Posts Tagged ‘Foreclosures’

In the middle of November of the waning year of 2008 it seems that the foreclosure crisis has worsened with numbers reaching for the sky. Meanwhile the authorities at all levels continue to try to contain the menace by administering various measures. The foreclosure crisis has led to the sprouting of foreclosure-mills that handle en masse cases on behalf of lenders and borrowers. It has brought in an endless supply of work that are not always palatable. There are sanctions, stern admonitions from judges and the like. The judges too are a harassed lot as they tackle increasing number of foreclosure related cases. Invariably this leads to mistakes and errors.

One interesting case is that of widow Joanne Fredenburg who owned a house in Lehigh, Florida. The state is one of the worst hit foreclosure zones where real estate prices have fallen to dangerous low levels. In October 2008, Joanne was served with not only one but with two foreclosure notices. These were from two different lenders who claimed to be in possession of her promissory note and the mortgage. It is alleged that she owes each of them $276,000 – which is ridiculous.

Of the two lawsuits one seems to make better sense. The plaintiff in this case is the Deutsche Bank. The latter here is a trustee for investors who have purchased mortgage supported securities. The various investors are the collective owner of loans like that of Joanne’s. A servicing company that collects mortgage payments representing the investors has filed the other legal suit. The latter cannot file the suit, as a servicer cannot be the owner of a loan. After enquiry proceedings being conducted regarding this matter the servicing company, American Home Mortgage Servicing, decided to withdraw the suit.

Despite this gesture the lawyer representing Joanne is not satisfied. He will continue trying to find out what payments had been made by his client, whether they were paid to the proper entity and whether the credit was proper.

So far the general trend had been for the accused not to contest the forseclosure suits. As a result the plaintiffs get away with almost anything unchallenged. Stray cases like that of Joanne Fredenburg bring into focus the prevailing irregularities. Entities seem to be filing and winning foreclosure suits on notes they do not own. It is hoped that Florida Circuit Judges will be able to enlighten the interested about what is going on.

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The mortgage investors and middlemen are denying that they are hindering the foreclosure relief measures. The lawmakers are skeptical about their sincerity.

Tom Deutsch of American Securitization Forum speaking to the House Financial Services Committee said, “Because foreclosure is usually the most costly means of resolving a loan default, it is typically the least-preferred alternative for addressing a defaulted loan.”

The service companies handling billing, taxes and other incidental tasks of mortgaged properties are empowered to modify the loans. It is mandatory of them for them to do so if the change will cause less loss than if the mortgage firm continued with the mortgage.

A reduction in interest or the principal of the mortgages that have been parceled into securities would greatly help the foreclosure victims by cutting down on their monthly payments. The investors too would have to incur greater losses by continuing with the foreclosure process. Spencer Bachus of Alabama (Republican) said, “Fear of being sued by unhappy investors has served as powerful disincentive for mortgage services considering whether to modify a troubled borrower’s mortgage.”

Another factor that deterred service companies from taking the initiative in loan modification is that they earned fees by mailing statements and collecting monthly dues from the house owners. But if they proceeded with loan modifications they would not tuck anything into their pockets.

The picture was quite different about three decades ago. The banks owned the mortgage without any ambiguity. But today the mortgage or may be a slice of it could be owned as a mortgage-backed-security by any type of investor.

According to the Federal Reserve $2.8 trillion of the $14.8 trillion of pending mortgage debts are held as mortgage-backed-security that had been made possible by the creation of loan pools. Fannie Mae and Freddie Mac now hold $4.2 trillion as mortgage debt.

Rep. Barney Frank (Democrat) critically remarks that people are not getting help – that is what he is seeing all around. It is difficult to believe otherwise. He said, “Who am I going to believe, you or my eyes?”

Deutsch clarified that the mortgage servicers have to do a lot of tight rope walking. They can be legally sued for “over modification” and also for not doing as much as is required to help the foreclosure victims.

The legal counsel of Managed Funds Association that looks after hedge funds said that modifications are preferred to foreclosures.

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From trends being noticed since October it seems that Henry M. Paulson’s toxic plan is not going to be of much use for foreclosure victims. The observers are getting inconsistent signals.

Paulson has decided not to buy soured bank assets. This indicates that he has drawn two conclusions regarding the jumbo $700 bailout package.

Firstly it seems he has realized that the plan would not work out properly. Secondly it appears that the financial and economist pundits who were wary about the direct injection of capital into the banking system seems to have been in the right from the very beginning.

Paulson recently announced that the federal government would soon give up the plans of purchasing troubled mortgage-supported securities from the banks and other jumbo investors. It will now concentrate on how to defreeze the credit markets. Only a week after launching the bailout package Paulson has started giving indications that the focus of help had changed. The money would now go to buying preferred shares of the banks to allow for flow of capital. With the replacement of slow IV drip with an adrenaline shot sent direct to the heart, the stock market got a boost for few weeks. The recent announcement is not a surprise but a re-statement of something that has already happened. $60 billion is yet to be spent from the original outlay of $350 billion. So far the purchase of soured assets has not taken off.

This change of course has put USA at par with the measures being taken by Britain and the rest of Europe. Direct re-capitalization of the banks has become the rule here and the response to financial problems.

Concerns are being raised about the inconsistencies of Paulson. The original plan was labeled TARP – Troubled Asset Relief Program. In the maze of all this shifting the humble foreclosure victim is getting lost and forgotten. Campbell R. Harvey of Duke University said, “This was a major piece of legislation. TARP was what people were voting on, and now he announces that TARP is not going to be TARP.” Paulson and also the Congress are now failing to define the goal of TARP. It was targeting the troubled banks in the beginning but now the talk is about both banks and non-banks. The foreclosure issue seems to be lost in a maze of policies.

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The mortgage companies Fannie Mae, Freddie Mac and Citigroup Inc. are planning to halt foreclosures by cutting down on house loan payments. This will benefit thousands of troubled borrowers. Similar moves are being mulled over by other jumbo banks.

Fannie Mae and Freddie Mac will be cutting down both on the principal and interest of some loans. The terms of some others will be extended according to Federal Housing Finance Agency. The latter took over the controls of Fannie Mae and Freddie Mac last September.

The mortgage servicing companies are being pressurized by the Congress to work with the borrowers. The third quarter reports on foreclosures were alarming. Last month Morgan Chase said that it would put on hold foreclosures on few loans while it sorted out the problem of how to make payments easier of mortgages worth $110 billion that were troubling borrowers. Bank of America claimed that it had modified 226,000 loans in this current year.

Joel Naroff of Naroff Economic Advisors Inc. of Holland, Pennsylvania said, “If housing doesn’t get stabilized, it’s really going to continue to bleed the economy.” Naroff has been one of the most accurate forecasters.

Another jumbo bank, Citigroup, will reach out in the next six months to nearly 500,000 house owners having trouble with mortgages worth $20 billion. Citigroup claimed that they had assisted nearly 370,000 foreclosure victims struggling with mortgages worth $35 billion from 2007. The main aim of the bank is to see that people stay in their houses. For six consecutive quarters Citigroup has suffered losses on mortgage holdings. It has modified over 120,000 loans. This includes granting of extension to some in the first six months of 2008. Citigroup is concentrating mainly on borrowers from areas that are “likely to face extreme economic distress.” Citigroup will be targeting those owners who live in their mortgaged houses and have the income to run the new modified mortgages. Those who fulfill these conditions will be allowed a grace period from foreclosures.

The stocks of all three – Fannie Mae, Freddie Mac and Citigroup had fallen sharply in the New York Stock Exchange. According to RealtyTrac there were 765,558 foreclosures this third quarter of 2008 – the highest since 2005. Real estate prices tumbled by 20% in 20 metropolitan areas. The price of previously occupied houses in August was 32% less than the peak it had reached in September 2005.

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Coral Springs has been given a chance by the US Department of Housing and Urban development to deal with foreclosures by entering the housing business. The department has given Coral Springs $3,378,142 to deal with foreclosed homes. There are five ways of using the funds. These include purchase and rehabilitation of the foreclosed homes.

The idea has been applauded by Mayor Scott Brook. Brook feels that if foreclosed homes are purchased selectively, although maintenance will require money, ultimately the market will turn around. “I’m OK with the city being in the housing business,” he said. “I like the idea of selective purchase of abandoned homes. We will have to spend some money to maintain them, but the market will turn around. ”

However, Brook’s colleagues beg to differ. They feel that it is not for the city to enter into the housing and mortgage business. According to city Manager Mike Levinson, buyers will not be found for these foreclosed homes purchased by the City and it will mean extra expenses for the city. “We are not a housing authority; we are not in that business,” said Levinson. “We can acquire and renovate foreclosed homes, but where are the buyers going to come from? There isn’t a market out there. Levinsons’ views are shared by Vice Mayor Vince Boccard. Boccard estimates atleast another two years for the housing market to start turning. Commissioner Roy Gold also feels that it is beyond the scope of the city to enter into the mortgage business and act as landlords. Yet Roy Gold is reluctant to let $3.3 million pass by. He suggests examining all possibilities of getting the money without financially endangering Coral Springs.

The programme will be discussed by the commission at its forthcoming meeting in mid-November. Public input will be sought after all the details are given, according to Erdal Donmez, Assistant City Manager.

The money can also be used to purchase and develop foreclosed homes and properties, demolish structures and redevelop vacant or demolished properties. Another way of using the funds is to establish a land bank. This will be a public authority, which will hold, foreclosed property and manage it.

According to Donmez, despite foreclosures, the city is not acutely affected. The provision for demolition of structures is not applicable for Coral Springs, says Donmez. He says that the city already has rehabilitation and purchase assistance for foreclosure victims.

1st December is the deadline, which has been set for applying the programme.

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It is hoped that federal money rushing to the rescue of foreclosure-plagued Florida will be of help. Florida is one of the top states affected by the foreclosure crisis. This has made the federal government focus its attention on it. Florida, the Sunshine State will get more federal help than any other state in America.

The foreclosure mess is evident everywhere – untended backyards and gardens with tall grass, piles of rubbish and broken down fences. This is especially so in South Florida. The vacant derelict foreclosed houses bring down the property value of the adjoining houses and this has a snowballing effect affecting the entire state.

But help will soon be rolling in. South Florida will be getting $140 million for assisting the counties and cities plagued by foreclosures. The houses will be bought, repaired and resold as affordable units. Neighborhood Stabilization Program that is being run by HUD right across USA is releasing the funds. Right now the details are being finalized. The cities will identify those houses that have been foreclosed before going on to purchase, repair and then sell them to suitable qualified buyers.

Marty Larsen who is involved in this redevelopment work said, “This is to get rid of vacant foreclosed properties, restore neighborhoods. From that standpoint – long term – it’s gonna have a great benefit to the local municipalities.” He was speaking to reporter Carey Codd of CBS4. Carey was recalling his experiences of coming across houses where appliances had been ripped off, trash dumped everywhere, stagnant stinking pools and homes that had developed structural problems. He explained that the federal funds would be utilized to appoint workers to fix the problems and make the houses habitable.

Larsen categorically stated that although the funds would not solve the crisis it would help the help to clear up the foreclosure mess. Nobody wanted vacant properties lying around for quite some time. He said, “It’s not good, it’s counterproductive to market values; it’s counterproductive to everything we want to do in having good, safe quality neighborhoods.”

David Rosa of Miramar is one of the suffering many. He has two abandoned houses near his residence. He feels that if these two could be repaired and sold the complexion of the entire neighbourhood would change.

The federal money should be coming in by the middle of January.

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The aftermath of foreclosure crisis is haunting US Real Estate market, if the latest press reports are any indication. Market watchers report that Single-family home prices are heading south, particularly in the Western parts – a regretful 7.7% during the first quarter. This is the largest decline year-to-year ever since the National Association of Realtors started reporting property prices in 1982. Compared with the last three months of 2007, the median sale prices of housing properties fell to $196,300 – a 4.8% nose-dive.

Realty circles attribute this record decline to troubles faced in the financial markets, liquidity problems in particular. High priced markets attract jumbo loans and the last quarter has turned out only fewer originations in this segment. Realty experts hasten to add that California accounted for 40% of all sales with jumbo mortgages going over $417,000, and the liquidity crunch has it from the summer of 2007 to taper down in home sales to only 10%.

Another reason for this high priced markets sales getting discouraged could be, the Government sponsored agencies – Fannie Mae and Freddie Mac – raising the cap of jumbo loans from $417,000 to include prices up to $729,750 since February. Other mortgage lenders charge higher rates of interest for these conforming jumbos at 1% to 1.5% more than ordinary conforming loans, leading to fall of sales figures in higher price ranges.

The subprime implosion forced a lot of lower priced housing properties back on the markets, hitting hard the higher priced markets to suffer, which again has the effect of dragging down NAR’s statistics as above. California and similar other Sun Belt cities have the unfavorable combination of high prices as well as heavy proportions of subprime mortgages for losing big on the sales indexes.
Plummeting price lines are recoded thus – California, Sacramento 29.2% to $258,500 in comparison with last year’s prices; Riverside 27.7% to $287,100; Las Vegas 20.2% to $247,600 and Phoenix, Arizona 15.4% to $222,200.

Loss of employment due to factory closing is plaguing the Midwestern cities. So the median prices fell sharply as – Lansing, Michigan 26.9%. Out of 150 real estate markets studied, Saginaw, Michigan turns out the lowest median price – an amazingly low $65,400 for a housing property. Analysts are of the opinion that the factors behind such a steep fall are – weak industrial economics caused by the Big Three automakers – Ford, GM and Chrysler and deflating of the real estate bubble.

Interestingly in some quarters there is solace by showing gains in nearly one third of the markets, the best performance coming from New York reporting a rise in prices by 11.8% to $109,700; followed by Peoria, Illinois up by 10.4% to $119,400; and Spartanburg, S.C. by 10.2% to $130,300.
Region-wise results are – Northeast shows single-family home prices rising slightly by 3.2% to $280,000, while all others dipped. South dropping 7.5% to $164,200; Midwest reporting a fall of 7.9% to $142,700 and West plunging deep by 12.3% to $296,300.

Overall a gloomy future looms large on the markets by big rises in foreclosure filings hitting home prices severely in the last 12 months, where delinquencies more than doubled. During the first 3 months of the year some 155,000 home owners forfeited their homes to bank repossessions. The projection for 2009 is bleak since adjustable rate mortgages (ARMs) are expected to reset this year for higher rates, making defaults soaring further.
Inventory of unsold foreclosures has risen to an average of 10 months, adding up to the record number of 2.9 million vacant homes for want of takers. Builders looking to sell homes are forced to aggressive slashing of prices and adding up incentives to buyers, while housing starts have been held up at a 17 year low.

Finally the home sales figures at nearly 492,000 a month are hardly a 2/3rds of the peak in summer 2005. The general trend is condo prices are fetching better than single-family homes, the median price falling slightly by 3% since early 2007. The market projections for February 2009 indicate prices falling still worse.

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Alarmed at the phenomenal increase in foreclosures Sheriff Tom Dart of Cook County ordered his deputies not to participate in eviction of occupants from foreclosed houses. The staggering increase in foreclosures made him take this extreme step.

Foreclosures are not just about figures and statistics but tears of individuals. This is the story of one individual who fought desperately to save the house that her mother had proudly bought in 2004.

Since this was the first house the lady had bought she had qualified for a loan with the help of Wisconsin Housing and Economic Development Authority by paying 20% down payment. For some time everything was hunky dory.

Then personal problems surfaced. She had been battling with breast cancer in 2000. This surfaced in May 2005 and within another two years she died. She left behind for her daughter not only memories but also a pile of unpaid bills together with a mortgage. The equity had been used up during the time when she could no longer work.

The daughter dealt with the equity problem and then approached WHEDA to know about paying off the mortgage. She was surprised to know that already foreclosure proceedings had been started! One of the terms of the mortgage loan was that the borrower should be in occupation of the unit. Since the mother had died the lenders now began to take advantage of the clause.

The daughter tried to contact the firm in Milwaukee but had a trying time with the elusive staff. Calls remained unanswered. After three months she was given the figure of the pay off. Apart from the principal (that the daughter knew beforehand) it included thousands of dollars as accumulated interest and legal charges.

The daughter did not think that it was all clean and clear. She had asked for the accounts for quite some time and saw no reason why the extra months interest should be borne by her. She decided to stand up for a fight. Unfortunately the judge was against her. For her the war now took on another complexion – she felt for the thousands of others who were facing foreclosure unjustifiably. She was ready to pay but not the extra amount.

She is one of the many who are now standing beside Sheriff Dart giving him their full moral support for the steps he is taking to contain the foreclosure evictions.

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