Below follows some interesting thoughts on loan modifications.
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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?
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Also See: Another Loan Modification failure
Friday, December 10, 2010
Thursday, December 9, 2010
End of foreclosure moratorium won't mean flood of closings
It may take a while to resume, but it will. And foreclosures have not slowed much.
*************************************
Although Fannie Mae and Freddie Mac lifted a moratorium on the seizure and sale of tens of thousands of distressed homes, it doesn't mean that would-be buyers will be rushing to close their long-delayed contracts.
More than a week after the government-sponsored mortgage companies said they would move ahead with sales of foreclosed houses, brokers and title agents say closings will be slow to resume.
In early October, Washington-based Fannie Mae and McLean, Virginia-based Freddie Mac halted sales of homes foreclosed by several big loan servicers — including Ally Financial, Bank of America, Chase and PNC Bank — amid allegations that they were using flawed documents to foreclose on borrowers.
Because many deals have been on hold since the mortgage siblings suspended closings, loan documents have to be reworked and title searches have to be redone to make sure no liens or new judgments have been filed against properties during the delay, said North Miami attorney Carol Keys, who performs title searches for buyers.
Buyers also need to update employment information and other data required by lenders. Loan documents are good only for 30 days.
"It doesn't mean we can close over night," said real estate broker Larry Salas, referring to a Nov. 24 Fannie Mae memo giving the go-ahead to close deals.
"It's going to take some weeks if not a month before closings start," said Salas, owner of All Star Realty Sales in Miami. His company markets Fannie Mae-owned properties in South Florida.
Because the Fannie Mae is his largest client, Salas' business plummeted nearly 70 percent during the REO sales and marketing moratorium, he said.
Marcus Edwards, a Fort Lauderdale broker who specializes in lender-owned properties, said the review was needed because some loan servicers were in disarray.
Right before the freeze, a loan servicer sent Edwards an order to change the lock on a recently foreclosed home. Soon after the new lock's installation, a man appeared in Edwards' office with proof that he had acquired the property through a short sale, in which the lender agrees to sell a distressed property for less than the amount of the delinquent mortgage.
"The moratorium was good," Edwards said. "It forced them to take a closer look at their files."
Yvette Betancourt, president of a Kendall title closing company, expects to close five out of seven Fannie Mae contracts that were put on hold in October within a week.
"I am sure the big companies are experiencing a log jam," said Betancourt, with The Closing Co.
Processing hundreds of thousands of foreclosures since the nation slid into its worst recession in decades has created mounting problems for lenders and loan servicers.
The Florida attorney general is investigating four Florida foreclosure firms that processed a large volume of cases for Fannie Mae, Freddie Mac and Bank of America, among others, over allegations they fabricated documents and forged signatures to foreclose on properties.
The Fannie and Freddie lifted the freeze after their loan services claimed that internal reviews of their procedures reveals no wrongdoing.
The moratorium hurt REO sales at a time when they are critical to the industry's effort to rid the market of troubled properties.
For example, 408 REO condos in Miami-Dade County sold in November, compared with 623 in September, a drop of about 35 percent, according to the Miami Association of Realtors.
The sale of single-family REO homes fell to 235 in November, down from 364 in September, a decrease of nearly 36 percent.
In Broward County, 316 REO condos sold in November, compared with 557 in September, a 43 percent decline. The sales of single-family lender-owned homes fell to 207 November, from 325 in September, down about 36 percent.
The Miami Association of Realtors did not have Palm Beach County statistics.
Edwards, with Keller and Williams Partners, said his company already closed five deals since the Fannie Mae and Freddie Mac's announcement.
"It's been crazy in the last few days," he said. "Fannie Mae is pushing closings as much as they can before the end of the year."
He said financial institutions want to close deals to start the year on a better footing.
Preserving Values
Lifting the freeze on the government-sponsored mortgage companies' REO inventory is good news for the housing market, because those homes will most likely sell at close to market value, rather than at a deep discount, several brokers said.
Fannie Mae and Freddie Mac often pay for home repairs, replace appliances, install carpeting and paint properties to boost their value and to make them more marketable, said REO broker Rick Suarez, owner of Castle Realty in Miami.
By doing that, they help protect property values, compared to other financial institutions that sell REO properties in poor condition at discounted prices, he added.
"Their whole idea is to bring the property to the value of the neighborhood," he said. "They don't want home values in the neighborhood to depreciate."
For that reason, he said most people buying Fannie Mae and Freddie Mac's REOs are people who will live in the home, instead of attracting discount-hungry investors, he said.
"They really help preserve values," Edwards added.
More than a week after the mortgage giants Fannie Mae and Freddie Mac said they would move ahead with sales of foreclosed houses, brokers and title agents say closings will be slow to resume.
Because many deals have been on hold since the government-sponsored companies suspended closings, loan documents have to be reworked and title searches have to be redone to make sure no liens or new judgments have been filed against properties during the delay.
Buyers also have to update employment information and other data required by lenders sincelLoan documents are only good for 30 days.
*************************************
Although Fannie Mae and Freddie Mac lifted a moratorium on the seizure and sale of tens of thousands of distressed homes, it doesn't mean that would-be buyers will be rushing to close their long-delayed contracts.
More than a week after the government-sponsored mortgage companies said they would move ahead with sales of foreclosed houses, brokers and title agents say closings will be slow to resume.
In early October, Washington-based Fannie Mae and McLean, Virginia-based Freddie Mac halted sales of homes foreclosed by several big loan servicers — including Ally Financial, Bank of America, Chase and PNC Bank — amid allegations that they were using flawed documents to foreclose on borrowers.
Because many deals have been on hold since the mortgage siblings suspended closings, loan documents have to be reworked and title searches have to be redone to make sure no liens or new judgments have been filed against properties during the delay, said North Miami attorney Carol Keys, who performs title searches for buyers.
Buyers also need to update employment information and other data required by lenders. Loan documents are good only for 30 days.
"It doesn't mean we can close over night," said real estate broker Larry Salas, referring to a Nov. 24 Fannie Mae memo giving the go-ahead to close deals.
"It's going to take some weeks if not a month before closings start," said Salas, owner of All Star Realty Sales in Miami. His company markets Fannie Mae-owned properties in South Florida.
Because the Fannie Mae is his largest client, Salas' business plummeted nearly 70 percent during the REO sales and marketing moratorium, he said.
Marcus Edwards, a Fort Lauderdale broker who specializes in lender-owned properties, said the review was needed because some loan servicers were in disarray.
Right before the freeze, a loan servicer sent Edwards an order to change the lock on a recently foreclosed home. Soon after the new lock's installation, a man appeared in Edwards' office with proof that he had acquired the property through a short sale, in which the lender agrees to sell a distressed property for less than the amount of the delinquent mortgage.
"The moratorium was good," Edwards said. "It forced them to take a closer look at their files."
Yvette Betancourt, president of a Kendall title closing company, expects to close five out of seven Fannie Mae contracts that were put on hold in October within a week.
"I am sure the big companies are experiencing a log jam," said Betancourt, with The Closing Co.
Processing hundreds of thousands of foreclosures since the nation slid into its worst recession in decades has created mounting problems for lenders and loan servicers.
The Florida attorney general is investigating four Florida foreclosure firms that processed a large volume of cases for Fannie Mae, Freddie Mac and Bank of America, among others, over allegations they fabricated documents and forged signatures to foreclose on properties.
The Fannie and Freddie lifted the freeze after their loan services claimed that internal reviews of their procedures reveals no wrongdoing.
The moratorium hurt REO sales at a time when they are critical to the industry's effort to rid the market of troubled properties.
For example, 408 REO condos in Miami-Dade County sold in November, compared with 623 in September, a drop of about 35 percent, according to the Miami Association of Realtors.
The sale of single-family REO homes fell to 235 in November, down from 364 in September, a decrease of nearly 36 percent.
In Broward County, 316 REO condos sold in November, compared with 557 in September, a 43 percent decline. The sales of single-family lender-owned homes fell to 207 November, from 325 in September, down about 36 percent.
The Miami Association of Realtors did not have Palm Beach County statistics.
Edwards, with Keller and Williams Partners, said his company already closed five deals since the Fannie Mae and Freddie Mac's announcement.
"It's been crazy in the last few days," he said. "Fannie Mae is pushing closings as much as they can before the end of the year."
He said financial institutions want to close deals to start the year on a better footing.
Preserving Values
Lifting the freeze on the government-sponsored mortgage companies' REO inventory is good news for the housing market, because those homes will most likely sell at close to market value, rather than at a deep discount, several brokers said.
Fannie Mae and Freddie Mac often pay for home repairs, replace appliances, install carpeting and paint properties to boost their value and to make them more marketable, said REO broker Rick Suarez, owner of Castle Realty in Miami.
By doing that, they help protect property values, compared to other financial institutions that sell REO properties in poor condition at discounted prices, he added.
"Their whole idea is to bring the property to the value of the neighborhood," he said. "They don't want home values in the neighborhood to depreciate."
For that reason, he said most people buying Fannie Mae and Freddie Mac's REOs are people who will live in the home, instead of attracting discount-hungry investors, he said.
"They really help preserve values," Edwards added.
More than a week after the mortgage giants Fannie Mae and Freddie Mac said they would move ahead with sales of foreclosed houses, brokers and title agents say closings will be slow to resume.
Because many deals have been on hold since the government-sponsored companies suspended closings, loan documents have to be reworked and title searches have to be redone to make sure no liens or new judgments have been filed against properties during the delay.
Buyers also have to update employment information and other data required by lenders sincelLoan documents are only good for 30 days.
Wednesday, November 17, 2010
Permanent loan mods inch forward as Obama plan draws fire
Loan modification continue to be a carrot dangled in front of struggling homeowners, while the banks keep collecting their payments. The story below is just another sample of the failure of the program:
*******************************************************
Permanently modified home loans under the Obama administration's anti-foreclosure program rose by 4% to about 467,000 in September, according to a government report. But a watchdog said the program had dashed the hopes of many participating borrowers who wound up worse off.
The plan was aimed at lowering mortgage payments to keep millions of distressed borrowers in their homes, using funds from the $700-billion bank bailout program to reward lenders and borrowers for reaching permanent modification agreements. But it has proved less than a robust success.
Of the 1.37 million trial modifications started as of Sept. 30, about 700,000, or 51%, have washed out, the government reported Monday. And roughly 28,000 of about 495,000 so-called permanent modifications have been canceled as well.
What's more, many borrowers participating in the program complain that they are strung along for months by promises of permanent modifications that never come true. Some of these have sued lenders, as this Times story reports.
In a more than 300-page reportMonday, Neil Barofsky, the special inspector general for the bank bailout, described how borrowers had been offered hope in vain.
He said some borrowers have depleted their savings unnecessarily in trying to hang on to their homes. Others have been socked with huge fees and demands for back interest after having permanent modifications denied, he said, while others wind up with battered credit scores and less home equity.
Barofsky said that two other government programs to support housing had proved disappointing as well.
Only 342 households have benefited from a program that pays banks incentives for short sales -- the deals where the borrower satisfies the mortgage dent by selling the home for less than the mortgage amount, Barofsky said. And only 21 homeowners have received help in paying down second mortgages.
Tim Massad, an administration official spearheading the housing stabilization programs, defended them by saying the government has "redefined the loan modification standard for the mortgage industry overall." That has led to more than 3.5 million modifications under its program and others, Massad said.
One eye-catching fact from the loan-modification report: No. 1 mortgage customer-service provider Bank of America Corp. saw the number of its mortgages in permanent modifications actually fall, reporting about 79,000 such loans compared to 78,000 at the end of August.
In totaling up permanent modifications, the government is backing out borrowers who fall 90 days delinquent after receiving permanent modifications, plus the few who manage to sell their homes and any whose loans are moved to another servicer.
Spokesman Rick Simon said the decline in permanent modifications at BofA was artificial, caused by a change in internal procedures that held up the reporting of several thousand loans to the Treasury Department.
"We think we'll be back on the plus side going forward," Simon said. But he added that the trend would be toward "fewer gains" at BofA and the entire mortgage industry as the weak economy and job losses drag some borrowers back into delinquency even after their payments are lowered.
The other major mortgage customer-service providers -- Wells Fargo & Co., JPMorgan Chase & Co., Citigroup Inc., and GMAC Mortgage -- saw small increases in their number of permanently modified loans.
The banks say they are changing loan terms under their own in-house programs when borrowers can't qualify for modifications under the government 's Home Affordable Modification Program.
Bank of America, for example, said it has completed 700,000 mortgage modifications since January 2008, mostly to loans it acquired as part of its takeover of Calabasas' Countrywide Financial Corp. Of those, about 85,000 were completed as part of the Home Affordable Modification Program.
In an October 2008 settlement with California and other states, Bank of America agreed to reduce loan payments by billions of dollars to Countrywide borrowers who had subprime and pay-option mortgages.
The feds rolled out their loan-modification program the following spring.
By E. Scott Reckard, Los Angeles Times
October 26, 2010
*******************************************************
Permanently modified home loans under the Obama administration's anti-foreclosure program rose by 4% to about 467,000 in September, according to a government report. But a watchdog said the program had dashed the hopes of many participating borrowers who wound up worse off.
The plan was aimed at lowering mortgage payments to keep millions of distressed borrowers in their homes, using funds from the $700-billion bank bailout program to reward lenders and borrowers for reaching permanent modification agreements. But it has proved less than a robust success.
Of the 1.37 million trial modifications started as of Sept. 30, about 700,000, or 51%, have washed out, the government reported Monday. And roughly 28,000 of about 495,000 so-called permanent modifications have been canceled as well.
What's more, many borrowers participating in the program complain that they are strung along for months by promises of permanent modifications that never come true. Some of these have sued lenders, as this Times story reports.
In a more than 300-page reportMonday, Neil Barofsky, the special inspector general for the bank bailout, described how borrowers had been offered hope in vain.
He said some borrowers have depleted their savings unnecessarily in trying to hang on to their homes. Others have been socked with huge fees and demands for back interest after having permanent modifications denied, he said, while others wind up with battered credit scores and less home equity.
Barofsky said that two other government programs to support housing had proved disappointing as well.
Only 342 households have benefited from a program that pays banks incentives for short sales -- the deals where the borrower satisfies the mortgage dent by selling the home for less than the mortgage amount, Barofsky said. And only 21 homeowners have received help in paying down second mortgages.
Tim Massad, an administration official spearheading the housing stabilization programs, defended them by saying the government has "redefined the loan modification standard for the mortgage industry overall." That has led to more than 3.5 million modifications under its program and others, Massad said.
One eye-catching fact from the loan-modification report: No. 1 mortgage customer-service provider Bank of America Corp. saw the number of its mortgages in permanent modifications actually fall, reporting about 79,000 such loans compared to 78,000 at the end of August.
In totaling up permanent modifications, the government is backing out borrowers who fall 90 days delinquent after receiving permanent modifications, plus the few who manage to sell their homes and any whose loans are moved to another servicer.
Spokesman Rick Simon said the decline in permanent modifications at BofA was artificial, caused by a change in internal procedures that held up the reporting of several thousand loans to the Treasury Department.
"We think we'll be back on the plus side going forward," Simon said. But he added that the trend would be toward "fewer gains" at BofA and the entire mortgage industry as the weak economy and job losses drag some borrowers back into delinquency even after their payments are lowered.
The other major mortgage customer-service providers -- Wells Fargo & Co., JPMorgan Chase & Co., Citigroup Inc., and GMAC Mortgage -- saw small increases in their number of permanently modified loans.
The banks say they are changing loan terms under their own in-house programs when borrowers can't qualify for modifications under the government 's Home Affordable Modification Program.
Bank of America, for example, said it has completed 700,000 mortgage modifications since January 2008, mostly to loans it acquired as part of its takeover of Calabasas' Countrywide Financial Corp. Of those, about 85,000 were completed as part of the Home Affordable Modification Program.
In an October 2008 settlement with California and other states, Bank of America agreed to reduce loan payments by billions of dollars to Countrywide borrowers who had subprime and pay-option mortgages.
The feds rolled out their loan-modification program the following spring.
By E. Scott Reckard, Los Angeles Times
October 26, 2010
Lawsuits accuse lenders of sabotaging mortgage modifications
Loan modification continue to be a carrot dangled in front of struggling homeowners, while the banks keep collecting their payments. Now homeowners have had enough, and they are fighting back:
*******************************************************
Financially strapped homeowners struggling to obtain mortgage modifications are taking their frustrations to court, accusing banks and loan servicers of misleading them or breaking promises to help them hold on to their homes.
The lawsuits go to what U.S. Housing and Urban Development Secretary Shaun Donovan has described as the heart of the government's anti-foreclosure efforts: ensuring that banks work in good faith from the start to help borrowers.
Although the foreclosure process is less complicated in California than in states where home seizures must be approved by judges, the litigation shows that borrower-servicer relationships can be contentious in the Golden State as well.
As controversy grew over the accuracy of foreclosure paperwork, Donovan last week said the Obama administration's top priority is "making sure that steps are being taken early in the process to keep people in their homes rather than only focusing on the steps that come late in the process, in which it's much less likely somebody will be able to stay in their homes."
A theme of the lawsuits filed by homeowners is that banks have denied permanent modifications to borrowers who make their payments on time and otherwise hold up their end of the agreements.
For example, Jean C. Wilcox of Irvine has sued EMC Mortgage Corp., accusing it of stringing her along for three years while making several offers to modify her nearly $800,000 loan, losing documents repeatedly and never intending to permanently change the terms of the mortgage. An EMC spokesman declined to comment.
"It was just 'extend and pretend,' " said Wilcox's lawyer, Anthony Lanza of Irvine. "And it was like they had the fax machine hooked up to a shredder."
Anaheim lawyer Damian Nassiri said his firm had filed about 100 lawsuits against mortgage lenders since 2007. Earlier suits alleged that lenders misrepresented terms of mortgages or engaged in other shady practices to foist abusive loans on borrowers. Most of his firm's suits now accuse lenders of dealing in bad faith with borrowers who have become delinquent on loans.
Worse, Nassiri said, in cases where foreclosure was inevitable, banks misled borrowers into accepting trial loan modifications. The intent, he claimed, was "to get some kind of money out of them" while stalling actions to seize the homes.
"There are too many bad loans for the banks to handle, and they can't dump all these properties out on the market all at once because we would have another Depression," Nassiri said.
Similar allegations of breaches of contract and acting in bad faith have cropped up in lawsuits around the nation, said Anthony Laura, a Washington lawyer who represents lenders accused of wrongdoing and tracks litigation trends.
Some suits allege that the problem is so widespread that courts should certify the plaintiffs as representing an entire class of aggrieved borrowers. Wilcox's suit, for example, seeks class-action status on behalf of other California borrowers with similar complaints about EMC.
Boston consumer lawyer Gary Klein, a longtime antagonist of mortgage lenders, has filed suits seeking class-action status against the top three loan servicers — Bank of America Corp., Wells Fargo & Co. and JPMorgan Chase & Co. — and others.
A multidistrict panel of federal judges on Oct. 8 consolidated eight such suits, including two from California, for pretrial proceedings in federal court in Boston.
The suits allege that trial loan modifications extended by Bank of America under the Obama administration's anti-foreclosure plan were contracts that the bank violated by denying permanent modifications to borrowers who fulfilled their obligations.
A spokeswoman for the Charlotte, N.C., bank declined to comment.
In court documents filed in one of the cases, Bank of America said the plaintiffs mistakenly believed they were guaranteed loan modifications if they made three trial payments under the government's program.
"A borrower must actually qualify, including income verification, an analysis of the modified loan's affordability and other factors," the bank said in the filings.
The loan-modification lawsuits add to enormous legal headaches for the banks.
The troubles include demands by mortgage giants Fannie Mae and Freddie Mac, Newport Beach bond fund goliath Pimco and the Federal Reserve Bank of New York that the banks repurchase billions of dollars in defaulted loans that were pooled to back mortgage securities.
On another legal front, several giant home lenders were forced to put evictions on hold this month after lawsuits turned up evidence that bank employees had signed thousands of court affidavits attesting that foreclosures were warranted — without reading the accompanying documentation.
Some analysts who follow mortgage lending said fixing that problem could be done with relative ease, as illustrated by Bank of America, the nation's largest loan servicer.
BofA issued a moratorium on pending foreclosures Oct. 1 but said last week that it had lifted the hold. The bank said it would resubmit legal affidavits, corrected where necessary, on 102,000 loans in the 23 states that require court approval for foreclosures and would resume asking judges for foreclosure orders.
Bank of America still has evictions on hold in 27 states that don't require court approval for foreclosures, including California, while it reviews its compliance with applicable laws.
But banks can't resolve so quickly the lawsuits they face over allegations that they lost or destroyed paperwork, failed to record payments or misapplied payments to run up fees and extra interest.
In the Wilcox case, for instance, EMC first modified her loan on a trial basis in late 2007 to lower its 8.34% interest rate, her lawsuit said, and she made the lower payments as agreed. But as time passed, she said, she was shuffled back and forth between numerous EMC employees, who kept changing the rules for a permanent modification.
EMC, which made so-called subprime loans as an arm of the collapsed Wall Street firm Bear Stearns Cos., is now a subsidiary of JPMorgan Chase. Chase spokesman Tom Kelly declined to comment.
Wilcox, a lawyer with expertise in real estate transactions, said she began having trouble paying the high-interest mortgage when her earnings as a sole practitioner slipped in 2007, leading her to seek a loan modification. She took a job at a law firm where her earnings are steady but lower.
Wilcox said that beginning in August 2008 she notified EMC four times in writing that she believed it was making false promises and demanded that it stop, laying the groundwork for one of the legal claims in her suit.
Wilcox's suit contends EMC was too buried in troubled loans to handle all the foreclosures at once. Instead, the lawsuit alleges, the company induced borrowers to accept trial loan modifications that it never intended to make permanent in order to keep payments coming in from the properties.
It also contends that EMC misapplied some payments and delayed the processing of others, intentionally inflating her balance with unjustified penalty fees and additional interest.
The company secretly recorded a notice of default as she was in the middle of her second trial modification, the suit alleges, and finally told her that her modification had been denied because an unidentified investor in her loan had refused to accept it.
The lawsuit alleges breach of contract, deceptive business practices and fraud. It seeks a court order requiring EMC to grant prompt modifications to qualified borrowers and compensate injured consumers.
Wilcox said she had about $250,000 in equity in her home when EMC first offered to modify her loan and would have sold the house had she not relied on the company's promises for a permanent modification. Now it's not clear whether any equity remains.
"You're paying out all this money," she said, "and all the time the value of your house keeps going down."
By E. Scott Reckard, Los Angeles Times
October 26, 2010
*******************************************************
Financially strapped homeowners struggling to obtain mortgage modifications are taking their frustrations to court, accusing banks and loan servicers of misleading them or breaking promises to help them hold on to their homes.
The lawsuits go to what U.S. Housing and Urban Development Secretary Shaun Donovan has described as the heart of the government's anti-foreclosure efforts: ensuring that banks work in good faith from the start to help borrowers.
Although the foreclosure process is less complicated in California than in states where home seizures must be approved by judges, the litigation shows that borrower-servicer relationships can be contentious in the Golden State as well.
As controversy grew over the accuracy of foreclosure paperwork, Donovan last week said the Obama administration's top priority is "making sure that steps are being taken early in the process to keep people in their homes rather than only focusing on the steps that come late in the process, in which it's much less likely somebody will be able to stay in their homes."
A theme of the lawsuits filed by homeowners is that banks have denied permanent modifications to borrowers who make their payments on time and otherwise hold up their end of the agreements.
For example, Jean C. Wilcox of Irvine has sued EMC Mortgage Corp., accusing it of stringing her along for three years while making several offers to modify her nearly $800,000 loan, losing documents repeatedly and never intending to permanently change the terms of the mortgage. An EMC spokesman declined to comment.
"It was just 'extend and pretend,' " said Wilcox's lawyer, Anthony Lanza of Irvine. "And it was like they had the fax machine hooked up to a shredder."
Anaheim lawyer Damian Nassiri said his firm had filed about 100 lawsuits against mortgage lenders since 2007. Earlier suits alleged that lenders misrepresented terms of mortgages or engaged in other shady practices to foist abusive loans on borrowers. Most of his firm's suits now accuse lenders of dealing in bad faith with borrowers who have become delinquent on loans.
Worse, Nassiri said, in cases where foreclosure was inevitable, banks misled borrowers into accepting trial loan modifications. The intent, he claimed, was "to get some kind of money out of them" while stalling actions to seize the homes.
"There are too many bad loans for the banks to handle, and they can't dump all these properties out on the market all at once because we would have another Depression," Nassiri said.
Similar allegations of breaches of contract and acting in bad faith have cropped up in lawsuits around the nation, said Anthony Laura, a Washington lawyer who represents lenders accused of wrongdoing and tracks litigation trends.
Some suits allege that the problem is so widespread that courts should certify the plaintiffs as representing an entire class of aggrieved borrowers. Wilcox's suit, for example, seeks class-action status on behalf of other California borrowers with similar complaints about EMC.
Boston consumer lawyer Gary Klein, a longtime antagonist of mortgage lenders, has filed suits seeking class-action status against the top three loan servicers — Bank of America Corp., Wells Fargo & Co. and JPMorgan Chase & Co. — and others.
A multidistrict panel of federal judges on Oct. 8 consolidated eight such suits, including two from California, for pretrial proceedings in federal court in Boston.
The suits allege that trial loan modifications extended by Bank of America under the Obama administration's anti-foreclosure plan were contracts that the bank violated by denying permanent modifications to borrowers who fulfilled their obligations.
A spokeswoman for the Charlotte, N.C., bank declined to comment.
In court documents filed in one of the cases, Bank of America said the plaintiffs mistakenly believed they were guaranteed loan modifications if they made three trial payments under the government's program.
"A borrower must actually qualify, including income verification, an analysis of the modified loan's affordability and other factors," the bank said in the filings.
The loan-modification lawsuits add to enormous legal headaches for the banks.
The troubles include demands by mortgage giants Fannie Mae and Freddie Mac, Newport Beach bond fund goliath Pimco and the Federal Reserve Bank of New York that the banks repurchase billions of dollars in defaulted loans that were pooled to back mortgage securities.
On another legal front, several giant home lenders were forced to put evictions on hold this month after lawsuits turned up evidence that bank employees had signed thousands of court affidavits attesting that foreclosures were warranted — without reading the accompanying documentation.
Some analysts who follow mortgage lending said fixing that problem could be done with relative ease, as illustrated by Bank of America, the nation's largest loan servicer.
BofA issued a moratorium on pending foreclosures Oct. 1 but said last week that it had lifted the hold. The bank said it would resubmit legal affidavits, corrected where necessary, on 102,000 loans in the 23 states that require court approval for foreclosures and would resume asking judges for foreclosure orders.
Bank of America still has evictions on hold in 27 states that don't require court approval for foreclosures, including California, while it reviews its compliance with applicable laws.
But banks can't resolve so quickly the lawsuits they face over allegations that they lost or destroyed paperwork, failed to record payments or misapplied payments to run up fees and extra interest.
In the Wilcox case, for instance, EMC first modified her loan on a trial basis in late 2007 to lower its 8.34% interest rate, her lawsuit said, and she made the lower payments as agreed. But as time passed, she said, she was shuffled back and forth between numerous EMC employees, who kept changing the rules for a permanent modification.
EMC, which made so-called subprime loans as an arm of the collapsed Wall Street firm Bear Stearns Cos., is now a subsidiary of JPMorgan Chase. Chase spokesman Tom Kelly declined to comment.
Wilcox, a lawyer with expertise in real estate transactions, said she began having trouble paying the high-interest mortgage when her earnings as a sole practitioner slipped in 2007, leading her to seek a loan modification. She took a job at a law firm where her earnings are steady but lower.
Wilcox said that beginning in August 2008 she notified EMC four times in writing that she believed it was making false promises and demanded that it stop, laying the groundwork for one of the legal claims in her suit.
Wilcox's suit contends EMC was too buried in troubled loans to handle all the foreclosures at once. Instead, the lawsuit alleges, the company induced borrowers to accept trial loan modifications that it never intended to make permanent in order to keep payments coming in from the properties.
It also contends that EMC misapplied some payments and delayed the processing of others, intentionally inflating her balance with unjustified penalty fees and additional interest.
The company secretly recorded a notice of default as she was in the middle of her second trial modification, the suit alleges, and finally told her that her modification had been denied because an unidentified investor in her loan had refused to accept it.
The lawsuit alleges breach of contract, deceptive business practices and fraud. It seeks a court order requiring EMC to grant prompt modifications to qualified borrowers and compensate injured consumers.
Wilcox said she had about $250,000 in equity in her home when EMC first offered to modify her loan and would have sold the house had she not relied on the company's promises for a permanent modification. Now it's not clear whether any equity remains.
"You're paying out all this money," she said, "and all the time the value of your house keeps going down."
By E. Scott Reckard, Los Angeles Times
October 26, 2010
Thursday, November 4, 2010
Another Loan Modification Failure
Another example of how bad the confusion and process for loan modification really is. The fact is, in Florida, only about 7% of loan modifications are successful. What is your Plan B, when you fall into the 93% group? Remember, attorneys can only delay and negotiate up to a point, at some point, you either have to start paying, or lose the house. Do attorney talk about default judgments? In my experience, most people tell me NO, their attorneys did not explain it. Who gets paid first when you hire an attorney? How much? How Long? Isn't it interesting to get the answers to these questions? Just some thoughts.
**********************************************************
Jill Gray of Mesquite, Texas, said her three-year-old son, Anthony, often tells her before he goes to bed: “I wanna go to the other house.”
Jill, Anthony and Tiffy, their black Labrador-mix dog, moved about 12 miles to a rental home three weeks ago 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, only to have the approval rescinded. Bank of America Corp. said documents were missing -- papers that Gray said she sent.
Gray’s experience, in which homeowners get evicted while participating in programs 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 came under fire at hearings last week for “trial” arrangements that allow late fees and debts to stack up and documents to disappear, triggering seizures.
“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 Oct. 27 Congressional testimony. “One incomplete payment or one accounting mistake can land you on an apparently unstoppable conveyor belt to eviction.”
With as many as 7 million homes facing foreclosure or already taken, according to Zillow Inc., both the government and companies such as Bank of America and JPMorgan Chase & Co., 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.
More Payments
About half the 1.4 million temporary or “trial” modifications granted since the program’s March 2009 inception have been canceled, according to U.S. Treasury Department 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, or SIGTARP, 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,” the report said.
Lost Paperwork
Mortgage firms make the problem worse by losing paperwork, according to testimony from Richard 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 100 percent 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,” said Joe Ridout, a spokesman for Consumer Action, an education and advocacy group based in San Francisco 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 signed and submitted court documents to justify home seizures without verifying they were accurate. Attorneys general in all 50 states are investigating.
Treasury Responds
HAMP modifications reduce mortgage payments to 31 percent of a homeowner’s monthly gross income. The process often results in a larger mortgage as accrued interest and other charges are tacked onto the balance. Some HAMP modifications add so-called balloon payments to the loan that are due when a house is sold or the mortgage paid off.
“The program continues to perform well,” Andrea Risotto, a Treasury spokeswoman, said in a phone interview. “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 over time.”
Tom Kelly, a JPMorgan spokesman, said the New York-based lender is able to track paperwork because it scans every document as soon as it’s received. At Ally Financial Inc., spokeswoman Gina Proia said the Detroit-based 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.
Processing Fees
Richard Cormier, in Rialto, California, had made eight payments on a trial modification of his mortgage when Wells Fargo & Co. told him Oct. 12 his home was being auctioned at the end of the month. The San Francisco-based bank told Cormier his file was missing documents.
“Every time I try to do something they ask, it’s never right,” said Cormier, 56.
Tom Goyda, a spokesman at Wells Fargo, the biggest U.S. mortgage lender, said yesterday the modification will be approved. As of June, the company has started to assign one employee to handle a modification from start to finish so that a homeowner “knows who they’re working with,” Goyda said.
Under HAMP guidelines, final foreclosure sales are banned until 30 days after an applicant has received a notification of rejection. A sale can’t take place until servicers provide foreclosure attorneys with written certification that all modification efforts have been exhausted.
Delayed Responses
“Our normal policy is to continue with the foreclosure process while we review a customer for a loan modification,” Bank of America’s Bauwens said in an e-mailed statement. “If we have not finished our review, we will postpone the foreclosure sale automatically.”
Some lenders take as long as nine months to approve modifications, something that should take as little as 45 minutes, said Rick Rogers, an attorney in Bannockburn, Illinois, who represents borrowers. Witnesses at last week’s hearing pointed in part to understaffing.
“Lenders are overwhelmed,” Nathalie Martin, a professor at the University of New Mexico School of Law, in an interview. “A lender is duty-bound to hire enough people to be able to service their loans.”
Gray, the Texas mother, said she fell behind on her mortgage bills last year after paying for medical treatments for her son that weren’t covered by insurance. When her home was auctioned in September, there were no bidders, so it reverted to the mortgage holder, Mclean, Virginia-based Freddie Mac, taken over by the government in 2008. The house is now listed for sale at $55,000.
When Gray, a part-time Avon Products Inc. saleswoman, received the modification offer in December from Bank of America, based in Charlotte, North Carolina, she said she immediately signed and returned the contract using the supplied FedEx Corp. envelope.
Call Log
Bauwens said the bank didn’t receive it by the due date. For Gray’s three subsequent applications, she said she faxed copies of pay stubs and financial statements requested by the bank. Bauwens said the bank didn’t get key documents.
Gray kept a record of her calls to the bank, in addition to 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. Called back. Ruby answered. She referred me to their REO Dept.”
HAMP conducts regular reviews of servicers as part of its Second Look compliance program that includes analyzing some files of homeowners who were denied modifications, said Risotto, the Treasury spokeswoman. If loans are under a Second Look review, foreclosure sales are suspended, and if reviewers conclude that servicers aren’t following guidelines, they may require applications to be re-evaluated, she said.
Gray is again being considered for a modification and the foreclosure sale may be rescinded, Bank of America’s Bauwens said. Gray, who works in the building permit department in a city called Fate, said she doesn’t expect to be approved. Now that she’s been evicted, she has to pay $775 a month in rent -- boosting her expenses beyond the program’s guidelines.
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Another Interesting Article about Public Housing
**********************************************************
Jill Gray of Mesquite, Texas, said her three-year-old son, Anthony, often tells her before he goes to bed: “I wanna go to the other house.”
Jill, Anthony and Tiffy, their black Labrador-mix dog, moved about 12 miles to a rental home three weeks ago 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, only to have the approval rescinded. Bank of America Corp. said documents were missing -- papers that Gray said she sent.
Gray’s experience, in which homeowners get evicted while participating in programs 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 came under fire at hearings last week for “trial” arrangements that allow late fees and debts to stack up and documents to disappear, triggering seizures.
“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 Oct. 27 Congressional testimony. “One incomplete payment or one accounting mistake can land you on an apparently unstoppable conveyor belt to eviction.”
With as many as 7 million homes facing foreclosure or already taken, according to Zillow Inc., both the government and companies such as Bank of America and JPMorgan Chase & Co., 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.
More Payments
About half the 1.4 million temporary or “trial” modifications granted since the program’s March 2009 inception have been canceled, according to U.S. Treasury Department 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, or SIGTARP, 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,” the report said.
Lost Paperwork
Mortgage firms make the problem worse by losing paperwork, according to testimony from Richard 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 100 percent 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,” said Joe Ridout, a spokesman for Consumer Action, an education and advocacy group based in San Francisco 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 signed and submitted court documents to justify home seizures without verifying they were accurate. Attorneys general in all 50 states are investigating.
Treasury Responds
HAMP modifications reduce mortgage payments to 31 percent of a homeowner’s monthly gross income. The process often results in a larger mortgage as accrued interest and other charges are tacked onto the balance. Some HAMP modifications add so-called balloon payments to the loan that are due when a house is sold or the mortgage paid off.
“The program continues to perform well,” Andrea Risotto, a Treasury spokeswoman, said in a phone interview. “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 over time.”
Tom Kelly, a JPMorgan spokesman, said the New York-based lender is able to track paperwork because it scans every document as soon as it’s received. At Ally Financial Inc., spokeswoman Gina Proia said the Detroit-based 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.
Processing Fees
Richard Cormier, in Rialto, California, had made eight payments on a trial modification of his mortgage when Wells Fargo & Co. told him Oct. 12 his home was being auctioned at the end of the month. The San Francisco-based bank told Cormier his file was missing documents.
“Every time I try to do something they ask, it’s never right,” said Cormier, 56.
Tom Goyda, a spokesman at Wells Fargo, the biggest U.S. mortgage lender, said yesterday the modification will be approved. As of June, the company has started to assign one employee to handle a modification from start to finish so that a homeowner “knows who they’re working with,” Goyda said.
Under HAMP guidelines, final foreclosure sales are banned until 30 days after an applicant has received a notification of rejection. A sale can’t take place until servicers provide foreclosure attorneys with written certification that all modification efforts have been exhausted.
Delayed Responses
“Our normal policy is to continue with the foreclosure process while we review a customer for a loan modification,” Bank of America’s Bauwens said in an e-mailed statement. “If we have not finished our review, we will postpone the foreclosure sale automatically.”
Some lenders take as long as nine months to approve modifications, something that should take as little as 45 minutes, said Rick Rogers, an attorney in Bannockburn, Illinois, who represents borrowers. Witnesses at last week’s hearing pointed in part to understaffing.
“Lenders are overwhelmed,” Nathalie Martin, a professor at the University of New Mexico School of Law, in an interview. “A lender is duty-bound to hire enough people to be able to service their loans.”
Gray, the Texas mother, said she fell behind on her mortgage bills last year after paying for medical treatments for her son that weren’t covered by insurance. When her home was auctioned in September, there were no bidders, so it reverted to the mortgage holder, Mclean, Virginia-based Freddie Mac, taken over by the government in 2008. The house is now listed for sale at $55,000.
When Gray, a part-time Avon Products Inc. saleswoman, received the modification offer in December from Bank of America, based in Charlotte, North Carolina, she said she immediately signed and returned the contract using the supplied FedEx Corp. envelope.
Call Log
Bauwens said the bank didn’t receive it by the due date. For Gray’s three subsequent applications, she said she faxed copies of pay stubs and financial statements requested by the bank. Bauwens said the bank didn’t get key documents.
Gray kept a record of her calls to the bank, in addition to 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. Called back. Ruby answered. She referred me to their REO Dept.”
HAMP conducts regular reviews of servicers as part of its Second Look compliance program that includes analyzing some files of homeowners who were denied modifications, said Risotto, the Treasury spokeswoman. If loans are under a Second Look review, foreclosure sales are suspended, and if reviewers conclude that servicers aren’t following guidelines, they may require applications to be re-evaluated, she said.
Gray is again being considered for a modification and the foreclosure sale may be rescinded, Bank of America’s Bauwens said. Gray, who works in the building permit department in a city called Fate, said she doesn’t expect to be approved. Now that she’s been evicted, she has to pay $775 a month in rent -- boosting her expenses beyond the program’s guidelines.
***********************************************
Another Interesting Article about Public Housing
Thursday, October 7, 2010
As can be seen from the following article, you really do need to get expert advice when dealing with one of your largest investments and purchases in your life. by no means do I think that all realtors are created equal, just as all doctors, mechanics , lawyers etc. are not created equal, however, when buying or selling a home, you really do need the help of a realtor, just as you would need a doctor when you are sick. Even a mediocre agent from a established brokerage is still better than none at all.
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Buy Owner, the nation’s largest company for broker-free real estate sales, is the latest victim of the housing crunch, filing for liquidation in Broward Circuit Court.
Buy Owner and 18 affiliates filed an assignment for the benefit of creditors Monday after turning over all their assets Friday to Michael Moecker & Associates managing director Philip J. von Kahle.
Moecker is an auction firm that specializes in liquidating insolvent companies.
An assignment for the benefit of creditors, also known as an ABC, is a state court alternative to federal bankruptcy action. The insolvency proceedings are seen by some attorneys as less expensive and more efficient than bankruptcy.
The Deerfield Beach-based real estate company aggressively expanded to 10 of the country’s top real estate markets, including Miami, Fort Lauderdale, West Palm Beach, Chicago, Dallas and Atlanta, catering to homeowners who wanted to sell their property without the expense of agent commissions.
“They were extremely busy, business was booming, and they took on debt from Bank of America for the purposes of expansion and purchasing their franchisees back. In doing so, they got up to 400-plus employees and — just like that — the bottom fell out of the real estate market,” von Kahle said.
Experts also say the competitive landscape has changed with the real estate downturn and that simply listing a home on a website is no longer enough to sell a property.
Buy Owner could not turn a profit even after laying off all but 20 employees at its Deerfield Beach and Chicago offices.
The company claims at least $5.1 million in debt and listed assets of about $60,000 plus an office building in an assignment contract signed last week. The contract is the legal document transferring control of its assets to von Kahle, who is charged with selling them off to repay creditors.
He said he did not know how much money creditors might see from the liquidation.
The company owes more than $3.9 million to Bank of America, its only secured creditor, and $1.2 million in back wages to its top executives. Listed assets include an office building in Oak Brook, Illinois, a $55,338 Illinois tax refund, furniture and $4,647 in bank accounts.
“They still cannot afford to pay the secured debt, and that’s what really choked them,” von Kahle said.
Although Buy Owner is essentially dead, von Kahle said he will attempt to keep its website and services alive and available to consumers, who should not notice a change.
“If we just sit there, turn the key off and shut the web page down, there’s little value here,” he said.
An assignment for the benefit of creditors allows the operation to continue under von Kahle’s control — but only to raise capital to pay creditors.
A petition commencing the assignment for the benefit of creditors was filed by von Kahle’s attorney, GrayRobinson shareholder Leyza F. Blanco of Miami.
Eckert family members who led the firm, including Buy Owner president and CEO Scott A. Eckert, resigned Friday. Staff at the company’s Deerfield Beach office said Tuesday that he declined to comment.
If any of the company’s 33 shareholders are owed money, they will become creditors as well. Calls to several of the company’s top investors were not returned.
Creditors will have until Nov. 23 to file claims against the company.
Since its founding in 1984, the company expanded by opening franchises in Atlanta, Chicago, Dallas, Jacksonville, New Orleans, Orlando, Philadelphia and Tampa. On its website, the company claimed to be the most popular destination for homeowners interested in buying or selling homes with 10 million page views each month.
But its simple philosophy — cutting costs by eliminating the middleman — hasn’t proven strong enough to carry the company through the recession. That surprises Brad Hunter, chief economist at Palm Beach Gardens real estate consulting firm Metrostudy.
“I thought they had a business model that would be viable in today’s tough market because it allows people to save the commission. On the other hand, it demonstrates it is so hard to sell a home in this market that you do need a real estate expert to get the job done,” he said.
Going with Buy Owner meant going it alone, without the expertise needed to sell a home in a depressed market, said Oliver Ruiz, managing broker of Fortune International Realty in Miami and residential president for the Realtor Association of Greater Miami and the Beaches.
When the market was healthy, the share of brokerless transactions made up nearly a tenth of all properties sold. Ruiz said it has decreased in recent years as homeowners realize they need the marketing depth of agents to complete sales in the tougher market.
A study prepared for the Florida Association of Realtors last November showed the share of Florida sellers who sold their own homes was 10 percent compared with a national average of 11 percent. The study also showed 40 percent of those sellers knew the buyer before the sale.
“Marketing is a very important tool,” Ruiz said. “Just putting a property on the MLS (Multiple Listing Service) doesn’t do it anymore.”
Buy Owner is free to buyers but made money by selling advertising and charging fees to market properties in its magazines and on its website. Fees were based on the number of photos and virtual tours a seller wanted to place on the company’s site. The service included pre-screening prospective buyers and helping sellers with the paperwork required to sell their properties. Sellers were responsible for showing their own properties.
The company landed on the wrong end of a class action lawsuit after consumers complained the company would not allow customers to cancel contracts.
A 2009 settlement covering thousands of customers resulted in refunds for many who paid Buy Owner from 2002 to 2008.
*********************************************************************************
Buy Owner, the nation’s largest company for broker-free real estate sales, is the latest victim of the housing crunch, filing for liquidation in Broward Circuit Court.
Buy Owner and 18 affiliates filed an assignment for the benefit of creditors Monday after turning over all their assets Friday to Michael Moecker & Associates managing director Philip J. von Kahle.
Moecker is an auction firm that specializes in liquidating insolvent companies.
An assignment for the benefit of creditors, also known as an ABC, is a state court alternative to federal bankruptcy action. The insolvency proceedings are seen by some attorneys as less expensive and more efficient than bankruptcy.
The Deerfield Beach-based real estate company aggressively expanded to 10 of the country’s top real estate markets, including Miami, Fort Lauderdale, West Palm Beach, Chicago, Dallas and Atlanta, catering to homeowners who wanted to sell their property without the expense of agent commissions.
“They were extremely busy, business was booming, and they took on debt from Bank of America for the purposes of expansion and purchasing their franchisees back. In doing so, they got up to 400-plus employees and — just like that — the bottom fell out of the real estate market,” von Kahle said.
Experts also say the competitive landscape has changed with the real estate downturn and that simply listing a home on a website is no longer enough to sell a property.
Buy Owner could not turn a profit even after laying off all but 20 employees at its Deerfield Beach and Chicago offices.
The company claims at least $5.1 million in debt and listed assets of about $60,000 plus an office building in an assignment contract signed last week. The contract is the legal document transferring control of its assets to von Kahle, who is charged with selling them off to repay creditors.
He said he did not know how much money creditors might see from the liquidation.
The company owes more than $3.9 million to Bank of America, its only secured creditor, and $1.2 million in back wages to its top executives. Listed assets include an office building in Oak Brook, Illinois, a $55,338 Illinois tax refund, furniture and $4,647 in bank accounts.
“They still cannot afford to pay the secured debt, and that’s what really choked them,” von Kahle said.
Although Buy Owner is essentially dead, von Kahle said he will attempt to keep its website and services alive and available to consumers, who should not notice a change.
“If we just sit there, turn the key off and shut the web page down, there’s little value here,” he said.
An assignment for the benefit of creditors allows the operation to continue under von Kahle’s control — but only to raise capital to pay creditors.
A petition commencing the assignment for the benefit of creditors was filed by von Kahle’s attorney, GrayRobinson shareholder Leyza F. Blanco of Miami.
Eckert family members who led the firm, including Buy Owner president and CEO Scott A. Eckert, resigned Friday. Staff at the company’s Deerfield Beach office said Tuesday that he declined to comment.
If any of the company’s 33 shareholders are owed money, they will become creditors as well. Calls to several of the company’s top investors were not returned.
Creditors will have until Nov. 23 to file claims against the company.
Since its founding in 1984, the company expanded by opening franchises in Atlanta, Chicago, Dallas, Jacksonville, New Orleans, Orlando, Philadelphia and Tampa. On its website, the company claimed to be the most popular destination for homeowners interested in buying or selling homes with 10 million page views each month.
But its simple philosophy — cutting costs by eliminating the middleman — hasn’t proven strong enough to carry the company through the recession. That surprises Brad Hunter, chief economist at Palm Beach Gardens real estate consulting firm Metrostudy.
“I thought they had a business model that would be viable in today’s tough market because it allows people to save the commission. On the other hand, it demonstrates it is so hard to sell a home in this market that you do need a real estate expert to get the job done,” he said.
Going with Buy Owner meant going it alone, without the expertise needed to sell a home in a depressed market, said Oliver Ruiz, managing broker of Fortune International Realty in Miami and residential president for the Realtor Association of Greater Miami and the Beaches.
When the market was healthy, the share of brokerless transactions made up nearly a tenth of all properties sold. Ruiz said it has decreased in recent years as homeowners realize they need the marketing depth of agents to complete sales in the tougher market.
A study prepared for the Florida Association of Realtors last November showed the share of Florida sellers who sold their own homes was 10 percent compared with a national average of 11 percent. The study also showed 40 percent of those sellers knew the buyer before the sale.
“Marketing is a very important tool,” Ruiz said. “Just putting a property on the MLS (Multiple Listing Service) doesn’t do it anymore.”
Buy Owner is free to buyers but made money by selling advertising and charging fees to market properties in its magazines and on its website. Fees were based on the number of photos and virtual tours a seller wanted to place on the company’s site. The service included pre-screening prospective buyers and helping sellers with the paperwork required to sell their properties. Sellers were responsible for showing their own properties.
The company landed on the wrong end of a class action lawsuit after consumers complained the company would not allow customers to cancel contracts.
A 2009 settlement covering thousands of customers resulted in refunds for many who paid Buy Owner from 2002 to 2008.
Thursday, August 12, 2010
Home foreclosures up 9% from last month
The number of U.S. homes lost to foreclosure surged in July, another sign lenders are moving quicker to take back properties from homeowners behind in payments.
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.
Meanwhile, homeowners who are falling behind on their payments are being allowed to stay in their homes longer because lenders are reluctant to add to the glut of foreclosed homes on the market.
The number of properties receiving an initial default notice — the first step in the foreclosure process — rose 1 percent last month from June, but tumbled 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.
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.
Meanwhile, homeowners who are falling behind on their payments are being allowed to stay in their homes longer because lenders are reluctant to add to the glut of foreclosed homes on the market.
The number of properties receiving an initial default notice — the first step in the foreclosure process — rose 1 percent last month from June, but tumbled 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.
Tuesday, August 10, 2010
Market Roundup
Home sellers are seeing their properties languish on the market for years, in some cases. It is beginning to seem normal to see properties that have been listed for more than 360 days
As we are rounding this year, the news isn’t going to look a lot better for home sellers.
Unemployment is extremely high and companies are still laying off workers in many areas. Where unemployment is high, foreclosures are spiking.
Speaking of foreclosures, the number of homes receiving a foreclosure notice hit an all-time high in 2010, but the number is expected to rise further next year (perhaps as high as 4 million).
While the number of homes on the market has shrunk a bit, there is a shadow inventory of as many as 2.5 million homes that hasn’t even been listed. This includes properties where homeowners are delinquent on their mortgage and bank-owned properties (also known as REO properties).
The only pieces of good news: mortgage interest rates hit a 50-year low recently falling all the way to 4.71 for a 30-year fixed-rate mortgage and 4.25 percent for a 15-year loan, and the federal government offered the $8,000 first-time home buyer tax credit and in November introduced the $6,500 trade-up tax credit.
Unfortunately, home sellers are going to find tougher conditions all around next year, as the tax credits end, mortgage interest rates rise, and the number of foreclosures increases.
More economists and industry observers are saying that the housing industry will make an extremely slow recovery due to the lack of jobs and the tightening of credit.
As we are rounding this year, the news isn’t going to look a lot better for home sellers.
Unemployment is extremely high and companies are still laying off workers in many areas. Where unemployment is high, foreclosures are spiking.
Speaking of foreclosures, the number of homes receiving a foreclosure notice hit an all-time high in 2010, but the number is expected to rise further next year (perhaps as high as 4 million).
While the number of homes on the market has shrunk a bit, there is a shadow inventory of as many as 2.5 million homes that hasn’t even been listed. This includes properties where homeowners are delinquent on their mortgage and bank-owned properties (also known as REO properties).
The only pieces of good news: mortgage interest rates hit a 50-year low recently falling all the way to 4.71 for a 30-year fixed-rate mortgage and 4.25 percent for a 15-year loan, and the federal government offered the $8,000 first-time home buyer tax credit and in November introduced the $6,500 trade-up tax credit.
Unfortunately, home sellers are going to find tougher conditions all around next year, as the tax credits end, mortgage interest rates rise, and the number of foreclosures increases.
More economists and industry observers are saying that the housing industry will make an extremely slow recovery due to the lack of jobs and the tightening of credit.
Wednesday, July 21, 2010
Loan modifications still failing in South Florida
Publisher comments:
When people finally realize that loan modifications do not work, and is a carrot held in front of their noses to get as much money as possible from them, we will see an escalation in foreclosures worse than today. - Charl
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The loan mod picture is still very busy, but borrowers in South Florida continue to drop out of the Obama administration’s Making Home Affordable program.
South Florida’s metro areas had more loan modifications than any other cities in the nation in June – which is the same as in May. Statewide, Florida’s number of troubled loans getting new terms was second only to California, also unchanged.
But what’s new: Fewer South Florida borrowers had a permanent loan modification than in May.
Nationwide, the number of borrowers getting permanent loan mods is higher than the previous month. But over the long haul, the Associated Press points out, 530,000 borrowers have dropped out of the program since it began in March 2009 with 1.3 million homeowners.
The Making Home Affordable permanent modifications “are on pace and sustainable for the homeowner, as more than 50,000 trial agreements graduated to permanent in June and default rates remain low,” the Treasury’s statement says.
According to the Treasury’s report released today:
The Miami-Fort-Lauderdale-Pompano-Beach metro area had 35,621 trial and permanent loan modifications underway in June, down from almost 38,500 in May.
Orlando-Kissimmee had 15,130, down from more than 16,000 in May.
Add those two metro areas together and they account for 6.7 percent of all loan modification activity nationwide. That proportion is greater than Los Angeles, with 6.5 percent, New York, with 6 percent and Chicago, with 5.1 percent of all loan modifications nationwide under the Obama administration’s program.
The two also accounted for more than half of all loan modifications in Florida.
Only California was busier when it came to trouble mortgage modifications. In California, there were 168,155 loan modifications underway last month, compared to 92,754 in Florida.
Among lenders, Bank of America has produced the largest number of permanent loan modifications, 72,232 nationwide. JP Morgan Chase reported 54,722 loan modifications.
Nationwide, the Treasury said there were 389,198 permanent modifications were reported in June, up from 340,459 in May.
Why aren't more people getting a permanent loan modification in South Florida? I asked that question in a recent column and you can read the answers I found here.
Click here for more
When people finally realize that loan modifications do not work, and is a carrot held in front of their noses to get as much money as possible from them, we will see an escalation in foreclosures worse than today. - Charl
******************************************************
The loan mod picture is still very busy, but borrowers in South Florida continue to drop out of the Obama administration’s Making Home Affordable program.
South Florida’s metro areas had more loan modifications than any other cities in the nation in June – which is the same as in May. Statewide, Florida’s number of troubled loans getting new terms was second only to California, also unchanged.
But what’s new: Fewer South Florida borrowers had a permanent loan modification than in May.
Nationwide, the number of borrowers getting permanent loan mods is higher than the previous month. But over the long haul, the Associated Press points out, 530,000 borrowers have dropped out of the program since it began in March 2009 with 1.3 million homeowners.
The Making Home Affordable permanent modifications “are on pace and sustainable for the homeowner, as more than 50,000 trial agreements graduated to permanent in June and default rates remain low,” the Treasury’s statement says.
According to the Treasury’s report released today:
The Miami-Fort-Lauderdale-Pompano-Beach metro area had 35,621 trial and permanent loan modifications underway in June, down from almost 38,500 in May.
Orlando-Kissimmee had 15,130, down from more than 16,000 in May.
Add those two metro areas together and they account for 6.7 percent of all loan modification activity nationwide. That proportion is greater than Los Angeles, with 6.5 percent, New York, with 6 percent and Chicago, with 5.1 percent of all loan modifications nationwide under the Obama administration’s program.
The two also accounted for more than half of all loan modifications in Florida.
Only California was busier when it came to trouble mortgage modifications. In California, there were 168,155 loan modifications underway last month, compared to 92,754 in Florida.
Among lenders, Bank of America has produced the largest number of permanent loan modifications, 72,232 nationwide. JP Morgan Chase reported 54,722 loan modifications.
Nationwide, the Treasury said there were 389,198 permanent modifications were reported in June, up from 340,459 in May.
Why aren't more people getting a permanent loan modification in South Florida? I asked that question in a recent column and you can read the answers I found here.
Click here for more
Wednesday, July 14, 2010
Online auctions make repos faster for banks
As I expected, after the expiration of the tax credit, and with the failures in loan modifications and other government programs, banks would continue to take back houses. As mentioned below, the online auctions makes it easier, as howeowners generally don't attend like they sometimes do in court, and contest the sales. The process works quite well, I have been online at all three counties, they use the same system.
Whatever small price bumps we saw, it will probably go down again as these houses come to market. Short sales is still a viable, strong alternative, and the banks have ramped up systems and training, it is getting better in the loss mitigation departments.
Also see the following article:
40 percent of Florida homes sales are foreclosures
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Lenders are repossessing homes at a faster clip in 2010 and are on pace to take back nearly 50,000 properties in South Florida this year, according to a report from CondoVultures.com.
Banks repossessed an average of 4,000 South Florida properties a month in the first half of 2010, an 83 percent increase from a year ago. Miami-Dade County had a 125 percent increase, while repossessions rose by 112 percent in Palm Beach County and 42 percent in Broward.
If repossessions approach 50,000 for the year, it would easily surpass the 30,400 homes that lenders took back in 2009.
Peter Zalewski, a principal with the Bal Harbour-based consulting firm, said in a statement the number of bank repossessions in 2010 is higher than at any time in at least 20 years.
He points out that the bank-owned homes will be coming back on the market at a discount. That almost certainly will drive prices down.
Foreclosure auctions were moved online this year in South Florida. Zalewski said a reason for the increase in repossessions is that the Internet auctions allow courts to clear the backlog of cases more quickly.
Whatever small price bumps we saw, it will probably go down again as these houses come to market. Short sales is still a viable, strong alternative, and the banks have ramped up systems and training, it is getting better in the loss mitigation departments.
Also see the following article:
40 percent of Florida homes sales are foreclosures
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Lenders are repossessing homes at a faster clip in 2010 and are on pace to take back nearly 50,000 properties in South Florida this year, according to a report from CondoVultures.com.
Banks repossessed an average of 4,000 South Florida properties a month in the first half of 2010, an 83 percent increase from a year ago. Miami-Dade County had a 125 percent increase, while repossessions rose by 112 percent in Palm Beach County and 42 percent in Broward.
If repossessions approach 50,000 for the year, it would easily surpass the 30,400 homes that lenders took back in 2009.
Peter Zalewski, a principal with the Bal Harbour-based consulting firm, said in a statement the number of bank repossessions in 2010 is higher than at any time in at least 20 years.
He points out that the bank-owned homes will be coming back on the market at a discount. That almost certainly will drive prices down.
Foreclosure auctions were moved online this year in South Florida. Zalewski said a reason for the increase in repossessions is that the Internet auctions allow courts to clear the backlog of cases more quickly.
Tuesday, July 13, 2010
Mansion Foreclosures Surge
The taxes are coming, the taxes are coming, that is why we see this:
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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?
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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?
Thursday, July 1, 2010
Home buyers to get more time
Associated Press
WASHINGTON - Congress has sent President Obama a plan to give home buyers an additional three months to finish qualifying for federal tax incentives that boosted home sales this spring.
The legislation would give buyers until Sept. 30 to complete their purchases and qualify for tax credits of up to $8,000.Under the current terms, buyers had until April 30 to get a signed sales contract and until June 30 to complete the sale.
The bill allows only people who already have signed contracts to finish at the later date.
The National Association of Realtors had estimated this week that about 180,000 home buyers who already signed purchase agreements were likely to miss the Wednesday deadline.
The House approved the measure Tuesday. Legislation in the Senate, sponsored by Majority Leader Harry Reid (D., Nev.), was approved Wednesday night by unanimous consent. The popular tax credit has helped to stabilize the nation's slumping housing market. Nearly three million taxpayers claimed the tax credit through May 22 - claiming more than $21 billion - according to the Treasury Department.
The Realtors group said the tax credit had generated one million home sales that would not have happened otherwise. The bill would also make it easier for the Internal Revenue Service and state prison officials to share information about inmates in order to fight fraud.
The Treasury Department's inspector general for tax administration reported last week that nearly 1,300 prison inmates had improperly received more than $9 million in tax credits for home buyers while they were locked up. The report said the IRS did not have up-to-date information on inmates.
The tax credit for first-time home buyers was part of Obama's economic-recovery package enacted last year. In November, Congress extended the credit and expanded it to longtime owners who bought new homes. First-time buyers were eligible for a tax credit of up to $8,000. Current owners who bought and moved into another home could qualify for a credit of up to $6,500.
The Realtors group had been pushing hard in Congress for the extension. Mortgage lenders, the trade group said, have been swamped with borrowers trying to get approved by the end of the month. Delays with mortgage lending and appraisal companies have meant that home sales are taking far longer to complete this year.
There have been particularly long delays for buyers of so-called short sales, in which banks agree to accept less than the total mortgage amount. In Las Vegas, for example, short sales made up nearly a third of all sales last month.
WASHINGTON - Congress has sent President Obama a plan to give home buyers an additional three months to finish qualifying for federal tax incentives that boosted home sales this spring.
The legislation would give buyers until Sept. 30 to complete their purchases and qualify for tax credits of up to $8,000.Under the current terms, buyers had until April 30 to get a signed sales contract and until June 30 to complete the sale.
The bill allows only people who already have signed contracts to finish at the later date.
The National Association of Realtors had estimated this week that about 180,000 home buyers who already signed purchase agreements were likely to miss the Wednesday deadline.
The House approved the measure Tuesday. Legislation in the Senate, sponsored by Majority Leader Harry Reid (D., Nev.), was approved Wednesday night by unanimous consent. The popular tax credit has helped to stabilize the nation's slumping housing market. Nearly three million taxpayers claimed the tax credit through May 22 - claiming more than $21 billion - according to the Treasury Department.
The Realtors group said the tax credit had generated one million home sales that would not have happened otherwise. The bill would also make it easier for the Internal Revenue Service and state prison officials to share information about inmates in order to fight fraud.
The Treasury Department's inspector general for tax administration reported last week that nearly 1,300 prison inmates had improperly received more than $9 million in tax credits for home buyers while they were locked up. The report said the IRS did not have up-to-date information on inmates.
The tax credit for first-time home buyers was part of Obama's economic-recovery package enacted last year. In November, Congress extended the credit and expanded it to longtime owners who bought new homes. First-time buyers were eligible for a tax credit of up to $8,000. Current owners who bought and moved into another home could qualify for a credit of up to $6,500.
The Realtors group had been pushing hard in Congress for the extension. Mortgage lenders, the trade group said, have been swamped with borrowers trying to get approved by the end of the month. Delays with mortgage lending and appraisal companies have meant that home sales are taking far longer to complete this year.
There have been particularly long delays for buyers of so-called short sales, in which banks agree to accept less than the total mortgage amount. In Las Vegas, for example, short sales made up nearly a third of all sales last month.
Wednesday, June 23, 2010
Florida’s existing home, condo sales rise in May
My Comments:
I am cautiously optimistic, and have personally seen activity jump a lot. The numbers below are great, but they do not break down the numbers betwen condos and single family homes. Condos continue to sell, mostly cash, at large discounts on short sale. It continues to be extremely difficult to finance condos (I have a case of clients with 780+ credit being denied twice on a condo on the intracoastal with no COA problems, and $1.1 mill. in reserves), despite all the government efforts.
All the sales activity from the tax credit that expired in April is still in the process of closing, with the current deadline of June 30. This may be extended to September 30 for all people who were under contract by April 30, pending approval in the house. We are moving into the June - August summer months, which traditionally has been more active as families move during the summer vacations. Interest rates are still at hsitorical lows, and all this means is that I expect the numbers to be good for the next few months.
Foreclosures are slowing, but there are still record numbers every month, this pent up inventory will take 3-5 years to clear. Bankruptcies are at record numbers too, and most of these are the result of foreclosures, so expect those to impact the numbers too.
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ORLANDO, Fla., June 22, 2010 – Sales of existing homes in Florida rose 18 percent in May, marking 21 months that sales activity has increased in the year-to-year comparison, according to the latest housing data released by Florida Realtors®.
A total of 16,745 single-family existing homes sold statewide last month compared to 14,172 homes sold in May 2009, according to Florida Realtors. The statewide existing-home median price of $140,400 in May was slightly higher – by $300 – than April's statewide existing-home median price of $140,100. It marks the third month in a row that the statewide existing-home median price has increased over the previous month's median.
Across the state, a variety of housing opportunities continues to be available at attractive prices while mortgage interest rates remain historically low, said 2010 Florida Realtors President Wendell Davis, a broker with Watson Realty Corp. in Jacksonville.
"Favorable conditions like this spark buyers' interest," Davis said. "However, like the rest of the world, Floridians are deeply concerned about the long-term ramifications of the April 20th explosion of BP's Deepwater Horizon oil rig, which killed 11 people and triggered the oil spill disaster in the Gulf of Mexico."
Seventeen of Florida's metropolitan statistical areas (MSAs) reported higher existing home and existing condo sales in May. A majority of the state's MSAs have reported increased sales for 23 consecutive months.
Florida's median sales price for existing homes last month was $140,400; a year ago, it was $143,800 for a decrease of 2 percent. The median is the midpoint; half the homes sold for more, half for less.
Thenational median sales price for existing single-family homes in April 2010 was $173,400, up 4.5 percent from a year earlier, according to the National Association of Realtors® (NAR). In California, the statewide median resales price was $306,230 in April; in Massachusetts, it was $295,000; in Maryland, it was $244,943; and in New York, it was $197,000.
According to NAR's latest industry outlook, factors such as a return of buyer confidence, stabilizing home prices and an improving economy are supporting the market in the federal homebuyer tax credit's wake. "The housing market has to get back on its own feet," said NAR Chief Economist Lawrence Yun, "and now appears to be in a good position to return to sustainable levels even without government stimulus, provided the economy continues to add jobs."
In Florida's year-to-year comparison for condos, 6,779 units sold statewide last month compared to 4,845 units in May 2009 for an increase of 40 percent. The statewide existing condo median sales price last month was $98,700; in May 2009 it was $113,500 for a 13 percent decrease. The national median existing condo price was $171,000 in April, according to NAR.
Interest rates for a 30-year fixed-rate mortgage averaged 4.89 percent in May, close to the 4.86 percent averaged during May 2009, according to Freddie Mac. Florida Realtors' sales figures reflect closings, which typically occur 30 to 90 days after sales contracts are written.
Among the state's larger markets, the West Palm Beach-Boca Raton MSA reported a total of 887 homes sold in May compared to 737 homes a year earlier for a 20 percent increase. The market's existing home median sales price last month was $235,200; a year earlier it was $232,900 for an increase of 1 percent. A total of 877 condos sold in the MSA in May compared to 676 units sold in May 2009 for an increase of 30 percent. The existing condo median price last month was $99,600; a year earlier, it was $107,500 for a decrease of 7 percent.
© 2010 Florida Realtors®
Related NEWS:
Florida's Population growth hits a wall
Existing home sales in palm beach county up
I am cautiously optimistic, and have personally seen activity jump a lot. The numbers below are great, but they do not break down the numbers betwen condos and single family homes. Condos continue to sell, mostly cash, at large discounts on short sale. It continues to be extremely difficult to finance condos (I have a case of clients with 780+ credit being denied twice on a condo on the intracoastal with no COA problems, and $1.1 mill. in reserves), despite all the government efforts.
All the sales activity from the tax credit that expired in April is still in the process of closing, with the current deadline of June 30. This may be extended to September 30 for all people who were under contract by April 30, pending approval in the house. We are moving into the June - August summer months, which traditionally has been more active as families move during the summer vacations. Interest rates are still at hsitorical lows, and all this means is that I expect the numbers to be good for the next few months.
Foreclosures are slowing, but there are still record numbers every month, this pent up inventory will take 3-5 years to clear. Bankruptcies are at record numbers too, and most of these are the result of foreclosures, so expect those to impact the numbers too.
**********************************************************
ORLANDO, Fla., June 22, 2010 – Sales of existing homes in Florida rose 18 percent in May, marking 21 months that sales activity has increased in the year-to-year comparison, according to the latest housing data released by Florida Realtors®.
A total of 16,745 single-family existing homes sold statewide last month compared to 14,172 homes sold in May 2009, according to Florida Realtors. The statewide existing-home median price of $140,400 in May was slightly higher – by $300 – than April's statewide existing-home median price of $140,100. It marks the third month in a row that the statewide existing-home median price has increased over the previous month's median.
Across the state, a variety of housing opportunities continues to be available at attractive prices while mortgage interest rates remain historically low, said 2010 Florida Realtors President Wendell Davis, a broker with Watson Realty Corp. in Jacksonville.
"Favorable conditions like this spark buyers' interest," Davis said. "However, like the rest of the world, Floridians are deeply concerned about the long-term ramifications of the April 20th explosion of BP's Deepwater Horizon oil rig, which killed 11 people and triggered the oil spill disaster in the Gulf of Mexico."
Seventeen of Florida's metropolitan statistical areas (MSAs) reported higher existing home and existing condo sales in May. A majority of the state's MSAs have reported increased sales for 23 consecutive months.
Florida's median sales price for existing homes last month was $140,400; a year ago, it was $143,800 for a decrease of 2 percent. The median is the midpoint; half the homes sold for more, half for less.
Thenational median sales price for existing single-family homes in April 2010 was $173,400, up 4.5 percent from a year earlier, according to the National Association of Realtors® (NAR). In California, the statewide median resales price was $306,230 in April; in Massachusetts, it was $295,000; in Maryland, it was $244,943; and in New York, it was $197,000.
According to NAR's latest industry outlook, factors such as a return of buyer confidence, stabilizing home prices and an improving economy are supporting the market in the federal homebuyer tax credit's wake. "The housing market has to get back on its own feet," said NAR Chief Economist Lawrence Yun, "and now appears to be in a good position to return to sustainable levels even without government stimulus, provided the economy continues to add jobs."
In Florida's year-to-year comparison for condos, 6,779 units sold statewide last month compared to 4,845 units in May 2009 for an increase of 40 percent. The statewide existing condo median sales price last month was $98,700; in May 2009 it was $113,500 for a 13 percent decrease. The national median existing condo price was $171,000 in April, according to NAR.
Interest rates for a 30-year fixed-rate mortgage averaged 4.89 percent in May, close to the 4.86 percent averaged during May 2009, according to Freddie Mac. Florida Realtors' sales figures reflect closings, which typically occur 30 to 90 days after sales contracts are written.
Among the state's larger markets, the West Palm Beach-Boca Raton MSA reported a total of 887 homes sold in May compared to 737 homes a year earlier for a 20 percent increase. The market's existing home median sales price last month was $235,200; a year earlier it was $232,900 for an increase of 1 percent. A total of 877 condos sold in the MSA in May compared to 676 units sold in May 2009 for an increase of 30 percent. The existing condo median price last month was $99,600; a year earlier, it was $107,500 for a decrease of 7 percent.
© 2010 Florida Realtors®
Related NEWS:
Florida's Population growth hits a wall
Existing home sales in palm beach county up
Monday, June 7, 2010
Tax Hikes and the 2011 Economic Collapse
By ARTHUR LAFFER:
People can change the volume, the location and the composition of their income, and they can do so in response to changes in government policies.
It shouldn't surprise anyone that the nine states without an income tax are growing far faster and attracting more people than are the nine states with the highest income tax rates. People and businesses change the location of income based on incentives.
Likewise, who is gobsmacked when they are told that the two wealthiest Americans—Bill Gates and Warren Buffett—hold the bulk of their wealth in the nontaxed form of unrealized capital gains? The composition of wealth also responds to incentives. And it's also simple enough for most people to understand that if the government taxes people who work and pays people not to work, fewer people will work. Incentives matter.
MoreGay Couples Get Equal Tax Treatment IRS Nears Action on Church Pensions Complete Coverage: WSJ.com/Taxes .
People can also change the timing of when they earn and receive their income in response to government policies. According to a 2004 U.S. Treasury report, "high income taxpayers accelerated the receipt of wages and year-end bonuses from 1993 to 1992—over $15 billion—in order to avoid the effects of the anticipated increase in the top rate from 31% to 39.6%. At the end of 1993, taxpayers shifted wages and bonuses yet again to avoid the increase in Medicare taxes that went into effect beginning 1994."
Just remember what happened to auto sales when the cash for clunkers program ended. Or how about new housing sales when the $8,000 tax credit ended? It isn't rocket surgery, as the Ivy League professor said.
On or about Jan. 1, 2011, federal, state and local tax rates are scheduled to rise quite sharply. President George W. Bush's tax cuts expire on that date, meaning that the highest federal personal income tax rate will go 39.6% from 35%, the highest federal dividend tax rate pops up to 39.6% from 15%, the capital gains tax rate to 20% from 15%, and the estate tax rate to 55% from zero. Lots and lots of other changes will also occur as a result of the sunset provision in the Bush tax cuts.
Tax rates have been and will be raised on income earned from off-shore investments. Payroll taxes are already scheduled to rise in 2013 and the Alternative Minimum Tax (AMT) will be digging deeper and deeper into middle-income taxpayers. And there's always the celebrated tax increase on Cadillac health care plans. State and local tax rates are also going up in 2011 as they did in 2010. Tax rate increases next year are everywhere.
.Now, if people know tax rates will be higher next year than they are this year, what will those people do this year? They will shift production and income out of next year into this year to the extent possible. As a result, income this year has already been inflated above where it otherwise should be and next year, 2011, income will be lower than it otherwise should be.
Also, the prospect of rising prices, higher interest rates and more regulations next year will further entice demand and supply to be shifted from 2011 into 2010. In my view, this shift of income and demand is a major reason that the economy in 2010 has appeared as strong as it has. When we pass the tax boundary of Jan. 1, 2011, my best guess is that the train goes off the tracks and we get our worst nightmare of a severe "double dip" recession.
In 1981, Ronald Reagan—with bipartisan support—began the first phase in a series of tax cuts passed under the Economic Recovery Tax Act (ERTA), whereby the bulk of the tax cuts didn't take effect until Jan. 1, 1983. Reagan's delayed tax cuts were the mirror image of President Barack Obama's delayed tax rate increases. For 1981 and 1982 people deferred so much economic activity that real GDP was basically flat (i.e., no growth), and the unemployment rate rose to well over 10%.
But at the tax boundary of Jan. 1, 1983 the economy took off like a rocket, with average real growth reaching 7.5% in 1983 and 5.5% in 1984. It has always amazed me how tax cuts don't work until they take effect. Mr. Obama's experience with deferred tax rate increases will be the reverse. The economy will collapse in 2011.
Consider corporate profits as a share of GDP. Today, corporate profits as a share of GDP are way too high given the state of the U.S. economy. These high profits reflect the shift in income into 2010 from 2011. These profits will tumble in 2011, preceded most likely by the stock market.
In 2010, without any prepayment penalties, people can cash in their Individual Retirement Accounts (IRAs), Keough deferred income accounts and 401(k) deferred income accounts. After paying their taxes, these deferred income accounts can be rolled into Roth IRAs that provide after-tax income to their owners into the future. Given what's going to happen to tax rates, this conversion seems like a no-brainer.
The result will be a crash in tax receipts once the surge is past. If you thought deficits and unemployment have been bad lately, you ain't seen nothing yet.
People can change the volume, the location and the composition of their income, and they can do so in response to changes in government policies.
It shouldn't surprise anyone that the nine states without an income tax are growing far faster and attracting more people than are the nine states with the highest income tax rates. People and businesses change the location of income based on incentives.
Likewise, who is gobsmacked when they are told that the two wealthiest Americans—Bill Gates and Warren Buffett—hold the bulk of their wealth in the nontaxed form of unrealized capital gains? The composition of wealth also responds to incentives. And it's also simple enough for most people to understand that if the government taxes people who work and pays people not to work, fewer people will work. Incentives matter.
MoreGay Couples Get Equal Tax Treatment IRS Nears Action on Church Pensions Complete Coverage: WSJ.com/Taxes .
People can also change the timing of when they earn and receive their income in response to government policies. According to a 2004 U.S. Treasury report, "high income taxpayers accelerated the receipt of wages and year-end bonuses from 1993 to 1992—over $15 billion—in order to avoid the effects of the anticipated increase in the top rate from 31% to 39.6%. At the end of 1993, taxpayers shifted wages and bonuses yet again to avoid the increase in Medicare taxes that went into effect beginning 1994."
Just remember what happened to auto sales when the cash for clunkers program ended. Or how about new housing sales when the $8,000 tax credit ended? It isn't rocket surgery, as the Ivy League professor said.
On or about Jan. 1, 2011, federal, state and local tax rates are scheduled to rise quite sharply. President George W. Bush's tax cuts expire on that date, meaning that the highest federal personal income tax rate will go 39.6% from 35%, the highest federal dividend tax rate pops up to 39.6% from 15%, the capital gains tax rate to 20% from 15%, and the estate tax rate to 55% from zero. Lots and lots of other changes will also occur as a result of the sunset provision in the Bush tax cuts.
Tax rates have been and will be raised on income earned from off-shore investments. Payroll taxes are already scheduled to rise in 2013 and the Alternative Minimum Tax (AMT) will be digging deeper and deeper into middle-income taxpayers. And there's always the celebrated tax increase on Cadillac health care plans. State and local tax rates are also going up in 2011 as they did in 2010. Tax rate increases next year are everywhere.
.Now, if people know tax rates will be higher next year than they are this year, what will those people do this year? They will shift production and income out of next year into this year to the extent possible. As a result, income this year has already been inflated above where it otherwise should be and next year, 2011, income will be lower than it otherwise should be.
Also, the prospect of rising prices, higher interest rates and more regulations next year will further entice demand and supply to be shifted from 2011 into 2010. In my view, this shift of income and demand is a major reason that the economy in 2010 has appeared as strong as it has. When we pass the tax boundary of Jan. 1, 2011, my best guess is that the train goes off the tracks and we get our worst nightmare of a severe "double dip" recession.
In 1981, Ronald Reagan—with bipartisan support—began the first phase in a series of tax cuts passed under the Economic Recovery Tax Act (ERTA), whereby the bulk of the tax cuts didn't take effect until Jan. 1, 1983. Reagan's delayed tax cuts were the mirror image of President Barack Obama's delayed tax rate increases. For 1981 and 1982 people deferred so much economic activity that real GDP was basically flat (i.e., no growth), and the unemployment rate rose to well over 10%.
But at the tax boundary of Jan. 1, 1983 the economy took off like a rocket, with average real growth reaching 7.5% in 1983 and 5.5% in 1984. It has always amazed me how tax cuts don't work until they take effect. Mr. Obama's experience with deferred tax rate increases will be the reverse. The economy will collapse in 2011.
Consider corporate profits as a share of GDP. Today, corporate profits as a share of GDP are way too high given the state of the U.S. economy. These high profits reflect the shift in income into 2010 from 2011. These profits will tumble in 2011, preceded most likely by the stock market.
In 2010, without any prepayment penalties, people can cash in their Individual Retirement Accounts (IRAs), Keough deferred income accounts and 401(k) deferred income accounts. After paying their taxes, these deferred income accounts can be rolled into Roth IRAs that provide after-tax income to their owners into the future. Given what's going to happen to tax rates, this conversion seems like a no-brainer.
The result will be a crash in tax receipts once the surge is past. If you thought deficits and unemployment have been bad lately, you ain't seen nothing yet.
Tuesday, June 1, 2010
Chase’s Foreclosure Disgrace
News Article by: Greg Kaufman
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 more information 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 House passed 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.
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 more information 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 House passed 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.
Tuesday, May 25, 2010
High-End Homeowners Falling Into Foreclosure Trap
Another great article - we are not out of the woods yet. This is a great opportunity for buyers.
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 increase, 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.”
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 increase, 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.”
Thursday, May 20, 2010
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.
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.
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.
Wednesday, May 19, 2010
Dropouts rise in White house loan modification program
The number of homeowners dropping out of the Obama administration's main mortgage assistance plan is growing, and is now almost equal to the number who have received permanent relief.
More than 299,000 homeowners had received permanent loan modifications as of last month, the Treasury Department said Monday. That's about 25 percent of the 1.2 million who started the program since its March 2009 launch. They are paying, on average, $516 less each month.
However, the number of people who started the process but failed to get their mortgages permanently modified rose dramatically in April.
To complete the program, borrowers must make at least three payments on time. About 277,000 homeowners, or 23 percent of those enrolled, have dropped out during this trial phase. That's up from about 155,000 a month earlier.
Many borrowers are still stuck in limbo, unable to complete the process and caught up in a bewildering bureaucracy, housing advocates say.
"These mortgage companies have to get it together," said Henrietta Thompson, housing coordinator with United Family Services in Charlotte, N.C. "We're not getting anything done."
Most analysts say the administration's program has yet to make a dent in the foreclosure crisis, and critics say it is merely delaying an inevitable surge in foreclosures. But officials insist the program is helping the housing market turn around.
"The number of homeowners receiving significant relief through a mortgage modification continues to rise," Phyllis Caldwell, chief of Treasury's homeownership preservation office said in a statement.
The program is designed to lower borrowers' monthly payments by reducing mortgage rates to as low as 2 percent for five years and extending loan terms to as long as 40 years. Mortgage companies get up to $75 billion taxpayer incentives to reduce borrowers' monthly payments.
But there have been problems from the start. One of the big ones: Initially, borrowers were able to state their income verbally and provide proof of their income later. That jammed up the system as many borrowers didn't provide a complete set of documents, and some complained that their information was lost.
Treasury officials have directed lenders to shift to a new system. Starting with loan modifications that go into effect June 1, they are required to collect two recent pay stubs at the start of the process. Borrowers will have to give the Internal Revenue Service permission to provide their most recent tax returns, rather than submitting the returns themselves.
Among those who have completed the program, 3,744 borrowers, or 1.3 percent, have dropped out, up from about 2,900 a month earlier. Most of those borrowers likely defaulted on their modified loans, but a handful either refinanced or sold their homes.
Borrowers who don't get help will likely end up losing their homes. That can happen through foreclosure. Another option is a short sale, which is when banks agree to let borrowers sell their homes for a reduced price if they owe more than it's worth.
To encourage more of those sales, the Obama administration is giving $3,000 for moving expenses to homeowners who complete such a sale or agree to turn over the deed of the property to the lender.
Mortgage companies will now have to set their minimum bid before the house is listed for sale. If the offer is above that, the lender must accept it. That's a big change from current practice. Lenders generally don't calculate how much money they are willing to accept until they have an offer in hand, causing long delays.
The new program will boost short sales this year, but 80 percent of distressed sales this year are still likely to be foreclosures, estimates Celia Chen, senior director of Moody's Economy.com.
More than 299,000 homeowners had received permanent loan modifications as of last month, the Treasury Department said Monday. That's about 25 percent of the 1.2 million who started the program since its March 2009 launch. They are paying, on average, $516 less each month.
However, the number of people who started the process but failed to get their mortgages permanently modified rose dramatically in April.
To complete the program, borrowers must make at least three payments on time. About 277,000 homeowners, or 23 percent of those enrolled, have dropped out during this trial phase. That's up from about 155,000 a month earlier.
Many borrowers are still stuck in limbo, unable to complete the process and caught up in a bewildering bureaucracy, housing advocates say.
"These mortgage companies have to get it together," said Henrietta Thompson, housing coordinator with United Family Services in Charlotte, N.C. "We're not getting anything done."
Most analysts say the administration's program has yet to make a dent in the foreclosure crisis, and critics say it is merely delaying an inevitable surge in foreclosures. But officials insist the program is helping the housing market turn around.
"The number of homeowners receiving significant relief through a mortgage modification continues to rise," Phyllis Caldwell, chief of Treasury's homeownership preservation office said in a statement.
The program is designed to lower borrowers' monthly payments by reducing mortgage rates to as low as 2 percent for five years and extending loan terms to as long as 40 years. Mortgage companies get up to $75 billion taxpayer incentives to reduce borrowers' monthly payments.
But there have been problems from the start. One of the big ones: Initially, borrowers were able to state their income verbally and provide proof of their income later. That jammed up the system as many borrowers didn't provide a complete set of documents, and some complained that their information was lost.
Treasury officials have directed lenders to shift to a new system. Starting with loan modifications that go into effect June 1, they are required to collect two recent pay stubs at the start of the process. Borrowers will have to give the Internal Revenue Service permission to provide their most recent tax returns, rather than submitting the returns themselves.
Among those who have completed the program, 3,744 borrowers, or 1.3 percent, have dropped out, up from about 2,900 a month earlier. Most of those borrowers likely defaulted on their modified loans, but a handful either refinanced or sold their homes.
Borrowers who don't get help will likely end up losing their homes. That can happen through foreclosure. Another option is a short sale, which is when banks agree to let borrowers sell their homes for a reduced price if they owe more than it's worth.
To encourage more of those sales, the Obama administration is giving $3,000 for moving expenses to homeowners who complete such a sale or agree to turn over the deed of the property to the lender.
Mortgage companies will now have to set their minimum bid before the house is listed for sale. If the offer is above that, the lender must accept it. That's a big change from current practice. Lenders generally don't calculate how much money they are willing to accept until they have an offer in hand, causing long delays.
The new program will boost short sales this year, but 80 percent of distressed sales this year are still likely to be foreclosures, estimates Celia Chen, senior director of Moody's Economy.com.
Thursday, April 15, 2010
Foreclosure filings jump in South Florida
As can be seen from the article below, we are not out of the woods yet, despite all the news talk about the market reaching bottom. For South Florida, we still ahve a long way to go. Why the high rate of foreclosures? I believe that after many failed attempts to modify loans, continued high unemployment in Florida, the fact that many homes are investment homes or condos, which carry a tax liability when short sold, many people are turning to bankruptcy (see: http://www.usatoday.com/money/economy/2010-03-03-bankruptcy03_ST_N.htm ), and as these cases get discharged, the homes end up in foreclosure or short sale anyway (yep, after bankruptcy, you still have to deal with the house)
---- Charl Van Wyk
South Florida Sun-Sentinel.com
Real estate
Foreclosure filings jump in South Florida
Mounting job losses, “underwater” mortgages lead to more foreclosure filings in South Florida
By Paul Owers, Sun Sentinel
April 15, 2010
Foreclosure filings rose last month by 38 percent in Broward County as homeowners struggled with unemployment and "underwater" mortgages, RealtyTrac Inc. said Thursday.
Broward had 6,341 homeowners in some stage of foreclosure in March, up from 4,599 a year ago, according to the Irvine, Calif.-based company that tracks mortgage defaults nationwide. Broward had the eighth-highest foreclosure rate among Florida's 67 counties, with one in every 127 housing units receiving a filing.
Palm Beach County filings in March totaled 3,983, more than double the 1,509 in March 2009. The county had the state's 17th-highest foreclosure rate.
The problem isn't likely to improve soon, as job losses mount and home price declines add to the number of homeowners who owe more than their properties are worth.
"We're going to continue to have a dark cloud hanging over our real estate market for some time," said Greg McBride, senior financial analyst with Bankrate.com in North Palm Beach.
Initial foreclosure filings in both counties were down substantially compared with February, perhaps an early indication that a government-sponsored foreclosure-alternative program started recently is working, RealtyTrac said.
The plan is designed to remove barriers to so-called short sales and promote deeds in lieu of foreclosures, in which homeowners hand back their properties to the banks. The plan took effect April 5, but some lenders were using it earlier this year.
The program is sure to be popular with people who want to get out from under onerous mortgages. But it will drag down home prices, creating more underwater borrowers who may fall into foreclosure, Fort Lauderdale real estate lawyer Shari Olefson said.
"I don't know that this is the answer," she said.
RealtyTrac spokesman Daren Blomquist said it's important to speed up short sales because that will clear the inventory of available homes and ultimately help the housing market recover.
Meanwhile, South Florida remains one of the busiest areas in the nation for loan modifications. A Treasury report on the Making Home Affordable program showed that the Miami-Fort Lauderdale-Pompano Beach metropolitan area accounted for 4.7 percent of loan modification activity under the program.
But those efforts aren't likely to ease the foreclosure crisis, according to the Congressional Oversight Panel, a watchdog agency monitoring the federal government's bailout program.
RealtyTrac compiles default notices, scheduled foreclosure auctions and bank repossessions. Not all homeowners who get notices lose their properties.
Florida had the nation's fourth-highest foreclosure rate in March, with one in every 149 housing units receiving a filing, RealtyTrac said.
In December, the Florida Supreme Court ordered the creation of a statewide mediation program for homeowners and lenders before a property can be sold through foreclosure.
Broward's 17th Judicial Circuit Court has appointed the American Arbitration Association to administer its mediation program starting July 1. Program details for the 15th Judicial Circuit Court in Palm Beach County are not yet clear.
A bill in Florida's Legislature that would allow banks to foreclose without going before a judge appears to have died.
While the state's clogged foreclosure system needs an overhaul, the proposed bill was too radical, said Rod Petrey, president of the Collins Center for Public Policy. The nonprofit group provides mediation services for four state circuit courts.
"With someone's home, where their family is, we ought to move very slowly in taking that away," Petrey said.
Staff writer Harriet Johnson Brackey contributed to this report.
Paul Owers can be reached at Powers@SunSentinel.com or 561-243-6529.
Copyright © 2010, South Florida Sun-Sentinel
http://www.sun-sentinel.com/business/fl-foreclosure-realty-trac-20100415,0,7862149.story
---- Charl Van Wyk
South Florida Sun-Sentinel.com
Real estate
Foreclosure filings jump in South Florida
Mounting job losses, “underwater” mortgages lead to more foreclosure filings in South Florida
By Paul Owers, Sun Sentinel
April 15, 2010
Foreclosure filings rose last month by 38 percent in Broward County as homeowners struggled with unemployment and "underwater" mortgages, RealtyTrac Inc. said Thursday.
Broward had 6,341 homeowners in some stage of foreclosure in March, up from 4,599 a year ago, according to the Irvine, Calif.-based company that tracks mortgage defaults nationwide. Broward had the eighth-highest foreclosure rate among Florida's 67 counties, with one in every 127 housing units receiving a filing.
Palm Beach County filings in March totaled 3,983, more than double the 1,509 in March 2009. The county had the state's 17th-highest foreclosure rate.
The problem isn't likely to improve soon, as job losses mount and home price declines add to the number of homeowners who owe more than their properties are worth.
"We're going to continue to have a dark cloud hanging over our real estate market for some time," said Greg McBride, senior financial analyst with Bankrate.com in North Palm Beach.
Initial foreclosure filings in both counties were down substantially compared with February, perhaps an early indication that a government-sponsored foreclosure-alternative program started recently is working, RealtyTrac said.
The plan is designed to remove barriers to so-called short sales and promote deeds in lieu of foreclosures, in which homeowners hand back their properties to the banks. The plan took effect April 5, but some lenders were using it earlier this year.
The program is sure to be popular with people who want to get out from under onerous mortgages. But it will drag down home prices, creating more underwater borrowers who may fall into foreclosure, Fort Lauderdale real estate lawyer Shari Olefson said.
"I don't know that this is the answer," she said.
RealtyTrac spokesman Daren Blomquist said it's important to speed up short sales because that will clear the inventory of available homes and ultimately help the housing market recover.
Meanwhile, South Florida remains one of the busiest areas in the nation for loan modifications. A Treasury report on the Making Home Affordable program showed that the Miami-Fort Lauderdale-Pompano Beach metropolitan area accounted for 4.7 percent of loan modification activity under the program.
But those efforts aren't likely to ease the foreclosure crisis, according to the Congressional Oversight Panel, a watchdog agency monitoring the federal government's bailout program.
RealtyTrac compiles default notices, scheduled foreclosure auctions and bank repossessions. Not all homeowners who get notices lose their properties.
Florida had the nation's fourth-highest foreclosure rate in March, with one in every 149 housing units receiving a filing, RealtyTrac said.
In December, the Florida Supreme Court ordered the creation of a statewide mediation program for homeowners and lenders before a property can be sold through foreclosure.
Broward's 17th Judicial Circuit Court has appointed the American Arbitration Association to administer its mediation program starting July 1. Program details for the 15th Judicial Circuit Court in Palm Beach County are not yet clear.
A bill in Florida's Legislature that would allow banks to foreclose without going before a judge appears to have died.
While the state's clogged foreclosure system needs an overhaul, the proposed bill was too radical, said Rod Petrey, president of the Collins Center for Public Policy. The nonprofit group provides mediation services for four state circuit courts.
"With someone's home, where their family is, we ought to move very slowly in taking that away," Petrey said.
Staff writer Harriet Johnson Brackey contributed to this report.
Paul Owers can be reached at Powers@SunSentinel.com or 561-243-6529.
Copyright © 2010, South Florida Sun-Sentinel
http://www.sun-sentinel.com/business/fl-foreclosure-realty-trac-20100415,0,7862149.story
Wednesday, April 14, 2010
Home repossessions jump 25% in South Florida
Lenders repossessed almost 9,200 properties in South Florida during the first quarter of 2010, a 25 percent increase from the first quarter of 2009, according to a new report from CondoVultures.com .
The first quarter surge was led by 3,707 property repossessions in Broward, Miami-Dade and Palm Beach counties in March 2010. That was a new high for a single month in the 39 months that CondoVultures.com has tracked bank repossessions.
Prior to March, the record was 3,706 repossessions set in December 2009, according to the report.
South Florida bank repossessions totaled 2,900 in the month of February and 2,475 in January, according to the report.
CondoVultures is a real estate consultancy based in Bal Harbour.
-- MIAMI HERALD STAFF
Read more: http://www.miamiherald.com
The first quarter surge was led by 3,707 property repossessions in Broward, Miami-Dade and Palm Beach counties in March 2010. That was a new high for a single month in the 39 months that CondoVultures.com has tracked bank repossessions.
Prior to March, the record was 3,706 repossessions set in December 2009, according to the report.
South Florida bank repossessions totaled 2,900 in the month of February and 2,475 in January, according to the report.
CondoVultures is a real estate consultancy based in Bal Harbour.
-- MIAMI HERALD STAFF
Read more: http://www.miamiherald.com
Wednesday, April 7, 2010
Surge in foreclosures attracts lawyers who promise to renegotiate mortgages but don’t
By PAUL ELIAS
The Associated Press
“I nearly ended up in a homeless shelter,” Warren Jacobs said of his hiring United Law Group to renegotiate the mortgage on his Mesquite, Texas, home.
SAN FRANCISCO | Warren Jacobs was desperate when he received a “robo-call” that promised to help him stave off foreclosure of his home near Dallas.
The father of six had lost his construction job, lacked health insurance and couldn’t pay the bills for his 17-year-old daughter’s cancer treatment, let alone his mortgage.
So on Jan. 21, he dialed the return number and was connected to the United Law Group. Minutes later, Jacobs agreed to scrape together $2,000 to pay the Irvine, Calif., law firm.
Jacobs unwittingly became one of the many thousands of homeowners who authorities say have been taken in by unscrupulous or incompetent loan-modification lawyers who rushed into a burgeoning niche: helping struggling homeowners renegotiate their mortgages.
Ripoffs of homeowners have become so common that state bar associations from Florida to Arizona are warning their members of the many ethical pitfalls that await those who exploit the mortgage crisis.
The California State Bar is investigating more than 400 lawyers who are suspected of ripping off thousands of homeowners nationwide.
The first to be charged was Sean Rutledge, the founder of the law firm that purported to represent Jacobs and 13 other homeowners.
Just months after securing a law license, Rutledge had been flying high. His United Law Group added several lawyers and opened offices in other states.
Today Rutledge’s license is suspended, his nascent career lies in tatters and he is under investigation in California and Ohio for taking fees of up to $3,500 from desperate homeowners then allegedly doing little — or nothing — to save their homes.
The California Bar in July formally charged Rutledge with not only failing to perform vital tasks to stop foreclosures, but also calling his clients “losers” in the rare occasions he returned their phone calls.
Rutledge has denied the allegations and said he would contest the attempt to disbar him. He is appealing the dismissal of a lawsuit he filed against the California Bar, alleging that the group violated federal laws that protect people with disabilities. Rutledge is diabetic and alleges state bar investigators, when scheduling meetings, ignored his need for treatment.
Rutledge did not return e-mail messages seeking comment, and he could not be reached through the United Law Group, which remains in business.
January was the 11th straight month in which more than 300,000 properties nationwide were subject to foreclosure filings, according to Irvine-based RealtyTrac, which predicts a record 3 million foreclosures this year.
Jacobs told investigators that Rutledge’s law firm advised him to stop making mortgage payments and cease communicating with his lender.
When the bank moved to seize the house for which Jacobs paid $175,000 in 2003, United Law Group failed to formally request “forbearance,” as it promised, to delay foreclosure. On June 1, Jacobs hired another lawyer to file bankruptcy on his behalf to stave off foreclosure the next day. In September, he agreed to a new payment plan with his bank and continues to live in the 4,000-square-foot house in suburban Dallas.
“I nearly ended up in a homeless shelter,” Jacobs said.
Earlier this month, Ohio Attorney General Richard Cordray filed a lawsuit against Rutledge and the United Law Group, alleging they defrauded homeowners in that state.
Nina Vultaggio, a spokeswoman for United Law Group, and others contend that the financial industry is behind the crackdown on lawyers. Vultaggio said that the financial industry is the biggest villain in the mortgage crisis and wants to deprive their customers of legal representation during complicated negotiations to save homes.
“When you get into trouble, you need an attorney to talk to these negotiators,” Vultaggio said.
Vultaggio said United Law Group has filed class-action lawsuits against Bank of America, JP Morgan Chase and Washington Mutual, alleging unfair business practices. The banks deny the allegations.
Legal experts still strongly recommend homeowners in peril hire lawyers to counsel them in how best to deal with their lenders, but state bar officials warn clients to research a lawyer’s background.
Jacobs said he is still waiting for United Law Group to refund the $2,000 fee he paid in January.
The Associated Press
“I nearly ended up in a homeless shelter,” Warren Jacobs said of his hiring United Law Group to renegotiate the mortgage on his Mesquite, Texas, home.
SAN FRANCISCO | Warren Jacobs was desperate when he received a “robo-call” that promised to help him stave off foreclosure of his home near Dallas.
The father of six had lost his construction job, lacked health insurance and couldn’t pay the bills for his 17-year-old daughter’s cancer treatment, let alone his mortgage.
So on Jan. 21, he dialed the return number and was connected to the United Law Group. Minutes later, Jacobs agreed to scrape together $2,000 to pay the Irvine, Calif., law firm.
Jacobs unwittingly became one of the many thousands of homeowners who authorities say have been taken in by unscrupulous or incompetent loan-modification lawyers who rushed into a burgeoning niche: helping struggling homeowners renegotiate their mortgages.
Ripoffs of homeowners have become so common that state bar associations from Florida to Arizona are warning their members of the many ethical pitfalls that await those who exploit the mortgage crisis.
The California State Bar is investigating more than 400 lawyers who are suspected of ripping off thousands of homeowners nationwide.
The first to be charged was Sean Rutledge, the founder of the law firm that purported to represent Jacobs and 13 other homeowners.
Just months after securing a law license, Rutledge had been flying high. His United Law Group added several lawyers and opened offices in other states.
Today Rutledge’s license is suspended, his nascent career lies in tatters and he is under investigation in California and Ohio for taking fees of up to $3,500 from desperate homeowners then allegedly doing little — or nothing — to save their homes.
The California Bar in July formally charged Rutledge with not only failing to perform vital tasks to stop foreclosures, but also calling his clients “losers” in the rare occasions he returned their phone calls.
Rutledge has denied the allegations and said he would contest the attempt to disbar him. He is appealing the dismissal of a lawsuit he filed against the California Bar, alleging that the group violated federal laws that protect people with disabilities. Rutledge is diabetic and alleges state bar investigators, when scheduling meetings, ignored his need for treatment.
Rutledge did not return e-mail messages seeking comment, and he could not be reached through the United Law Group, which remains in business.
January was the 11th straight month in which more than 300,000 properties nationwide were subject to foreclosure filings, according to Irvine-based RealtyTrac, which predicts a record 3 million foreclosures this year.
Jacobs told investigators that Rutledge’s law firm advised him to stop making mortgage payments and cease communicating with his lender.
When the bank moved to seize the house for which Jacobs paid $175,000 in 2003, United Law Group failed to formally request “forbearance,” as it promised, to delay foreclosure. On June 1, Jacobs hired another lawyer to file bankruptcy on his behalf to stave off foreclosure the next day. In September, he agreed to a new payment plan with his bank and continues to live in the 4,000-square-foot house in suburban Dallas.
“I nearly ended up in a homeless shelter,” Jacobs said.
Earlier this month, Ohio Attorney General Richard Cordray filed a lawsuit against Rutledge and the United Law Group, alleging they defrauded homeowners in that state.
Nina Vultaggio, a spokeswoman for United Law Group, and others contend that the financial industry is behind the crackdown on lawyers. Vultaggio said that the financial industry is the biggest villain in the mortgage crisis and wants to deprive their customers of legal representation during complicated negotiations to save homes.
“When you get into trouble, you need an attorney to talk to these negotiators,” Vultaggio said.
Vultaggio said United Law Group has filed class-action lawsuits against Bank of America, JP Morgan Chase and Washington Mutual, alleging unfair business practices. The banks deny the allegations.
Legal experts still strongly recommend homeowners in peril hire lawyers to counsel them in how best to deal with their lenders, but state bar officials warn clients to research a lawyer’s background.
Jacobs said he is still waiting for United Law Group to refund the $2,000 fee he paid in January.
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
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
New Plan to help Struggling Homeowners
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.”
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.”
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