Underwater Properties Continue to Plunge

Underwater Properties Continue to Plunge

By: Joshua C Anderson
Colwell Banker/Housing Assist Chief Correspondent

Los Angeles- In a recent statement released by Zillow.com, 28.4 percent of single family residences are underwater, in other words they owe more on their home than it is actually worth, and in most cases that means hundreds of thousands of dollars. Large metropolitan cities like Los Angeles, Las Vegas, Atlanta and Chicago, to name a few, have nearly 50 percent of homes underwater, and in some cities, its worse. Owning an underwater mortgage is just the tip of the iceberg, once in that position it’s very likely that a number of other problems will occur that may eventually lead to foreclosure.  These problems can range from loss of income, illness, death and divorce, all of which can certainly cause financial constraints.

The original HAMP or Home Affordable Modification Program was regarded by industry experts as a failure for a number of reasons. One of the most significant aspects of the HAMP failure was that already troubled borrowers were once again set up for failure, once they defaulted on their trial payment; foreclosure proceedings began almost immediately, further deterring their situation. Another key factor was that the guidelines became too stringent for homeowners to qualify for. As a result, more than 80% of those who applied or even qualified had eventually either been denied or foreclosed.

When faced with such a dire situation, most homeowners decided they needed to make a change, for some however that meant walking away. A recent study showed that homeowners who decided to short sale rather than a foreclosure were more likely to be back on track financially within a two year period. The ramifications to their credit and livelihood were greatly reduced when they short sold the property. The only down side to short selling is that the homeowner needs to be certain that the company or realtor representing them has adequate experience. Many fly by night realtors claim to have the credentials to complete a short sale, however after months of unsuccessful negotiations, it becomes increasingly clear that they were in over their heads.

California based Housing Assist of America, www.housingassist.com, has recently teamed up with Real Estate giant Coldwell Banker in an effort to streamline the short sale process for both agents and perspective clients and the results are phenomenal, 92 percent of the clients who apply and stay cooperative throughout the process end up with favorable results. Lenders are now encouraging homeowners who have exhausted all of their option to opt for the short sale.

How to Short Sale Your Home

Key Words: short sale, real estate, instructions, property obligations, property loans, process, tips, warns

How To Short Sale Your Home 

If you’re thinking of selling your home, and you expect that the total amount you owe on your mortgage will be greater than the selling price of your home, you may be facing a short sale. Short sale often occurs when a borrower cannot pay the mortgage loan on their property, but the lender decides that selling the property at a moderate loss is better than pressing the borrower. Both parties consent to the short sale process, because it allows them to avoid foreclosure, which involves hefty fees for the bank and poorer credit report outcomes for the borrowers.

The general processes of doing a short sale are:

1.  Verify the value of your property

2.  Add up all the costs of selling the property

3.  Determine the amount owed against the property

4.  Do the calculations: Subtract the total amount owing against the property from the estimated proceeds of the sale.

5.  Contact the lender(s)

6.  Ask the lender what its procedures are for a short sale

7.  Sell the property

Here are some tips and warns to remember when you are starting the Short Sale process:

• Closing costs will include title and escrow fees (if the seller is responsible for any portion of them, which will depend on your county), attorney fees, a portion of unpaid property taxes, re-conveyance fees, notary fees, delivery fees, documentary fees and/or transfer fees.
• If you sell the property without the assistance of a real estate broker, you will save the amount of the commission and have more to apply toward paying off your loan.
• If you feel more secure having a real estate broker handle the transaction, consider using a discount broker to market your property. You could also try to negotiate the sales commission with your broker.
• Remember that the amount on your monthly loan statement does not include interest. Interest is accrued until the date a loan is paid off, so you may have as much as 30 days of interest on top of the balance owing, and you’ll need to include this interest in the total payoff amount.
• If a property is sold under a short sale, the lender may require the buyer to make up the difference, either through a personal obligation or a collection.
• The IRS often gets involved with short sales, because they are seen as a relief of debt and may be treated as income. Check with your accountant.

Short Sale Tips for Realtors

Short Sale Tips For REALTORS®

As a REALTOR® involved in short sales, you want to be at the top of your game. Whether you’re the listing agent or buyer’s agent, a short sale transaction may take a huge investment of time and effort. If things don’t pan out, however, that translates into a huge waste of time and effort. To help stack the odds in your favor, here are some good tips and recommendations for REALTORS® in short sale situations:

• Pre-Screen Short Sale Listings: Before taking a short sale listing, carefully consider the likelihood that the transaction will close escrow successfully. Consider, for example, how much of a shortfall the lender must approve. Other considerations include, but are not limited to, the nature of the seller’s hardship, the time you have to sell before the homeowner potentially loses the property through foreclosure, the number of liens against the property, and market conditions.

• Assess Homeowner’s Considerations Upfront: A short sale transaction may have significant tax, credit, personal liability, and other consequences for a homeowner. As a listing agent, encourage your seller to seek upfront the advice of an attorney, accountant, or other professional regarding those consequences. Before you take a listing, carefully assess whether the seller has come to terms with the possible consequences of a short sale. Assess, for example, whether the seller will proceed with a short sale in the event that the lender agrees to release its lien against the property, but reserves its rights to pursue the seller for the shortfall. Also assess whether the seller has adequately considered the alternatives to a short sale, such as refinancing, loan modification, foreclosure, deed-in-lieu of foreclosure, and bankruptcy. Consider whether the seller has sought legal and tax advice. When you’re involved in a long, arduous short sale process, the lender’s refusal to release the seller from personal liability or the seller’s decision to file bankruptcy to wipe out tax liability are not surprises you want right before close of escrow.

• Do Your Research: Whether you’re a listing agent or buyer’s agent, gather and review as much information about a short sale transaction as you can upfront. Check your local Multiple Listing Service (MLS) rules and regulations to make sure you properly enter the short sale listing into the MLS. Obtain information from public records, comparable sales, title searches, other real estate agents, and other sources to determine the likelihood your short sale will succeed. If a property is in foreclosure, you may want to continually monitor that process to make sure the seller does not lose the property through foreclosure before close of escrow. Short sale negotiations with a lender do not automatically stop that lender’s foreclosure process.

• Use C.A.R.’s Transactional Tools: As a member benefit for REALTORS®, C.A.R. offers many standard forms, legal articles, and other tools to help you with your short sale transactions. To address the issues unique to short sales, properly complete and attach C.A.R.’s standard form Short Sale Listing Addendum (SSL) to your listing agreement and C.A.R.’s Short Sale Addendum (SSA) to a sales agreement. Among other things, these forms make a sales agreement contingent upon the short sale lenders’ approval, address timing issues, and advise the seller to consult with an attorney, accountant, or other expert regarding the potential consequences of a short sale. As another transactional tool, C.A.R. has many legal articles addressing short sales, including their tax and credit consequences. You may download these articles at http://qa.car.org to give to your clients, but keep their acknowledgment of receipt in your files.

• Submit a Complete Short Sale Package: An agent’s proficiency in putting together a short sale package may improve the likelihood that the short sale will not only get approved, but get approved quickly. Documentation for a typical short sale package includes, but is not limited to, a hardship letter, financial statements, paycheck stubs, income tax returns, sales comparables, property condition including repair estimates and pictures, estimated HUD-1 Settlement Statement, listing and sales agreements, and C.A.R.’s standard form Authorization to Release and Convey Information (ARC). Do not be cavalier about the short sale approval process just because the seller isn’t realizing a profit. A short sale lender may want you, as the listing agent, to demonstrate that you have actively marketed the property for sale, and that you have aggressively negotiated for the best possible price and terms.

• Take a Proactive Approach: Good short sale agents often attribute their success to their own tenacity, perseverance, and resourcefulness. Start the short sale approval process as soon as you can. Monitor its progress frequently. Ask questions. Carefully document your conversations with the short sale lender and others. An ability to get things done will serve you well in short sale transactions.

• Watch Out For Multiple Investors: When it comes to investors involved a short sale approval, one is one and two is ten. A transaction where only one lender must approve the short sale is usually much less problematic than a transaction where both senior and junior lenders and other investors, creditors, and insurers must approve the short sale. If, for example, you’re handling a short sale with multiple liens, make sure you submit a short sale request to all the lenders and creditors as soon as possible. Furthermore, some short sale lenders may be loan servicers, but the underlying loans have been insured (e.g. PMI), securitized, or sold in the secondary mortgage market to Freddie Mac, Fannie Mae, or other investors. You may want to make sure as soon as possible that these other interested parties will approve the short sale.

• Do the Math: Help ensure a successful close by checking upfront whether there will be enough money to go around. As the listing agent, take into account that in a down market, the ultimate sales price may be less than the initial listing price. As either the listing or buyer’s agent, make sure that all transaction costs are included in the estimated HUD-1 Settlement Statement submitted to the short sale lender, such as buyer-required repairs, smoke detectors and water heater bracing, property taxes, HOA dues, and a moving allowance for the seller if appropriate. Also encourage your client to have a back-up plan in case the lender doesn’t approve these expenditures.

• Properly Handle Subsequent Offers: As a listing agent, you may be waiting for the lender to approve a short sale to Buyer 1 when you receive a better offer from Buyer 2. Present the second offer to the seller, so the seller can decide what to do. One alternative, among others, is for the seller to enter into a backup contract with Buyer 2 using paragraph 1 of C.A.R.’s Purchase Agreement Addendum (Form PAA) and submit the backup contract to the short sale lender in accordance with paragraph E of the Short Sale Addendum (Form SSA). Another alternative is for the seller and listing agent to ask Buyer 1 to increase the price to match that of Buyer 2 or sign mutual cancellation instructions to allow the seller to proceed with Buyer 2 instead.  After all, the short sale lender may ultimately reject Buyer 1 anyway in favor of Buyer 2’s better offer.

• Stay Away From Loan Fraud: Oftentimes you may know certain things that the short sale lender doesn’t know. Let’s say, for example, a junior lienholder wants your client to secretly pay $9,000 outside of escrow because the senior lienholder only authorized $3,000 for the junior lienholder. What do you do? The prudent course of action is: “When in doubt, disclose.” In this case, disclose the $9,000 payment to the senior lienholder and obtain its approval of the proposed arrangement in writing. You and your client do not want to risk committing loan fraud, which is very broadly defined under federal law to include anyone who knowingly makes a false statement for the purpose of influencing a federally-insured mortgage lender. The punishment for loan fraud is, among other things, 30 years imprisonment plus a $1 million fine.

• Beware of Unlicensed Negotiators: Stay away from unlicensed or unscrupulous short sale negotiators. Someone who charges a fee to act on a homeowner’s behalf in negotiating a loan must generally be licensed with the California Department of Real Estate (DRE). An unlicensed person who practices real estate is committing a crime. Also, if you pay that unlicensed person for conducting licensed activity, you too may be committing a crime.

*** This information has been provided by the California Association of Realtors legal department. Housing Assist of America does not offer tax or legal advice and recommends homeowners to consult with their tax preparers and attorneys before making any decision regarding their properties.

Unemployment Causes More Foreclosures

High Levels of Unemployment Deepen the Foreclosure Crisis

The foreclosure crisis continues to get worse as a slow job market forces many homeowners into the worst financial situation of their lives.

In cities like Seattle, Houston and Chicago, who seemed to be dealing with the foreclosure bust quite well, are now having a more difficult time keeping up with their mortgage payments.  Many have already seen their homes repossessed by lenders.

All told, foreclosure activity jumped in 149 of the country’s 206 largest metropolitan areas last year, foreclosure listing firm RealtyTrac Inc. said Thursday.

Questions Regarding Your Home?

Unemployment has been the main cause of foreclosures, rather than the time-bomb mortgages resetting to higher payments.

Just to show you a quick example of what I am talking about:

The Houston-Sugar Land-Baytown metropolitan area in Texas saw its foreclosure rate jump 26 percent from 2009, the largest increase among the top 20 biggest metro areas, the firm said.

Still, foreclosure activity in many of the metro areas in these states actually declined last year.

Three California metro areas posted among the biggest annual drops in foreclosure activity: Riverside-San Bernardino-Ontario, down 20 percent; San Diego-Carlsbad-San Marcos, down 17 percent; and, Los Angeles-Long Beach-Santa Ana, down 16 percent.

A large reason for the reasonable decline is that lenders took steps to delay foreclosure actions in these states as they sought to manage the flow of troubled properties coming onto their books. In the closing months of last year, several lenders went further, temporarily halting foreclosure activity to deal with allegations of improper evictions.

Currently many of the banks have resumed their foreclosure activity, and have begun taking action once again.  The pace of foreclosures is expected to pick up this year and most definitely outpace the rate of foreclosures from 2010.

We will most likely see the values of homes plummet even more so this next year.  More borrowers will be in negative equity this year, forcing more foreclosures.

Lenders took back 1 million properties in 2010, and no metro area saw more homes repossessed by lenders than Phoenix-Mesa-Scottsdale in Arizona.

Some 55,372 properties were taken back by lenders there last year, up 17 percent from the year before.

The Chicago metro area was second, followed by the Detroit-Warren-Livonia metro area in Michigan. Its home repossessions rose 19 percent.

Market Recovery Unlikely for 2011

Real Estate Market Recovery very unlikely for 2011

By Joshua C Anderson, Lexington Realty Correspondent

Thursday January 06 2011

Los Angeles- Government stimulus programs and federal tax credits would have seemed to be great news for the real estate market, however the market has showed slow signs on recovery. While the foreclosure and unemployment rates show no signs of stabilizing, 2011 is almost exactly where it was a year ago with the exception of a few changes.

According to expert analyst the real estate market has yet to bottom out and while prices remain low there simply are not enough qualified buyers to make up the difference. While foreclosures are still very common home values will continue to plummet, further weakening the economy. The only entities benefiting from this situation are real estate investors who are buying properties and holding on them for the long term. One of the major contributors to the crisis is delinquent homeowners who won’t budge. The government has stepped in to offer its help via the HAFA program. It’s essentially a short sale that offers sellers up to $3,500 in relocation assistance if they qualify. The majority of short sellers are in fact insolvent and the relocation assistance would be a great benefit for them. On the other hand there investors who own rental properties and they will not likely benefit from HAFA. The problem however is not easily solved; getting the delinquent homeowners to agree to the short sale requires a lot of negotiating. Like most people in the United States home ownership is the American dream and like anything else there is a deep emotional attachment.

California based firm Housing Assist of America www.housingassist.com is one of the leading short sale companies in the country and have done hundreds of short sales with nearly every lender. A spokesman from the company stated that, “2011 is going to be one our busiest years yet, banks are stepping up their efforts to get these short sales approved with efficiency and satisfactory results”. The end result of these short sales is a positive direction in the real estate market.

Foreclosures Continue to Bring Down The Housing Market

Foreclosures continue to bring down the housing market despite a recent decline in underwater mortgages

By Joshua C Anderson, Lexington Realty Correspondent

As the holidays approach, many Americans are considering relocating to take advantage of the low prices available in the market. However, the savings are not a result of an amazing deal, there the aftermath of the worst housing crisis in history. For the miniscule market of qualified buyers, there are some great opportunities, but for the rest of the nation the turmoil continues. Just last week Forbes online magazine released an article of the worst hit cities in the nation, and that list continues to grow.

Cleveland Ohio was the top city to have the sharpest decline in home values, followed closely by Minneapolis and Portland. The nation however has seen somewhat of a decrease in underwater mortgage holders. But the problem of underwater homeowners still has an adverse effect on the market. The underwater homes carry the highest risk of default and foreclosures. The only realistic solution for these homeowners is a short sale. The short sale process has several benefits for the homeowners as well as the lender. The market will continue decline regardless of new buyers as long as there are foreclosures. Many delinquent borrowers do not want to face the fact that they will lose the house to foreclosure if they do not short sale, and there are still many holding on to the idea of the failed modification program.

In addition to the devastating consequences of foreclosure, many homeowners are opting for bankruptcy, deed in lieu and abandonment. All of which will continue to drive down the economy. If all of these delinquent borrowers choose a short sale, they will avoid all of these problems. Housing Assist of America is a southern California based company that has been named number one and is platinum certified through equator. HAA also has an immaculate rating with the better business bureau and doesn’t charge fees to facilitate the transaction. To learn more about them you can visit www.housingassist.com In these uncertain economic times its prudent to make the right decisions for the long run.

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.

Bank of America Resumes Foreclosures

Bank of America Resumes Foreclosures

On Monday, Bank of America stated that, after having reviewed 102,000 foreclosures in 23 states where courts must sign off on proceedings, they are now resuming the process on said cases.

B of A stated that the first of the new affidavits are scheduled to be submitted by October 25, 2010, and will continue reviewing in 27 other states soon after. According to a B of A spokeswoman, no errors were found during their review, and less than 30,000 foreclosure sales across all 50 states will be delayed as result of the investigation. The announcement came one day before the banks third quarter earnings report, the news sending B of A’s shares up 36 cents to $12.34 or 3.01%. B of A stated that the review process, “has been an important step to give customers confidence they are being treated fairly.”State Attorneys General have stepped up pressure on banks recently after it was revealed that some bank employees had signed foreclosure affidavits without verifying that the documents were accurate, also known as “Robo-signing”.

October 1^st was the initial launch of review for B of A, and October 18^th is said to be the day the bank will expand its document probe to all 50 states. The bank says that their initial assessments in the remaining 27 states show that the basis for their foreclosure decisions were indeed accurate.

So far at least five other major mortgage servicers have announced their own document review process. 1.8 million Loans are in foreclosure in the 23 judicial states, while 1.3 million are pending in other parts of the country, according to a Morgan Stanley analyst report.

Lender

A lender is a private or public entity which loans money to borrowers.

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