Wednesday, November 4, 2009

New Subprime Lender: The US Government

New Subprime Lender: The US Government

According to this City Journal article, Our Subprime Federal Government, "President Obama’s mortgage plan imitates the lenders who inflated the housing bubble." The article references the 10/9/2009 Congressional Oversight Panel report, October Oversight Report: An Assessment of Foreclosure Mitigation Efforts After Six Months, for its data.

On 10/9/2009 the Congressional Oversight Panel released its first analysis of the Obama Administration's Making Home Affordable (MHA) initiative (Through the US Treasury, the MHA is "the federal government's central tool to combat foreclosures. MHA consists of two primary programs. The Home Affordable Refinance Program (HARP) helps homeowners who are current on their mortgage payments but owe more than their homes are worth, refinance into more stable, affordable loans. The larger Home Affordable Modification Program (HAMP) reduces monthly mortgage payments in order to help borrowers facing foreclosure keep their homes.") via the report mentioned above, October Oversight Report: An Assessment of Foreclosure Mitigation Efforts After Six Months. According to the report, the US Treasury's stated goal for the HAMP program is to "prevent as many as 3 to 4 million of these foreclosures." The report goes on to say that "there is reason to doubt whether the program will be able to achieve this goal."

The article states "The analysis shows that the Treasury, in trying to keep people in homes they can’t afford, is relying on the same perverse principle that inflated the housing bubble in the first place: namely, that it’s fine to borrow recklessly to buy a house, because house prices can only go up and up. Trying to maintain a bubble mentality, rather than help people adjust to life after the bubble has burst, will hobble economic recovery."  I absolutely agree with this statement.  The question I keep asking myself is why when the real estate market was going up rapidly did we repeatedly hear the cry of "affordable housing" with the result of more and more low down payment and easy to qualify for mortgage loans combined with federal, state and local housing grants, bond programs, etc. (the result of these loans and subsidies was to artificially increase buyer demand and push home prices up further), and now that the real estate market is finally moving home prices back into affordable territory we have the federal government intervening to artificially prop up home prices?

The article states "President Obama first announced HAMP eight months ago. The program helps struggling borrowers slash their monthly mortgage payments to 31 percent of their gross income (from participants’ original median of 45 percent). To encourage the financial industry to modify the loans, the government offers inducements to mortgage “servicers” (the companies that handle paperwork for borrowers and lenders), including a $1,000 payment each year for the first three years of a successful “workout.” The government also offers lenders partial compensation for the losses that they will take on the workouts. And the government gives borrowers $1,000 a year for up to five years for staying current on their modified loans; the extra money will help pay down their loans. Reworking bad loans isn’t a bad idea; it can prevent even bigger losses for both borrower and lender. Say you purchased a house worth $220,000 in 2006, borrowing 100 percent of the value, and the house’s value has since fallen to $150,000. If you can afford a mortgage on $175,000 worth of debt, it likely makes more sense for your lender to cut your mortgage debt down to $175,000 than to sell your house for $150,000. Indeed, such write-downs should be a healthy part of the economy’s readjustment to a post-bubble world. They would help address the housing bubble’s legacy: one-quarter or so of homeowners now owe more than what their houses are worth.  Healthy write-downs of bad debt are not what the White House is encouraging, though. HAMP has been reducing people’s mortgage payments not by cutting the amount they owe in line with realistic home values, but by slashing the interest rates on their mortgages. Of the nearly 2,000 completed workouts so far, mostly of initially fixed-rate mortgages, under 1 percent have included forgiveness of any debt, the congressional oversight panel said; instead, mortgage administrators have cut payments "almost exclusively" through interest-rate reductions. The HAMP borrowers’ median annual interest rate has thus fallen from 6.85 percent to an absurdly low 2 percent annually. The cuts have made a big difference in monthly payments, which have dropped from a median $1,419 to just $849.  But there’s a catch: the cuts are temporary. Five years from modification, the interest rate on each modified mortgage will begin to increase, either to the original mortgage rate or to the market mortgage rate at the time the loan was modified. As the congressional report notes, “the affordability of the loans will move back toward [original] levels eight years from now.” Treasury has taken fixed-rate mortgages that borrowers can’t afford and transformed them into the very “teaser-rate” mortgages that grew so popular during the housing bubble—to mask and exacerbate the same problem: the house costs too much for the buyer."

Even worse than the loan modifications being temporary is the fact that the mortgage lenders and servicers can add on some of the costs of missed mortgage payments and other fees to the homeowner's original mortgage balance.  Therefore, unless there is a substantial increase in housing prices, these homeowners could be even more underwater/upside down than when they started!  According to the article, "The median homeowner in HAMP owed an untenable 122 percent of the value of his house before entering the program; today, the same owner owes an even more untenable 124 percent. Worse, before modification, 474 of the 2,000 HAMP borrowers weren’t yet “underwater”—that is, owing more than the value of their homes. Now, only 424 remain in that relatively good position. Will the $5,000 (maximum) in government payments to borrowers who stick to their new mortgages cut the amount they owe by more than the lenders will eventually increase it?  So far, it looks to be close to a wash.  Notwithstanding the government’s best efforts to sustain a bubble, home prices are falling to about where they should be so that people can afford to buy houses again without incurring impossible debt burdens."  I have been saying this for some time now.  Home prices need to fall to a point that they are sustainable based on peoples' incomes and not their ability to take on debt. The result of this "false propping" will be more short sales and foreclosures for years to come.

The article goes on to state "Consider the Treasury’s small universe of HAMP participants. Treasury balks at releasing the raw data behind its program, but the interest rates and monthly payments detailed in the congressional report make it easy to determine that the average HAMP borrower likely owed about $220,000 on his mortgage before and finds himself with a house worth about $180,000 today. Suppose, in an ordinary process of healthy write-downs, lenders reduced that average loan to today’s value and lenders of any second mortgages or home-equity loans—which are supposed to offer less protection—lost all of their money (as they should, but don’t, under HAMP). In that case, the borrowers’ median monthly payment would be less than $1,200, even at the original 6.85 percent interest rate. And at the record-low 5 percent rates that qualified borrowers can secure today—something that the government could more reasonably support than the 2 percent rates—payments would fall below $1,000.  The White House, instead of letting the market bring prices down to where they should be, is kicking the problem five years down the road. It hopes that five years from now, home prices will have risen so much that borrowers will no longer be underwater. Borrowers would then be able to sell their homes at prices higher than their mortgage balances, getting out of their still-unaffordable original mortgages without huge losses for lenders. Washington is trying to prearrange this outcome through other programs, such as its $8,000 tax credit for first-time homebuyers—another attempt to keep home prices artificially high with taxpayer money. But this policy isn’t good for the economy. Overvalued houses force people to continue borrowing too much and keep their financial resources from going into savings or investments—that is, into more productive, job-creating industries. Using borrowed federal money to further this goal also takes funding away from infrastructure and other public investments that a healthy economy needs.  Nor is this policy good for the homeowners whom Treasury is purporting to help—those who can’t afford their mortgages. If housing prices aren’t substantially higher in five years even after the government’s best efforts at distortion, the Treasury program will only have discouraged people from cutting their losses and moving on with their lives.  HAMP’s beneficiaries could better adjust to reality without this government intervention. Borrowers are generally free to walk away from their houses without declaring bankruptcy. Under the contracts that mortgage lenders and servicers drew up as well as precedent, mortgage debt is understood to be backed by the value of the house, not by a borrower’s full pledge to pay the debt with his personal resources. (In fact, that’s why mortgage interest rates have historically been lower than credit-card rates: lenders know that a valuable physical asset secures the home, not a person’s ability and willingness to pay his debt.) A borrower who can’t afford his house under normal conditions may have to leave the property and start renting instead, but that’s hardly sufficient reason for the government to sink tens of billions of dollars into maintaining an irrational environment of high prices—one in which it makes perverse sense to keep mindlessly buying houses.  Instead, the White House should help the economy adjust to lower home prices and force lenders and borrowers to recognize their losses—both key elements to a recovery. Treasury should say that it won’t subsidize mortgage administrators that offer temporary interest-rate cuts; it should use any subsidy to encourage lenders to forgive principal. Someone who couldn’t afford a mortgage based on his home’s current value—or less, if the mortgage administrator thinks fit—would have to move. All of these steps would make far more sense than Washington’s current policy: becoming the biggest predatory lender of them all, and eating the economy alive."

I normally would not quote so much of an article, but the author, Nicole Gelinas, hit all the points so well that I did not want to mess with such a well written and reasoned piece of journalism. The conclusion of all of this information is that you cannot buy into any of the home sale figures offered by the US government showing a "real estate recovery" because they are all based on temporary housing programs and incentives, which will only serve to delay (not prevent) the inevitable: more foreclosures and short sales resulting in lower home prices in the future.

If you are a homeowner in Middle Tennessee who cannot pay your mortgage (due to losing your job, having your income reduced, illness, health problems, etc.), or your home is already in foreclosure, or you owe more than your home is worth, please contact me to discuss your options including a loan modification or a short sale. I am a Middle Tennessee distressed real estate, short sale, pre-foreclosure (preforeclosure) and foreclosure REALTOR and Expert. I serve real estate owners, homeowners and investment property owners in Rutherford County TN, Williamson County TN, Davidson County TN, Murfreesboro TN, Smyrna TN, La Vergne TN, Eagleville TN, Lascassas TN, Rockvale TN, Christiana TN, Brentwood TN, Franklin TN, Nashville TN and Belle Meade TN. If you do need to short sell your home (a real estate short sale occurs when the sale proceeds are not sufficient to pay off all the mortgages and liens on the property/home), or you need a quick sale due to being in foreclosure, you can request short sale and foreclosure help and assistance on my website at Get Short Sale and Foreclosure Help and Assistance from a Middle Tennessee Short Sale and Foreclosure REALTOR and Real Estate Expert.

New Home Sales Drop in September 2009

New Home Sales Drop in September 2009

According to this Nashville Business Journal article, New home sales drop unexpectedly, "New home sales took a surprising turn downward last month, according to newly released government figures." According to the article, on 10/28/2009, the US Commerce Department reported that sales of new homes declined by 3.6 percent in September 2009 to a seasonally adjusted rate of 402,000 new home sale units.

The article stated the following new home sales figures:
  • The number of unsold new homes fell for the 29th straight month to 251,000.
  • The supply of new homes at current sales rates remained unchanged at 7.5 months.
  • The median time it takes to sell a home remained unchanged at 13 months.
  • The number of completed new homes for sale fell to 109,000 units.
The article quotes Patrick Newport, a U.S. economist for IHS Global Insight, as saying "September’s decline is hard to explain."  According to the article, Newport offered the following possible explanations for the "unexpected" decline in new home sales:
  • "One possibility is that inventory has fallen so low that builders do not have enough completed homes on hand, and are losing sales to the market of existing homes."
  • "A second possibility is that September's reading was simply an aberration, just like the August drop in existing home sales was an aberration, and that sales will take off in October."
  • His final possible explanation is that due to the deadline for the first-time homebuyer tax credit nearing on 11/30/2009, would be new home buyers do not think they will be able to close in time and so these buyers decided not to buy.
I have to say that I do not find this "unexpected" decline in new home sales to be unexpected at all. The fundamentals of the real estate and housing market are poor. Unemployment is over 10%, foreclosures and other distress sales are at record levels, banks are failing in record numbers (in terms of dollar losses). The only things keeping home prices (including new construction) at current levels (i.e. preventing home prices from falling to sustainable levels) is artificial government intervention in the form of:
  • The $8,000 home buyer tax credits.
  • Expanded FHA and other government backed mortgage loans (see my blog post Real Estate Recovery or More Problems (Short Sales and Foreclosures)?, which shows that "of all the home sales that have occurred in 2009, 59% of all buyers relied on low down payment government financing programs.").
  • Extraordinary government purchases of mortgage loans (95%+ of all mortgage loans are purchased by the government owned agencies Fannie Mae, Freddie Mac and Ginnie Mae - see Recent Developments in Mortgage Finance).
With the $8,000 tax credit coming to an end soon (even with the proposed extension it will only last for an additional 8 months), continued unemployment, record foreclosures and a pending pull back in FHA and other government loans due to the record default rates (see my blog post FHA in Deep Trouble: Default Rates Skyrocketing) new home sales should decline.  Only the government nonsensical intervention is fooling buyers into thinking things are OK.

If you are a home buyer or real estate investor in Middle Tennessee who is interested in purchasing new construction (new single home, new townhouse or new condo), do not be fooled by builder hype and marketing. If you want a great deal on new construction, you will need knowledgeable, aggressive and professional buyer representation. Please contact me, or visit my website Search the Middle Tennessee MLS - Find New Single Homes, New Townhomes and New Condos in Middle TN. I help home buyers in Rutherford County TN, Williamson County TN, Davidson County TN, Murfreesboro TN, Smyrna TN, La Vergne TN, Eagleville TN, Lascassas TN, Rockvale TN, Christiana TN, Brentwood TN, Franklin TN, Nashville TN and Belle Meade TN.

On the other hand, if you are a home builder in Middle Tennessee who is in financial trouble due to being unable to pay your mortgage payments, or owe more in mortgage debt than you can sell your newly constructed homes for, or you are already in foreclosure please contact me to discuss selling your new homes via short sales. I am a Middle Tennessee distressed real estate, short sale, pre-foreclosure (preforeclosure) and foreclosure REALTOR and Expert. I serve real estate owners, homeowners and investment property owners in Rutherford County TN, Williamson County TN, Davidson County TN, Murfreesboro TN, Smyrna TN, La Vergne TN, Eagleville TN, Lascassas TN, Rockvale TN, Christiana TN, Brentwood TN, Franklin TN, Nashville TN and Belle Meade TN. If you do need to short sell your new homes (a real estate short sale occurs when the sale proceeds are not sufficient to pay off all the mortgages and liens on the property/home), or you need quick sales due to being in foreclosure, you can request short sale and foreclosure help and assistance on my website at Get New Construction Short Sale and Foreclosure Help and Assistance from a Middle Tennessee Short Sale and Foreclosure REALTOR and Real Estate Expert.

Tuesday, November 3, 2009

Buying a Foreclosure Is Harder Than It Should Be

Buying a Foreclosure Is Harder Than It Should Be

This video, How to Buy a Bank-Owned Home (see below), is both hilarious and infuriating because it is true. I really believe that banks choose the most incompetent and ignorant foreclosure and REO agents to market their bank owned foreclosures.



If you are a home buyer or real estate investor in Middle Tennessee who is interested in purchasing a Fannie Mae foreclosure, a Freddie Mac foreclosure, bank foreclosure or REO, a short sale, or other distressed real estate in order to get a great home or investment property at an attractive price without dealing with the difficult REO/foreclosure listing agents and you want aggressive and professional buyer representation, please contact me, or visit my website Search the Middle Tennessee MLS - Find Middle TN Short Sales, Pre-foreclosures, Foreclosures & REO's so that you can find foreclosures, short sales and other distressed real estate and homes in Middle TN. I help home buyers in Rutherford County TN, Williamson County TN, Davidson County TN, Murfreesboro TN, Smyrna TN, La Vergne TN, Eagleville TN, Lascassas TN, Rockvale TN, Christiana TN, Brentwood TN, Franklin TN, Nashville TN and Belle Meade TN.

Thursday, October 29, 2009

Terrazzo to Auction Condo Units Due to Slow Sales

Terrazzo in Nashville Gulch to Auction Condo Units Due to Slow Sales

According to this Nashville Business Journal article, Terrazzo to slash prices, auction condos, Crosland, the developers the Terrazzo, a $68 million 117 unit luxury high rise condo project in the Gulch section of downtown Nashville Tennessee, will auction off up to 30 units at 1:00 PM CST on November 21st at the Renaissance Hotel. According to the article, sluggish sales are the reason that the developer opted to auction off some condo units.

The article quotes Bill Barkley, president of Crosland's Tennessee division (the developer of the Terrazzo) as saying that the auction "offers Terrazzo the opportunity to sell a significant number of condominium homes and instantly build the growing community at Terrazzo — all in a single day."  The article goes on to state the following terms and conditions of the Terrazzo auction:
  • "Minimum offering bids will range between 40 percent and 50 percent of list price. Minimum bids for one-bedroom units will range between $159,000 and $225,000, two-bedroom units will start between $250,000 and $310,000, and three-bedroom units will start at $399,000. Bids will include one parking space in the mixed-use building’s underground garage."
  • "Interested buyers are required to register and preview the units before bidding. According to the Terrazzo’s Web site, bidders will need to come prepared with a cashier’s check or money order for $5,000 and a blank personal check, which will be added to the $5,000 to equal 5 percent of the winning bid price."
I would like to say a couple of things about this auction:
  • The minimum bid prices are still too high.  This will result in very light bidding.
  • Overall, I do not think many units will sell at these prices. See my previous blog post, Birmingham Auction Ended Abruptly After Too Many "Low Bids", for the results of a condo auction in Birmingham Alabama. The highest bids at that auction were only about one-third of the original list prices.
  • According to the City Federal Condos (the Birmingham condo project mentioned above) website, the developer is now trying to sell the condo units that fetched $80,000 at the auction for $139,000.  My guess is that this project will be bankrupt in less than 12 months.
  • Even if the developers do sell some some units at 50% of the original list prices, what happens to the people who already purchased condos before the price drop?  If they have to sell due to a job loss, job relocation, illness, or other reason, they will lose over $100,000, or be forced to short sale their condos.
  • Based on the above information, I think that the Terrazzo will end up being auctioned off by the lenders who financed the project.  Until the developers accept the fact that there is only a limited number of high income young people and wealthy "empty nesters" they will never price their condo units where the overwhelming majority of the market is.  It seems like the developers are still in denial.
If you are a home buyer or real estate investor in Middle Tennessee who is interested in purchasing a Fannie Mae foreclosure, a Freddie Mac foreclosure, another foreclosure, REO, short sale, auction home, or other distressed real estate in order to get a great home or investment property at a low price, please contact me, or visit my website Search the Middle Tennessee MLS - Find Middle TN Short Sales, Pre-foreclosures, Foreclosures & REO's so that you can find foreclosures, short sales and other distressed real estate and homes in Middle TN. I help home buyers in Rutherford County TN, Williamson County TN, Davidson County TN, Murfreesboro TN, Smyrna TN, La Vergne TN, Eagleville TN, Lascassas TN, Rockvale TN, Christiana TN, Brentwood TN, Franklin TN, Nashville TN and Belle Meade TN.

Homeowners Walking Away: Right or Wrong?

Homeowners Walking Away: Right or Wrong?

In my previous blog post, Underwater Homeowners Walking Away From Their Homes, I covered the issue of homeowners who "walk away" from their homes and mortgages (even though they can afford to pay their mortgages) due to the mortgage debt on their homes far exceeding the market value of their homes (in other words, they are "underwater"). "Walking away" is also called a "Strategic Default". That post briefly covered the fact that most homeowners view "strategic default" as being morally wrong, but despite that many homeowners would still "walk away" from their homes and mortgages if the debt to market value ratio reached a certain point. The post showed, that based on current financial research, that debt to market value ratio is somewhere around 50%. In this post I want to address the issue of whether "walking away" from a home and mortgage is Right or Wrong?

I will only state my position briefly as I would like input and comments from other people. A few years ago I would have said that "walking away" from your home and mortgage was definitely wrong. Now, I am not so sure. Real estate investors, business owners, Wall Street firms, etc. have "walked away" from debts for many, many years. If a business or investment firm cannot pay a debt, they file bankruptcy, shut down, simply do not pay, or now ask for a government bailout. Why should looking at paying debts as a business decision be OK for businesses and investment firms, but not for individuals? That is why I am no longer sure "walking away" is wrong. If buying a home is an "investment" as the National Association or REALTORS (NAR) has stated for years (they should regret that statement now) then why shouldn't a homeowner have the option to "walk away" if that so-called "investment" goes bad? After all, the mortgage lender does have contractual recourse (via the loan note and mortgage) such as reporting the lack of payment to credit reporting agencies, taking the home back via foreclosure and pursuing the delinquent homeowner for any losses not recovered by selling the foreclosed home. No where in the documents that the borrower/homeowner signed does it say that shame or moral indignation is part of that recourse. That being said, I do think that trying to sell a home via a short sale is a significantly better option for a homeowner than a "strategic default". Therefore, I would highly recommend that a homeowner try a short sale before "walking away". With that I respectfully request your comments.

If you are a homeowner in Middle Tennessee who cannot pay your mortgage (due to losing your job, having your income reduced, illness, health problems, etc.), or your home is already in foreclosure, or you owe more than your home is worth, please contact me to discuss your options including loan modifications or short sales. I am a Middle Tennessee distressed real estate, short sale, pre-foreclosure (preforeclosure) and foreclosure REALTOR and Expert. I serve real estate owners, homeowners and investment property owners in Rutherford County TN, Williamson County TN, Davidson County TN, Murfreesboro TN, Smyrna TN, La Vergne TN, Eagleville TN, Lascassas TN, Rockvale TN, Christiana TN, Brentwood TN, Franklin TN, Nashville TN and Belle Meade TN. If you do need to short sell your home (a real estate short sale occurs when the sale proceeds are not sufficient to pay off all the mortgages and liens on the property/home), or you need a quick sale due to being in foreclosure, you can request short sale and foreclosure help and assistance on my website at Get Short Sale and Foreclosure Help and Assistance from a Middle Tennessee Short Sale and Foreclosure REALTOR and Real Estate Expert.

Wednesday, October 28, 2009

Underwater Homeowners Walking Away From Their Homes

Underwater Homeowners Walking Away From Their Homes

According to this New York Times article, Homeowners Walking Away, a study produced by the Financial Trust Index (a financial and economic research group formed by the Kellogg School of Management at Northwestern University and The University of Chicago Booth School of Business) states that more than 25% of foreclosures are actually strategic defaults where the homeowners walk away from their homes and mortgages even though they can afford to pay their mortgages. The Press Release, When Homeowners Walk Away: New Research Reveals More than 25 Percent of Mortgage Loan Defaults are Strategic, and Study, Moral and Social Constraints to Strategic Default on Mortgages, show that while most homeowners generally believe that walking away from a home is immoral, many will still do it if their negative home equity situation reaches a certain threshold. According to the Press Release "17 percent of households would default, even if they can afford to pay their mortgage, when the equity shortfall reaches 50 percent of the value of the house." Given that information and the fact that a Deutsche Bank report published this past summer (See my blog post on the subject - SCARY STUFF: About half of U.S. mortgages seen underwater by 2011) predicts that about 50% of all US mortgages will be underwater by 2011, it is highly probable that the foreclosure crisis could actually accelerate in the near future rather then settling down as several organizations have suggested. I predict that there will be record numbers of loan modifications, short sales and foreclosures over the next 3 years.

According to the Press Release "People under the age of 35 and over the age of 65 were less likely to say it was morally wrong to default compared to middle-aged respondents." I guess that younger people and older people view the strategic default decision more as a business decision than a moral one. There are in fact consequences of walking away from your home and mortgage including damaged credit, which will make it very difficult to borrow money in the future, get credit of any kind, obtain insurance (insurance companies frequently check credit as part of the insurance underwriting process) and even get a job (employers frequently check credit as part of the job application process). Another pitfall of the strategic default is that you are open to a potential deficiency judgment where the mortgage lender could pursue you for their losses not recouped by selling your foreclosed home. For these reasons, I highly recommend trying a short sale instead of a strategic default.

If you are a homeowner in Middle Tennessee who cannot pay your mortgage (due to losing your job, having your income reduced, illness, health problems, etc.), or your home is already in foreclosure, or you owe more than your home is worth, please contact me to discuss your options including loan modifications or short sales. I am a Middle Tennessee distressed real estate, short sale, pre-foreclosure (preforeclosure) and foreclosure REALTOR and Expert. I serve real estate owners, homeowners and investment property owners in Rutherford County TN, Williamson County TN, Davidson County TN, Murfreesboro TN, Smyrna TN, La Vergne TN, Eagleville TN, Lascassas TN, Rockvale TN, Christiana TN, Brentwood TN, Franklin TN, Nashville TN and Belle Meade TN. If you do need to short sell your home (a real estate short sale occurs when the sale proceeds are not sufficient to pay off all the mortgages and liens on the property/home), or you need a quick sale due to being in foreclosure, you can request short sale and foreclosure help and assistance on my website at Get Short Sale and Foreclosure Help and Assistance from a Middle Tennessee Short Sale and Foreclosure REALTOR and Real Estate Expert.

Monday, October 26, 2009

CitiMortgage: Loan Modifications Increasing Delinquent Loans

CitiMortgage: Loan Modifications Increasing Delinquent Loans

According to this Forbes article, Citi's Mortgage Problem, the Home Affordable Modification Program (HAMP - the Obama Administration's Mortgage Loan Modification Program) is actually increasing the number of delinquent mortgage loans. According to the article, CitiMortgage said the Home Affordable Modification Program, which was supposed to reduce the number of foreclosures by reducing mortgage loan delinquencies, has been "ineffective at lowering delinquency levels. The bank hints that this loan modification program is actually making it tougher for the government-supported bank to manage its balance sheet." According to the article, in its 3rd quarter earnings report, CitiMortgage said that "delinquent mortgages are increasing because of HAMP. Loans in the trial modification period under the HAMP continue to remain delinquent even if the reduced payments agreed to under the program are made by the borrower. The impact of HAMP also contributed to the $2 billion sequential increase in loans 90+ days past due in the North America residential real estate lending business." According to the article, the report showed that the delinquencies of first mortgages at CitiMortgage increased from $10.2 billion in the 2nd quarter 2009 to $12.5 billion in the 3rd quarter of 2009. This represents nearly a 23% increase in the number of first mortgage delinquencies. It is clear that the number of short sales and foreclosures will continue to increase for CitiMortgage mortgage loans. Also, this information is still more proof that loan modifications will not stop the foreclosure tidal wave that is yet to come.

If you are a homeowner in Middle Tennessee who cannot pay your mortgage (due to losing your job, having your income reduced, illness, health problems, etc.), or your home is already in foreclosure, or you owe more than your home is worth, please contact me to discuss your options including loan modifications or short sales. I am a Middle Tennessee distressed real estate, short sale, pre-foreclosure (preforeclosure) and foreclosure REALTOR and Expert. I serve real estate owners, homeowners and investment property owners in Rutherford County TN, Williamson County TN, Davidson County TN, Murfreesboro TN, Smyrna TN, La Vergne TN, Eagleville TN, Lascassas TN, Rockvale TN, Christiana TN, Brentwood TN, Franklin TN, Nashville TN and Belle Meade TN. If you do need to short sell your home (a real estate short sale occurs when the sale proceeds are not sufficient to pay off all the mortgages and liens on the property/home), or you need a quick sale due to being in foreclosure, you can request short sale and foreclosure help and assistance on my website at Get Short Sale and Foreclosure Help and Assistance from a Middle Tennessee Short Sale and Foreclosure REALTOR and Real Estate Expert.

Wednesday, October 21, 2009

Fannie Mae and Freddie Mac Offer Incentives to Buy Their Foreclosed Homes and Properties

Fannie Mae and Freddie Mac Offer Incentives to Buy Their Foreclosed Homes and Properties

According to this New York Times article, Help From Fannie and Freddie for Foreclosed Homes, Fannie Mae and Freddie Mac are currently offering fairly attractive incentives for buyers who purchase their foreclosed properties. According to the article, and information gathered from the websites of the Fannie Mae HomePath Financing Program and the and Freddie Mac HomeSteps SmartBuy Program, the incentives are as follows:

Fannie Mae HomePath Financing Program

  • Low down payment (minimum of 3%), which can be funded by your own savings; a gift; a grant; or a loan from a nonprofit organization, state or local government, or employer.
  • Flexible mortgage terms (fixed-rate, adjustable-rate, or interest-only).
  • Somewhat lenient credit requirements.
  • Available to investors in addition to owner occupants.
  • Loans available without Private Mortgage Insurance.
  • No appraisal fees.
  • Closing cost assistance is is available (if you ask for it) on a property by property basis. There is no cap on the amount of closing cost assistance. According to the article, "the average homeowner has received payments equivalent to 3.75 percent of the loan’s value."
  • HomePath Mortgage financing is available from a fairly large number of lenders. Click here for a list of HomePath Mortgage lenders.
  • Renovation funds are available to complete light renovations through the HomePath Renovation Mortgage. Click here for a list of HomePath Renovation Mortgage lenders.

Freddie Mac HomeSteps SmartBuy Program (for initial offers received by October 30, 2009 and closed by December 31, 2009)

  • Comprehensive 2 year Home Warranty paid for by Freddie Mac.
  • Closing cost assistance up to a 3.5% of the purchase price (must be requested in initial offer).
  • Appliance Discount of up to 30% name brand appliances.

If you are a home buyer in Middle Tennessee who is interested in purchasing a Fannie Mae foreclosure, a Freddie Mac foreclosure, another foreclosure or REO, a short sale, or other distressed real estate in order to get a great home at a low price, please contact me, or visit my website Search the Middle Tennessee MLS - Find Middle TN Short Sales, Pre-foreclosures, Foreclosures & REO's so that you can find foreclosures, short sales and other distressed real estate and homes in Middle TN. I help home buyers in Rutherford County TN, Williamson County TN, Davidson County TN, Murfreesboro TN, Smyrna TN, La Vergne TN, Eagleville TN, Lascassas TN, Rockvale TN, Christiana TN, Brentwood TN, Franklin TN, Nashville TN and Belle Meade TN.

Loan Servicers Prefer Foreclosure Over Loan Modifications

Loan Servicers Prefer Foreclosure Over Loan Modifications
According to this National Consumer Law Center (NCLC) report, Why Servicers Foreclose When They Should Modify and Other Puzzles of Servicer Behavior, and the press release, AVOIDABLE FORECLOSURES CONTINUE DESPITE SERVICERS' "LOAN MODIFICATIONS", announcing the report, "(loan) servicers, unlike investors or homeowners, generally don’t risk losing money on foreclosures. In fact, servicers usually make money on foreclosures." That is a major reason why loan servicers reject loan modifications and delay or reject short sales and pursue foreclosure even when it would seem to make sense to avoid foreclosure.
According to the press release Diane E. Thompson, the report author and an attorney with NCLC, said, "The country is in the midst of a foreclosure crisis of unprecedented proportions. Millions of families have lost their homes and millions more are expected to lose their homes in the next few years. With home values plummeting and layoffs common, homeowners are crumbling under the weight of mortgages that were at best only marginally affordable when made. One common sense solution to the foreclosure crisis is to modify the loan terms in more instances. Foreclosures are a costly ordeal for the homeowner, the lender, and the community. Yet they continue to outstrip loan modifications because servicers have no incentive to help borrowers stay in their homes."
The press release describes mortgage loan servicers as "banks or financial companies that usually collect payments and administer mortgage loans. They play a key role in the current foreclosure crisis, since original lenders frequently sell loans to investment trusts that rely on servicers to carry out most day to day transactions. Homeowners seeking to save their homes by modifying unaffordable loans typically deal with servicers. That is why the financial interests of servicers have the potential to hurt homeowners. And too many of those financial incentives encourage servicers to ignore the interests of homeowners. For example, the report found that servicers often deny homeowners principal and interest rate reductions because as servicers they find it profitable to offer repayment plans or forbearance agreements that do little to reduce homeowners’ debt burdens. The consequences of such choices can be grim for homeowners." The NCLC report states "Loan modifications inevitably cost the servicer something. A servicer deciding between a foreclosure and a loan modification faces the prospect of near certain loss if the loan is modified, and no penalty, but potential profit, if the home is foreclosed."
According to the NCLC report, there is no systemic 3rd party oversight of mortgage loan servicers so there is no party that can force a mortgage loan servicer to offer the struggling homeowner a loan modification, or to approve a short sale.
The NCLC recommend the following reforms to try and stop the foreclosure crisis:
  • Avoid irresponsible lending through regulation of loan origination.
  • Mandate loan modifications before a foreclosure.
  • Fund quality mediation programs.
  • Provide for principal reductions on existing loans in the Administration’s Home Affordable Modification Program (HAMP) and through bankruptcy reform.
  • Increase automated and standardized loan modifications for borrowers in default and provide a safety net for borrowers for whom a standardized modification is not affordable or who later default, through no fault of their own, on a loan modification.
  • Ease accounting rules for modifications to facilitate standardized review, encourage long-term modifications, and enhance servicer recovery of the expenses incurred in performing a modification.
  • Require more transparency and uniformity in how servicers report loan modifications to investors
  • Limit fees charged borrowers in default to reasonable and necessary ones
My conclusion is that until reasonable and effective mortgage loan servicer reforms are enacted, there will be more foreclosures and more homeowners will desire short sales after their loan modification requests are rejected.

If you are a homeowner in Middle Tennessee who cannot pay your mortgage payment(s) (i.e. due to losing your job, having your income reduced, illness, health problems, etc.), or your home is already in foreclosure, or you owe more than your home is worth, please contact me to discuss your options including a loan modification or a short sale. I am a Middle Tennessee distressed real estate, short sale, pre-foreclosure (preforeclosure) and foreclosure REALTOR and Expert. I serve real estate owners, homeowners and investment property owners in Rutherford County TN, Williamson County TN, Davidson County TN, Murfreesboro TN, Smyrna TN, La Vergne TN, Eagleville TN, Lascassas TN, Rockvale TN, Christiana TN, Brentwood TN, Franklin TN, Nashville TN and Belle Meade TN. If you do need to short sell your home (a real estate short sale occurs when the sale proceeds are not sufficient to pay off all the mortgages and liens on the property/home), or you need a quick sale due to being in foreclosure, you can request short sale and foreclosure help and assistance on my website at Get Short Sale and Foreclosure Help and Assistance from a Middle Tennessee Short Sale and Foreclosure REALTOR and Real Estate Expert.

Real Estate Recovery or More Problems (Short Sales and Foreclosures)?

Real Estate Recovery or More Problems (Short Sales and Foreclosures)?

According to this RISMEDIA article, 59% of Home Buyers Rely on Low Down-Payment Government Mortgages, of all the home sales that have occurred in 2009, 59% of all buyers relied on low down payment government financing programs, which the article defines as "FHA, VA or USDA financing programs with 96.5% to 100% LTV."

Some people would look at the slight increase in home sales and see only positive things. However, my view is that this is further proof that the real estate market still has not settled into a bottom since the housing market needs these artificial government financing programs in order to prop up home prices. In my opinion, this will lead to more distressed home sales as homeowners who purchased their homes with these financing programs lose their jobs, just realize they cannot afford their homes and/or realize that the values of their homes are less that what they recently paid. As a result, there will be more homeowners who will need loan modifications, and there will be more short sales and foreclosures.

If you are a homeowner in Middle Tennessee who cannot pay your mortgage payment(s) (i.e. due to losing your job, having your income reduced, illness, health problems, etc.), or your home is already in foreclosure, or you owe more than your home is worth, please contact me to discuss your options including a loan modification or a short sale. I am a Middle Tennessee distressed real estate, short sale, pre-foreclosure (preforeclosure) and foreclosure REALTOR and Expert. I serve real estate owners, homeowners and investment property owners in Rutherford County TN, Williamson County TN, Davidson County TN, Murfreesboro TN, Smyrna TN, La Vergne TN, Eagleville TN, Lascassas TN, Rockvale TN, Christiana TN, Brentwood TN, Franklin TN, Nashville TN and Belle Meade TN. If you do need to short sell your home (a real estate short sale occurs when the sale proceeds are not sufficient to pay off all the mortgages and liens on the property/home), or you need a quick sale due to being in foreclosure, you can request short sale and foreclosure help and assistance on my website at Get Short Sale and Foreclosure Help and Assistance from a Middle Tennessee Short Sale and Foreclosure REALTOR and Real Estate Expert.

Monday, October 19, 2009

Get Short Sale and Foreclosure Help and Assistance from a Middle Tennessee Distressed Real Estate, Short Sale, Pre-foreclosure and Foreclosure REALTOR and Real Estate Expert

Get Short Sale and Foreclosure Help and Assistance from a Middle Tennessee Distressed Real Estate, Short Sale, Pre-foreclosure and Foreclosure REALTOR and Real Estate Expert

Property Owners and Homeowners in Middle Tennessee: (Rutherford County TN, Williamson County TN, Davidson County TN, Murfreesboro TN, Smyrna TN, La Vergne TN, Eagleville TN, Lascassas TN, Rockvale TN, Christiana TN, Brentwood TN, Franklin TN, Nashville TN and Belle Meade TN) - Get Expert Assistance from a Middle Tennessee Distressed Real Estate, Short Sale, Pre-foreclosure and Foreclosure REALTOR, Real Estate Expert & Real Estate Professional
If one or more of the above situations apply to you then you need to get help from a Short Sale, Pre-foreclosure and Foreclosure REALTOR & Real Estate Professional who can help you avoid Foreclosure, sell your home via a Short Sale, or even get a Loan Modification.


A Loan Modification may help you keep your home and should be considered. However, many lenders seem unwilling to grant modifications for a number of reasons including that most loan modifications fail. If you cannot get a loan modification, or your home is worth less than the mortgage balance(s), or you just can't afford to keep your home then a Short Sale may be your best option as it could salvage what is left of your credit and to reduce the risk of the lender pursuing you for their net loss (deficiency judgment). Acting quickly will give you the greatest chance of getting your life back without all the stress and worry. For immediate help please contact Jim McCormack now!*


Foreclosure and Short Sale Help and Assistance Hotline
(615) 653-4383


*Jim McCormack is a REALTOR, not an attorney. You should consult an attorney before making any real estate decisions.


If you would like more information first, please let me introduce myself. My name is James W. McCormack. I am a Short Sale, Pre-foreclosure and Foreclosure REALTOR and Real Estate Expert. I am a 10+ year real estate sales veteran and full-time real estate professional who specializes in helping property owners (homeowners, real estate investors, real estate developers and home builders) in Middle TN who have defaulted in their mortgage payments, are in foreclosure, and/or who need expert help and assistance with a real estate short sale (i.e. where the property value is worth less than the mortgage debt). I focus on short sales, pre-foreclosures, foreclosures and investment properties in the Middle Tennessee TN market with my primary focus being on Rutherford County TN, Williamson County TN, Davidson County TN, Murfreesboro TN, Smyrna TN, La Vergne TN, Eagleville TN, Lascassas TN, Rockvale TN, Christiana TN, Brentwood TN, Franklin TN, Nashville TN and Belle Meade TN. My website helps you to search for and find short sale listings, pre-foreclosure listings and foreclosure listings in Murfreesboro TN, Smyrna TN, La Vergne TN, Brentwood TN, Franklin TN, Belle Meade TN and Nashville TN.

If you are a property owner or homeowner in Middle Tennessee who cannot pay your mortgage (due to job loss, income reduction, illness, health problems, etc.), or your home is already in foreclosure, or you owe more than your home is worth, please contact me to discuss your options including a loan modification or a short sale. I am a Middle Tennessee distressed real estate, short sale, pre-foreclosure (preforeclosure) and foreclosure REALTOR and Expert. I serve real estate owners, homeowners and investment property owners in Rutherford County TN, Williamson County TN, Davidson County TN, Murfreesboro TN, Smyrna TN, La Vergne TN, Eagleville TN, Lascassas TN, Rockvale TN, Christiana TN, Brentwood TN, Franklin TN, Nashville TN and Belle Meade TN. If you do need to short sell your home (sell even though you owe more than your home is worth), or you need a quick sale due to being in foreclosure, you can request help and assistance on my website at Get Help and Assistance from a Middle Tennessee Short Sale and Foreclosure REALTOR and Real Estate Expert.

I am a real estate expert who is here to help you. Please call me at 615-653-4383 to discuss your real estate situation or problems. I almost always return phone calls by the next business day.I provide the following real estate services:
Specialty and Challenging Real Estate (Sales, Consulting & Leasing):
  1. Physically Distressed Properties (i.e. fixer uppers, rehab properties, handyman specials, etc.).
  2. Foreclosures.
  3. Pre-foreclosures (i.e. Notice of Default, etc.).
  4. Short Sales (i.e. where the sale price is not enough to pay off the mortgage(s) and other liens.).
  5. Bank Owned Real Estate (i.e. REO's).
  6. Divorce Sales.
  7. Estate Sales.
  8. Abandoned and Vacant Properties.
  9. Rental Homes and Properties (Leasing and Consulting).
  10. Lease Option/Lease Purchase Homes (Sales, Leasing & Consulting).
  11. Other Difficult Situations.
Commercial and Investment Real Estate (Sales & Leasing):
  1. Small Multifamily Properties (2-4 units).
  2. Apartment Buildings (5+ units).



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Find Middle TN Real Estate, Houses, Homes, Townhomes, Condos, Building Lots, Farms & Land
Find Short Sales, Pre-foreclosures, Foreclosures, REO's, Bank Owned Properties, Fixer Uppers & Other Distressed Real Estate

Friday, October 16, 2009

How to Buy a Freddie Mac Foreclosure

How to Buy a Freddie Mac Foreclosure

Freddie Mac, one of the 2 quasi governmental mortgage buying companies and sister company to Fannie Mae (the largest), published this document on how to purchase a HomeSteps Mac foreclosure/REO, 5 Easy Steps to Buying a HomeSteps Home.

According to the document, a potential buyer, or their agent should do the following 5 things in order to give them the best shot at buying a Freddie Mac foreclosure.
  1. Prepare your offer, signed by the buyer(s), in writing on your local or state contract.  The seller should appear as "Freddie Mac."
  2. Include signed copies of the following HomeSteps addenda: (1) the Single-Family Real Estate Disposition, (2) the Lead-based Paint Disclosure addendum, (3) Property Condition addendum and release, (4) State Riders (if applicable) and (5) Manufactured Home addendum (if applicable). These addenda are available from the listing agent. Please reference them in the contract, and remember, no changes are allowed to the addenda printed text.
  3. Submit a buyer pre-qualification letter with the purchase contract and addenda to the listing broker. The listing broker must have all required documentation prior to presenting the offer to HomeSteps.
  4. Negotiate the written offer verbally until final agreement is reached.
  5. Submit final terms on a clean, typed contract with buyer’s original signatures and initials, along with all required addenda. Return the executed contract and any additional deposit monies to the listing broker no later than three (3) business days from the verbal acceptance by HomeSteps. If the contract is not returned timely, HomeSteps (Freddie Mac) may withdraw its verbal acceptance to sell the home at the agreed-upon terms.
According to the document, HomeSteps (Freddie Mac) will not agree to the following items:
  • Offer contingent on the sale of buyer’s current residence.
  • Buyer(s) to occupy or store personal items at the home prior to closing.
  • Buyer(s) allowed access to the home to perform repairs prior to closing.
  • Buyer(s) to receive credit at closing for repairs not completed.
  • Repairs after the buyer(s) signs the closing documents.
  • Seller’s funds to be escrowed
According to the Freddie Mac document, the following persons are not eligible to purchase Freddie Mac-owned homes:
  • HomeSteps suppliers (including listing agent, agents within listing broker’s offices, all independent subcontractors, etc.), their employees and/or their immediate family members.
  • HomeSteps or Freddie Mac employee or member of his/her immediate family or household.
If you are a home buyer in Middle Tennessee who would like to purchase a Freddie Mac foreclosure, a Fannie Mae foreclosure, another foreclosure or REO, a short sale, or other distressed real estate in order to get a home at a low price, please contact me, or visit my website Search the Middle Tennessee MLS - Find Middle TN Short Sales, Pre-foreclosures, Foreclosures & REO's so that you can find foreclosures, short sales and other distressed real estate and homes in Middle TN.  I help home buyers in Rutherford County TN, Williamson County TN, Davidson County TN, Murfreesboro TN, Smyrna TN, La Vergne TN, Eagleville TN, Lascassas TN, Rockvale TN, Christiana TN, Brentwood TN, Franklin TN, Nashville TN and Belle Meade TN.

Bank of America Loses More Money Due to High Mortgage Loan Defaults

Bank of America Loses More Money Due to High Mortgage Loan Defaults

According to this Bloomberg article, Bank of America Posts Third-Quarter Loss on Defaults, in the 3rd quarter of 2009, Bank of America had its second quarterly losing quarter this year when it posted a $1B loss for the third quarter.  The loss was attributed to the sagging economy and high mortgage and consumer loan defaults.  To date, Bank of America has taken 2 government bailouts.

The article quotes Harvard University professor Niall Ferguson as saying "The idea that the financial crisis is over is a fantasy and it looks like the numbers bear that out.  It’s clearly not over for Bank of America." According to the article, Bank of America "said the provision for credit losses was $11.7 billion, with $9.6 billion of loans considered uncollectible. Reserves for future losses increased by $2.1 billion, compared with a $4.7 billion addition in the previous quarter, the statement said. The bank’s reserve is now 4 percent of total loans, compared with 4.7 percent at JPMorgan Chase & Co. and 5.9 percent at Citigroup Inc., analyst John McDonald of Bernstein Research said in a report today.  Bank of America said net write-offs of uncollectible loans rose 11 percent from the second quarter to $9.62 billion. The bank wrote off $3.2 billion of home loans, including home equity loans, during the quarter, up 10 percent from the second quarter. Charge-offs on credit cards increased 5 percent to $2.17 billion." Again, this is a debt problem. All forms of debt (mortgages, car loans and consumer loans) are performing poorly.

As I said in some previous blog posts a lot of the "record profits" reported by big banks such as JPMorgan Chase & Co. and Goldman Sachs Group Inc. are due to profits from their trading activities (risky - could just as easily be huge losses) and write downs on their own debt (as the value of their own debt (bonds) declines due to the poor financial condition of the banks they are able to book the decline in the value of their debt as income). The big banks are making lots of fee income from writing mortgages, overdraft fees, credit card fees, etc., but are not actually lending much money. Almost all of the loans made by the big banks are being bought by the US government (via Fannie Mae and Freddie Mac) so when they go bad it will be the US taxpayer who will be taking the loss. This is type of lending (i.e. riskless to the mortgage company writing the loan as they are little more than a loan broker) is one of the causes of the financial mess we are currently in. Bank of America is no different than the other big banks in that most of BofA's earnings growth came from their acquisition of investment bank Merrill Lynch, which made made money primarily through trading activities. One of my concerns beyond the government buying all those loans is what happens when the investment banks lose money via their trading activities. The government will probably have to bail out the banks again. Does this knowledge encourage the banks to take on extra risk since they will not have to pay the full cost of trading losses? That remains to be seen.

According to the article, "Bank of America expects to add to its 20.5 percent share of U.S. home lending over the next five years, Barbara Desoer, president of home loans and insurance, said in an Oct. 14 interview. Home loans not accruing interest increased by 14 percent to $16.5 billion, or 6.9 percent of the bank’s loans and foreclosed properties, the bank said." In other words, nearly 7% of Bank of America's mortgage and home loans are not producing any income because the borrowers are not making payments. Therefore, how can Bank of America increase their mortgage lending? Simple, they will make a ton of new loans (in order to generate fee income), which will be purchased by the US government via Fannie Mae and Freddie Mac, thus transferring the risk to the US taxpayer. The result of these activities will be more short sales and foreclosures.

If you are a homeowner in Middle Tennessee who has defaulted on your Bank of America, or other, mortgages, just cannot pay your mortgage due to income loss or unemployment, or your home is already in foreclosure, please contact me to discuss your options including a loan modification or a short sale. I am a Middle Tennessee distressed real estate, short sale, pre-foreclosure (preforeclosure) and foreclosure REALTOR and Expert. I serve real estate owners, homeowners and investment property owners in Rutherford County TN, Williamson County TN, Davidson County TN, Murfreesboro TN, Smyrna TN, La Vergne TN, Eagleville TN, Lascassas TN, Rockvale TN, Christiana TN, Brentwood TN, Franklin TN, Nashville TN and Belle Meade TN.

If you need to sell your home through a short sale, or pre-foreclosure sale, you can request help on my website at Get Help and Assistance from a Middle Tennessee Short Sale and Foreclosure REALTOR and Expert.

Foreclosures Reach Record High in 3rd Quarter 2009

Foreclosures Reach Record High in 3rd Quarter 2009

According to this CNNMoney article, Foreclosures: 'Worst three months of all time', "Despite signs of broader economic recovery, number of foreclosure filings hit a record high in the third quarter - a sign the plague is still spreading." The loan modification and foreclosure prevention programs pushed by the government are just not working. The 3rd quarter of 2009 saw foreclosures hit a record high. The article quotes Rick Sharga, spokesman for RealtyTrac, as saying July 2009 through September 2009 "were the worst three months of all time. The fastest growing area is in the 180 days late-plus category, the most seriously delinquent borrowers. It's going to be a lingering problem. It's hard to envision [the banks] putting millions of properties up for sale and cratering prices. Recovery will be slow and gradual. I don't see home prices getting much better until 2013."

According to the article, "During that time, 937,840 homes received a foreclosure letter -- whether a default notice, auction notice or bank repossession, the RealtyTrac report said. That means one in every 136 U.S. homes were in foreclosure, which is a 5% increase from the second quarter and a 23% jump over the third quarter of 2008. Nevada continued to be the worst-hit state with one filing for every 23 households. But even tranquil Vermont, where the foreclosure crisis has barely brushed the housing market, saw foreclosure filings jump nearly 170% compared with the third quarter of 2008. Still, that resulted in just one filing for every 5,023 households in the state -- the best record in the country. The RealtyTrac report also unveiled the results for September, and it found that there was slight relief from foreclosure filings. Last month, notices totaled 343,638, down 4% compared with August. Unfortunately, that total accounts for 87,821 homes that were repossessed by lenders. That deluge contributed significantly to the quarter's record 237,052 repossessions, a 21% jump from the previous three months. So far this year lenders have taken back 623,852 homes."

The article quotes James Saccacio, RealtyTrac's CEO, as saying "REO activity increased from the previous quarter in all but two states and the District of Columbia, indicating that lenders may be starting to work through some of the pent-up foreclosure inventory caused by legislative delays, loan-modification efforts and high volumes of distressed properties."

The article raises concern over these record foreclosure numbers occurring despite all the government efforts to prevent foreclosures and lenders voluntarily not foreclosing on many homeowners who are many months delinquent on their mortgage payments. In short the train is coming and there is nothing that can stop it.

The article mentions that many lenders are starting the foreclosure process, but just not following through. The article quotes Jim Rokakis, treasurer for Cuyahoga County, Ohio, which includes Cleveland, as saying the lenders will "even set the date for the sheriff's sale, but they don't file the final papers. They hold it in abeyance and let the residents stay in the house." I have seen this many times. It is insane. In many cases the homeowners cannot take the stress of the whole thing so they want the foreclosure to end, but the lenders just do nothing. That is why many homeowners simply abandon their homes.

The article quotes a study by the Chicago Booth School of Business and the Kellogg School of Management that "determined that when home price declines drop home values 10% below the mortgage balances, people start to give up their homes. When "negative equity" approaches 50%, 17% of households default, even when they can still afford their mortgage payments."

The article states "the RealtyTrac statistics may understate the depth of the foreclosure mess because lender and government actions have delayed many filings. As a result, some delinquencies have not been counted on the foreclosure tallies. That means the crisis may not end quickly." As I have been saying for a while now, this foreclosure crisis is far from over because it was caused by a housing market that was built on debt, not peoples' incomes. Until prices fall back down, the market will continue to be poor.

If you are a homeowner in Middle Tennessee who cannot pay your mortgage, or your home is already in foreclosure, please contact me to discuss your options including a loan modification or a short sale. I am a Middle Tennessee distressed real estate, short sale, pre-foreclosure (preforeclosure) and foreclosure REALTOR and Expert. I serve real estate owners, homeowners and investment property owners in Rutherford County TN, Williamson County TN, Davidson County TN, Murfreesboro TN, Smyrna TN, La Vergne TN, Eagleville TN, Lascassas TN, Rockvale TN, Christiana TN, Brentwood TN, Franklin TN, Nashville TN and Belle Meade TN.

If you need to sell your home fast via a short sale, you can request help on my website at Get Help and Assistance from a Middle Tennessee Short Sale and Foreclosure REALTOR and Expert.

Citigroup Getting Hurt By Mortgage Defaults and Consumer Loan Delinquencies

Citigroup Getting Hurt By Mortgage Defaults and Consumer Loan Delinquencies

According to this Yahoo! News article, Citi results weighed down by failed loans, Citigroup (aka CitiBank) is being hit very hard by high rates of default on mortgages and consumer loans. The article states, Citigroup "reported a $101 million profit before accounting for $288 million in preferred stock dividends and the debt exchange offer that gave the government a 34 percent stake in the bank. Including those items, the New York-based bank reported a $3.24 billion loss. Citigroup, one of the hardest hit during the credit crisis and recession, said loan losses during the quarter came to $8 billion, down $386 million from nearly $8.4 billion in the second quarter, but a sign that many consumers continue to be overwhelmed.
Citigroup's results are a measure not only of its health after it lost nearly $19 billion in 2008 and needed a $45 billion government bailout, but also the economy's, since the bank caters to consumers."

The article quotes Bart Narter, a senior vice president at consulting firm Celent, as saying "The bank is not making money, they are losing money in credit cards and mortgages, and it's dragging down the entire bank." The article also quotes Nancy Atkinson, senior analyst at Boston-based research firm Aite Group, as saying that Citigroup "still has a number of quarters that are going to be challenging. They made very bad bets on mortgages and consumer lending. They were clearly a leader in the consumer card space, and as a result are suffering now."

According to the article, the problems at Citigroup are similar to other large banks as a result of the poor economy and high unemployment rate. The article states "more customers stop repaying loans as the economy falters and unemployment rises. Credit card defaults and mortgage losses are likely to continue to climb."

If you are a homeowner in Middle Tennessee who cannot pay your mortgage payments, or are in foreclosure, please contact me to obtain help with a loan modification. If you owe more than your home is currently worth, we can discuss a short sale. I am a Middle Tennessee distressed real estate, short sale, pre-foreclosure (preforeclosure) and foreclosure REALTOR and Expert. I serve real estate owners, homeowners and investment property owners in Rutherford County TN, Williamson County TN, Davidson County TN, Murfreesboro TN, Smyrna TN, La Vergne TN, Eagleville TN, Lascassas TN, Rockvale TN, Christiana TN, Brentwood TN, Franklin TN, Nashville TN and Belle Meade TN.

If you need help or assistance with a loan modification, or need to sell your home via a short sale, you can request help on my website at Get Help and Assistance from a Middle Tennessee Short Sale and Foreclosure REALTOR and Expert.

Thursday, October 15, 2009

Legal Loophole May Help Homeowners Delay or Stop a Foreclosure

Legal Loophole May Help Homeowners Delay or Stop a Foreclosure

According to this RISMedia article, Op-Ed: 60 Million Mortgages May Have Fatal Flaws, issues with the way mortgages were sold in the secondary market and the way the ways they were recorded in the local county offices may prevent many mortgage companies (or mortgage servicing companies) from foreclosing on delinquent homeowners. The problem apparently is due to a company called MERS (Mortgage Electronic Registration Systems, Inc.) which is a company that records the mortgages against the properties in the local county offices where the properties are located. While that is normal procedure, the problem is that MERS is basically an exchange where mortgage lenders can buy and sell mortgage loans without having to re-record the ownership of the mortgage notes. In other words, although MERS shows up as the mortgage lien holder on the public records, MERS does not actually own the mortgage loans. Since it is established case law that the mortgage loan holder (i.e. the note holder) must be identified and must produce the mortgage note (the mortgage note and the mortgage lien are 2 separate documents - the note is the borrower's promise to pay and the mortgage is the document that pledges the property as collateral in the event that the borrower does not pay), MERS, due to not being the actual note owner, cannot foreclose. The other problem is that the actual note holder does not own the mortgage lien since MERS owns that. The obvious solution to this problem is for the actual note owner to have the mortgage assigned to them by MERS (and pay the normal recording fees, etc.) or to just join in the foreclosure action and then proceed with the foreclosure. The problem is that MERS seems unable to find many of the actual notes which they hold on behalf of the note owners. There have already been court rulings in the Kansas Supreme Court and the U.S. Bankruptcy Court for the District of Nevada in which the judges ruled that MERS had no legal standing to forecloses since they did not own the note and could not produce the actual note showing who the note owner is. This could become a huge problem for mortgage lenders if more homeowners and attorneys become aware of this legal snafu.

According to the article, "As a registered security, the Note is a negotiable instrument, like money or a cashier’s check, and under securities law that Note must be given to the investor. In this case, mortgage backed securities, (MBS) were bundled together in a pool and shipped to…well, we don’t really know. One of the impediments to an MBS is the need to file assignments for the beneficiaries in each county each time the mortgage is resold. And apparently, no one holds them for very long because most have been passed around several times. In order to avoid the logistical nightmare of trying to maintain a public chain of title, the biggest lenders joined MERS, Mortgage Electronic Registration Systems, Inc. MERS was created with the sole intent of evading the recording fees due to the county in which the security is located. In so doing, in my opinion, they also destroyed the age-old practice of making a public record of information concerning real property in general, and legal interest specifically. The chain of title is a vital record produced to resolve many a dispute. Now, that’s gone. I believe, erased simply so they themselves, MERS, could siphon off the recording fees for themselves. They sold their business model to lenders as a better way to track mortgages that were being sold and resold all over the world. But, as there often is with a BIG IDEA, there were also unintended consequences. Only now are they coming to light. Until MERS was challenged in a foreclosure proceeding, no one had taken a look at the law. The law, according to a Nevada Judge, is that for purposes of foreclosure, both the Note and the Deed of Trust must be assigned. When the Note is split from the Deed of Trust, the Note becomes unsecured. A person holding only a Note lacks the power to foreclose because it lacks the security. MERS lost track of the Notes. In some cases, according to my research, they deliberately destroyed them."

The article states that in reviewing the judicial rulings the author has concluded the following:

  • MERS is not the beneficiary of the Notes and has no skin in the game. It did not lend any money, collect any payments or do anything more than track the sale of the securities.
  • Judicial procedure requires that parties identify themselves and prove their standing.
  • Splitting the Note and Trust Deed leaves no party with standing to foreclose. The true holder of the Note, the security, paid the lender so the lender is covered. The true holder of the Note was insured by AIG so they are covered. AIG and the banks were bailed out by taxpayers. So, unless the American tax payer can produce a “blue-ink” original Note, no one has standing to foreclose.
  • Allowing a foreclosure to proceed without the original Note places the homeowner in double jeopardy. If the original Note were to surface, the holder of the Note would be entitled to payment, but from whom? The borrower is still on the hook.
  • MERS currently holds 50 to 60 million loans so this is no small matter. And, just because they have lost repeatedly doesn’t mean they will give up. They will keep right on foreclosing in hopes that the homeowner won’t fight back and, in most cases, they won’t be stopped.

If you are a homeowner in Middle Tennessee and your home is in foreclosure you should contact a real estate attorney and discuss the legal loophole described above to see if it can delay or even stop the foreclosure action against you.  If that is not successful, or only helps you delay the foreclosure process you should contact me to discuss a short sale if (1) you have lost your job or have seen your income decline, and (2) your home is worth less than your mortgage balance. I am a Middle Tennessee distressed real estate, short sale, pre-foreclosure (preforeclosure) and foreclosure REALTOR and Expert. I serve real estate owners, homeowners and investment property owners in Rutherford County TN, Williamson County TN, Davidson County TN, Murfreesboro TN, Smyrna TN, La Vergne TN, Eagleville TN, Lascassas TN, Rockvale TN, Christiana TN, Brentwood TN, Franklin TN, Nashville TN and Belle Meade TN.

If you need to sell your home fast via a short sale you can request help on my website at Get Help and Assistance from a Middle Tennessee Short Sale and Foreclosure REALTOR and Expert.

Middle Tennessee Foreclosure Prevention and Loan Modification Help and Assistance

Middle Tennessee Foreclosure Prevention and Loan Modification Help and Assistance

According to this Tennessean article, Loan modification can forestall foreclosure, you can obtain help with a loan modification from your local United Way office through their affiliations with local agencies. The article conveys the story of one Franklin Tennessee (Williamson County TN) family went through difficult financial times after a job loss. It is truly sad to see so many hard working people suffer due to the poor job market. In this case, the family depicted in the article eventually lost their home when the bank foreclosed on them.

If you are a homeowner in Middle Tennessee who has lost your job, have seen your income decline or are in foreclosure, please contact me to obtain free help and assistance on how to stop the foreclosure proceedings. You should also contact a real estate attorney. If your home is worth less than your mortgage balance, I can help you with a short sale. I am a Middle Tennessee distressed real estate, short sale, pre-foreclosure (preforeclosure) and foreclosure REALTOR and Expert. I serve real estate owners, homeowners and investment property owners in Rutherford County TN, Williamson County TN, Davidson County TN, Murfreesboro TN, Smyrna TN, La Vergne TN, Eagleville TN, Lascassas TN, Rockvale TN, Christiana TN, Brentwood TN, Franklin TN, Nashville TN and Belle Meade TN.

If you need to sell your home fast via a short sale you can my request help on my website at Get Help and Assistance from a Middle Tennessee Short Sale and Foreclosure REALTOR and Expert.

Wednesday, October 14, 2009

Bank of America Increases Loan Modifications

Bank of America Increases Loan Modifications

According to this CNBC article, Bank of America Ups Its Foreclosure Prevention Efforts, Bank of America "increased the number of customers with a trial mortgage modification by 62% in September to 95,000" and "increased the total number of modification offers under the Home Affordable Modification Program to 156,000 last month, versus 125,338 in August" which is an increase of nearly 25%.

According to the article, "Data on success rates at this point is limited and in a way lagging. The program is barely six months old and its terms require that a modified loan stay current for three months to be considered a success." Personally, I do not think being current for 3 months is successful at all.

The article quotes a Bank of America document as saying "With sustained high unemployment, even the most aggressive loan modification program will not help where there is no income." In my opinion, this is the real issue: unemployment.

The article states "The government program also includes a refinancing component, which is meant to decrease the number of potential defaults. BofA says that as of September it has taken more than 144,000 applications in that category and funded some 60 percent of them. According to August Treasury data, the bank has the largest number of loans that are 60 days or more past due (836,000)—a key benchmark of delinquency and foreclosure barometer. Foreclosures continue to run at a record rate, despite a multitude of government and private programs. The problem has spread well beyond its original flash point, the subprime sector. The program is designed to help homeowners already in trouble (the loans have become delinquent) and those who may be heeded for it. Loan services receive a fee of $1,000 per loan modification. In addition, they receive a $1000 a year for three years if the modified loan stays current. The program also covers underwater borrowers. The loan-to-value ratio, which started out at 105 percent, is now 125 percent, meaning a homeowner with a $250,000 loan on a property valued at $200,000 is eligible for refinancing aid."

There are a few reasons why these increased loan modifications will still fail:
  • Job Losses - You cannot pay your mortgage if you do not have a job.
  • Number of Foreclosures - The number of foreclosures far exceeds any loan modification efforts.
  • Underwater Homeowners - Even if the bank lowers their payments by a few hundred dollars per month many homeowners will still default due to owing far more than their home is worth.
In some cases, though, a loan modification is the right option for a homeowner.  It all depends on their personal situation.  If you are a homeowner in Middle Tennessee who is interested in a loan modification please call me for a free consultation.  I can give you valuable information on how to improve your chances of getting your loan modification request approved.  On the other hand, if you are a Middle TN homeowner who  is unemployed, have seen your income decline substantially, are already in foreclosure, have already been turned down for a loan forbearance or loan modification, and your home is worth less than your mortgage balance(s), please contact me to discuss selling your home via a short sale. I am a Middle Tennessee distressed real estate, short sale, pre-foreclosure (preforeclosure) and foreclosure expert and REALTOR. I serve real estate owners, homeowners and investment property owners in Rutherford County TN, Williamson County TN, Davidson County TN, Murfreesboro TN, Smyrna TN, La Vergne TN, Eagleville TN, Lascassas TN, Rockvale TN, Christiana TN, Brentwood TN, Franklin TN, Nashville TN and Belle Meade TN.

If you need to sell your home fast via a short sale you can my request help on my website at Get Help and Assistance from a Middle Tennessee Short Sale and Foreclosure Expert and REALTOR.

Monday, October 12, 2009

Housing Market Problems Persist Despite Government Intervention

Housing Market Problems Persist Despite Government Intervention

According to this REUTERS article, Housing risks still lurk even as buyers return, the US housing market will likely decline further due to continued pressure from adverse economic forces. The article proposes that the most significant economic forces which will hurt the real estate market in the near and mid term future are:
  • Expiration of the first time home buyer tax credit on Novermber 30, 2009.
  • Continued job losses.
  • High rates of foreclosures.
The article states "On the surface, a glimmer of confidence is returning to the battered U.S. housing market, after more than three years of gut-wrenching defaults, price slumps and foreclosures. But investors and homeowners in California, the most populous U.S. state and a benchmark for housing across the country, are bracing for another fall as emergency government support measures fall short or expire." The quotes Mark Jacques, a mortgage broker in Corona Del Mar, California as saying "All that has been achieved is to put off the real pain until later on. I'm hunkering down for the storm." I agree with this comment. The real problem with the real estate market is that housing prices still exceed the historical ratios of incomes to housing prices - in short houses are still too expensive when compared to the incomes people actually earn.

The article states "California led the United States when housing prices soared early this decade, spurred by an array of public policy incentives to encourage home ownership. The boom fueled a frenzy of lending and spending that drove the U.S. economy. But California proved to be the epicenter of reckless lending that pushed housing throughout most of the United States over a cliff in 2007, triggering a credit crisis that plunged the world economy into recession. The sobering view now from ground zero of the U.S. property market underscores the problems faced by President Barack Obama as he tries to fix the U.S. economy. Washington is trying to stem rising numbers of homeowners who cannot afford their mortgages as job losses mount. Housing prices have fallen to levels not seen since 2003. But even investors pouring millions of dollars back into real estate say it may take up to four more years for California's housing market to settle. The reasons why -- rising foreclosures, joblessness and tight credit -- are not unique to the state and may have already slowed a recent recovery in places like Florida."

Tax Credit Threat

The article describes how the potential housing rebound will be challenged by the expiration of the $8,000 first time home buyer tax credit on November, 30, 2009. According to the article, the "(tax credit) plan has resulted in 357,000 home sales so far in 2009, out of a total 3.88 million, according to a survey of realtors by research firm Campbell Communications Inc." The article quotes John Burns Real Estate Consulting in Irvine, California as saying that ending the tax credit "will likely cause a drop-off in buyers, or a "false peak" of the budding housing recovery."

Recent rumblings in Washington indicate that the government is considering extending and/or expanding the home buyer tax credit due to their concern that the housing market is still not stable. I have to say that the housing market is definitely not stable.

According to article, "Helped by government measures and a sense that the worst of the price slump is over, U.S. home prices have risen nearly 4 percent from their low point in April. But the bounce was preceded by a 33 percent slide since the peak in July 2006. The nascent housing recovery has combined with stronger data in other sectors to suggest the U.S. recession is over. This has helped thaw credit markets that are the lifeblood of the economy. Bidding wars are breaking out in some areas. Sales are now routinely above asking prices in California, from wealthy Orange County towns like Irvine to harder-hit San Bernardino County in the high desert east of Los Angeles." Apparently foreclosed houses are selling for 25-30% less than their 2007 market peaks, but still about 40% more than their original new construction prices of 2002. To me, those prices are still too high. Ask yourself, did incomes of the buyers for these types of homes increase 40% from 2002 to 2009? The answer is "No". Therefore, those homes are still priced too high.

Job Loss Threat

According to the article, "Efforts by the government and by banks to help struggling homeowners cut payments and stay in their homes are outpaced by mortgages going bad. The mortgage-modification programs risk being swamped by rising unemployment." A recent mass loan modification event in Los Angeles "drew 50,000 people over five days, hoping for mortgage-reduction deals to help keep them in their homes." The article quotes JC Ferebee, manager of Wells Fargo's team at the mass loan modification event, as saying "When you look at the whole culture right now and the economy with the jobs situation, it's a domino effect." We already know that the September 2009 US unemployment rate hit a "26-year high of 9.8 percent and is likely to head into the double-digit levels already suffered in California. The jobless rate is usually considered to be a lagging economic indicator because employers are slow to hire after a recession as they wait to be sure a recovery is for real. Economists fear that a protracted and high unemployment rate this time will deter Americans from spending more again on houses and goods, raising the prospect of a slow recovery." In short, jobs drive consumer spending and home purchases. With the economy shedding over 500,000 jobs each month there can be no real and meaningful housing market recovery.  What we are seeing now is more mirage than substance.

Foreclosures Threat

In previous blog posts I have stated that the banks are holding back on offering their foreclosures for sale and not taking back homes even when the home owners haven't paid their mortgages for many months. My opinion is that the banks are trying to artificially inflate the market values of their foreclosed assets (i.e. homes). According to the article, "Economists fear a repeat of the flood of foreclosure listings that scared all but vulture buyers -- specialized in assets few others want -- and sped the 2008-09 price slump. More than half of house sales in southern California in late 2008 and early this year involved "distressed" properties, accelerating price drops, according to Thomas Lawler, founder of Lawler Economic & Housing Consulting in Leesburg, Virginia. In response to the slump, banks slowed foreclosure sales to seek other solutions for homeowners and help shore up prices. At the same time, the Federal Reserve's emergency slashing of interest rates to near zero has helped encourage buyers to take advantage of the lowest prices in decades and a rush by the Federal Housing Administration, a U.S. agency, to guarantee more loans is also helping would-be home owners find credit. But the emergency steps by the government and the Fed will be overrun by economic forces, according to many analysts. "We are far from persuaded by a little summer upturn in a sector that the government had endeavored so mightily to support," Deutsche Bank said in a report last month. In California's Inland Empire -- a 27,000 square mile (69,900 square kilometers) region made up of Riverside and San Bernardino counties, prices will likely fall 15 percent from June for a peak-to-trough drop of 66 percent, the most for the biggest 10 U.S. metropolitan areas, Deutsche Bank predicted. Local buyers rely not only the scheduled-to-expire tax credit but almost entirely on funding from the FHA, which in response to rising taxpayer losses may soon tighten access to its credit. One bill would require bigger down-payments."  I discussed this FHA insolvency issue in a previous blog post.  In short, lending irresponsibly is not a solution for a problem that was caused by lending irresponsibly.

Regarding the failure of loan modifications, the article states "Nearly 43 percent of homeowners whose mortgages were modified in the first quarter fell behind on payments within three months, data from the U.S. Office of the Comptroller of Currency shows. For older modifications, the re-default rate is above 50 percent.  Postponed foreclosures have created a backlog that banks may have little alternative but to dump onto the market.  Foreclosures being processed surged nearly 80 percent in the second quarter from a year earlier to nearly 1 million. But completed foreclosures fell nearly 10 percent to 106,007, the OCC says.  Brokers in California bemoan what they say is just a delay in the inevitable pain of people losing their homes and the follow-on boom in sales of cheap properties, something for which there is no shortage of demand today.  Bruce Norris, president of property investment firm The Norris Group, said inventory levels are "completely artificial, completely baloney ... The delinquency rate (in California) has exploded, but inventory levels have gone down. In many of these cases the banks have simply avoided foreclosure."  I have been saying this for months.

According to the article, "Amherst Securities, a broker-dealer specializing in residential mortgage-backed securities, calculated a mountain of 7 million U.S. housing units is likely to end up on the market -- equivalent to 135 percent of a normal year's supply." Fred Arnold, a broker in Stevenson Ranch, California said "It's going to drip on the market.  We don't have the state and federal government that will let the natural supply and demand market occur which is pushing the real estate problem into 2012."  Amen, that is what I have been saying for months now.  The best way to get the housing market to stabilize is to allow the housing market to hit the real bottom, which will be at prices that buyers can actually afford without government subsidies.  Per my previous post, it will take until about 2020 (or longer) for home prices to return to their 2006 peaks.  For homeowners who owe more than their homes are worth and who have lost their jobs or suffered a reduction in their incomes 2020 will probably not come quickly enough.  Many of these homeowners will need to get loan modifications, sell their homes via short sales, or suffer through a foreclosure.

If you are a homeowner in Middle Tennessee who is unemployed or have seen your income decline and your home is worth less than your mortgage balance, please contact me to discuss selling your home via a short sale. I am a Middle Tennessee distressed real estate, short sale, pre-foreclosure (preforeclosure) and foreclosure expert and REALTOR. I serve real estate owners, homeowners and investment property owners in Rutherford County TN, Williamson County TN, Davidson County TN, Murfreesboro TN, Smyrna TN, La Vergne TN, Eagleville TN, Lascassas TN, Rockvale TN, Christiana TN, Brentwood TN, Franklin TN, Nashville TN and Belle Meade TN.

If you need to sell your home fast via a short sale you can my request help on my website at Get Help and Assistance from a Middle Tennessee Short Sale and Foreclosure REALTOR and Expert.