Rent your Foreclosure From Your Lender

May 26, 2011 1 Comment

I’m often asked about whether a Lender would rent back to a debtor after a foreclosure. Generally the answer is no since there may be a new buyer at the foreclosure or, if the lender gets the property back as an REO, they typically want to re-sell it as soon as possible. But this may be possible with a Deed in Lieu of Foreclosure (“DIL”), particularly if the loan is owned by FannieMae (FNMA).

Unlike a foreclosure which is a forced transfer, a DIL is a voluntary transfer of the title to the property from the lender.  This saves the lender time and money. And it can allow space and communication for negotiations.  If a loan modification or a short sale is not possible, the DIL allows the debtor to get rid of the property while avoiding the deficiency judgment risk and credit damage of a foreclosure.  Here’s how it works:

In late 2009, FNMA started what it calls a “Deed for Lease Program” which combines a DIL with a Lease-back to the occupant for up to 12 months.  The program is targeted for qualifying homeowners who are facing foreclosure but do not qualify for a loan modification.  As stated by FNMA:  “This new program helps eliminate some of the uncertainty of foreclosure, keeps families and tenants in their homes during a transitional period, and helps to stabilize neighborhoods and communities.”

The basic qualifying requirements are :

1.  It must be a first loan on a 1-4 unit property. The loan cannot be government guaranteed (FHA, VA, HUD, Rural Dev.); Any junior liens must subordinate;

2.  It must be the borrower’s primary residence or their tenant’s primary residence;

3.  The occupant must meet income and payment guidelines (similar to HAMP) and cannot be in bankruptcy or litigation involving the property or the loan.

If the occupant meets the qualifications, FNMA will Lease the property back to the occupant for up to 12 months after completion of the DIL at a market rent not to exceed 31% of the occupant’s monthly gross income.  What is very significant here is that the Lease-back can apply to tenants in the borrower’s rental property.  While we’ve not seen any other lenders offer a similar Deed for Lease program, a request for lease-back could be part of any DIL negotiations.

To learn more about the FNMA Deed for Lease Program, click on these links:

http://www.fanniemae.com/newsreleases/2009/4844.jhtml

https://www.efanniemae.com/sf/guides/ssg/annltrs/pdf/2009/0933.pdf

https://www.efanniemae.com/sf/servicing/d4l/pdf/d4lfaqs.pdf

Short Sale Blog search terms:

Filed Under Foreclosure Problems Tagged With forclosure rental, foreclosed home can be rented, rent back your foreclosed home, rent your foreclosure

How to Handle an Updside Down Mortgage

May 24, 2011 Leave a Comment

GUIDE FOR UPSIDE DOWN PROPERTY OWNERS
For the past three years, I’ve been regularly advising upside-down property owners on the challenges, risks, and strategies of dealing with their lenders and upside down loans. Over 2,000 borrowers and their Realtors have consulted with us to determine what they should do. As our nation’s economy slowly recovers, some solutions have improved such as lender’s willingness to do short sales while others have gotten worse such as the failure of loan modification programs. And we’re now defending more and more clients from lender and collection company lawsuits seeking deficiency judgments. At the request of several clients, we’ve providing the following Guide which goes into greater detail than our regular Seminar Outlines to give you the informational links that can help owners and Realtors know which questions to ask and learn which way to proceed.

What should you do with the upside down property?
You only have three real options: Keep It, Sell It, or Lose It. Everyone’s personal situation is different so what works for your neighbor may not work for you. And to make the best decision, you need to know how each option affects you, particularly your risk of a lender suing you if they’re not paid in full. This Guide will introduce you to the various issues to be considered and how they relate. For most people, Modification will be an unavailable and frustrating experience. Yet 5% will get them. For another 5%, foreclosure may be the best path. And for about 90%, selling through a short sale will provide the safest resolution and help ease the moral anguish everyone feels when they find themselves in a financial place where they never thought they would be. Coming later this month will be a detailed update on lender litigation, strategies to defeat or resolve it. This will be very important in understanding what’s going on at BofA and Chase and with collection agencies

Short Sale Blog search terms:

Filed Under Upside Down Mortgage Tagged With handle an upside down mortgage, help with upside down mortgage, how to handle an updside down mortgage, mortgage help, underwater mortgage help

MERS Can Foreclose Without Owning the Mortgage Note Says California Courts

May 23, 2011 1 Comment

As readers of my Blog are aware, there has been a legal issue in the nation as to whether MERS, the Mortgage Electronic Registration System, can foreclose on a Deed of Trust if they do not own the Promissory Note. First a little background.  A loan is generally made up of two documents: 1) the Promissory Note in which the borrower promises to repay the lender upon terms set forth in the Note; and 2) the Deed of Trust which gives the lender a security interest in the real property.  If the borrower defaults in payment under the terms of the Note, the lender can take the property based upon a foreclosure power contained in the Deed of Trust. Depending upon the State and the method of foreclosure used, the lender may or may not be able to obtain a court judgment against the borrower for any portion of the loan not paid (deficiency judgment).

During the growth of the real estate bubble from 2000-2008, lenders regularly sold the loans to get money to make more loans. This involved assigning the Note and Deed of Trust to the new owner and recording the assignment of the Deed of Trust.  This process was costing lenders millions of dollars in recording fees. Their solution to avoid this was the creation of a separate entity, MERS, which would be assigned the Deed of Trust but note the Note.  Then, if there was a default, whoever then held the Note would tell MERS to foreclose.  The legal question this raised was whether MERS had any real rights to enforce the loan default terms or were they merely an agent of the actual owner of the loan, ie: the holder of the Note.  This is very important because if MERS is only an agent, they have no legal right (“standing”) to take any action… only the holder of the Note can.  In States where foreclosure can only be done through a legal action (such as Ohio, Florida, and others), foreclosure actions by MERS started getting thrown out of Court when they could not prove that they also owned the Note.

These early successes gave birth to law firms promoting that they would stop foreclosures by finding the disconnect between MERS and the Note holder.  However, it also started legal argument nationwide on whether this ownership of both the Note and Deed of Trust was required.  In May 2010, the US Bankruptcy Court in California ruled that if MERS did not own the Note, they could not foreclose on the debt (Case of Rickie Walker).  However, that did not settle the dispute.  As reported in DSNews.com , Courts around the country have continued to differ. Last week, a New York judge ruled that MERS cannot foreclose unless they own the Note.  But within days, judges in Kansas and Mass. ruled that ownership was not required. Other Courts, particularly the Minnesota Supreme Court, ruled that MERS could foreclose. On February 18, 2011, California Court of Appeals (4th Dist) ruled that MERS could foreclose (Gomes v Countrywide Home Loans). In that case, MERS was actually named in the Deed of Trust signed by the borrower and had authority to foreclose.  Different facts might bring a different result.

Only rulings by a State’s Supreme Court are binding on all lower courts in a State so it is likely that the dispute will continue.  However, consensus appears to be growing in the Courts around the nation that MERS does not need to own the Note to foreclose on the security.  Perhaps, although not stated, this reflects a judicial attitude that since the borrower has actually defaulted in repaying the debt, they should not be able to use the MERS technicality to avoid the consequences.

Time will tell how this dispute eventually plays out. In the meantime, we advise that you do not get lured in by advertisements promising they’ll stop foreclosures because MERS doesn’t own the Note.

Short Sale Blog search terms:

Filed Under Foreclosure Problems Tagged With Can MERS Foreclose, MERS 2011, MERS Foreclosure, MERS new, MERS update

Why Now May Be The Best Time To Buy!

May 20, 2011 Leave a Comment

As any observer of the real estate market knows, property pricing remains in the dumps with most sales being either short sales or foreclosures and REO’s. While the economy in general appears to be recovering, real estate has been lagging behind. 2011 is projected to see increasing foreclosures as lenders clean-out their backlog of defaulted loans. Meanwhile, we’re just starting into dealing with upside down commercial properties. For this reason, many economists project we won’t really turn the corner on real estate recovery until 2014 at the earliest.  So why might this be the best time to buy?

1.   Properties are Undervalued – As reported in DSNews.com,  based on the latest Case-Shiller home price index, a study by Capital Economics shows that in the fourth quarter of 2010, housing was 21 percent undervalued when compared with disposable income per capital. Looking at data included in the index published by the Federal Housing Finance Agency (FHFA), the firm found that housing in Q4 was 15 percent undervalued as measured against individuals’ disposable income. Capital Economics says its results illustrate “housing is exceptionally undervalued,” and the gap is getting bigger. In its third quarter 2010 report, the research firm pegged the Case-Shiller index readings as 19 percent undervalued and the FHFA index as 14 percent below what would constitute a balanced housing value in relation to income.  This downward pressure on prices will continue as the foreclosures clear out, opening the gap even further.

2.  Financing Remains Very Affordable – On top of low prices, mortgage rates have fallen back a bit in recent weeks, leaving them even further below the 20-year average of 7 percent. Last week marked the third consecutive week that rates have continued to decline. A national survey conducted by Freddie Mac shows that the average 30-year fixed-rate has dropped to 4.87 percent, while the 15-year fixed-rate has slipped to 4.15 percent. When you wrap declining home prices and historically low mortgage rates together, Capital Economics says, “The incredibly favorable affordability and valuation environment is the housing market’s one big positive.”

3.   Government Financial Support May be Ending – As my readers know, the future of FNMA and Freddie Mac is in jeopardy. These Government Sponsored Enterprises (GSE’s) were originally created to provide a funding source for socially desirable but higher risk loans. When started, GSE’s provided funds for 30% of all loans. Today, that number is 90% and steps are being taken in Congress to get government out of the lending business or at least scale it back.  Last week, Freddie Mac published a Memo that starting June 1st, they will no longer purchase loans with loan-to-value ratios of less than 5%.  As these GSE’s retract from the marketplace, interest rates and down-payment requirements are likely to rise making home ownership less achievable.

4.  Buy to Own or Invest, not to Flip – While there will always be opportunities for the knowledgeable and diligent to make money flipping properties, declining prices and increasing loan costs will shrink the profit margins available as flippers find it harder to re-sell.  In contrast, those who buy for their home or for rental investment will benefit from 1) locking in the profit margin between current prices and actual value; and 2) potentially higher rental values as the ranks of renters swell with people who cannot obtain a loan to buy their own home.

All of the above factors indicate that right now may be the ideal time to buy real estate, not for quick profit but for the long-term stability and financial growth that real estate has historically provided as a part of your overall financial plans.

Short Sale Blog search terms:

Filed Under Uncategorized Tagged With buy a home, buying a new home 2011, buying real estate, when to buy a home, when to buy a new home 2011

ARE CHANGES COMING TO BANK OF AMERICA?

February 12, 2011 5 Comments

Anyone

involved in the real estate industry is aware of the processing problems at Bank of America.  Applicants for loan modification get pushed from trial mod to trial mod before being rejected and borrowers in default are often going two years without paying while no foreclosure is started.  Perhaps that will now be changing.

As reported in DSNews.com

Bank of America announced last week that it has set up a new operational division to deal with problem loans and resolve investors’

mortgage repurchase claims. The newly formed unit, which the company has labeled Legacy Asset Servicing, will service all defaulted loans and discontinued residential mortgage products. It will be led by Terry Laughlin. Laughlin will oversee the bank’s mortgage modification and foreclosure programs, in addition to his existing duties of resolving residential mortgage representation and warranties repurchase claims.  In addition, Laughlin is charged with leading BofA’s borrower outreach program to include more than 400 housing rescue fairs in 2011, building additional homeowner assistance centers in communities across the country, and expanding partnerships with nonprofits.

The decision to establish a new, separate division to handle the company’s problem loans came out of the North Carolina bank’s very recent, and very public, robo-signing quandary, which prompted reviews of hundreds of thousands of case files and a nationwide suspension of all Bank of America foreclosures and REO sales. The bank said in a statement that the issues that came to light in September and October of last year led the company to initiate a “self-assessment of default servicing.”  While the review of the foreclosure process found that the underlying grounds for foreclosure decisions has been accurate, Bank of America implemented a series of improvements – including staffing, customer impact, and quality controls,” the company said.

Barbara Desoer, Bank of America Home Loans president, will continue to oversee the servicing of the company’s more than 12 million mortgage customers who remain current on their accounts, as well as the mortgage origination side of the business.  “This alignment allows two strong executives and their teams to continue to lead the strongest home loans business in the industry, while providing greater focus on resolving legacy mortgage issues,” said Brian Moynihan, BofA’s president and CEO. “We believe this will best serve customers – both those seeking homeownership and those who face mortgage challenges – as well as our shareholders and the communities we serve.”

Bank of America also said Friday that it is exiting the reverse mortgage origination business, citing “competing demands and priorities that require investments and resources be focused on other key areas of our business.”  Bank of America Home Loans will continue to serve the needs of existing reverse mortgage customers and those with loans in process.

Whether any or all of these changes will bring any certainty or predictability to BofA’s handling of loan modifications, short sales, and foreclosures is unclear at this time.  BofA has reported an increase of permanent modifications from November to December yet during that same period people in trial modifications declined.  Until we see any clear guidelines on what to expect when dealing with BofA, we encourage you to act early, connect with a Realtor, and know your options.

Short Sale Blog search terms:

Filed Under Short Sale Help Tagged With bank of america, bank of america foreclosure, bank of america modification, bank of america short sales, bank of america trial modification, bofa, bofa foreclosure, bofa modification, bofa short sales, bofa trial modification, mha trial modification

IS THE HAMP PROGRAM IN DANGER OF FAILING?

February 10, 2011 2 Comments

Anyone who has tried to get a loan modification through the Home Affordable Modification Program (HAMP) knows what a frustrating and, most-often, unsuccessful “solution” this has been for upside-down homeowners seeking to save their homes.  As I have previously reported, only 4.6% of applicants ever obtain a permanent HAMP modification and, as of those, 60% later fail generally because there is no principal reduction. 

HAMP was created in 2009 as a part of President Obama’s plan to stabilize the housing market and help struggling homeowners get relief and avoid foreclosure.  Yet for 2010, HAMP modifcations declined compared to lender’s own proprietary modifications.

Meanwhile, these have been dwarfed by foreclosures, 2.6 million foreclosures started and 1 million completed.  In a report to Congress published the first week of February, Neil Barofsky described the drawbacks and potential problems the bank bailout had created in regard to companies deemed “too-big-to-fail.”

His report also covered controversial issues surrounding the Home Affordable Modification Program (HAMP), designed by Treasury as a foreclosure prevention effort.  Barofsky is the special inspector general for the Troubled Asset Relief Program (TARP). The HAMP initiative, including incentive payouts to servicers, borrowers, and investors, is funded with TARP dollars. 

HAMP, Barofsky says in the report, “continues to fall dramatically short of any meaningful standard of success.”  According to Barofsky, the program was doomed from the beginning, because it was inefficiently designed with inconsistent rules that have been revised too frequently. He calls the 522,000 permanent modifications the program provided in 2010 “anemic,” and calls attention to the more than 792,000 trial and permanent modifications that have been canceled and more than 152,000 that are still in limbo. 

In December, the Congressional Oversight Panel estimated that at this rate, HAMP will generate anywhere from 700,000 to 800,000 permanent modifications, a far cry from the 3 to 4 million modifications predicted by Treasury.

Not only does Barofsky assert that HAMP is not working because of poor design and implementation, but he also says another issue is the participation and administration of the program by servicers.

Servicers, he says, have been compounding the problems of the program with unnecessary delays, by failing to follow program standards, and even by misplacing borrower paperwork. Treasury’s reaction to these issues has been lenient because of a fear that enforcing the program rules will encourage servicers to discontinue use of HAMP all together.

“Without meaningful servicer accountability,” Barofsky writes, “the program will continue to flounder. Treasury needs to recognize the failings of HAMP and be willing to risk offending servicers. And if getting tough means risking servicer flight, so be it; the results could hardly be much worse.” 

In response to the Barofsky Report, three congressmen on the Oversight and Government Reform Committe have proposed a bill to end the program.  “HAMP is a colossal failure,” said Rep. Jim Jordan (R-Ohio), who is chair of the Oversight subcommittee on Regulatory Affairs, Stimulus Oversight and Government Spending.

He continued, “In many cases, it has hurt the very people it promised to help. It’s one more example of why government interference in the private sector doesn’t work and that’s why it should be repealed.” 

 

Rep. Patrick T. McHenry (R- North Carolina), , who chairs the Oversight subcommittee on TARP, Financial Services and Bailouts of Public and Private Programs, thinks enough is enough.

“The number of homeowners kicked out of HAMP – and arguably left worse off by participating in the program- exceeds the number actually helped by hundreds of thousands,” he said. 

What the future holds for HAMP and how this will impact the millions of financially-strapped borrowers trying to save their homes is unknown.

Don’t expect any improvement from the government. As frustrating as the present system is, it is the only path to modification.  Don’t quit trying but don’t put yourself in a deeper hole in the process.

Get good, qualified information early and watch for changes.

Short Sale Blog search terms:

Filed Under Foreclosure Problems, Short Sale Help Tagged With HAMP FAILING, hamp problems, homeowner relief, loan modification issues, making homes affordable 2011, making homes affordable problems, mha 2011, mha failing, mha issues, mha problems, modification issues, modification problems, obama mortgage program, obama mortgage program fails

Chase Second Mortgage – Short Sale and Foreclosure

January 6, 2011 3 Comments

One of the key points we look for when we advice upside-down owners is whether they have multiple loans. This is because if a foreclosure by Trustee Sale occurs, generally it will be the first loan that forecloses and that action would wipe out the second lender’s security leaving them a right to sue the borrower for any deficiency.  However, under California law, when both loans are owned by the same lender, a “merger” of interest occurs. The foreclosure by one is treated as the foreclosure of both and in California neither would have any deficiency recourse against the borrower.

One area we have seen often is lenders breaking the merger by selling off the second loan after a default occurs.  Although there has not been much action by these second lenders to pursue a deficiency, we have raised the defense that the buyer of such a loan really had nothing to lose since there was no real value in the security for the loan and therefore they should not be able to sue the borrower for any unpaid amount on the second loan following a foreclosure by the first.

We expect to see a lot of such lawsuits over the next few years brought by collection companies and others who may pay pennies on the dollar and then sue for the full dollar.

Today we encountered a change to that typical sell-off strategy. In this case, Chase held both the first and second loans and was demanding recourse which the borrower could not pay.  The borrower had some leverage because of the merger and had some defenses if Chase sold the second to another creditor. 

But Chase flipped this on its head. 

Instead, Chase assigned the first loan to Bank of America which immediately filed a Notice of Default to start foreclosure, a foreclosure which will wipe out the security for the Chase second loan. The assignment broke the merger but it did not create a defense against Chase filing a lawsuit on the second because Chase already owned the second loan.

We already know that Chase more than any other lender is playing hardball in the short sale and foreclosure process.  This unique strategy change is no doubt intended to improve their odds of recovering from a borrower that may have some assets…. assets that Chase would have learned about through the Short Sale Hardship application. 

This approach, coupled with Chase’s common unwillingness (not)  to approve short sales, suggests that they view the short sale process not as loss mitigation but rather as a means of gathering information on the borrower that they can use to sue the borrower and get more money. 

In our initial discussions of this strategy, we think there are a number of other defenses to such a strategy that seeks to run around the established legal policy that a lender must look to its security first.  This “gaming the system” may not be endorsed by the coutrs but it is too ealy to tell. 

If you or your clients are dealing with Chase loans in a short sale, be wary especially where two loans are involved.  Let us know what your experiences are so together we can develop the best response to not only defeat this strategy but to convince Chase to cooperate with the short sale.

Short Sale Blog search terms:

Filed Under Foreclosure Problems, Short Sale Help Tagged With bank of america, chase second mortgage short sale, chase short sale, Short Sale Help, short sale not getting approved, short sale with chase bank

Real Estate Outlook 2011

January 5, 2011 2 Comments

 As we enter this New Year, our economy remains in serious condition and millions remain in default and uncertain about their housing futures.  Yet in the midst of this mess, there is both Good News and Bad News.

First the Good News – 2011 should see some improvement in the general economy as the damage from the real estate and financial market collapse begins to resolve.  We’re already witnessing climbing values in the stock market and record prices for commodities such as gold and silver.  This may not mean confidence but at least people with money to invest aren’t keeping their money under their pillow.  Interest rates are edging up but are still historically low. Retailers have reported strong sales during the Christmas season and, in general, despite all of the political battles between Republicans and Democrats, consumers are feeling somewhat upbeat.  They’re still in pain but most can feel the healing taking place.

Now the Bad News -  This recession will not be over in 2011, particularly as it affects real estate.  While the economy may be slowly improving, businesses are being slow to expand and so unemployment remains very high.  Without greater certainty of stable employment, people are hesitant about making major purchases such as homes.  This uncertainty is causing economists to predict that California could be looking at another 10-11% drop in housing prices during this year fueled both by high unemployment and enormous State budget deficits. Millions of homeowners still face possible foreclosure as loan modifications remain unavailable to most. Further, the impact of the real estate bubble collapse is expanding:

1) Subprime Loan Borrowers - This was the first phase of damage from the recession. Although most of these sub-prime loans have by now been foreclosed or short-sold, 2011 will see another wave of defaults on those 2006-7 loans with 5 year adjustments.  As these move from interest-only to fully amortized, borrowers could see their loan payments double removing any capacity to pay;

2) Economy Impacted Borrowers - This is the second phase of the recession and it’s where we are today and will likely be for at least another year.  The tough part about a collapsing bubble is that it also causes “collateral damage” to those with good loans.  Millions have lost their jobs, or had cut backs or government furloughs that leave them unable to pay their loans. And with California’s record budget deficits, no-one has any confidence that State spending will improve.  Significantly, many economy-impacted borrowers may have other assets that they could spend to cover their loan deficiencies, but with no end in sight and further value losses predicted, many are finding it wise to “strategically default” rather than disclose their other assets to their lenders as part of a loan modification or short sale application.  For these borrowers, letting a foreclosure occur may make more financial sense.

3) Commercial Borrowers – This is the third phase and the one with the largest economic consequences.  One doesn’t have to look far to see empty store fronts of businesses that have closed terminating their jobs in the process.  Each of these also means a loss of income for the owner of the property and, added together, can cause the property owner to default resulting in a possible loss of all businesses. 2010 saw foreclosures nationwide of shopping centers and office complexes and large manufacturing companies.  Unlike home foreclosures, the failure of commercial loans often involves tens of millions of dollars in debt, loss of hundred or even thousands of jobs, and the loss of tax dollars for communities.  These problems together could bankrupt the lenders and even the communities where the businesses are located.  As a result, we’re now seeing commercial loan workout programs coming together with owners, lenders, accountants, community leaders, and others seeking to find a way to prevent the wide-spread losses that failure would bring.  We’ll likely be working on this area through 2014 and this will be the key in finally turning the corner from recession to real recovery in the real estate market.

Meanwhile, lenders are picking up the pace of foreclosures and filing lawsuits to recover loan deficiencies. In response, borrowers and governments are fighting back.  I’ll cover this in more depth in my next posting along with how you can protect yourself.

Short Sale Blog search terms:

Filed Under Foreclosure Problems, Short Sale Help Tagged With comercial real estate 2011, economy 2011, loan modification 2011, making homes affordable 2011, real estate 2011, real estate outlook, real estate outlook 2011, subprime loans 2011

Housing Mess Silver Lining

December 21, 2010 Leave a Comment
It has now been nearly three years since the real estate market began unravelling.  Millions still struggle with over-encumbered properties and loss of income from the recession. Most economist predict that home prices may fall another 11% in 2011, as rising defaults crash with difficult to get purchase financing. Yet there is some good news for the diligent:1.  Housing prices are really undervalued. Today’s pricing is based on distressed sales. No-one would sell if they had a choice. This means that in reality, housing prices are higher than the sales would indicate. DSNews reports that the analysts at Capitol Economics have concluded that house prices are now 14% to 17% undervalued relative to disposable income per capita.  This is a 30 year high in affordability!

2.  Mortgage Rates remain low.  Although there has been some upward movement, mortgage rates remain between 4.25% and 5%.  My own office manager just refinanced her home for 3.5%!  Incredible financing opportunities.  Qualifying may still remain a challenge. Hopefully the lenders have learned their lesson and will actually require that the borrower have the ability to pay.

3.  Foreclosures are slowing.  Due in part to the Robosigner scam, foreclosure starts have been slowing even though delinquencies remain high. November Notice of Default filings were down 9.3% in California and 31.7% in Washington.  Lenders may be starting to realize that they can recover more for their investors by negotiating than they would get from a foreclosure. 

4.  Junior lenders are more willing to take hits.  The problem in most short sales has not been first lenders; it has been junior lenders (2nds and 3rds) who would have a personal judgment claim against the borrower after a foreclosure. Of course, having a claim and collecting upon it are two very different things. In the past week, our attorneys at BPE law have successfully negotiated a $200,000 release for $17,000; complete releases for $0; $150,000 for $5,000; and we’re completing a $2.2 million commercial loan payoff for no more than $100,000.

So what should this mean to you?  If you’re in default, keep negotiating with your lenders. They may be more accepting of a loan modification or a short sale without recourse or contribution.  And get help from real estate professionals in your community. They speak the language of the lenders.

If you have specific questions about your liability in California or about short sales, foreclosure, or any legal issues, feel free to contact us at sjbeede@bpelaw.com.  We offer a $200 flat fee consultation to evaluate your liabilities and strategize a resolution. This can be done in person or by phone. If interested, please call us at 916-966-2260.

The information presented in this Article is not to be taken as legal advice. Every person’s situation is different. If you are upside-down on your loan(s), especially if you’re facing a lender lawsuit, get competent legal advise in your State immediately so that you can determine your best options. 
Filed Under Short Sale Help Tagged With housing issue, housing mess, housing problem, mortgage issues

Robo-Signing Slows REO and Short Sales

November 23, 2010 1 Comment

Foreclosed Home As recently reported in www.DSNews.com, the ongoing controversy surrounding deficiencies in foreclosure documentation is taking its toll on the housing market as a significant share of home shoppers refused to even look at distressed properties in October, according to an industry study conducted by Campbell Surveys.  Fears of litigation from former owners who lost their homes to robo-signer foreclosures are making REO properties unattractive since legal battles could tie-up the properties for months or even years to come. With foreclosures on the rise, this presents a major problem for lenders who otherwise would get stuck with holding and maintaining unsellable properties. News reports that major servicers were pulling REO properties off the market, including some already under contract, clearly spooked would-be homebuyers, Campbell Surveys found.  The company’s closely-watched monthly survey found that 14 percent of owner-occupant homebuyers and 6 percent of investors refused to view foreclosed properties in October. This buyer fear was even worse for short sale properties, where 30 percent of owner-occupant shoppers and 20 percent of investors refused to consider short-sale homes.

Not surprisingly, the drop in overall distressed property sales activity helped produce a decline in average prices for short sales, move-in ready REO, and damaged REO in October. This certainly has helped sellers of non-distressed properties which suddenly became more attractive to ready buyers.  This increased demand has pushed their prices higher.

Is there an end in sight? Not soon.  Citigroup, which has adamantly contended that they were not involved in the robo-signer problem, has uncovered some 14,000 defective foreclosure actions.  Core Logic, the company which provided analytical date for the investment industry (www.corelogic.com), indicates that there currently are 4.2 million homes on the market for sale, a 15 month supply. However, beyond this “visible market”, there is a “shadow market” of properties more than 90 days in default, in foreclosure, or REO’s that are not on the market. Core Logic reports that there are 2.1 million more properties. When added together, we actually have a 23 month supply of houses on the market.  Typically a reading of six to seven months is considered normal, so the current total months’ supply is roughly three times the normal rate.  And it may be even more than that. Lender Procesing Services which handles foreclosure processing estimates that there are more than 7 million loans in default! (DS News 11/17/10).  In the aggregate, alanysts are projecting a possible 7% drop in home prices over the next year before the housing market starts to stabilize.

So what should this mean to you? If you’re in default, keep negotiating with your lenders. They may be more accepting of a loan modification or a short sale without recourse or contribution.  If you’re an REO or short sale buyer, check the documents carefully and make sure the title insurance will protect you from any claims of defective foreclosure actions.

The information presented in this Article is not to be taken as legal advice. Every person’s situation is different. If you are upside-down on your loan(s), especially if you’re facing a lender lawsuit, get competent legal advise in your State immediately so that you can determine your best options.

Short Sale Blog search terms:

Filed Under Short Sale Help Tagged With pulling REO properties off the market, reo, robo signing, short sales
« Older Posts