December, 2011:

Lifeline for Underwater Homes

Dec 21st, 2011
by Cathy Moran.
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The parent agency for Fannie Mae and Freddie Mac is considering a proposal for mortgage pay down through Chapter 13, Reuters reports.  The White House denies interest in the plan.

The Principal Pay Down Plan, conceived by Norma Hammes, a San Jose bankruptcy lawyer, and promoted by NACBA, would allow homeowners in Chapter 13 bankruptcy with an underwater mortgage to direct up to five years of their payments on the mortgage to the reduction of the principal outstanding.  The plan would not otherwise change the mortgage terms.

As proposed, the plan would only apply to home loans owned or controlled by Fannie and Freddie, which make up about 90% of U.S. mortgages.

By devoting five years of payments to principal, homeowners, who now have few economic reasons to keep paying on debt tied to houses with shrunken value, could build up equity and a financial stake in otherwise overencumbered homes.

It’s our opinion here at NorCalMortgageMods that a recovery of the California economy is tied, top and tail, to the housing market.  Congress failed to pass the judicial mortgage modification bill for bankruptcy relief to homeowners two years ago.  The Administration’s encouragement of mortgage modification has been insipid and ineffectual.

If this plan doesn’t suit the White House, what is their proposal?

 

 

Settlement with Banks = Trust and Recovery?

Dec 14th, 2011
by John Mlnarik.
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The Wall Street Journal reports that banks and a number of states are close to a settlement.  It is estimated that $19 Billion would be paid and banks would be monitored by an agreed upon third party, to ensure compliance with the terms of the deal.  Although nothing has been announced the article notes that the Obama Administration is pushing for a 50 state deal in attempts to put an end to the foreclosure log jam.

With so many states strapped for cash the settlement will no doubt be a welcomed pay day. Similarly with the election year ahead the incumbent wants signs the economy is recovering well before November rolls around. External pressure aside the American people are ready to move on with their lives and get back to work.  It is unclear how resolving claims against the big banks will allow this to happen, but the link between the two is front and center in the media.

What the economy needs to move forward is trust and how the settlement will begin to rebuild the people’s trust in our economic system again is unclear.  While resolving disputes without litigation is beneficial I can’t help but think there is an opportunity in the settlement being overlooked.

Foreclosure Crisis Continues

Dec 10th, 2011
by Doug Jacobs.
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240px-Sign_of_the_Times-Foreclosure

The New York Times states that the foreclosure crisis isn’t even half over!  Ouch!

The Times cited a report that analyzed the troubled homes from 2004 to 2008 and found that at least 2.7 million mortgages made between 2004 and 2008 have ended up in foreclosure and that there are nearly another 4 million in the same category.

According to the Times: “Put another way, ‘The nation is not even halfway through the foreclosure crisis.’”

The report, produced by the Center for Responsible Lending, also noted that certain types of loans have much higher rates of completed foreclosures and serious delinquencies. They include loans originated by brokers; hybrid adjustable-rate mortgages, option ARMs, loans with prepayment penalties and loans with high interest rates (subprime).

There’s additional analysis in the report which provides data about the impact this problem is having on minorities.
All in all, the foreclosure crisis is continuing.

 

image credit:  FlickreviewR

Get Back In The Real Estate Market After A Short Sale

Dec 5th, 2011
by Cathy Moran.
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Home ownership after short saleIs there  home ownership after a short sale?

One of the huge fears that keeps homeowners paying on underwater homes that overload their budget  is the worry that if they bail on the present house, it will be forever before they can buy another home.

Not so, says Keith Rockmael, a Bay Area real estate advocate.  Here’s what he wrote me on the subject:

If you listen to the media, investors and experts in the real estate everyone would be buying, buying and buying more. After all, with homes prices still soft and interest rates at ridiculously minuscule levels it would make sense. Many investors (and even owner occupiers) continue to break open their  piggy banks and dig through their mattresses to pay cash for homes.

For those without a mattress full of dinero, most people think that they can’t get a loan especially after a short sale, bankruptcy or foreclosure. Not true. People just need to look in the right place and have a relationship with a loan officer who knows their stuff.

A couple of banks and credit unions can lend to homeowners after a short sale with no waiting period or only a 90 day seasoning. Wells Fargo offers a post short sale loan if the homeowner remains current with all payments and a completed Short Sale. Homeowners needs a legitimate hardship and will likely not be able to purchase in the same city. The rates are good as it is an FHA loan.

In San Francisco, the Mission SF Credit Union can lend with no waiting period after a short sale again with no lates. Even with lates, they can lend one year after a short sale. Normally, most banks will make borrowers wait two years before they can qualify for a new loan post short sale.

With both of these loans, borrowers must show improved credit history post short-sale and the guidelines can be strict. Savvy homeowners realize that options exist for those who seek to get off the bench and back into the game.

The old bromide is that “time heals all wounds”, even to credit worthiness.  But its clear, that smart shopping for home loans can shorten the time a short seller is out of the market.

HARP 2.0 Debuts

Dec 2nd, 2011
by Cathy Moran.
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The government has launched a revised version of HARP, designed to facilitate refinancing underwater mortgages held by Fannie and Freddie.

The expectations for the impact of the program, however, are not high.

The New York Times reports that the original program promised help to 4 to 5 million homeowners.  Perhaps, 900,000 have gotten refinances, and few of those turned out to have underwater properties.

Image courtesy of Wikimedia.