There has been a lot of information over the last few months about the new homeowner help plans to assist homeowners in lowering mortgage payments by modifications or refinancing. They sound great and pledge to offer help to millions of struggling homeowners, but do they really work? And if not, are we going to see foreclosures hit the market in record numbers?
The foreclosure moratorium that was instituted right before the holiday season at the end of 2008 put many homes about to face foreclosure on the table, so to speak. Most banks agreed to withhold initiating, or stop following through with, foreclosure proceedings at that time. It was to last until the first of the year in 2009, but with the swearing in of a new President right around the corner many banks opted to extend the moratorium to see what the new administration would do to help both the homeowners and the banks.
There were some plans put in place that sound great in theory, and there are some people who have likely been assisted under these plans (if you are one I would LOVE to hear from you and learn of your experience, so please send me an email). The sad fact is that many people have not been helped, and those who are trying to seek help may not be able to qualify for loan modifications if they are no longer employed.
Banks who have been sitting on the loans that were placed under moratorium are now starting to initiate foreclosure proceedings, and although the effect could be devastating to many homeowners it could mean a windfall for buyers and investors.
Currently there are less than 400 foreclosure properties in San Diego County. There are over 4,000 properties in pre-foreclosure. Notices of Default (NOD) have spiked to an all-time high. Many economists predict that in the next 1-5 months these pre-forclosures will become bank owned properties. One statistic predicted 5 MILLION more foreclosures between now and 2011 nationwide.
Another interesting fact is that there are currently bank owned properties in San Diego county that are not on the market. Some experts have speculated that this is because the banks know that they will have to sell them so low and this will effect comparable sales. In turn, many people who are in trouble in those neighborhoods will then have even lower comps and will not want to or be able to make mortgage payments on their homes (because now there will be an even greater discrepancy between the amount owed on the loan and the current market value of the home). This in turn would increase the number of foreclosures and the number of bank owned properties. It is a Catch-22 and a vicious cycle.
Situations where the banks already own the property but the homeowner continues to live there for free (and has not even received notice of eviction) are not rare. I know of one in my own neighborhoodâ€šthe bank took the home in February and the owners remain, having received NO NOTICE of eviction or any communication whatsoever from the lender. The bank may feel that it is better than having the property empty and having to pay for upkeep.
RealtyTrac, a reputable national source of real estate statistics , says that there may be as many as 600,000 properties nationwide that have been repossessed by banks but not yet on the market, with California likely representing 80,000 of those homes.
RealtyTrac further estimates that only 30 percent of foreclousres were listed fore sale in Multiple Listing Services (MLS). The rest of the homes are what is known as â€šÃ„Ãºshadow inventory.â€šÃ„Ã¹ Some have surmised that the banks are keeping these homes off the market and servicing these mortgages to conceal the extent of their losses. It also keeps housing prices higher by withholding these homes from the MLS’, which could avoid further loss for the lenders.
The news appears grim but if you are a buyer or investor waiting for the â€šÃ„Ãºbottom,â€šÃ„Ã¹ you are in a great position. With more foreclosures on the way you will have a lot of inventory to choose from. Get preapproved and be ready, as they are starting to hit MLS’ already. The power of negotiating is in your hands so find an agent who can help you get a great bargain.
If you are a homeowner afraid of losing your home, I will repeat my mantra: GET EDUCATED. Learn all your options so that you are ready for changes that are certain to come. There may be other options out there you have not considered. There are definitely resources you can use and free counseling services available to you. But DON’T WAIT until it is too late, because then you will not be the one with the power. If you want a great place to learn all about options go to www.MortgageWalkawayOptions.com.