the number of permanent modifications through HAMP to a total 398,000.

Participating borrowers are required to go through a trial period before the modification becomes permanent. But cancellations of those trials remain high as many borrowers aren't able to meet eligibility requirements, including verifying income or successfully making all trial payments, according to the report.

Despite recent progress, some are critical of HAMP, saying it hasn't done enough to combat the nation's foreclosure problem.

HAMP "established some standardization for loan modification across the industry," Gordon said. "What it hasn't managed to do is produce the volume of loan modifications that is enough to make a difference in the overall economic impact of the foreclosure crisis ... let alone the lives of the people who are impacted."

Neighborhood funds

The bank-reform bill's money for the Neighborhood Stabilization Program brings total funding of the NSP to $7 billion, according to a news release from the National Foreclosure Prevention and Neighborhood Stabilization Task Force, a group of local and national organizations working to address the impact of the foreclosure crisis on communities. The task force is led by the National Housing Conference, Enterprise Community Partners and NeighborWorks America.

The NSP funds are used for purposes including the purchase and rehabilitation of abandoned or foreclosed homes, establishing financing tools for the purchase and redevelopment of foreclosed homes and the demolition of blighted structures.

"Given the magnitude of the foreclosure crisis, these additional funds are desperately needed," said Democratic Rep. Maxine Waters of California, chairwoman of the House Financial Services Housing and Community Opportunity Subcommittee, in the news release. "The additional NSP funds will help address the enormous supply of foreclosed properties plaguing nearly every corner of our country."

Since April 2009, 21,148 housing units have been constructed or rehabilitated and 11,814 units have been demolished or cleared using NSP funds, according to the Obama Administration's latest housing scorecard.


Habitat for Humanity volunteers breathe new life into foreclosed homes

Tom Perkins from AnnArbor.com brings us a great story regarding an effective use of foreclosed homes. Habitat for Humanity is giving many deserving families the gift of home ownership. They are taking foreclosed homes and renovating them after which time they are placing deserving families in them. Habitat purchases the foreclosed properties and then uses volunteer workers to rehabilitate the homes.

The program isn’t free to the new owners. Each adult who lives in a Habitat house must volunteer a minimum of 300 hours of their time in renovating their house or another Habitat house. They must also make payments on zero percent interest loans. They must also pay taxes and insurance for the home.

Why don’t we see this program in all of our cities?

Habitat for Humanity volunteers breathe new life into foreclosed homes

Erin and Larry Miller say their recent move into a new home in Ypsilanti Township has significantly improved their lives. The three-bedroom ranch is across the street from a park and in a quiet neighborhood they describe as "wonderful."

Erin Miller says it’s a vast improvement from the cramped apartment in which they previously lived with their three children. Crime and drugs were in issue in the complex off Harris Road, but there wasn’t a great opportunity for the family to improve their situation. Then a relative told them about Habitat for Humanity.

Through a program offered by the non-profit housing agency for working families, the Millers were able to move into the all-volunteer renovated home in the Nancy Park neighborhood last March.

“It has totally changed our lives in so many ways,” Erin Miller says. “We have peace of mind, we have stability and we’re excited to raise our kids in a better environment.”

On Saturday, through a three-way partnership amongst Habitat for Humanity, Toyota and Johnson Controls, another home in the same neighborhood saw its first steps toward rehabilitation so it can be eventually occupied by a family like the Millers.

Employees from Toyota's Technical Center began pulling down siding and a deck on a foreclosed house at 1923 Hull Avenue. The next order of business will be a new roof while the interior will see new doors, fresh coats of paints, a new kitchen and much more in its makeover.

Employees from Johnson Controls and Toyota spend either their Thursdays or Saturdays working on the home, which Habitat purchased out of foreclosure two months ago. The middle-class Ypsilanti Township neighborhood has been hit hard by foreclosures.

Theresa Finney Dumais, development director for Habitat for Humanity, said the work helps stabilize property values in the neighborhood. "We have had an incredibly positive response from the neighbors in the neighborhoods we're going into," she said. "They are so grateful we're coming in and taking down boards and mowing the lawn ... it's important and critical that we put a hardworking homeowner in there."

Once the renovations are complete, the group will seek potential homeowners who are able to meet a number of standards and contribute to the effort.

Finney Dumais said a qualifying family of four would earn between roughly $2000 and $4000 per month, which she says is not quite enough to qualify for a traditional mortgage and adequately support children. She said often times families with two working parents who also may be going to school are selected.

"We are the only non-profit in the county that works to provide home ownership opportunities to the 30 to 60-percent median income range," she said. "They are sort of the workforce of our community - that's how I describe our families."

Erin Miller is a stay-at-home mom who says she will soon return to school, while Larry Miller works as a bus driver for an Ann Arbor-based limousine company.

Many times, like the Millers, the families are already living in an apartment where they rent, but it has become to small or is too rough of a neighborhood for their children. Each adult in the family must be willing to contribute 300 hours of “sweat equity,” meaning they will help work on their home, another home or at the Habitat for Humanity office. They also agree to take classes on home maintenance and financial responsibility.

Habitat holds a zero percent interest mortgage on which the families pay. The family’s are additionally responsible taxes and insurance. Last year Habitat families paid over $200,000 in taxes to Ypsilanti, Ypsilanti Township, Ann Arbor and Superior Township.

Beyond direct contributions, Finney Dumais said the families often stay put in their home and their kids attend local school districts."The stability of the families is a benefit for our community in so many ways," she said. "It's not Habitat giving a way a home, it's Habitat empowering families to contribute to the community in a really meaningful way."

Megan Rodgers, a development associate with Habitat, said the non-profit continues to work closely with families after they move into the house.

“It’s a full circle program,” she said. “We would never want to set anyone up for failure and we work very hard to support them. It’s scary to buy your first home. But we don’t just give away the homes; people work hard for them. It’s a great

Habitat For Humanity has renovated or built 92 homes in the county with the help of thousands of volunteers like those from Johnson Controls and Toyota. Finney-Dumais said 14 homes are scheduled to be built or renovated this year, and that figure will likely grow annually as the organization does.

The response from Toyota and Johnson Controls was such that there wasn’t enough room for all the employees who wanted to help out to do so. Besides all the manpower, the auto supplier and auto manufacturer are contributing roughly $17,000 each to the effort.

Elaric Currie was one of the volunteers lending a hand. It’s the second home he’s helped renovate for Habitat for Humanity.

“I like doing stuff with my hands and I like that Habitat for Humanity is giving houses to people who need it,” he said. Currie, an electrical engineer by trade, said he didn’t bring any professional skills to the effort, but his wife interjected that he is “Mr. Fix It” at home.

“He moonlights as the handyman around the house,” Ieeia Currie laughed.


SUICIDE....There Are Other Alternatives

Coppell Mayor bought clothes, groceries with city-issued credit card

Brandon Formby and Erinn Connor bring us a very sad story from the State of Texas. The mayor of an affluent town decided to take the life of her 19 year daughter and then take her own life. According to the article, a contributing factor may have been their financial despair and the imminent loss of their house to foreclosure. The death of these two people surprised many that were around them.

You may be thinking, “Matt...What does this have to do with real-estate?” The answer is nothing...directly....but lots indirectly.

The vast majority of people (if not all?) that are reading this have either gone through foreclosure/short sale/loan mod, are going through it now or know someone that has/is. This can be a very harrowing time for the people that are going through what can be a very tumultuous time in their lives. Always keep your eyes and ears open to the warning signs. Always offer to find people professional help if they are on the brink. Always be understanding of the plight of those around you.

If you are reading this and you are thinking about suicide, think about the effect it will have on those that are around you. Also know that life isn’t that bad! If you think it is bad...guess what....it can only get better!

As quoted from the web:

“If you are feeling desperate, alone or hopeless? Call the National Suicide Prevention Lifeline at 1-800-273-TALK (8255), a free, 24-hour hotline available to anyone in suicidal crisis or emotional distress. Your call will be routed to the nearest crisis center to you.

Call for yourself or someone you care about

Free and confidential

A network of more than 140 crisis centers nationwide

Available 24/7”


Coppell Mayor bought clothes, groceries with city-issued credit card

06:56 PM CDT on Friday, July 16, 2010

By BRANDON FORMBY and ERINN CONNOR / The Dallas Morning News

Coppell city officials said Friday they now suspect that late Mayor Jayne Peters may have been using her city-issued credit card to keep up financial appearances in the face of personal money woes.

Rev. Dennis Wilkinson told those attending Jayne and 19-year-old Corinne Peters' joint funeral Friday that the mayor had financial trouble since her husband died in 2008. He said Jayne Peters kept much of the information about the family's finances from Corinne because she didn't want to ruin the recent high school graduate's memory of her father.

Police said at a 4 p.m. news conference that Cedar Hill Mayor Rob Franke had provided the Glock 9mm to Peters. Franke said Friday that he had spoken with Coppell police but declined to comment on the pistol, citing the ongoing police investigation. Franke said he first contacted police about the gun Tuesday night.

"We were friends through transportation, and I thought I knew the lady," Franke said. "It was such a surprise when you think you know someone, but there's a part of their life you know nothing about."

Peters made more than $5,800 in charges on her city-issued credit card in the three months leading up to her suicide, according to documents obtained by The Dallas Morning New s on Friday. The charges included $1,600 to Enterprise Rent-a-Car in Lewisville , more than $300 in clothes from trendy young adult clothing stores in Plano and more than $480 spent at Kroger in Coppell.

The records showed that she did pay the city more than $300 in reimbursements during that time, but it was not clear what charges the reimbursement was for.

City staffers were preparing the routine report that listed the questionable charges when the mayor and her 19-year-old daughter Corinne were found fatally shot in their two-story house Tuesday, sources said. Police believe Jayne Peters shot her daughter and then herself.

When asked about the detailed credit card charges obtained Friday, City Manager Clay Phillips said that the mayor for months had promised to pay back personal items she charged to the card but never did. He said she also failed to present receipts for other purchases. Phillips said the missing receipts made it impossible for city staffers to determine whether some questionable items were for personal or city use. He said after months of being put off by the mayor, he went to the city attorney and asked for an investigation.

"We were at that point," he said of his mounting suspicions that have only grown since the mayor was found dead.

The exact charges that are unaccounted for or may have been for personal use, and how much money they amount to, are not yet known. City officials said that the city attorney has not finished investigating the matter.

"When it's complete, we'll be able to answer anything it contains," Phillips said.

Once the attorney is done, he will likely turn his finding over to police officers investigating what they say is a likely murder-suicide.

"There may be something in there that helps them determine motivation," Phillips said.

Phillips said he began to wonder if the credit card charges and his repeated questions about them played a role in the mayor's apparent suicide after media reported Thursday that Jayne Peters faced personal money problems.

Phillips said he didn't suspect the credit card charges and lack of receipts and reimbursement were possible symptoms of a larger financial problem until media reports detailed Jayne Peters' apparent personal money woes.

"If I'd have known what I know today, absolutely," Phillips said.

The two-story Peters house in the 700 block of Greenway Drive was posted for foreclosure last July, according to Foreclosure Listing Service. It never made it to auction. Experts say several actions including making payments and filing for bankruptcy protection can get a home out of foreclosure.

A public-records search found no indication that Jayne Peters had filed for bankruptcy. Donald and Jayne Peters took out a $283,500 mortgage loan in 1998. Donald Peters died in 2008.

Foreclosure Listing Service estimated last year that $235,000 remained due, though that number is not exact. The Dallas County Appraisal District appraised the home's value at $422,780 this year.

According to Dallas County records, an outstanding lien for $1,258 was filed on the house last August for nonpayment of neighborhood-association assessments.

Records show a previous neighborhood-association lien for $1,169 was filed in June 2008 and paid three months later.

At Friday afternoon's news conference, Coppell Deputy Police Chief Steve Thomas said Franke called police late Tuesday night to tell them that there was a possibility that the gun belonged to him.

"He explained to me that Mayor Peters approached him with the premise that she was getting a concealed handgun license and she wanted to attend classes for training," Thomas said. "The conversation shifted that it would be possible to loan her a gun in advance of a Saturday class."

Franke said that Franke took Peters on July 8 to a firing range in Duncanville to allow her to become familiar with it. Peters took the gun in a camera bag along with some paper targets, earplugs and ammunition, Franke told police.

At the news conference, Thomas also detailed some of the four notes that were found at the house when police arrived on Tuesday night.

The envelope on the front door was addressed to "First Responders," Thomas said.

One note, the only one which was handwritten, was found on the door to the room where Jayne Peters was found.

"It was a do not resuscitate wish, in her handwriting," Thomas said.

Family friends, neighbors and Corinne Peters' classmates said the 19-year-old planned to attend Texas Christian University in Fort Worth until she learned she was accepted by the University of Texas at Austin.

Friends said she had been wearing UT shirts all week and was planning to attend an orientation session at the university Wednesday. After The News reported those statements, a spokesman for the university contacted the paper.

The spokesman said there is no record of anyone named Mary Corinne Peters, the 19-year-old's full name, applying to attend the school this fall. He said no one with her last name and birth date was either. He said she did not appear to be enrolled or scheduled to attend orientation this summer.

UT never received an SAT or ACT score from Corinne Peters, said Augustine Garza, the school's deputy director of admissions.

TCU also has no record of Peters' being enrolled for fall 2010, a spokeswoman said.


Homeowners Associations: The New Foreclosure

Diana Olick from CNBC brings us a very timely article regarding Home Owners Associations (HOA’s) foreclosing due to delinquent fees. While I will never give foreclosure advice to a homeowner (I leave that to the lawyers) I do add my opinions when asked. Homeowners do ask about staying current on their homeowners dues. I always suggest that they do. In most states HOAs have the ability to recover a set amount of HOA fees from the new owner (whether that’s the current owners bank at foreclosure or the new owner). In addition to this, they have the ability to foreclose on the property, take the title and then rent the property out until the senior lien holders sort things out with them. Because of this, HOA’s are foreclosing at an alarming rate.

Last week I visited an enclave of very nice waterfront homes. I met with the listing agent of a property that was in preforeclosure. He/she was also the President of the HOA (figure that one out). As the President of the HOA, they have been pushing to foreclose on the properties that are late on their HOA dues. They want to foreclose so they can put a renter into the property which will allow them to recover what they haven't been paid in the form of dues from the previous owner.

While I am not an attorney, I disagree with one part of the article. I don’t believe they have the ability to resell the property without paying off senior lien holders. None the less, you need to be aware of this fact when dealing with sellers with HOA’s. It can be a nasty surprise!



Homeowners Associations: The New Foreclosure

By: Diana Olick

CNBC Real Estate Reporter

"I had no idea that they could foreclose," Tony Goodman tells me.

Neither did I, but Goodman's homeowners association did just that in April because he owed $769 in back dues.

"I owed the HOA very little money in comparison to what I owed my mortgage company and my mortgage company, which is Chase, bent over backwards to help me," Goodman adds. Even as he was working on a loan modification, Goodman's HOA, Lookout Canyon Creek in San Antonio, TX took title to his home on the steps of the Bexar County Courthouse. They purchased the home for $2,019, about the amount of the dues plus attorneys fees.

Apparently this is not at all uncommon these days, as struggling borrowers let the dues slide, thinking it's more important to throw all their cash into their mortgage payments.

Thirty-four states allow for judicial foreclosures by HOAs, although the rules and redemption periods differ. The redemption period is the amount of time that a homeowner has to pay up all the dues and fees after the HOA has officially taken title to the home.

Texas has a 180 day redemption period.

Florida's is just 10 days.

"People don't understand that by failing to pay the association dues they can lose their home and be put in the street," says Florida attorney Robert Tankel. He represents HOAs in Florida and his business is positively booming.

"I hear the words Nazi and Communist used interchangeably probably twice a week," he adds, but he's gone from a staff of one paralegal and a receptionist just a few years ago to 17 paralegals and a much larger support staff. Tankel makes no apologies for what he does.

"The associations and their boards of directors have a duty to the people who pay and the duty is to collect the assessments."

He does have a point, cruel though it sounds, when you know Tony Goodman's story.

But the fact is that there are plenty of homeowners who pay extra to be in these communities specifically for the amenities they offer.

It's not just about mowing the lawns and shoveling the snow, these communities are often safer and cleaner and appreciate in value faster because of that.

Andrew Fortin of the Community Associations Institute makes a compelling argument, saying that in some cases now, where HOA's are having serious delinquency problems with dues, new buyers are having trouble getting mortgages. Apparently big banks want to see healthy HOAs. Also, the HOAs have to pay their own bills to the service providers in the community. If they don't get the dues, then they fall behind as well.

This is not to say that Tony Goodman hasn't been going through hell, trying to negotiate a repayment plan with the HOA. He says the attorney for the HOA doesn't return calls, and he's unsure, even if he is able to pay the HOA back, that he'll eventually get his house back.

Texas redemption rules favor the homeowner a bit more than in Florida. Tankel says that in Florida, with just a ten-day redemption period, HOAs can actually profit on foreclosures for a short time.

"We call that the race to the courthouse steps because if there's a first mortgage foreclosure pending and the first mortgage foreclosure beats us to the courthouse steps, then they wipe out the association's claim of lien," says Tankel.

Since the big banks on average can take over a year to foreclose on a home, the HOAs can swoop in, take title, boot the borrower, and either rent or sell the home for a good six to twelve months before the bank comes in with the far bigger lien and forecloses again. Most regular real estate investors don't touch HOAs because the risk is high and the time for profit short, but Tankel says there is a new breed of investor in Florida, wading into these waters.

Tony Goodman now has a job again and is trying to pay back the HOA. He has three more months on his 180 days.

"Not a day goes by that I don't think about it because it's my responsibility to take care of my family and I don't have any answers."


Fannie Mae Gets Tough With Walk-Away Mortgage Defaulters

Alex Finkelstein from the Real Estate Channel brings us an article that may impact quite a few people.  The subject of  “strategic defaults” or “Walk Aways” has been the topic of conversation at cocktail parties or around water coolers for sometime.  Simply put, a strategic default involves an individual who has no hardship and can afford to make payments but chooses not to.

According to Mr. Finkelstein:

“Under the new rules:


In my opinion the biggest detriment for strategic defaults revolves around going after deficiency judgments.  I’m not sure that tacking on a few extra years to the “waiting period” required to secure a new loan will make much of a difference.



Fannie Mae Gets Tough With Walk-Away Mortgage Defaulters

Posted by Alex Finkelstein 07/05/10 8:01 AM EST

The good times are gone for residential mortgage defaulters in the U.S.

Fannie Mae has just changed the rules of the game for people who walk from their home loans, better known as strategic loan defaults.

The government-owned agency that backs up loans from lenders says it will lock out borrowers from getting a new loan for seven years if they default on a mortgage they could afford to pay, the Wall Street Journal reports.

Under the new rules:

  • The five-year waiting period is eliminated.
  • Borrowers who can't document "extenuating circumstances" or show that they made an effort with their lender to avoid foreclosure will have to wait seven years to get a new loan.
  • Those who can demonstrate hardship or attempted a workout with their lender may have to wait only three years.
  • Fannie plans to step up legal actions to seek deficiency judgments in states that allow lenders to go after borrowers' other assets. In addition,
  • Fannie will instruct its lender partners to monitor delinquent loans owned by Fannie, and recommend cases that warrant attention.


Fannie Mae is taking the new steps after finding:

  • The majority of the defaulters are in Florida, Nevada and Arizona Nearly one in four homeowners with a mortgage is under water, or owes more than their home is worth, according to CoreLogic,
  • A Morgan Stanley report estimates that around 12% of all mortgage defaults in February were 'strategic', meaning homeowners were financially able to pay on the loan but chose not to do so.
  • In 2008, Fannie revised to five years from four the period that borrowers with a foreclosure must wait before they are eligible for a new loan.

The WSJ reports that even as Fannie Mae steps up penalties, the agency is preparing to reduce waiting periods for borrowers facing hardship who surrender their homes and avoid foreclosure.

Under previously announced rules that take effect next month, Fannie will reduce waiting periods to two years for borrowers who agree to transfer their homes to the company through a "deed in lieu of foreclosure," or who complete short sales, where homes are sold for less than the amount owed.

The move to lock out borrowers from getting a new loan for seven years represents the latest effort by the mortgage industry to prevent a new wave of losses that could result if more borrowers who can afford their monthly payments instead opt to "strategically" default on loans, because they owe far more than their homes are worth.

Terence Edwards

"Walking away from a mortgage is bad for borrowers and bad for communities, and our approach is meant to deter the disturbing trend toward strategic defaulting," Terence Edwards, Fannie's executive vice president for credit portfolio management, said in a prepared statement.

Fannie's move comes amid greater concern that it has become socially acceptable for borrowers to stop paying their loans, and that such a shift could exacerbate the housing bust. Those worries are particularly acute in Arizona, Nevada, Florida and other hard-hit housing markets where it could take years for borrowers to return to positive equity.

Fannie Mae's smaller sibling, Freddie Mac, also requires borrowers with a foreclosure to wait at least five years. Foreclosures can stay on a credit report for up to seven years.



Fed owns nearly half of all foreclosed homes

Ryan McMaken from the Christian Science Monitor reports on a growing problem within our government.  The government owns close to 50% of all homes that have been foreclosed upon.  Mr. McMaken astutely points out that bullish calls on the state of the housing market (i.e. prices) have caused lenders, servicers, investors etc. to stand pat when evaluating offers (pre foreclosure) in the hope that housing prices would miraculous bounce back.  This is not happening anytime soon.

This is best exemplified by the following passages from the article, “The latest data for the S&P/Case-Shiller Home Price Index were released. The home price index for April is still down considerably from the July 2006 peak:

As of April 2010, average home prices across the United States are at similar levels to where they were in late summer/early autumn of 2003. From their peak in June/July of 2006 through the trough in April 2009, the 10-City Composite is down 33.5% and the 20-City Composite is down 32.6%. The peak-to-date figures through April 2010 are -30.5% and -30.0%, respectively.

To paraphrase Donald Rumsfeld from a different context, it is close to impossible now to deny that the housing markets are in for a long, hard slog. Well, the places that have hit bottom are in for a slog. Some places, such as Las Vegas, are still on their way down. Comparing year over year, Las Vegas home prices actually fell 8.5 percent. April of 2009 was a disastrous month for home prices, but Vegas is now below even that.”

Fed owns nearly half of all foreclosed homes
The protracted growth of non-performing loans will likely continue to have a deflationary effect as lender portfolios contract with the value of residential real estate.


By Ryan McMaken, Guest blogger / July 1, 2010

The latest data for the S&P/Case-Shiller Home Price Index were released. The home price index for April is still down considerably from the July 2006 peak:

As of April 2010, average home prices across the United States are at similar levels to where they were in late summer/early autumn of 2003. From their peak in June/July of 2006 through the trough in April 2009, the 10-City Composite is down 33.5% and the 20-City Composite is down 32.6%. The peak-to-date figures through April 2010 are -30.5% and -30.0%, respectively.

To paraphrase Donald Rumsfeld from a different context, it is close to impossible now to deny that the housing markets are in for a long, hard slog. Well, the places that have hit bottom are in for a slog. Some places, such as Las Vegas, are still on their way down. Comparing year over year, Las Vegas home prices actually fell 8.5 percent. April of 2009 was a disastrous month for home prices, but Vegas is now below even that.

This all assumes an owner’s perspective, of course. It’s a nice buyers’ market out there right now for some people.

This is April data, so it doesn’t compare directly to the May data I commented on here a few days ago, but the data continues to drive home the fact that home prices simply aren’t going to bounce back. Thanks to bad public policy and perennial but unwarranted bullishness about real estate, lenders assumed that prices were going to bounce back. Consequently, mortgage servicers and investors have been dragging their feet on approving short sales and the liquidation of foreclosed properties.

Nevertheless, the holders of REO properties (foreclosed properties returned to the bank) are going to have to do something with them sooner or later. And worse yet, almost half of those REOs are held by the government:

Based on Radar Logic’s analysis, the federal government’s REO inventory — including homes owned by Fannie Mae, Freddie Mac, HUD, and the Department of Veterans Affairs (VA) — has increased steadily for over 24 months and now accounts for approximately 46 percent of the nation’s total REO supply.

Looking at information from the GSEs and HUD, Radar Logic says the government currently owns 209,500 homes as a result of foreclosure, and the company estimates there could be an additional 9,560 homes held by the VA, for a total of 219,060 government-owned foreclosed homes.

This will create additional downward pressure on prices for the foreseeable future.

In a larger context, the protracted growth of non-performing loans will likely continue to have a deflationary effect as lender portfolios contract with the value of residential real estate.

Mansion Foreclosures Surge

Robert Frank from the Associated Press reports on a trend that just keep on increasing.  He reports that, “The percentage of $1 million-plus loans more than 90 days delinquent rose to 13.3% in February.”  Mortgages that are delinquent and are greater than $5M also continue to rise.

Mr. Frank reports that, “Lenders to the wealthy are taking a hit. Bank of America’s U.S. Trust unit reported a nearly six fold increase in its loan-loss provision in the first quarter, to $184 million from $31 million a year earlier. “  The point here for those realtors and real estate buyers that are involved in short sales is that the higher end foreclosures are crushing banks bottom lines.  As a result they are more apt to take discounts on these mortgages in order to keep them off of their books.

JUNE 29, 2010, 11:14 AM ET
Mansion Foreclosures Surge

For those who think all is well again in the world of Richistan, consider the following statistic.

The percentage of $1 million-plus loans more than 90 days delinquent rose to 13.3% in February, half again as high as the 8.6% overall delinquency rate, according to First American CoreLogic, which tracks U.S. real estate and mortgages.

The statistic, from this Reuters article, points to a sobering reality amid the happy talk of newly minted millionaires. Many affluent and wealthy can’t keep up with their mortgage payments.

Last month, there were 205 foreclosure filings for mortgages of $5 million or more, the third straight month such filings rose, according to RealtyTrac. The 205 foreclosures totaled $813 million.

“Early on in the crash, the weakness was in the lower-price tiers. In the past year, most of the biggest price declines have been in the upper tiers,” Mark Zandi, chief economist of Moody’s Analytics, told Reuters. “That suggests high-end households are coming under increasing pressure.”

Lenders to the wealthy are taking a hit. Bank of America’s U.S. Trust unit reported a nearly sixfold increase in its loan-loss provision in the first quarter, to $184 million from $31 million a year earlier. Net charge-offs at Northern Trust rose to $31 million from $2.7 million a year earlier, though they were down from the 2009 fourth quarter, according to Reuters.

While some say the weakness at the top is part of every economic cycle, real-estate experts say the mansion market has rarely if ever been hit so hard. “This recession is unlike prior recessions. It hit the high end just as much as the low end,” said Sam Khater, senior economist at CoreLogic.

Of course, the foreclosures could be the result of over-leveraged speculators and developers as opposed to once-wealthy families. Or it could be the result of a poor stock market in 2010, along with higher taxes.

Why do you think the mansion market is getting hit so hard even as the finances of the wealthy are reported to be improving?

Less Than One Percent Of Modified Mortgages In Obama Foreclosure Plan Involve Principal Cuts

Shahien Nasiripour from the Huffington Post reports on an alarming fact that involves principal reductions.  I speak with homeowners ,weekly, who hold out hope that the lenders are going to forgive a portion of the principal that they owe on their home.  While this is certainly possible, it is very unlikely.

Mr. Nasiripour reports that  0.1% (not 1% but one tenth of one percent!) of loan modifications resulted in principal reductions!  Only 121,000 mortgages have been modified under the Obama Administrations Home Affordable Modification Program through March 2010.  Of these only 120 (one hundred and twenty!) resulted in principal reductions.  Those that are of the half is half full crowd might say, “Yeah but it’s still possible!”  While that is certainly true. It is very unlikely.

The article reports that, “More than 11.2 million homeowners with a mortgage, or 24 percent, owe more on their mortgage than the home is worth, according to real estate research firm CoreLogic. The firm estimates that the typical "underwater" homeowner won't return to positive equity until late 2015 to early 2016.

"In some depressed markets, the typical borrower in negative equity may not experience
positive equity until 2020 or later," the firm cautions.

A January report by the State Foreclosure Prevention Working Group noted that principal reduction is the best way to stem the foreclosure crisis.

"Given the correlation between negative equity and likelihood of default, the failure to write down principal in connection with loan modifications is a glaring flaw in current efforts," the state regulators noted in their report. With so many homeowners underwater, "doing 'business as usual' only adds to the likelihood of ultimate default."

The article quotes, Rep. Darrell Issa, the top Republican on the House Committee on Oversight and Government Reform as saying,  "The inescapable reality is that the economic problems facing our country [are] exacerbating the foreclosure problem, and until we have economic policies that enable and foster private sector job creation, efforts like HAMP will continue to fail and ultimately hurt those who need help the most,"  Unemployment is still a major problem and lynchpin in this recovery.

Less Than One Percent Of Modified Mortgages In Obama Foreclosure Plan Involve Principal Cuts



As few as 0.1 percent of mortgage modifications initiated under the Obama administration's signature foreclosure prevention program involve reductions of principal, according to a federal report released Wednesday.

Research by state regulators, academics, and by the Federal Reserve shows that principal reductions lead to more sustainable loan modifications. In other words, they're the best way to ensure that troubled borrowers don't lose their homes.

But of the nearly 121,000 troubled loans that have been modified by large banks and thrifts under the administration's Home Affordable Modification Program through March, just 120 of them involved a cut in principal, according to the report by the Office of the Comptroller of the Currency and Office of Thrift Supervision.

The Treasury Department has consistently said that the share of modified mortgages that incorporate a permanent reduction in principal is "under 10 percent." Phyllis Caldwell, chief of Treasury's Homeownership Preservation Office, reiterated that figure Wednesday on a conference call with reporters, acknowledging that the figure fluctuates as more trial modifications convert to five-year plans.

The low number reported by the federal bank regulators -- less than 0.1 percent -- calls into question the administration's entire approach to modifying the mortgages of distressed borrowers suffering from negative equity, a stagnating economy, and near-10 percent unemployment.

On Tuesday, members of the Congressional Oversight Panel sharply criticized the administration's approach during a hearing with Treasury Secretary Timothy Geithner. Damon Silvers, a member of the bailout watchdog, told Geithner that the administration's $75 billion Making Home Affordable program doesn't sufficiently address the problem posed by unemployed homeowners.

Nearly 15 million workers are unemployed. More than 45 percent of them have been unemployed for at least six months.

"The inescapable reality is that the economic problems facing our country [are] exacerbating the foreclosure problem, and until we have economic policies that enable and foster private sector job creation, efforts like HAMP will continue to fail and ultimately hurt those who need help the most," Rep. Darrell Issa, the top Republican on the House Committee on Oversight and Government Reform, said Monday.

The administration announced Wednesday that five states can begin to use $1.5 billion in federal bailout money for their own local programs to help struggling homeowners avert foreclosure.

Caldwell told reporters that the state agencies estimate that as many as 90,000 homeowners could be helped.

About three million homes will receive foreclosure notices this year, estimates real estate research firm RealtyTrac. More than one million of them will be repossessed by lenders.

Through March, the largest banks reported nearly 1.2 million foreclosures in process, federal bank regulators said. In the first three months of the year those servicers, which represent more than 64 percent of all outstanding first-lien home mortgages, initiated nearly 371,000 new foreclosures, a jump of 19 percent from the previous quarter. They completed nearly 153,000 during the same period, the OCC/OTS report shows, also a 19 percent increase.

HAMP is part of the Troubled Asset Relief Program (TARP). It's scheduled to end in October.

"We only have three months left with hundreds of thousands of families facing foreclosure," Congressional Oversight Panel Chairman Elizabeth Warren told Geithner on Tuesday. "Is it time to rethink whether or not a mortgage foreclosure prevention program that is based on a group of servicers whom you describe as having done a 'terrible job' is a program that perhaps should be redesigned?"

More than 11.2 million homeowners with a mortgage, or 24 percent, owe more on their mortgage than the home is worth, according to real estate research firm CoreLogic. The firm estimates that the typical "underwater" homeowner won't return to positive equity until late 2015 to early 2016.

"In some depressed markets, the typical borrower in negative equity may not experience
positive equity until 2020 or later," the firm cautions.

A January report by the State Foreclosure Prevention Working Group noted that principal reduction is the best way to stem the foreclosure crisis.

"Given the correlation between negative equity and likelihood of default, the failure to write down principal in connection with loan modifications is a glaring flaw in current efforts," the state regulators noted in their report. With so many homeowners underwater, "doing 'business as usual' only adds to the likelihood of ultimate default."

In a bright spot, though, Wednesday's report by the federal bank regulators showed that homeowners who modified their mortgage under the administration's plan stayed current on their new mortgage at a higher rate than others. Three months after their loans were modified, nearly 17 percent of HAMP homeowners were at least 30 days delinquent on their new mortgage versus 25 percent of all modified home loans. Less than eight percent of HAMP homeowners were at least 60 days late compared to 11 percent of all homeowners with modified mortgages, data through March shows.

"These lower early post-modification delinquency rates may reflect HAMP's emphasis on the affordability of monthly payments and the requirements to verify income and complete a successful trial period," the report noted.

About four-fifths of homeowners with modified loans under HAMP saw their monthly payments decrease by at least 20 percent, data from the OCC/OTS report shows. Treasury data through May shows that homeowners in HAMP saw their median monthly payment drop by about 41 percent, meaning that half the homeowners saw a bigger drop than 41 percent while half experienced a smaller decrease.

Treasury officials stressed that the Wednesday report by federal bank regulators relied on a different set of data, so the 0.1 percent figure may be misleading. That report, which looked at data through March, reported 120,659 five-year HAMP modifications. Through March, Treasury reported 227,922 active five-year modifications.

The OCC/OTS report uses data from the largest banks and thrifts. Those firms represent roughly 70 percent of the mortgages eligible for HAMP, according to Treasury data.

On Monday, the Huffington Post requested from Treasury the total number of permanent modifications utilizing reductions in principal through May. At the time of publication, Treasury had yet to provide that number.

Treasury officials hope to see an increase in the number of HAMP modifications that incorporate reductions of principal. While the administration has ramped up the incentives it provides for principal reductions, it still relies on voluntary participation by servicers.

The low number of modified mortgages that include principal cuts may reflect the efficacy of Treasury's incentives.

More than 16 months after President Barack Obama announced his plan to help struggling homeowners, HAMP is stalling. Nearly 436,000 borrowers have been kicked out of the program while just 340,000 have received permanent relief through May.

Last month, about 155,000 homeowners were bounced from the program; just 30,000 entered the program with new temporary trial plans.

"Our current efforts to end this crisis, including the administration's initiative, have fallen woefully short," Rep. Maxine Waters, a California Democrat, said Tuesday. "[HAMP], a voluntary program with little enforcement from Treasury, remains challenged and has failed to put a dent in the epic numbers of foreclosures sweeping our country."

Herbert M. Allison, Jr., Treasury's assistant secretary for financial stability, reiterated Wednesday the administration's commitment to struggling homeowners.

"While we've made important progress stabilizing the housing market and keeping responsible families in their homes, the Obama administration will continue to do everything it can to help those who are struggling the most during this difficult time," Allison said in a statement.

Congressional criticism of the administration's approach is growing.

"Voluntary programs don't work," Waters said Tuesday. "I'm going to speak honestly: HAMP was written by the Treasury and the servicers. They're not doing anything in that program that they don't want to do. And that's why the program isn't working."

Lenders collecting foreclosure deficiencies

Dina ElBoghdady from the Washington Post writes about a subject that I speak to realtors and sellers about on a daily basis.  The subject is deficiency judgments!  Uneducated homeowners and realtors oftentimes assume that if a bank forecloses on a property, then the homeowners financial obligations are behind them.  While this may be true in specific states and for particular types of mortgages, it’s not true everywhere.

Dina offers the following passage which emulates the plight of many people, “After the bank foreclosed on Fernando Palacios’s home in March, he thought he was done with what he described as the most stressful financial situation of his life.

The bank sold the home for far less than Palacios owed on it, as often happens with foreclosures. What Palacios did not see coming was the letter from his lender demanding that he pay the shortfall: $148,064.02. ‘I really thought I was through with this house,’said Palacios, who fell behind on payments when the economy soured and his cleaning business stumbled.”  Lenders are coming after judgments if they are unable to recoup what they are owed when the property goes to auction (in fact, lenders (in most cases) can recoup their losses from a short sale as well).

Another trend is that lenders are selling their rights to collect to credit collection companies.  Ms ElBoghdady writes about the Somers family who completed a short sale last year, ‘Last year, their first lender and their home-equity line lender granted permission for the short sale. But the second lender reserved the right to come after the couple. Six months later, a collection agency called demanding $85,000 for related losses.’”

So people think that they are taking the easy way out when agreeing to a short sale, yet they leave the door open for a deficiency judgment.  My prediction has always been that if and when this mess settles out, the lenders that will sell their rights to collect on deficiencies in bulk to collection agencies.

The best advice comes from an attorney quoted in the article.  The passage reads, “Borrowers should get a waiver in writing from their lenders to protect themselves, said Diane Cipollone, an attorney at the nonprofit Civil Justice. “Nobody should assume the deficiency is forgiven,” she said.”



Lenders collecting foreclosure deficiencies
By Dina ElBoghdady
WASHINGTON POST

After the bank foreclosed on Fernando Palacios’s home in March, he thought he was done with what he described as the most stressful financial situation of his life.

The bank sold the home for far less than Palacios owed on it, as often happens with foreclosures. What Palacios did not see coming was the letter from his lender demanding that he pay the shortfall: $148,064.02. “I really thought I was through with this house,” said Palacios, who fell behind on payments when the economy soured and his cleaning business stumbled.

Over the past year, lenders have become much more aggressive in trying to recoup money lost in foreclosures and other distressed sales.

In many localities, lenders have the right to pursue borrowers whose homes have sold at a loss to collect the difference between what the property sold for and what the borrower owed on it, also called a deficiency.

Before the housing bust, when the volume of foreclosures was relatively low, lenders seldom bothered to chase after deficiencies because borrowers had few remaining assets to claim and doing so involved hassles and costs. But with foreclosures soaring, lenders are more determined to get their money back, especially if they suspect borrowers are skipping out on a loan they could afford, an increasingly common practice in areas where home values have tanked.

Palacios said he was committed to staying in his Gainesville, Va., house, which he bought in 2005. He sunk $20,000 into improving it and hoped to raise his children there. But his lender refused to modify his loan, he said. To avoid personal liability for the deficiency, Palacios is filing for bankruptcy protection, as many people do who are in similar situations, said Nancy Ryan, his bankruptcy attorney.

“I am definitely seeing more people come through my door who walked away from houses a year or two ago and thought they were as free as the dead,” Ryan said. “They’re stunned when they realize they’re not.”

Several lenders contacted for this story declined to say how often they pursue deficiencies. But many said they try to collect the debt if they conclude the borrower can repay all or part of it.

“Lenders are not going after people who face a hardship,” said John Mechem, a spokesman for the Mortgage Bankers Association. “If they can’t pay their mortgage because they have a loss of income, there is no point in going after them.”

Those who had a second mortgage, such as a home-equity line of credit, in addition to their primary mortgage may find themselves particularly vulnerable, especially if they tapped into the equity line for cash.

Second lenders are last in line to get paid when a distressed property is sold. There’s usually little or no money left over for them, making it more likely that they will pursue large deficiencies, several attorneys said.

Gretchen Somers said she and her husband understood the risks last year when they completed a “short sale,” a transaction that allowed them to sell their Manassas, Va., home for about $150,000 less than they owed on it. But they felt they had no other options.

Somers said her family hung onto the house as long as possible. They tried but failed to sell it when her husband was transferred to Arizona for his job in early 2006, just as home prices were softening. They moved back into the house then tried to sell it again in 2008, after their adjustable-rate mortgage reset and their monthly mortgage payment nearly doubled. But home prices had plunged further by then, making it even tougher to sell.

Last year, their first lender and their home-equity line lender granted permission for the short sale. But the second lender reserved the right to come after the couple. Six months later, a collection agency called demanding $85,000 for related losses.

In hindsight, Somers said she and her husband should have just walked away from the house. “We took care of the house because we wanted it to sell,” Somers said. “If they were going to come after us anyway, we shouldn’t have done them the favor of making sure it looked good and cutting the grass even after we moved out, we should have mailed them the key and said: ‘Here you go.’ ”

A handful of states do not allow lenders to pursue deficiencies, nor does a federal program that took effect April 10. Lenders participating in that initiative are paid for approving short sales and as a condition, they cannot go after outstanding debt.

In many states, lenders can go after deficiencies, though laws vary widely. Some states limit how long the banks have to file a claim or collect the debt. Others may calculate deficiencies based on the fair-market value of the house, Rao said. For instance, if a home sells for $200,000 yet its fair market value is $250,000, “the borrower who owes $240,000 on the mortgage would not have a deficiency,” he said.

Borrowers should get a waiver in writing from their lenders to protect themselves, said Diane Cipollone, an attorney at the nonprofit Civil Justice. “Nobody should assume the deficiency is forgiven,” she said.

Why a Foreclosure Defense Attorney is So Important

Gary Carlson from the Viral Socialite brings us an article that is an important one to read.  The headline says it all!  Rather than me paraphrasing a very well written article, click the link to read the entire article.  You will be glad that you did!

Why a Foreclosure Defense Attorney is So Important
Posted by VS News On June - 20 - 2010

In today’s economic climate, more and more people are finding themselves in deep financial trouble. In 2009, there were an unbelievable 3 million+ foreclosures nationwide. If you are suffering from money troubles and you’re faced with a potential impending foreclosure, then help is at hand and that help will come from a foreclosure defense lawyer. It is possible that by engaging with such an Attorney this can you stop or at the very least slow down the foreclosure proceedings you are facing.

A foreclosure defense lawyer can be one of the most important elements in a foreclosure case, they will have plenty experience in dealing with cases exactly like yours and they will have the connections available to ensure that you receive any debt relief you may be entitled to. A lawyer can give you all the information you need about the options you have available to you, and you will receive helpful and honest suggestions about what could benefit you and your family the most in this kind of situation. A foreclosure defense lawyer can help you along every step of the way because they understand what it’s like to be suffering the effects of a foreclosure, so they can help relieve you of this one stress while you focus on taking care of your family.

A lot of people each year make the mistake of choosing to represent themselves, this can present severe pitfalls, no matter how confident or knowledgeable you feel you are. The laws that surround foreclosure and mortgage law can be heavily complex and representing yourself is not something you should be considering lightly. Foreclosure and mortgage laws are often changed regularly, so much in fact that a person who is not skilled in the defense of such cases could struggle to keep up with the pace, as well as this, you’re faced with the issue that you’re battling to save your home and sometimes your emotions can get ahead of you. A foreclosure defense lawyer can keep a calm demeanor in order to battle your case effectively, not to mention they have a lot of experience and knowledge in the routes that will need to be taken throughout the case that you might not be aware of. Allowing a professional to fight on your behalf is the best chance you’ll get at winning the fight for your home.

Contrary to popular belief, a foreclosure is the last thing that a lender will want, so more often than not they will be more than willing to come to some sort of agreement or solution that will help make things easier on you. To lenders, foreclosure often means large expenses and very long procedures, so they will do what they can to avoid this from happening. Provided you contact the lender early enough in the process and you are upfront with them letting them know you feel a foreclosure may be imminent. Given this situation you could actually be more likely to get a better resolution from the lender which will help you significantly. Upon early notification of your problem, most lenders will then consider the possibility of reviewing and restructuring your loan, so that it becomes a lot more affordable for you, and this is happening even more frequently now, considering the continued pressure of the Obama Administration has put on Loan Servicers and Lenders to expedite the process and assist more homeowners.

A foreclosure does not need to be part of your future, in most cases a solution can be found, and a foreclosure defense lawyer can help you find this solution quickly and efficiently to try and bring some normality back to your life and save keep you and your family where they belong, living in your home.

By: Gary Carlsen

U.S. Housing Market Recovery Dependent on Jobs Growth, Harvard Report Says

Kathleen Howley of Bloomberg writes an interesting article that reflects on our common sense.  No matter what kind of programs our government unveils, the key is going to be sustained job growth.  Why?  Because, while the foreclosure mess is being fueled by the big bad banks and their crazy loan programs, unemployment is what will continue the foreclosure debacle.

The projected unemployment rate for 2010 is 9.6% which would be the highest rate since 1983.  The one program that seems to have helped with a slight housing recovery was the home buyers tax credit.  The credit contributed to 1 million new home sales.  This incentive has ended, so the eyes are on the bottom.  People are sitting on the sidelines, waiting to buy “when the market hits bottom.”  When will this be?  Anyone's guess.

Potential solution....buy property at distressed prices based on the actual market value.

U.S. Housing Market Recovery Dependent on Jobs Growth, Harvard Report Says
By Kathleen M. Howley - Jun 14, 2010

Job growth will be the key factor in whether the U.S. real estate market can extend a recovery after the end of the federal homebuyer tax credit, according to a Harvard University study.

High unemployment is fueling the foreclosure crisis and discouraging the household formation that drives property demand, according to the State of the Nation’s Housing report issued today by Harvard’s Joint Center for Housing Studies. The weak labor market resulted in people “doubling up,” or sharing residences, rather than buying their own home, the report said.

“What happens with jobs will matter the most to the strength of the housing rebound,” said Eric Belsky, executive director for the center in Cambridge, Massachusetts. “If employment growth surprises on the upside or downside, housing numbers could too.”

The U.S. unemployment rate dropped to 9.7 percent last month from 9.9 percent in April, the Labor Department said June 4. For all of 2010, it probably will be 9.6 percent, the highest for any year since 1983, according to the average estimate of 82 economists polled by Bloomberg.

The homebuyer tax credit of as much as $8,000 required buyers to have a signed contract by April 30 and close on a property by July 1. The credit resulted in 1 million additional home sales between February 2009, when it began, and its expiration this year, according to Lawrence Yun, chief economist of the Chicago-based National Association of Realtors.

Consumer confidence now needs to improve for the market to sustain itself, he said in an interview. The percentage of consumers who planned to buy a home in the next six months fell to 1.9 percent in May after touching a seven-month high of 2.8 percent in March, the New York-based Conference Board said in a report last month.

‘Self-Fulfilling Prophecy’

“It comes down to whether consumers perceive that the market has bottomed or if they continue to wait,” Yun said. “If they wait, it pushes the market down and becomes a self- fulfilling prophecy.”

Mounting foreclosures are another headwind for a real estate recovery, according to the Harvard report. There were 2.1 million loans in the foreclosure process in the first quarter, almost quadruple the number from three years ago.

“The foreclosure trend is going to get worse before it gets better,” Thomas Lawler, an independent housing consultant in Leesburg, Virginia, said in an interview. “The biggest risk for housing is that you’ll see more foreclosed homes hitting the market and not have an offsetting rebound in household formation triggered by a recovering jobs market.”


Legal mess over foreclosures deepening

Todd Ruger of the Sarasota Herald Tribune brings us a very interesting article that discusses more legal maneuverings in the State of Florida.  The Florida Supreme Court is attempting to crack down on the often shoddy paperwork produced by the foreclosure mills that are strewn across the state.  They are focusing on incomplete filings that are being used to boot people out of their homes.

While several judges in Manatee and Sarasota Counties have used the rule to throw out several foreclosure cases in the last month, the foreclosure mills are not going down without a fight.  They are questioning the language in the rule that leaves open whether the rule is actually enforceable...yet.

Mr. Ruger comments, “The bottom line for homeowners: when a foreclosure is filed, do not give up your property easily. Rather, make sure the bank or lender retaking your home has the paperwork to show it can, attorneys say.”  Who best to fight the fight?  You got it...a foreclosure defense attorney.

Legal mess over foreclosures deepening
By Todd Ruger


An attempt to fix the sloppy legal work plaguing thousands of foreclosure cases in Florida has been ineffective, and has now caused a legal mess of its own.


The Florida Supreme Court got tough on attorneys for banks and lenders in February, responding to stories of homeowners losing their property based on shoddy or incomplete paperwork. The incomplete filings also wasted judicial resources and clogged up the courts.

To combat that, a new rule enacted by the high court requires the attorney or bank filing a foreclosure to verify -- under penalty of perjury -- that the allegations and paperwork are accurate when a residential property is at stake.

But attorneys have not followed the rule. Some contend they do not have to, arguing that the Supreme Court said the rule was not in effect yet.

"The decision by the Supreme Court in Florida specifically says 'Not final,'" said Miami attorney Gerald Richman, who is still fighting the new requirement on behalf of one of the state's largest foreclosure firms.

The issue may have to be settled by the Florida Supreme Court, though no action is scheduled.

The continuing problems with the foreclosure process could affect the speed at which the housing market recovers by slowing the process of reselling properties and stabilizing the market.

The vast majority of the state's housing lawsuits come from Florida's five so-called foreclosure mills, where attorneys can each handle thousands of cases gushing from the deflated housing market.

A court-sanctioned review of hundreds of residential foreclosure filings in Sarasota and Manatee counties -- unofficially dubbed "Stop the Slop" -- found that nearly all the lawsuits lacked basic documentation.

Of the 52 cases in the first round of review in Sarasota, all lacked the new verification requirement or other proof the bank is entitled to take the property, an attorney who reviewed the cases says.

Backed by local Chief Judge Lee Haworth, who served on the state task force that recommended the new rule, judges in Manatee and Sarasota counties used the new rule to throw out dozens of foreclosure complaints in the past month.

But Miami attorney Richman, who represents banks and lenders, contacted Haworth last week and told him he and the other judges were jumping the gun.

The confusion results from the wording of the Supreme Court's ruling.

Haworth, along with other judges and attorneys across the state, rely on the part of the ruling that states the rule "shall become effective immediately upon the release of this opinion." The opinion was released Feb. 11.

But the foreclosure mills cite a line later in the opinion that states the ruling is "not final" until any motions for rehearing are considered. That interpretation delays implementation of the rule, which benefits their bottom lines because verifying the documents takes time and could bring perjury accusations if wrong.

Richman filed a motion for rehearing in February, saying the new rule needs to be clarified. But the top court has not acted on that motion, set a date to hear arguments or otherwise clarified its ruling.

A spokesman for the Supreme Court said ethical rules prevent anyone there from commenting on the opinion, or clarifying whether the verification rule is in effect.

The confusion sent Haworth backpedaling last week, after Richman said his client would appeal the tossing of the cases. Haworth temporarily suspended that part of the "Stop the Slop" program Friday, saying he was not alone in having questions.

"I'm expecting they'll do something to clarify the situation," Haworth said.

The bottom line for homeowners: when a foreclosure is filed, do not give up your property easily. Rather, make sure the bank or lender retaking your home has the paperwork to show it can, attorneys say.

Sarasota-Bradenton had one foreclosure for every 61 housing units last year, according to RealtyTrac. There were 544,000 foreclosure filings in Florida last year.

The number of foreclosures spiked following the downturn in Florida's housing market and the mortgage crisis.

Courts in Sarasota and across the state started "rocket dockets" to handle cases in bulk and more quickly, even as examples of poor lawyering for banks and lenders came to light.

Some of the most egregious Florida examples come from Sarasota County. In one case, an attorney for a lender used a false reason to schedule a Sarasota widow's home for a foreclosure sale. A judge canceled that sale.

And one circuit judge in Sarasota, after an attorney assured her everything was in order, happened to glance at foreclosure paperwork and realized the two properties were in Miami, far outside her jurisdiction.

Judges have said they can only catch a few errors as they try to keep the rest in line, and do not have the resources to police all the complaints.

Foreclosure defense attorneys had already pointed to Haworth's "Stop the Slop" program as an example that should be followed across the state.

Haworth said he will continue policing foreclosure documents aside from the Supreme Court verification requirements.

Pet owners facing tough times with foreclosures

I sent out a newsletter last year regarding the subject of pets and foreclosures.  Cheryl Hanna from the Rescue Examiner reminds us that 1,000,000+ pets this year will be affected by foreclosures.  I have a Labrador Retriever and 2 cats.  The loss of them would be difficult to swallow.

If you have pets or know someone that does, take the time to read the entire article.

Pet owners facing tough times with foreclosures
May 23, 8:57 PM Pet Rescue Examiner Cheryl Hanna

According to the ASPCA, one million pets could lose their homes this year due to tough economic conditions. With 63% of US households having at least one pet, it is up to us as responsible owners to provide proper care, reciprocal respect and love when faced with tough financial decisions pertaining to our pets.

In order to keep a pet with us  when facing home foreclosure, it is necessary to start planning well in advance. Start with saving money. Ask your vet if there is a less expensive, but still nutritious pet food you can use. When supplies are needed, go to thrift stores or garage sales. In order to save on veterinarian bills,  just  get the most vital vaccinations and preventative health care. Always keep your dog on a leash; safety is a great way to keep medical emergencies to a minimum. Sometimes pet insurance on young animals is very cost effective and can minimize the shock and cost of an unexpected injury.

When looking for a new place to live, utilize the internet and locate real estate agents who specialize in pet friendly properties. Apartments have to accept children, but do not have to accept pets. Find websites that list pet friendly rentals. If the landlord is reluctant to allow a pet, provide documentation that shows you are a responsible owner. Show the landlord veterinarian records of vaccinations, spay/neuter, and rabies certificates. Ask your vet for a reference letter to show a landlord how you are a responsible pet owner. Reach out to family, friends, and co-workers to temporarily care for your pet until you find a new home.

Never underestimate the power of local assistance to help you keep your pet. Pet food pantries have become popular since it is less expensive to subsidize food expenses than taking in someone's pet. There are also low cost veterinarian care available, boarding facilities and placement services. The Pet Pantry in Richmond Virginia's SPCA provides food for those owners suffering financial hardships.
The Humane Society of the United States has a Pet Foreclosure Fund, and $80,000 in grants are available through local non-profit organizations to help organize food banks, subsidize veterinarian care, low cost spay and neuter programs, foster care and provide help with security deposits for animal friendly rentals.

There are also organizations that can provide temporary placement and can search for animal shelter and organizations in your area where you can surrender ownership of your pets which do not euthanize adoptable animals. At www.petfinder.com, you can be connected to a shelter who will care for your pet up to 60 days for no cost, and then you can be reunited. If you do not reclaim your pet, the animal will be put up for adoption. Some organizations are also able to find foster homes for temporary care until you get yourself re-established.
If you plan to put your pet up for adoption, never place an ad, "Free to Good Home." Always ask for an adoption fee and write out a contract so you have peace of mind that your pet has been offered some written protection by you.

Be aware that local animal control and humane society shelters that offer local open admission and accepts all animals ( strays too) do not guarantee adoption. If the shelter is overcrowded, your pet may be facing euthanasia no matter what breed, what age or what temperament. It is absolutely critical you always ask questions before surrendering your pet.

There are many options people  have for their pets when faced with foreclosure, but don't ever leave an animal behind to fend for themselves. There are too many horror stories of dogs and cats patiently waiting for their families to return while they slowly die of starvation and dehydration. A dog or cat can become dehydrated within 24 hours without water and could die in extreme heat within a few days. Animals have been deserted and found tied to trees, and thrown away like trash and dumped in the "country."

In  all states animal abandonment is considered neglect and animal abuse, and in some states an owner could face felony animal cruelty charges with mandatory prison time and fines.  There is no excuse to abandon an animal; some consider it the highest form of animal cruelty.

Stagecoach log home goes to foreclosure

Tom Ross from Steamboat Today reports on a ski house that recently went to foreclosure.  While this in itself is not an interesting story, the background behind it sounds familiar.

Ultimately the house was taken back by the bank for $350,000.  The listing realtor had an offer for $330,000 placed with Chase 2 months before the auction.  Doing the math, when you incorporate holding costs, insurance, taxes etc, the bank probably would have fared better with the $330,000 offer.  Why Chase didn’t accept it is anyone's guess.

When I read the article I noticed a few things.  First and foremost was that the listing agent appears to have tried to negotiate the short sale herself.  In my opinion, that’s a huge mistake and a massive waste of time.  I noted that she was trying to communicate with the banks attorney...again a big mistake.  Who is better positioned to negotiate with a lenders attorney, a realtor or the sellers attorney?  With all due respect to the realtors that are reading this, my money is with the attorney to attorney negotiation.

While previous offers weren’t discussed, the story seems to imply that the $330,000 offer came within a few months of the sale date.  This, unfortunately, is an issue that realtors can be plagued with.  That of retail buyers coming and going.  Ask me how we address this issue (and others).

Stagecoach log home goes to foreclosure
By Tom RossSunday, May 23, 2010

Steamboat Springs — A property auction at the Routt County Courthouse this week illustrated the thin line in today’s distressed home market between losing one’s home to foreclosure and salvaging a portion of one’s credit rating.

Steamboat Springs Realtor Denise Cantafio was frustrated Wednesday when her clients’ log home in Stagecoach was claimed by the original lender in a public trustee’s sale.

“That was a sale that really shouldn’t have happened,” Cantafio said. “We’ve had a standing offer of $330,000 on that home for two months.”

Chase Home Finance took the home back during a foreclosure sale at the Routt County Courthouse on Wednesday morning after no third-party bidders appeared to top the bank’s own deficiency bid of $349,726 on the home in the Meadowgreen subdivision. A bid of an amount just $1 higher than the bank’s bid would have claimed the home that sold for $695,000 in August 2007, virtually at the peak of the Steamboat real estate bubble.

Cantafio was representing the previous owner in a short sale process when another Realtor brought her a buyer who made the $330,000 offer. It was within $20,000 of what the bank indicated it was willing to accept in the foreclosure auction, and Cantafio was optimistic at the time.

Cantafio, who is with Real Living Real Estate in Steamboat Springs, said she has helped to close several short sales in the recent past. It’s a process that results when a homeowner realizes that a change in their circumstances, for example a job loss, means they won’t be able to keep up with their mortgage payments. Instead of waiting until they are in arrears on their mortgage payments, they go to the bank and work out a plan in which the bank agrees to sell the property for less than what is owed on the mortgage.

Even when the sale is successful, the homeowner loses their property and their equity, but the hit to their credit is not as severe as it would be in a foreclosure.

Routt County Public Trus tee Jeanne Whiddon said Wed nesday the total outstanding indebtedness on the home at 23425 Willow Highland Trail was $587,730.

Stephen Caragol, who invests in distressed properties, said the home, built in 2006, appeared to be an attractive investment. However, he did not attend Wednesday’s sale.

Caragol’s Steamboat-based company, Blue Rhino Investments, sometimes acquires foreclosed properties in Routt County, but more often in Front Range cities. He said that had the Meadowgreen home been offered at foreclosure auction in a market with a community of active investors, it might have been bid up to the neighborhood of $375,000.

The two-story, four-bedroom, 3.5-bath home comprises a total of 2,299 square feet. Of that, 1,713 square feet is livable space, according to records at the Routt County Assessor’s Office. The home has a two-car garage and luxuries such as granite countertops and a large corner bathtub. Large log posts support the vaulted paneled ceiling in the great room. Of course, there are views of Stagecoach Reservoir.

Cantafio said when she initially described the short-sale offer to a representative of Chase, she was told not to submit it because it was too low. She said an attorney representing the bank advised them to take a closer look, and she submitted the offer despite instructions to the contrary. She called the representative weeks later and was told again that the offer was too low.

Typically, the next step would be for the bank to engage a Realtor specializing in foreclosures to sell the house.

Efforts to reach the previous owner of the home at a phone number in Westminster were unsuccessful.

New Poll Reveals Americans' Feelings On Foreclosure

Daniel Indiviglio from the Atlantic reports on a recent poll that discusses how Americans feel with the subject of foreclosure.  While foreclosure used to be a social stigma, it is now a topic of conversation at cocktail parties.  A couple of interesting tidbits from the poll:


While statistics are just that...statistics, they do provide a window that shows what has happened.  It’s apparent that foreclosures will be with us for awhile and price stability is further away than expected.

New Poll Reveals Americans' Feelings On Foreclosure
MAY 21 2010

Do homeowners like the idea of walking away from their homes? Are many Americans considering buying foreclosed properties? Do they intend to spend much to renovate them? These are a few of the questions answered by a new poll sponsored by foreclosure expert RealtyTrac and real estate search website Trulia.com. Its results and the market observations of executives from these two companies provide some insight into the future of housing.

The Underwater Problem

At this point, most foreclosures aren't caused by wacky subprime mortgage products: they're caused by unemployment. And if you don't have any equity -- or even negative equity -- in your home, then you may be less likely to do whatever it takes to prevent foreclosure. These so-called underwater borrowers now make up one out of five mortgages in the U.S. They're driving foreclosures at this time.

But according to the poll, a mere 1% of respondents said that walking away is their first choice if they are unable to pay their mortgage. 69% would first try modification. Clearly, most people want to remain in their homes.

Another problem is strategic default. This occurs when homeowners actually can pay, but since they are so far underwater, they decide to default instead. Yet, 59% polled said they would not consider walking away from their home no matter how much it is underwater. Of course, the flipside is that 41% would consider it, which is a sizable portion of homeowners who could consider strategic default.

Interest in Foreclosures

So what's going to happen to all these foreclosures -- someone has to buy them. It turns out that there's a little less negative stigma surrounding foreclosures these days.78% of those polled believed there were downsides to buying a foreclosed property. That might sound like a lot, but it's lower than the 85% who had that same response a year earlier.

Yet, the poll also revealed that 45% of adults are at least somewhat likely to consider purchasing a foreclosed home in the future. That's lower than the 55% who had this response a year ago. This is a little bit worrying, as there are an awful lot of foreclosures available, and those numbers aren't slowing down very much.

Finally, 57% of renters said they were at least somewhat likely to purchase a foreclosed home in the future, while only 40% of homeowners said they would consider it. Again, these numbers aren't very impressive, considering how many foreclosed homes have and will continue to hit the market.

Renovating the Job Market

Construction was probably the biggest industry hit by the collapse of the housing market and recession that followed. Many of those jobs aren't coming back, but if renovations to foreclosed properties ramp up, some of these workers will find employment. The good news is that 92% of those polled said they would be willing to invest in improvements such as renovations and remodeling if they purchase a foreclosed home. Moreover, 65% of that group would be willing to invest up to 20% of the home's purchase price in upgrades. This provides a little hope that some construction jobs could return as more foreclosures continue to be bought up.

Shadow Inventory

On the conference call to discuss the poll results, RealtyTrac Senior Vice President Rick Sharga also discussed the foreclosure market in general. He spent some time explaining that there was still a significant shadow foreclosure inventory. Those are defaulted homes banks are purposely preventing from hitting the real estate market. He said that banks are releasing these properties slowly, so not to flood the market and bring down prices.

How big is the shadow inventory? According to Sharga, it consists of about two-and-a-half times as many foreclosed properties as are currently available for sale. That's probably around 600,000, says Sharga. And that doesn't include the additional properties that default each month.

Looking for Recovery

So how long will homeowners foreclose at elevated rates? Quite a while. Foreclosure activity will likely peak in 2011, according to Sharga. He says somewhere between 5 and 5.5 million mortgages are in some stage of serious delinquency. He expects foreclosures to reach normal levels in late 2013. But he also believes that banks' strategy of releasing foreclosures into the market slowly should keep prices from falling much further nationally. At the same time, however, he doesn't expect prices to rise much, if at all, over the next several years.

The Other Foreclosure Menace

The national news is plastered with articles about people losing their homes due to delinquent mortgage payments.  Fred Schulte from the Huffington Post reports on another way people are losing their homes to foreclosure for much smaller amounts of money.  

When people fail to pay property taxes, city liens etc, the municipalities sell these liens to investors.  Investors earn a certain percentage when the liens are redeemed or paid off.  If the liens are not paid off, the investor has the right to foreclose, oftentimes securing the title to the house for very little money (i.e. for the price they paid for the lien).

When working on short sales, I would highly suggest (whether you are a realtor or buyer) you secure a preliminary title search.  While home owners typically have a handle on what is owed, many forget all of the liens that are attached to the property.  A preliminary title search should give you an indication of what is owed and to whom.  I hope this helps.

The Other Foreclosure Menace
Mortgage Paid Off, Woman Loses Home -- Over a Small Water Bill

By Fred Schulte, Ben Protess and Lagan Sebert
Huffington Post Investigative Fund

Valentine lost the two-story brick row home after the city sold her debt to investors through a contentious and byzantine legal process called a "tax sale." (Photo by Lagan Sebert / Investigative Fund)

One raw day in early February, Vicki Valentine stood by helplessly as real estate investors snatched her West Baltimore home over what began with an unpaid city water bill of $362.

As snow threatened to fall, she watched a work crew hired by the new owners punch out the lock on her front door. A sheriff’s deputy was on the scene while Valentine and her teenage son piled whatever they could into a borrowed car.

Running out of time, Valentine scrambled to pack up clothing and mementos. The home had been her family’s for nearly three decades, and her father had paid off the mortgage in 1984. “It’s hard to say goodbye to this house,” she said. “It’s like someone forcing you out of something that belongs to you. I don’t get it.”

Valentine lost the two-story brick row home after the city sold her debt to investors through a contentious and byzantine legal process called a “tax sale.” This little-known type of foreclosure can enrich investors as growing numbers of property owners struggle to pay their bills.

These foreclosed homeowners are not the families making headlines for taking on mortgages they could ill afford. Families ensnared in the tax sale sometimes are unable to overcome relatively small debts owed to local tax collectors.

Rather than collect the overdue money they are owed, many local governments are selling tax liens. Buyers range from behemoths such as JPMorgan Chase & Co, and some regional banks and law firms, to small-fry investors lured by late-night television commercials promising quick riches. Investors generally bid in an auction for the right to collect delinquent taxes and other municipal debts on property owners, sometimes by paying only a few hundred dollars. When owners can’t pay, investors can pick up property at bargain prices.

It can be a good deal for everyone except the property owner. Selling the debts to investors can help governments efficiently ease budget woes without having the added expenses of debt collection, foreclosing and being a landlord.

Investors, meanwhile, can rake in hefty profits. That’s because they can tack on fees and steep interest rates, which can amount to 18 percent annually in Baltimore.

In Valentine’s case, legal fees and other charges climbed past $3,600 – nearly 10 times her original bill.

Investors purchased an estimated $30 billion of real estate tax debt held by governments across the country in 2009, double the amount a year earlier, according to the Florida-based National Tax Lien Association. Altogether, 29 states and the District of Columbia can sell tax lien debt to investors.

Lien sales in Baltimore have nearly doubled since the housing bubble of 2006. On Monday, the city sold 12,689 liens – a probable record. Properties ranged from boarded-up shells and vacant lots to row homes in gentrified neighborhoods and some commercial buildings.

Last February, Vicki Valentine was evicted when she couldn't pay $3,603.41 to rescue her Baltimore home. Valentine's wasn't a typical foreclosure -- the mortgage was paid off. But when she failed to pay a $362.28 water bill, the city auctioned her debt off in a tax lien sale. An investor now owns her home.

City records show that one in five of these liens on properties is for unpaid taxes or other municipal bills amounting to $1,000 or less. If Baltimore’s 2009 tax sale is any indication, hundreds will stem from delinquent water bills; there were 666 such liens last year.

Although the brisk tax lien trade thrives beneath the radar, largely unnoticed, it has occasionally drawn scrutiny from law enforcement authorities.

Some of Maryland’s most prominent tax sale investors have been swept up in a criminal investigation into bid rigging at the sales. Federal prosecutors allege that those investors agreed in advance which properties to bid at some auctions, improperly reducing the money earned by municipalities.

So far, Justice Department prosecutors have secured three convictions in the ongoing investigation. At a May 4 sentencing hearing for two of the defendants, a witness for the government was lawyer John Reiff, part-owner of the company that currently owns Valentine’s lien. He was not charged in the case.

Investing in liens can be risky, with profit on a particular property anything but certain. Investors generally compensate for such uncertainty by buying in large volumes, sometimes at a clip of thousands of liens each year.

Two of the investors who pleaded guilty in the bid rigging case made at least $10 million from fees and other costs collected from owners of some 6,000 property liens they bought over six years, according to federal prosecutors.

Prosecutors said in court filings they suspect bid-rigging occurs in other areas of the country. A JPMorgan subsidiary called Xspand and at least two other companies received grand jury subpoenas last year as part of a Justice Department anti-trust investigation in New Jersey, according to Bloomberg.

‘Unintended Consequences’

Some state lawmakers have questioned the fairness of the tax sale foreclosure process,  which often sticks homeowners with thousands of dollars in legal fees and other costs. But cities and counties in Maryland earlier this year fended off an effort to keep water bills out of the tax sale, arguing that without the threat of losing homes many people would fail to pay their bills.

Revenue collectors defend their tax sales as a necessary, if sometimes distasteful, means for feeding the public treasury. In aging cities such as Baltimore, there’s also hope that new owners will rehab decaying or abandoned properties, restoring them to the tax rolls.

Investors say they aren’t the bad guys – they’re providing a service that helps plug holes in municipal budgets. Homeowners should face consequences for failing to pay their bills, they argue, noting that people faced with losing property have many opportunities to redeem it. The mounting fees, they say, reflect the costs involved in navigating complex legal requirements, tracking down property owners and taking them to court to enforce the liens. In Valentine’s case, they noted, a judge approved the fees.

“We are essentially the city’s bill collector,” said lawyer and tax lien investor Reiff.

Critics of tax sales question the morality of government tax collectors acting to enrich private investors at the expense of property owners with low incomes or facing hard times. They ask whether it's the best way to compel people to honor their debts — especially involving relatively paltry public utility bills.

After all, when water bills go unpaid, some cities and counties simply shut off service. In Baltimore, officials often leave it on. Another alternative would be to have private collection agencies track down debtors.

“This is a case where good intentions have led to severe unintended consequences,” said Debra Gardner, of the Public Justice Center in Baltimore, a non-profit advocacy group for minorities and the poor.

Asked about Valentine’s story, David Vladeck, director the Federal Trade Commission's Bureau of Consumer Protection in Washington, said it was “just horrifying to me."
While noting that his comments did not reflect agency policy, Vladeck said he believed more recession-wracked homeowners across the country could face a similar plight. “It’s beyond tragic that this poor woman lost her home.”

Pleas – and More Fees

Valentine was incredulous when the price to keep her property shot past $3,600. Jobless and lacking the savings to pay, she said she could do little to stave off the day of reckoning.

That day arrived on February 3, when a Baltimore City Sheriff’s Department deputy served her with a court-issued “writ of possession” stripping her claim to the home.

Valentine, a former mental health counselor and rehab specialist with four children, said she moved back to her childhood home about a decade ago to care for her ailing father, Charles L. Turner. A retired brewery worker, he had Alzheimer’s disease.

As his condition worsened, he tended to hide bills from the family. (City records confirm that Turner often fell behind in meeting his obligations during the final years of his life and nearly wound up in the tax sale as early as 2000 over unpaid water bills and property taxes.)

When her father died in 2003, Valentine took over the home and stayed there with her son, Dimitrian, now 17. She said she fell into a serious depression in the wake of her father’s deteriorating health and death, and was unable to work or pay her bills on time. She has worked only sporadically since his death. Though she made partial payments on the water and sewer account in 2006, she acknowledges her failure to pay a bill of $462.28 in full. She went down to city hall and paid $100, but never took care of the balance.

When the deadline passed for paying up, the city added 2005-2006 property taxes of $287.92, interest and city tax-sale processing charges. That brought the total she owed to $710.57, according to city records.

The City of Baltimore washed its hands of Valentine’s debt in May 2006 when it sold the lien to Sunrise Atlantic LLC, an arm of the BankAtlantic in Fort Lauderdale. The Florida bank has bid on tax liens in a range of states, from Florida to Illinois, though it has largely sold off its Maryland lien portfolio and is not implicated in the bid-rigging case. BankAtlantic did not return phone calls seeking comment.

Unlike mortgage foreclosures initiated by banks, there’s no appealing a tax sale debt once it is sold off; a property owner has no option other than to abide by the investors’ terms and pay the fees. The lien holders also have little incentive to be flexible about repayment terms.

Maryland law gives property owners six months to redeem a tax lien with only minimal added costs. But if they don’t pay by then, lien holders can sue to seize the property and stick the homeowner with a slew of fees, including legal bills incurred in taking the matter to court. Sunrise Atlantic filed such a case on Valentine’s home in Baltimore City Circuit Court in December 2006, records show.

More than a year later, the court awarded the property to Sunrise Atlantic.

At that point, Valentine sent a handwritten letter to the court, begging for mercy and more time to repay.

In the letter, dated Feb. 9, 2008, Valentine described being unable to work because of depression and other problems. “For now, this is the roof over my son and my head. I am trying to get the money together to catch up on my delinquent bills.” She added: “Please allow more time to pay all bills connected with the foreclosure of said property.”

But the longer she waited and the more she protested, the more legal fees and other charges she incurred.

In 2008, Baltimore attorney Anthony De Laurentis, who represented Sunrise Atlantic, submitted itemized charges to the court: $305.91 in interest on the lien; a $1,500 bill for responding to Valentine’s requests to cut the fees and other legal work; more than $1,000 in assorted expenses, including $325 for a title search of the property and $79 for photocopies, according to court records.

The price list passed muster with a judge, who on Sept. 19, 2008 ordered that Valentine pay $3,603.41 – or forfeit her property.

She asked for another hearing, which delayed the process for more than a year.

While the case dragged on, the Florida bank started divesting its tax lien certificates from Maryland, eventually transferring the lien on Valentine’s home to a firm called Montego Bay Properties. Part of the firm is owned by a trust set up to benefit members of the family of lawyer De Laurentis. Reiff, one of De Laurentis’ law partners, also owns part of the firm.

In an interview in their Baltimore office, De Laurentis and Reiff said 90 percent or more of property owners eventually pay whatever is necessary to keep their homes.

They said most of the properties they take over are vacant and thus nobody is displaced. They also said they had repeatedly tried to settle the matter with Valentine and showed Investigative Fund reporters a thick file of court papers and other records as well as notes of more than a dozen contacts with her to make arrangements to clear the debt.

“We bent over backwards for her,” Reiff said, adding that his staff had tried for more than two years to “work something out” to no avail.

Feds Say Bids Rigged

Though Valentine had no way of knowing it, some investors rigged the 2006 Baltimore tax sale auction that led to her eviction, federal prosecutors alleged in court.

The roots of that conspiracy run deep, prosecutors said. For years, a handful of Baltimore real estate lawyers and their investment partners quietly dominated Maryland tax sale auctions, with few questions asked about their bidding tactics or collection policies.

That changed after The Baltimore Sun used city records and court filings to report in March 2007 that hundreds of mainly low-income city residents had been kicked out of their homes over small unpaid bills, ranging from water and sewer charges to minor environmental citations. Some people were driven from family property because they couldn’t afford to pay thousands of dollars demanded by lien holders.

The Baltimore newspaper also documented for the first time that while dozens of parties bid in Baltimore tax auctions in 2006 and 2007, just three investment groups had won about two-thirds of the liens.

Prosecutors went on to charge three men with conspiring to rig bids at 21 auctions in Baltimore and four other jurisdictions, including Montgomery and Prince George’s counties in the suburbs of Washington D.C. between 2002 and 2007. All three have since pleaded guilty. No other charges have been filed.

Another investment group involved in the conspiracy was DRT Fund, according to court filings by federal prosecutors. DRT is owned in part by De Laurentis and Reiff. DRT participated in a dozen of the 21 fixed auctions, though not the Baltimore City auction in 2006 in which Valentine’s lien was sold, according to court filings.

The Justice Department filed no charges against DRT, which came forward in the fall of 2007 and “fully and truthfully reported their own wrongdoing and that of their co-conspirators and terminated their part in the conspiracy,” prosecutors wrote in court papers filed last month.
DRT went on to sign an amnesty agreement with the Justice Department that commits it to “pay restitution to any person or entity injured as a result of the bid-rigging activity being reported in which it was a participant,” court records state.

Neither De Laurentis nor Reiff would discuss DRT’s settlement with the Justice Department.

Water Bill Woes

Some law makers have tried for years, with modest success, to rein in the tax-sale fees that can steamroll low-income homeowners. Maryland legislators passed a bill in 2008 that raised the minimum lien sold from $100 to $250. But a bill to prohibit cities and counties from selling delinquent water bills to investors failed in the state Senate earlier this year by a single vote.

Legislators also rejected a bill that would have prevented the sale of any lien of less than $750, as happens in some other locales outside of the state.

Both bills failed, lawmakers said, largely due to fierce opposition from tax collectors and officials in Baltimore, which conducts the largest tax sale in the state.

Andrea Mansfield, of the Maryland Association of Counties, testified that the tax sale process provides “a much-needed device to ensure that property owners remit payment for their fair share of taxes and charges connected to public services.”

Eliminating water bills from the tax sales would result in more “deficient accounts,” and lead to “increased rates on citizens who properly pay,” she wrote.

Sen. James Brochin, a Democrat from Baltimore County who co-sponsored the legislation that would have banned the sale of delinquent water bills to investors, vehemently disagrees. “It's just disgusting. It's highway robbery. It's dead wrong. It's immoral," he said.

While city officials publicly defend the practice, he said, in reality “they're humiliated and embarrassed by it. Deep down they know how immoral it is."

Baltimore’s mayor, Stephanie Rawlings-Blake, declined requests for an interview on the topic with the Investigative Fund.

City officials were more talkative earlier this year when they sought to block lawmakers from banning the sale of water bill liens. Mary Pat Fannon, a lobbyist for the mayor’s office, said in prepared testimony for a February 5 hearing that the city had begun offering repayment plans for water bills to help homeowners avoid tax sale.

She said that the 666 water bill liens sold by Baltimore City in 2009 was way down from the 1,129 sold to investors the previous year and credited the repayment plans for the reduction.

And she went further, testifying that nobody had lost a home due to an unpaid water bill from either sale in 2008 or 2009. What Fannon neglected to mention: Because of the lengthy transfer process in the courts, it was too early for those groups of property owners to begin losing their homes. Most tax sale lawsuits have taken longer than two years to resolve through the courts.

Fannon also said that without the tax sale, the city would need to file debt collection lawsuits against each delinquent property owner, which she said “would be very expensive, time consuming and flood the courts.”

Two days before Fannon’s testimony at the state capital, Valentine stood watching as her belongings piled up on the sidewalk in Baltimore.

A Neighborhood’s Decline

More than three years after Valentine’s small debt drew her into the tax sale, neither the city nor the investors seem to have won much.

The property is unlikely to be fixed up any time soon. Instead, it adds to a sense of decay that permeates some parts of urban Baltimore. On Valentine’s old block in the Sandtown neighborhood, all but a handful of houses, abandoned long ago, are boarded up.

Such decline has summoned other ills. “Drugs moved in and replaced the good with the bad,” said Valentine, who is living temporarily with her mother. Many of her possessions are in storage.

De Laurentis and Reiff now hold a “writ of possession” for a property that’s in need of substantial repair. Though the home is assessed at $46,000, in such dilapidated condition the investors said they probably would have trouble selling it for more than $16,000.

In addition, investors could be on the hook for a $7,000 water bill of their own. Just how that happened is unclear; there may have been an undetected leak in Valentine’s home. Last month, the city finally turned off the water.

If the investors take the final step to secure a deed to the property, they would have to pay the city roughly $6,300, which the city is then supposed to turn over to Valentine. The law entitles original property owners to receive at least some compensation.

De Laurentis and Reiff say they’re still willing to work with Valentine to resolve the matter. Reiff said he gave her a key to the new lock so she could > have more time to remove her belongings as a good faith gesture.

“We'll definitely work something out with her,” Reiff said.


Phoenix foreclosures attract Canadians

Marty Hope from the Calgary Herald reports on Canadian money coming back into the market. Because Canadian currency is increasing in value relative to the American dollar, Canadians are coming into the US and buying property in droves.  Now, it’s not just because of the strength of the Canadian currency that is ringing our friends form the North down.  They are seeing properties that can be purchased, and then rented with positive cash flow.

Phoenix foreclosures attract Canadians

Rents rising within Arizona city

BY MARTY HOPE, CALGARY HERALD
MAY 15, 2010

It was the end of the month -- and as in every city anywhere in North America, people were on the move.

From Scottsdale to Queen Creek, streets throughout greater Phoenix, Ariz., were dotted with half-ton trucks and rented vans moving families from one home to another.

In this desert state, relocation is always a big deal come month-end.

Some people are taking advantage of foreclosures to move around in the marketplace while others, unfortunately, are packing up because they've lost their homes.

Still others are getting into rental digs -- a proposition that is becoming challenging, says the Cromford Report, which tracks the current status of the Phoenix area resale market on a daily basis. Earlier this month, the analyst who publishes the report says demand for single-family home rentals is outrunning supply and causing an unprecedented fall in the inventory of available rentals.

I know there are several Calgarians who have become landlords in the Phoenix area, having scooped up firesale-priced homes as income-producing properties.

And as the Canadian dollar fights for parity with the U.S. greenback, there will, doubtless, be another wave of investors from here heading there.

An article in the Arizona Republic says that since last September, the number of available rental homes in metro Phoenix has dropped by 40 per cent.

If you're looking for family-sized homes in some of the more desirable neighborhoods, the decline is even more severe, says the article.

The sharp drop, the newspaper article suggests, is another ripple effect of the foreclosure crisis that is playing havoc with real estate across Arizona, but particularly in the Sonoran Valley metropolitan area.

My, how the rental market has turned.

In the early days of the foreclosure fiasco, foreclosures increased the number of houses in the rental market.

People who lost homes, or who just walked away from mortgages that were higher than the value of their home, found they could rent similar-sized houses, often in the same neighborhood, for less than their mortgage payments.

This was occurring all over, including many of the newer neighborhoods on the west side where the foreclosure total was huge. Even tenants with bad credit could negotiate lower rents and how long they wanted to stay.

I recall talking with realtor Mike Orr down there and asking why the west side was hit so badly with foreclosures.

"We had a circumstance down here among first-time buyers who would drive until they qualified -- and that happened mostly on the west side," he said.

But back to the rental situation. In the past few months, as more of those former owners became renters, demand for those three-to four-bedroom rental homes climbed.

As lenders foreclosed on more homes, but were slow to resell them, the number of available houses dropped.

When houses do come onto the rental market, rents are rising and landlords of family-size homes are receiving multiple offers and filling houses in days, said the Arizona Republic article. Orr said that while the detached home rental situation is worsening and rental agencies managing properties have waiting lists, many Phoenix area apartment complexes still are having a tough time attracting tenants.

If you're the least bit handy or have the money to hire someone to do some improvements, there are some great foreclosure opportunities at, or just under, $100,000 US in the Phoenix area.

Many of the homes, with posted notices of foreclosure taped to the front doors, are in desperate need of a good cleaning, new paint, flooring and wall repairs -- and in some of the more extreme cases, new walls to fix those damaged by frustrated or angry owners prior to leaving the property.

Queens DA: Fraud Scheme Preyed on Homeowners Facing Foreclosure

Chris Herring from the Wall Street Journal reports on a foreclosure fraud scheme that was cracked in NY City.  While the scheme took advantage of people in common ways (read the article), one part of it really stuck out.  The thieves were targeting properties that had legitimate equity in them but were also in preforeclosure.  If you are reading this you need to understand that some houses can solve their own problems.  In this case, houses with equity that are in pre foreclosure can typically be sold and settle the existing debt (obviously it depends on how much equity, how much debt but we will assume that the equity will more than cover the debt).  So, if you are in a situation where the property can be sold and cover the debt without putting the property through a short sale....do the right thing.

Queens DA: Fraud Scheme Preyed on Homeowners Facing Foreclosure


By Chris Herring

A group of 17 people was charged in a multimillion-dollar real estate fraud Thursday, a scam prosecutors say left some victims homeless. The list of those charged includes attorneys, mortgage brokers and real estate advisors.

The charges, brought forth by Queens District Attorney Richard Brown, accuse two men of having led a predatory scheme to take advantage of homeowners in Queens, Brooklyn and the Bronx who were trying to avoid going into foreclosure. Brown said the fraud cheated victims and various lending institutions out of more than $3 million of equity at 26 residential properties.

Prosecutors accused those in the scheme of targeting homeowners who had substantial equity in their homes but either faced foreclosure or were behind in mortgage payments.

Roger Huggins and Inderpaul Sookraj, who prosecutors pinpointed as the scheme’s ringleaders, are accused of setting up sham realty and construction companies in Queens. They face an array of first- and second-degree felony charges — including accusations larceny, money-laundering, identity-theft and falsified-records — and a maximum of 25 years in prison if convicted.

Among other things, prosecutors said Huggins and Hookraj basically stole peoples’ homes through trickery. The pair was charged with using false documents and forging their clients’ personal information to make it look like the homeowners had agreed to sell their homes over to Huggins and Hookraj.

In other cases, prosecutors said, they simply induced distressed homeowners into selling or transferring their properties for reduced prices — a move that allowed them to “flip” the properties and sell them for more.

Attorney information for Huggins and several other people charged wasn’t immediately available, as arraignments hadn’t begun as of early yesterday evening. The arraignments were expected to take start and run into night court. Prosecutors said Sookraj remained at large.

A pair of attorneys from Queens, Trevor Rupnerain and Shawn Chand, were also accused in the fraud. Prosecutors charged them with fraudulently preparing financial and real-estate documents when closing out deals with victims.

Chase's Foreclosure Disgrace

Greg Kaufman reports on what Chase has done to 3 homeowners that have played by the rules.  The article highlights 3 people that applied for and met all of the requirements for a permanent loan modification but were denied by Chase.  Mr. Kaufman surmises that the reason behind these (and may others I’m sure) rejections revolves around the fact the loan modifications are purely voluntary.

The particular homeowners that are highlighted in this article were also awarded foreclosures by Chase!  How nice of Chase to do so!  The home owners are not laying down, though.  They are suing Chase.  Can anyone say, “Class Action”?

Kaufman points out, “It doesn’t matter whether someone is losing their home because of a bad subprime mortgage, a lost job, or because they owe more on the mortgage than the home is now worth. Every foreclosure decreases the property value of a neighbor’s home. Every dollar lost in property value--and over $7 trillion in wealth has now been lost by American households--reduces local and state revenues. As revenues are lost, so are jobs and services. And the vicious cycle which devastates our communities continues. A HAMP program that was supposed to help three to four million homeowners has only made 230,000 permanent modifications. March set a new monthly record with 367,056 foreclosure filings, up nearly 19 percent from February, according to RealtyTrac, which has been tracking foreclosure filings since 2005.

So while loan mods are oftentimes good for the public, they are not embraced by the banks and the servicing companies.  As the lenders dawdle with these applications, houses slide closer and closer towards foreclosure.

Chase's Foreclosure Disgrace
Greg Kaufmann: If Big Banks Won't Play by the Rules, Where Does That Leave Homeowners in Distress?

Here's the problem with the Obama Administration’s approach to foreclosure prevention: it depends entirely on the banks voluntarily doing the right thing, even when homeowners have held up their end of the bargain to prevent a foreclosure.

Take the case of three homeowners in Queens, New York. Each one met the requirements for a “permanent” modification of their mortgages--which means a reduction of payments for five years--as laid out under the Administration’s Home Affordable Modification Program (HAMP). They did so by making three months of trial modification payments to JP Morgan Chase and verifying their incomes. They had contracts with Chase and fulfilled their obligations under those contracts.

So how did Chase reward them?

Permanent modifications denied. Delinquency reports to credit rating agencies issued. And the cherry on top--foreclosure.

These three homeowners-each working full-time, with at least one job, working up to six days a week--are fighting back. With the help of the Urban Justice Center, a non-profit legal services provider in New York, they filed suit last Tuesday against the bank in federal court in Brooklyn.

“We want Chase to live up to the contracts that they entered into and give permanent modifications to these homeowners,” said Ted De Barbieri, an attorney at the Urban Justice Center. “If you’re going to sign onto HAMP, you have to follow the rules. These homeowners followed the rules, and now it’s time for Chase to.”

A spokesman for the bank told the Wall Street Journal that Chase would be “happy to talk with the customers, review their situations and see if we can help.”

This official response stands in stark contrast to what the homeowners have experienced in dealing with Chase up until now. De Barbieri said that prior to filing the lawsuit, even with the help of community-based HUD certified home loan counselors and the Urban Justice Center, the homeowners had been unable to get an adequate response from Chase.

Three Life Stories

Here’s a little moreinformation about these three citizens who Chase--post-lawsuit--suddenly says it will try to help.

Shanaz Begum lives with her husband and two sons--one of whom is headed to college in the fall--in a home they purchased in 2005. She fell behind on mortgage payments in September 2008 after she lost her job as manager of a retail business. Begum now works for the Department of Transportation on weekdays, and on weekends as a server at Boston Market. Her husband is a full-time taxicab driver. Begum has made trial modification payments of $1576 on time for eight months.

Tamara Williams lives with her two sons in a home she purchased in 2005 and has made three on-time trial payments of $1,274 this winter. She fell behind on her mortgage when she lost her job in November 2008, and went into foreclosure four months later. She now works doing post-renovation and demolition cleanup for a contractor and also attends school.

The lawsuit alleges that Chase instructed homeowner Alex Lam to deliberately miss mortgage payments in order to become eligible for a modification. Lam bought his house in 2002 and refinanced in 2005. Lam says he skipped payments in February and March of 2009 on the bank’s advice. Those are the only payments he has ever missed but he now faces foreclosure. Chase says its Net Present Value (NPV) test--required by HAMP to determine if the value of a modification is worth more to investors than a foreclosure--is the reason Lam isn’t receiving a modification. The infuriating thing about the NPV is that HAMP doesn’t require banks to disclose the data they use for their analysis. Banks don’t exactly have a stellar record for good behavior where transparency is lacking.

“The Obama administration’s program was supposed to give people like me a lifeline and a chance to save our homes. But if the banks won’t play by the rules, what else are we supposed to do?” said Williams.

That’s why more and more homeowners are turning to the courts. Reporter Paul Kiel of ProPublica writes that “at least 50 homeowners have recently filed lawsuits alleging the servicer foreclosed with a loan mod request pending or even while they were on a payment plan.” De Barbieri told me, “We’re part of an advocate community that’s representing homeowners who are in similar situations around the country. There are [similar] lawsuits in Massachusetts, Ohio, California, and Washington State. It’s one tool that advocates are using to do what’s right.”

As Kiel notes, there are still no penalties for servicers who don’t comply with the rules. According to the Wall Street Journal Treasury Secretary Timothy Geithner recently “threatened to crack down on banks that don’t ‘hold up their end’ of the bargain.”  

But Treasury was whistling that same tune at a hearing in December. “We’re putting them on notice, and then we will exact penalties of them, and be publicly outspoken about who’s performing well and who’s not,” railed Herbert Allison, Assistant Secretary for Financial Stability. “We’re going to move to the point where we’re disciplining the banks if they don’t perform better than they are today.”

Move when exactly? I’m not sure which planet the Obama Administration is living on that they still believe the banks will do the right thing simply because they are being asked to--or because they are being offered a few carrots (a couple thousand dollars per modification--not even a garnish for the banks). Here on Earth, where the rest of us reside, we know that nothing will change until banks are forced to do the right thing.

Congressional Weakness

For that reason, the Housepassed legislation that would allow bankruptcy judges to modify the principal on people’s mortgages--known as a “cramdown”--for primary residences just like they are able to do for rich people’s vacation homes. It was defeated in the Senate. Why haven’t we seen one of President Obama’s virtuoso performances demanding that the weak-kneed Senate take it up again--perhaps even as an amendment to the financial reform bill?

Representatives Raúl Grijalva and Marcy Kaptur have also introduced legislation that would allow homeowners the right to rent at fair market rental value for five years once they receive a foreclosure notice. Not only would that allow homeowners time to find alternative affordable housing, or new employment, it would give them time to expose banks like Chase for any bad behavior. The right to rent concept was initially proposed by Dean Baker, co-director of the Center for Economic and Policy Research, and has been embraced by individuals across the political spectrum.

Grijalva and Kaptur also signed a letter to Secretary Geithner along with twenty-five House Democratic colleagues suggesting the establishment of “a new federal entity” modeled after FDR’s Home Owners’ Loan Corporation (HOLC), to be capitalized through remaining TARP funds. The letter notes, “During the Great Depression, the government successfully acquired, refinanced, serviced and sold more than a million mortgages, accounting for one in every five non-farm dwellings in the United States. Such actions prevented untold foreclosures, and even managed to return a small profit to the Treasury.”

Finally, in towns like Philadelphia, mandatory mediation has proven effective in foreclosure prevention. Rhode Island Democratic Senator Jack Reed has introduced legislation that would create an $80 million grant program to support those kinds of efforts.  

A Treasury spokesman told me the Administration is very concerned about moral hazard--rewarding people for taking out loans they never should have taken. But clearly the most hazardous moral around is continuing to cater to the banks’ interests.  

It doesn’t matter whether someone is losing their home because of a bad subprime mortgage, a lost job, or because they owe more on the mortgage than the home is now worth. Every foreclosure decreases the property value of a neighbor’s home. Every dollar lost in property value--and over $7 trillion in wealth has now been lost by American households--reduces local and state revenues. As revenues are lost, so are jobs and services. And the vicious cycle which devastates our communities continues. A HAMP program that was supposed to help three to four million homeowners has only made 230,000 permanent modifications. March set a new monthly record with 367,056 foreclosure filings, up nearly 19 percent from February, according to RealtyTrac, which has been tracking foreclosure filings since 2005.   

As John Taylor, president and CEO of the National Community Reinvestment Coalition, recently put it, “Everybody has a dog in this hunt when it comes to these foreclosures.”

This week in Brooklyn, three Queens’ homeowners took action. They said to the banks, “No more,” and the court is giving Chase until the end of the month to respond.

The time for President Obama to show that kind of toughness with the banks is tragically overdue.

(The opinions expressed in this commentary are solely those of the author.)


Phony Audits: A New Twist on Foreclosure Rescue Scams

The Federal Trade Commission reports on the latest flavor of the month...Forensic Loan Audits.   Forensic Loan Audits are being sold as a way for consumers to “beat the bank.”  The idea is for the auditor to comb through the mortgage documents of a seller in pre foreclosure in an attempt to provide discrepancies.  Lore has it that some of these companies promise “forgiveness of all debt.”

Some excerpts from the report include:

In exchange for an upfront fee of several hundred dollars, so-called forensic loan auditors, mortgage loan auditors, or foreclosure prevention auditors backed by forensic attorneys offer to review your mortgage loan documents to determine whether your lender complied with state and federal mortgage lending laws. The “auditors” say you can use the audit report to avoid foreclosure, accelerate the loan modification process, reduce your loan principal, or even cancel your loan.

Nothing could be further from the truth. According to the FTC and its law enforcement partners:


If you are in default on your mortgage or facing foreclosure, you may be targeted by a foreclosure rescue scam. The FTC wants you to know how to recognize the telltale signs and report them. If you are faced with foreclosure, the FTC says legitimate options are available to help you save your home.

Don’t get me wrong, there are legitimate companies that perform loan audits (typically involving attorneys) and their are legitimate reasons to have your loan docs audited.  Beware of false promises.  If the company wants to charge an up front fee, think twice.

If you want to read the bulletin, go to:

http://www.ftc.gov/bcp/edu/pubs/consumer/alerts/alt177.shtm

Phony Audits: A New Twist on Foreclosure Rescue Scams

May 10, 2010by FTC

WASHINGTON, D.C. - May 10, 2010 - (RealEstateRama) — If you are facing default on your mortgage or foreclosure on your home, watch out for the latest scam:  phony “forensic mortgage loan audits.”  Con artists claim that for an upfront fee, their audits can help you hold onto your home.  Don’t believe them.

In a new consumer alert, Forensic Mortgage Loan Audit Scams:  A New Twist on Foreclosure Rescue Fraud, the Federal Trade Commission provides consumers with information and legitimate resources to help save their homes.

To read the alert and learn more about how to spot and avoid forensic mortgage loan audit scams, go to:  http://www.ftc.gov/bcp/edu/pubs/consumer/alerts/alt177.shtm.

The Federal Trade Commission works for consumers to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them.  To file a complaint in English or Spanish, visit the FTC’s online Complaint Assistant or call 1-877-FTC-HELP (1-877-382-4357).  The FTC enters complaints into Consumer Sentinel, a secure, online database available to more than 1,800 civil and criminal law enforcement agencies in the U.S. and abroad.  The FTC’s Web site provides free information on a variety of consumer topics.




High-End Homeowners Falling Into Foreclosure Trap

Joseph Pisani from CNBC reports on a growing trend in the distressed real estate market.  More and more Luxury Homes (defined as homes with mortgages that are equal to or greater than $1,000,000) are falling into foreclosure.  According to Mr. Pisani, in February of 2010, 4169 homes were in some stage of foreclosure, which represented an increase of 121% versus last year.

Pisani also reports, “Data shows that that may be the case around the county. The 90-day delinquency rate on home loans worth over a million dollars hit a high in February at 13.3 percent, higher than the overall rate of 8.6 percent, according to real estate data firm First American CoreLogic. Foreclosure proceedings generally begin to start after a homeowner has been at least 90 days late on a mortgage payment, experts say”

An interesting observation from the article echoes what we have been saying for a very long time, ““Lenders are far more likely to go the short sale route," says Andrew LePage, an analyst at real estate research firm DataQuick. "There’s a lot more money at stake, and maintenance can be high if a foreclosure just sits there.”  Lenders don’t want high end homes back.  They weigh their bottom line down...they are difficult to sell...they are expensive to maintain etc etc.  

So if you are not focusing on the high end market, don’t you think that you should start?

High-End Homeowners Falling Into Foreclosure Trap

By: Joseph Pisani
CNBC News Associate

Heated pools, ocean views and media rooms are not what most people would expect to find in a foreclosed property, but more high-end homes—priced over a million dollars—have been falling into the hands of banks this year.

Foreclosures of homes worth over $1 million began increasing at the end of 2009, according to exclusive data provided by foreclosure tracking website RealtyTrac. Foreclosures reached a high in February 2010, the last month data is available, when 4,169 homes were somewhere in the foreclosure process; either having received a foreclosure notice, had an auction scheduled or the lender took ownership of the property. That’s a 121 percent increase from a year ago.

The deterioration comes just as housing experts say that foreclosures in the low- and mid- ends of the housing market are showing signs of stabilization.

“They were able to stave off foreclosure longer,” says independent real estate analyst Jack McCabe, CEO of McCabe Research and Consulting in South Florida. “Lower-end homeowners were the first ones to see the escalating foreclosures because they generally do not have the cash reserves or credit available that the luxury homeowners do. They had the ability to take their credit cards and pull out thousands of dollars while the lower end buyers were already tapped out.”

McCabe expects to see foreclosures in the high-end market to increase into 2011.

Though the RealtyTrac data is not available on a regional or metropolitan basis, anecdotal evidence indicates the problem is cropping up across the country. Of course, the high-end and luxury categories vary widely from market to market. In some suburban areas of the Northeast and California, for instance, million-dollar homes are fairly common, but nationwide, they represent only 1.1 percent of the overall housing stock.

“We have seen an in
crease, in the million-plus range, of the number of foreclosures and short sales in the greater Chicago area,” says Jim Kinney, vice president of luxury home sales at Baird and Warner.

He says that of the 295 million-dollar, single-family properties sold in the January-April period this year, 37 were either a foreclosure or short sale (when a bank and homeowner agree to sell the home for less than the loan is worth). During the same period a year ago only 10 of 231 fell into those categories.

In the Fort Myers, Fla. area, a second-home market for the wealthy, Mike McMurray of McMurray and Nette and the VIP Realty Group, says he has seen a few foreclosed homes on the market compared to none last year. He's currently showing a 4,800 square-foot, $3.65 million home on Captiva Island, where foreclosures are usually very rare. The bank-owned home has five-bedrooms and access to 150-feet of Gulf coast beachfront.

"There are more we see coming down the pipeline," McMurray says.

Data shows that that may be the case around the county. The 90-day delinquency rate on home loans worth over a million dollars hit a high in February at 13.3 percent, higher than the overall rate of 8.6 percent, according to real estate data firm First American CoreLogic. Foreclosure proceedings generally begin to start after a homeowner has been at least 90 days late on a mortgage payment, experts say.

One difference in the high-end market is that lenders are willing to do more to head off a foreclosure by either renegotiating the loan or accepting a short-sale transaction, which is essentially a last-ditch effort.


“Lenders are far more likely to go the short sale route," says Andrew LePage, an analyst at real estate research firm DataQuick. "There’s a lot more money at stake, and maintenance can be high if a foreclosure just sits there.”

A $1.15 -million condominium in Chicago in the landmark Palmolive Building started was initially offered as a short sale but , after a buyer did not materialize, is now owned by the bank , says Janice Corley, founder of Sudler Sotheby's International Realty who’s currently listing it. The condo has lake views and a long list of luxury-building amenities including a steam room, doorman and gym.

The rise in foreclosures has one Las Vegas real estate agent flying prospective buyers into the city via private jet for free. Luxury Homes of Las Vegas and JetSuite Air teamed up to offer the complimentary trip for buyers flying from Los Angeles to view three foreclosed homes priced between $4.9 and $6.1 million.

Agent Ken Lowman said he gave three tours over a one-week period and hopes to expand the offer to buyers from other West Coast cities.

There's just too much competition, says Lowman. “It takes an innovative approach like this to get results."

Nine years to dig out of home foreclosure inventory

Rocky Vega reports on a staggering figure.  Based on today's current glut of foreclosed homes that reside in the coffers of lenders around the world, it will take a staggering 9 years to clear the CURRENT inventory!  This doesn’t take into account the additional homes that are pouring into the trough on a daily basis.

This will affect consumers and real estate professionals alike.  While the government has chased several acronyms....I mean housing programs..around, Mr. Vega predicts that they will have little lasting affect on this debacle.

One solution is to use any means to keep properties out of foreclosures.  Methods such as short sales and loan modifications (ones that actually stick rather than tease) are examples.



Nine years to dig out of home foreclosure inventory
It may take nine more years for banks to dig out of the current home foreclosure backlog.



By Rocky Vega, Guest blogger / April 30, 2010

At this point there are so many bank-owned foreclosed homes that it would take almost nine years to clear out the housing inventory. That time frame doesn’t even begin to take into consideration the additional homes that are likely to also enter the backlog while the current inventory of foreclosed homes gets cleared out.

“How much should we worry about a new leg down in the housing market? If the number of foreclosed homes piling up at banks is any indication, there’s ample reason for concern.

“As of March, banks had an inventory of about 1.1 million foreclosed homes, up 20% from a year earlier, according to estimates from LPS Applied Analytics. Another 4.8 million mortgage holders were at least 60 days behind on their payments or in the foreclosure process, meaning their homes were well on their way to the inventory pile. That “shadow inventory” was up 30% from a year earlier.

“Based on the rate at which banks have been selling those foreclosed homes over the past few months, all that inventory, real and shadow, would take 103 months to unload. That’s nearly nine years.”

As we already know, this predicament already includes the government programs at work to artificially improve the situation. For example, the Home Affordable Modification Program, or HAMP, was shown a recent report from the Special Inspector General for the Troubled Asset Relief Program to be operating because, “supporting home prices is an explicit policy goal of the Government.” When this support slows down, and stops altogether, the foreclosed inventory could end up taking a lot longer than nine years to clear out.

Foreclosure Lawyers Face New Heat In Florida

Amir Efrati reports on a growing trend among high volume foreclosure mills.  A few weeks ago I reported on the Law Offices of David Stern and how a representative back dated a notarized document.  The second largest foreclosure mill in Florida, the Florida Default Group, is being accused of similar deeds.

According to Mr. Efrati, the Florida Attorney Attorney’s General’s office has launched an investigation of the Florida Default Group.  According to the AG’s website, it’s looking at whether the firm is “fabricating and/or presenting false and misleading documents in foreclosure cases.” It added: “These documents have been presented in court before judges as actual assignments of mortgages and have later been shown to be legally inadequate and/or insufficient.”

At issue is their relationship with a company called Lender Processing Services (LPS).  Apparently this company is called upon by the Florida Default Group to produce documents that show ownership interest by banks in mortgages.  LPS is under investigation by the Justice Department.


Foreclosure Lawyers Face New Heat In Florida

By Amir Efrati

These are precarious times for lawyers in the business of filing foreclosure cases for banks. This is particularly true in one of the epicenters of the foreclosure crisis, Florida.

As we’ve noted before, the feds in Jacksonville recently started a criminal investigation of a company that is a top provider of the documentation used by banks in the foreclosure process. And a state-court judge ruled that a bank submitted a “fraudulent” document in support of its foreclosure case. That document was prepared by a local law firm.

For more Law Blog background on the foreclosure mess in our nation’s courts, this post will help.

The news today: the Florida Attorney General’s office said it has launched a civil investigation of Florida Default Law Group, based in Tampa, which is one of the largest so-called foreclosure-mill law firms in the state.

According to the AG’s website, it’s looking at whether the firm is “fabricating and/or presenting false and misleading documents in foreclosure cases.” It added: “These documents have been presented in court before judges as actual assignments of mortgages and have later been shown to be legally inadequate and/or insufficient.”

The issue: judges are increasingly running into situations in which banks are claiming ownership of properties they actually don’t own. Some of them end up chewing out the lawyers representing the banks.

The AG’s office said Florida Default Law Group appears to work closely with Lender Processing Services — the company we referenced earlier that is being investigated by the Justice Department.

LPS processes and sometimes produces documents needed by banks to prove they own the mortgages. LPS often works with local lawyers who litigate the foreclosure cases in court. Sometimes those same law firms produce documents that are required to prove ownership.

We’ve reached out to Florida Default Law Group and LPS and will let you know if we hear back.

Man Facing Foreclosure Tries To Tear Down Home With SUV

Stephanie Sklar from New Carlisle OH report on what NOT to do when facing foreclosure!  The article describes a man that took his SUV and proceeded to destroy his house!  I guess he thought felt that if he couldn’t have it, the bank wasn’t going to get it either!  

While this is an extreme example is does demonstrate that many sellers do.  They strip fixtures (items that are physically attached to the house) from homes prior to the bank foreclosing on them.  The issue is that this practice is against the law.

So if a friend or client mentions this tact, explain to them what you have learned today.

Man Facing Foreclosure Tries To Tear Down Home With SUV
BY Stephanie Sklar


A New Carlisle man facing foreclosure, is also facing criminal charges, according to WDTN 2.Clark County officials said that Steve Doak attempted to tear down his Firwood Drive home after he found out that the bank was foreclosing on the property.“As far as I’m concerned I am not done yet,” Doak said on Wednesday. “Not until it’s laying completely on the ground.”

Deputies were called to Doak’s home on Tuesday following neighbors reporting that he was driving an SUV through his yard, colliding into fences and walls.

Officials described the scene as very dangerous. They said there were neighbors outside and, also, Doak could have hit gas or electric lines, potentially causing an explosion.

Doak is now charged with a handful of criminal charges, including inducing panic, disorderly conduct, driving under suspension, and reckless operation.“His actions last night were completely out of control and unwarranted,” said Sheriff Gene Kelly.

“This was conduct that was not called for.”Sheriff Kelly said he will have additional patrols around Doak’s home, making sure that he does not do any extra damage.

The investigation is ongoing and officials said that additional charges could be filed in the future.You can view the news coverage on the story in the video above.

Foreclosure rates highest in 5 years

Alex Veiga from the Associated Press reports on a record number of foreclosures during the first 3 months of 2010.  RealtyTrac Inc. reported that the number of foreclosures increased by 35% during the first quarter of 2010.  Houses that were in pre foreclosure jumped by 16% as compared to the same period in 2009.

A quote from the article reads, “We’re finally seeing the banks start to process the inventory that has been in foreclosure, but delayed in processing,” Sharga said. “We expect the pace to accelerate as the year goes on.”  What they are referring to is the “shadow inventory” that the banks have been sitting on.  The article is also quoted, ”The Obama administration’s $75 billion foreclosure prevention program has only been able to help a small fraction of troubled homeowners.”

So, unfortunately, it appears that the bloodbath is going to continue.  Stay close to those that are, or will be, in need.

Foreclosure rates highest in 5 years

ALEX VEIGA
AP Real Estate Writer
Published: Friday, April 16, 2010 9:46 AM MST


LOS ANGELES — A record number of U.S. homes were lost to foreclosure in the first three months of this year, a sign banks are starting to wade through the backlog of troubled home loans at a faster pace, according to a new report.

RealtyTrac Inc. said Thursday that the number of U.S. homes taken over by banks jumped 35 percent in the first quarter from a year ago. In addition, households facing foreclosure grew 16 percent in the same period and 7 percent from the last three months of 2009.

More homes were taken over by banks and scheduled for a foreclosure sale than in any quarter going back to at least January 2005, when RealtyTrac began reporting the data, the firm said.

“We’re right now on pace to see more than 1 million bank repossessions this year,” said Rick Sharga, a RealtyTrac senior vice president.

Foreclosures began to ease last year as banks came under pressure from the Obama administration to modify home loans for troubled borrowers. In addition, some states enacted foreclosure moratoriums in hopes of giving homeowners behind in payments time to catch up. And in many cases, banks have had trouble coping with how to handle the glut of problem loans.

These factors have helped slow the pace of foreclosures, but now that trend appears to be reversing.

“We’re finally seeing the banks start to process the inventory that has been in foreclosure, but delayed in processing,” Sharga said. “We expect the pace to accelerate as the year goes on.”

In all, more than 900,000 households, or one in every 138 homes, received a foreclosure-related notice, RealtyTrac said. The firm based in Irvine, Calif., tracks notices for defaults, scheduled home auctions and home repossessions.

Homeowners continue to fall behind on payments because they’ve lost their job or seen their mortgage payment rise due to an interest-rate reset. Many are unable to refinance because they now owe more on their loan than their home is worth.

The Obama administration’s $75 billion foreclosure prevention program has only been able to help a small fraction of troubled homeowners.

About 231,000 homeowners have completed loan modifications as part of the Obama administration’s flagship foreclosure prevention program through March. That’s about 21 percent of the 1.2 million borrowers who began the program over the past year.

But another 158,000 homeowners who signed up have dropped out — either because they didn’t make payments or failed to return the necessary documents. That’s up from about 90,000 just a month earlier.

Last month, the administration expanded the program, launching a plan to reduce the amount some troubled borrowers owe on their home loans and give jobless homeowners a temporary break. But the details of those programs are expected to take months to work out.

The states with the highest foreclosure rates in the first quarter were Nevada, Arizona, Florida and California, with Nevada leading the pack, RealtyTrac said.

Rising home prices and speculation fueled a wave of home construction there during the housing boom. But now the state, particularly around the Las Vegas metropolitan area, is saddled with a glut of unsold homes.

Still, the number of homes in Nevada that received a foreclosure filing dropped 16 percent from the first quarter last year.

All told, one in every 33 homes in Nevada was facing foreclosure, more than four times the national average, RealtyTrac said.

Foreclosure filings rose on an annual and quarterly basis in Arizona, however.

One in every 49 homes there received a foreclosure-related notice during the quarter.

Florida, meanwhile, posted the third-highest foreclosure rate with one out of every 57 properties receiving a foreclosure filing.

California accounted for the biggest slice overall of homes facing foreclosure — roughly 23 percent of the nation’s total. One in every 62 properties received a foreclosure filing in the first quarter.

Homeowners face foreclosure after told to stop paying

Lita Epstein brings us an article that hits home.  On a very frequent basis, home owners are being told by lenders and/or servicing companies to “stop paying your mortgage or your loan modification won’t be considered.”  The problem is that very few loan modifications are getting approved.  Because very few get approved and because they take an inordinate amount of time to process, guess what is happening?  You guessed it, the sellers credit is getting wrecked due to the missed payments and the house moves closer and closer to foreclosure!

Lita states the obvious but I want to reinforce one of the points.  Nothing is guaranteed unless you have it in writing.  Remember, servicing companies get paid when they service something.  When the seller goes behind in their payments, guess what?  The servicing companies have to service the delinquent loan therefore they get paid!

The article points out what I have been an advocate of:  Get an attorney on your side.  Let the attorney do battle with the lenders and the servicing companies.  Any fee paid should be worth its weight in gold!

Homeowners face foreclosure after told to stop paying

Banks dragged their feet for months now. They told people that before they can get help they must stop paying their mortgages, so they can qualify for a loan modification. They eventually even sped up the process of giving people temporary modifications.

Now they're starting the final round: foreclosing on homes even after people were promised a modification. Foreclosure problems are reported in almost every state, but the most in depth report was done by The Chicago Reporter.Melissa Huelsman, who specializes in the areas of predatory lending/mortgage fraud lending litigation and foreclosure rescue scam litigation in Western Washington, told me that "unless you have something in writing from the bank that says they will not foreclose on your home," you can't believe the person on the telephone. Only a piece of paper promising you that the bank will not foreclose will protect you protect from foreclosure. When you start the modification process you do sign a piece of paper acknowledging that the foreclosure process can proceed if you fail to get a modification.

Huelsman thinks that if you're having trouble making payments your first call should be to an attorney who specializes in predatory lending or foreclosure rescue. She said there are attorneys taking cases at reduced fees or pro bono in almost every state. You can also make contact with a HUD housing counselor. She definitely does not think you should try to go it alone with the banks. The National Association of Consumer Advocates can help you locate a lawyer near you. Even if you started the modification process, it's not to late to seek help from a lawyer or HUD housing counselor.

Huelsman explained you need to work with an attorney in your state because each state has different foreclosure laws. In fact 35 states allow non-judicial foreclosure, so you won't even get your day in court. Foreclosure and mortgage modification have an "entire vocabulary all its own that people aren't used to. It's this lack of understanding that gets people into trouble," she explained. She also said if there is a second lien holder, they can obstruct the process.

She's had several run ins with Chase and its chairman and CEO Jamie Dimon. She thinks, "Mr. Dimon will spend the bank's money to fight rather than work out solutions." I found that to be true when Chase told me it won't consider principal reduction, even though all other major banks now do put that on the table.

Your state may even offer foreclosure mediation programs. You can find out more about the 26 programs now in operation working with the National Consumer Law Center (NCLC) at the Center's Web site.

In addition to the foreclosure mediation programs, NCLC, with its co-counsel, filed four class action suits on behalf of Massachusetts residents to challenge the failure of Wells Fargo Bank, Bank of America, J.P. Morgan Chase Bank and IndyMac Mortgage Servicers/OneWest Bank to honor their agreements with borrowers to modify mortgages and prevent foreclosures under the United States Treasury's Home Affordable Modification Program ("HAMP").

NCLC says, "These complaints are filed with the United States District Court for the District of Massachusetts and assert claims for breach of contract, breach of the implied covenant of good faith and fair dealing and promissory estoppel under Massachusetts common law arising from the financial institution's alleged failure to keep its promises to modify eligible loans to prevent foreclosures against homeowners who have lived up to their end of the bargain as required by HAMP."

Clearly, you should not try to go it alone with the banks. They have lawyers on the payroll and you have little chance of being able to defend yourself. Don't wait until its too late and the bank already completed its foreclosure process while you patiently wait for an answer to your modification application.

Foreclosed? Here comes the tax man

This article from Les Christie is a very timely article.  A question that needs to be addressed BEFORE the short sale starts, is one of taxation.  If you are purchasing a short sale or if you are considering listing a short sale, you should require that the seller seek advice regarding the tax effects of a short sale.  They need to make an educated decision to pursue a short sale PRIOR to starting the process.

I would suggest that you click the link that takes you to the article.  Knowing a little will save you allot!

Foreclosed? Here comes the tax man

By Les Christie, staff writerApril 14, 2010: 5:24 PM ET


NEW YORK (CNNMoney.com) -- Did you lose your house to foreclosure this year? Did your lender forgive some of your mortgage debt because you sold it for less than it was worth? If so, you could be facing a big tax hit.

It is IRS policy to tax forgiven debt you are personally responsible for as if it is income. Say, for example, your credit card company settled a $10,000 debt for 50 cents on the dollar. You'd have a debt forgiveness of $5,000, which the IRS would count as income, just like your wages.

The same policy held true for most mortgage debt until 2007, when Congress passed the Mortgage Forgiveness Debt Act. That ended the liability for many homeowners -- but not all.

In general, if you lose your home to foreclosure or short sale, where you sell your home for less than you owe, the IRS won't add insult to injury by counting the difference as income. At least until 2012.

There are four major exceptions to the rule:

1. You did a cash-out refinance and splurged.

Many homeowners took cash out when they refinanced their homes and used the extra dough to pay for new cars, boats or vacations. Say you did that and then got into trouble, losing the house through a foreclosure or short sale. Even if your lender waived the remaining debt, the IRS will treat as income the portion of the forgiven debt that you took out as cash and spent. Only the funds used to actually improve your home won't be taxed. Yes, even if you spent the money on paying off your student loans or credit cards.

The IRS' reasoning is that only the money spent on home improvement actually added to your home's value. And that, presumably, diminished the difference between what you owed on your mortgage and the value of your home when it was foreclosed.

Beware: Some lenders made refinancing offers contingent on homeowners paying off credit card debt, according to Kent Anderson, a Eugene, Ore.-based attorney and tax expert. If you took one of those deals, the refinance money will be reported to the IRS and you will owe taxes on it.

2. You have a home-equity line of credit.

During the boom years, many homeowners tapped soaring home equity to make all sorts of consumer purchases. But the same rules that apply to refinancings also apply to home-equity loans: The IRS will only forgive the tax liability if the loan money was spent improving your home. And, tax experts advise, you'll need to show receipts to prove you did.

3. You lost your vacation home or investment property.

So the market tanked and you lost your vacation home. Unfortunately, if you didn't use it as your primary residence for at least two of the previous five years, you're going to pay the tax man.

More common, however, may be the case of investment properties gone sour. During the housing boom, buying homes for investment purposes soared, accounting for 28% of all sales during 2005, according to the National Association of Realtors. (Vacation homes made up 12%.) And many of these purchases were made with little down payment.


When the bust hit, second home prices cratered. The median price paid for investment properties fell 43% to $105,000 in 2009, from $183,500 in 2005, according to NAR. For vacation homes, the median price paid dropped 17% to $169,000.

If an investor bought a property in 2005 at the median price and sold it in 2009, he could have run up $75,000 or so in forgiven debt. If the investor is in the 25% income tax bracket, that would add nearly $19,000 to their tax liability. Ouch!

4. You owned a multi-million-dollar home.

It may be hard for Americans struggling in this weak economy to sympathize with anyone wealthy enough, at one time, to afford a multi-million-dollar home. But owners losing one could be on the hook for a huge tax bill.

Only the first $2 million in forgiven debt will be voided under the relief act; all the overage is taxable as income.

So, say, for example, you're Scarlett Johansson. You paid $7 million for your Hollywood Hills villa in 2007. (With a 100% mortgage; this is hypothetical, remember.) But now, you have it on the market for $4.59 million.

Say you can't unload it, your movies tank and you have to a short sale. (Hey, it happened to Nicholas Cage; he went into foreclosure.) If you sell it for $4 million, leaving a $3 million balance, the IRS would forgive the first $2 million. But the remaining million? You better hope you have a good accountant and a lot of deductions.

The good news? Even if you fall under any of these four scenarios, you may have a way out, according to Anderson. "If the taxpayer was insolvent at the time of the foreclosure, the forgiven debt can be excluded for tax purposes," he said. "It can also be discharged in a bankruptcy and approved by court order."

And then there is California
Until last week, California still made you pay taxes on forgiven mortgage debt.

The state, which has endured some of the worst price declines and foreclosure rates in the nation, previously authorized relief, but only for the 2007 and 2008 tax years. But there were struggles trying to extend the benefit through 2009.

One attempt at passing an omnibus "conformity" bill resulted in a veto by Gov. Schwarzenegger for reasons having nothing to do with mortgage debt forgiveness. The governor objected to a different provision covering erroneous tax reporting by businesses.

But the problem was worked out and a new bill signed by Schwarzenegger just before the tax-filing deadline.


Why a short sale often takes so long
REAL ESTATE: It's better for some banks to 'delay and pray,' brokers say

Tom Bayles from the Sarasota Herald Tribune brings us an enlightening article describes the plethora of reasons as to, “Why a short sale often takes so long” to complete. He touches on the obvious ones which include:
• The banks are being flooded by short sale requests • The banks are under staffed • The existence of multiple liens on the house can drag a short sale out

He also touches on a few that are not so obvious:
• Loans are bundled with other loans and sold off as a portfolio that can include hundreds of individual notes. The ultimate decision to approve a short sale is now subjected to yet another layer which is the investor • Mix this in with Private Mortgage Insurance and you have another approval layer to deal with! • Another reason is better expressed through direct quotes from the article, “Some banks are urging federal regulators not to come in and force them to admit all of their problem loans, he said. "Most banks are trying to buy time. It is called the 'delay and pray strategy,'" Thomas said. "You delay valuating the house at market and pray the value will come back. If you mark it down for short sale and do that deal you have to take a hit to your capital." • Then there is “extend and pretend” This is where the bank will extend the term, lower the interest rate or grant a forbearance to the home owner. This strategy is designed to extend the inevitable so the bank doesn’t have to show the bad debt on their books. This happens frequently with higher end homes.

So now you know! Short sales can take a LONG time!

Why a short sale often takes so long
REAL ESTATE: It's better for some banks to 'delay and pray,' brokers say
HERALD-TRIBUNE ARCHIVE / 2010
By Tom Bayles


Nothing is more mercurial in today's Southwest Florida real estate scene than short sales.

No one can fully explain why it remains such a difficult task to complete one short sale -- the process by which a lender agrees to accept less than is owed on a home -- while another sails through. The only certainty as to why lenders do what they do: their bottom line.

Sometimes short sales bring more cash than foreclosures, and vice-versa. Which one it is depends on a host of factors, not the least of which is whether a lender has an agreement with the Federal Deposit Insurance Corp. for reimbursement of most losses on a bad loan like those sold short.

Multiple liens on a house and fat home-equity lines of credit that must be dealt with first are easy explanations for why a short sale languishes. Another is that lenders -- historically only handling a few cases each year -- are now overwhelmed with hundreds or more in a month, a logjam that builds upon itself.

Then there are the complexities of the post-boom world: loans that have been bundled with hundreds of others, then securitized and sold to an investor, and scores of Florida banks on the verge of insolvency that do not want to account for losses on a short sale.

Even with those hurdles, there are short sales that can take 90 days or less from offer to consummation.

Simply put, the decision an individual lender or investor group makes -- even if that is not to make a decision -- is laden with a convoluted mix of what-ifs, if-thens, no-ways and sure things.

"You never really know why," said Chip Waterman, a Coldwell Banker agent who has specialized in short sales and foreclosures for decades. "You just know that you are not getting a response."

'The logjam'

The Southwest Florida real estate community is keenly focused on short sales because distressed properties are the new normal.

Roughly 4,000 Florida Realtors have completed a short sale certification program since the National Association of Realtors launched it in October.

Nearly half of transactions in the region covered by the Sarasota Association of Realtors involve distressed properties. The proportion is about the same in Manatee.

Those high percentages of distressed sales is the single biggest factor holding back any significant gains in home prices, Realtors say. The enormous backlog of distressed properties also will govern any hope of a return to equilibrium in sales.

Mortgage lenders and servicers were caught unequipped to deal with the crush, said Mickey Ross of National Quick Sale, a Jacksonville-based company specializing in short sales.

"The biggest problem is the logjam," Ross said. "It's like you've got 100,000 people in a football stadium and nobody expected them all to go out the same door at the same time."

'Maniacal problem'

In the worst straits are those borrowers, usually through sub-prime loans, who have had their mortgage wrapped into an investment pool like those held by Citigroup and Bank of America, Ross said.

About 25 percent of boom-time mortgages are contained in such securities. Few of those securities have even basic guidelines for short sales, he said.

"They got into some pretty crazy financial gymnastics," Ross said. "If your loan is in one of those groups it could be very challenging to get a short sale approved."

The process of bundling notes and selling them to investors as a security was a boom-time staple, said Irv DeGraw, a banking professor at St. Petersburg College. AIG, Citigroup, Lehman Bros. and others backed, or insured, these so-called "credit-default swaps." When the housing market began tanking in 2006 and foreclosures began piling up, pay-outs to the investors skyrocketed.

Eventually the federal government stepped in with the multibillion-dollar bailout that shook America's consciousness.

"It was an absolutely maniacal problem," DeGraw said. "Nobody understood exactly what we were dealing with and then it exploded. Those taking the risk did not understand the amount of risk they were exposed to."

In a counter-intuitive move, many investment groups preferred a complete collapse of the security rather than agreeing to short sales.

"When the mortgages start to get into trouble an insurance policy kicks in and they are made whole," DeGraw said. "If they grant a short sale they are not made whole. It's one of these bizarre nightmare scenarios where people got too sophisticated."

'Delay and pray'

Thomas Budzyn, past president of the Mortgage Bankers Association of Southwest Florida, acknowledged the nightmare scenario that banks are facing with these bad loans.

"You are going to see more banks go out of business this year than in the last ten years combined," Budzyn said, noting that dozens of banks nationwide have failed so far this year.

In the midst of that crisis, it is somewhat understandable that getting a short sale done is often difficult.

"Some of the short sale offers I have seen, for example, are on a loan of $400,000, and the offer comes in at $125,000," Budzyn said. "Some of the banks would rather wait until a more reasonable offer comes in rather than take that much of a hit upfront."

Many are loath to approve a short sale because they stand on perilous footing -- one in four by the count of Ken Thomas, a Miami-based expert on Florida banking with a doctorate in economics.

"The banks in Florida are having a very difficult time because they make loans on real estate and we are ground zero for the collapse," Thomas said. "Instead of being hit by a Category 5 hurricane we've been hit with a Category 5 mortgage crisis."

Some banks are urging federal regulators not to come in and force them to admit all of their problem loans, he said.

"Most banks are trying to buy time. It is called the 'delay and pray strategy,'" Thomas said. "You delay valuating the house at market and pray the value will come back. If you mark it down for short sale and do that deal you have to take a hit to your capital."

Others employ what Thomas calls the "extend and pretend" strategy to keep regulators from noticing a delinquent mortgage, whether that be lengthening the term, lowering the interest rate or allowing a distressed homeowner to skip a few payments.

"Banks will say there is nothing wrong with that because we have one on the books for a million dollars and the market will come back in a year, so why we should we hurt our shareholders," Thomas said.

Banks are hoarding assets to avoid the fate that Thomas described, said Matt Augustyniak of Bradenton's Horizon Realty, Horizon Title and Horizon Financial.

"They have to show as much assets as possible to balance the books," Augustyniak said. "That is why these banks are dragging their feet on short sales."

FDIC cash

When Bank A takes over failed Banks B's assets, usually laden with risky mortgages, the FDIC often agrees to a "loss-share" agreement to minimize the acquiring bank's risk. The agreements cover anywhere from 80 percent to 95 percent of any losses on the bad loan portfolio.

In some cases, that prods lenders to agree to a short sale, especially if they can make more with the FDIC cash than the banks would if the house fell into foreclosure.

But the opposite can be true as well, with the lender actually making more from a foreclosure if the loan has a private mortgage insurance payout and can be resold at a good price.

The Committee for a Responsible Federal Budget, a Washington, D.C.-based think-tank, reports that the FDIC has taken over 203 failed banks since 2008, many with a loss-share agreement. Total deposits so far this year equaled $18 billion. In 2008, it was $389 billion, and at an estimated cost to the FDIC of $64.4 billion.

Seventy-eight percent of the existing loss-share agreements have no deductible, so the FDIC starts paying banks for their losses immediately.

For single-family mortgages, the loss-share agreement stays in effect for 10 years and covers losses when the loan is modified, foreclosed upon, when a second mortgage is charged off, or when the property is sold short.

"It has helped us sell a considerable amount of assets that we normally would have had to keep," said FDIC spokesman David Barr. "We audit the loss-share agreements to look that they are modifying the loans in a timely manner and not just opting for foreclosure or short sale. They have to choose the option that makes the most economic sense to the FDIC."

'Little incentive'

Despite the efforts of the Obama administration to speed and streamline the short-sale process, experts say banks do whatever will provide the best outcome for their bottom lines.

Charryl Youman, a sales agents with Prudential Florida Realty in Venice, has seen that firsthand.

What the banks are often doing by scuttling a short sale seems -- at first -- to make no sense, Youman said.

She had a buyer put in three offers over the course of 240 days on a two-bedroom, two-bath home selling short for $82,000. The buyer gave up.

"I never did hear from the bank," Youman said. "I did, however, hear from the foreclosure listing agent to take off my lockbox because the bank now owned the property. They sold it for $48,000."

But it turns out the lender may have played the game very well, she said.

The bank received mostly interest payments for three years before the buyer defaulted. It also received the payout from the private mortgage insurer, which was about $50,000, and then the proceeds of the foreclosure sale.

"The bank walked away with $98,000 -- and the three years of mortgage payments," Youman said. "The bank is not really losing much and sometimes can actually make money on these deals -- and so they can have little incentive to take a short sale offer."

Foreclosure firm's revenues jump to $260 million

Michael Sasso from the Tampa Tribune brings us a report regarding the law offices of David Stern. David Stern is Florida’s top law firm that represents banks and their investors who are foreclosing on peoples homes. When I say “top” I am not implying that they are the best; they are the largest. They take in 5000+ files per MONTH!

Based on the headlines, one would think that the article focuses on the financial exploits of David Stern. While this is certainly part of the article, a more interesting tid bit involves fraud. Apparently, a Pasco judge has accused the law firm of forging a notary stamp. The firm claims that “it was a simple mistake.” That’s laughable!

Why is this article significant to you? If you demand that a law firm represent the seller in your short sale transaction, don’t you think the law firm is going to be aware of these deeds of mistrust? As realtors, don’t rely on those silly little addendums that you received when you got your SDPE. A good attorney will blow these up in court. Do the right thing. Make sure the seller is represented by counsel.

Foreclosure firm's revenues jump to $260 million
By MICHAEL SASSO | The Tampa Tribune

TAMPA - The housing crisis has been very good for Florida's biggest processor of foreclosure lawsuits: Its revenues have skyrocketed to $260 million since the housing bust began.

In recent years, the Law Offices of David J. Stern, a Broward County-based foreclosure law firm, has become the largest filer of foreclosure suits in Florida. It also is the biggest filer in Hillsborough County, according to local court records.

Stern has taken an unusual step by separating his firm's lawyers from its back-office clerks, title insurance workers and other non-legal staff. Stern spun this back-office staff into a publicly traded company called DJSP Enterprises, which must file financial reports with the Securities and Exchange Commission.

While it's separate from Stern's law practice, Stern is still chairman and chief executive officer of DJSP Enterprises, and Stern's law practice relies on DJSP for everything that doesn't require a lawyer's hand.

This spin-off provides a glimpse into Stern's foreclosure empire.

According to DJSP Enterprises' recent annual financial report, the back-office operation had profits of about $44.6 million in 2009 on revenues of $260.3 million. That means the company's revenues have multiplied by a factor of six as the foreclosure crisis got worse.

In 2006, for example, the company reported profits of $8.6 million on revenues of $40.4 million, the company's report says.

The SEC report does not include financial information for Stern's separate law practice, which is not publicly traded and does not report its financial information.

DJSP's chief financial officer, Kumar Gursahaney, confirmed the revenue and profit figures in the company's SEC report. Stern could not be reached for comment.

In its financial report, DJSP says the booming number of foreclosures in Florida fueled its growth. So, too, did the huge backlog of homes that banks have taken back from delinquent homeowners. DJSP Enterprises helps lenders dispose of these homes.

Today, it processes more than 5,800 foreclosure files per month and more than 70,000 per year, its SEC filing says. As of Dec. 31, the company had 950 employees and offices in Plantation and Louisville, Ky. Also, DJSP uses outsourced workers in Manila, the Philippines.

DJSP's stock trades for $12.05 per share on the Nasdaq-GM exchange.

Still, even with its boom, companies such as DJSP and its chief customer, the Law Offices of David J. Stern, are getting more attention from judges lately.

Dubbed "foreclosure mills," these firms are known for a factory-like process where most of the legwork of filing lawsuits, researching titles and other duties are handled by clerks and paralegals rather than lawyers.

Some judges around Florida have criticized foreclosure mills for sloppy legal work and cutting corners.

Last week, The Wall Street Journal wrote about Lynn Tepper, a circuit court judge in Pasco County who accused the Law Offices of David J. Stern and a banking client of submitting a fraudulent document.

According to the article, the judge found Stern's office presented a mortgage document with a falsified notary stamp. In an interview with The Tampa Tribune Monday, Tepper said it appeared the document had been backdated in order to give a bank legal standing to foreclose on a home.

Forrest McSurdy, the in-house legal counsel for Stern's law practice, told the Tribune it was not intentional.

"Really it was a mistake by the notary and it was something that was not caught at the time of the hearing," McSurdy said.

Tepper believes otherwise.

"This isn't a clerical error," the judge said. "It wasn't a mistake. A notary isn't supposed to notarize that someone swore an instrument in front of them if, in fact, they didn't sign it in front of them."

Foreclosures Hit Rich and Famous

Craig Karmin and James Hagerty from the Wall Street Journal report on a trend that is spreading across the countryside. Houses with mortgages of $5M or more have seen a dramatic rise in mortgage defaults. People used to make money and could afford these gargantuan money pits but, with job cuts and a struggling economy these properties are going down the tubes, like their lower cost brethren. The article states, “In February alone, 352 homes nationwide in this category were scheduled for foreclosure auction, the final step before a bank acquisition. That is the largest monthly number of these so-called notices of sale since the financial crisis began. By comparison, in all of 2009, there were 1,312 such notices.” Astonishing numbers!

I think that this is the beginning of a trend. Why? Because wealthy people have the means to pump good money after bad to keep a house out of foreclosure. But, the money will eventually run out. Either that, or the home owner will make a business decision and engage in a strategic foreclosure. Either way, there may be opportunity heading your way.

Foreclosures Hit Rich and Famous
By CRAIG KARMIN And JAMES R. HAGERTY

The rich and famous now have something in common with hundreds of thousands of middle and lower-class Americans: The bank is about to take their homes.

Houses with loans of $5 million or more will likely see a sharp rise in foreclosures this year, according to a RealtyTrac study for The Wall Street Journal.

Just this week, a Tudor mansion in Bel-Air belonging to film star Nicolas Cage was in foreclosure auction and reverted to the lender. On Wednesday, Richard Fuscone, a former top Wall Street executive, declared personal bankruptcy, forestalling a foreclosure auction that had been scheduled this week on his 14-acre Westchester mansion. Last month a Manhattan condominium owned by Italian film producer Vittorio Cecchi Gori was sold in a foreclosure auction for $33.2 million.

In February alone, 352 homes nationwide in this category were scheduled for foreclosure auction, the final step before a bank acquisition. That is the largest monthly number of these so-called notices of sale since the financial crisis began. By comparison, in all of 2009, there were 1,312 such notices.

Economists say the super-wealthy are among the last to lose their homes in a mortgage crisis because they usually have high savings, better access to credit and other means for staving off foreclosure. But many of them work in financial services and other industries hit especially hard by the crisis, and have seen their wealth shrink in the market crash.

While the numbers are modest compared with foreclosures at other income levels, they suggest the possibility of a sudden spike in bank takeovers of the wealthiest Americans' property. Typically half the notices of sale result in homes being turned over to creditors, though the figure could be slightly lower for the richest Americans who have more financial options, according to Daren Blomquist at RealtyTrac.

Big borrowers are more likely to default than ordinary people, according to data from First American CoreLogic. Its loan database, reflecting more than 80% of the overall home-loan market, includes 1,700 loans with balances of $4 million or more. About 14.8% of those loans were 90 days or more overdue at the end of January, compared with 8.7% for all home loans tracked by First American. Sam Khater, a senior economist at First American, said the bigger borrowers may be more prone to stop making payments when they have lost all their home equity.

Mr. Fuscone, Merrill Lynch's one-time head of Latin America, put his mansion up for sale in November, asking $13.9 million. But he couldn't find a buyer.

The court had scheduled a foreclosure auction for Thursday for the 18,471-square-foot mansion—with two swimming pools, two elevators, six fireplaces, 11 bathrooms and a seven-car garage. The personal bankruptcy filed in U.S. Bankruptcy Court Wednesday temporarily freezes the foreclosure process.

Reached by phone, Mr. Fuscone declined to comment. Brokers and real estate tracking companies say that his home is one of the most expensive properties to face foreclosure proceedings yet.

The phenomenon is not limited to the New York area. Banks have taken over homes with loans of $5 million or more in Georgia, North Carolina and Colorado, RealtyTrac says.

Mr. Cage had tried to sell his 11,817-square-foot Bel-Air property for $35 million but failed to get any offers, said James Chalke, a real-estate agent who had the listing. At a foreclosure sale Wednesday, the property attracted no bids from investors and so was acquired by the foreclosing lender. Annett Wolf, a spokeswoman for Mr. Cage, said he had no comment.

A representative of Mr. Cecchi Gori, producer of more than 200 films including "Il Postino" and "Life is Beautiful," said his financial situation is improving.

In Florida's Miami-Dade County, the three largest foreclosure filings initiated against homes in the past six months involved a 4,655-square-foot home in Sunset Islands; a 8,443-square-foot house in Coral Gables; and a condo in Miami Beach, according to Peter Zalewski, a principal of Condo Vultures. All three had mortgages of $3.5 million to $4 million.

Mortgage defaults began to surge in late 2006, mostly among borrowers with subprime mortgages, those for people with weak credit records or high ratios of debt to income.

Over the next few years defaults spread rapidly to better-heeled borrowers, especially those who got loans without documenting their income. At the end of 2009, nearly eight million households, or 15% of those with mortgages, were behind on mortgage payments or in the foreclosure process.

Wealthy people have the means to stretch out the distress process, sometimes for years.

"It's very, very difficult for these people to believe they've had such a severe reversal of fortune," says Maggie Navarro, a real-estate agent in Pasadena, Calif.

Marc Carpenter, a San Diego-based foreclosure specialist, adds that while it's much harder for potential buyers to get loans, there are also fewer buyers who can pay for top-dollar properties. "The upper end is definitely a lagging indicator," he says.

In his bankruptcy filing, Mr. Fuscone provided a list of his debts, including ones to the Greenwich Country Day School, American Express, Mercedes-Benz, a local hardware store, a pet store, and Richards of Greenwich, a fine-clothing store.

"My background is in the financial-services industry and I have been personally devastated by the financial crisis which came to a head in March 2008," Mr. Fuscone said in his bankruptcy declaration. "I have been sued by Patriot National Bank" as part of a foreclosure action. "I currently have no income for the 30-day period" following his bankruptcy petition.

C.W. Kelsey, owner of Greenwich Hardware, was among the local merchants owed money by Mr. Fuscone, though he wouldn't say how much.

"Traditionally, the majority of our credit problems were contractors," he said. "Now there are people you'd never expect two or three years ago to have problems, who live in multimillion dollar homes."

—Nick Timiraos and Josh Barbanel contributed to this article.

TO HAFA OR NOT TO HAFA...THAT IS THE QUESTION!

Our government recently introduced yet another acronym....HAFA or Home Affordability Foreclosure Avoidance . People praise this as a new foreclosure prevention program when, in fact, it is a revision to HAMP or the Home Affordability Modification Program.

Jeff Watson, a short sale attorney, has put together a video blog which breaks down what HAFA is and what it is not. I will include a link to this video at the end of this commentary. According to Jeff, HAFA:
• The home owner decides whether they will participate in HAFA, not the lender
• Not all lenders have opted into the HAFA program
• The lender dictates what price the house is listed for, not the homeowner
• There is no guarantee from the government that the house will sell
• The homeowner must make mortgage payments on the 1st of every month until the house is sold that equals 31% of the gross monthly income of the mortgage holder
• The homeowner must be able to provide the new buyer with clear title. If there are junior liens (mortgages, HELOCs, HOA liens, contractor liens, IRS liens etc. etc.), the homeowner must either pay them in full or negotiate short payoffs with a complete settlement and satisfaction with no deficiency judgment.
• HAFA lets homeowners offer up to 3% of the unpaid principal balance on a lien as full settlement. SO if a homeowner owes $10,000 to a lien holder, they are allowed to offer the home owner a maximum of $300 to fully settle the debt!!
• The homeowner is allowed a maximum of $3000 to fully SETTLE all junior liens!
• The person that buys a HAFA house can’t resell the house for 90 days.
• HAFA gives the government the right to collect very sensitive information from the home owner (see video)
• The homeowner has 120 days to sell the house at the banks price. If they don’t sell it in 120 days they can apply for a longer sales period not to exceed 365 days.
• If they can’t sell the house in 365 days, the homeowner must agree to a deed in lieu if the short sale doesn’t work
• Regarding the infamous “10 days to respond”, this have very specific criteria, terms and conditions (see the video)

So you decide, if HAFA is beneficial to the home owner. The link to Jeff's video (titled Jeff Watson Breaks Down HAFA)


Above water?
The Washington Post brings us another article about yet another “refinement” to the Treasury Department's Home Affordable Modification Program (HAMP) program. The refinement involves forbearances for those that are recently unemployed. They also involve programs that will encourage lenders and loan servicing companies to write down principal balances in order to make a mortgage more affordable.

What these programs don’t address is our bulging unemployment rates. If the government spent as much time coming up with ways to lessen unemployment as they do in coming up with the latest acronym of the month, we might be some where! Wait until you read one of my next commentaries on HAFA...it’s laughable!

Above water?
Sunday, March 28, 2010

DESPITE RECENT, tentative signs of stabilization, the housing market remains fragile, and that translates into insecurity or outright hardship for millions of Americans. Twenty-four percent of all homeowners with mortgages are "underwater," meaning that they owe more on the residence than it is worth. For those borrowers who are unemployed, this situation is especially devastating: They can't tap equity to deal with expenses, and they often can't sell if a job offer requires them to move. In many cases, it's cheaper to walk away and let the bank foreclose than to keep up monthly payments.

The Obama administration, like the Bush administration before it, faces a clamor for relief. But if there were an easy solution to the foreclosure crisis, someone would have found it already. Loan modifications remain the best option, but targeting them to just the right population so as to avoid rewarding irresponsible behavior is a lot easier said than done. Small wonder that the administration's signature program, the Treasury Department's Home Affordable Modification Program (HAMP), provided permanent payment relief to only 116,000 of 1.7 million potentially eligible cases through January.

On Friday, the administration announced a plan in response to those who say it must do more. Though billed in some headlines as a big expansion of mortgage relief, the plan is probably better thought of in the term used by the administration's own news release: a "refinement" of the existing program. The major changes involve more temporary loan forbearance for unemployed borrowers and incentives for creditors to offer write-downs of loan principal for underwater borrowers, instead of reductions in interest only. But these new steps still affect only the original HAMP target population of roughly 4 million households and -- crucially -- do not require principal write-downs as many of the administration's critics had urged. The Obama administration rightly resisted mandatory loan-balance reductions, which could have triggered unmeetable demands for similar breaks from other homeowners.

Taken together, the changes may indeed prevent a few more foreclosures than would have otherwise occurred. But the sad reality is that new foreclosures were far outpacing new loan modifications before the new plan came out, and probably will continue to do so until the wider economy begins to produce new jobs and stable, affordable mortgage rates. Economic weaknesses and government debt are what really ails the housing market, and for those ills, even the best-designed mortgage relief is a Band-Aid.

Foreclosure Properties May Take 5 Years To Be Absorbed Into Market

Cheryl Reams brings us an article about a subject that people have heard about but probably know little about. That subject is the “Shadow Market” of houses that will continue to depress out housing market for years to come.

Cheryl points out that , “The shadow inventory is composed of homes with delinquent loans, bank owned properties and foreclosures that are not yet accounted for under banking regulations. Accounting rules allow banks to keep foreclosed properties off their balance sheets until a property is resold. The record number of homes in the shadow inventory will pressure housing prices in the majority of markets, but should not depress prices as much as earlier levels, according to analysts.” She quotes that there are currently 6 million properties in this inventory.....and counting......foreclosures aren’t stopping anytime soon.

Ms Reams mentions that in some states, lenders are more than 30 (thirty!) months behind in processing properties that they have taken back in foreclosure proceedings. This number continues to build.

Foreclosure Properties May Take 5 Years To Be Absorbed Into Market
Written by: Cheryl Reams

Even switching into high gear, the nation’s banks have far to go to catch up with processing an unprecedented number of foreclosures. This could potentially delay recovery for another half decade according to Housing Predictor. Although the true extent of this shadow inventory is unclear, foreclosures have topped 7 million in just the last 3 years. See the following article from Housing Predictor for more on this.

The shadow inventory of homes and other residential properties exceeds 6 million, which will prolong the recovery of the U.S. housing market. The inventory of properties that have not yet been completed as foreclosures, but are under distress represent a growing inventory to be absorbed by the market.

The shadow inventory is composed of homes with delinquent loans, bank owned properties and foreclosures that are not yet accounted for under banking regulations. Accounting rules allow banks to keep foreclosed properties off their balance sheets until a property is resold. The record number of homes in the shadow inventory will pressure housing prices in the majority of markets, but should not depress prices as much as earlier levels, according to analysts.

Bank servicing companies have added staff and upgraded computer systems to handle the record volume of foreclosures. But they are running as much as 30-months behind in some areas of the country, particularly in hard hit California, Florida and Nevada. As a consequence, the time it takes to get foreclosed properties to the market and re-sell them has been delayed.

Banking analysts are reluctant to say how many foreclosures are in the pipeline due to public outcries over the foreclosure crisis. A high placed analyst with one of the nation’s largest lenders says it’s impossible to “really tell the magnitude of the problem.” However, a study of more than 100 markets by Housing Predictor heavily impacted by the housing crisis shows that there are at least six million residential properties in the shadow inventory.

The number of homes already seized by banks in foreclosure proceedings over the past three years has topped 7-million, according to Senate Banking Committee Chairman Chris Dodd (D-Conn.). A flood of foreclosures could act to further pressure housing prices, but since bankers are slowing the foreclosure process down the market will have more time to absorb the inventory. The efforts by bankers are an attempt to begin to stabilize home prices in a larger portion of the country.

Government programs started by the Obama administration have produced at least some amount of stability in especially hard hit markets in California, Florida and Nevada. Home sales have risen in most of Florida as prices decline. But the inventory of homes has tightened in many areas as a result of fewer foreclosures. California housing prices have been sliding as a result leading to a rise in bank seizures.

The housing market took a decade to recover from the downturn triggered by the Savings and Loan Crisis in 1988, and even longer after the housing bust that accompanied the Great Depression. However, prices had not increased as much as they have in the last thirty years during the 1930s. After the industrial revolution America went through massive changes, and it seems as though more sweeping changes are in store as the nation comes to grips with the digital age.

The artificial housing inflation triggered by derivatives traded on Wall Street that supplied the mortgage money coupled with the toxic new creative mortgages set the stage for the financial crisis.

Housing Predictor analysts project it will take at least another five years for the shadow inventory of foreclosed properties to be absorbed by the market. For home buyers there will be plenty of deals as the shadow inventory is marketed and sold off.

This article has been republished from Housing Predictor. You can also view this article at Housing Predictor, a real estate analysis and forecasting site.

As PBC foreclosure paperwork piles up, so does desperation

Kimberly Miller from the Palm Beach Post brings us an article regarding the mountains of paperwork that are deluging courthouse offices across the United States. Now, you may say that I am pointing out the obvious....which is partly true! But I found a little nugget that may help the real estate professionals out there help those that are seeking to buy properties “on the courthouse steps.”.

Buying properties at auction is the rage. As this article points out, the mountain of paperwork breeds chaos and confusion. One individual that is highlighted in the article paid cash for a house at auction and, 1 month later, is still waiting for the deed! As the old adage says, buyer beware!

As PBC foreclosure paperwork piles up, so does desperation
By KIMBERLY MILLER
Palm Beach Post Staff Writer


Don Cameron's March 8 win in a Palm Beach County home auction is stalled somewhere on the third floor of the courthouse in stacks of foreclosure filings piled several feet overhead.

He'd like to start fixing up the three-bedroom house, renovate the kitchen, maybe get it ready for a first-time home buyer hoping to cash in on the waning days of the $8,000 tax credit.

But nearly a month after his $74,570 purchase, which he is required to pay for in full by noon the next day, the massive backlog of foreclosures in the Palm Beach County Clerk and Comptroller's Office still has him waiting for the home's title.

Despite tripling the number of employees who handle foreclosures, and scanning a feverish 30,000 case pages into the computer every day, staff can't keep up with what amounted to about 2,500 foreclosures each month last year. (In all of 2005, there were 3,049 foreclosures in the county).

By statute, the clerk can't release a title for 10 days, but waiting up to 60 days to claim ownership is cutting into Cameron's profit margin and, some say, the economic recovery.

Getting foreclosures back on the market means paychecks for people who do renovations.

Buyers will purchase furniture and accessories.

Real estate and property taxes get paid.

"We can't do anything. We can't get our money back, we can't work on the property, we can't sell the property, we can't market the property," said Cameron, owner of real estate investment company Hi-Land Properties, a West Palm Beach subsidiary of We Buy Ugly Houses. "It's a domino effect."

This year, the Florida State Courts Administration is requesting $9.6 million from the state to hire more judges and speed the backlog of foreclosures through the system. The administration estimates there are about 500,000 foreclosure cases pending statewide, including 55,000 in Palm Beach County, and 13,750 in Martin and St. Lucie counties combined.

But even if the judges get their money, the cases could still get stuck in a processing logjam on the clerk's side.

And lawmakers are looking to cut $23 million statewide from county clerks' budgets, including a $2.6 million dig in Palm Beach County that could mean a loss of more than 100 clerk employees.

Palm Beach County Clerk and Comptroller Sharon Bock said that kind of staff reduction would mean fewer services in satellite offices, years-long waits for divorces and a continued quagmire for foreclosures.

"These foreclosures are already languishing," Bock said. "By allowing that, there is absolutely a capital loss, a loss in business, a loss in the market and a personal loss to the person stuck in limbo."

Bock estimates an average foreclosure case takes her office an overall 230 minutes to process from the time it is filed, sold on a new online auction system, and to closing.

Last year, when auctions were still live, processing the 30,227 foreclosures took about 118,470 hours of clerk work.

"It's very paperwork intensive," said Mark Broderick, director of Palm Beach County civil court services.

Martin and St. Lucie counties would see 10 percent cuts in their budgets for next year.

In Martin, that would be a reduction of about $360,000 and likely 14 positions, said Martin County Clerk of Courts Marsha Ewing.

While Ewing is still able to get titles on foreclosed properties bought at auction processed in 10 days, she said she's taken employees from other divisions to keep up with the filings.

Martin had 2,082 foreclosures in 2009, compared with 127 in 2005.

In St. Lucie County, proposed budget cuts would equal about $810,000.

"Cutting the budget would be disastrous for the public," said St. Lucie County Clerk of Courts Joseph Smith, whose office processed 8,324 foreclosures last year, compared with 485 in 2005. Smith has a staff of 23 working on foreclosures. Five years ago, it was half that.

The proposal to cut county clerks' budgets is based on a law passed last year requiring clerks to track their average cost per case and base their budgets on the unit cost.

But the clerks have been collecting the data for less than six months, and at least one senator said it was therefore inconclusive.

The plan will go to budget conference for debate.

Meanwhile, Cameron is waiting to get title on five foreclosures he's purchased this year through auction. "We want to help improve the community, put people to work and assist the recovery," Cameron said. "But we keep meeting stumbling blocks all the way through."

A Bold U.S. Plan to Help Struggling Homeowners

David Streitfeld from the New York Times reports on new government initiative that, on the face of it, sounds good. The new program (I’m not quite sure what acronym they’re going to throw at it!) will target those that are behind in payments but also those that own a property that is worth less than what is owed. The plan has a provision that allows for the principal reduction of the mortgage.

The article points out a very nagging fact, “None of these programs have the force of law, and lenders have often seen no good reason to participate.” This has always been the Achilles heel of the residential mortgage meltdown. The government can’t enforce the program. They can probably encourage the lenders that took TARP money to adopt it. The problem that the government will face is that the vast majority of mortgages are owned by investors and investors aren't bound to do anything with respect to the notes that they own.

One aspect of the new program that will effect home owners is, “(that the government) had previously planned to give homeowners that sell their homes rather than let them go into foreclosure a “relocation assistance” payment of $1,500. The plan announced on Friday increases that amount to $3,000.”

Whatever the final plan looks like, I hope it helps the homeowner.

A Bold U.S. Plan to Help Struggling Homeowners
By DAVID STREITFELD New York Times

Once again, the federal government is adding to its arsenal of programs for troubled homeowners, seeking to help those who urgently need it while neither angering nor creating perverse incentives for those who do not.

The new measures, announced by financial policy makers at the White House on Friday, are among the boldest to date. They are aimed not only at the seven million households that are behind on their mortgages but, in a significant expansion of aid that proved immediately controversial, the 11 million that simply owe more on their homes than they are worth.

Some of these people, if the government plan works, will emerge with a house whose payments they can afford and whose new mortgage reflects its market value. Unlike many previous modification recipients, they would presumably be less likely to re-default, helping to stabilize a housing market that remains queasy.

“We’re walking that delicate balance to make sure these solutions are sustainable and not temporary,” said David H. Stevens, commissioner of the Federal Housing Administration.

It is a balancing act in numerous ways. If the plan falls short — and some experts were skeptical on Friday — the Obama administration could find itself having to start over yet again in six months or a year.

“The housing market is the Vietnam War of the American financial system,” said Howard Glaser, a housing consultant. “The federal government is in so deep, they have to keep ramping up to find a way out.”

The latest programs, together with foreclosure assistance efforts already in place, are aimed at helping as many as four million embattled owners keep their houses. But the measures, which will take as long as six months to put into practice, might easily fall victim to some of the conflicting interests that have bedeviled efforts to date. None of these programs have the force of law, and lenders have often seen no good reason to participate.

To lubricate its efforts, the government plans to spread taxpayers’ money around liberally. For instance, it had previously planned to give homeowners that sell their homes rather than let them go into foreclosure a “relocation assistance” payment of $1,500. The plan announced on Friday increases that amount to $3,000.

All told, the new measures are expected to cost about $50 billion. The White House was careful to stress that the money will come from funds already set aside for housing programs in the Troubled Asset Relief Program. There will be “no additional commitment of taxpayer dollars,” Michael S. Barr, an assistantsecretary of the Treasury, said at the White House briefing.

Here is what the $50 billion is supposed to buy:

The simplest component of the plan involves assistance to unemployed homeowners. Mortgage companies will now be encouraged to reduce payments for at least three months and possibly six months while the homeowner pursues a new job.

To be eligible, borrowers must submit proof they are receiving unemployment insurance. The new payments will be 31 percent or less of their monthly income. The missing money will be tacked onto the loan’s principal.

A second and more complicated program is a requirement that mortgage servicers consider writing off a portion of a borrower’s loan to get it down to a more manageable level.

Borrowers in the government modification plan who owe more than 115 percent of the value of their home and are paying more than 31 percent of their monthly income toward the mortgage are eligible. The write-downs are to take three years, with the borrowers in essence being rewarded for making their payments on time.

The third major new program strays the farthest from the government’s previous approach. Borrowers who owe more on their homes than they are worth will get a chance to cut their debt — providing the investor or bank who owns the loan agrees.

Mr. Stevens of the F.H.A. said the program was “for responsible homeowners who through no fault of their own find themselves in a situation of negative equity.”

There is no official requirement that these homeowners be in distress, but it would probably make the investor more receptive to a deal. Whether homeowners will scheme to get into the program is one of the big uncertainties.

The investors will write down the loans to 97.75 percent of the appraised value of the property, at which point the F.H.A. will refinance them through new lenders. The F.H.A., which currently insures about six million homes, will insure the new loans as well.

If the homeowner has a second mortgage, as many do, the total value of the new mortgage can be as much as 115 percent of the value of the property. The F.H.A. will spend up to $14 billion to provide incentives to the banks that service the primary loan as well as the owners of the secondary loans. Some of the money will also provide additional insurance on the new loans.

Numerous parties will have to work together to make these deals fly. The primary loan might have been bundled into a pool and sold to investors during the housing boom. The investor must agree to cut the principal balance for a deal to work, and any bank holding a second mortgage on the property would have to go along, too.

The only incentive for the first lien holder is a quick exit from a loan that might ultimately default. Payments for second lien holders will be made on a sliding scale.

Early reaction to the refinance program among lending groups was less than enthusiastic.

“The magnitude of this program will likely be measured in the tens of thousands rather than the hundreds of thousands of borrowers,” said Tom Deutsch, executive director of the American Securitization Forum. Both banks and investors belong to the forum.

The Mortgage Bankers Association, which represents the banks that service the primary loans and own outright many of the secondary loans, warned that “each servicer will need to determine whether this is the best approach to help the individual borrower.”

The new proposals irked many people, who flooded online forums Friday. Some said those in trouble deserved their fate. Others asked why the government was propping up housing prices when many renters still could not afford to buy a house. And some wondered about the message these rescue plans were sending to those who resisted the housing bubble.

Dave Juliette, a software worker in Pittsburgh, is in the last group. He paid off his loan eight years ahead of schedule and now owns his house free and clear. “I’m a homeowner in a more genuine sense of the word than many of these people with mortgages,” Mr. Juliette said. “But I won’t be seeing a dime.”

Cuyahoga County sheriff to bar appraisers from buying foreclosures
The Columbus Dispatch brings us a short but very interesting piece. The sheriff in Cleveland wants to ban any appraiser from buying houses that are sold at public foreclosure auctions. Sheriff Reid sees a potential conflict of interest. I would agree with his position but would suggest that he (and those throughout our country) take it a step further.

First, I agree with his position because there is a definite conflict of interest. My first assumption is that the appraiser is performing an appraisal for a bank on a pre foreclosure property. If an appraiser plans on purchasing a specific property that he or she is appraising for a bank his or her inclination will be to appraise it very high? Why you might ask? Because a bank uses this value to determine market value and to evaluate offers. If the value that they have been given by a rogue appraiser is too high, the banks inclination is to foreclose and auction it off.

I think they should take it a step further. I think they should ban real estate agents who perform brokers price opinions from re listing the same properties for the banks. These folks are commonly known as REO agents or Real Estate Owned Agents. There is the same conflict of interest. If an agent knows that they or their brokerage has the potential of securing a bank owned listing if the the property that they are evaluating goes into foreclosure, the real estate agents inclination will be to value the property above market. This action could produce the same outcome as a high appraisal.

SO if your involved in a short sale or preforeclosure and you find that the bank is sending out a REO agent, be ready to appeal the BPO if it doesn’t represent the just market value for the property.

Cuyahoga County sheriff to bar appraisers from buying foreclosures

CLEVELAND (AP) - The sheriff in Cleveland plans to bar the 36 appraisers working for his office from buying homes that have gone through public foreclosure.

The move by Cuyahoga County Sheriff Bob Reid is meant to avoid any conflict of interest in setting the value of foreclosed homes. The sheriff's office has overseen nearly 33,000 auctions of foreclosed homes in the past five years.

Under Reid's predecessor, appraisers were an important source of political fundraising for the sheriff's office.

Wine Is Not an Immunity to Foreclosure

Sajid Farooq from NBC writes an article that interests us. There are 10 wineries in Napa Valley that are in danger of being foreclosed upon. While Randy and I enjoy an occasional glass of good wine, we were both amazed at this data. In fact the article goes on to say that over 250 vintners haven't seen economic times in 20 years. If anyone hears of any Napa or Sonoma Wineries that are overleveraged and in danger of default, call me.

Wine Is Not an Immunity to Foreclosure
By SAJID FAROOQ

Cheap wine prices soon may not be the only thorn in Napa Valley's vine. A recent survey suggests decreased land value may be an aging problem in wine country.

Bloomberg News is reporting that as many as 10 Napa Valley wineries and vineyards will likely be sold in distressed sales or worse, fall to foreclosures over the next two years.

The findings are based on a study by the Silicon Valley Bank, which says Napa Valley land values have dropped 15 percent since 2007. About 7 percent of the survey respondents said their finances are "very weak" or on "life support." Still no vineyards have fallen into foreclosure yet.

The bank has more than 250 vintners as clients who are calling their current economic situation the worst they have seen in 20 years. That's bad news for the new kids on the block.

Bill Stevens, the manager of the Silicon Valley Bank's wine division, says "anybody who was late to the party won’t have staying power.”

Giant bank, giant struggle in providing mortgage help
Mary Shanklin from the Orlando Sentinel reports on what many of you already know. Bank of America has a terrible reputation for approving short sales and permanent loan modifications. This is partially due to the systems that they have in place. B of A’s acquisition of Countrywide has also contributed to the poor performance.

Passages from the article include, "Realtors that I work with, if they hear Bank of America, they won't even show the property," said David Pruett, a broker for D.A. Pruett Properties.

The chairman of the Orlando Regional Realtor Association, Kathleen Gallagher McIver, said recently that Bank of America has the worst record for expediting short sales, "and there's not anyone out there who will tell you otherwise."

Another known fact about Bank of America and Countrywide is that if an offer is presented and later cancelled and then a subsequent offer is presented, the ENTIRE negotiation process starts ALL OVER AGAIN! SO what does this mean? The realtors that are reading this are at a major disadvantage. Based on B of A/Countrywides history, the likelihood of your first buyer walking away from their offer prior to their offer being approved is VERY high. This means that you will waste a TREMENDOUS amount of time when processing your own short sales (my contention is that you will ALWAYS waste your time processing any of your own short sales). When we place an offer on a property, our offers will stay in place until negotiations have reached some sort of conclusion.

While B of A presents challenges, we embrace these opportunities and opportunities presented with other lien holders attached. If you have any questions, call me!

Giant bank, giant struggle in providing mortgage help
Foreclosure-assistance pipeline clogged for Bank of America, other lenders
By Mary Shanklin, Orlando Sentinel


Two years after swallowing the troubled mortgage giant Countrywide Financial, Bank of America trails other major U.S. lenders in resolving troubled home loans through short sales or modified loan terms.

The lender, one of the nation's biggest banks, holds more than a million mortgages that are months behind on their payments — twice as many defaulting home loans as any other lender in the country. But it has given permanent mortgage modifications to only about 1 percent of those borrowers — one of the lowest rates among lenders nationally, according to a report released last month on the federal government's Home Affordable Modification Program.

The issue is key in Metropolitan Orlando, which has the nation's 11th-highest rate of mortgage modifications, with 18,000 homeowners in trial modifications and 2,468 in permanent ones, the report stated.

Loan modifications aren't the only way of out a foreclosure. In January, about a quarter of all Orlando-area home closings were short sales, which occur when the lender allows a homeowner to sell the property for less than what's owed on the mortgage.

But when it comes to short sales, Bank of America also lags other lenders, real-estate agents say, by taking too long to respond to offers.

"Realtors that I work with, if they hear Bank of America, they won't even show the property," said David Pruett, a broker for D.A. Pruett Properties.

The chairman of the Orlando Regional Realtor Association, Kathleen Gallagher McIver, said recently that Bank of America has the worst record for expediting short sales, "and there's not anyone out there who will tell you otherwise."

Bank of America acknowledges it needs help with its short sales.

"We clearly recognize the need to improve the short-sale process for both our customers and the real-estate professionals who are critical to a successful transaction," said Jumana Bauwen, a bank spokeswoman.

The company said it has updated its training, enhanced its technology and established a short-sale team to help customers and real-estate agents navigate the process. It is piloting a short-sale program for owners who don't qualify for new mortgage terms. And it has established a 24-hour phone line so agents, buyers and sellers can track the status of their short sales.

Bank of America is not alone in its struggles to deal with the avalanche of defaulting home mortgages, according to the February modification report by the U.S. Treasury Department and the U.S. Department of Housing and Urban Development.

Wachovia Corp., now owned by Wells Fargo & Co., has approved permanently modified terms for fewer than 1 percent of its 86,461 defaulting mortgage customers. American Home Mortgage Servicing Inc. has a similar track record with the 127,521 mortgages headed toward foreclosure that it holds. Among the nation's largest lenders, GMAC Mortgage Inc. had the best rate: 17 percent of its 65,751 defaulting home loans have been permanently modified.

Bank of America, which inherited much of its mortgage portfolio from Countrywide, says part of the problem is that many homeowners have not been diligent about submitting the documents needed to convert a trial mortgage modification into a permanent one.

Clermont resident George Simmons said he is now totally frustrated, having tried for more than a year to get Bank of America to convert a series of trial modifications into something permanent.

"Let's see, the last correspondence I had from them said they didn't have my income-tax return and my Social Security records," Simmons said. "I sent it to them so many times. I've got my fax receipts and my certified postal receipts. They just keep asking for the same paperwork over and over and over again."

Overall, about a fifth of Bank of America's defaulting-mortgage customers have received temporary, three-month trial modifications. To address the huge volume of troubled loans needing permanent solutions, the company has hired about 15,000 staffers. Workers knock on doors and call homeowners with trial modifications at least 10 times before the temporary terms expire in three months.

At one point, Bauwen said, Bank of America was behind in getting homeowners into trial loan modifications. But it has ramped up those efforts, she said, and many of those trials will be converted into permanent modifications.

More importantly, Bauwen added, the company is not ramping up its foreclosure efforts unnecessarily.

Arizona Leads the Way in Combating Foreclosure

Dean Baker from Truthout reports on an innovative bill that is being considered by Arizona. They want to pass a law that allows home owners to stay in their homes for one year after they have been foreclosed upon!

The bill limits this benefit to low and moderate income home owners. The bill also has a provision that allows the homeowners to rent from the bank on a month to month basis.

In my opinion the bill is sending a message to the lenders and their investors.....do everything you can to avoid foreclosure (i.e. approve a loan modification, a short sale, etc) or we (Arizona) will hold you hostage for a long long time. Frankly, I hope it passes!

Arizona Leads the Way in Combating Foreclosure
by: Dean Baker

As the Obama administration works up its 12,487th plan for keeping underwater homeowners in their homes, Arizona's legislation may have the courage and good sense to do the obvious: let foreclosed homeowners stay in their home as renters. A bill was just introduced in legislature that would allow homeowners in houses that sell for less than the median price to remain in their home as renters for at least one year following foreclosure.

With this simple gesture the Arizona legislature could do more for the nation's underwater homeowners than all the brilliant DC policy wonks have managed to accomplish in the last three years with all their billions of dollars. The legislation would give low and moderate-income homeowners security in their homes. It doesn't make them jump through hoops and prove to bureaucrats that they were worthy. It doesn't require them genuflect before loans servicers or bankers.

This legislation would give homeowners the right to stay in their home. And bingo, every low and moderate-income homeowner in the state would know that the bank could not just throw them out on the street. If this passes the banks may also think more seriously about loan modifications, since they couldn't just throw a foreclosed homeowner out on the street. The proposals doesn't cost the taxpayers any money. It also doesn't require any government bureaucracy. It's easy to see why it's a non-starter in Washington.

Fortunately, this one doesn't have to go through Washington. Every state in the country could follow the lead of Arizona. If legislators are tired of seeing people thrown out on the street, if they are tired of seeing foreclosed homes sit vacant and ruin whole neighborhoods, they can just grant underwater homeowners in their state the same rights as are being proposed for homeowners in Arizona.

Of course, this will mean bucking the banks. The banks don't see any reason that they should suffer just because they made bad loans in the middle of the housing bubble. The banks feel it is especially unjust that they should suffer since they have spent so much money buying politicians who will gladly funnel them taxpayer dollars for mortgage modifications under the guise of "helping homeowners." The whole point is to keep the homeowners paying money as much as possible as long as possible.

Who cares that underwater homeowners will never get any equity in their homes and that they are paying far more on their mortgage than they would ever pay in rent? The interests of the banks can't be held hostage to the welfare of homeowners.

So what if homeowners' debt burdens are dragging down the economy? It is not the banks' problem if mortgage payments leave consumers little money to spend in other areas. Bank profits are more important than sustaining the recovery.

That may be the view in Washington, but this view may not win out in Arizona. At last a group of legislators are prepared to take serious action to address the problems created by the collapse of the housing bubble instead o just repeating silly platitudes about the importance of homeownership.

Of course, other legislatures can and should go beyond the provisions of the Arizona measure. This act ensures homeowners the right to stay in their home for one year with the possibility of staying longer on a month-to-month basis. It would be desirable to provide greater housing security to foreclosed homeowners by extending the right to rent over a longer period such as 5-10 years. This would give foreclosed homeowners enough time to get back on their feet, to let their kids finish their school and in other ways get their life in order. After all, it wasn't that fault that Alan Greenspan and Ben Bernanke were too dumb to recognize the largest housing bubble in the history of the world.

But the bill before the Arizona legislature would be a great step forward. Washington may be controlled by people who can only think of ways to help banks, but the Arizona action shows that at least in some states people can get elected who have other priorities. We should hope that this will be the first in a series of state level measures designed to really help homeowners.

Lenders starting to run after 'walkaway' homeowners

Charles Feldman brings us a very good article regarding “walkaways.” There is a growing group of people that simply walk away from their homes because they are worth less than what is owed. Recently, this trend has caught the eye of bankers and they are not rolling over.

Lenders are securing the deficiency judgments by garnishing wages, stripping banks accounts and even securing IRS tax refunds. It’s not a free lunch. People must understand that simply walking away can impact them in a very negative fashion. Banks are pulling the credit of homeowners and checking to see if they are late on other debt payments (cars, credit cards etc). If they are not late on other payments, banks have been aggressively pursuing judgments.

An interesting passage from the article is, “As one Web site that helps provide homeowners with foreclosure news points out, the extent that a lender can go after you when you walk away from your home depends, to some degree, on the laws of the state you reside in. So it is important you check this out if you are giving serious thought to walking away from your underwater property. Complicating matters, the site also points out, is whether you have a second mortgage on the property. You need to take all that into your calculations when it comes to any future liability.” What does this tell you? Seek an attorney!

Lenders starting to run after 'walkaway' homeowners

It's a variation of "you can run, but you can't hide," in the case of underwater homeowners (those whose homes are now worth less than the remaining mortgage). In increasing numbers, according to reports, people are simply walking away from their homes. Now banks and other lending institutions are starting to run after them.

According to the Detroit Free Press, more and more lenders are either hiring collection agencies or "getting deficiency judgments -- court orders that allow banks to collect on mortgage balances."

And that is bad news for the walkaway ex-homeowner. Such a court order would allow the bank to do everything from garnishing wages to grabbing any tax refund he might be expecting.

It gets worse, too.

If you walk away from your home, you are still responsible for taxes on it. At the moment, many banks are actually paying off that bill because they want to head off a tax foreclosure situation. But once they catch their breath, guess who the lenders will go after to recoup those payments made on your behalf?

Yep. You.

Florida real estate attorney Larry Tolchinsky tells CNN.com: "Banks are pulling credit reports to see if it's a strategic default. If you're behind on all your other payments, you're okay. But if you're not, they'll come after you."

As one Web site that helps provide homeowners with foreclosure news points out, the extent that a lender can go after you when you walk away from your home depends, to some degree, on the laws of the state you reside in. So it is important you check this out if you are giving serious thought to walking away from your underwater property. Complicating matters, the site also points out, is whether you have a second mortgage on the property. You need to take all that into your calculations when it comes to any future liability.

None of this, of course, deals with the larger ethical question: Whether, under any circumstances, it is okay to walk away from a property you still owe money to lenders on? That debate has been intensifying in recent months as more distressed homeowners are taking that option.

But if you have settled this ethical issue in your own mind and with your family, and have decided to go ahead and toss those keys back to the bank, you really do need to be keenly aware that the banks are apparently starting to fight back and your money concerns may not come to an end just because you closed that door and walked away.

Charles Feldman is a journalist, media consultant and co-author of the book, "No Time To Think-The Menace of Media Speed and the 24-hour News Cycle." He has written about real estate related issues for several years

Obama unveils mortgage plan to help California, 4 other states

Peter Nicholas and Ashley Powers report on the governments latest flavor of the month. President Obama announced a $1.5B (yes that’s right BILLION) program designed to help just 5 states. While I live and do business in one of these states (Florida) and do business in two others (California and Arizona), it is my opinion that this is yet another band aid.

The article points out that, “The money will go toward homeowners who have lost their jobs, owe more than their houses are worth or cannot afford to make monthly payments.” While I applaud helping homeowners that are in need, I believe that the money will simply delay the inevitable.

Why not spend money to streamline the short sale process so more families can be saved from the trauma of a foreclosure?

Obama unveils mortgage plan to help California, 4 other states
In Nevada, the president touts a $1.5-billion program designed to help people in danger of foreclosure. He also talks up beleaguered Sen. Harry Reid.
By Peter Nicholas and Ashley Powers


Reporting from Henderson, Nev. - Standing in the heart of the nation's hard-hit foreclosure country, President Obama on Friday rolled out a $1.5-billion mortgage program meant for a handful of states, including California and Nevada, that have endured waves of home foreclosures during the recession.

The president also used the moment to give a needed boost to Senate Majority Leader Harry Reid's reelection chances, crediting him with helping stave off a depression over the last year

Obama spoke to 1,800 people at a town hall-style event as part of a two-day Western swing in which he raised money for Democrats and campaigned for two senators facing tough campaigns: Reid and Michael Bennet of Colorado.

The announcement of new steps to prevent home foreclosures was aimed especially at Nevada, which has ranked first in foreclosures for 37 consecutive months. Although the administration has already put forward programs to reduce monthly mortgage payments, officials acknowledged that more relief is needed.

Under the new policy, $1.5 billion that had been reserved for the bank bailout will be rerouted to five states that have seen housing prices drop more than 20% since 2006: Nevada, California, Michigan, Florida and Arizona.

The money will go toward homeowners who have lost their jobs, owe more than their houses are worth or cannot afford to make monthly payments.

After announcing the program, Obama got a standing ovation.

"Government alone can't solve this problem," the president said. "And it shouldn't. But government can make a difference. It can't stop every foreclosure. . . . But what we can do is help families who have done everything right stay in their homes whenever possible."

Polls indicate voters are unnerved by the economy and impatient with incumbents, and both Reid and the president seemed intent on showing they grasp the public mood.

Reid got straight to the point in introducing Obama. Speaking in hushed tones, he opened with: "Mr. President, people in Nevada are really hurting. We have people out of work, people that are afraid they're going to lose their jobs."

Nevada's 13% unemployment rate is the nation's second-highest, behind Michigan.

Obama portrayed Reid as a vital partner in passing recovery programs that averted an even worse economic downturn.

Like himself, he said, Reid has been scarred by the prolonged and bruising debate over healthcare. Obama said his political advisors warned him last year not to attempt a healthcare overhaul. He said he ultimately decided it was worth it, but that his advisors had a point.

"The people who were giving me advice at the beginning of the year were right," Obama said. "Healthcare has been knocking me around pretty good. It's been knocking Harry Reid around pretty good."

Rescuing Reid won't be easy. A January poll for the Las Vegas Review-Journal newspaper showed that more than half the voters surveyed disliked Reid.

Championing Obama's call to revamp healthcare has hurt Reid at home, the survey showed. More than half the people polled said they opposed the plan, even though more than 450,000 state residents are uninsured.

Obama said Reid shared credit for the foreclosure plan unveiled Friday and other economic programs.

"I can personally attest that Harry Reid is one of the toughest people I know. He does not give up," Obama said. "He knows what he cares about. He knows what he believes in, and he's willing to fight for it."

The president also sought to rally support for his healthcare overhaul. Next week he will meet with congressional leaders from both parties in a bid to revive the plan, which has been stalled in Congress.

Obama said he was open to Republican ideas, but he made it plain that he would arrive at the meeting with a plan reflecting Democratic priorities. That approach doesn't sit well with Republicans, who say they would prefer to start from scratch.

"We're going to move forward the Democratic proposal," Obama said. "We hope the Republicans have one too. And we'll sit down and let's hammer it out. We'll go section by section."

He urged Americans to watch the session, which will be televised. "Pay attention to what this debate is about," he said.

By visiting Nevada, the president also hoped to make amends for past statements suggesting that Las Vegas was a place budget-conscious Americans should avoid.

This month, Obama angered Nevada officials, Reid included, when he told a New Hampshire audience: "When times are tough, you tighten your belts. . . . You don't blow a bunch of cash in Vegas when you're trying to save for college."

Las Vegas Mayor Oscar Goodman told reporters this week that he wouldn't meet with Obama unless he stopped "derogatory" references to his city.

One man at the town hall meeting gave Obama a chance to patch things up. He introduced himself by saying he was from Arkansas. When the president asked why he was in town, the man replied, "Everybody comes to Vegas."

Obama said: "That's what I'm talking about! There you go. Everybody comes to Vegas! . . . Here's my question: 'Have you spent some money here in Vegas?'"

"Yes, sir," the man said.

"That's good. We like to see that," Obama said.

Reinforcing the message, he spoke later in the day to the Las Vegas Chamber of Commerce and told the audience: "Before I go any further, let me set the record straight. I love Vegas! Always have."

Foreclosure stresses take human toll

In this day and age the news is filled with stats and stories about foreclosures, short sales, loan modifications etc. etc. What many fail to see is the toll foreclosures take on the human race. They take an emotional toll on those that are involved often causing the break up of family and friends. The most devastating impact can be on the children.

If you are involved, in any way, with a property that is involved with a distressed sale, be aware of the human toll.....be aware of the children.

Foreclosure stresses take human toll
By Renae Merle
The Washington Post


The stress of a foreclosure can disrupt marriages and produce behavioral changes in children, according to a recent study.

The study is based on interviews with 25 Latino families by the National Council of La Raza and the Center for Community Capital at the University of North Carolina at Chapel Hill.

"People losing their homes is more than losing a physical space, bricks and mortar," said Janis Bowdler, deputy director of Wealth-Building Policy Project at the National Council of La Raza.

"We have been so focused on the short-term impact of the financial crisis, the policy solutions, the physical loss of the house, that we don't always consider the larger picture."

The families, who were from Texas, Michigan, Florida, Georgia and California, said that after the foreclosure, they incurred significant financial losses, on average about $89,000.

Of the parents interviewed, about half reported problems in their relationship, and more than a