Starting on March 1, Fannie Mae will require mortgage servicers to extend the forbearance relief to qualified unemployed borrowers for six months – without any approval needed from Fannie Mae. The government-sponsored enterprise also says special consideration will be made for some borrowers in suspending mortgage payments or reducing them for up to a 12-month period.

Fannie’s announcement follows on the heels of Freddie Mac’s announcement earlier this week about similar changes to its mortgage relief program for the unemployed. Freddie Mac announced it would begin offering a 12-month forbearance period to qualified unemployed borrowers starting on Feb. 1.

To qualify, mortgage servicers will determine if the “borrower has less than 12 months worth of mortgage payments in reserves and has monthly housing expenses above 31 percent of their incomes before extending a forbearance plan,” HousingWire reports.

During the third quarter of 2011, the GSEs issued more than 7,000 forbearance plans, according to the Federal Housing Finance Agency.

Source: “Fannie Mae Unveils new Forbearance Program for Unemployed,” HousingWire (Jan. 11, 2012)

For this reason, foreclosures, evictions, relocation assistance (cash for keys) or lockouts should not be scheduled or occur during the following Holiday Moratorium dates:

• Dec. 22-26, 2011, returning to business as usual on Dec. 27, 2011.
• For VA properties, the year-end dates are Dec. 22 through Jan. 2, returning to business as usual on January 3, 2012.

If you receive any tasking or communications related to foreclosure, eviction, relocation assistance or lockouts during these moratorium periods, you must place a clarification call to the eviction specialist at Bank of America before proceeding with the tasking or communication.

When it comes down to a choice to either “pay or walk away” more and more homeowners are opting to abandon their homes to the foreclosure process.

If you decide to default on your mortgage and allow the lender to foreclose on the house, the important thing to remember is to avoid any risky behaviors that will have negative consequences for you once you have walked away. This sort of planned foreclosure is called a “strategic default.” Here’s how to protect yourself from prolonged and serious legal consequences:

1. Do know the type of foreclosure you are facing.
Non-judicial foreclosures do not go through the state court system. Essentially, homeowners simply stop paying their mortgage and wait for their lender to institute foreclosure proceedings. Depending on the housing market in their area, banks may be more or less eager to take back a particular property.

I know people who are still living in their homes several years after they have stopped making mortgage payments.

A judicial foreclosure proceeds through the state court system and in states where it is allowed a judgment for the deficiency (between what the house is worth and what you owe on the mortgage) will be rendered against you in a court of law.

In some states, lenders have the ability to sue for the unpaid balance for a period of time ranging from 6 months to 6 years depending on the circumstances. Research whether you live in a “non-recourse” state where lenders can take back the house, but not touch your other collateral or assets to close the gap in what you still owe them.

2. Don’t try to get “revenge” on the lender. No matter how angry you are over the circumstances that have caused you to abandon your home, do not take it out on the house! There are serious legal consequences to destroying a home in foreclosure.

3. Do remember that until the bank forecloses, you are still the owner of the property. Even if you aren’t living in the house, you are the responsible party until lender legally takes possession.When you leave, be sure to leave the house in good condition. Do a walk-through and make sure everything is okay. Take pictures that show the home is in good condition.

Keep your liability insurance current—remember, if someone is injured on the property, you are still the owner of record.

If you continue to live in the area, do occasional drive-bys. Make sure the house has not been broken in to or vandalized. Even if you are angry with your mortgage holder, try to have some compassion for your neighbors. Homes that have been foreclosed devalue the entire neighborhood; homes that have been foreclosed and are in bad repair drop everyone’s property values even more.

4. Do have a responsible plan for the future. Get a strong financial plan in place that will let you use the money formerly put toward your mortgage payments to regain stability.Rent a home if the rent is less than your monthly mortgage (otherwise, why leave the home at all?)

Know that your credit score will suffer moderate to severe negative impact depending on the circumstances around your decision to allow foreclosure.

Remind yourself that bad credit is a relatively short-term outcome (from 1 to 10 yeas) and be prepared to work to repair yours. Avoid other offers that entice you to live beyond your current means. After all, wasn’t it “easy credit” that got you into this situation in the first place?

In all of the solutions for getting out from an underwater housing situation, you must force the lender to come to you. You cannot count on parity, equality, good faith—you can’t count on any promises—on the part of the lender.

The fact is, you took their money on their terms and now they are entitled to take your money every month, change your interest, take or sell your house.

Homeowners in trouble need to be smart about their options to walk away, it’s the only way to maintain the possibility of ever gaining back their piece of the American Dream. Therefore, contact a reputable real estate attorney in your area for legal advice before making any rash decisions.

The largest decline on a percentage basis was in Lakewood Ranch, which is proving to be one of the epicenters of the housing recovery in Southwest Florida. There were 321 homes for sale in the master-planned community last month, down 8 percent from August and nearly 34 percent from a year ago.

That inventory is a six-month supply at the current sales pace, a level that is considered indicative of a market in equilibrium.

The Sarasota real estate market had a six-month supply of homes during September. In the Sarasota real estate market, the 6,305 homes for sale compared with 8,800 a year ago.

Besides Lakewood Ranch, another large drop in inventory occurred on Siesta Key, which saw the total number of homes for sale fall 6 percent from August to 536 homes. That also was a 22.4 percent decline from a year ago.

Bradenton, Sarasota and Longboat Key all saw declines topping 5 percent, while the smallest drops were in Venice at 3.8 percent and Englewood at 1.6 percent from August.

Anna Maria Island, another strong point in the real estate rebound, saw a decline of 5.4 percent to 403 homes. But it continues to have fairly high inventory, with a 16 month supply.

Longboat Key, another barrier island, also still has a 12.4 month supply.

This information is from the Sarasota Herald Tribune.

Still, foreclosure starts remained 18% below the level measured in August of last year, just two months before the robo-signing scandal broke. Servicers across the country to froze the process to check mishandled documentation.

Default notices, the first stage in the process in nonjudicial states, jumped 55% in California.

“The big increase in new foreclosure actions may be a signal that lenders are starting to push through some of the foreclosures delayed by robo-signing and other documentation problems,” RealtyTrac CEO James Saccacio said. “It also foreshadows more bank repossessions in the coming months as these new foreclosures make their way through the process.”

According to ForeclosureRadar, another tracker of foreclosures along the West Coast, Bank of America (BAC: 7.05 0.00%) is behind the major boost in new foreclosures.

Overall filings, including default notices, scheduled auctions and bank repossessions, reached 228,098 in August, up 7% from the previous month but still down 33% from last year.

Lenders finished the process and repossessed more than 64,800 properties in August, down 4% from July and 32% from one year ago.

Nevada posted the nation’s highest foreclosure rate for the 56th straight month with one in every 118 properties receiving a filing. The 9,677 filings was a 3% decrease from the month before and down 28% from last year.

One in every 103 Las Vegas properties received a filing, five times the national average.

In a housing market that’s as lousy as this one, it makes sense that prospective buyers are becoming increasingly interested in foreclosures. After all, some of these properties – which accounted for 24 percent of home sales in May, by the way – are selling at up to 50 percent less than comparable homes. Interested in rummaging through the bargain bin? Here’s a primer:

Find listings – This is the easy part. You don’t need to show up at courthouse auctions or search through legal filings. All you need to do is look on sites that allow you to search for foreclosed properties, like Zillow. Just use the Listing Type search filter to narrow down to these sales.

Work with a specialized agent – A real estate agent who specializes in foreclosures is not only a time saver, but a necessity. They will guide you through the process, help you find the best properties, tip you off to the various issues/challenges/risk, and do the nitty gritty along the way, from researching property title documents to recommending reputable inspectors and contractors.

Understand your buying options – While you can buy directly from the owner (before they’re officially foreclosed on), or try your hand among the seasoned investors at an auction, the safest way to buy a foreclosed property is to buy it back from the bank (bank foreclosed properties are also called real estate owned, or REOs). That’s because you can inspect the home before you buy it, and you can finance the purchase with a mortgage. Furthermore, when a bank takes back a home, it will clear any outstanding liens.

Budget for repairs/renovations – Don’t underestimate the amount of work that may be needed to restore the home to a “livable” condition as these residences are sold “as is.” You can easily factor in 10 percent for updates and repairs on any foreclosed purchase.

Make an appropriate bid – Banks aren’t necessarily selling foreclosed homes at the kind of fire sale prices you’d find at a pre-foreclosed sale or at an auction, but that doesn’t mean you shouldn’t haggle – particularly if the bank has a huge inventory of foreclosed homes, and the property has sat vacant for some time. Just make sure you’ve done your homework, taking into consideration not only the price, but also the condition of the property, and the surrounding neighborhood. (Ideally, you want to find a foreclosure in a neighborhood that doesn’t have very many of them.) Also, get your financing pre-approved before you bid or you could delay the process and ultimately miss out.

But the discount that buyers commanded on the properties shrank during the first three months of 2011 in Manatee, Sarasota and Charlotte counties — sometimes dramatically.

Foreclosure and short sales totaled 1,317 in the three-county area during the most recent quarter, down 6.3 percent from the fourth quarter, according to data released Wednesday by California-based RealtyTrac Inc.

The number of properties varied greatly from county to county, according to RealtyTrac’s statistics.

Manatee saw a 44 percent dip in transactions, while Sarasota County experienced a slight increase and Charlotte saw a spike of 25 percent.

In Sarasota County and Charlotte, distressed properties represented about 30 percent of sales; in Manatee, about 16 percent.

The discount percentage from traditional property sales was highest in Sarasota County at 31.8 percent, with an average sales price of $125,026. That compared with 29 percent during the fourth quarter.

In Charlotte, the discount was 27 percent, with an average sales price of $85,698. The discount was 28.7 percent in the fourth quarter.

The discount in Manatee was most recently 7.21 percent, down substantially from 21 percent in the fourth quarter. The average sales price was $159,467.

Statewide, 25,052 distressed properties changed hands — or 32 percent of all sales — for an average of $116,583. Sales were down 13 percent from the fourth quarter.

The statewide discount was 27 percent, compared with 28 percent in the fourth quarter.

Nationally, bank-owned properties were 28 percent of all sales during the first three months of 2011, up slightly from the previous quarter and the highest percentage since first quarter 2010.

The average sales price was $168,321, nearly 27 percent below traditional sales and a slightly higher rate than during the fourth quarter.

Third parties bought 158,434 bank-owned homes and those in some stage of foreclosure during the first quarter, a decrease of 16 percent from the fourth quarter.

Across Florida, there were 62% fewer foreclosure filings in the first quarter of 2011 than in 2010’s first quarter. But researchers at RealtyTrac, which provided today’s updated data, say the state’s reported totals don’t tell the full story.

“Processing delays continued to keep foreclosure activity artificially low,” RealtyTrac said, because Florida relies on a judicial process to handle its foreclosure filings. Regardless, 9% of all U.S. foreclosures occurred within the state.

The Gulf Coast’s three largest metropolitan areas — Tampa-St. Petersburg-Clearwater, Sarasota-Bradenton-Venice, and Cape Coral-Fort Myers — saw a combined 15,233 filings in the first three months of 2011, representing roughly a quarter of the state’s total activity.

Cape Coral had the highest rate of foreclosures as a percentage of total housing units, at 1.16% (one in 86 homes), followed by Sarasota (0.65%, or one in 155 homes), and Tampa (0.63%, or one in 155 homes).

But foreclosure rates did slow down significantly compared to last year’s first quarter. Filings were down 59%, 60%, and 56% in each of those respective markets.

• that buying a foreclosure might involve hidden costs,
  
• that the buying process itself is risky, and
• that the home might continue to lose value, after escrow closes.

While there certainly are risks that run with buying a foreclosed home, the most risky way to do it is also the least common method: at the foreclosure auction itself. Auction buyers often don’t have the opportunity to fully vet the foreclosure to ensure that they are receiving clear title and/or to make sure they’re not getting a lemon. With that said, most foreclosures are resold not at the foreclosure auction, but as an REO (short for Real Estate Owned – by the bank), listed by a real estate broker on the Multiple Listing Service. Here are my Top 4 Tricks and Traps for Foreclosure Buyers:

When you buy an REO in this way, you have lots of opportunities to use some tricks of the trade, so to speak, to avoid some of the traps you may fear.

1.  As-is means as-is, period.  (Most of the time.) Banks have very little interest, inclination or even the logistically necessary resources to execute repairs on your home. Many of these homes are managed by an asset management company in another state, and may not even have a local person besides the agent who can handle large repairs. Generally speaking, bank-owned homes are sold on a very strict “as-is, where-is” basis, which just means that you should expect to take possession of it, if you buy it, in exactly the position and location it is, no matter how defective.  Do not walk into a viewing of a foreclosed home, notice how the plumbing is all ripped out of the wall, and make an offer for it, assuming you’ll be able to get the bank to “fix” the issue later.  Usually, if the bank is willing to do any repairs to a foreclosed home, they do so, on the advice of the listing agent, prior to the home being listed.

Out of hundreds of foreclosure transactions I have personally been involved in, I have seen exactly four where the bank did agree to do some level of repairs at a buyer’s request.  Every one of those times, the repair was to fix a health-and-safety endangering property defect, like a gas-leak or an electrical fritz. And every one of those times, the property defect was highly non-obvious – not something even a diligent buyer could have detected visually prior to making an offer.  Maybe another few times I’ve seen a bank agree to a small price reduction due to surprising condition problems.  And dozens of times, I’ve seen transactions fall apart or buyers take on the property’s repair costs, when they request repair credits, price reductions or actual repairs from the ban seller.

If a foreclosure you’re considering has obvious property damage, have your contractor stop by with you or gather whatever information you need to get as comfortable as possible with your offer price, assuming that the bank will not be chipping anything in for repairs, before you make the offer.

2.  The bank speaks no evil.  When it comes to real estate disclosures, the fact is, the bank speaks not much of anything!  Many states exempt banks and other types of corporate homeowners from making substantive disclosures about the condition of the property.  Even in jurisdictions where the bank is not legally exempt, most banks will simply write across the required disclosures something to the effect that the bank has no knowledge of the property’s condition.  (Before you protest with a “that’s not fair!!” keep in mind that the bank never lived in the property, so most often truly does have no idea of any important facts or details about its condition or location, the things an average home seller would be required to disclose.)

Even in a normal transaction, it behooves a buyer to be thorough in having the property inspected and meticulous about reviewing the resulting inspection reports.  But buying a foreclosure ups even that ante, as you have no seller disclosures to highlight particular problems you should have looked at, and none of the usual legal recourse you would have if a “regular” seller made incomplete disclosures.  Get a property inspection.  A pest inspection.  A roof inspection.  A sewer line inspection. A pool inspection, if you have a pool and care about its condition.

Yes – all these inspections cost money, but the drama and thousands each of them can save you is well worth it. And read your state’s buyer inspection advisory or similar document (ask your agent), just to make sure you’re aware of all the inspections that are available to you, and work with your agent to determine which ones make sense, and which are not appropriate.

Some insider tips:

• Vacant foreclosures often have their utilities disconnected.  Work with your agent to make sure the utilities get turned on – even for a single day – so that your property inspector can run the water taps, test the stove and dishwasher, see if the water heater and electrical outlets work, and so forth.
  
• If appliances are there, the bank will probably leave them there, even though they may not have technical “legal” ownership of them, so they may not be included in the contract, like in a “normal” home sale.
• However, the bank will not give you any sort of warranty on appliances, so try to obtain any warranty coverage you want or need elsewhere – from a home warranty company or, potentially, the original manufacturer/retailer.

3.  The contract terms, they are a changin’. One thing squarely in the wheelhouses of local real estate pros are local market standard practices.  From negotiating practices to which party pays which closing costs, every market is different, and experienced local agents are experts on this information.  If you’re buying a foreclosure, though, the bank will often require you to use it’s own purchase contract, rather than the more commonly used state forms.  Many times, this is done to advise the buyer of the bank’s refusal to make substantive disclosures (see above) and to change some of the normal practices for your area to the bank’s standard practices.   When you buy a foreclosure, you might end up working with the bank’s escrow company, instead of a company you or your agent selects.  And the bank’s escrow provider might be slow or disorganized.  Too bad!  The bank might rush you for your deposit money, but take their own sweet time coming up with the necessary signatures on their end to close the deal.  Par for the course.  You might expect that the bank would be desperate for buyers, and instead find out that there are 20 offers on the same REO.  Or, you might be the only offer and still get your aggressively low (but still reasonable) offer rejected, only to have the bank reduce the list price of the home to the same price of your offer!  (They often want to see if exposing it to other buyers at the new, lower list price might generate more interest and higher offers.)  

When you’re buying a foreclosure, expect glitches, expect your calendar to be derailed, expect the bank to be inflexible and possibly even unreasonable.  It’s not overkill to ask your broker or agent to brief you on the common complications they see in REO transactions.  Having realistic expectations may keep you from pulling your hair out.  And if the transaction turns out to run smooth as silk?  You’ll be pleasantly surprised.

For instance, if you are buying a home in a contingency state, where you would usually have to sign a document proactively releasing contingencies, the bank’s contract will probably change that, so that your transaction operates on an objection period. In “objection” based transactions, you  have a certain period of time in which you must either speak up about your concerns with the property and/or cancel the deal, or you will automatically be presumed to be moving forward with the deal and your deposit money will be forfeited if you change your mind after that date. 

If you’ve been making offers on non-foreclosures on the standard contract form, or you’ve bought homes before and think you know the drill, please – I implore you – READ every word of the contract you sign when you buy a home from the bank, and ask your broker, agent or attorney to explain anything that doesn’t make sense.

4.  Expect the unexpected.

The number of delinquent accounts – those with payments 60 days past due – is predicted to fall to 4.98 percent by the end of 2011 from 6.89 percent at the end of 2009.

“This is a welcome contrast to the year-over-year increases of 54 percent between 2006 and 2007, 53 percent between 2007 and 2008 and 50 percent between 2008 and 2009,” TransUnion said in a press release.

Steve Chaouki, group vice president in TransUnion’s financial services business unit, said the decrease in delinquencies could be attributed to “a slowly improving unemployment picture and continued stabilization in housing markets.”

“While there is continued price pressure in many markets, we expect a rise in property values along with some stabilization of values in those states and markets hardest hit by the recession,” he said.

TransUnion said Nevada would see a 24.77 percent drop in its delinquency rate next year while Arizona’s rate would drop 24.27 percent. In Florida, the rate would drop 23.9 percent.

“Interestingly, the states projected to experience the greatest decrease in mortgage delinquencies – Nevada, Arizona and Florida – are the same areas expected to have the highest 60-day mortgage delinquency rates at the end of next year,” TransUnion said.

The states most in need of improvement, in other words, are expected to experience the highest rates of improvement.