Archive for Foreclosure News
Declining Foreclosures on the Horizon!
Posted by: | CommentsU.S. credit bureau TransUnion predicted Thursday the number of delinquent mortgage accounts would drop by nearly 20 percent next year.
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.
Banks Put Brakes on Foreclosures
Posted by: | CommentsBy Matthias Rieker (Wall Street Journal)
NEW YORK -(Dow Jones)- The longer that U.S. banks place a moratorium on home foreclosures, the higher the risk they might suffer financial costs in addition to the political pain they already feel.
Bank of America Corp. (BAC: 13.20 ,0.00 ,0.00%) said Friday it would review its foreclosure documents in “all fifty states” and “stop foreclosure sales until our assessment has been satisfactorily completed.” Brian Moynihan, the chief executive of Bank of America, the nation’s biggest bank by assets and deposits, told the National Press Club Friday the Charlotte bank hasn’t found problems in its foreclosure process, but wanted to “clear the air” with its halt to foreclosure sales.
Bank of America, J.P. Morgan Chase & Co. (JPM: 39.38 ,0.00 ,0.00%), and Ally Financial Inc. last week postponed foreclosures in 23 states because of foreclosure documents signed by staff who did not review those documents. PNC Financial Services Group Inc. (PNC: 53.08 ,0.00 ,0.00%) said it “is reviewing its mortgage servicing procedures to ensure these comply with applicable law,” a spokesman said Friday.
U.S. Bancorp (USB: 22.33 ,0.00 ,0.00%), meanwhile, said in a statement late Friday, “We regularly review our [foreclosure] processes and will continue to do so going forward, while responding appropriately to requests for information from our regulators and other governmental authorities. We do not have plans to halt foreclosures.”
Eventually the banks will foreclose on nearly all the properties. In many cases owners have already left their home or been evicted. But there are legal and administrative costs related to delayed foreclosures.
But for banks that have to publicly defend their foreclosure procedures, the issue is a political hot potato. To the public, already inflamed by government bailouts and a debate over bank fees, it’s one more instance of banks treating their customers badly.
For some banks, the bad publicity, said David Trone, an analyst with JPM Securities LLC., might hurt “deposits and ongoing relationships with customers.”
There may also be a broader economic impact from the slowdown in foreclosure sales: “It adds a level of uncertainty that prevents” the banks involved “from making new loans” until the banks hold the capital they hope to recover from foreclosure sales, Trone said.
However, the direct hit to the profit of the banks involved is unlikely to be material, “unless it drags on for 12 to 24 months,” said Gerard Cassidy, an analyst with RBC Capital Markets.
Few of the reviews of foreclosure documents that banks have ordered will result in an actual reversals of the foreclosures.
“The banks should have already written down the credit ,” Mike Mayo of CLSA wrote in a research note Thursday–though the ratio of loans that are classified as unlikely to be paid back “will remain inflated for a significant period.”
There is some legal risk. Judges might harden their position against banks once the foreclosure documents are resubmitted; lawyers have to be paid. Some judges might throw the foreclosures out, Mayo said.
There is also the cost to the bank that has to keep the house longer than expected–as a rule of thumb, those cost can be about 1% of the value of the house per month. There are the administrative costs of reviewing the foreclosure documents.
All this could shave “a few cents” off quarterly earnings, Trone estimated. But the longer the issue drags along, and the more severe the political backlash to foreclosure overall, the higher those costs will eventually be.
Don’t Abandon Your Property!
Posted by: | CommentsWhy Just Letting the Bank Take Your Property Could Present a Real Problem:
Your home is underwater. You owe more on the mortgage than the property is worth. Maybe hundreds of thousands of dollars more. You cannot afford the mortgage payments, the homeowners’ association dues, the property taxes, and the upkeep. Why not let the Bank take the property? Why shouldn’t you just mail the keys back to the Bank and let the Bank sort it out?
With thousands of mortgage foreclosure lawsuit being filed each month in Florida, it appears that not just a few homeowners and investors are choosing to ignore the problem and head for the hills. Many of these lawsuits are won by default for failure of the homeowner to file a response to the complaint of foreclosure.
Be careful. Ignoring this particular problem could have consequences you could not possibly have imagined.
For example, pursuant to Rule 1.560(b) of the Florida Rules of Civil Procedure, the lender may request that the Final Judgment of Foreclosure include an order requiring the judgment debtor to complete a Fact Information Sheet (Form 1.977) within 45 days of the entry of the Final Judgment. The Fact Information Sheet is a form of interrogatories in aid of execution that was adopted by the Florida Supreme Court in 2000. The information sought includes the judgment debtor’s income, employment information, bank account information, motor vehicles owned by the judgment debtor, real estate assets, paycheck stubs, income tax returns, and any other such financial statement or loan applications submitted within the last three years.
Most importantly, this Rule specifically states that “Failure to obey the order may be considered contempt of court.” Civil contempt is defined as the failure to do something ordered by the court for the benefit of a party to a civil action. Accordingly, it is within the court’s power to issue an arrest warrant against a judgment debtor who refuses to complete the Fact Information Sheet. It is becoming increasingly common for aggressive lenders to pursue entry of an order of civil contempt against a party who continues to ignore a judgment creditor’s legal right to discovery of the debtor’s financial condition as part of the creditor’s efforts to collect on deficiency judgments. In other words, the legal system does not let you simply ignore or walk away from the problem.
While your situation may seem hopeless, relief may be had by attacking the problem head-on. Keep open communication with your lender and explore loan modification options. If that doesn’t work, hire a Realtor that specializes in short-sales immediately, to assist you in the sale of the property. And if you decide to pursue a short sale, with some persistence, your lender may even agree to waive their right to pursue the loan deficiency balance remaining after the sale of the property or negotiate a lesser amount.
If you have been served with a foreclosure lawsuit, hire an attorney. Your attorney can assist you in defending the foreclosure, buy you additional time to obtain a short-sale, and also assist with your negotiations with the lenders. Making this effort to mitigate your damages can result in a reasonable settlement and may help you escape liability for a large amount of debt.
Alternative to Foreclosure Gains Traction
Posted by: | CommentsKen Harney (Herald-Tribune)
Short sales have been the hot solution for financially stressed homeowners and their lenders for the past year, but here’s another potent foreclosure alternative that’s about to take center stage: deeds-in-lieu.
Some of the largest mortgage servicers and lenders in the country are gearing up campaigns to reach out to carefully targeted borrowers with cash incentives that sometimes range into five figures, plus a simple message: Let’s bypass all the time-consuming hassles of short sales and foreclosures. Just deed us the title to your underwater home and we’ll call it a deal. We won’t come after you to collect any deficiency between what you owe us on the mortgage and what we obtain from the home sale. We might even be able to wrap up the whole transaction in as little as 30 to 45 days.
Mortgage companies say troubled borrowers increasingly are signing up.
One of the largest servicers, Bank of America, has mailed out 100,000 deed-in-lieu solicitations to customers in the past 60 days, and its volume of completed transactions is breaking company records, according to officials.
What precisely are deeds-in-lieu? The full name is deeds-in-lieu-of-foreclosure. They are voluntary transfers of property ownership from borrowers to creditors that make court-directed foreclosures unnecessary.
The concept is one of the oldest in real estate, but it got a special boost earlier this year when the Obama administration included it as an option in its Home Affordable Foreclosure Alternatives program, and mortgage giant Fannie Mae cut the penalty-box time for homeowners who use the technique from four years to two before they can qualify for another home mortgage.
Deeds-in-lieu also are surging because they provide a win-win for borrowers and mortgage investors that short sales often cannot match. Tops on the list: speed. Travis Hamel Olsen, chief operating officer of Loan Resolution Corp., a Scottsdale, Ariz., firm that works with lenders to solve troubled borrowers’ problems, said deeds-in-lieu represent “a very expeditious way to move on” for underwater borrowers who are facing potential foreclosure.
“A lot of owners just want to be finished with it, now,” he said. “They don’t want to deal with (the house) anymore.” They don’t want to deal with real estate agents or signs on the front lawn that reveal their financial squeeze to neighbors. They don’t want to haggle with potential buyers coming in with lowball prices. But they also don’t want to simply walk away — strategically default — because that will crater their credit files and scores for as much as seven years.
Greg Hebner, president of the MOS Group Inc. of San Diego, which also works with banks and investors across the country to resolve defaulting borrowers’ situations, said a key motivation now is that lenders are stuck with massive backlogs of underwater homes that haven’t yet gone through foreclosure and been put on the market — the so-called shadow inventory.
Not only is it cheaper for them to do deeds-in-lieu to gain control of those properties, but with current mortgage rates below 5 percent, they’re likely to be able to resell them faster and on potentially more favorable terms in the summer and fall.
“If you can get a lot of inventory moving in the next couple of months” of prime home-buying season, said Hebner, “you are solving a lot of problems.”
Matt Vernon, Bank of America’s top short sale and deed-in-lieu executive, said the technique works so well for both borrowers and mortgage owners that his company is running pilot programs in major housing markets to alert borrowers who might benefit but are not familiar with deeds-in-lieu.
To sweeten the pot, Bank of America is offering cash incentives that range anywhere from $3,000 to $15,000 — and is getting a strong response, according to Vernon.
What are the downsides or limitations of deeds-in-lieu for homeowners?
Probably the most important, say experts, is that they don’t work for every situation involving serious mortgage default. For example, if you have equity in the property, you’ll probably want to pursue a loan modification first, then a short sale, rather than hand your equity stake over to the lender.
Deeds-in-lieu usually don’t work when there are multiple mortgages from different creditors encumbering the property.
Also, though deeds-in-lieu do less damage to borrowers’ credit histories than foreclosures or bankruptcies, they definitely leave a mark.
Fair Isaac, developer of the widely used FICO credit score, says on its “MyFico” Web site that deeds-in-lieu and short sales are both treated as “not paid as agreed” accounts, and are treated the same by the FICO scoring model.
How Bad Will Housing Market Get?
Posted by: | CommentsBy Nick Timiraos (Wall Street Journal)
Most analysts expected housing might hit a rough patch after the home-buyer tax credit expired in April. But is the plunge in demand becoming worse than expected?
It’s a fair question, given Wednesday’s report that new home sales plunged 33% in May from April and were off 18% from one year ago.
Moreover, the Mortgage Bankers Association reported that mortgage rates fell again, down to 4.75% last week from 4.82% two weeks ago. By comparison, rates were slightly higher one year ago, at around 5.3%.
Yet demand for refinancing or for taking out new loans is tepid. The index that tracks new purchase-loan activity was down 2.3% from last week and nearly 37% from one year ago.
That weakness is also showing up in home sales contracts signed in May, which the National Association of Realtors estimates is down 10% to 15% from one year earlier. Those deals won’t close until later this summer, which means that we could be in for several more months of gloomy housing indicators.
One big question is how quickly demand will bounce back as the market works through the post-tax credit hangover. Another big question: How quickly will new supply come onto the market in those intervening months? If more banks put homes on the market this summer and more sellers list their homes, that pushes up inventories and pushes down prices.
Housing economists are gloomier about the prospects than just a month ago, which suggests that there may be more evidence that the tax-credit lull won’t be as temporary as once believed.
The answers to those questions could foretell whether housing prices drop just 5%, or if there’s truly a “double-dip” in store, that would mean drops of around 10-15%.
Home Buyer Tax Credit Being Extended?
Posted by: | CommentsHome buyers may get an extra three months to finish qualifying for federal tax incentives that boosted home sales this spring.
Senate Majority Leader Harry Reid, D-Nev., said Thursday he wants to 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 proposal would only allow people who already have signed contracts to finish at the later date.
The National Association of Realtors estimates that about 180,000 buyers who already signed purchase agreements are likely to miss the deadline.
The tax credits have helped propel sales in Southwest Florida for the last several months, taking the levels of homes changing hands back to the boom times of mid-2005.
Sales have not declined in the Sarasota-Bradenton market for nearly a year. They were up 32 percent in April. In Charlotte County-North Port — which has not seen a drop since December 2008 — sales rose 6 percent last month, according to data from the Florida Association of Realtors.
Condominium sales also rose dramatically in April — up 70 percent in both Sarasota-Bradenton and Charlotte County-North Port.
Reid introduced the proposal as an amendment to a bill that would extend jobless benefits through the end of November. Joining him were Sen. Johnny Isakson, R-Ga., and Christopher Dodd, D-Conn.
The Senate is expected to take up the amendment next week. Senate Democratic leaders hope to finish work on the jobless benefits bill next week, but they have yet to secure enough votes.
Military Home Buyers Get Extended Tax Credit
Posted by: | CommentsJune 10, 2010–Military families seeking to buy a home can count on a little tax help. The Homebuyers Tax Credit, which provides eligible buyers with a tax credit of $8,000 for first time buyers and $6,500 for repeat home buyers, ended on April 30, 2010 for civilians. However, active duty military or those on extended overseas duty have until on or before April 30, 2011 to have a binding sales contract in place. The bill also exempts qualified service members on official extended duty from tax credit recapture rules.
“We honor those who serve our country and are glad that this bill acknowledges the unique circumstances they face,” said Benjamin Clark, 2010 President of NAEBA. ”This bill ensures that members of the military have equal opportunity to participate in the homebuyer tax credit and offers relief to struggling military families by making the mortgage payment tax deductible.”
The Worker, Homeownership, and Business Assistance Act of 2009 provides a tax credit of up to $8,000 for qualified first-time home buyers purchasing a principal residence and a tax credit of up to $6,500 for repeat home buyers who have owned a home for five consecutive years out of the prior eight years. The tax credit is available for eligible purchasers who have a binding sales contract in place by April 30, 2010, and close by June 30, 2010. However, realizing that members of the military, the Foreign Service and Intelligence Community have unique circumstances the bill has special provisions for this group:
– Tax credit extended for one year for military personnel serving outside the United States for at least 90 days during the period beginning December 31, 2008 and ending May 1, 2010.
– Eliminates the 36-month recapture requirement for military personnel, including members of the Foreign Service and intelligence community, forced to sell or move from a tax credit home as a result of an official extended duty of service.
Visit www.irs.gov for more information on qualifying and claiming the tax credit.
Foreclosures Not Always “The End”
Posted by: | CommentsLast Modified: Saturday, June 5, 2010 at 11:45 p.m.
Thomas insisted that his lender, American Home Mortgage Servicing, agree not to come after him for the estimated $174,000 he still owed on his two mortgages.
“I feel incredible relief,” the 32-year-old restaurant manager said last week.
Others may not be as fortunate.
Lenders will file a tidal wave of lawsuits against homeowners in the next few years as a way to recoup losses when home sales or foreclosure auctions don’t result in enough money to pay the mortgages in full, real estate and legal analysts say.
“It will be a dramatic problem because the borrowers will not know it’s coming,” said Frank Alexander, a law professor at Emory University in Atlanta.
Laws vary from state to state. In Florida, banks have five years from the date of the sale to file for so-called deficiency judgments and up to 20 years to collect. Lenders can garnish wages or make claims on borrowers’ assets.
Before the housing meltdown, few lenders filed these lawsuits. Foreclosures and short sales — selling for less than the mortgage amount — were relatively rare at the time, and many of the homeowners didn’t have sufficient assets to make it worth the banks’ time and expense.
But following the heady days of the housing boom that spawned millionaire investors seemingly overnight, it’s not uncommon for borrowers to default on mortgages while still holding lucrative investments.
As the next wave of the housing crisis plays out, those most in danger of getting slapped with lawsuits include angry homeowners who ransack properties they’re losing in foreclosure and borrowers who walk away from “underwater” mortgages. In both cases, analysts say, banks will want to discourage other people from such behavior.
More than four in 10 homeowners said they would consider abandoning properties that are underwater, or worth less than the mortgages, according to a national online survey released last week by real estate firms Trulia and RealtyTrac.
Mortgage companies typically won’t sue homeowners who negotiate in good faith or those who default on their loans because of job losses or other unforeseen circumstances, said Anthony Manno, an executive with Steelbridge Real Estate Services. The Miami-based company works with lenders on the resale of foreclosed homes.
Still, borrowers shouldn’t rely on a lender’s verbal commitment, Manno said. “Get something in writing.”
Critics insist that spite will play a role in some of these lawsuits. Lenders deny it.
“We certainly would not do that,” said Russell Greene, president of Grand Bank & Trust of Florida in West Palm Beach. “It’s a business decision — not an emotional decision. It’s very time-consuming to take someone to court.”
Even if lenders don’t pursue the judgments, they could sell mortgage debt to collection agencies at deep discounts. And it will be those debt collectors that will hound borrowers, said Shari Olefson, a Fort Lauderdale real estate lawyer.
“They paid money to be able to hassle you,” she said.
Thomas, the former Pompano Beach homeowner, said he didn’t have money for a down payment but was approved for 100 percent financing on two loans in spring 2006. He bought a three-bedroom home for $245,000.
Thomas said he soon became responsible for the entire mortgage after his roommate lost his job. That became even more difficult after Thomas took a pay cut.
So he attempted a short sale, eventually finding plenty of prospective buyers interested in a property that had plummeted nearly 70 percent in value. He and American Home Mortgage accepted one offer for $80,000. After closing costs, the lender netted about $71,000, said his Fort Lauderdale lawyer, Joe Kohn.
But before the sale closed, Kohn had American Home Mortgage waive its right to collect on the remaining mortgage debt.
Under new government guidelines for short sales that took effect this spring, lenders aren’t supposed to hold homeowners responsible for any remaining mortgage debt. But not all short sales fall under the guidelines, while some lenders choose not to implement them, Kohn said.
