Tuesday, November 17, 2009

Nashville Developer Faces Foreclosure

Nashville Developer Faces Foreclosure

According to this Nashville Business Journal article, Bank forecloses on property for Crosland's Griffin Plaza, Crosland, Inc.'s Griffin Plaza property (a 280,000 square-foot mixed-use development) in Downtown Nashville TN (in the Gulch area) is being foreclosed on by Carolina First Bank. The trustee auction sale is scheduled to take place on 11/30/2009 at 11:00 AM in front of the main entrance to the Sommet Center. This news comes only about a week after I posted my article, Terrazzo in Nashville Gulch to Auction Condo Units Due to Slow Sales, in which I predicted that the developer of the Terrazzo (also Crosland) would face foreclosure on that project. Now, I am almost certain that foreclosure will occur. It is clear that many other Nashville Tennessee and Middle Tennessee developers will go bankrupt and/or face foreclosure. The worst is yet to come.

If you are a Middle TN real estate investor, home builder or real estate developer who cannot pay the property/project mortgage payments (due to the poor economy, adverse financing conditions, slow sales, loss of investment property tenants, vacancy issues, lack of funds to complete the project, feuding business partners, etc.), have already defaulted on the mortgage, or are already in foreclosure, or owe more than the property/project is worth, please contact me to discuss your options including a short sale (a real estate short sale occurs when the sale proceeds are not sufficient to pay off all the mortgages and liens on the property/project). I am a Middle Tennessee distressed real estate, short sale, pre-foreclosure (preforeclosure) and foreclosure REALTOR and Expert. I primarily help sellers (property owners, real estate investors, home builders and real estate developers) of distressed real estate, short sales, pre-foreclosures, foreclosures, investment properties, failed new construction projects and struggling commercial real estate developments located in and around 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).  If you do need to short sell your home or property, 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, November 16, 2009

Foreclosure Problem Spreading

Foreclosure Problem Spreading

According to this SmartMoney article, Beyond California: New Foreclosure Hot Spots, and this The Christian Science Monitor article, Foreclosure surprise: 10 fastest-growing problem cities are newcomers, the foreclosure problem is spreading to previously stable (and largely untouched) cities and towns.  Both articles cite rising unemployment as the main cause of the spreading foreclosure crisis. The result of this spreading crisis will be more short sales and foreclosures in these areas.

If you are a Middle TN homeowner, property owner, real estate investor, home builder or real estate developer who cannot pay your mortgage payments (due to losing your job, having your income reduced, illness, health problems, adverse business conditions, slow sales, loss of investment property tenants, vacancy issues, lack of funds to complete the project, feuding business partners, etc.), know that you will not be able to pay your mortgage, have defaulted on your mortgage, are already in foreclosure, or owe more than your home is worth, please contact me to discuss your options including a loan modification and a short sale (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). I am a Middle Tennessee distressed real estate, short sale, pre-foreclosure (preforeclosure) and foreclosure REALTOR and Expert. I primarily help sellers (homeowners, property owners, real estate investors, home builders and real estate developers) of distressed real estate, short sales, pre-foreclosures, foreclosures, investment properties, failed new construction projects and struggling commercial real estate developments located in and around 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).  If you do need to short sell your home or property, 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.

FDIC Hurting Distressed Homeowners

FDIC Hurting Distressed Homeowners

As set forth in this FDIC publication, IndyMac Shared-Loss Agreement, the FDIC is making so called "Shared-Loss Agreements" (SLAs) with investors who are willing to purchase the assets of insolvent financial institutions.  Without going into all the details, these SLAs basically offer these investors guarantees on huge percentages of any net losses that they may suffer as a result of their investment in the failed financial institution.  In this particular case, the FDIC is paying for 80%+ of the net losses of the investor (OneWest Bank) who purchased the assets of IndyMac. Basically, the Net Loss is calculated by taking the current outstanding balance of the mortgage note (at the time of the loan purchase) less the net proceeds of the short sale or foreclosure offer price.

The reason this is a problem for financially distressed homeowners is that due to the loss guarantees provided by the FDIC, the investors mentioned above have very little financial risk in the deal.  Therefore, they have incentives to take what would normally be a big risk (but isn't due to their sweet loss guarantees courtesy of the FDIC) such as foreclosing on homeowners to try and squeeze out more profit even when there are feasible alternatives to foreclosure such as short sales and loan modifications.  As a result, these investors are making it difficult and even impossible to get loan modifications and short sales approved.

In her blog post, Is the FDIC Killing Short Sales, Alexis McGee of Foreclosures.com states that "IndyMac was taken over by the FDIC and sold to OneWest Bank in March/2009. Guess who the investors are behind OneWest? George Soros, Michael Dell, Steve Mnuchin (former Goldman Sachs executive), and John Paulson (hedge-fund billionaire)." She goes on to describe the terms of the SLA.  The highlights are below:
  • The investors purchased all current residential mortgages at 70% of par value (70% of the outstanding loan amounts).
  • They purchased all current HELOCS at 58% of Par Value.
  • The FDIC stepped in and guaranteed that for any residential mortgages where OneWest experiences a loss, the FDIC will step in and cover anywhere from 80%-95% of the loss. The loss is calculated using the current outstanding balance of the mortgage note (at the time of the loan purchase), not the amount that OneWest paid for the loan.
  • For foreclosures, the FDIC picks up 80% of the tab on all of the extra costs associated with a foreclosure (BPO’s, upkeep, utilities/maintenance, legal fees, etc.)
Here is an example which shows why this creates a problem for financially distressed homeowners who would like to do a short sale, or obtain a loan modification.  Let's say one of the loans that OneWest purchases has a Current Loan Amount of $500,000.  Based on the 70% purchase deal described above, OneWest would have paid $350,000 for this loan.  Also, let's assume that an all cash investor wants to purchase the property via a short sale for net offer price to OneWest of $200,000.  Below is the analysis of this situation:

  • The Net Loss, according to the FDIC calculations, is $500,000 (i.e. the current outstanding balance of the mortgage note at the time of loan purchase) less $200,000 (i.e. the net proceeds of the short sale offer) = $300,000.
  • Based on this $300,000 Net Loss, the FDIC pays OneWest $240,000 (i.e. 80% of the Net Loss).
  • One West would then be able to sell the property in question for the short sale Net Offer Price of $200,000 and end up with total revenue of $440,000 ($240,000 + $200,000) for a loan that they paid $350,000 for.  Therefore, OneWest will have made a profit of $90,000. 

The reason that this situation creates a problem for a financially distressed homeowner seeking a short sale is that since the FDIC (per the information above) pays 80% of the losses of foreclosure there is no incentive for OneWest to mess around with a short sale unless they can make much more money.  That is why they are demanding absurd short sale settlements and promissory notes from the homeowner.  Of course, there is absolutely no incentive to offer a loan modification so that request would be dead on arrival.

According to Alexis McGee, "The scary thing is that over 50 banks have Shared Loss Agreements in place with the FDIC. Some of them include: Bank of America (go figure), CitiMortgage, Wells Fargo, etc."  I have to agree.  That is truly scary.  I can already see the pain and anguish of hundreds of thousands, if not millions, of financially distressed homeowners as they are unnecessarily dragged through the foreclosure process.

If you are a Middle TN homeowner, property owner, real estate investor, home builder or real estate developer who cannot pay your mortgage payments (due to losing your job, having your income reduced, illness, health problems, adverse business conditions, slow sales, loss of investment property tenants, vacancy issues, lack of funds to complete the project, feuding business partners, etc.), know that you will not be able to pay your mortgage, have defaulted on your mortgage, are already in foreclosure, or owe more than your home is worth, please contact me to discuss your options including a loan modification and a short sale (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). I am a Middle Tennessee distressed real estate, short sale, pre-foreclosure (preforeclosure) and foreclosure REALTOR and Expert. I primarily help sellers (homeowners, property owners, real estate investors, home builders and real estate developers) of distressed real estate, short sales, pre-foreclosures, foreclosures, investment properties, failed new construction projects and struggling commercial real estate developments located in and around 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).  If you do need to short sell your home or property, 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.

Saturday, November 7, 2009

Our Phony Real Estate Market

Our Phony Real Estate Market

The "real estate recovery" (or market bottom called), which has been trumpeted by the "drive by media" (translation - they are too lazy to do any real research) for almost a year now, is a fraud, a sham. All we are seeing is the result of artificial government market propping. I cover this in my blog posts: Real Estate Recovery or More Problems (Short Sales and Foreclosures)?, US Government Provides Funding For 95% Of Mortgages, New Subprime Lender: The US Government and Sad Loan Modification Story. If you do not want to read them the key points are below:
  • 59% of all home sales in 2009 are to buyers with FHA, VA, USDA and other government guaranteed/insured/subsidized loans.
  • The US government is now purchasing about 95% of all mortgage loans via Fannie Mae, Freddie Mac and Ginnie Mae. "Lenders" are really nothing more than loan brokers.
  • Government promoted "foreclosure resolution" and "loan modification" programs are nothing more than subprime schemes. Homeowners are given temporary rate and payment reductions, but the real problem (negative equity) is not addressed. The result will be more foreclosures and short sale in the future as these modified loans re-default (most do), or expire. The negative equity will remain and until it is addressed, no real solution will be offered to this financial and real estate mess.
  • The $8,000 first time home buyer tax credit caused an additional 350,000+/- home sales to occur, but about 1,900,000 people will receive the credit according to NAR (these numbers will be much higher due to the recent extension). The result is that each one of those additional 350,000+/- home sales cost approximately $43,000 (1,900,000 x $8,000 / 350,000) in taxpayer money. Based on the typical 1st time buyer home purchase price of $200,000, the cost of each additional sale created was over 20% of the sale price. Clearly, this program is absurdly costly and has no merit. All the tax credit is doing is temporarily propping up housing prices so they stay high relative to historical norms. The home buyers who pay retail prices for homes due to the tax credit will end up the next generation of underwater homeowners, stuck in the homes (prisons) for many, many years due to the negative equity unless they want to short sell their homes.
The real question is what to do if you are a current owner of a home who may want to sell, or a buyer who may want to buy. Here is what you should do:
  • Sellers - If you think you might want to sell soon do not wait. Sell now before the market gets worse. This winter and the spring of 2010 will be your window before the government market propping starts to fail.
  • Buyers - If you cannot wait a few years to buy a home or other property when the market hits bottom I recommend that you buy only short sales, foreclosures, bank owned properties and other distressed properties in order to price in the coming market decline.
Update (9/8/2010): This article was written before the extension of the 2009 housing tax credit to April 30, 2010 (closing before September 30, 2010), so the "Seller's Window" advice above was off by a few months, but did in fact turn out to be accurate. Housing prices are declining again and will continue to do so for the foreseeable future.

Short Sale and Foreclosure Help and Assistance for Homeowners and Property Owners in Nashville TN and Middle TN. If you are a Nashville Tennessee, Franklin Tennessee, Brentwood Tennessee, Nolensville Tennessee, Spring Hill Tennessee, Murfreesboro Tennessee, Smyrna Tennessee, La Vergne Tennessee, or Middle Tennessee homeowner, property owner, condo owner, real estate investor, home builder or real estate developer who cannot pay your mortgage payments (due to losing your job, having your income reduced, illness, health problems, adverse business conditions, slow sales, loss of investment property tenants, vacancy issues, lack of funds to complete the project, feuding business partners, etc.), know that you will not be able to pay your mortgage, have defaulted on your mortgage, are already in foreclosure, or owe more than your home is worth, please contact me to discuss your options including a loan modification and a short sale (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). I am a Middle Tennessee distressed real estate, short sale, pre-foreclosure (preforeclosure) and foreclosure REALTOR, Expert and Real Estate Investor. I primarily help sellers (homeowners, property owners, condo owners, owners of high end homes and properties (estate homes, luxury homes and executive homes), real estate investors, home builders and real estate developers) of distressed real estate, short sales, pre-foreclosures, foreclosures, investment properties, failed new construction projects and struggling commercial real estate developments located in Middle Tennessee (Rutherford County TN, Williamson County TN, Davidson County TN, Robertson County TN, Maury County TN, Murfreesboro TN, Smyrna TN, La Vergne TN, Eagleville TN, Lascassas TN, Rockvale TN, Christiana TN, Brentwood TN, Franklin TN, Nashville TN, Belle Meade TN, Nolensville TN, Spring Hill TN, Gallatin TN, Springfield TN and Mt. Juliet TN). If you do need to short sell your home or property, 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 Nashville Tennessee and Middle Tennessee Short Sale and Foreclosure REALTOR, Real Estate Expert and Real Estate Investor.

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.

Friday, November 6, 2009

Sad Loan Modification Story

Sad Loan Modification Story

In this Mish's Global Economic Trend Analysis article, "Wells Fargo Madness" a Reader Reply to Fear and Shame Tactics, a reader replied to an article on that website (Government and Lender Policies of Fear and Shame Help Keep Homeowners Debt Slaves which I referenced in my blog post Why Lenders Push Homeowners Around) and told a very sad, but sobering story regarding his attempt to obtain a loan modification from Wells Fargo.  Rather than trying to paraphrase the reply/comment, I have posted almost the complete reply/comment below:

"I bought a house back in 2004, having moved halfway across the country for a new job. It was a house I could comfortably afford - I made a little over $70,000 as a senior manager for a newspaper, and my mortgage was a little under $900 a month (including taxes and insurance), fixed at 5.25% for 30 years with Wells Fargo. In spite of the pressure put on me by a broker when I was buying, I avoided the no money down variable option because I wanted to do what I thought was the responsible thing to lock in my payments at a decent rate I knew I could afford and avoid the reset lotto. In April of 2008, I was notified that the job I had moved across the country for was set to be eliminated, along with the entire staff of my department. The company I worked for was highly levered in an environment where revenues were shrinking, and 'consolidations' were being made across the company. The day I found out that I was going to be out of work, I called Wells Fargo to see if it would be possible to make some alternate payment arrangements until I found work, and was told precisely what the article you reference noted - that they couldn't even discuss the matter with me until I was 30 days in arrears. I was mortified, knowing that being 30 days in arrears would leave me with the dreaded 'mortgage late' on what had been a pristine 800 credit score. I had been prudent and saved a fair sum of money, so I decided to try and keep the plates spinning while I looked for work. I applied myself to the job hunt, but with nearly 50 positions eliminate from my company and a few hundred at other domestic newspapers who shared my area of specialty, it was a tough task finding work. Then in August, Gannett, the biggest newspaper company in the world, announced that they would be laying off 1000 workers, and my sources inside Gannett told me that they were going the 'consolidation' route, meaning that in the course of 3 months nearly a third of the total positions in my field had gone *poof*. My prospects for finding work in the industry where I had experience had just gone from tough to Quixotic. I again called Wells Fargo to see if there was anything they could help me with that didn't involve damaging my credit - I still had a sizable amount of savings to negotiate with - but the answer was the same: 30 days late or no discussion. I decided I'd have to take them up on the offer. When 30 days had elapsed, I contacted them once again, only to now be told that they couldn't work out any arrangements until I had found work. I was angry, as one might imagine. I decided that they had received the last payment they were going to receive from me. Fourteen months later, I have kept the vow. I'm not proud of walking away from my 'responsibility', but in light of the situation - nearly 18 months without finding work - it seems that it was the best thing that could have happened. If I had kept paying all along, I'd have depleted a good deal of my savings, and I'd still be facing losing the unemployment benefits that are keeping the other bills paid. As it stands, I've still got that nest egg to see my family through the rough days that lie ahead. I've been to the housing counselors the state has set up, and the best they were able to do for me was that I could pay off the back payments, penalties and interest, and resume making payments. My house is set to be sold at auction next week, and due to the rules in the state, the minimum price will be well in excess of what I suppose the market price would be. I expect that the bank will be the buyer by default. If my experience is representative, walking away might be the best option. From Wells Fargo's perspective, this was an avoidable situation. I called them when I found out about my joblessness, and I did everything I could to avoid a default. All I wanted was some recognition that I was willing to work with them if they would work with me - maybe only paying interest until I was able to find something. However, once I felt double-crossed, having been told to let it go into arrears so that they could work with me, and then to be told they still couldn't work with me, I did what I thought was prudent. I decided to see how long I could live rent free. As of today, it's been almost 14 months. Assuming that the house sells next week and I get an order to vacate the next, I'll be here through the end of January (it takes a minimum of 60 days to affect an eviction here). More likely, I won't get the order to vacate until the bank sells my house as part of a package foreclosure deal for about 20 cents on the dollar. I might get to live here rent-free for a good spell longer. I could have, and probably would have, paid them nearly 50% of the house's value as a cash settlement 14 months ago if they'd been willing to have a conversation. I've come to the realization that I'm not going to find work in the field to which I'm accustomed and I'm back in school to get another degree. I started in August after the Gannett news came out, as much to avoid a long gap in my resume without an explanation as anything else. I've been doing programming and database work since I minored in computer sciences 15 years ago, but I figured I'd legitimize my skills with a degree - since I have the down time. I've got 8 classes to go and a 4.0 GPA. The big question is: will I find work when I get done this spring?"

Wow, that comment is fantastic, and sad all in one. What really angers me is that the government bank bailouts (TARP) combined with the FASB accounting changes that allow banks to count virtually worthless assets such as 2nd mortgage loans collateralized by homes that are no longer worth enough to even cover the 1st mortgage loans let alone the 2nd mortgage loans have allowed mortgage lenders to take this callous approach toward homeowners and reject the lone cure to this financial mess - voluntary mortgage loan principal reductions. In short, the US taxpayer is helping banks artificially have more leverage in their dealings with distressed homeowners and allowing the banks avoid doing what is necessary to solve this financial crisis. Of course, taxpayers will pay again when these lenders ultimately fail after billions and billions more are wasted. The end result will be more and more foreclosures and short sales.

If you are a Middle TN homeowner, property owner, real estate investor, home builder or real estate developer who cannot pay your mortgage payments (due to losing your job, having your income reduced, illness, health problems, adverse business conditions, slow sales, loss of investment property tenants, vacancy issues, lack of funds to complete the project, feuding business partners, etc.), know that you will not be able to pay your mortgage, have defaulted on your mortgage, are already in foreclosure, or owe more than your home is worth, please contact me to discuss your options including a loan modification and a short sale (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). I am a Middle Tennessee distressed real estate, short sale, pre-foreclosure (preforeclosure) and foreclosure REALTOR and Expert. I primarily help sellers (homeowners, property owners, real estate investors, home builders and real estate developers) of distressed real estate, short sales, pre-foreclosures, foreclosures, investment properties, failed new construction projects and struggling commercial real estate developments located in and around 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).  If you do need to short sell your home or property, 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.

Why Lenders Push Homeowners Around

Why Lenders Push Homeowners Around

According to this Mish's Global Economic Trend Analysis article, Government and Lender Policies of Fear and Shame Help Keep Homeowners Debt Slaves, lenders offer loan modifications to financially distressed homeowners only if doing so financially benefits the lender (i.e. it as a business decision), while homeowners view walking away from their homes as a moral decision. The article concludes that the result of these differing view points is that homeowners are at a distinct disadvantage compared to mortgage lenders when trying to make sound financial decisions regarding their homes. Without going into all the details described in the article (if you would like all the details, I highly recommend that you read it), I would like to mention the following points made in the article.
  • Homeowners heavily factor in personal responsibility and morality into their decision to keep paying their mortgages even though they are financially struggling and/or may owe more than their homes are worth (although this view is changing somewhat - see my blog post Underwater Homeowners Walking Away From Their Homes).
  • Lenders are more responsible than homeowners for the real estate boom and bust due to lenders' superior real estate market knowledge including appraisals to determine property/collateral values, complex default models, deciding to require lower down payments even though the lenders knew that higher loan to value mortgage loans had higher default rates, etc.
  • Due to lenders being more than 50% responsible for the housing bust, lenders should be willing to voluntarily write off some of the debt in order to reduce the amount that homeowners are underwater (i.e. negative equity), but they are not doing this since when lenders are trying to decide on how to best handle struggling homeowners, they do not factor in "responsibility" for the housing market crash.  Instead, lenders strictly desire an outcome that will maximize profits or minimize losses.
  • Due to the difference in the way that homeowners and lenders view mortgage loan default (personal responsibility/morality versus business decision), mortgage lenders are able to manipulate homeowners to do things that are to the financial benefit of mortgage lenders, but to the financial detriment of homeowners.
The article states "First, lenders know that borrowers with high credit scores are unlikely to default even at high levels of negative equity. To modify loans for these homeowners would be to throw money away – and to encourage more homeowners to ask for modifications. Second, a significant number of homeowners who temporarily default on their mortgages "self-cure" without any help from their lender – though self cure rates have dropped precipitously in the last two years. Again, to modify the loans of individuals who would otherwise self cure would be to throw away money. Third, homeowners with poor credit, or who end up in arrears because of “triggering events” such as unemployment, divorce, or other financially devastating circumstances are likely to default on the modified loan as well. To modify loans for these individuals is to waste time and risk housing prices falling further before the lender eventually has to foreclosure and sell the property anyway. Given these economic incentives for the lender, a seriously underwater homeowner with good credit and solid mortgage payment history who responsibly calls his lender to work out a loan modification is likely to be told by his lender that it will not discuss a loan modification until the homeowner is 30 days or more delinquent on his mortgage payment. The lender is making a bet (and a good one) that the homeowner values his credit score too much to miss a payment and will just give up the idea of a loan modification. However, if the homeowner does what the lender suggests, misses a payment, and calls back to discuss a loan modification in 30 days, the homeowner is likely to be told to call back when he is 90 days delinquent. In the meantime, the lender will send the borrower a series of strongly-worded notices reminding him of his moral obligation to pay and threatening legal action, including foreclosure and a deficiency judgment, if the homeowner does not bring his mortgage payments current. The lender is again making a bet (and again a good one) that the homeowner will be shamed or frightened into paying their mortgage. If the homeowner calls the lender’s bluff and calls back when he is 90 days delinquent, there is a good possibility that he will be told that his credit score is now so low that he does not qualify for a loan modification. Most lenders will, in other words, take full advantage of the asymmetry of norms between lender and homeowner and will use the threat of damaging the borrower’s credit score to bring the homeowner into compliance. Additionally, many lenders will only bargain when the threat of damaging the homeowner’s credit has lost its force and it becomes clear to the lender that foreclosure is imminent absent some accommodation. On a fundamental level, the asymmetry of moral norms for borrowers and market norms for lenders gives lenders an unfair advantage in negotiations related to the enforcement of contractual rights and obligations."

The information above is why:
  • Lenders take as long as they want to respond to homeowner loan modification requests.
  • Lenders frequently reject loan modification requests.
  • Financially struggling homeowners can frequently stay in their homes for many months despite not paying their mortgage loans (the lenders are frequently deciding to do nothing until foreclosure is absolutely imminent).
  • Homeowners do sometimes walk away despite the personal responsibility - they get completely frustrated with the games lenders play.
  • Walking away needs to be a viable option (albeit not the best one) for homeowners.
  • Short sales and foreclosures will continue to increase.
If you are a Middle TN homeowner, property owner, real estate investor, home builder or real estate developer who cannot pay your mortgage payments (due to losing your job, having your income reduced, illness, health problems, adverse business conditions, slow sales, loss of investment property tenants, vacancy issues, lack of funds to complete the project, feuding business partners, etc.), know that you will not be able to pay your mortgage, have defaulted on your mortgage, are already in foreclosure, or owe more than your home is worth, please contact me to discuss your options including a loan modification and a short sale (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). I am a Middle Tennessee distressed real estate, short sale, pre-foreclosure (preforeclosure) and foreclosure REALTOR and Expert. I primarily help sellers (homeowners, property owners, real estate investors, home builders and real estate developers) of distressed real estate, short sales, pre-foreclosures, foreclosures, investment properties, failed new construction projects and struggling commercial real estate developments located in and around 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).  If you do need to short sell your home or property, 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.

Thursday, November 5, 2009

US Government Provides Funding For 95% Of Mortgages

US Government Provides Funding For 95% Of Mortgages

According to this article, Recent Developments in Mortgage Finance, in the October 26, 2009 edition of the Federal Reserve Bank of San Francisco newsletter, the US government (via Fannie Mae, Freddie Mac and Ginnie Mae) are now providing unprecedented support for the US housing market by "owning or guaranteeing almost 95% of the new residential mortgage lending."  In other words, the US government is currently providing the funding for 95% of all residential mortgage loans.  Therefore, when you hear that "the banks are starting to lend again", what is really happening is that the banks are operating as little more than glorified loan brokers by selling nearly all their loans to the federal government via Fannie Mae, Freddie Mac and Ginnie Mae (see the graph below courtesy of the FRBSF).


The article goes on to state "This shift in mortgage finance has had a profound impact on the types of borrowers receiving loans. In the fourth quarter of 2006, approximately 10% of originations in our sample were labeled by originators as "subprime." For the entire universe of mortgages, subprime loans are estimated to have made up about 20% of originations in 2006. By the first quarter of 2008, the subprime share was effectively zero. Since then, increased FHA lending—identified here by Ginnie Mae's share—has revived this segment of the market. After plummeting in early 2008, the share of borrowers with FICO credit scores lower than 660 has returned to just higher than 20%, the same share as when subprime securitization peaked in 2006. The collapse of nonconforming loan originations has had a particularly strong impact on the higher end of the market. The share of jumbo mortgages was nearly 9% at the peak in 2006. By the end of 2008, jumbo loans accounted for just 3% of new originations. Meanwhile, in another big shift, option ARMs made up about 6% of originations in the fourth quarter of 2006. By year-end 2008, option ARMs had vanished from the data set." What this means is that the US government has taken the place of the subprime lenders that went belly up due to making too many bad loans and that the US government, as a % of total loans made, is making just as many subprime loans as the now defunct subprime lenders did during the peak of the subprime feeding frenzy. In my opinion, the result of this will be more foreclosures and short sales which will cause massive losses that the US taxpayer has to ultimately pick up all because we refuse to tell people that they cannot afford to buy a home. Common sense has truly left this country.

The article concludes "With the vast majority of current mortgage lending now intermediated in some form by the GSEs, it will be difficult for the housing market to return to normal." What this means is that it is going to be nearly impossible for the housing market to be weaned off of artificial and unsustainable government support. The end result will be disastrous when the government "market proppping" is eventually discontinued. That is why I know for sure that the housing market is not recovering. What we are seeing is a mirage created by artificial artificial support. Even the mirage is not that pretty, so the reality is that much worse. The US housing market will continue to suffer for the next several years with the worst to come within the next 3 years.

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, 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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