Posts Tagged ‘lenders’

Foreclosures are challenging Congress and as yet seem to be enjoying the last laugh. Democrat Rep. Tim Walz speaks about his own personal experience. The house next to his has been in foreclosure for more than a year and pulled down the value of his own unit by 20%. The story of Walz is being repeated all over Minnesota with the bursting of the housing bubble. Both Democrats and Republicans are harangued with complaints from community leaders about the rot spreading from foreclosed vacant houses. Leaders of both parties are huddled together sitting at the same table desperate to find solutions to tackle the common enemy.

The House and Senate have passed bills and more are in the offing. There are doubts if the Democratic led Congress will be able to come to terms with Bush administration and the President’s veto threat.

The House bill consists of three parts aimed at avoiding foreclosures with the hope of bringing back the mortgage market to its rails. It allotted greater powers to the Federal Housing Agency to be able to insure refinanced mortgages. On their part the lenders would have to reduce the amount of loan in tune with the prevailing market prices. Secondly the bill allows $11 billion as tax credits to buyers and mortgage holders who refrain form itemizing their respective tax deductions. This also includes the granting of $7,500 to new buyers. It allots to the state $10 billion for floating mortgage revenue bonds to help in the refinancing of sub-prime mortgages. Thirdly the bill made changes in the Freddie Mac and Fannie Mae mortgage companies that are federally sponsored.

Democrats together with a large Republican approval supported the bill but the numbers were not strong enough to override the veto threat. The critics said that it was a bail out for buyers by putting the market at jeopardy. Republican Rep. John Kline criticized the bill for doing ‘little to address the current foreclosure problems’. The market should be allowed to find its level. However he did not oppose other forms of assistance. Walz stressed on voluntary moves between lenders and borrowers. He did not want the blame game to sling mud at each other. His contention was that since the forest is already on fire something should be immediately done before arguing about who started it. The problem should be tackled keeping in view the interests of the borrowers, the mortgage industry as well as the market.

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South Bay foreclosure figures are alarming. The question is – how much more can this region take? Statistics show that on each average working day there are 1,038 foreclosure related auctions. In April Santa Clara County recorded 500 postings – this being a 47% hike from the previous month of March 2008 and a 585 jump from April 2007. The county now ranks 40th in March this year among the counties in California a regards foreclosures per capita. Loans worth $292.4 million were foreclosed upon last March.
Foreclosure is a judicial process. Of late it has hit the headlines because of the alarming increase in numbers. When a borrower defaults a notice is sent regarding foreclosure. The county records office is also intimated. If after about four months the borrower is unable to become current in mortgage dues then an auction sale is conducted at the courthouse. For last year or so the houses are not being sold at the public auctions and are reverting back to the bankers. The latter are offering huge discounts but even that is not letting the ball start rolling in the real estate market.
In Santa Clara on an average 15% discount is being offered at the auctions. It means that if the previous owner owed the bank $400,000 the bank isnow willing to settle the matter for $340,000. Increase in default notices point to escalation of the foreclosure crisis. It is definitely not petering off. In April there were 44,101 notices in the state. It was an increase of 14% from January 2008. The lenders are now more often agreeing to short sales for a quick settlement of the matter without going through the whole process of foreclosures. A short sale takes place when the lender allows the borrower to sell the house even though the value of the house is less than the loan amount. However the process of short sale involving approvals from the lenders is painstakingly slow. Invariably the borrowers complain that they have managed to find a buyer in these difficult days but the approval has not come through. So the deal is put off. The lenders complain that they are deluged with such requests and do not have the infrastructure to deal with it swiftly. Each one is a specific case and has to be handled accordingly. The best way is to seek refinancing and modification so that the borrower can continue to stay in the house that is the home.

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More and more personal stories are tumbling in to show that despite anticipations more lenders are failing to stop foreclosures. The companies do not have the infrastructure to handle the sudden increase in volume of work.

Thomas and Tracy Barboza are just one of many who are suffering. Three times they found an escape route from foreclosure but three times their lender failed expectations. Finding it impossible to continue with their mortgage the Barbozas are trying to sell their house. Since last summer they have got three offers. The offers are however less than the mortgage amount. This made their lender – Countrywide, refuse to write off a part of the loan and allow the sale. The couple has already moved to a sparse flat ready for the sale. But things are not maturing. Thousands of others like them are in the same boat. The lenders remain adamant and unrelenting.

On the other hand the loan companies complain that they do not have the infrastructure to deal with thousands of negotiations and appeals for short sales. This is one of the reasons for their silence, which may be interpreted as refusal. Those affected in and involved in the matter like the house owners and realtors compare this to a black hole; the system just cannot be cracked and everything is sucked into it. Automated phone calls cannot be penetrated and callers are made to wait for hours. Inside the company paper work is piling up and those dealing with the matter do not have the final authority to make a decision.

The American Securitization Forum that comprises of mortgage holders and companies in the loan servicing business, say that all steps are being taken to address the issue. The problem is that nothing can be steam rolled as each case is specific and needs individual attention. Some loan companies have introduced online application forms. Nevertheless short sales pose specific problems, as it would mean waiving a chunk of the principal loan. This could be something around $100,000. First and second mortgages on the same property further complicates matters.

But consumer groups say that rejecting a short sale offer is something positive and cannot be explained away easily. Countrywide has now agreed to expedite the matter of short sale. The firm has apologized to the Barbozas but as yet the couple has not got a positive reply.

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The virus is raging across the country. Foreclosures respect nothing – socio-economic barriers, regions, or celebrity status. Like fire it has an insatiable appetite and is truly communistic in its approach – levels high and low into one big gulp. It is a challenge – one of the many mankind has always been facing. Man, being man must rise to it and go about immunizing foreclosures – taking steps to neutralize it.

Foreclosures jumped by 57% from March 2007 to March 2008. It increased by 5% from February to March this year. The blame is being put on predatory lending practices. When interest rates began to increase foreclosures began to take over the scene. One by one the houses began to tumble and fell vacant. The borrowers lost their property as well credit ratings. The lenders found themselves overwhelmed with unsold units while the neighbourhoods became dotted with eerie desolate houses. Crime and disease began to play havoc. A massive credit crunch hit the economy while tax kitties began to dry up. Foreclosures also resulted from the usual personal causes – illness, death, job loss and or divorce.

Considering the atmosphere even if one is not in foreclosure it is better to be forewarned so as to be forearmed. It is like being vaccinated to avoid ahead the attack from the virus.

The latest buzzword is ‘save’! Observe thrift and save for a rainy day. Put something in the piggy bank everyday if not every month. If there is a temporary loss of income one can tide over the mortgage commitments by dipping into this fund. The best thing is to target putting an amount that will cover a lapse of three months.

Saving will become effective by reducing expenses. Cutting down on unnecessary expenses like dining out or disconnecting premium cable channels will go a long way in reducing spending.

If the house is already inside the foreclosure risk zone and the borrower has tripped on one payment there is still hope to remedy matters. The house that is the home can still be saved. The banks do not want any more foreclosures. Consequently they are amenable to talks since the process is costly for the lender also. To foreclose a house the average cost is $40,000. Free advice and often help is available from HUD authorized counseling agencies. The avenues of help open are forbearance, reinstatement, modification, short sale, deed in lieu of foreclosure and assumption.

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House Democrats are going ahead with a bill, which will offer states $15 billion in grants and loans to buy and revamp deserted homes. The Bush administration has threatened to veto this legislation. The White House’s Office of Management and Budget said that if the bill were to be presented to President George W. Bush, he would veto it, on the advice of his senior advisers. According to a statement released in Washington today, the White House has said that the ones to benefit from this plan would be private lenders – who now own abandoned property- rather than homeowners who have been struggling hard to prevent their homes from going into foreclosure. However, the House Democrats still plan to go ahead with the measure tomorrow.

The measure has been initiated by the House Democrats. The U.S. House of Representatives may have to weigh tomorrow as lawmakers try to arrest this foreclosures in the wake of the sub prime mortgage crisis. According to Irvine, California based RealtyTrac Inc, the foreclosure filings have shot up by 57 percent in March from the previous year.

The plan proposed by the House Democrats is as follows. The states would repair the abandoned homes. They would find people to stay in these homes since, according to lawmakers, the foreclosed property bring down the value of the neighbouring properties. Funds would be allotted based on a state’s percentage of foreclosure. Obviously therefore, the worst victims such as Ohio and Nevada would benefit the most.

According to the OMB, the above-mentioned legislation would just create an incentive for more lenders to foreclose rather than sort out matters with homeowners. However, the House Financial Services Committee Chairman Barney Frank, who put forward the plan in March, refused to accept the criticism, stating the Federal Reserve’s rescue of Bear Stearns. The House has decided to take into consideration Frank’s plan to allow the Federal Housing Administration insure up to $300 billion in mortgages, only after loan holders agree to cut down the principal. This legislation has brought in negative attention from House Republicans at a press conference in Washington.

John Boehner is a House Minority leader and an Ohio Republican. He said that they were talking about a $300 billion bailout for those people who were scamming the market. Besides, the lawmakers have also put forward another plan. It includes a one-time homebuyer tax credit of up to $10,000.

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Four years ago Ellen Scrivens had bought a house. She refinanced her loan contracting an interest-only loan but two months later she lost her job and began to falter in her monthly payments. At the time of refinancing the lender had said that the monthly payment of about $2,000 included taxes and insurance. But in reality it did not. However with a running job she could have managed the installment. But six months without a job shook her foundations. Scrivens now sought the help of a counseling agency. She contacted Frederick County Action Agency, and Joe Baldi ex-alderman took up her case. Baldi and his colleague Peterson have taken the lead in this matter of helping people to stay on in the houses that are their homes.

Many people are ashamed to come out in the open about their impending foreclosure because of social stigma. The foreclosure fires rage on with no signs of the flames being doused. The numbers seeking help from FCCAA have doubled each quarter. It went up from 12 individuals in the third quarter to 24 in the fourth and jumping to 48 during the first quarter of this year. These numbers are just the tip of the iceberg. Thousands are in need of help.

Keith Patterson, a real estate agent blames defective government policy for this debacle. Even the state’s highest tax official, Comptroller Peter Franchot lays the blame on the Congress. For the last few years Washington has become the Wild West where any and everything is allowed. A price has to be paid by all for many years to come for this laxity he went on to add. They just looked the other way while all this was going on in the sub-prime category. The matter of minimum down payment, proof of income levels as well as floating interest rates was ignored. The lenders asked for 80% on the first mortgage, 10% on the second one and 10% on the third. Sometimes it was 80/20 contracts. The second and third agreements were at much higher rates ranging from 10% to 15%. At first the going was good but soon it became a problem for the mortgage industry when with falling real estate these mortgages could no longer be sold to Walls Street.

However the good news is that free help is available in Frederick County if foreclosure victims seek timely help.

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Trying to slow down the alarming pace of the crisis, the California Senate has given the green signal to a foreclosure bill on Monday. For a month the bill had been tossed around between the parties leading to a stalemate.

Now the bill has seen the light of day. According to it, the lender will have to try at least three times to get in touch with the borrower personally or by telephone. This will be within 30 days from sending the default notice. When the communication lines open, the lender will try and find out the financial position of the borrower and seek alternatives to foreclosure.

The President of the Senate Pro Tem Don Perata (D-Oakland) introduced the bill. The last one is similar to the one he had introduced earlier. In the latter the two parties would have had to sit face-to-face but it fell one short of the required majority in January. Except for one, all the Republicans voted against it. The bill has now been amended to allow phone conferences - allowing the mortgage banking party to drop its opposition. This time the bill could go through with 10 opposing. Their concern was that the reeling mortgage industry would get into a worse jam. George Runner (R-Lancaster) said that the worry continued to remain because the bill ‘still has the potential to interrupt liquidity in the market’. However Dustin Hobbs of California Mortgage Bankers Association supported the bill because he said that its primary clause is something that everyone is unanimous about – communication between lenders and borrowers. For final approval the bill now moves on to the Assembly.

The bill will give the borrowers 30 days after talks with the lender, to take the necessary steps for keeping their houses. The law applies only to those mortgages contracted between 1st January 2003 and 31st December 2007. This was the period in which all the difficult loans debuted. The bill also is strict about the maintenance of vacant houses by the repossessing lenders.

Perata stressed that the biggest problem is to ensure that before people are evicted from their houses they get an opportunity to sort out the matter with the lender on a personal level.

The foreclosure figures of California are depressing. In the first quarter of this year the numbers were a record high since the last 15 years.

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Foreclosures spare none – not even the brave young, staking their lives for the country abroad. Military and financial aid bodies are commenting that there are an increasing number of troops complaining about their failure to keep pace with mortgages and are facing risk of losing their hearth and homes to foreclosures. US troops are battling the enemy abroad and foreclosures at home.

Citing statistics from legal office, Army spokesperson Lt. Co. Anne Edgecomb commented that it has been noticed in the army that more and more soldiers and their families are seeking assistance for battling foreclosures. It is unfortunate that neither the Pentagon nor the Veteran Affairs department are detailing the number of military families caught in the foreclosure net. USA financial services company based in San Antonio keeps figures of the delinquencies of army families but they refused to release these. A large number of army families are involved in the total of 1.2 million foreclosures that have slapped the entire nation.

Nine of Veteran Affairs regional centres have noted increase in help calls from the veterans as well as from those in active duty. These are the findings of an informal pole. Houston based Money Management International said that the numbers of help calls coming from the troops have doubled. Previously the calls were two dozen per month during the first quarter of 2007 but this has become four dozen this year.

As per the law some amount of protection is given to the troops from foreclosures – Service Members Civil Relief Act. But it is not comprehensive as the lenders, with orders from the court, can foreclosure even if the owner is on the battle field. As the foreclosure problems worsen the legal officers of the army are gearing themselves for a flood of calls this summer. This is the time when the soldiers usually change their work and shift from one base to another. Often they are compelled to sell their houses. The foreclosure tide may affect GIs who live in rented accommodation.

One victim is Staff Sgt. Daniel Escamilla posted in Iraq in 2007. He had to negotiate from the battlefield with the lender regarding questionable penalties for rise in floating interest rates. His monthly payments had swelled from $967 to over $3,000. Escamilla has to worry not only about surviving on the war front but also about the day to day existence of his family back at home.

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