The Invisible Recession

The Invisible Recession

“An in depth look into what really happened after the economic collapse”

Joshua Anderson. Lexington Realty Correspondent.

We have all seen the apparent signs of the big recession. First there was the mortgage crisis, the failed banks, the Wall Street scandals and of course the unemployment rate. All of this began when the housing market began to collapse and continued on a downward spiral. The more homes that were foreclosed, the less equity became available. Small businesses began to take a dive and within a matter of months the entire financial infrastructure of the United States was faltering at a record rate. As the smoke began to clear, massive layoffs ensued and corporate giants began to buckle.

One of the highlights in this crisis was the big Wall Street bailout. Stronger banks acquired the weaker banks and we all believed that we, the American people, were somehow going to benefit from this. The outcome, we didn’t, not at all in fact. The only noticeable signs we saw of this bailout was that Wamu’s became Chase and Merrill Lynch became Bank of America. Aside form the obvious acquisitions in the news; we were left waiting for a savior. Homeowners who were delinquent were expecting modifications that never came to fruition, and the unemployed waiting to be hired again. In the midst of this fiasco, several large banks were compensating there executives with skyrocketing incomes & bonuses.

While the rest of the economy was struggling to keep up, Bank of America CEO Thomas Montag received a total compensation of $29,930.431. This was considered only slightly larger that that of Wells Fargo CEO John Stumpf who made just over $21,000,000.  These numbers are astronomical and completely unfair to the American people who are barely able to stay in their homes. The most terrifying factor is that for those who are facing foreclosure thought they had a fighting chance. However, the Obama administration made it clear that stepping up foreclosures is the only way to stabilize the doomed housing market.

At this point in time, there are not many options available to those who are struggling. There is however some long term tips to keep in mind. Continuing education may be the best way to secure a great career and of course smart savings and investments. There may be a recession but as you can see there is a dramatic difference between those who are feeling the effects, and those who aren’t.

Obama Advocates Foreclosure

Obama Advocates Foreclosures

By Joshua C Anderson, Lexington Realty Correspondent November 14, 2010 3:39 PM PT

Los Angeles—The housing market has been jolted by several failed attempts to recover and the only solution at this point, seems to destroy and rebuild.

In the midst of the month long foreclosure moratorium, harsh decisions had to be made. Obama administration officials stated that all lending and servicing institutions needed to review there foreclosure policies and procedures, this however did not result in a mass of homeowners getting out of trouble. The officials made it clear that they did not support the moratorium for several reasons. One main point being that the housing market wouldn’t return to normal without foreclosures.

A stable market in the future does not come without consequences. The continuation of foreclosures will not only hurt the housing market, but it will also have an adverse affect on the overall economy. The Mortgage modification program was supposed to lower homeowner’s monthly payments by 31%. The program was a complete failure and many homeowners have been misinformed.  Laurie Goodman of Amherst Securities said in a statement, “What they have now realized is there are a lot of borrowers who can’t be saved and have to be moved through the foreclosure process.”

This will be a hard fact to address to the American people. There will be a lot of animosity and many will feel left out. There are however, alternative options to foreclosure. The most popular and less damaging is the short sale.

Southern California based Housing Assist of America has made quite an impact on the short sale market. They are among the nation’s best negotiators and have over a 90% percent success rate. Typically in a short sale the lender will accept less than what you owe on the property and in most cases forgive the left over balance. The consequences are significantly less detrimental to the homeowner’s credit and financial situation than that in a foreclosure. Housing Assist of America has recently made an alliance with tax powerhouse H&R Block. Together, they educate at risk homeowners on short sales and tax ramifications. There scheduled to host a free seminar next week in Culver City, a hard hit  suburb of Los Angeles. As the foreclosures in the nation increase so do the opportunities for scammers. When the loan modification wave hit, several fly by night firms starting collection retainer fees from homeowners, only to yield no results. Other signs to watch out for include companies that promise results and charge an upfront fee. Banks do not charge there clients to modify or short sale there homes.

In this vulnerable time it’s important to be vigilant to what your options are. The government has made it clear that foreclosures will continue and everyone who falls into that category will inevitably fall into it, one way or the other. From a homeowner’s perspective, the best option is to accept the demise and seek out the best exit strategy. For those who are still holding on to hope or speculation, this message from the top should clearly define the future housing forecast.

“As we near the end of 2010, the housing market remains fragile, and has recently come under renewed pressure from slowing economic growth, weaker employment and foreclosure uncertainties, We believe that it will be a considerable time until the housing market has a sustained recovery.” A chilling statement from Freddie (FMCC) Mac CEO, Charles Haldeman.

Foreclosure Moratorium

What You Need To Know About the Foreclosure Moratorium

By Joshua C Anderson, Lexington Realty correspondent. October 19, 2010

Los Angeles (Lexington Realty) – - In the recent weeks all of the major lenders and loan servicers have all followed the same trend of halting there foreclosures. To a delinquent homeowner that may sound like the miracle they were praying for. However, the situation is much more complex than they ever imagined.

What the foreclosure moratorium is in a conspectus is merely a break for the servicers to review documentation that may have been overlooked in the overwhelming housing crisis. Many banks will go back and scrutinize the terms and conditions of the delinquent loans in an effort to help homeowners who may have been victims of fraud. The problem that persists is that many homeowners were not victims at all. First time borrowers knew they were getting into a home they could never afford, and in addition to housing prices dramatically dropping, many of them lost there jobs and were unable to pay there mortgages. The lenders will not excuse past due payments because they simply could not afford it. After the bail out of several financial institutions, lenders were required by the government to stimulate the economy by restructuring loans. Within weeks, even homeowners who were current on payments were applying for modifications. Unfortunately, the trend did not last long and would leave a trail of foreclosure in its midst.

The modification boom in many opinions was a disaster. Recent reports from the Obama administration stated that 60% of modified homeowners failed the program within the first six months, and millions of others never had the chance. In the climax of the modification boom, several third party law firms and company’s targeted homeowners for what little money they had left, and were charging anywhere from $1,500-$5,000 for a retainer fee that yielded no results. Fast forward to the present day, and we have record high foreclosures and unemployment crippling the housing market.

The modification program was indeed a failure and there are very few success stories. The only positive outcome of the moratorium is that a few lucky homeowners will get modified if they can afford it. Many at risk homeowners do not want to come to terms with the fact that even with a temporary mod, they will foreclose.  What homeowners need to consider now is cutting there losses and salvaging what they have left of there credit.

Much like the attempt to help delinquent borrowers by modification, there is a new trend on the block that so far, has proven to be the best exit strategy in the housing crisis. Homeowners who owe more than there homes are worth, now have the option to Short Sale. There are not many qualifying factors as there were with the modifications. If you are delinquent, unemployed, and underwater or simply down on your luck financially, a short sale is the best solution. A homeowner can be free and clear credit wise, within 14 months of the short sale and if your loan is a non recourse the lender by law has to forgive you of any deficiency. There is also no cost required to facilitate the transaction. Homeowners are encouraged to go with a well established short sale firm rather than a traditional realtor because they often lack the experience to complete the sale successfully.

Within 14 months of the short sale, a homeowner can be eligible to purchase a new property and take advantage of the low prices that are flooding the market today and start from scratch.

The moratorium will prove to be just another wave of hope that will surpass many of the homeowners who need the help. Only 1/3 of the at risk foreclosure candidates were modified this year and the rest will likely foreclose.www.Housingassist.com is a well established short sale company who helps homeowners in those situations and counsels them through and even after the process is complete. They also hold seminars in different cities to educate homeowners on the subject.

With the foreclosure halt coming to an end, many will be right back where they were before it begun. It is the responsibility of the homeowner to asses there situation and make choices that will benefit them in the future.

Underwater Homeowners Buying New Homes

Underwater Homeowners Purchasing New Homes

Blame the America dream for the ingenuity in this new trend that we are now seeing.  People are fixated on the fact of owning a home, even if they are currently upside down on their existing property.   Some people are trying to sell their existing homes at a loss (short sale) and purchase bigger homes at a similar cost in today’s market.

Some experts say it makes a lot of sense, since homeowners can get out of bad, old mortgages and get into fresh, larger ones, without raising their monthly payment much. That’s because home prices have dropped and interest rates have gone so low.  What are your thoughts?

Foreclosed Homes 30% Off

Foreclosures, Foreclosures, Foreclosures…

Foreclosures took the cake for the first 3 months of 2010, accounting for nearly 1/3 of all sales.  Many of these foreclosures were selling at a 30% discount.

When we are referring to these  foreclosure sales they include properties sold in short sales or after a bank repossession, known as REOs in industry terms.

REOs are the homes that are already taken back from the borrowers, selling for on average average 34% less than conventional sales while pre-foreclosures averaged only 15% less.

Part of the reason for the bigger price cut for REOs is that many of them come to the market in poor condition, their previous owners either unable to or unwilling to maintain them.

A fascinating statistic is that during 2009, more than 1.2 million property sales involved foreclosures. That grew 25% compared with the year before, and 2,500% from 2005.

Waiting to Walk Away?

When is a good time to walk away?

It’s no surprise that the main reasons people walk away from their home is because of a job loss or severe reduction in home value.  Although a surprising factor is how long people hold onto these properties before they actually walk away.

The Federal Reserve have noticed that most people won’t walk away from their property until they are 62% under value. The Fed then looked to separate defaults caused by job losses and other income shocks and those that just gave up paying the mortgage because of the drop in their home’s value. They found that the median borrower does not strategically default until equity falls to negative 62 percent of their home’s value. Ultimately the Fed found that 80 percent of defaults in the sample ended up in default because of a combination of job loss and negative equity.

Another key difference the researchers found is whether or not the home owner lives in a state that allows recourse, which means the lender can chase the borrower for any shortfall after a foreclosure. California is a non-recourse state.

There is no reason these homeowners shouldn’t short sale these properties and get out of a situation where they owe much more than their home is really worth.

Real Esate Recovery Stalled

When will real estate fully recover?

In real estate there is a term called “shadow inventory”.  This is applied to real estate that will be on the market, but we don’t know about yet. This includes all types of homes:

- homes that are several months in arrears on their mortgage and soon to hit foreclosure

- homes that are 90-plus days late and soon to be in foreclosure

- bank owned REO’s that have not put put on the market yet

Due to the low value of these homes, this will keep the housing market in a dismal state for some time to come.

Shadow inventory is scary, but not insurmountable.

Chammilionaire Loses Home To Foreclosure

Rapper Chamillionaire is getting out of a mortgage for a home that was valued at $2 million, by not making his payments and letting it go into foreclosure.  Millionaire musicians are walking away from their mortgages, as it makes no sense for them to hold onto a property that has no value.
Chamillionaire has made it clear that his decision to stop paying his mortgage was a business decision, and had nothing to do with financial negligence.

Are Loan Modifications Working?

After much effort on the governments behalf to dig us out of this inevitable housing crisis we face, the efforts have seemed to fail horribly.  Only a small amount of homeowners were eligible for these modifications to begin with, and those that did receive help are still unable to meet the payment requirements.  The modification always looked like a temporary resolution to a problem that would stir up once again in no time at all.  The answer is to short sale. Get out of the negative debt you owe, stop trying to hold on to this property that has no value.  Throw your emotions to the side and start making smart decisions for your future.

Foreclosures Slowing Down

Are foreclosures slowing down?

Foreclosures nationwide have dropped 2% in February, compared to the prior month.  The big question on everyone’s mind is if foreclosures are actually coming to a slow stand still.  Even though we are seeing foreclosures gradually slow down, there are several factors that can be covering the reality of the situation. This is in part due to all the government programs that are attempting to stop foreclosures, when in reality they might just be delaying the inevitable.  Lenders are creating delays by not proceeding with foreclosures as soon as borrowers are in default.  The evaluation period of defaults and foreclosures is what is casting a long delay on these properties going into foreclosure.

California is still leading the pack with about 1 in every 195 homes receiving foreclosure filings.  The number of homes that have been taken back from the banks have fallen from 87,648 in January to 78,683 in February.

For the most part, once homes are back on the market they are not having any problem selling.  Only time will tell if any of these government programs are actually going to work or are just delaying the foreclosure process in general.

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