Archive for April, 2008

Although tackling the problem of foreclosures is difficult it is not impossible. There are many foreclosure options – provided one hunts for these. Peter Goodman is an attorney. Since 1992 he has been dabbling in real estate and is keen to help the novice buyer. He has been asked to speak on various on what options and help are available for foreclosure victims. Together with Rafael Jose, Peter Goodman has set up Good Home Help a Loss Mitigation company. They are attending to individual distress calls. Borrowers are being helped to continue to stay in the houses that are their homes until finances can be worked out to bring down the mortgage to affordable levels. In cases where even this much the house owners cannot afford, then alternative arrangements are made for selling the unit.

A short sale benefits both sides. The lender does not have to go through the time, money and energy consuming process of foreclosure while the borrower is spared the ignominy of foreclosure that leads to loss of credit rating. In a short sale the value of the house is less than the loan amount. Part of the debt is thus forgiven. The other alternative is deed in lieu of foreclosures. The house is handed back to the lender to do what it will do while the borrower escapes the dragnet of foreclosure. It is now the responsibility of the lender to sell the house and realize whatever can be salvaged. More often than not the lenders usually agree to a short sale because then the latter does not suffer the hassle of selling the unit. Most of the units can be bought for a price that is less than the 15% or even 20% of the current rates.

Taking advantage of the naïve borrowers boiling in the foreclosure cauldron, many unscrupulous scammers are taking advantage. In the name of help they are picking the bones of the half dead foreclosure victims. They are taking advantage of the short sale possibilities. Another mode of operation is fabricating a HUD related settlement while flipping the unit for a quick profit. These operations help neither the borrower nor the neighbourhood. It only lines the pockets of the scammers who soon vanish from sight.

The approach of Good Home Help is new. They are trying to pair house owners with potential buyers. Many organizations – government and non-government groups are sanctioning loans to those qualified to buy foreclosed houses. Good Home Help provides the link.

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The gloomy apprehension is that soon one in 32 house owners in New York will be cursed with foreclosures within two years or so. The story of this debacle started with the taking of sub-prime loans. These large numbers of foreclosures will cause a loss of about $65 billion to the state and local administration. This is according to a report of The Pew Charitable Trusts.

Across the county the tax loss will amount to $365 billion. This calculates to New York bearing 18% of the net tax loss. Of all those who own houses in New York nearly 52% will lose $18,334 on the value of their properties. Nationally the figure is 43.5% of house owners having to bear with a median loss of $8,771.

The manager of Pew’s, Kil Huh has written a boom ‘Defaulting on the Dream’. He analyses that the focus is on New York because real estate values are astronomical with a high concentration of buildings. Thus more houses are affected when one in the locality suffers foreclosure.

According to the survey conducted by Pew’s, across US one out of every 33 house owners will be gobbled up by foreclosure in the forthcoming two years. Marks were allotted in which New York state did not fare too badly as regards severity of the challenge and its response to it. Its plus points are that New York has refinancing and scam protection programmes as well as arrangements for counseling and legal penalty clauses against predatory lending. But so far it has not come to an understanding with lenders regarding modification of loans so as to cover a large section. Also it has not been explicit about mortgage brokers following some rules regarding its attitude towards the borrowers – more transparency, more granting of time and arranging for counseling. Nine other states have initiated such steps.

However it cannot be denied that New York state has been very proactive in measures taken to tackle the foreclosure menace. But lots more has yet to be done to reach the affected house owners in New York city and the entire metropolitan area. These and other factors puts New York high amongst those states that have taken positive effective measures against foreclosures.

It has been so far difficult to get a clear accurate picture of the foreclosure crisis because of conflicting data. The area to be covered is vast – ranging from house prices to first hiccups in payment defaults.

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Only half a dozen turned up at the Merced County court to attend a foreclosure auction. The first property that came up on the list was the Pimentel dairy farm. Janice Pimental and her son Nick were also present on this day that was sad for them. The flashy auctioneer in sunglasses and jeans made the announcements and waited for bids. There were none. The dairy farm had been in operation for more than two decades – it being a family concern. It has now become the property of the local lender. Janice accepted the fate stoically.

The Pimental farm is in the luscious Central Valley of California – the famous fruit basket of the country. Today it has the highest number of foreclosure concentrations. Many are situated in rural towns. The foreclosure melt down is changing forever the character of this region.
The focus is on what is happening in the big cities but rural America has not been spared. This is the analysis of Housing Assistance Council, a non-profit organization based in Washington. Executive Director, Moises Loza commented that foreclosures are sparing none – “it is happening all over”. In fact the problem seems to be more widespread in small towns rather than cities. Rural housing includes 15% of the houses being mobile and prefabricated units. Three quarters of the latter were bought from loans taken on personal property and not mortgage. Thus when default occurs the property is taken over without going through the process of foreclosures. Here in rural America there are less banking bodies and so there is not much to choose from. It is easy for the people to fall prey to high interest rates and predatory lending. Accurate statistics of the rural scene is hard to obtain. In metropolitan areas the federal law makes it compulsory to disclose all lending operations. But this is not so with rural financial houses.
Merced County is ranking high on the foreclosure County list – it ranking 4th. San Joaquin County (where Stockton is located) ranks 2nd. Stanislaus County (with Modesto) ranks 3rd while no.1 is Caper Coral-Fort Myers in Florida.

In the three counties in California foreclosures were started on 3,100 units. Of these 1,300 were repossessed. One out of every one hundred units were tainted by foreclosure – the national average being one out of 557 houses. Those counties, like Merced, that witnessed a housing boom are today the worst sufferers.

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Foreclosures have hit the nation with Ohio being one of its worst targets. It has had its effect on the housing market where the sales have gone down by 16.8% from what it was in the previous year. This is according to the Ohio Association of Realtors. The example of the 10th Senate district can be cited. There were 10.4% lesser number of house transactions of sale and purchase. This is largely because of the increase in number of foreclosures. The Mortgage Bankers Association stated that Ohio has the highest number of foreclosures in the state.
Foreclosures affect not only the individuals and their families but also the entire community. Abandoned houses pose health hazards and attract criminals. This in turn causes the value of neighbouring houses to fall.

Ohio General Assembly and other state bodies are trying to find out legal means and programmes to protect Ohio from foreclosures. In September last year the Ohio Homebuyer’s Protection Act became effective. This made it compulsory for brokers and lenders to complete education course and obtain license before during business. It also included a note of warning that they could be hauled up by the court for any fraudulent activities contradicting the Consumer Sales Practice. The licensed brokers and agents would have to act bearing in mind the welfare of their clients. This would save consumers from predatory lenders.

Ohio state has announced with much fanfare its Save the Dream Foreclosure Prevention Public Awareness Campaign. To do so help has been taken of radio and television slots aiming to make the public aware of the grave implications of mortgage loans and the subsequent foreclosures that may follow if they delay action in seeking help.

The Bush administration in Washington is acting along similar lines so that borrowers are able to refinance to more affordable mortgages and thus avoid further foreclosures. The problem is that the worth of the property has now become less than the loan amount. This is because of the debacle in the real estate market following the foreclosure tsunami. The plan is that FHA lenders would forgive part of the loans by negotiating smaller mortgages. For this the lenders would get the support of the federal housing administration. House owners would also get free advise from government approved counselors. The contacts can be found over the website or a newly installed hotline. The dream of every American owning a house surrounded by a white fence continues to dominate the country.

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It is reads like a story book tale – except that it is true to life. Rick and Lisa Wain were shocked to find one fine day that their mortgage payment had spiked by $750 per month. They knew of course that their interes-only payment was to go up but they were hoping to refinance. This became impossible when the value of the house began to fall – and kept on falling. To add insult to injury – Rick who had two jobs, lost one. Lisa fell ill and could not go out for work. It was the perfect model of a financial failure. Time had run out. The couple would have to leave without delay. They have five children whom the have reared in this house that was their home for years recently they had acquired the ownership from Lisa’s mother and taken out a mortgage. They unsuccessfully tried to negotiate with the bank only to find that the bank had sold the mortgage to another party.

A friend tried to help the couple by buying on a short sale agenda but the bank wanted more than the friend could offer. The friend aimed at buying the house and then renting it out to the Wains and thus helps them to keep their credit ratings by avoiding a foreclosure. The end of the story is tragic – the Wains are moving out. For Lisa it is more agonizing than the others. For the most part of her life she has lived in this neighbourhood with known faces of relatives and friends around her. Her grandfather set up home here when he came from Sweden in 1909. He built this house in the 30’s and for 75 years this attachment has remained with his descendents. Lisa feels she is leaving behind her grandparents.

In a rented house they will start life from less than zero with a bad credit rating. No advice will be of help to the Wains but they can give advice by warning all and sundry about the pitfalls of foreclosures. A nice guy turns up to sell a mortgage – always be on the alert. This is exactly what happened when Rick’s salary was inflated to allow him to qualify for the mortgage. The best thing is to engage a lawyer while dealing with these ‘nice guys’. The next thing – seek help as soon as clouds appear and do not wait for rain to fall.

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A recently given Ohio appellate court decision might give the teeth Ohio’s state government requires to halt increasing foreclosures.

Last December the attorney general of Ohio, Marc Dann was not successful with 40 foreclosure cases in the state. These could not be dismissed. However the ruling on 7 of these is still pending. Tom Winters, the first assistant secretary to the attorney general says that a ruling by the court on 20th March by the 10th District Court of Appeals , Columbus, might turn the tide in their favour. This might be applied to other similar cases.

The attorney general’s office wanted the 40 cases to be dismissed because Ohio had been named as the defendant. It is a routine process for lenders to name the state and sometimes the city as well as the county as defendants together with the name of the borrower. This is because it is presumed that there may be tax defaults. It is a sort of ‘shot gun’ approach. The motions were dismissed because the state did not have any interest in the unit. Some lenders backed out and the state was denied in other instances. But the state did not get the chance as yet to argue that the lenders could not show clearly who owned the mortgages at the time of foreclosure. The message is that they should get their cases clear before filing.

In another move the attorney general’s office is trying to see that low and modest income families get free legal help while working out a settlement with the lenders. It will be great if the pace of foreclosure filings can be slowed down so that houses are not abandoned. But so far nothing has yet happened to crow about.

In 2007 Ohio stood 7th in the national foreclosure ratings with nearly 90,000 properties in some stage of foreclosure. It calculates to one out of 56 houses being in foreclosure. The state however is keen to help the at-risk house owners. A free toll free numbers has been started as a help line. The programme has been named Save the Dream by which legal help and advice will be available to the needy. There are 8 to 10 personnel working in the office ready to directly talk with individual sufferers to see which remedial measures will suit whom. The programme officially made its debut on 1st April 2008.

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One has to be brave to think about buying in Las Vegas or Tampa where the real estate market is sliding down from bad to worse. But in other cities there are growing signs of stabilization and one can try to snap up a bargain in foreclosed properties. The best places are Charlotte, Raleigh, Oklahoma, San Antonio and Albuquerque. Right now these five cities are the top five best options for the buyer to go to.

The largest 100 metro areas have been categorized according to the number of foreclosures within the ranges covering 3% to 4%. Riverside is 3.8%, Detroit is 4.8% while Seattle is 0.4% and Austin 0.8%. From these figures the buyer should be able to gauge the mood of the real estate market.

Apart from taking foreclosures as an yardstick there is another method related to correct valuation of the house. Undervalued houses do not always mean a sound investment. For instance a house in Detroit may be relatively cheap but the economic atmosphere here is bleak and this tells on the market. If Detroit had more jobs then the picture would have been different.

The other cities that measured up to quality of life as regards local economy are Raleigh and Oklahoma where foreclosure numbers were low while economic climate was also good.

The next point of focus was how real estate had been performing since 2006. In no city had there been big jumps but nevertheless in San Antonio prices had increased between 2006 and 2007 by 8.24%. Thus this city carries far less risk than others like Sacramento where prices had dropped during the same period by about 10%.

Having sifted through all these angles it was now necessary to see the gap between average prices and the foreclosure prices from reliable data to find out where the largest discounts were being offered by the banks. Stubborn sellers will not negotiate but cling on to their demands. Those who want to short sale are the best options for here the house is offered at a price that is less than the loan amount. On this count Charlotte is a good bet. Here the houses of foreclosed units are 28% below the average thus causing an average saving of $56,874. It is nothing to be ignored in a market where the average sale price stands at $147,299.

Online there are details of all the houses listed but it is wiser to go through renowned routes

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A federal grant has been made of $4.3 billion to help 7,000 foreclosure victims in Minnesota. It is the second largest sanctioned in the country related to the present crisis. It will help the state to hire more housing counselors to steer the borrowers through the maze of lender bureaucracy. Governor Tim Pawlenty commented that the state wants to go all out to prevent foreclosures. However he warned that it does not involve the foreclosure deferment bill that is raising much controversy while navigating through the House and Senate. This bill will make Minnesota the first state to announce a hold on some of the foreclosures while permitting borrowers to make reduced payments for a year. Pawlenty added that he would veto the bill when it would come to him. The step would have grave consequences that had not been anticipated. It will push up credit costs for the residents of Minnesota.

Apart from the federal grant the Marquetter Financial Companies will give the state more aid worth $5000,000 to help those who will benefit from a bridge loan and avoid foreclosure.
Minnesota has been particularly hard it. It is expected that there will be 37,000 foreclosures in 2008. Legislators at state and federal level are scrambling for solution as the entire socio-economic structure of the country is adversely affected. On Tuesday the Minnesota House passed a number of foreclosure related bills that would step up financial assistance and give protection to tenants and mobile house owners.

Packages aimed at foreclosure assistance are moving through the Congress as well as the Senate. This will sanction funds to local governments to enable them to buy foreclosed units, increase the scope of mortgage assistance and permit bankruptcy judges to modify the terms of the house loans. But it is not all smooth sailing. Senator Ellen Anderson (Democrat) said that the deferment bill is required to buy time allowing the Congress to find out more comprehensive measures to solving the foreclosure crisis, looming large over US. She commented that while the 37 extra counselors are most welcome nevertheless it is vital that the house owners are given more time to breathe form the foreclosure embrace that is choking them. The number of counselors will be doubled but the problem will remain with out of the state lenders. With the mortgages being bundled into packets it is now difficult to locate the lenders stationed around the globe.

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