Posts Tagged ‘loans’

With much fanfare housing relief has made its debut but too many conditions will help too few foreclosure victims. The sponsors say that about 500,000 will be helped but what about the cut off date of 1st October excludes many? The Senate Banking Committee passed a housing bill and panel chairperson Dodd was euphoric in claiming that many will benefit. It is however most unlikely that the magic figure will touch 500,000. Experts analyze that at the most 325,000 will be helped. It would cut down the apprehended number of future foreclosures by 8% for the forthcoming years, says analyst Alec Phillips of Goldman Sachs.

The key clause of the bill permits the Federal Housing Administration or FHA to insure new loans up to a limit of $300 billion. This is dependent on a condition – the lender will have to write down a part of the loans and bring it at par with the current appraised value of the units. The official version of bill has not yet been released.

The enforcement of the bill will take off from 1st October although previously it was assumed that 1st June would be the cut off date. The bill is connected to political expediency. The four-month pause will flush out a 1.5 million borrowers who had taken sub-prime loans and whose loans are geared to increase. By the time 1st October comes, many houses would have been swallowed up by foreclosures. Thus those whose rates went up from 1st January 2008 would not benefit from the bill but would be sacrificed to the wolves. The bill will help those whose rates will rise from the third quarter. In May the maximum resetting takes place. They too will not be able to avail of the opportunity of saving their houses. In those states however where the foreclosure process goes on for about a year the bill will help some.

If the Congress had addressed the problem before the massive numbers had reset, a substantial number of foreclosure victims would have been helped and the foreclosure numbers contained. There were however explanations Jaret Seiberg an expert from Stanford Group (Washington research firm dealing with policies) said “there’s upfront planning that needs to occur for this to be successful.”

Political heat is on with heated arguments between Democrats and Republicans. This has largely led to the delay in putting into action positive thoughts of help.

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So far Silicon Valley has been fortunate. The foreclosure attack on Silicon Valley has been relatively less severe in comparison to the rest of California. But real estate agents and tax experts believe that it is biding time – soon foreclosures will flood the valley.

At a recent meeting of Silicon Valley Association of Realtors, Pamela Simmons of Simmons and Purdy commented that foreclosures continue to rise as the state struggles through falling estate prices and at-risk mortgages. According to information complied by DataQuick, the Trustees Deeds numbered 47,171 during the first three months of 2008 as compared to 11,032 during the same period in 2007. This calculated to a jump of 327.6%.

About 18 months ago Simmons had noticed the first flow of foreclosure cases increasing. The first lot consisted of those who had no reason to buy a home at the very onset. They had no steady income and became easy targets of predatory lending tempted by nil down payment loans. These buyers were the first ones to succumb to foreclosures.

The second lot of foreclosure victims consisted of those in trouble for having contracted sub-prime mortgages with adjustable interest rates. These rates began to swing up throwing down the borrowers. It became impossible for them to keep pace with the upswing.

The third wave is now visible, says Simmons. These are house owners with negative amortization loans. It means these borrowers siphoned off equity from their house during the boom period but now that the prices of real estate have fallen they are getting entangled in the foreclosure net. For some the monthly payment has increased by as much as $3,000. The third group with multiple mortgages on their properties is referred to as ‘flippers’. It is like a game of musical chairs. Now that the music has stopped they do not have a chair to sit on!

Simmons further went on to explain the difference between judicial and non-judicial foreclosure. The former is processed through a court of law starting with the filing of complaint giving details of the debt. If the court is satisfied with the plea then it issues an order for the lender to proceed with an auction and realize dues together with incidental fees. The judicial process is extremely costly and may involve an expenditure of $100,000 for the lender. Non-judicial foreclosures are conducted without the mediation of the courts. Nearly all the foreclosures in California State are non-judicial.

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This time the women voters in
Clermont County are readying to battle foreclosures. The Clermont County League of Women Voters will be addressing the foreclosure problem during their meeting in May this year.

Foreclosures have churned into a national problem during the past few years. In Clermont County during 2006 there had been 2006 foreclosures as per figures released by Legal Aid Society of Southwest Ohio. In 2007 there had been over 1,000 foreclosures.

Analysts opine that there are three major factors behind this crisis. Firstly the credit standards had been too lax. It allowed people with modest income to be lured into buying houses they could ill afford. The temptation of no down payments and initial teaser rates were too much for them to resist. This predatory lending has harmed society and the economy. Predatory lending is that type of granting loans when the lender does not take into consideration the ability of the borrower to repay. On top of this the interest rates are usually very high. Loans were sanctioned after inflating the value of the property. But when the latter came down to realistic levels the loan amount remained higher than the price of the unit. Thus even by selling the house the borrower could not avoid the stigma of foreclosure. Predatory loans are also saddled with exorbitant pre-payment penalties making it impossible for the borrower to refinance.

Secondly the prices of essentials have suddenly started to increase. Medical bills, repair expenses have shot up while the income has often been going down if not been actually interrupted. Few weeks of unemployment will automatically lead to default in mortgage payments and end up in foreclosures.

The general depression in the economy has led to plants downing shutters. Layoffs have become common. Usually the income from two family members contributed to the running of the mortgage. Thus even if one lost a job the mortgage suffered. Illness and divorce have their negative impact also.

The women voters en bloc actively gave support to a bill passed in the previous year aimed at controlling predatory lending. The new law is being enforced now and it is hoped that it will address the abuses in the mortgage industry. The foreclosure on old loans however will continue to harangue society for many years to come. With interest rates rising there is apprehension that the country will be flooded anew with foreclosures.

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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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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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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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