Trial loan modifications are being canceled at an increasing rate

Lenders are canceling trial loan modifications at an alarming rate. In fact, the number continues to rise so much that Citigroup has canceled the program altogether.

Citigroup, along with B of A had also been offering principal reductions to try to help home owners in trouble, but that program also seems to be offered at a reduced rate as this housing problem continues to plague, not just the U.S., but the world. Stock markets around the world have been in dive mode – the DOW dropped below 10,000 again today. The reason most often cited is the housing problem here in the U.S. which is not only not improving, but seems to be getting worse. People are not buying – while banks are sitting on cash, and tightening lending guidelines at the same time. The rationale, of course, is the fear of more bad loans.

The government advises home owners who have either been denied a modification, or have had trial modifications canceled mid-stream to keep trying other alternatives before seeking either a short sale, or letting the property go to foreclosure.

Continue reading on Examiner.com Trial loan modifications are being canceled at an increasing rate – Portland Real Estate | Examiner.com

This answer is by Matt Bukovy, Sr. Mortgage Consultant at Wintrust Mortgage

To qualify for an FHA LOAN after a Short Sale: You must either wait 3 YEARS from the date sale closed and transferred to new owner. There is (theoretically) no waiting period if the borrower had no late payments on ANY mortgage or consumer debt within the 12 month period preceding the short sale AND they are not taking advantage of declining market conditions, but … seriously … that’s exceedingly unlikely.

For CONVENTIONAL LOANS, it’s more complicated:
7 years from date sale closed and transferred to new owner or transferred back to bank for new loans with less than 10% down payment.
4 years from date sale closed and transferred to new owner or transferred back to bank for new loans with 10% down payment.
2 years from date sale closed and transferred to new owner or transferred back to bank for new loans with 20% down payment.
2 years from date sale closed and transferred to new owner or transferred back to bank for new loans with 10% down payment and acceptable extenuating circumstances.

As far as acceptable extenuating circumstances are concerned, they need to be documentable and verifiable nonrecurring events that are beyond the borrower’s control and cause a sudden, drastic and prolonged reduction in income. Death of a wage earner and catastrophic illnesses would count, divorce would not (since that is within the borrower’s control.)

So, as a rule of thumb, since it seems unlikely that someone with a 10 or 20% down payment would be ALLOWED to short-sell, most of the time, it’s going to be three years before you can get an FHA loan, and 7 years to get a conventional one.

Laura Dominguez-Vasquez and her husband, Luis, recently sold their Coral Gables, Fla., home to all-cash buyers for just under $1 million. They’re now shopping for a new home and intend to pay cash as well.

The busy professionals have three kids, aged 14 to 20, and they don’t have the time or inclination to mess around with homebuying. "The process has to be painless," she said.

The Vasquezs are not unique; cash buys are becoming common. The number of homes bought with cash jumped to 32% in January compared to 26% a year earlier, according to the National Association of Realtors.

In Southern California, about 30% of the sales in January were cash, according to DataQuick Information Systems. Same thing in Denver. In Phoenix and Las Vegas, cash sales topped 50% of all deals.

Read the full story at More people are buying their homes with cash – Mar. 10, 2011.

“…the powers accorded to MERS by the Lender [whose name appears in the Trust Deed] – with the Borrower’s consent – cannot exceed the powers of the beneficiary. The beneficiary’s right to require a non-judicial sale is limited by ORS 86.735. A non-judicial sale may take place only if any assignment by [the Lender whose name appears in the Trust Deed] has been recorded.”

[Frank R. Alley III, Chief Bankruptcy Judge, published opinion, Donald McCoy III v. BNC Mortgage, et al., Adversary No. 10-6224 -fra, Case No. 10-63814-fra-13, February 7, 2011]

Slapdown! In a relatively uncomplicated adversary proceeding in Oregon’s bankruptcy court, Judge Alley hit the nail squarely on the head: If lenders in Oregon want to foreclose people out of their homes, they must follow ORS 86.735(1). Or in the words of one Oregon title counsel, Judge Alley’s decision means that “…all assignments behind a MERS trust deed must be recorded for a non-judicial foreclosure. In McCoy, it appeared there were unrecorded assignments by the original lender identified in the promissory note. A “beneficiary” in Oregon is defined as the entity or person identified in the trust deed as the one for whose benefit the trust deed is given (or their successor in interest) – that was not MERS, but rather the original lender making the actual loan to the borrower.

For some reason, this relatively simple requirement has been routinely and flagrantly ignored in virtually every non-judicial foreclosure I have reviewed last year and this year. I suspect if I went back to 2008 and 2009, I would see the same thing. And this holding isn’t confined to situations in which MERS is the (nominal) beneficiary.

Read the rest of the story at The McCoy Case Analyzed – MERS Smackdown! | Q-Law Blog.

The pace of home value declines further accelerated in January with monthly home value depreciation reaching 1.2% and annual depreciation hitting 7.3%. This rate of monthly depreciation is the highest seen in the national index since December 2008 (see Figure 2). The median home value nationally in January was $172,182, down 28.2% from its peak in June 2006 (see Figure 1).

Of the 131 metropolitan regions with a Zillow Home Value Index in January, 124 metros experienced year-over-year declines in home values (95%), four metros saw annual increases (3%), and three metros were flat from year-ago levels (2%). The markets experiencing the largest annual declines in home values included Ocala, Pueblo, Mobile, Flagstaff, Atlanta, Spokane, and Detroit. See the interactive chart below for data on all 131 metro areas.

Read the whole story here.

Only to the lender. I should qualify that a bit. In a true apples to apples neighborhood in the suberbs, the price per square foot (PSF) of the comparable sold homes matter. Especially to the lender who will be lending on it. They need metrics like this in order to explain to shareholders why they lent the money.

Builders use price per square foot for an area to help project their potential profits compared to their cost to build.

Investors can screen neighborhoods for homes that are significantly below the average price per square foot for the neighborhood.

For you and I. We need to be more specific. One way is a comparative market analysis or CMA.

There is one certainy though, to determine the value of a property, you can’t simply take the square footage and multiply it by the area’s PSF or even the comparable home’s PSF. It’s just not going to get you where you want to go.

As an example, I once met a man that built a massive addition on the back of his house. He added over 2000 square feet (SF) to his home. He then did the calculation; my home is 3400SF X $200 PSF = $680,000. Unfortunately, he simply added massive rooms without any appeal to them. He added only one jack and jill style bathroom for the 2000 SF he added. That was supposed to be a shared master bath. Needless to say, buyers didn’t see it and had a 100 other options for under $680,000 that were superior.

He ended up selling for $385,000 or $113 per SF. For him, using price per square foot to determine his value sent him down the wrong path by more than 40%.

via Does price per square foot matter?.

Sometimes I get asked questions I can not answer and I suspect no one else can either.

Making improvements to a home can increase it’s value but . . there is always a but. . not all improvements have a measurable return on investment and there are variables. For example spending 100K on a new kitchen in a $120,000 home does not make that home worth $220,000. Home values have limiting factors like location and size. It is possible that no matter how many improvements are made to the $120,000 home it can only be brought on value by another $30,000.

For small improvements like the sink just pick out the one that you like best. A sink is not going to impact the value of a home. Unless of course there is no sink in that case buyers will want about 500% the cost of a sink taken off the price of the house.

In an upper bracket home with a high end kitchen the sink may matter but it has been my experience that the people who buy those homes usually don’t have a problem with buying that perfect sink.

The same rules apply to kitchen appliances and washers and dryers.

via will the sink affect my resale value.

Today the Obama administration outlined 3 different scenario’s that would shut down Freddie Mac and Fannie Mae as the backstops of the mortgage markets.

All of the administration’s proposals envision a scaled-back role for the government, and officials emphasized the goal of restoring the market for mortgage-backed securities issued without the government’s guarantee.

… One option proposed by the administration includes a new government backstop of certain mortgages under a federal ‘reinsurance’ model, while another would proposes a more limited backstop that would scale up primarily during times of economic crisis. The third option proposes no such government backstop beyond existing federal agencies such as the Federal Housing Administration. via the WSJ

The one unifying factor of all these plans is that interest rates would rise and the banking system would be expected to play a much bigger role in the housing industry.

That is not all bad. Sure it will be a shock to the system, but the federalization of the housing market is not a great thing for the industry. Instead, the ability of housing market and the banking sector to find it’s equilibrium is the most important factor in a healthy real estate marketplace.

And never forget, banks need to make their money. So loans will be harder to get and they will be more expensive, but they also will not be subsidized by your tax money.

via Freddie Mac and Fannie Mae To Be Shut Down?.

* August 30th, 2010 6:40 pm PT

There are still far too many of these signs out there as numbers of home sales continue to drop

Photo: http://www.flickr.com/photos/respres/2539334956/

Lenders are canceling trial loan modifications at an alarming rate. In fact, the number continues to rise so much that Citigroup has canceled the program altogether.

Citigroup, along with B of A had also been offering principal reductions to try to help home owners in trouble, but that program also seems to be offered at a reduced rate as this housing problem continues to plague, not just the U.S., but the world. Stock markets around the world have been in dive mode – the DOW dropped below 10,000 again today. The reason most often cited is the housing problem here in the U.S. which is not only not improving, but seems to be getting worse. People are not buying – while banks are sitting on cash, and tightening lending guidelines at the same time. The rationale, of course, is the fear of more bad loans.

The government advises home owners who have either been denied a modification, or have had trial modifications canceled mid-stream to keep trying other alternatives before seeking either a short sale, or letting the property go to foreclosure.

In Oregon, there is a Foreclosure help line you can try before you give up all hope. You can also try Oregon Housing and Community Services .

Oregon is one of only five states to receive extra federal funds to help home owners in distress because unfortunately this state was one of the top five hardest hit states in the country for home loans in trouble and facing default because of the excessively high unemployment rate. Oregon received an additional $50 million – it is hoped the funds will last through the end of 2010, so if you need the help, don’t wait to seek it.

Most states do have some sort of help line as well. To find the help lines in your state, type your state plus "foreclosure help line" or "HOPE program" into your browser. It has finally reached a point where banks and lenders really do not want to take back any more homes, and will make some effort to try to help if they can.

Good luck out there.

via Trial loan modifications are being canceled at an increasing rate – Portland Real Estate | Examiner.com.

Short Sale: A Definition

Simply put, a short sale is when a homeowner is trying to sell a home when he owes more on the mortgage than the home is worth. The homeowner (seller) is going to ask the bank to take loss, in an attempt to forgo the foreclosure process.

Let’s look at an imaginary scenario to explain it further. Let’s say that homeowner Smith bought his home in 2005 for $300k. He took out one of those 100% loans that were the rage back then. Well, things were going fine until he got laid off 6 months ago. And he hasn’t been able to find a job since. Mr. Smith’s savings are dwindling fast so he has decided to sell his home. To make matters worse, the value of the homes in his neighborhood (and most of the city) have gone down 20%. His Realtor told him he could only get $240k for his home right now.

Mr. Smith owes a little under $300k and can only sell his home for $240k. Mr. Smith will put his home for sale as a short sale and try to get the bank to take payment in full for $240k.

Will the bank take the short payoff? The short answer is: it depends. See my next post to get the long answer and why I never recommend short sales to my buyers.