Foreclosure alternative gaining favor
By Kenneth R. Harney
Saturday, June 26, 2010
Short sales have been the hot solution for financially stressed homeowners and their lenders for the past year, but here's another potent foreclosure alternative that's about to take center stage: deeds in lieu.
Some of the largest mortgage servicers and lenders in the country are gearing up campaigns to reach out to carefully targeted borrowers with cash incentives that sometimes range into five figures, plus a simple message: Let's bypass the time-consuming hassles of short sales and foreclosures. Just deed us the title to your underwater home, and we'll call it a deal. We won't come after you to collect any deficiency between what you owe us on the mortgage and what we obtain from the home sale. We might even be able to wrap up the whole transaction in as little as 30 to 45 days. How about it?
Mortgage companies say troubled borrowers are increasingly signing up. One of the largest servicers, Bank of America, has mailed 100,000 deed-in-lieu solicitations to customers in the past 60 days, and its volume of completed transactions is breaking company records, according to officials.
What are deeds in lieu? The full name is deeds in lieu of foreclosure. They are voluntary transfers of property ownership from borrowers to creditors that make court-directed foreclosures unnecessary.
The concept is one of the oldest in real estate, but it got a special boost this year when the Obama administration included it as an option in its Home Affordable Foreclosure Alternatives program, and mortgage giant Fannie Mae cut the penalty-box time for homeowners who use the technique from four years to two before they can qualify for another home mortgage.
Deeds in lieu also are surging because they provide a win-win for borrowers and mortgage investors that short sales often cannot match. Tops on the list: speed. Travis Hamel Olsen, chief operating officer of Loan Resolution, a Scottsdale, Ariz., firm that works with lenders to solve troubled borrowers' problems, said deeds in lieu represent "a very expeditious way to move on" for underwater borrowers who are facing potential foreclosure.
"A lot of owners just want to be finished with it now," he said. "They don't want to deal with [the house] anymore." They don't want to deal with real estate agents or signs on the front lawn that reveal their financial squeeze to neighbors. They don't want to haggle with potential buyers coming in with lowball offers. But they also don't want to simply walk away -- strategically default -- because that will crater their credit files and scores for as much as seven years.
Greg Hebner, president of the MOS Group of San Diego, which also works with banks and investors across the country to resolve defaulting borrowers' situations, said a key motivation is that lenders are stuck with massive backlogs of underwater homes that haven't yet gone through foreclosure and been put on the market -- the so-called shadow inventory.
Not only is it cheaper for them to do deeds in lieu to gain control of those properties, but with mortgage rates below 5 percent, they also will probably be able to resell them faster and on potentially more favorable terms in the summer and fall.
"If you can get a lot of inventory moving in the next couple of months" of prime home-buying season, Hebner said, "you are solving a lot of problems."
Matt Vernon, Bank of America's top short sale and deed-in-lieu executive, said the technique works so well for borrowers and mortgage owners that his company is running pilot programs in major housing markets to alert borrowers who might benefit but are not familiar with deeds in lieu.
To sweeten the pot, Bank of America is offering cash incentives that range from $3,000 to $15,000 -- and is getting a strong response, Vernon said.
What are the downsides or limitations of deeds in lieu for homeowners? Probably the most important, experts said, is that they don't work for every situation involving serious mortgage default. For example, if you have equity in the property, you'll probably want to pursue a loan modification first, then a short sale, rather than hand your equity stake over to the lender.
Deeds in lieu usually don't work when there are multiple mortgages from different creditors encumbering the property. Also, though deeds in lieu do less damage to borrowers' credit histories than foreclosures or bankruptcies, they definitely leave a mark.
Fair Isaac, developer of the widely used FICO credit score, said on its "MyFico" Web site that deeds in lieu and short sales are treated as "not paid as agreed" accounts and are treated the same by the FICO scoring model.
From: http://ping.fm/GtrDE
Tuesday, June 29, 2010
Monday, June 28, 2010
Bill Extending Tax Credit Closing Deadline Falls Through in Senate
Bill Extending Tax Credit Closing Deadline Falls Through in Senate
06/25/2010 By: Carrie Bay
An amendment that would have extended the closing deadline for the homebuyer tax credit by three months failed on the Senate floor this week.
Senate Majority Leader Harry Reid (D-Nevada) proposed the extension, and the amendment itself was approved by a large margin last week as an add-on to H.R. 4213, the American Jobs and Tax Loopholes Act.
Republican senators, though, defeated the full measure on Thursday, for the third time, when Democrats moved to end debate and push it to a chamber vote. Reid has indicated that after three unsuccessful attempts, he plans to drop the matter altogether.
The amendment would have extended the tax credit deadline for closing on a home purchase to September 30. The current deadline is June 30.
The National Association of Realtors (NAR) says some 180,000 homebuyers who signed contracts in time will not be able to make the June 30 closing deadline, simply because of the time it takes for lenders to complete transactions. The trade group estimates that 75,000 of those who will miss out on the tax break are buyers of distressed properties.
NAR says its members have reported that as many as one-third of qualified applicants have already been notified by lenders that their mortgages will not close before June 30, due to the sheer volume of applications in the pipeline.
The tax credit amendment was just one piece of the multi-faceted bill that was primarily intended to extend unemployment benefits for Americans out of work for more than six months.
Republicans rallied against the measure on the grounds that it would have added $30 billion to the “already staggering national deficit,†they said.
From: http://ping.fm/jbBvE
06/25/2010 By: Carrie Bay
An amendment that would have extended the closing deadline for the homebuyer tax credit by three months failed on the Senate floor this week.
Senate Majority Leader Harry Reid (D-Nevada) proposed the extension, and the amendment itself was approved by a large margin last week as an add-on to H.R. 4213, the American Jobs and Tax Loopholes Act.
Republican senators, though, defeated the full measure on Thursday, for the third time, when Democrats moved to end debate and push it to a chamber vote. Reid has indicated that after three unsuccessful attempts, he plans to drop the matter altogether.
The amendment would have extended the tax credit deadline for closing on a home purchase to September 30. The current deadline is June 30.
The National Association of Realtors (NAR) says some 180,000 homebuyers who signed contracts in time will not be able to make the June 30 closing deadline, simply because of the time it takes for lenders to complete transactions. The trade group estimates that 75,000 of those who will miss out on the tax break are buyers of distressed properties.
NAR says its members have reported that as many as one-third of qualified applicants have already been notified by lenders that their mortgages will not close before June 30, due to the sheer volume of applications in the pipeline.
The tax credit amendment was just one piece of the multi-faceted bill that was primarily intended to extend unemployment benefits for Americans out of work for more than six months.
Republicans rallied against the measure on the grounds that it would have added $30 billion to the “already staggering national deficit,†they said.
From: http://ping.fm/jbBvE
Thursday, June 24, 2010
Fannie Mae Increases Penalties for Borrowers Who Walk Away
News Release
June 23, 2010
Fannie Mae Increases Penalties for Borrowers Who Walk Away
Seven-Year Lockout Policy for Strategic Defaulters
WASHINGTON, DC — Fannie Mae (FNM/NYSE) announced today policy changes designed to encourage borrowers to work with their servicers and pursue alternatives to foreclosure. Defaulting borrowers who walk-away and had the capacity to pay or did not complete a workout alternative in good faith will be ineligible for a new Fannie Mae-backed mortgage loan for a period of seven years from the date of foreclosure. Borrowers who have extenuating circumstances may be eligible for new loan in a shorter timeframe.
"We're taking these steps to highlight the importance of working with your servicer," said Terence Edwards, executive vice president for credit portfolio management. "Walking away from a mortgage is bad for borrowers and bad for communities and our approach is meant to deter the disturbing trend toward strategic defaulting. On the flip side, borrowers facing hardship who make a good faith effort to resolve their situation with their servicer will preserve the option to be considered for a future Fannie Mae loan in a shorter period of time."
Fannie Mae will also take legal action to recoup the outstanding mortgage debt from borrowers who strategically default on their loans in jurisdictions that allow for deficiency judgments. In an announcement next month, the company will be instructing its servicers to monitor delinquent loans facing foreclosure and put forth recommendations for cases that warrant the pursuit of deficiency judgments.
Troubled borrowers who work with their servicers, and provide information to help the servicer assess their situation, can be considered for foreclosure alternatives, such as a loan modification, a short sale, or a deed-in-lieu of foreclosure. A borrower with extenuating circumstances who works out one of these options with their servicer could be eligible for a new mortgage loan in three years and in as little as two years depending on the circumstances. These policy changes were announced in April, in Fannie Mae's Selling Guide Announcement SEL-2010-05.
From: http://ping.fm/CXHZp
June 23, 2010
Fannie Mae Increases Penalties for Borrowers Who Walk Away
Seven-Year Lockout Policy for Strategic Defaulters
WASHINGTON, DC — Fannie Mae (FNM/NYSE) announced today policy changes designed to encourage borrowers to work with their servicers and pursue alternatives to foreclosure. Defaulting borrowers who walk-away and had the capacity to pay or did not complete a workout alternative in good faith will be ineligible for a new Fannie Mae-backed mortgage loan for a period of seven years from the date of foreclosure. Borrowers who have extenuating circumstances may be eligible for new loan in a shorter timeframe.
"We're taking these steps to highlight the importance of working with your servicer," said Terence Edwards, executive vice president for credit portfolio management. "Walking away from a mortgage is bad for borrowers and bad for communities and our approach is meant to deter the disturbing trend toward strategic defaulting. On the flip side, borrowers facing hardship who make a good faith effort to resolve their situation with their servicer will preserve the option to be considered for a future Fannie Mae loan in a shorter period of time."
Fannie Mae will also take legal action to recoup the outstanding mortgage debt from borrowers who strategically default on their loans in jurisdictions that allow for deficiency judgments. In an announcement next month, the company will be instructing its servicers to monitor delinquent loans facing foreclosure and put forth recommendations for cases that warrant the pursuit of deficiency judgments.
Troubled borrowers who work with their servicers, and provide information to help the servicer assess their situation, can be considered for foreclosure alternatives, such as a loan modification, a short sale, or a deed-in-lieu of foreclosure. A borrower with extenuating circumstances who works out one of these options with their servicer could be eligible for a new mortgage loan in three years and in as little as two years depending on the circumstances. These policy changes were announced in April, in Fannie Mae's Selling Guide Announcement SEL-2010-05.
From: http://ping.fm/CXHZp
Monday, June 21, 2010
Real Estate Relapse Has Arrived « Great Speculations - Forbes.com
Real Estate Relapse Has Arrived - click on the link to read what Forbes has to say...
From: http://ping.fm/x5nmM
From: http://ping.fm/x5nmM
Thursday, June 17, 2010
Senate Approves Extension of Tax Credit Closing Deadline
The U.S. Senate has passed an amendment that would extend the closing deadline of the homebuyer tax credit by three months.
Right now, qualifying homebuyers who were under contract by April 30 have until June 30 to close the deal. But because of the large volume of applications for lenders to process, concerns have begun to surface that some buyers may miss out on the tax break simply because of the backlogged pipeline.
The National Association of Realtors (NAR) says it has received reports that as many as a third of the buyers eligible for the credit have already been notified by their lender that they won’t make the June 30 closing deadline.
The Senate’s amendment, approved Wednesday by a vote of 60 to 37, would give homebuyers and their lenders until September 30 to complete their transactions.
The extension was proposed by Senate Majority Leader Harry Reid, whose home state of Nevada still holds the title of one of the most distressed housing markets in the country.
Reid says not only did the tax credit make it easier for thousands of Nevadans to purchase their first home, it helped reduce the state’s overblown inventory of residential properties.
But a statement on his Web site warns, “There is growing concern that because of the time it takes for banks to complete transactions such as short sales, many of these home purchases would not be complete before the deadline through no fault of the homebuyer.â€
The measure granting an extension is part of a larger $140 billion jobs and tax bill currently under consideration by the Senate. A Senate vote on the full legislation is expected to come later this week or next week, and then it will be sent to the House for review.
“If Congress fails to act promptly, then prospective homebuyers might not get the benefit of the homebuyer tax credit, even though they have completed contracts,†NAR stressed in a recent letter to lawmakers.
From: http://ping.fm/csDeH
Right now, qualifying homebuyers who were under contract by April 30 have until June 30 to close the deal. But because of the large volume of applications for lenders to process, concerns have begun to surface that some buyers may miss out on the tax break simply because of the backlogged pipeline.
The National Association of Realtors (NAR) says it has received reports that as many as a third of the buyers eligible for the credit have already been notified by their lender that they won’t make the June 30 closing deadline.
The Senate’s amendment, approved Wednesday by a vote of 60 to 37, would give homebuyers and their lenders until September 30 to complete their transactions.
The extension was proposed by Senate Majority Leader Harry Reid, whose home state of Nevada still holds the title of one of the most distressed housing markets in the country.
Reid says not only did the tax credit make it easier for thousands of Nevadans to purchase their first home, it helped reduce the state’s overblown inventory of residential properties.
But a statement on his Web site warns, “There is growing concern that because of the time it takes for banks to complete transactions such as short sales, many of these home purchases would not be complete before the deadline through no fault of the homebuyer.â€
The measure granting an extension is part of a larger $140 billion jobs and tax bill currently under consideration by the Senate. A Senate vote on the full legislation is expected to come later this week or next week, and then it will be sent to the House for review.
“If Congress fails to act promptly, then prospective homebuyers might not get the benefit of the homebuyer tax credit, even though they have completed contracts,†NAR stressed in a recent letter to lawmakers.
From: http://ping.fm/csDeH
Wednesday, June 2, 2010
#1 Threat to Housing Recovery: Shadow Inventory
#1 Threat to Housing Recovery: Shadow Inventory
by Steve Harney on June 2, 2010
The concept of supply and demand is relatively easy to understand. It applies to real estate as it applies to any other industry. We must look forward to determine the upcoming supply of housing inventory just like every other industry does. As an example, let’s assume I own a hardware store in town. I have done $1 million in retail sales each and every year for the last ten years. What should I budget to do in sales over the next twelve months? Approximately $1 million seems like the correct answer. However, if I found out a Loews or Home Depot was building a store in the vacant lot across from my store, should I change my planned budget? Of course I should.
What does this have to do with the current real estate market? There is a ‘Home Depot’ being built as we speak. It is called ‘shadow inventory’.
‘Shadow inventory’ consists of homes that are not yet on the market but fall into one of these categories:
Houses that have not come to market because the homeowners didn’t put their homes up for sale in the last few years hoping that by waiting they will get a higher price.
Homes that have already been reposed by the banks (REOs) but not yet on the market.
Homes that are in already in the foreclosure process but have not yet been reposed by the banks.
Homes that are 90+ days behind on their mortgage payments (less than one percent will ever catch up. 99% will become a distressed sale).
What number are we talking about?
Pent-up Selling Demand
Zillow just recently released a survey on the category of ‘pent-up selling demand’. They asked:
“If you saw signs of a real estate market turnaround in the next 12 months, how likely would you be to put your home up for sale?â€
The responses extrapolated to show actual numbers:
5.3 million home owners would be ‘very likely’ to put their home up for sale
6.1 million would be ‘likely’
10.6 would be ‘somewhat likely’
By comparison, 5.2 million existing homes were sold during 2009.
Assorted Distressed Properties
There have been several organizations that have attempted to quantify the other category (delinquencies, homes in the foreclosure process and REOs). Here are their findings:
The Mortgage Bankers’ Association believes that there are 4.3 million homes in this category.
Barclay’s Capital puts the number at 4.7 million.
Capital Economics says 5.5 million.
Morgan Stanley, in a very recent study, claims 8 million.
Total Shadow Inventory
If we take the lowest number in each category, there could be an additional 9.4 (5.3 + 4.1) million homes entering the market.
Again, by comparison, 5.2 million existing homes were sold during 2009.
What does this mean to you?
If the concept of supply and demand applies to real estate, there will be a tremendous downward pressure on prices.
From: http://kcmblog.com/2010/06/02/number-1-threat-to-housing-recovery-shadow-inventory/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+KeepingCurrentMatters+%28KCM+Blog%29
by Steve Harney on June 2, 2010
The concept of supply and demand is relatively easy to understand. It applies to real estate as it applies to any other industry. We must look forward to determine the upcoming supply of housing inventory just like every other industry does. As an example, let’s assume I own a hardware store in town. I have done $1 million in retail sales each and every year for the last ten years. What should I budget to do in sales over the next twelve months? Approximately $1 million seems like the correct answer. However, if I found out a Loews or Home Depot was building a store in the vacant lot across from my store, should I change my planned budget? Of course I should.
What does this have to do with the current real estate market? There is a ‘Home Depot’ being built as we speak. It is called ‘shadow inventory’.
‘Shadow inventory’ consists of homes that are not yet on the market but fall into one of these categories:
Houses that have not come to market because the homeowners didn’t put their homes up for sale in the last few years hoping that by waiting they will get a higher price.
Homes that have already been reposed by the banks (REOs) but not yet on the market.
Homes that are in already in the foreclosure process but have not yet been reposed by the banks.
Homes that are 90+ days behind on their mortgage payments (less than one percent will ever catch up. 99% will become a distressed sale).
What number are we talking about?
Pent-up Selling Demand
Zillow just recently released a survey on the category of ‘pent-up selling demand’. They asked:
“If you saw signs of a real estate market turnaround in the next 12 months, how likely would you be to put your home up for sale?â€
The responses extrapolated to show actual numbers:
5.3 million home owners would be ‘very likely’ to put their home up for sale
6.1 million would be ‘likely’
10.6 would be ‘somewhat likely’
By comparison, 5.2 million existing homes were sold during 2009.
Assorted Distressed Properties
There have been several organizations that have attempted to quantify the other category (delinquencies, homes in the foreclosure process and REOs). Here are their findings:
The Mortgage Bankers’ Association believes that there are 4.3 million homes in this category.
Barclay’s Capital puts the number at 4.7 million.
Capital Economics says 5.5 million.
Morgan Stanley, in a very recent study, claims 8 million.
Total Shadow Inventory
If we take the lowest number in each category, there could be an additional 9.4 (5.3 + 4.1) million homes entering the market.
Again, by comparison, 5.2 million existing homes were sold during 2009.
What does this mean to you?
If the concept of supply and demand applies to real estate, there will be a tremendous downward pressure on prices.
From: http://kcmblog.com/2010/06/02/number-1-threat-to-housing-recovery-shadow-inventory/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+KeepingCurrentMatters+%28KCM+Blog%29
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