Home Sales Up in US but Down in CA - Lenders Partially to Blame
October 27, 2010
National home sales were up 10% this September according to the National Association of Realtors. Some factors contributing to this growth are low mortgage rates and high affordability, home prices are averaging 22% less of where they were five years ago. Affordability has been influenced by the weakness in home buying activity. September’s home sales are still down 19.1 % from the same period last year and demand for homes has decreased since the homebuyer tax credit expired last April.
However, California hasn’t experienced this national upswing in sales and the downward trend continues to be a problem. Buyers already have concerns about foreclosure reversals and lenders have already limited the number investors due to putting limits on how many properties they can purchase. Wouldn’t it be better to have a strong buyer with 25% down than a high risk FHA buyer at 3.5% down? This perpetuates the problem only causing more defaults. To make matters worse, many lenders are increasing their demands for short sale purchase prices, often demanding prices tens of thousands of dollars over the prevailing local assessed value. This is not only a disturbing trend to short sale homeowners and homebuyers but to the local communities affected. When lenders demand unreasonable prices in a weak market they discourage what few buyers there are, allowing properties, often vacant, to sit for months or even years. It is these types of practices that encourage the increase of city violations, HOA penalty fees, theft, vandalism and vagrant squatters, resulting in a further decrease in local property values.
HUD Secretary - Foreclosure Problems Aren’t Systemic
October 22, 2010
In the Federal Task Force meeting on Wednesday, the Secretary of Housing and Urban Development, Shaun Donovan said they have been aware of violations with certain servicers for some time and they will “take actions”. However, he stopped shy of identifying any systemic problems instead citing isolated non specific problems. More details could become available when the FHA probe is completed in about nine weeks. The Federal Task Force investigation has now shifted to determining whether there was “criminal intent to take a home” “robo-signing” or fraud. Any mortgage servicers found guilty of these actions could face hefty fines or lose their ability to work with the Federal Housing Administration at a minimum. It is still too early to tell which lenders may face charges and what effect any such charges would have on the lending industry as a whole.
Federal Task Force Investigation into Foreclosure Fraud Could Lead to Criminal Charges
October 20, 2010
According to CNN, White House Press Secretary Robert Gibbs the Federal Housing Administration and Financial Fraud Enforcement Task Force are in the process of an investigation into foreclosure regulations and they will expect any bank that violated the law to be fully accountable for those actions. The Task Force is meeting on October 20, 2010 at the Department of Housing and Urban Development. They are planning to determine whether civil or criminal charges will be enforced. There should be a White House briefing after the meeting concludes.
Mortgage Rates at Fifty Year Lows - Good Time to Invest in Central Valley Real Estate
October 15, 2010
According to Freddie Mac, 30 year fixed mortgage rates declined to 4.19% and 15 year rates are at 3.62%. These are the lowest rates on record since the beginning of tracking such data, in 1971. Some experts have said we would have to look back approximately 50 years to see similar mortgage interest rates. With these once in a lifetime rates houses should be selling, but the confidence in the economy is still low. There has been an increase in refinances, but people are leery of investing in real estate. In order to feel confident about a real estate investment the consumer must be able to commit for the long term. This is difficult for most when unemployment is still at about 10% and inflation continues to be a concern. However for those who work in less volatile employment sectors and are considering purchasing a home or investment property, there will never be a better opportunity. You can determine any property’s value with a quick and easy Eppraisal and if you have any further questions about central valley real estate or investment opportunities feel free to call Pat Holkesvig & Your Home Team at 209.471.6516 or complete our Contact Us form.
Foreclosures - Suspended or Expedited? Depends on Who You Ask
October 8, 2010
On October 7, 2010, Barack Obama rejected the Interstate Recognition of Notarizations Act, which would require courts to accept documents that have been notarized in another state. Many are calling for a moratorium on foreclosures, stating banks have reclaimed homes on fraudulent documentation. Just last week, Bank of America, JPMorgan Chase and GMAC announced they were suspending thousands of foreclosures due to inaccurate handling of documents. It is estimated that there are documentation problems in 80 percent of currently pending foreclosures.
Just when it seems the government and banks are beginning to act responsibly, Wells Fargo announced they will cease to delay foreclosure proceedings. Wells Fargo cited mortgage investors, including Fannie Mae and Freddie Mac, as the reason for this policy change. Which could mean, other banks will soon follow. This means an active short sale will no longer be an acceptable reason to prevent foreclosure proceedings. For those facing foreclosure on a Wells Fargo loan this means you must act swiftly to complete a short sale or the clock will run out. Unless Fannie Mae and Freddie Mac also act responsibly, all of this is just one step forward and two steps back.
Understanding Deficiency Clauses
September 30, 2010
Recently a seller let an approved short sale go to foreclosure over a deficiency clause. This is a situation where everybody loses, the seller, the buyer, their agents, the servicers and the lenders all who spend their time and money to negotiate the approval. All wasted over two little sentences.
“BAC Home Loans Servicing, LP and/or its investors may pursue a deficiency judgment for the difference in the payment received and the total balance due, unless agreed otherwise or prohibited by law, if the short sale closes on the loan referenced above. In addition, if this loan is covered by mortgage insurance, the mortgage insurance company may reserve the right to pursue the seller for the deficiency based on the terms of the mortgage insurance policy.”
Initially the servicer, Bank of America, claimed that if there was Mortgage Insurance (MI) or a second lien on a file they couldn’t remove a deficiency clause. However, there was no MI on the loan and the second lien holder was a different lender who had already accepted the terms of approval. The seller consulted an attorney who advised him that unless the deficiency clause was removed from the approval, that he should go ahead and let the property foreclose. This would protect the seller from owing the deficiency since California is a nonrecourse state. Hoping to salvage the deal, the seller offered to pay a promissory note in lieu of the deficiency clause. This should have been a reasonable offer to Bank of America considering that according to an article by Jason Opland on Aug. 17, 2010
Bank of America’s previous Senior Vice President of Credit Loss and Loss Mitigation, Mr. Jack Schakett, stated that if a borrower proves he can no longer pay the mortgage and has a few or no assets, Bank of America will waive it’s right to a deficiency judgment during the processing of the short sale deal. But, if a borrower can afford to pay or has assets, the bank will try to negotiate a set fee for the borrower to pay at closing. “We want to help customers who legitimately can’t afford to make payments, but we don’t want the one’s who have a bunch of money to just be able to walk away. These individuals will have to share some of our loss.” Mr. Schakett acknowledged that short sales in which the bank agrees to accept less for the home than the balance of the loan are less expensive to process than foreclosures, and thus they want to encourage more homeowners to pursue this course by making it clear they do not intend to pursue homeowners for deficiency judgments.
However Bank of America didn’t get to make that decision because Freddie Mac who held the note would not allow it. The negotiator responded saying the investor would not accept the promissory note and refused to remove the deficiency clause. They pointed out that the approval letter states the deficiency clause can be enforced “unless agreed otherwise or prohibited by law” and that California won’t allow it. This isn’t entirely true. The current statutes prohibiting deficiency judgments only pertain to foreclosures, not short sales. SB 931 which would prevent deficiencies on short sales, has not been signed into law by the governor. He has until September 30, 2010 to do so. Even then, we don’t know when the law will take effect, likely after January 1, 2011. This means if the seller had completed the short sale with the deficiency clause intact he would’ve been at risk of Bank of America coming after him for the deficiency until the statute of limitations had passed (about four years). Based on this information the seller decided to follow the advice of his attorney and let the property foreclose and be protected from the lender pursuing the deficiency judgment.
Posted via email from www.Homes-In-Stockton.com Posterous
A Plan to Bail Out Those With Negative Equity
September 9, 2010
Keith Gumbinger, a vice president at HSH Associates mortgage consulting firm, has proposed a new mortgage relief program he calls “value gap coverage.” In this plan, he proposes that if a borrower did not cause the decline in their home’s value, and has been making their monthly mortgage payments they should be subsidized rather than punished for doing the right thing. One of the primary differences between the Gumbinger and government plans is that the government plan requires mortgage holders to take a write down, and the “value gap coverage” doesn’t. In addition, Gumbinger’s idea absolves the borrower of any deficiency. Gumbinger believes the “value gap coverage” would reduce interest payments, and the incentive for strategic defaults. Another distinction of the “value gap coverage” plan is that the cost of this program would be known from inception and would go down as the time passed. This type of plan could be very successful in areas, like Stockton, where default rates are high by providing incentive to homeowners that could lead to a more stable market.
Posted via email from www.Homes-In-Stockton.com Posterous
Obama Launches New Mortgage Aid
September 7, 2010
Over the last month we have mentioned in Could This Be The End of Short Sales? and No New Ideas From Mortgage Summit that it was rumored the Obama administration was about to order the government-controlled lenders to forgive a portion of the mortgage debt for Americans who are underwater. Today the Obama administration has indeed launched a revised government mortgage relief program referred to as the “short refinance” program . However this program is not intended for Fannie Mae or Freddie Mac loans and it still faces the challenge of satisfying second lien holders. The administration still hopes that up to 1.5 million loans could be modified through the program. The intent is to focus on homeowners who are current on their mortgage payments but are at risk of default because they have no equity in their homes. It is still too early to tell how many Stockton area underwater homeowners will benefit from this program.
Posted via email from www.Homes-In-Stockton.com Posterous
US Home Sales Plummet as Inventory Rises; Great Time for Central Valley Buyers
August 26, 2010
The latest figures for existing homes sales were released this week with very discouraging results. Existing homes sales have hit the largest monthly decline in history at 27.2%. This is coupled with a record breaking 11 year peak in housing inventory. On the bright side, if you are looking to buy in the San Joaquin valley, there is no better time than the present. With great inventory to choose from and 30 year fixed mortgage rates at an all time low of 4.56% it is truly a buyer’s market.
Posted via email from www.Homes-In-Stockton.com Posterous
No New Ideas From Mortgage Summit
August 24, 2010
On August 12th in the post Could This Be The End of Short Sales? we wrote about how On August 17th the Treasury was going to be holding a hearing regarding the future plans for Fannie Mae and Freddie Mac. It was rumored that the Obama administration was about to order the government-controlled lenders to forgive a portion of the mortgage debt for Americans who are underwater.
At the end of the day, no new ideas came out of the August 17th summit and it is most likely that there will be little change to Freddie Mac and Fannie Mae for the short term. However, that means the government could continue to bail out the banks. It also leaves open the possibilities that Freddie and Fannie could go as far as writing off all remaining debt or at least refinance all existing troubled loans to current low interest rates.
