Archive for the ‘Foreclosure’ Category

SANTA CLARA MARKET STABILITY

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Ohlone/Chynoweth–Almaden (VTA)

Ohlone/Chynoweth–Almaden (VTA) (Photo credit: Wikipedia)

 

 

For about 3 years we have suffered through the craziest Real Estate Market I have seen in the 25 years I been a Broker here in Silicon Valley. During much of this period properties would be Listed Wed, Open House Sat and Sun, offers accepted Tue/Wed and Sold by Thu, after an average of 24 offers (the record I know of  was 79 offers on a nice 3 bed, 2 bath in South San Jose). This drove prices up a a ridiculous rate.

This was the inevitable result of a wave of overseas investors stocking up on “Cheap” California Real Estate, a surge of well qualified 1st time buyers, and historically low interest rates.

This excess of Buyers (DEMAND) led to a shortage of properties for sale (SUPPLY)

There are 3 significant results of this great Sellers Market:

1. The virtual disappearance of SHORT SALES, and REO (Foreclosure) properties for sale. The rising prices have rescued many homeowners from the UPSIDE DOWN (Negative Equity) situation they had fallen into.

2. A restoration of the Laws of SUPPLY and DEMAND. Over the past 7 years many people were forced to postpone their retirements when most of their Home Equity vanished, and they had to hunker down till the market improved. The rising prices are  allowing them to restart their long term plans to retire and move out of the area.

3. A significant number of MOVE UP BUYERS who got stuck in small houses despite the arrival of small children are now able to get prices which allow them to move up to a more suitable house. They are selling to  buyers who are helped by the huge number of special FIRST TIME BUYER PROGRAMS now available from  City, County, State, and Federal sources. These are greatly enhanced by the fantastic interest rates.

Now here we are in early 2015 and things have returned to something close to normality with inventory for sale, and ready and qualified Buyers pretty much in balance in most of the valley. The exception to this is in those areas with the top rated schools where the boom times are still hot although on a lesser scale.

 

FICO IS BROKEN.

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FICO logo

FICO logo (Photo credit: Wikipedia)

 

FICO FIXING

 

It’s time to tame the FICO god to which the Dinosaurs of FANNIE MAE and FREDDY MAC  bow down, and at whose bidding the American mortgage industry has been tied up by silver ropes.

While I still hold the mortgage lenders greatly to blame for the financial misery of the last 7 years, I also accept their strong desire to make more and better loans now. However they are prevented from doing so by the restrictions required by the industry Overlords (FANNIE and FREDDY).

No matter your politics, our current mortgage system requires a Secondary Market Maker such as we already have with FANNIE and FREDDY. For the vast majority of cases If Bank “A” gives you a mortgage it is planning to sell it to one of these 2 entities.  They in turn will package it along with thousands loans more loans and sell them on to an Institutional investor (i.e. a Pension management Company) to become part of their long term portfolio.

The money they gave to Bank “A” is now available to make another mortgage for another QUALIFIED buyer NOTE the term QUALIFIED because this is where FICO comes into the story.

FANNIE and FREDDY will only buy the BANK “A” mortgage if it meets their qualifying guidelines. One of the most important is a sufficiently high FICO score.  Effectively this means they cannot make a mortgage loan to someone whose credit is excellent but is not reflected as such due to the out of date structures of the FICO score Providers, EQUIFAX, EPERIAN, and TRANSUNION.

These procedures go back to the 1980’s and simply do not reflect today’s society. Their inability to allow for alternate ways to measure financial stability (income self employed and Individual Contractors), Behavioral history, and other liquid assets means that approximately 25% of all qualified potential buyer are unable to get a mortgage. The Banks would love to be able to serve them but without an acceptable FICO score cannot do so.

We desperately need to bring FICO up to date and incorporate it in a Mark 2 version to include some of the other accredited Fair Credit Reporting tools freely available. A primary example is the VantageScore system designed for exactly this situation.

There’s no need to lower credit qualifying standards.

Just bring them into the 21st Century and give the locked out 25% the same home ownership opportunities as the rest of us.

MORTGAGE DELINQUENCY RATE DROPS NEARLY 25% IN LAST YEAR

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Things really are getting better. English: Mortgage debt

The mortgage delinquency rate (the rate of borrowers 60 days or more delinquent on their mortgage) dropped 23.3 percent in the past year, ending the third quarter at 4.09 percent, down from a year earlier when the rate stood at 5.33 percent, according to data gathered from TransUnion’s proprietary Industry Insights Report. The mortgage delinquency rate also dropped on a quarterly basis, down 5.3 percent from 4.32 percent in the second quarter, the seventh straight quarterly decline.

All 50 states and the District of Columbia experienced a decline in their mortgage delinquency rate between third quarter 2012 and third quarter 2013. Five states – California, Arizona, Nevada, Colorado, and Utah – experienced declines of 30 percent or more in their mortgage delinquency rate. Three states – California, Florida, and Nevada – had double-digit percentage drops in the last quarter.

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THANKS TO BARBARA BOXER

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Barbara Boxer, United States Senator from Cali...

Barbara Boxer, United States Senator from California (Photo credit: Wikipedia)

As of Dec 1st both the IRS and Franchise Tax Board have put in writing that they no longer consider “Debt Forgiveness” resulting from a Short Sale to be taxable income under either State or Federal tax laws.

This removes a huge potential problem from anyone going through a short sale. Until now It has been common to receive a tax bill in the tens of thousands of dollars many months after the property has been sold.

Thanks are due to Barbara Boxer for her part in fighting this battle for us.

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SMART FHA CHANGE

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A great deal has been writen in the past few weeks about the MAJOR good news from FHA. It’s all useful to the professionals but let me try to take out the fluff and show just the bones.

As of August 8th, 2013, people who recently lost their homes due to temorary hardship in any of the following ways have a good chance of qualifying for a new FHA loan:

0. Foreclosure.

o. Deed in Lieu of Foreclosure.

o. Short Sale.

o. Bankruptcy (ch 7 and 13).

If you think you might qualify under the new guidelines talk to a Loan Agent who has strong FHA background. Understand that not all of them have strong FHA experience.

Logo of the Federal Housing Administration.

Logo of the Federal Housing Administration. (Photo credit: Wikipedia)

 

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SHORT SALES-THE END??

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Silicon Valley

Silicon Valley (Photo credit: Wikipedia)

For about 2 years now my market (Silicon Valley) has seen a steady increase in sales prices. This is finally causing changes in Banks approach to Short Sales.

I just had my 1st experience where a Bank (BofA) cancelled a previously approved short sale when they realized that the current value of the property is now higher than the amount of the loan.

They have now re-started the Foreclosure process where they can expect to get all of their money back and not have to take a loss after all.

This also gives the owner/borrower the opportunity to minimize the Credit hit by selling the property before the foreclosure completes, and maybe even get a little money back themselves.

I firmly believe that the age of the Short Sale Specialist is coming to it’s end and all those useless seminars will disappear with them.

However, there

Bank

Bank (Photo credit: 401(K) 2013)

for the home owner who is falling behind  if the Banks begin to think it might be smarter to foreclose and lose a lot less than previously, rather than expend time and effort trying to keep the afloat.

The next 6 month will be very interesting.

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THE DIGNITY MORTGAGE

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About 6 years ago the greedy incompetent Banks managed to effectively take mortgages back to the Dark Ages. Since then the idea of having mortgages designed in the interest of the Borrower has been totally abolished.

Now at last we are hearing stirrings of intelligent ideas coming from the industry.

BEFORE READING THE REST OF THIS ARTTICLE PLEASE BE AWARE THAT THERE ARE NO SUCH THINGS AS “SUB PRIME MORTGAGES”. THERE ARE ONLY “SUB PRIME BORROWERS”.

Housing advocates are pushing for a new type of loan, called the “Dignity Mortgage,” They are approaching bankers and federal regulators proposing this.

The Dignity Mortgage would be geared to applicants who have rebuilt their finances since losing their homes and or jobs during the past 5-6 years, but who have been able to get steady employment and repaired their credit scores since then.

Despite this it is very difficult to get a regular mortgage from the standard lenders at this time says Faith Bautista, who heads the National Asian American Coalition.

The Dignity Mortgage would target Borrowers who had a good credit history prior to the collapse, and have been able to save at least a 10% down payment since then.

Since it would be a higher risk loan, it would come with a higher rate for a higher risk. For example, borrowers would pay 1.25 percentage points above more creditworthy borrowers (e.g. 4.75 percent if more A+ borrowers were paying 3.5 percent), the Los Angeles Times reports.

However, if borrowers made timely payments for five years, the deal could greatly improve.

“At that point, the extra money they had paid in interest would be used to reduce the mortgage balance, and their rate would be cut to whatever borrowers with sterling credit and 20 percent down payments were charged at the time the loan was made,” the Los Angeles Times reports in explaining the proposal.

Source: “New Type of Subprime Loan Pushed,” Los Angeles Times (Jan. 29, 2013)

Loan

Loan (Photo credit: Philip Taylor PT)

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MORTGAGE FRAUD ALERT

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English: A sign advertising foreclosure rescue...

English: A sign advertising foreclosure rescue, name and number blanked out following discussion. (Photo credit: Wikipedia)

Despite frequent publicity and legal actions the Fraudsters and Scam Artists are still ripping off vulnerable and financially stressed homeowners with promises to fix their problems for a few thousand dollars up front.

They promise to obtain loan modifications, mortgage relief, and foreclosure rescue. Once the cheque is cashed they are no longer to be found.

There are many services available that legally try to help with these kinds of problems; however, they do not require payment up front which is totally illegal.

THE GOLDEN RULE IS THIS:

ANYONE ASKING FOR AN UP FRONT PAYMENT IS A CRIMINAL TRYING TO CHEAT YOU.

 

 

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OWNER TO RENTER

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AT LAST, SIGNS OF INTELLIGENT LIFE IN A BANK.

Pilot programs of this kind have been running successfully inside a number of Banks. If implemented more widely this strategy will make a huge positive impact on thousands of families.

CitiMortgage announced the launch of the Home Rental Program, a program designed to provide an alternative to foreclosure and allow eligible borrowers to stay in their homes.
The Home Rental Program will be managed by Carrington Capital Management, LLC and Carrington Mortgage Services, LLC. CitiMortgage and Carrington developed the program as a pilot.
Under the program, the eligible borrower transfers ownership of the property to a vehicle established by Carrington Capital and its joint venture partner, Oaktree Capital Management, L.P. A lease will then be established for the property at a manageable monthly payment.
Lease payments will be determined by local market rates but are expected to be lower than the borrower’s mortgage obligation. Carrington will work with borrowers to establish a length for each lease.
The program will be tested in six of the hardest-hit markets to evaluate its effectiveness: Arizona, California, Texas, Florida, Nevada, and Georgia. Carrington will contact homeowners who meet eligibility requirements.
In order to be eligible for the program, candidates must: Occupy the property; owe more than their home is worth; be delinquent for 120 days; and be unable or ineligible to receive an affordable loan modification while still having the resources to make monthly rent payments. In addition, candidates must have a loan in the pilot portfolio serviced by Carrington.
To implement the program, CitiMortgage has transferred the ownership of loans in its portfolio through the sale of $158 million in mortgages to the Carrington/Oaktree partnership.
“We’re looking forward to working on this important initiative with CitiMortgage and our partner, Oaktree Capital Management,” said Bruce Rose, founder and CEO of Carrington. “Offering alternatives for borrowers looking to stay in their homes and simultaneously relieving their distress is core to the operating principles of our firm and will help substantially in the overall housing market recovery.”

HARP – HAMP – HAFA etc

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For borrowers unable to afford their mortgage payment, listed below are the options you will need to consider in the following order… HARP is always your 1st Option

1.) HARP (Home Affordable Refinance Program) this allows you to convert to a low 30Y Fixed. You must have a Fannie or Freddie loan with good credit and be current on your payments.

2.) HAMP (Home Affordable Modification Program) this is where most of the borrowers will be; however not everyone will qualify. You will need to have a financial hardship and there are front and back end financial conditions that need to be met.

3.) HAFA (Home Affordable Foreclosure Alternative) If you were denied a loan modification and unable to afford your mortgage payments, then you may want to consider selling your property at a loss (Short Sale). Your lender would first need to agree to the short sale and the credit impact will be two years and is less damaging then a foreclosure.

4.) Deed in Lieu (DIL). This is where you give the property back to the lender by signing a Deed-in-Lieu of Foreclosure. This also avoids a Foreclosure. DIL is not possible if you have more than one loan i.e. 2nd mortgage or Home Equity Line of Credit as these stay in force and the 1st mortgage holder would have to accept responsibility for them.

5.) Foreclosure. People with excellent credit are now foreclosing on their properties by walking away from it. They believe the property will not go up in value and have suffered a substantial loss from it. Consequences apply as this will stay on your credit report for 7 years.

6.) Bankruptcy. Regardless if it’s a Chapter 7 or 13, it will stay on your credit report for 10 years.
With the new Bankruptcy ACT of 2005 it is now more difficult to file for Chapter 7 and most likely you will need to file a 13, which still requires you to pay back your debts.