Archive for June, 2007

Foreclosures in the subprime market have nose-dived. The news media are choking with information. The sub-prime was set up to help the low-income group or those with bad credit history. But it is this group’s dream houses are crumbling like sand castles. But mortgage representatives as well as the Federal Reserve Bank have rushed in with the assurance that these are merely teething troubles.

Center for Responsible Lending opines that what is happening is just the tip of the iceberg. 2.2 million borrowers in the sub-prime group have either lost or will lose their houses within few years. It comes down to the harsh statistics of one out of every five sub-prime borrower in 2006-06 being affected. The figures remain unmatched in the history of modern mortgage.

Till yesterday Philadelphia and South Jersey had seen appreciation in the real estate market with a climb of about 70% to 80% in the last five years. For sub-prime owners this was a boon because if they defaulted in their installments they could sell their property. It would not only clear their dues but also leave something extra for the future. But the reverse is taking place. Foreclosures are increasing and property rates are falling.

In Philadelphia appreciation of property is at 5% against 14% in 2004 and 2005. This will lead to about 17% house owners to forfeit their property through foreclosures. Similar is the pattern in Camden region where the appreciation rate has plummeted from 16% to 6%.

Till now the comfortable appreciation rate had made the regions an oasis safe from the depredations of foreclosure. People without funds just could not get an entry. But the sub-prime strategy played upon the feelings of those who coveted rich houses. They fell for the trap with disastrous consequences.

The mortgage rates are temptingly low at first but begin to climb after two years. It is as high as a 45% increase. To add insult to injury, sub-prime borrowers who improved their credit and wanted to move onto loans with better terms had to pay thousands in penalties. Never has such fraud taken place in the prime mortgage market.

Some players in the mortgage field are optimistic that the market will automatically correct itself. But words will not fill empty hopes. Strong legal action based on common sense is the need of the hour.

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The prostrate real estate market continues to get beaten. For the lucky few smart ones this is the time to pick up pearls from the messy pigsty. It needs sharp eyes, patience and exceptional foresight to reap profits from countrywide falling prices and foreclosure listings rising to historic numbers.

Gambling in a market that has gone down? The risks are enormous. Vultures are just waiting in the sidelines to tempt and lure the unwary into the trap of a golden tomorrow. ‘Fire sale’ strategy is known ambush tactics to cash in on temporary impulses of investors who are new in the line. James Saccacio, CEO of RealtyTrac strongly opines that at this juncture it is essential for investors in the real estate market to chalk out a long-term plan and carefully do the researching before purchasing.
Some practical hints and tips will be of invaluable help for the brave-hearts determined to wade into the murky waters of fallen markets. The first thing – here as everywhere – is knowledge. Knowledge is power. Glean a detailed knowledge of the region where one plans to invest.

Secondly – chalk out ahead step by step a plan of action that will work in the specific circumstances and then apply these as and when the situation arises.

Thirdly the foreclosure process must be made to work for the interested individual. Find out which technique suits you and your strong and weak points. The same medicine does not apply to all.
Fourthly, each deal must be given a detailed scrutiny. One should not get away with the false notion that foreclosure itself means that the property is a hot deal. This is actually far from reality.
Fifthly carefully pick and choose a team that you can rely on. Give specific duties suitable to their talents and experience. Do not overburden yourself. Be like the king with his cabinet ministers.

Lastly have a close network of connections with financial bodies. In a down market banks and lenders will be eager to sell as many properties as possible since they are overburdened with numbers. The pull of the market will bring down prices. The bottom line is strike at the opportune moment but do not be impulsive and hasty. The market scenario gives the buyer the upper hand but try to make the best deal. Many are investing and winning. Why not you?

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A bankruptcy filing has delayed a project in South Salem, Marion County. Developer Morford filed protection from creditors claiming shelter under bankruptcy laws just two hours before scheduled start of foreclosure proceedings.

Morford, from Portland, is in charge of PJM Fairview. His attorney Bradley Baker took the help of Chapter 11 to file the petition in Marion County Courthouse. Fairview owed the lenders, OFO Partners more than $13.5 million for a 104-acre property in South Salem. It postponed the foreclosure but it also meant a big delay in implementation of the project. But Morford has not given up hope to make his dreams come true. He is frantically working to refinance it.

Under the legalities of Chapter 11, PJM Fairview keeps possession of the property but Morford must submit to the court reorganization plans delineating how he plans to meet the demands of the creditors.

On the other side of the fence, OFO Partners, under the guidance of their attorney Brent Summers is sharpening their swords and waiting to ask the court within few days relief from the postponement that has adversely affected them. The aim it to complete the process of foreclosure and satisfy his clients.
Morford had bought the land from Sustainable Fairview Associates in 2006 for about $21 million. He planned something that would be sustainable as well as environment friendly. It would be located next to Pringle Creek Community – the latter being a green-development coming up on the remaining 32 acres of Fairview. Pringle Creek is not included in Morford’s holding and remains unaffected by plans gone awry with its next-door plot.

Morford’s plans for development envisage a project with mixed facilities. It will stand on more than 240 acres at 2250 Strong Road SE. There would be 816 single family home blocs on the south. On the north there would be multi-family homes, space for offices and shops as well as a 5-acre park. A site plan has also been drawn up for a school.

Gordon Root, the owner of another creditor does not think that these are anything but teething troubles and will not derail Morford’s project. Fairview owes Root Holdings more than $6 million. It too has started foreclosure proceedings for 145 acres. He is however of the opinion that for the welfare of all, every one should come forward to give Morford’s spectacular dream a big push.

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Government officials together with executives from prime mortgage lending firms of Massachusetts are to meet today to discuss avenues of escape for the victims of foreclosures.

Dan O’Connell, the secretary of Housing and Economic Development of the Patrick administration has taken the initiative. He corresponded with executives of top ten mortgage firms in Massachusetts asking them to participate. This is a leak information from a person who has seen the letter but chooses to remain anonymous. The meeting is to be held in the offices of Daniel Crane, the Director of the Office of Consumer Affairs and Business Regulation. The agenda however was not delineated.
Kofi Jones, the spokeswoman of O’Connell, confirmed the news but did not add anything new. According to her O’Connell was not available for comment. She said that a number of players were being invited to sit at the same table and thrash out a solution.
Sub-prime loans, taken out during the last few years, are mainly responsible for the increase in foreclosure filings in Massachusetts. Suddenly the loans have become delinquent.

Borrowers with poor credit history had been awarded the loans and it was very popular at the time of real estate boom because the initial rates were low. It tempted people to own property in costly Massachusetts. The borrowers wrongly estimated their own capacity to continue with repayments. The end of the road came when interests took a sharp swing upwards.

Governor Deval L. Patrick has already suggested enactment of laws to put a check on foreclosure rates. It included a clause that would require the applicants to sign a form relating to the fixed or adjustable rate of interest. Previous to this recent move, the Patrick administration had called a meeting of lenders, activists, and regulators in April. Suggestions were made asking the State to provide the money to refinance loans so that owners do not get thrown out on the streets.

The Banking Commissioner of Massachusetts state, Steven Antonakes had said in April that he had managed to obtain a temporary freeze for 11 property owners in this region and was already working out ways and means to help others. This action followed on the heels of the steps taken by Patrick in instructing members of his administration to go all out to help the hapless victims by directly negotiating with the lenders.

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In an atmosphere of carnival fun the auction proceeds in a packed room. In a fast and furious pace a three bedroom condo in South San Francisco is snapped up for $425,000. Over 2,300 people had crowded in. ‘Ringmen’ in tuxedos were managing the show. One even did a jig whenever there was a bid. Black and white clad women ‘runners’ clapped and cheered while rushing around with paper and board. Some sold out in two minutes with only four bidders. All the while snack dealers made hay while the accompanying children played around in the sun outside.

That was only one of the 88 properties up for foreclosure mostly in the Counties of Alameda, Contra Costa and Solana. In a decade there had not been the likes of such a large-scale show in the foreclosure field. There was no doubt that the rising tidal waves were lashing the Bay Area also.

The company conducting the auction, had been hibernating for the last ten years. The market was too hot. But now they were hot on the trails of a cooling market and making up for lost time. In the matter of a month they had auctioned off 290 foreclosed properties in Southern California. They were now on a hurricane tour of the county, knee-deep in the foreclosure crisis. Financial institutions are selling off their properties via the auction route on the reasoning that a quick sale is better than a slow one. Losses can be repaired as against time that never comes back.

The game plan was that each property had declared a minimum bid but there was a y secret reserve price. The latter was the minimum acceptable to the banks. Bids below the actual reserve price were given the denial notice within a week. The rates were fine for those who want to live in it but not tempting enough for investors.

Bidders had to bring $5,000 cashier’s cheque. The top bidder was expected to put down 5% of the bid price and sign over the cashier’s cheque together with the personal cheque for the balance. A 5% buyers fee has to be paid to defray costs. The realtors get a seller’s fee. The difference between foreclosure and county auctions is that the latter is out of reach of the common man because it requires all payments in cash. Moreover the title deeds may or may not be clear.

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New Jersey realtors are now more accessible to clients – thanks to their turning more than never before to the Internet and like devices. This is on the basis of a survey started by National Association of Realtors, on behalf of New Jersey Association of Realtors (NJAR). The Survey reveals the activities and demographic leanings of the realtor group.

As elsewhere, the real estate industry too is constantly changing. Change means a shift in needs and expectations of clients. Realtors are swiftly adapting to the change by turning to the Internet and mobile phones. Users of web sites increased from 49% in 2005 to 84% in 2006. The use of the website of NAR, REALTOR.com has shot up from 52% in 2005 to 89% in 2006. 91% use e-mail showing an increase of 81% from 2005.
Cell phone usage has also increased and is up by 10%.
Realtors are going for advertising in newspapers in a big way. The numbers rose from 9% in 2005 to 28% in 2006.

About 93% of real estate firms (56% in New Jersey) have their own web sites. Most of them use the sites to host hot news on the community, its demographics, reports on schools, mortgages, and financial weather – making it a virtual tour. Most of the sites have links to state and local governments, lenders, mortgage and other real estate service providers.

New Jersey realtors work for about 40 hours per week and earn $41,200 on an average. This can be compared with the national number of $47,700. The typical New Jersey realtor has been at his job for nine years – this being two more than the national average. Most (about 95%) are confident that they will hold on with vigour for another two years.
According to the survey the realtors are very well educated. The NAR and its sister institutions award professional designation. To earn it the realtors are expected to complete courses, which will groom them to serve clients in a particular field of the real estate business in an improved manner.

These findings are on the base of a questionnaire, which NAR circulated via the mail on January 2007 to 70,000 realtors, picking at random. The same set was distributed to another 70,000 through the Internet. 10, 774 replies were received of which 147 were rejected. Thus the response rate was 4.9%.

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There is hot solution for defaulters of mortgage payments facing foreclosures. The numbers have doubled in Alameda County, tripled in Santa Mateo and San Joaquin according to RealtyTrac.com.

63 years old Harrell was one of the unfortunate victims who got a foreclosure notice. But unlike others he did something different. He picked up the phone and dialed the toll free hotline (888) 995-HOPE. Harrell was not going to give up his 31-year-old home without a fight. A workable repayment plan was worked out for refinancing the loan he had taken in 2005. He continued to keep his hearth and home.

The Hotline was set up in June 2005 to give immediate foreclosure counselling. A national advertising campaign will now be kicked off to acquaint many others of the services at a time when foreclosures are rising at an alarming rate. In Alameda County the number has gone up to 783 from 338 a year ago.
Nearly half of those who receive foreclosure notices via mail never respond to the lenders because they feel that from that end no help would be coming. It was a general feeling that the lenders were mainly interested in taking over the property. But it is not always so – actually lenders want their money.

NeighborWorks America, a national non-profit organization initiated this help-line over the phone and reaches out a helping hand to these unfortunate victims. The hotline is the brainchild of Homeownership Preservation Foundation and NeighborWorks America. The latter teams up with over 240 community organizations to provide counsellings in matters of real estate, targeting mainly with low and middle income.

The California Association of Mortgage Brokers and the California Mortgage Bankers Association have lent their voice and tells the owners to contact lenders without delay.

As foreclosures rise so do calls to the HOPE hotline. Adjustable mortgage rates invariably rise after the completion of the period of low introductory payments. In the previous year the hotline received 24,000 calls from all over the country. Till date in the current year the calls have already shot up to 35,000.
Those seeking help should find out the local affiliate of NeighborWorks America. Housing counselors within housing development communities work jointly with them and give advice specific to each situation. Other sufferers need not wait for the advertisement campaign to start because the hotline is running. Pick up the phone and talk.

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Foreclosure tornados are blowing off roofs above the heads of many in Tulare County. The rate is up 105.7%. Scam artists parading as consultants are using strong-arm tactics to make owners sell off at low rates.

To forestall predators and protect victims a public education programme has been launched. The idea is to bring matters to the notice of the District Attorneys Fraud Unit. Launched in January 2006 it has already investigated 25 reports related to real estate fraud. This month one Yrays Cruz was taken into custody and charged with forgery, grand theft and wrongful use of personal identification information.

The unit not only investigates and prosecutes but also warns people when they are at risk and what they can do to avoid becoming a victim. Among those in financial distress the worst affected are the poor, elderly and unsophisticated – especially those not fully conversant with English.
Residents are warned about the pitfalls in sub-prime lending practices. The original purpose of the latter was to help those with bad credit to become house owners. But by hurting those it aimed to help, has defeated the very purpose. For sometime the monthly repayments were reasonable but soon interest rates began to fluctuate and went beyond the capacity of the borrowers. It led to one foreclosure after another.

Those facing foreclosure should be made aware of certain cardinal points. First be sure that the agent has a validated license. Never transfer ownership without reading and understanding the contract. The contract must be in writing and explained in a language understandable to the owner and include the name, telephone number and address of the provider (of sales or service) the exact amount to be received or paid, the services to be provided and all the chargeable fees. Each agreement must show clearly that the owner has a right to cancel and also delineate the procedure of cancellation. During the cancellation period, (date to be clearly stated) the unit cannot be sold or transferred and must be free from legal and financial obligations. The contract must be signed before agreeing to sign any documents of transfer. Insist on a copy of the contract. For more detailed information the affected may contact the relevant authorities.

Fraud unit of District Attorney – (559) 7333-660 ext. 213/www.datulareco.org/The California Department of Real Estate – www.dre.ca.gov./US department of housing and urban development – www.hud.gov./US department of veteran affairs - www.homeloans.va.gov.

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