Archive for the ‘mortgage workout plans’ Category
Thursday, September 29th, 2011
With the economy in turmoil and people scared to make big purchases, the real estate business is undoubtedly challenged. In difficult times some people panic, and I see that happening amongst distressed borrowers, yet there is a process to the situation that you need to follow in order to have a chance to save your home and your credit. I have blogged on this topic before and it is worth repeating.
If you are in a distressed situation you need to approach it methodically, even if you don’t believe that there are options. Foreclosure should be the last resort. Here are some steps you can take to try and avoid it:
1. Contact your lender. I know this sounds horrible, but you need to start somewhere. Some lenders, like Bank of America, actually have been stepping up to help people avoid foreclosure. You need to have all pertinent information ready when you call – your loan number, employment information, bank statements, etc. You want to see if you can qualify for a loan modification. This will take some time, but you need to get the ball rolling sooner rather than later, as soon as you discover you are unable to pay your mortgage or if you have a change of circumstance.
2. Contact a counselor if your bank cannot help you. There is a wonderful free counseling organization called HopeNow that can help you evaluate your situation and see what options may be out there for you to peruse. You can reach them at 888-995-HOPE. You can find them on the web at http://www.HopeNow.com.
3. Investigate ALL other possible options. If you are in the military, there are options that may be available to you. You may be able to qualify for a deed in lieu of foreclosure, refinancing, postponement, or a reverse mortgage if you are older and have equity in your home. There are stalling tactics you may be able to use while you find a way to get yourself on track. There are government programs that may help you if you are unemployed. Investigate all options, but do not feel overwhelmed. If you speak with your lender or a counselor you can whittle down the available options.
4. Short sale. When there is no other option a short sale is better than going through foreclosure. You need to speak with an experienced agent if you are considering this option. Make sure you understand all tax and credit consequences – speak with your accountant or an attorney. Many lenders will bless short sales, and it is a good idea to work with someone experienced because they can try to get lender approval at the get-go. Some lenders are even evaluating homes now and telling the homeowners what price they will accept on the short sale BEFORE the home is listed. You may also qualify for programs like HAFA (Home Affordable Foreclosure Alternatives Program), which allows you to collect up to $3000 from your lender toward moving expenses.
It is important to understand the foreclosure laws in your state and the consequences they carry. If you are having difficulties with your mortgage please do not just give up – you need to try and find a solution before succumbing to foreclosure. Do not walk away from your home either, as that is a voluntary foreclosure. If you spend a little time you may find a solution that lets you avoid foreclosure, so hang in there.
If there are any distressed property issues you would like to see addressed in this blog, please let me know in the comment section below. If you do not see the comment section, simply click on the title to this blog and then scroll back down.
Monday, September 26th, 2011
The distressed property market continues to be a big part of our real estate market, and there is a lot going on as of late. Here are some of the highlights:
First time homebuyers getting tired of short sales: A survey conducted by Campbell/Inside Mortgage Finance revealed that first time buyers have had enough with short sales. This segment of buyers purchased around 40% of short sales in August, compared to 54% of all short sales purchased in November of 2009. Some of the reasons sited for this drop in short sale purchases are frustration with timelines to get the home through escrow, paperwork glitches and appraisal issues, and overall dissatisfaction with short sale lenders. Short sales are still seen as good bargains by many buyers, as they typically sell for 27% less than similar traditional sale homes, making them a great deal for many first time and repeat home buyers who do not have to move immediately.
Florida may change to a non-judicial foreclosure state. The state of Florida, one with a large number of foreclosures, is heeding the cry of many homeowners and buyers by contemplating switching to a non-judicial foreclosure state. Currently a judicial foreclosure state – which means that all foreclosures must go through the court system to be finalized (and there is a huge backlog) – Florida’s foreclosures take longer than those in non-judicial states, up to three times as long by some estimates. Some lawmakers are afraid that these lags will cause lenders not to lend in the state, and that the current system stagnates the market and leads to neighborhood blight. The court system, as we know, can be very slow, so I think this is a good idea, although some lawmakers are opposed to a change with the status quo.
State attorneys general still not close to agreement in robo-signing scandal: Yes, it pains me to report that once again, there is no final decision in the robo-signing scandal. Lenders and attorneys general cannot seem to come up with a punishment for the lenders that makes all happy. Really? Whose money is being used for these attorneys general to meet ad nauseum and figure this out? I frankly think it ridiculous. Some AGs are saying that the banks should not be held liable for things that have not been investigated yet (what?), and that the liability should be placed on Wall Street and not so much on the lenders. Come on people – accept the blame and move on. The committee has stated that it the lenders will not be released from all civil liability…the saga continues.
Fixing the foreclosure mess may take more than a year. The latest statistics on fixing the foreclosure nightmare are that it may take more than a year, according to one story in HousingWire.com. Not a big surprise to many folks, and much of the long fix is due to the robo-signing fiasco. Over 4.5 million files must be examined for signs of improper foreclosure procedures, and new plans put in place to prevent such incidences from occurring in the future.
Some interesting numbers: 31% of all home purchases in California in August were short sales. In San Diego county alone, there are currently over 2500 short sales on the market today, with 1098 pending and over 3000 awaiting lender approval (contingent status). In the last six months in the county there have been 3412 short sales that closed escrow, with an average market time of 149 days. The point is that short sales are still very much a part of our current market, and I don’t think that will change any time soon.
Sunday, August 7th, 2011
In trying times you can surely bet that there will be those who will come up with ideas – some good, some bad. There is one mortgage servicer that has been following a plan for the last year, and it has proven successful in helping underwater homeowners (those who owe more to their mortgagors than the current market value of their homes). The program has been so successful it is going to be applied to many more loans the servicer is acquiring.
Ocwen Financial, a mortgage company that services 460,000 loans throughout the country, just completed a one year study of their new program, achieving an unbelievable 2.6% redefault rate (compared to nationwide 40-50% redefault rates for federal programs). Here is how it works: the mortgage servicer agrees to reduce your loan balance to the point that your debt is 5% below current appraisal value (giving you equity in your home). They then modify your mortgage so your new monthly payments are based on your reduced principal balance. Over the next three years, in annual increments, they write off the amounts of the original debt that they reduced (so you are truly paying a mortgage based on current value, with equity, and there is no tacking on the old balance to the end of your loan).
There is a catch: the homeowner has to agree to keep loan payments current, and has to share 25% of any future gain realized if the home is resold. Sounds like a good plan, right? Considering that there are an estimated 11 million homeowners who are underwater on their mortgages, with an expectation of 2 million of those who will face foreclosure (according to an article posted today by Ken Harney), this could be a program that might prevent more foreclosures if adopted by other lenders.
I think this idea is good enough to share, and I hope that other lenders will follow suit and initiate similar programs. Some big lenders, like Wells Fargo and Bank of America, do offer principal reduction programs, but they do not utilize the “shared appreciation feature” inherent in Ocwen’s plan. I believe it is a brilliant possible solution for many people, so if your loan is not serviced by Ocwen please discuss this with your lender. Thank you to Ken Harney for bringing this story to light.
Monday, June 13th, 2011
Downpayment increase rule under debate: If you haven’t heard, banking industry regulators have a rule on the table that would require buyers to pay a minimum of 20% down on home purchases. Although many lenders require this already there are some loans that can be obtained with very little money down, such as FHA loans (which require only 3.5% down). This has stirred much debate amongst buyers, sellers, Realtors, economists and politicians, with studies concluding that 30% of the home sales market would be decimated.
Congress’ intention in raising downpayment rates is to provide stronger borrowers, thus preventing fewer loan defaults in the future. But many groups, including the National Association of Realtors (NAR) are vehemently opposed to such legislation and have been lobbying against the proposal. I will keep you updated.
Mortgage Servicers in the Hot Seat Again: At least 14 regulated mortgage servicers have been scolded by banking regulators for negligence and misconduct in servicing, or failing to properly service loans. The U.S. Treasury also recently released a report indicating performance by the 10 largest HAMP (Home Affordable Modification Program) servicers. They found 4 need substantial improvement (including Bank of America, Wells Fargo and JP Morgan Chase), and are withholding future financial incentives under the program to the 3 mentioned above until improvements are made and problems addressed.
Home Sales Expected to Rise This Year: Some economists, like Lawrence Yun – chief economist for the National Association of Realtors – predict sales for the remainder of the year will improve for the following reasons: more jobs, stock market wealth is on the rise, apartment rents are climbing, conditions of high affordability continue, home values are at historically low levels, investors are out in the market nice again looking to hedge against inflation, lenders starting to shorten lengthy short sale processes, and the number of foreign buyers has increased due to market conditions. Of course there are other factors to keep an eye on, like gas prices and the fate of Congress’ attempt to increase down payments on home purchases (see above), but there seem to be strong factors indicating this may in fact be true. Let’s hope so.
Monday, May 16th, 2011
I read an alarming statistic today that “walking away” from one’s mortgage, an option to foreclosure that was popular in 2008, is now no longer viewed as morally reprehensible. In fact, a Fannie Mae survey of underwater homeowners (those with negative equity) found that 27% of them consider walking away – which today is called a strategic default – as a viable option to foreclosure.
Back in 2008 when I wrote my book, “Mortgage Walkaway Options,” the key focus was on options to foreclosure, with walking away as a last resort. My co-author and I urged homeowners to get educated and learn about other possible options before they walked away. At that time companies promising a bright future to homeowners who paid a fee to walk away were gaining deep pockets. They did not tell troubled borrowers that walking away was actually an intentional foreclosure, and many unknowing borrowers ended up with a foreclosure on their credit record when they may have been able to salvage it.
Most homeowners used to feel walking away was morally reprehensible, irresponsible. But even though strategic defaults have gone down the new study shows that this may no longer be the case. It is worrisome for several reasons, but what effect might it have on the housing market and on your property values?
The housing market will not come into a complete recovery until we clear out all the distressed property. If homeowners start walking away in large numbers this will take even longer. Obviously this will effect property values for a longer period of time.
More importantly, we need to find alternative ways to help struggling homeowners. People should not feel it is ok to turn their backs on an obligation to which they have committed. States are doing their part to help, organizations are fighting to get government help. We all need to seek the assistance available and try to find other ways to stay in our homes before resorting to walking away.
Wednesday, May 11th, 2011
Amidst all the news of double-dipping in the housing market, falling prices and an increase in lender-owned properties, there is one thing that may be a silver lining in the doom and gloom news these days: lenders will likely start to approve short sales much sooner and more often.
As housing prices drop across the nation lenders have realized that in order to prevent an inundation of foreclosures they will need to stop the delay of short sale acceptances. This I feel is necessary if we are ever going to improve the housing market.
The current state of the market indicates that with the depletion of home values there will be more homeowners finding themselves underwater with their mortgages. If you are planning on staying in your home for a long time this doesn’t mean you should run out and short sale your property. On the contrary, as long as you can pay your mortgage you should stay put. As with any market, things will eventually rebound and you will be happy you didn’t damage your credit and let your lower real estate taxes (in most cases, if you have owned for some time) go by the wayside.
It is also important to look at your hyper-local market when taking into consideration all the gloomy news. For example, here in North San Diego the default rate has been DOWN for the 17th consecutive month. According to ForeclosureRadar this computes to 1.7 per 1000 defaults, a low number compared to other parts of California and the nation.
Foreclosures are also down in North San Diego. ForeclosureRadar states that only 1 of 1000 homes were foreclosed upon in April.
But have lenders truly embraced the short sale option? Some seem to think so, and one economist was quoted as saying exactly this. However, as an agent currently waiting for approval on two short sales I will believe it when I see it. I must say that in general response time is quicker than it used to be, but we still are waiting long periods in most cases (a few months at least).
Another factor that comes into play with getting short sales approved more quickly is the skills of the listing agent or his/her negotiator. This can make a big difference in approval time, so if you are considering selling your home as a short sale, the most important question you need to ask your agent is how she plans to negotiate with the lender(s) once an offer(s) is received.
Thursday, May 5th, 2011
I have discussed before the importance of state foreclosure prevention programs, and the fact that more states would be initiating or revising their programs due to cancellation of federal programs and counseling. In my most recent blog on MoneyPress I discuss the main ideas behind these programs and provide a list of which states offer assistance, as well as links to their websites. To read the blog visit http://bit.ly/jtaDqR
Monday, April 18th, 2011
In what I personally think is a big mistake, Congress announced that it is eliminating $88 million in funds for housing counseling programs. These are the programs that allow struggling homeowners and others with questions to call in and get counseling advice. It is often the first step in pre-foreclosure, or even in avoiding foreclosure altogether.
One of my favorite counseling hotlines, HopeNow, stated that it is not being shut down, but will be effected by the cuts. I have referred people to HopeNow for years. It is approved by the Department of Housing and Urban Development (HUD) and the people who work the phone lines actually know what they are talking about. The biggest complaint I have heard is that sometimes one has to hold for help for some time, but the advice is real and they really do go over specific situations and crunch numbers with callers.
Why would the government want to cut these programs? Well, I think that the government is busy trying to come up with ways to prevent foreclosures and help the housing mess by implementing new programs (of course, we have not seen these as of yet, but the most promising seem to be on the way, stemming from the robo-signing lender punishment saga). At the same time they are trying to trim our exorbitant budget, so these goals may conflict.
Many states are creating their own programs to cover the slack the federal programs have left behind after being canceled, but there are only a handful that have such programs in operation already.
So what is a troubled homeowner to do now? Some federal programs have been eliminated, not all states have yet implemented programs to help, and the mandated lender reforms (currently in the works as punishment for the robo-signing scandal) are not yet finalized. People need to know their options.
Basically there are three options, and some of them have multiple sub-options:
1. Stay in your home. To do so you may need to look into a loan modification, change of job, or a complete reevaluation of your finances so that you can eliminate or lower other expenses. You may need to get creative, consider getting a second job, renting a room or putting your young children to work (just a hint of black humor/sarcasm–of course I don’t recommend this).
2. Sell your home. If you cannot make number one work and you need to sell it will either be a traditional sale or a short sale. Either way, make sure to work with a Realtor who is experienced in your area, and if you are doing a short sale make sure that person is experienced in this regard. You also should look into the HAFA program if you are considering a short sale–at least you can get money to help with moving expenses (up to $3000–see previous posts. To find them go to the categories list to the right of my blog and click on short sales).
3. Foreclosure. This is the last resort, or course. But many times there may be no other option if you are in over your head financially, have a job loss, illness, changed circumstances, divorce, etc. Just make sure you speak with your financial planner, attorney or accountant (or all 3, in my opinion) before doing so. You need to understand all options so you can make the right choice.
As we continue to see cuts to vital programs options may dwindle, at least for a while. I have discussed multiple times how I feel states will start to jump in to help residents with their own programs, much like California has done with Keep Your Home California. If you do not yet have a program in your state I would still advise contacting HopeNow or La Raza. Your lender may have counselors available to help you as well. But do not wait until it is too late. If you are not yet delinquent on your payments you need to start researching now. Best of luck.
Friday, April 1st, 2011
In the latest attempt to speed up the foreclosure process, judges may soon become intimately involved with homeowners and lenders. Yesterday the Senate Judiciary committee approved the Limiting Investor and Homeowner Loss in Foreclosure bill, which will give judges authority to meet with homeowners and their lenders in foreclosure mediation proceedings. The bill will now go before the full Senate.
This act, while not as broad as past proposals to allow judges to modify mortgages, will basically give judges the authority to open lines of communication between lenders and distressed property owners. The goal is to help the homeowner avoid foreclosure and get the ball rolling on possible options.
The state of Rhode Island already has a similar program that has been successful. While this bill will not prevent foreclosures it may be a positive step in helping many homeowners, as many know too well that just starting a conversation with someone in the loss mitigation department can be beyond difficult.
Requiring lenders and homeowners to meet face to face adds a human element and prevents the homeowners from being seen as mere pieces of paper in a file on top of a crowded desk.
Friday, March 25th, 2011
Are you one of the countless homeowners who tried to obtain a loan modification under HAMP (the government’s Home Affordable Modification Program) but were denied? If so you may not have been given a reason, which makes all the time you spent, the hopes you harbored, the pages and pages of documentation you compiled, seem like a complete waste of time. Disclosure requirements have now changed for loan modification denials under HAMP, making it doubtful others will go through the same difficulties.
As of February 1 of this year lenders are required to send disclosure letters to some borrowers who applied for modifications under HAMP but were denied. Yes, I said “some,” so not everyone will receive such information (and I am not sure how this is determined). The letters must reveal up to 33 data points. These are points that the servicer uses to determine whether the borrower qualifies under HAMP, in order to satisfy the net present value (NPV) test. The goal is to make sure the new loan would be in the lender’s best interests so as to prevent future default.
If the borrower feels information used to deny the modification was incorrect, he may appeal the modification to the servicer within 30 days of receipt of the letter. Appeals must be in writing, supported by evidence explaining the perceived correct values. An example is if the home was valued incorrectly. If the borrower has a recent appraisal that changes the valuation she could present that as evidence in the appeal process.
The U.S. Treasury Department is currently creating a website where borrowers will be able to go to run their own HAMP tests to see if they meet the HAMP criteria for a modification. The site should be ready in late springtime. It may be of help to those who want to understand the 51 HAMP data points that are taken into consideration when applying for a modification under the program.