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Archive for January, 2011

Foreclosures are proceeding

Saturday, January 29th, 2011

There has been copious news coverage regarding foreclosures and trustee sales by the money center lenders. Initially, several of the larger banks ( Bank of America, Chase, Citi etc.) halted foreclosures to review their foreclosure process in light of some “robo-signing” reports. Initially the foreclosures were stopped in some states, and then in all by several lenders. The lenders are now proceeding with repossession of defaulted property by resuming trustee sales. To that end, we wanted to keep you abreast of the latest developments. Please be advised;

                                                                     Foreclosures are proceeding.

 As it relates to your short sale and possible foreclosure, we will need to have your property under contract and the offer to purchase/financial package submitted to the bank a minimum of 10 days prior to any scheduled foreclosure sale. The majority of the banks servicing mortgages are not likely to postpone a foreclosure sale unless this timeline is met.

This timeline has been instituted by most banks to give them a chance to perform a valuation of your property and determine if the offer submitted is of “fair market value”.   If the bank feels the offer is workable they will, at their discretion, postpone the foreclosure sale (normally for thirty 30 days or later) so they have ample time to do a more complete review of the file. If the offer is not deemed to be at a fair market purchase price it is highly likely that the foreclosure sale will proceed as scheduled.

 Over the last year we have seen many changes in the lenders short sale process. The lenders have instituted several new policies and procedures while rescinding others. This policy could also change through time, and we will advise you of material changes as they occur. That being said, it would be prudent to assume the current policy will guide any decisions made regarding any postponement of a foreclosure sale scheduled for your property.

Avoiding short sale lawsuits

Tuesday, January 25th, 2011

This blog was originally posted by. Bill Gassett. To see the original blog entry visit, Short Sale Lawsuits

There is no question that in this economic down turn we have experienced over the last five years or so that short sales and foreclosures have become part of our everyday Real Estate landscape.

Every week there are countless new short sale listings that hit the market in Massachusetts. In many of these short sales the seller, not understanding there is a big difference between a traditional Real Estate transaction and a short sale hires any ole Realtor® they happen to come across to represent them.

One the other side of the coin, there are also plenty of Real Estate agents that see the growing number of short sales coming available for sale and realize there is a lot of money to be made.

The problem however, is that many of these agents are flying by the seat of their pants and have done nothing to educate themselves on the ins and outs of closing a short sale.

As a Realtor® who has been successfully closing short sales for almost four years, this is one of my biggest pet peeves! How anyone can look a desperate seller in the face and take on a listing to sell their home with no short sale expertise is just beyond me. It pisses me off when I see a new short sale listing hit the market and know the agent has no track record with this type of transaction.
There are many Realtors® that are putting the noose around their own neck. In desperate times people do desperate things. The end result is that on many occasions consumers get very poor advice that can cost them dearly.

Realtors® that do not have short sale expertise could really do themselves a favor by referring the business out to an agent that is qualified to get the job done.

You may be wondering why this has become such a passion of mine? The answer is simple. Short sales have become stigmatized because there are numerous Real Estate agents and buyers that have been involved in deals where the listing agent did not know what they were doing. The end result for a number of different reasons is a sale that didn’t happen. This leaves a bad taste in everyone’s mouth. Going forward it makes it harder for the agents that do know what they are doing to find buyers for the short sales they are marketing.

Below I am going to touch on all the things you should look out for in trying to successfully complete a short sale whether you are in Massachusetts or another state.

Properly pricing a short sale
When you are short selling your home there is a good chance that you are not able to afford the monthly mortgage payments any longer. You may be just scraping by and know that next month you won’t have enough to pay your lender. When you decide to short sell your home and are no longer paying your mortgage pricing the home properly becomes critical.
The last thing you want to do is either over price or under price the home. For obvious reasons if you over price you will more than likely not be able to procure a buyer in a timely fashion.
If you under price the home and receive a contract from a buyer, the lender is going to reject the short sale after reviewing the appraisal or broker price opinion that they order.
Both of these scenarios can leave you with nothing and that much closer to a foreclosure. A short sale should be aggressively priced such that you will find a buyer in a timely fashion but not so low the lender is going to reject the short sale contract.

The short sale contract
There are numerous Realtors® that are clueless when it comes to giving sellers advice on the short sale Real Estate contract. Lets get one thing straight right off the bat….. When a seller signs a Real Estate contract it is almost always legal and binding as to the terms and conditions in the agreement.
Here are 4 short sale contract issues you need to be aware of:
• Realtors® submitting multiple unsigned offers to your lender
• Realtors® submitting low ball offers to the lender
• Realtors® allowing home inspection contingencies after short sale approval.
• Realtors® allowing an investor to negotiate the short sale

1. When a Realtor® submits an unsigned offer to your lender YOU do not have a legal and binding contract. The buyer can walk at any point in time with no consequences to them! Does this benefit a seller in anyway? The answer is NO NO NO! The Realtor® you hire should be looking to lock up the most qualified buyer who stands the greatest chance of getting to the closing table.

2. If you sign a low ball offer you stand an equally strong chance that the lender is going to reject your offer and send it back. If you accept an offer that is no where near the market value do you really expect the buyer is going to agree to the price the lender wants? Not likely and again you will be back at square one after being off the market for an extended period of time.

3. Allowing home inspections after the short sale approval is another big mistake. Do you really want to have your home off the market for months, get a short sale approval from your lender and then find out the buyer wants to back out due to inspection items? Don’t let the blind lead the blind. There is no reason for letting a buyer have home inspections after short sale approval. I find most buyer’s agents think they are protecting their client by trying to save them from spending a few hundred dollars. WRONG – what the buyer’s agent is preventing is the buyer from negotiating a pricing discount if there were issues discovered. Lenders DO NOT negotiate home inspections issues after short sale approval.

4. Letting a buyer negotiate for a seller is clearly foolish. The investor only cares about the seller if they get the terms THEY want. An agent who lets an investor take over a short sale transaction is asking for a lawsuit. Realtors should not let investors negotiate a short sale!

Short sale negotiations

This is clearly an area where you will see most of the lawsuit’s against Realtors®. There are agents who are engaging lenders in the negotiations of short sale approval but don’t have the knowledge and understanding of either short sale debt release and/or short sale tax ramifications.

Who do you think will get sued if a seller receives a 1099-C or 1099-A at the end of the year or gets stuck with a deficiency judgment by their lender(s) at some later date in the future and they were not informed up front about it?

There are many Realtors® who have negotiated short sales that misrepresented to their client that the short sale approval letter removed the short sale deficiency when in fact it did not.

Realtors® are supposed to abide by the Real Estate Code of Ethics but clearly there are many who’s judgment is clouded by the almighty dollar.

The Code of Ethics clearly states:
Article 11 Realtors® are knowledgeable and competent in the fields of practice in which they engage or they get assistance from a knowledgeable professional, or disclose any lack of expertise to their client.
Article 13 Realtors® do not engage in the unauthorized practice of law.

Speaking of giving legal advice, there are Realtors® who are guilty of telling their client to stop paying the mortgage to complete a short sale. While this may be the proper advice in 9o-95% of most circumstances with short sales what if the sale falls into the 5-10% where stopping payment was not necessary?

Most major lenders may require payment stoppage but some of the smaller lenders do not have that guideline. Telling a seller to stop paying the mortgage could have serious consequences on their credit that could have been avoided. Again Realtors® should not be giving this kind of advice. It should come from a lawyer.

The take home message here is to make sure you do your home work when hiring a Realtor to represent you in your short sale!

Fitch: $23 Billion in Commercial Mortgages Coming Due in 2011

Sunday, January 23rd, 2011

01/21/2011 By: Carrie Bay

Top of Form

By: Carrie Bay 

Fitch Ratings says approximately 2,000 commercial mortgage loans are due to mature over the next 12 months, representing an outstanding balance of $22.5 billion.

According to a new report released by the ratings agency Friday, the maturing loans, which have an average balance of $11.4 million, were originated between 1996 and 2007 and are predominantly secured by retail (32%), office (30%), and multifamily (16%) properties.

Fitch says more than half of the maturities — $12 billion — were originated between 2005 and 2007, when real estate values grew to their highest levels.

“Borrowers of maturing five-year interest only loans will need to contribute additional equity to reduce debt levels,” said Adam Fox, a Fitch senior director. “Five-year loans will face more difficulty in refinancing, especially office loans with significant upcoming lease rollover.”

Of the 2,000 loans maturing, 248 with an outstanding balance totaling $5 billion are in special servicing. While this is a high percentage, Fitch says nearly half of the loans ($2.3 billion) are current on debt service payments. The agency’s analysts explained that these loans are likely with the special servicer for an extension or short term forbearance to complete refinancing.

Of the loans maturing in 2011, Fitch says $16 billion, or 70 percent, are expected to pass its refinance test. This is because most of these loans have 10-year maturities and are not experiencing leverage issues.

“Loans that pass Fitch Ratings’ refinance test will be in a better position to be refinanced as liquidity continues to return to the CMBS [commercial mortgage-backed securities] market,” Fox said.

Of the remaining 30 percent not expected to pass the refinancing test, loss expectations derived are already reflected in their current ratings.

The majority of the 2011 maturities — $12.9 billion – are expected in the second half of the year.

FDIC’s Bair Warns of Double-Dip if Servicing Problems Aren’t Remedied

Thursday, January 20th, 2011

By: Carrie Bay 

FDIC Chairman Sheila Bair warned mortgage bankers Wednesday that failure to take immediate and decisive action to deal with the foreclosure crisis and breakdowns in servicing procedures will trigger a double-dip in U.S. housing markets and keep the industry deeply mired in a cycle of credit distress.

Speaking at a Mortgage Bankers Association servicing summit in Washington, D.C., Bair outlined specific steps to address what she described as “chaos in mortgage servicing and foreclosure.”

Her fix includes assigning distressed borrowers a single point-of-contact throughout the entire loss mitigation process, instituting new fee structures so that servicers aren’t forced to cut corners, and establishing a claims commission funded by servicers to compensate borrowers who’ve been impacted by substandard practices.

“FDIC-insured institutions have recognized more than half a trillion dollars in losses thus far, and they’re not finished yet,” Bair said.

“The fact is, every time servicers have delayed needed changes to minimize their short-term costs, they have seen a deepening of the crisis that has cost them – and the rest of us – even more. It is time for government and industry to reach an agreement that will finally bring closure to the crisis and pave the way for a lasting recovery in our housing and mortgage markets,” she told mortgage professionals at the forum.

Bair urged lenders and servicers to recognize that loss mitigation is “not just a socially desirable practice” to preserve homeownership, but is “wholly consistent with safe and sound banking and has macroeconomic consequences.”

For the industry to successfully respond to today’s foreclosure crisis, Bair said first, regulators must remedy failures endemic to the largest mortgage servicers with enforceable requirements that will improve opportunities for homeowners to avoid foreclosure.

She said one such requirement is that servicers must provide a single representative to assist a troubled borrower throughout the loss mitigation and foreclosure process.

“In order to prevent costly miscommunication, this person – and it does need to be a real person – must be well trained and adequately compensated,” Bair said, and she stressed that this person must be authorized to put a hold on any foreclosure proceeding while loss mitigation efforts remain ongoing.

In addition, Bair said industry benchmarks – based on a maximum number of delinquent loans per representative – must be established and servicers must commit to adequate staffing and training for effective loss mitigation.

She noted though, “There is no question that the fee structure currently in place for most servicers provides insufficient resources for effective loss mitigation and has led servicers to cut corners in their legal and administrative processes.”

Bair said paying servicers a low fixed-fee structure based on volume may be sufficient to ensure that payments are processed and accounts are settled during good times, but it does not provide sufficient incentives to effectively manage large volumes of problem loans during a period of market distress.

She said this compensation structure drove automation, cost cutting, and consolidation in the servicing industry in the years leading up to the crisis. Case in point, Bair said the market share of the top five mortgage servicers has nearly doubled since 2000, from 32 percent to almost 60 percent. However, when mortgage defaults began to mount in 2007 and 2008, she said servicing shops were left without the contractual flexibility, financial incentives, or resources they needed to responsibly manage distressed loans.

In addition, Bair said to expedite the loan modification process and help clear the market, the industry should look for opportunities to simplify loan modification offers in exchange for waivers of claims, and must also deal head-on with the second-lien problem and the potential conflicts of interest they pose.

Bair called for independent reviews of loss mitigation denials and an appeals process for borrowers; eliminating incentive payments to law firms for speedy foreclosures; and regulations that prohibit foreclosure sales when a loan is in loss mitigation, unless delay would disadvantage the investor or violate existing contracts.

Lastly, Bair said the industry must provide remedies for borrowers harmed by past practices. She suggested establishing a foreclosure claims commission, modeled on the BP oil spill or 9/11 claims commissions, which would be funded by servicers and address complaints from homeowners who have been foreclosed on as a result of servicer errors.

Bair said these resolutions should become part of a settlement agreement between servicers and the regulators and state attorneys general who are investigating foreclosure and servicing practices.


Breaking News Alert

Thursday, January 13th, 2011

Over 1M Homes Seized by Lenders in 2010

New data just released by RealtyTrac shows that lenders repossessed 1,050,500 homes last year. A record 2.9 million properties received foreclosure filings in 2010 despite a sharp drop-off in activity during the last two months of the year due to the controversy surrounding foreclosure documentation.

Indymac Boys get Sweetheart Deal….

Wednesday, January 12th, 2011

Interesting Scenario!

http://www.youtube.com/user/fiercefreeleancer

Report: Phoenix home prices to keep falling

Thursday, January 6th, 2011

Phoenix Business Journal – by Mike Sunnucks

Date: Thursday, January 6, 2011, 2:10pm MST

Housing remains a dark cloud over Arizona’s hope for an economic rebound.

Phoenix-area home prices are expected to drop 9.4 percent in 2011, according new projections from Clear Capital. The research information provider said Valley home prices were down 8 percent in 2010.

Tucson is projected to see an 11.9 percent drop this year after a 12.3 percent drop in 2010.

The real estate group says unemployment and a high number of distressed, foreclosed and bank-owned homes in markets such as Phoenix and Tucson puts downward pressure on housing demand and prices.

Phoenix ranks 45th and Tucson 48th among the 50 largest U.S. metro areas for home price projections for 2011, according to California-based Clear Capital.

Nationally, the company expects U.S. home prices to decline 3.7 percent after a 4.1 percent drop in 2010.

Projections show metro Washington with the best housing price growth in 2011 (6.5 percent gain) and Virginia Beach, Va., with the worst (12.8 percent loss).

Dayton, Ohio, had the worst price drop in 2010 (22.3 percent). Honolulu did the best, with a 7.2 percent gain.

 

Clear Capital Reports 4.1% Drop in Home Prices in 2010

Thursday, January 6th, 2011

By: Carrie Bay

Clear Water has released its home price report for the 2010 calendar year. The company’s analysis shows that compared to where prices were at the end of 2009, nationally, residential properties lost 4.1 percent of their value over the last 12 months, with 70 percent of major markets reporting price declines for the year.

The California-based valuation firm is forecasting home prices nationally to fall by another 3.7 percent by the end of 2011. Dr. Alex Villacorta is Clear Capital’s senior statistician, and he says the two clear drivers of individual market results will be local unemployment rates and the prevalence of distressed homes.

“Some housing markets are well on their way to recovery, while others are experiencing a renewed downturn reminiscent of the housing crash only two years ago,” Villacorta said.

Clear Capital describes the movement in home prices during 2010 as “turbulent,” with prices increasing 9.7 percent over a 21 week span (late March to mid August), only to be followed by a decline of 9.4 percent over the following 19 weeks (September to December).

“In terms of home prices, this past year has certainly been characterized by uncertainty,” said Villacorta. “Tax incentives and high levels of distressed sale activity had counter effects on home prices which contributed to the fragility of the markets.”

But even with the volatility, Clear Capital says the “rapid and severe” depreciation dives during the months when

the crash echoed the loudest have subsided. Only eight major markets in the company’s study experienced double digit home price declines in 2010:

  • Dayton, Ohio (-22.3%)
  • Columbus, Ohio (-17.0%)
  • Milwaukee, Wisconsin (-13.1%)
  • Tucson, Arizona (-12.3%)
  • New Haven, Connecticut (-11.7%)
  • Jacksonville, Florida (-11.1%)
  • Virginia Beach, Virginia (-10.3%)
  • Richmond, Virginia (-10.2%)

To illustrate the uncharacteristic volatility of 2010, Clear Capital points out that of the top 50 major markets, 38 saw price swings of more than six percent at some point last year. Conversely, from the middle of 2002 through mid 2009, the company says national prices only changed direction once and at no point were there quarterly price swings from negative to positive gains of more than one percent in consecutive quarters.

At the beginning of 2010, national prices saw a 10.1 percent price swing from price declines to price growth, as measured by Clear Capital’s index. As the effects of the tax credit wore off, national prices reversed this pattern during the latter half of 2010, posting a 7.4 percent price swing into negative territory for consecutive quarters.

Clear Capital says the wild spikes experienced in 2010 will likely be replaced with more gradual price trends this year. The company’s price forecasts show varying levels of decline across all four regions in 2011, with local markets in the West expected to accumulate the largest overall losses.

Major cities in the western Gulf states and Washington, D.C. are least likely to see high dollar declines in home values, according to Clear Capital’s projections. Washington, D.C. follows up its strong performance in 2010 with an expected 6.5 percent year-over-year gain in 2011.

The company says a 7.9 percent state unemployment rate bodes well for major markets in Texas, as well, with home prices forecast to gain 3.6 percent in Houston and 1.4 percent in Dallas over the course of this year.