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More Home Owners Stay-Put in Foreclosure

More lenders are allowing home owners in default to stay-put in their homes longer–and even negotiating special arrangements with them, such as the lender paying the home insurance if the home owner pays the utility costs, The New York Times reports.

Why the postponement? Banks don’t want the cost of maintaining more homes on their books. Many municipalities are forcing banks to better maintain foreclosed homes, which has been adding to the costs.
By the end of January, more than 644,458 homes were under bank ownership. What’s more, about 710,725 are in the foreclosure process, awaiting to add to that number, according to data by RealtyTrac.

“Under normal circumstances, the banks would be able to cover the cost of maintenance, upkeep, and property taxes by just reselling the property, but these are desperate times, and banks are resorting to somewhat desperate measures in some cases,” Daren Blomquist, a vice president at RealtyTrac, told The New York Times. “It is more of a factor now because property values have come down and will not cover all these costs when the banks resell the property, if they can resell the property.”

In 2007, the average time it took to complete a foreclosure was four months. By the end of 2011, that has stretched to a year. In some states the slowdown is even more pronounced, such as in Florida where defaulting home owners often stay put for more than two years, or in New York in which foreclosures in 2007 once took 263 days to complete and in 2011 now average 1,019 days.

In Phoenix, Arizona, many homeowners are able to stay in their homes for 1 year or more before receiving the Arizona Notice of Foreclosure and then they still have 90 days before the trustee sale. Approximately half of all Arizona trustee sale are being postponed on any given day for one reason or another.

Short Sales Rise, More Banks View it as a Better Option

Banks are more willing to agree to a sale at a lower cost than a home owner’s mortgage balance in order to avoid having the property fall into foreclosure, which can be more costly for a lender.

In the fourth quarter of 2011, there were more than 88,000 short sales, a rise of 15 percent compared to a year prior. In all, short sales made up 10 percent of all home sales sold in the fourth quarter, according to recent data released by RealtyTrac.

On the other hand, bank-owned homes dropped 12 percent year-over-year (to 116,000), making up 13 percent of all home sales during the fourth quarter.

The average short sale in the fourth quarter sold for $184,221, according to RealtyTrac. The average foreclosure, on the other hand, sold for $149,686.

Banks are now more willing to do short sales and that trend will likely “show up in more local markets in 2012 as lenders recognize short sales as a better option for many of their non-performing loans,” said RealtyTrac CEO Brandon Moore.

Meanwhile, during the fourth quarter, 24 percent of homes sold — nearly one in four — were in some stage of foreclosure, either already bank-owned or already winding through the process, RealtyTrac reports. The number is slightly down compared to a year prior when foreclosures accounted for 26 percent of all home sales, RealtyTrac reports.

However, Moore says he expects foreclosure sales to rise this year, “particularly pre-foreclosure sales, as lenders start to more aggressively dispose of distressed assets held up by the mortgage servicing gridlock over the past 18 months.”

The number of Phoenix short sales listing is currently 8,237 listings as compared to Phoenix REO listing at 1,567. The number of short sales in Phoenix sold in the month of February was 2,004 homes as compared to 1,662 REO properties. Phoenix short sales homes are on the rise and they will continue to be more popular with the banks in the future.

NAR: REO Rental Programs Largely Unnecessary

Housing markets are complex and varied, and a government pilot program to turn properties into bank-owned rentals could be disruptive and counterproductive in some markets, according to the National Association of REALTORS®.

NAR urges the Federal Housing Finance Agency (FHFA) to proceed cautiously with its Real Estate-Owned (REO) Initiative pilot program to sell homes repossessed by government agencies to private investors to convert into rental units.

“REALTORS® support efforts to reduce the high inventories of foreclosures, but all real estate is local and we are concerned that REO-to-rental programs are not necessary in some areas and could even hinder the recovery,” NAR President Moe Veissi said. “In many communities REOs are already moving well through the normal processes, so we urge caution when proceeding with a rental program.”

According to a recent NAR analysis, while the overall visible inventory of foreclosures has been trending down across the country, there is a noticeable difference in foreclosure inventories in states that require judicial proceedings to foreclose on a property versus inventories in states that do not require the court’s intervention. Foreclosure inventories in judicial states are currently 2.5 times higher than non-judicial states. In addition, the disposition of foreclosure inventories is considerably faster in non-judicial states, where foreclosure sales rates are four times higher than in judicial states.

“Inventories of condos and single-family homes for sale continuously fell last year, suggesting that there is no significant oversupply of visible foreclosure inventory in the market,” NAR Chief Economist Lawrence Yun said. “Even the shadow inventories of distressed homes have fallen, though they remain elevated and are an ongoing concern. The government REO-to-rental plan could work in areas where buyers are not quickly absorbing the shadow inventory.”

To prevent further increases in foreclosure inventory, NAR has repeatedly called for improved lending to creditworthy home buyers and have urged lenders to make more loan modifications, mortgage refinancings, and short sales, which will help stabilize struggling housing markets.

“While REO-to-rental programs could be successful in a few communities, we believe that doing more to ensure mortgage availability for qualified home buyers and investors could be even more beneficial in helping absorb excess foreclosure inventories across the country,” Veissi said.

NAR urges that a national advisory board be created to ensure that current and future REO-to-rental pilot programs truly benefit the local community, minimize taxpayer losses and stabilize home values, and suggests substantial participation of local market experts, especially licensed real estate professionals, who have unparalleled knowledge of local market conditions.

In Arizona, we have seen a number of bank owned properties being converted into rental properties. Arizona bank owned properties are being managed by large property management companies and will later be put on the market to sell. The inventory of bank owned properties in Arizona have decreased which is a good sign for the market.

What To Look Out For When Purchasing Trustee Sale Properties

Each state has their own laws that pertain to the process of purchasing trustee sales but the due diligence is pretty much the same for each state. Before you bid on any property, you will want to make sure you are not bidding on a lien in second position. If you purchase a property that was foreclosed in second lien position, then you will be responsible for paying the full balance owed on the first lien. This is not a good situation since the first lien holder could foreclose their lien and you will lose your whole investment into the property. This is very important that you either research public records to make sure the lien being foreclose is in first position or you hire a title company to do a title search.

Also, you will want to make sure their are no government liens or any other liens that would not be wiped out in the case of a trustee sale. The most common government liens are property taxes, IRS liens, maintenance violation liens, etc. If you find a lien on the property, then make sure the owed amount is no more than what you are willing to spend if you purchase the property.

Furthermore, when you purchase a trustee sale property you are purchasing the legal description so its very important that you identify the property based on the legal description instead of the property address or Assessor’s Parcel Number. An address might be incorrect or the trustee might have entered the wrong Assessor’s Parcel Number for the property. If you bid on a property with the wrong address or parcel number, then you have no recourse since you were bidding on the legal description for the property.

If you are not comfortable with researching public records or with reading a legal description, then it is advised that you seek the help from a licensed real estate brokerage company. Beware of companies offering bidding services that are not licensed with the “Arizona Department of Real Estate” since if something should go wrong you will not have any recourse. These non-licensed companies have no fiduciary duty to protect your best interest and might take advantage of you. The Arizona Department of Real Estate has a general fund where you can seek damages and get reimbursed for your losses if you work with a licensed real estate broker.

We are a licensed real estate brokerage company that offers a trustee sale bidding service. Our fees are very reasonable and we can assist you with the due diligence process before you bid on a property. Give us a call TODAY!!

$26 Billion Deal Could Offer Relief to Home Owners

After months of tense negotiations, the nation’s five largest banks and state and government officials have agreed to a $26 billion settlement aimed at holding banks accountable for the mishandling of some foreclosures.

The settlement is expected to help 1 million home owners, by having lenders reduce their mortgage debt or refinance into lower mortgage rates to reduce costs of their monthly payments. Also, about 750,000 people who lost their homes to foreclosure from September 2008 to the end of 2011 are expected to receive checks for about $2,000. The aid from the settlement will be distributed over the next three years, The New York Times reports.

“I wouldn’t say it’s a panacea for the housing industry but it is good for the banks to get this behind them,” Jason Goldberg, an analyst with Barclays, told The New York Times about the settlement.
Details of the settlement still need to be finalized, including how many states will participate. Also, federal officials say the final figure could move upwards to $39 billion. Mortgages owned by Fannie Mae and Freddie Mac will not be part of the deal.

The banks involved in the settlement are Bank of America, JPMorgan Chase, Wells Fargo, Citigroup, and Ally Financial.

Banks Offer More Cash Incentives for Short Sales

More banks are offering home owners incentives to sell their houses in a short sale to prevent a costly foreclosure to the bank. In fact, some banks are offering struggling home owners as much as $35,000 to do a short sale, according to an article at CNNMoney.

Many home owners have been surprised at banks’ recent willingness to approve short sales.
“Initially, the home owners are skeptical,”. “The bank may have already turned down their request for a modification. Then, one day, they call and say, ‘Let us give you some cash.'”

For banks, the incentives have proven to be a smarter move than letting a property fall into foreclosure.
“The first choice is a modification, but if that’s impossible then a short sale is a faster, more efficient solution,”.

With a foreclosure, home owners stop making their mortgage payments and usually property taxes as well. They also often put off maintenance issues, which can cause the home to lose value even more. Foreclosed homes sold, on average, for 22 percent less than homes not in foreclosure in December, according to National Association of REALTORS®’ data. For comparison, discounts for short sales were about 14 percent.

“I’ve seen a lot of foreclosures for sale where it would cost a lot more than $20,000 to get them into condition to sell again,”.

SHORT SALE YOUR HOME ~ LENDER PAYS ALL CLOSING COSTS ~ RECEIVE $3,000 FOR MOVING

A homeowner that has fallen behind on their mortgage payments have options that they must consider. The first option is to ask their lender for a loan modification. The lender will want to review your tax return, bank statements, pay check stubs (historical financial statements if self employed), a hardship letter, a list of all your assets (car, other real estate, furniture, ect) and much more. The process is similar to when you applied for the loan (Well, if you did not get a stated income loan from 2003 to 2006) and much much more!

A major determining factor if you are qualified for a loan modification is your debt-to-income ratio and your hardship letter. If your debt-to-income is not within +/- 31%, then you could be turn down for the loan modification. This is part of the reason why so few loan modifications have been approved over the last three years. If you qualify and you are able to live more comfortable, then I would accept the loan modification.

If the bank’s offer does not lower your monthly mortgage payments enough to live comfortably, then I would not accept the loan modification. If you are facing a foreclosure, then accepting the loan modification might postpone the trustee sale and buy some time before you would have to move out.

As an alternative, you should consider a short sale which is where your lender agrees to take a loss between what is owed on your mortgage and the sales price. The benefits of a short sale as apposed to a foreclosure is as follows:

  • Your lender can’t come after you for a judgment and try to garnish your wages. (Must make sure the agreement released the note and the deed of trust)
  • Your credit score may be impacted as little as 50 points vs. 250+ with foreclosure (in some cases no impact).
  • You may be able to obtain a new Mortgage, immediately in some cases.
  • You will be eligible for Fannie Mae-backed Mortgage after only 2 years vs. 5 years with Foreclosure.
  • A short sale is not reported on Credit History vs. 10+ years of reporting with foreclosure.
  • A foreclosure may impact your current or future employment, short sale will not.
  • A foreclosure may impact a security clearance, a short sale will not.
  • You can receive $3,000 or more at closing to help with moving costs.
  • You can sleep better at night & know your family is protected!

As you can see, the benefits of a short sale are much better than just letting the home go into foreclosure. My best advice for you is that you need to hire a licensed professional that understands the short sale process to help you with the negotiation process with your lender. We have helped hundreds of people short sale their homes and we would love to have the opportunity to help you as well! We offer a FREE NO OBLIGATION CONSULTATION where we can discuss your situation in total privacy. Call TODAY!!

480-213-5251

Obama Extends Foreclosure Prevention Program Aid

The Obama administration will be expanding eligibility requirements for its foreclosure prevention program, the Home Affordable Modification Program (HAMP), to help more struggling home owners participate.

The program will expand its eligibility requirements for those who may qualify for a loan modification, including how the debt ratio of mortgage borrowers is calculated as well as extending the program to owners of rental properties too.

HAMP will also triple the incentives it pays banks in order to get more banks to reduce the principal on loans, and it would offer incentives to Fannie Mae and Freddie Mac to reduce loan principals for those who participate in the program (previously only private lenders and banks were eligible for the incentives).
However, the Federal Housing Finance Agency, which oversees Freddie and Fannie, says that while it will consider the HAMP changes, in a recent analysis it found “that principal forgiveness did not provide benefits that were greater than principal forbearance” — a possible sign the GSEs may not support reducing the mortgage principal on loans, housing experts speculate.

HAMP was first launched in 2009 and set out to help some 4 million struggling borrowers modify their loans, yet it has fallen short from its original goal. To date, HAMP has helped fewer than 1 million home owners.

Some housing experts are optimistic that the changes to HAMP will allow more home owners to take part in the program, and that HAMP will help more “responsible home owners lower their costs and stay in their homes,” Gene Sperling, the director of the National Economic Council, at a press conference.
The new changes to the program will take effect at the end of April. Also, the program has been extended to December 2013.

4 Ways to ID Borrower Assistance Scammers

Scammers have targeted delinquent borrowers during the past few years, hoping to take advantage of their desperation and financial inexperience. Their approach typically involves posing as a representative of a nonprofit or government agency who can help with a loan modification or some other form of assistance.

Sheri Stuart, education manager at Springboard Nonprofit Consumer Counseling, says she frequently encounters consumers at courses offered by her organization who have been victimized by these scams. Stuart says she recently met a couple from Southern California at one of these events who’d paid $3,000 to a fraudulent company in an attempt to keep their home out of foreclosure.

“It’s disconcerting,” she says. “It has a ripple effect. It not only affects the home owners, it affects the communities as well.”

To keep more consumers from being taken in by these scams, Stuart offers the following four red flags to help determine whether borrowers’ knight in shining armor is actually a swindler on the make:

1. They ask for money up front. “That’s usually an indication that someone has an ulterior motive,” Stuart says.

2. “Phantom help” appears out of nowhere. If a consumer hasn’t proactively contacted anyone about missed mortgage payments, but suddenly gets calls and mail about getting help for missed mortgage payments, it’s probably a scammer.

3. They present phony credentials. Many companies that claim to offer assistance will have official-looking seals from credentialing institutions on paperwork, promotional materials, and Web sites. Research those organizations to make sure they actually exist.

4. They make promises they can’t deliver. If they make ambitious guarantees about being able to modify loans or halt foreclosures, that should set off alarm bells. “Nobody can promise you a loan mod,” Stuart says.

If your you suspect you have been targeted, contact Loanscamalert.org to get more information and report the scammers.

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