January 28, 2011

New Mortgage Scam Hits California

Posted by martikilby under Mortgage Scams | Tags: , , , , , |
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Non-English speaking homeowners are the latest victims of a new scam in California’s Central Valley.  Con artists seem to be targeting Latinos who are facing foreclosure with a promise of eliminating their existing loan and replacing it with a mortgage that is often as low as 25% of the original loan amount.

People who are on the verge of losing their home will often try anything, and want to believe this will work.  The scammers file a fraudulent reconveyance with the county recorder, showing that the old mortgage has been paid off.  They then charge the homeowner thousands of dollars for a new loan.  In the end, the homeowner loses the money spent on the fake new loan, and they lose their home when the legitimate lender forecloses.

Another approach to the fraudulent reconveyance scam is the “vapor money theory”.  According to this scam, homeowners are told that federal banking systems are invalid and mortgages cannot be legally enforced because they rely on wires or checks as opposed to gold or cash.  The old loan is “eliminated” through a fake reconveyance and the homeowner is charged thousands for the service.  Once again, the homeowner loses his money and his home.

In another twist on the scam, homeowners are told that their mortgages will be pooled with others and sold for pennies on the dollar, allowing the scammer to issue a new loan with a lower principal amount.   Still other homeowners are told that federal bailout money rewards the new note holders for taking over underwater mortgages.

The bottom line is that there is no cure-all for eliminating your mortgage and if it sounds too good to be true, it probably is.  

  • Be wary of anyone who says you don’t have to repay your debt because of secret laws.
  • Don’t pay up-front fees.
  • Avoid anyone who encourages you to stop paying your mortgage without talking to your lender.
  • Run away from anyone who suggests you pay them instead of your lender.
  • Be wary of anyone who suggests they have a special connection with any government agency or bank.

If you are having trouble paying your mortgage there is help, and several options.  Please don’t hesitate to contact me for more information.

 

December 29, 2010

Taking a Bet on Real Estate in 2011? Here’s My Predictions

Posted by martikilby under foreclosure, Home Ownership, Interest rates, loan modification, Real Estate Sales Statistics, Real Estate Values, REO, Short Sale | Tags: , , , , , , , , , , , |
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Once again, Santa forgot to bring me a crystal ball.  So this look into the future of the housing market is based on trends from the past year, projections from those that crunch the numbers, and my gut feelings based on life in the real estate trenches.

Foreclosures continued to be the top story in 2010 with robo-signing and questionable practices making headlines.  In 2011 so-called shadow inventory will be making news as it grows and clogs the pipeline.  This includes borrowers that are 90 days or more delinquent, homes in foreclosure, and bank-owned properties not yet on the market.  S & P estimates that it will take 41 months to clear the backlog, continuing to slow the recovery.

Short sales will increase as the government and lenders try to stem the deluge of foreclosures that add to the shadow inventory.   Right now about 35% of defaults end in a cure or short sale.  I see that number growing as banks and the government iron out the problems with HAFA (Home Affordable Foreclosure Alternatives), and the processing of short sales is streamlined.

Loan modifications will continue to be largely unsuccessful.   There is some hope for small improvement in the numbers if the FHA principal reduction program can be expanded.

Mortgage interest rates jumped this last month, but are gradually heading down.   Frank Nothaft, chief economist for Freddie Mac foresees rates staying below 5.00% throughout the year.  Let’s hope he’s right.

Home sales will increase, especially for first-time buyers, provided interest rates remain low and the economy continues to improve.  If unemployment continues to decrease and incomes increase we should see an increase in home sales over 2010 by the 2nd half of the New Year.

Home values throughout most of the country will reach the bottom by mid-year and many areas, such as San Diego County will see modest gains of 2.00 – 4.00%.  The exception continues to be the luxury home market where home prices in locations such as La Jolla and Rancho Santa Fe will continue to decline.

My advice?  If you own a home and are not terribly upside-down, hang tight.  Looking to buy?  Do it now!  This is a great time to purchase your first home or pick-up an investment property.  Struggling with your payments?  Let’s explore your options, before it’s too late.  Overall, I’m cautiously optimistic.

Best wishes for a happy, healthy and prosperous New Year!

 

December 21, 2010

Hope for Homeowners Facing Foreclosure

Posted by martikilby under foreclosure, loan modification | Tags: , , , , , , , |
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Finally, it appears that something is working to help save homes and stop foreclosures.  In a report released on Monday, NeighborWorks America revealed that a homeowner who works with a housing counselor is nearly two times more likely to avoid foreclosure than those that receive no counseling.

NeighborWorks America is the administrator of the National Foreclosure Mitigation Counseling Program (NFMC) established by the federal government in 2008.  The first two years of the program were analyzed by the Urban Institute of Washington, D.C, and revealed the value of counseling intervention in not only reducing the number of foreclosures for homeowners who were counseled, but in mortgage modification.  Homeowners who worked with a counselor to get their mortgages modified ended up with reductions averaging $555 a month, compared to savings of $288 for those that did not work with a counselor. 

Another benefit of working with a counselor is that the re-default rate is lower.  After receiving a loan modification 49% of non-counseled borrowers re-default after 8 months, compared to 36% of those counseled.  This still seems high, but overall the report clearly demonstrated the value of counseling as 55% of those in foreclosure that sought counseling were able to cure the foreclosure and save their home within 12 months.

The report did not indicate if the lenders involved in the modifications reduced principal balances or simply modified rate and term.  And while counseling may be useful in many cases, I still believe that principal reductions are the only real tool to stop the foreclosure flood as counseling does not address the issue of strategic default.

 

November 29, 2010

Beware Forensic Audit Loan Scams

Posted by martikilby under foreclosure, lenders, loan modification, mortgage | Tags: , , , , , , , |
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Behind on your mortgage?  Beware.  You could become the target of a growing scam by foreclosure prevention “specialists” who use deception and outright lies to sell services that promise relief to distressed homeowners.

In the scam, homeowners are asked to pay an upfront fee to retain the services of an auditor, who is supposedly backed by an audit attorney.  This fee might be as much as 1.0% of the principal balance.  On a $350,000 loan that could be as much as $3500, and some audit companies even charge a monthly retainer of $1000.  For this fee, the audit team then offers to review your loan documents to determine if your lender complied with all state and federal lending laws.  The auditors propose that if irregularities are discovered, you can use the audit report as ammunition against your lender to stop foreclosure, get your loan modified, the principal reduced, or even cancel the loan.

Not true.  According to the FTC there is no evidence that forensic loan audits will help you get a modification or any other foreclosure relief, even if conducted by a legitimate attorney.  Some federal laws may allow you to sue your lender for errors in your loan documents, but even if you win your lender is not required to modify your loan.

The bottom line is that if it sounds too good to be true, it probably is and looking for lender errors or omissions is not going to save your home.  But you do have options.  For free guidance visit www.hopenow.com , view the options I discussed  in a previous post, or for immediate answers, please don’t hesitate to contact me directly.

 

October 19, 2010

Finally…a Solution to the Housing Mess?

Posted by martikilby under foreclosure, lenders, Real Estate Values, REO, Short Sale | Tags: , , , , , , , , |
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Numbers were released today for the month of September that show that foreclosures and inventories of bank-owned properties are on the rise in Washington, Oregon, Nevada, Arizona, and California.  The report was issued by ForeclosureRadar, a company that tracks every foreclosure in the five western states and provides auction updates.  Although several bank and loan servicers have announced that they are suspending foreclosures while investigating internal procedures, ForeclosureRadar analysts have yet to see any impact of this suspension on the numbers.

So the report is reminding us that nothing is getting any better, and in fact it’s getting worse.  Last month in California, the number of foreclosed properties that sold declined by 15.6% while inventories of bank-owned homes increased by 5.3%. And according to ForeclosureRadar’s CEO, Sean O’Toole, “…the reality is that far more homeowners are behind on their mortgage payments than are even in foreclosure.”  To me, this spells a further increase in the number of short sales and foreclosures, with no end in sight.

However, in the middle of this disheartening news, Mr. O’Toole voiced the only logical response to the real estate crisis that I’ve heard all year. “The clear problem in the housing market today is not foreclosures, but negative equity; and as long as the focus remains on the symptom rather than the disease we will see little progress towards real solutions and this crisis will drag on for years to come.”

Finally!  Someone gets it!  Negative equity is the real problem that needs to be addressed.  As I mentioned in my earlier post about the FHA principal reduction program, reducing the principal owed to be more in line with current values is the best and quickest way to curtail the growing number of strategic defaults.  Most people who have bought a home, want to keep their home…..but it has to make financial sense, especially in today’s struggling economy.  Reducing the principal amount owed not only makes the mortgage payment more affordable, it provides an incentive to stay and pay.

So from my perspective, until the banks and investors decide that taking a loss through principal reduction is preferable to taking a loss through foreclosure, our housing market will continue to disintegrate.  How many more foreclosures and short sales will it take before the banks are ready to listen?

 

October 12, 2010

FHA Principal Reduction Program….Will it Work?

Posted by martikilby under Internet, lenders, loan modification, REO | Tags: , , , , , , , |
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Most loan modification programs are designed to simply lower a borrower’s mortgage interest rate, thus reduce their monthly payment.  However with home values so low, a loan mod that reduces the interest rate still means that most homeowners are paying on negative equity.  They owe more than the home is worth, so even if the payment is more affordable, it could be years before any part of their monthly payment is actually paying down principal on the current value of the home.

For many homeowners, this just doesn’t make financial sense and they are allowing their homes to go to foreclosure, a practice dubbed “strategic default”.  Experts predict that the number of strategic defaults will likely increase as home prices remain stagnant and homeowners become increasingly angry with banks. Everyone including the government, industry analysts, and the public would probably agree that an increase in strategic defaults and the subsequent foreclosures will only slow the housing market recovery.

So the FHA has introduced a new Short Refinance Program aimed at borrowers who are upside down.  The goal is to reduce the actual principal amount owed to a level more in line with current home values and thus encourage homeowners to stay in their homes and continue to make payments.

Sounds like a great idea at face value, but qualifying for the program does come with a list of conditions for the homeowner, including: 

  • Be current on their mortgage payments
  • Have a credit score of at least 500
  • Have negative equity
  • Not have a current FHA mortgage
  • Occupy the property
  • And…..have a bank willing to write off 10% of the loan principal

OK, I was thinking, “This might work….” until I read the last condition.  I don’t know about you, but I haven’t heard of many banks stepping up to the plate and offering principal reductions, (Wachovia being the only exception that comes to mind).  So I’m not sure how successful this will be.  And doing the math, will a 10% reduction really be enough to encourage people to stay and pay?  In some parts of the country where the housing boom had the most impact, such as locations in CA and FL, values have dropped by as much as 50% since 2006.  So if a $500,000 mortgage is reduced to a $450,000 mortgage but the property is only worth $250,000 or even $300,000, will that be sufficient incentive to keep a borrower from walking?

I applaud the concept but am very skeptical about outcomes.  Principal reduction is, I believe, the mechanism that has the best chance of slowing strategic defaults.  The banks certainly take a big financial hit when a home goes to foreclosure…..why can’t they take the hit up front and keep people in their homes?

 

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