Some Encouraging News

Hope Now, one of the largest foreclosure avoidance non-profits out there has announced that it foresees at least 2 million loan modifications in the coming year. This would be as part of their ongoing programs to help homeowners avoid losing a home to foreclosure.

They plan to do this by increasing the number of homeowner workshops by at least thirty over present numbers. This increase will also be accompanied by more use of the internet and telephone to assist homeowners in seeking modification of their loans.

Good News...and Bad

Today, we have, so-to-speak, a doubleheader of sorts. Some of this is good news for borrowers, while, unfortunately, some is not. First, the good news.

Birminham, Alabama-based Regions Financial, a multi-state financial services firm of $144 Billion in assets, with offices in 16 states across the South, Midwest and Texas, announced that through its Customer Assistance Program (CAP) it has helped 103,000 of its borrowing clients avoid potential default and/or foreclosure. In use since 2007, the firm offers a wide variety of plans to assist customers in need, some on its own, and others in conjunction with HUD's H4H or through NeighborWorks and other third party organizations.

If you are a client of this organization, you should contact your local Regions office immediately if you are having trouble with your mortgage payments.

Now, the negative. In a news conference held in Washington on December 8, the Controller of the Currency, John Dugan, said that over half of all loans that were adjusted through Loan modification in the first quarter of 2008 have become delinquent again within six months after the modifications were made.

Using figures covering 2008, Dugan said that in the first three months after the loan mod was done, 38% of borrowers had redefaulted, while for loan mods done over six months ago, the rate of redefault was 53% and over eight months it was 58%--none of these being very encouraging figures.

No-one seems certain of the reasons. Items being looked at are poor quality of the moldifications done, transfer of the amount of payments saved by loan modifications to credit card or other debt, as well as a number of other possibilities.

More Relief!

Both Freddie Mac and Fannie Mae, in a burst of seasonal good will, have announced some relief on at least a temporary basis today. They will suspend some previously scheduled evictions and foreclosure sales until at least January 9, 2009. While this won't help everyone in such dire straits, it will provide additional time to at least some of those facing either the loss of their homes or eviction from homes already foreclosed upon.

It applies to 10,000 Fannie Mae owned borrowers and 6,000 borrowers whose loans are Freddie-owned.The properties affected are those currently occupied and either single family or 2-4 unit properties, with foreclosure sales already scheduled between November 26, 2008 and January 9, 2009. It WILL NOT affect vacant properties.

While delaying the pending foreclosures of these properties, it simultaneously allows the owners of these properties the time to take advantage of the recently announced loan modification programs that both of these mortgage firms created. Scheduled start times for those programs is December 15, 2008.

Some More Possible Help

Today, it was announced that both Fannie Mae and Freddie Mac are considering some mass loan modificatioon programs. Additionally, Citigroup has just announced a large scale loan mod plan. Details follow, as taken directly from the announcement:

NEW YORK - The government and the mortgage industry are launching the most sweeping effort yet to help troubled homeowners by speeding up the process for renegotiating hundreds of thousands of delinquent loans held by Fannie Mae and Freddie Mac.
The Federal Housing Finance Agency, which seized control of the two mortgage finance companies in September, announced the plan Tuesday along with other government and industry officials, including Hope Now, an alliance of mortgage companies organized by the Bush administration last year.
"Foreclosures hurt families, their neighbors, whole communities and the overall housing market," said James Lockhart, the housing finance agency's director. "We need to stop this downward spiral."
The plan could have tremendous importance because Fannie Mae and Freddie Mac own or guarantee nearly 31 million U.S. mortgages, or nearly six of every 10 outstanding. Still, government officials did not have an estimate of how many people would qualify for the new program.
Officials hope the new approach, which goes into effect Dec. 15., will become a model for loan servicing companies, which collect mortgage companies and distribute them to investors. These companies have been roundly criticized for being slow to respond to a surge in defaults.
To qualify, borrowers would have to be at least three months behind on their home loans, and would need to owe 90 percent or more than the home is currently worth. Investors who do not occupy their homes would be excluded, as would borrowers who have filed for bankruptcy.
Borrowers would get help in several ways: The interest rate would be reduced so that borrowers would not pay more than 38 percent of their income on housing expenses. Another option is for loans to be extended from 30 years to 40 years, and for some of the principal amount to be deferred interest-free.
Citigroup announced late Monday it is halting foreclosures for borrowers who live in their own homes, have decent incomes and stand a good chance of making lowered mortgage payments. The New York-based banking giant also said it is also working to expand the program to include mortgages for which the bank collects payments but does not own.
Additionally, over the next six months, Citi plans to reach out to 500,000 homeowners who are not currently behind on their mortgage payments, but who are on the verge of falling behind. This represents about one-third of all the mortgages that Citigroup owns, the bank said.
Citi plans to devote a team of 600 salespeople to assist the targeted borrowers by adjusting their rates, reducing principal or increasing the term of the loan.

Late last month, JPMorgan Chase & Co expanded its mortgage modification program to an estimated $70 billion in loans, which could aid as many as 400,000 customers. The New York-based bank has already modified about $40 billion in mortgages, helping 250,000 customers since early 2007.
Bank of America, meanwhile, has said that starting Dec. 1, it will modify an estimated 400,000 loans held by newly acquired Countrywide Financial Corp. as part of an $8.4 billion legal settlement reached with 11 states in early October.

Possible Relief in California

In information released to the media yesterday, Gov. Schwartzenegger proposed a new plan to help people facing foreclosure. His plan is directed at homeowners who have already received Notices of Default (NOD), but not yet been foreclosed upon.

The specifics, as outlined yesterday, include a 90 day stay on the foreclosure process for anyone owning a home who has already received the NOD. A lender could get an exemption from this stay if it has in place what was referred to as an "aggressive modification program", according to the account in today's SF Chronicle.

The Chron reports that the modifications would be modeled on the format that was used by the FDIC in the recent IndyMac bank failure and the foreclosing loans held by that institution. Under that plan, borrowers' monthly payments would have to be limited to no more than 38% of their incomes. The lenders involved would be allowed to achieve that level from any of the following methods: lowering the interest rate on the loan; extending the maturity of the loan up to a maximum length of 40 years; or deferring a portion of the principal from repayment until such future date as the home is either sold or refinanced by the borrower. The Chronicle estimates that such actions could reduce payments by as much as 25 to 30%, which is a sizable amount.

For example, a 25% cut on a monthly payment of $500 would leave a new payment amount of $375. In the case of a current mortgage payment of $2,000 a month, a 30% reduction would leave the borrower paying only $1400, not cheap, but far better than his/her current payment amount.

As for when this or any other plan may be available, that remains to be seen, but the Governor is said to be pushing hard to get the legislature to do something about it soon after it reconvenes in January.

Will Obama Help?

Well, the election is now over, ending 21 months of campaigning. Whether your candidate won or lost, one thing is likely--some additional relief from the foreclosure tsunami is likely to find its way into any overall financial relief package put together by Obama and the new Congress. As to the specifics, that will have to wait until the new government actually takes over--Congress on January 1, 2009; and Obama at noon on January 20.

Some Relief for Countrywide Borrowers!

In a settlement arrived at yesterday, Bank of America, the pending purchaser of Countrywide,announced that it will allow a combination of loan modifications and interest rate reductions for tens of thousands of mortgage holders in eleven states. The states are: California, Illinois, Arizona, Connecticut, Florida, Iowa, Michigan, North Carolina, Ohio, Texas and Washington.

Starting in December, the program will adjust the size of the loan payments so that they do not exceed 34% of the borrower's income. In some cases, loan principal will also be adjusted. No modification fees will be charged, and prepayment penalties are to be waived.

In the case of homeowners whio will be unable to keep their homes even with this assistance, the agreement also provides a vehicle to assist them in moving to new locations.

Bailout Help

As everyone waits for news of the bailout, and its terms, the subject of help for homeowners is discussed almost as frequently as the other proposed subjects. Until a bill is finally passed, no-one will really know whether there is any new help for homeowners facing foreclosure. The Democrats have tried to get some form of additional aid for homeowners inserted into the bill, but the Republicans have just as adamantly opposed such assistance. While some form of 'bailout' bill is DEFINITELY NECESSARY, it is taking a great deal of work and discussion to get there. This was proven this week as the supposedly agreed upon terms failed to pass in the House by a narrow margin.

Keep your attention here, and as soon as I have more information for you, it will be here immediately.

ATTENTION-INDYMAC BOROWERS!

Good News! If your loan is with Indymac Bank, the federal government has just announced that if you are 'seriously delinquent' or in default on your mortgage and it's from Indymac, you will be able to switch it to a fixed rate loan with an interest rate of about 6.5% per annum. So far, no one has defined exactly what is meant by 'seriously delinquent' or how it differs from default. However, just the fact that the FDIC, who is managing the failed bank, is willing to do this is definitely a big plus. Basically, it requires that you be able to accurately document your situation when you apply for the switch. The best way to get started is to go to your local Indymac location, and ask about this plan.

Housing & Economic Recovery Act--Details

Well, Pres. Bush finally signed this act a couple of weeks ago, providing some much needed help to suffering homeowners. Although best estimates are that it will benefit only 4-500,000 of those owners in danger of losing their homes to foreclosure, it goes a lot farther than any earlier "solutions" offered by the administration.

Highlights are as follows:
A.) The FHA will be permitted to insure up to $300 Billion in refinanced mortgaged mortgages. This will give lenders an incentive to refi many existing loans that may face default and foreclosure.
B.) Provide $3.9 Billion to local communities to buy and rehab foreclosed properties in especially hard hit areas. This will create a new source of affordable housing and help avoid some blight.
C.) Provide a wide range of new support from the Treasury to both Fannie Mae and Freddie Mac. This support will include purchase of some of their loan portfolios as well as buying stock in the firms. As these two organizations own or guarantee about half of all mortgages in the nation, this is a vital step in re-establishing confidence in the mortgage market while also increasing liquidity for home buyers seeking loans.
D.) Cap loans that Freddie & Fannie can buy, and that FHA can insure, at $625,000. This is higher than the old figure of $417,000, though below the $729,750 temporary limits for high cost regions.
E.) Provide $15 Billion in tax breaks, including a credit of up to $7500 for first time buyers buying between April 9, 2008 and July 1, 2009, as well as a deduction on 2008 property taxes for those taxpayers not itemizing.

New Hope for Californians

The state of California has announced a new program to help first time buyers buy and banks with REO's in certain areas sell those properties to the benefit of both groups. The California Housing Finance Agency has received a $200 Million allocation of bond funds for use in the Community Stabilization Home Loan Program. This will likely help between 800 and 1,000 Californians buy their first home.
It's only available for specific REO properties owned by one of the four following banks: Wells Fargo, HomeEq, CitiMortgage and Fannie Mae. All of these lenders have agreed to price the properties at 12% below market value.

The program also only applies to the following areas: the counties of Merced, San Joaquin, Riverside and Stanislaus. Also covered are certain specific Zip Codes in Alameda, Contra Costa, LA and San Bernardino counties. It will provide 30 year fixed rate loans at 5.5%, with no down payment. Borrowers must pay the expense of mortgage insurance. There are also certain income limits for borrowers. This can be found at links.sfgate.com/ZEGL .

The Fed Speaks!

For those of you who look at foreclosures as a possible investment, as well as anyone else looking to finance a real estate purchase, the Fed announced new regulations last week. Basically, the Fed is now requiring that banks perform full due diligence before making a real estate loan. This means that from now on, banks will be acting more responsibly in deciding who borrows and who is denied. Instead of taking a borrower's word for it on income, the lender will require proof of income. Stated income loans are, happily, a thing of the past (they never should have been allowed in the first place). Lenders will also have to be more careful in the appraisals they accept for a property.

What all of this means is that the lenders will be doing what they historically used to do before greed and stupidity took over much of the lending process.

Good News for Maryland

The state of Maryland has recently enacted some new legislation to help those facing foreclosure. In one case, homeowners will have extended periods of time to attempt to resolve their default situations before a foreclosure can be completed on their homes.
Separately, lawyers doing pro bono (free) work for homeowners facing default/foreclosure can assist in one of three ways: 1.) direct representation of the homeowner; 2.) brief assistance and advice to the owner; and 3.) Of Counsel representation. In the third case, they would act to assist regular counsel for groups offering assistance to homeowners. This initiative's importance was given added emphasis by an open letter sent to all attorneys in the state by the Chief Justice of Maryland's Court of Appeals, Justice Bell.

Finally, the State Bar has published a free booklet for homeowners on benefits under new foreclosure assistance laws in the state.

Governor Signs Bill in California!

Last week I mentioned that the California legislature had sent a bill to Governor Schwartzenegger providing for some preventive action, as well as tenant protection in a foreclosure.
Yesterday, July 8, the governor signed the bill, SB1137, into law. It forces lenders to contact defaulting homeowners sooner in the foreclosure process to attempt to work out some non-foreclosure resolution to the problem where possible. It also requires that once a property is foreclosed upon, the lender must provide the tenants 60 days notice to move instead of the previously mandated 30 days.

It also provides local communities the right to pass ordinances that would require the foreclosing lender to maintain the outside appearance of the property so as to avoid urban blight that often comes when a home remains vacant for a long period.

In California, Some New Help!

Yesterday, July 2, 2008, the California State Senate overwhelmingly passed and sent to Governor Schwartzenegger a bill providing some relief for homeowners facing foreclosure and for tenants in properties already foreclosed upon. The governor has indicated that he will sign the bill, which, if signed, would take effect immediately.

It would require lenders to contact homeowners by phone or in person at least 3o days before filing a Notice of Default, and also undertake discussions wit the homeowner about alternative options on repaying the loan.For tenants of foreclosed properties, the bill would increase the time before eviction of those tenants from the present 30 days to 60 days. This would give the affected tenants a bit more time to locate new quarters before having to move.

Separately, the bill also would allow local municipalities the authority to fine owners of vacant lots that are not being maintained. This is an attempt at slowing potential blight of an area that has been foreclosed upon.

The Latest On Possible Relief

As I mentioned five days ago, Congress is getting closer to passage of a new foreclosure relief bill. Today the Senate passed it by a huge margin. Now its differences must be reconciled with the House bill, after which it goes to the desk of the President. Bush has said he will veto it, claiming it's a bailout of the banks and also rewards what he terms irresponsible borrowing by the homeowners who, in his opinion, should have known better than to assume this much debt under the conditions of the loans made. Talk about blaming both ends of the same issue. This bill, once both versions match, is by far the best idea to come out of Congress in years, in the humble opinion of this observer. It directly deals with the major portion of the largest financial crisis since at least the Savings and Loan debacle of the 80's and perhaps the Depression. If you are in need of support on your home loans, call or write your representatives in the House and Senate and get this bill to the President's desk, and do it with such a large margin that even if it is vetoed, the veto can be overridden. That is a MUST!

Arrests and Veto Overrides

Two important things happened today, and at least one of them could provide vital assistance to homeowners fearing loss of their homes to foreclosure. The one that Could help homeowners is the one we've discussed here on a number of previous occasions--the Frank bill from the House of Representatives and its Senate mirror image. All along the Bush White House has threatened to veto the bill, saying it would be too costly and also could 'unfairly' cut into lender profits (as if all of the foreclosures weren't doing EXACTLY that already).

The Senate today beat back Republican attempts to gut the bill and passed it by veto-proof margins. Subject to a committee review of its effects vis-a-vis Countrywide, it may soon actually get to Bush's desk for his signature, and, if vetoed, back to both houses of Congress for the override vote.

The other item of interest, although too soon to see if it will be a basis for further assistance to homeowners and those who've already lost their homes, is a large mortgage fraud sting by the FBI. Citing various alleged violations of mortgage fraud laws, the Bureau obtained indictments or arrested hundreds of lenders from at least 19 separate lending institutions today. The makeup of the accused ranged from executives at the leading investment banking firm, Bear Sterns to employees of a number of other mortgage lenders and brokers. Is this too little-too late? Only time will tell. Stay tuned.

New Program to Help Homeowners

The major bank lenders who are already participating in the Hope Now program will announce a new plan tomorrow designed to further aid desperate homeowners facing foreclosure. Although Hope Now has been somewhat of questionable benefit to date due to its tight limits on eligibility, under this new plan, borrowers will apparently get better contact and information as they try to stave off foreclosure.

Homeowners will receive an acknowledgment within five days of making contact with their lender. Additionally, lenders will pledge to remain in close contact with the borrowers while the review of their mortgages is underway.


Unfortunately, this agreement is not planned to be legally binding.

New Help At the State Level

Just as there are various plans approved or in process at the Federal level, there are a number of foreclosure-related bills currently under discussion in the California state legislature. The main ones of interest are:
1.) SB1137: passed by the state Senate earlier in the year, this would require lenders to contact homeowners earlier than at present in the foreclosure process,give 60 days notice to renting tenantgs in homes likely to be foreclosed upon and require foreclosing lenders maintain the physical condition of homes to avoid blight. In addition to the Senate, it has already passed the Assembly Banking Committee and is scheduled to be heard by the Assembly Appropriations Committee.
2.) AB1830: Passed by the Assembly on May 29, this bill would tighten underwriting standards for future sub-prime loans; ban pre-payment penalties and eliminatge 'steering' of borrowers to higher interest rate loans by loan brokers.
3.) AB2740: Sets new rules on how loan servicers deal with homeowners. It is modeled on a similar bill that became law last year in North Carolina.

There are others as well, but these appear at this time to be the most relevant.

More News!

Yesterday I updated everyone on the status of Senate action on a foreclosure relief bill to be worked into some form of relief along the lines of the Frank bill from the House. Later yesterday, the Senate Banking Committee passed its version of the bill I discussed by a vote of 19-2, with all the Republican members except Bunning of Kentucky and Enzi of Wyoming voting to pass it. It will provide a large amount of foreclosure relief along the lines I discussed yesterday, and now goes to the full Senate for a vote, probably sometime in the next month or so. While the White House hasn't said what they intend to do about the Senate version, other than they don't like it, they have specifically threatened a veto of the Frank bill.

Solution for you: WRITE TO YOUR CONGRESSMAN AND SENATORS!!

More News on Mortgage Assistance

Well, three days ago I'd noted that the Senate was debating its version (similar but not exactly the same) of Barney Frank's bill that passed the House recently. Yesterday, the chairman of the Senate Banking Committee, Sen. Dodd of Connecticut, accompanied by the ranking Republican, Sen. Shelby of Alabama, announced that their bill has reached the stage of proceeding forward on a bi-partisan basis. It will allow the FHA to support up to $300 Billion in new loans to homeowners facing foreclosure who might otherwise be unable to refinance. Money for the plan would come from an affordable housing plan funded by profits of Freddie Mac and Fannie Mae. Borrowers would have to demonstrate that they could afford the new loans, and lenders would have to agree to take a cut in their planned profits as a result of the swap from existing loans to the new ones.

The Bush administration, on record with a veto threat for Rep. Frank's version, has not yet taken a position on this bill. Stay tuned.

Here's The Latest!

Well, a couple of weeks ago you may recall I mentioned that a new piece of legislation was wending its way through Congress. This was Barney Frank's bill to vastly expand the funds for foreclosure counseling, freeze high rate loans at a lower fixed rate, and reopen the bankruptcy laws for certyain specifically limited mortgage-related situations/individuals.
It has since passed the full House by a healthy margin, although not enogugh to be veto-proof. It has yet to clear the Senate, although indications are that it will do so, probablybefore the Congress recesswes for its summer vacation. Bush has loudly proclaimed he will veto it as "too unreasonable and too expensive". From this corner,it looks like exactly what the country could use in terms of relief, but to make it so someone has to convince a larger number of Congressmen/women and Senators to vote for it, enough to insure a veto-proof majority of 2/3 of each house of Congress. Let your congressional representatives and Senators know how you feel--and remind them that November is not that far off!

Here's The Latest!

Latest on the Legislative Front

Well, in past posts I've discussed laws that have either been passed or that are pending passage. Today, I'm going to update the latter. The Senate's just passed a bill that will provide $10 Billion for refis of subprime mortgages, $4 Billion for purchase of foreclosed properties and $180 Million for foreclosure counseling. No bankruptcy assistance was included. Most consumer/borrower advocates claim this is far to little in terms of helping them, but it was an 84-12 vote, so both parties agreed.
Far more borrower oriented and more helpful to them is a bill just passed out of committee by Barney Frank's Financial Serviceds committee. This would provide a great deal more assistance to homeowners trying to avoid foreclosure by handling refis and other assistance to the homwowners. The Bush White House has voiced opposition, and hinted at a veto, so whatever assistance finally gets passed will still be a way off.

The Latest & What (If Anything) It Means

Last week I had occasion to attend an annual 3-day conference on foreclosures and related items and, for the first time, found heavy emphasis on how lenders can avoid foreclosing on your home. That's right--the emphasis was heavily weighted to loss mitigation. What that purports to mean in plain English is the lenders are now starting realize that it behooves them to bend over backwards to work with their borrowers and find a way to avert foreclosure whenever it's reasonably possible. This does not mean in every case, they will agree not to foreclose. What it does mean is they have belatedly come to the conclusion that as long as things are so bleak, they would be smarter to utilize such things as forbearance or loan modification, to name a couple of methods, to try to keep the homeowner in his/her house.

Separately, you'll recall a couple of weeks ago I mentioned new action on Capitol Hill directed at legislation to ease the burder of homeowners. More plans have been offered up, but so far, nothing of substance has happened. Members of Congress favoring the lenders have gummed up the works, and those trying to help the beleaguered borrowers have been left trying to get something done against the efforts of the former. Net result--refer to the start of this post and talk to your lender.

New Relief? Maybe....

Well, it now seems that everybody is jumping on the bandwagon. Almost makes you think there is an election coming up. Oh, yeah! That's right! There is! Yesterday (4-3-08) a congressional committee announced it's working on a new plan that will include foreclosure relief in a novel form--money to help pay for more foreclosure counseling services by the lenders. Assuming the proposed bill becomes law, it would include a provision for $100 million to be used buy lenders to help initiate and/or expand counseling services to their borrower clients facing default and foreclosure. It's a long way from law and lots can change between now and whenever eventual passage and Presidential signature takes place, so don't start getting too excited just yet. But, as things develop, I'll keep you posted.

Beware of the Scammer!

As with any crisis or disaster, in addition to the folks who really do try to assist those in dire straits, it never fails that the scum of the earth also show up trying to take whatever advantage they can of those less fortunate than they are. This is just as true in the case of foreclosures as in any other major crisis situation. The scammers just crawl out from under their rock and start taking--from anyone they can trick or deceive.
One of the more common scams making the rounds now is the equity strip routine. Basically, it goes like this. Pleasant sounding scammer approaches someone in default on their mortgage, but still owning the jhouse and having some equity in it. He convinces the homeowner that if the owner will just add the scammer's name to the title, the scammer will make certain the mortgage is paid on time until the homeowner can get back on his or her feet financially. The scammer may even ask the homeowner to pay a 'small' monthly payment to Mr. Scammer as 'rent' or a 'service fee' for the supposed assistance being rendered.
Once the homeowner has placed scammer's name on title, scammer then goes, unbeknownst to homeowner, to a bank and takes out another loan on the property equal to all,or most of the remaining equity in the property. Newly enriched at homeowner's expense, he disappears, never to make a single payment on either the new loan or the old. As no mortgage payments are being made by anyone, the homeowner ultimately does lose his or her home, along with any equity they may have had in the property before our scamming slimeball showed up in the first place.
Moral of the story: If it seems too good to be true, it probably is. Good advice: Don't agree to ANYTHING or sign ANYTHING with someone who you don't know well or have had an opportunity to thoroughly check out.

More Relief--Maybe....

I just heard of another possible life preserver for anyone who finds themselves in trouble with their mortgage. Provided by Fannie Mae, it is NOT designed to save those who just simply got in trouble because they weren't careful enough in taking on too much debt in buying their home. Rather, it is directed at those in trouble with their mortgage purely because they fell afoul of what I call the 'Fatal Four'. The Fatal Four are: Life, Wife, Health and Wealth. They represent what are relatively temporary life events that can have major negative impacts on a homeowner's ability to pay the mortgage. The first, Life, refers to a death of a family member, along with all of the expense and emotional aggravation it carries. The second, Wife, refers to a divorce, and, yes, it obviously could just as easily be Husband, but that doesn't rhyme. Anyone going through a separation or divorce knows only too well how that can destroy family budgets and obliterate the monthly mortgage payment. Health is obvious. A major health crisis with its attendant medical expenses can kill your mortgage faster than anything else. I have had people in these straits tell me they had to choose between taking action to save their lives or paying the mortgage and, obviously, the mortgage lost. That's a very understandable choice, to say the least. The final issue, Wealth, is usually an issue when the homeowner loses his or her job, or, in some cases, has a major financial catastrophe other than the other three issues arise.
Folks who fall into one of these groups may be eligible for a small unsecured personal loan to cover the late payments on their mortgages, as well as the following regular payments until they are back on their feet and able to resume payments on a regular basis from their income. Called the HomeSaver Advance program, loan servicing firms will be able to offer borrowers a maximum loan of the lower of either $15,000 or 15% of the unpaid mortgage balance. The loan can be for as long as fifteen years at a rate of 5% interest. Not only can it cover mortgage payments, it can also be used for mortgage-related costs, such as lawyers fees, escrow costs or insurance payments. The borrower doesn't ever get to physically receive the money. Rather, it goes to the servicing firm, which applies the funds to the borrower's mortgage.
Qualifications: the borrower must have a mortgage loan that was sold to Fannie Mae, a requirement that is met by nearly a quarter of all mortgages. The original loan must be at least six months old, and the borrower must be behind at least two payments. Finally, the borrower must be able to prove that they have solved the problem that got them in trouble in the first place, and can afford the additional payments the new loan will require.
Is this for you? It's better than the alternative. You have nothing to lose by asking your servicer. Call NOW! The home you save may be your own.

A word for investors in foreclosed property--AUCTION! As more and more properties are lost to foreclosure, the repossessing lenders are having to find new ways to dispose of the properties they now own. Though most will initially be listed for sale by Realtors and made available for sale in the traditional way, as more and more of these fail to sell as quickly as the owning lenders desire, many are being packaged and turned over to professional auction firms for sale in huge bulk auctions. Lasting usually 1 or 2 days, a typical auction will dispose of many hundreds, sometimes thousands of properties, often a rate of one home every two minutes. Financing is often available at the site of the auction for the winning buyer/bidder. When you attend, be prepared for a mind numbing cacophony of noise as the bidder and auctioneer's voices are amplified throughout the (usually) huge hall. Also, have at least 10% of your purchase price on hand as a down payment (amounts vary with each auction and its ground rules).
These auctions, unlike the traditional foreclosure public auction that reclaims the property for the lender, also have open houses in advance of auction dates so that potential buyers can view and arrange inspections of the property they are interested in.
I recently bid on a house that the former owner paid $790,000 for in July, 2005. Opening bid was $329,000; winning bid was $505,000.Someone got an excellent deal.
There are many firms handling this type of auction for the lenders. One of the best known is Hudson & Marshall. You can find them online.

More Help May be Coming

In an announcement on Wednesday, March 12, the House Business Affairs subcommittee, chaired by Barney Frank (D-MA), announced a plan to assist homeowners facing possible foreclosure. Much more broad based and realistic than an earlier one put into use by the Treasury Department, the plan will potentially assist a larger number of homeowners facing default and foreclosure. It will also mandate more limits on the lenders involved than existing plans so that they are more directly involved in the assistance envisioned. REMEMBER: at present, this is only a proposed bill; it is not yet law. But it is a start. Keep watching here.

Another way to invest in foreclosures

I've previously discussed the pros and cons of buying properties at the public auctions when the lender actually is foreclosing on the property. As the national foreclosure crisis has continued to grow, another opportunity has become quite common, and, to a degree, without some of the risks that the "auction on the courthouse steps" has. This is what the auctioneers call the Foreclosure Auction. More properly, it should be called the Post-Foreclosure Auction because the properties auctioned off in these auctions already have been foreclosed upon and the banks owning them are resorting to an auction because the owning banks have subsequently been unable to get them sold.
The process is usually a one or two day auction run by a professional auction company. For sale are hundreds, sometimes thousands, of properties that have one thing in common--they are bank-owned foreclosed properties. Often more than one bank's foreclosed properties are included in an auction. In most cases a brochure giving some details of all of the properties to be auctioned are made available to anyone wanting them. Usually a series of open houses is held before the auction, and buyers can even have inspections done before the auctions. Unlike the "courthouse steps" auction, these post-foreclosure auctions even allow escrow periods to provide time for financing and title searches.
At the auction, each property is put up to bid, usually with a minimum starting bid. After that, it's traditional auction--highest bidder wins and owns the property. At a typical one of these auctions, the action is loud and fast--approximately 25 properties each hour are sold, and the auctions usually last most of the day and into the evening.
As for values, typical winning bids seem to average anywhere from one third to just over half of what the claimed recent values are for the properties sold. There are a number of auction firms specializing in such auctions, and they can be Googled for further information on time and location of the upcoming auctions.

Trouble Finding Help?

We have previously mentioned for those of you worried about foreclosure, that it is increasingly possible to have the bank holding your mortgage modify the terms of the mortgage, making it easier for you to make the payments and make them on time. You basically have to call the bank and tell them of your problem, and, with proof of why you're in the situation and how you can get out of it, get them to modify the terms of your loan.
The big problem for many in this situation, it turns out, is that the lenders haven't been making it easy to find the right people to talk to at the bank. Freddie Mac, in a recently released report, said that 57% of all delinquent borrowers didn't even know they had options to alleviate their troubles. Defining delinquent borrowers as those at least a month behind in their payments, the survey found that many knew nothing about what options might exist or what, if any, applied to them in any given case.
These statistics could drop now as an industry group established to help ease the crisis, Hope Now, recently completed a mass mailing of 500,000 letters to delinquent borrowers. These letters directed the homeowners to a toll free counseling telephone number, (888) 995-4673, where they could get direction and assistance in possibly resolving their individual situations.
With numbers of defaults and foreclosures continuing to increase, and costs and losses to banks rising with every new foreclosure, it behooves the banks to make such assistance more accessible than they did previously. Every foreclosure avoided benefits BOTH sides--the banks and the homeowner whose house is at risk.

Alternatives to foreclosure

When you can't make the payments any more, for whatever reason, you do not necessarily have to go through a foreclosure. We've previously discussed some ideas here. There are others in tighter situations. It may seem unavoidable, particularly when you owe more than the house is worth, but there are alternatives. The most common of these is the Short Sale. It is called this because the bank holding your mortgage agrees to let you sell the house for whatever it's now worth and they agree that they'll accept less than they are owed if that's all the property can bring on the open market. In essence, the bank comes up 'short'. This doesn't mean that all is suddenly wonderful and rosy again. There are a few things to be aware of in such a situation. First, a short sale will still result in a hit on your credit record--just not as sever a hit as a full foreclosure. Second, you will likely incur a tax liability. Tax law considers any debt forgiven (your unpaid mortgage amount, for example) as regular income and taxes must be paid on it at regular income tax rates. Consult your tax advisor on this aspect. But, a short sale may still be better than waiting for the foreclosure. You at least can get on with your life, and at less a disadvantage than a foreclosure. Call your Realtor to discuss the idea. Make certain that he or she is experienced in this type of transaction. Just being a Realtor may not be enough, due to the fact that the process is very specific as to what a lender will want from you to agree to allow you to do such a sale. Ask your Realtor if they have experience in the field, and, if not, if they or their broker can refer you to someone who does have that experience. Then work with them. Good luck.

Hello, again. I was discussing the potential pitfalls of buying a property at the public foreclosure auction yesterday when we ended our discussion. As I was mentioning at the time, one thing a potential investor has to be very careful about is that he or she is bidding on a property that is being foreclosed by the holder of a first mortgage, NOT a subordinate one. That is so that if he or she is the successful bidder, there are no surprises in store along the lines of a bank with a senior mortgage contacting the proud new owner demanding that the
loan be paid by that new owner.

If the property is in a trust deed/escrow state, an investor can pay a title insurance firm for a property profile that should reveal all of the liens recorded against the property. A careful review of the mortgages recorded should tell if the foreclosing institution is in first or some subordinate position, and the amounts of each loan.

For those of you in a state where the closing is handled by attorneys, your attorney should be able to search the title records and arrive at a similar result. Costs of each process will vary with state and locale, as well as between attorneys or title firms, but the few hundred dollars could be well worth spending if the cost saves you from a much worse fate--owing unexpected thousands! Good luck and keep you eyes here for more in the future.

There's one question I get at least a half dozen times a day. (Used to be about once daily, but as foreclosures mount, so does the number of folks asking the question.) "Can you get a really good deal buying a foreclosed properfty?" Well, the answer is, "Maybe." I usually reply that it all depends on many factors. Is the property already foreclosed and owned by the bank? If so, how long has the bank owned it, and how large is that lender's foreclosure portfolio? What condition is the property in? How much did the bank have to write off when they foreclosed? If it's NOT yet owned by the bank, but only facing foreclosure, is the mortgage a first mortgage or a subordinate one (second, third, etc.)?

The reason for all of these questions is simple. Depending on the answers, a buyer can sometimes get an excellent deal at far below market value. However, if the answers are not the right ones, that same investor can find himself owning a real "Money Pit" (apologies to Tom Hanks and Shelly Long).

If the house hasn't yet been foreclosed upon, you may be able to make a deal with the owner, and how good a deal that is will depend on your abilities at bargaining, as well as the abilities of the seller. If it is going to be sold at public auction--the classic "auction on the courthouse steps"--the chances of your getting a good deal depend on how many others are seeking the same thing on that same property. More bidders usually means a higher price.

Also, in an auction situation, you probably won't have any opportunity to do inspections, nor get a list of disclosures about the property from the owner. It may be in fabulous shape....or all but falling down. You could find yourself the winning bidder, but on which mortgage? If it's the first mortgage, you don't have to worry about subordinate loans, as they're usually wiped out by the foreclosure sale. Except for IRS and judgment liens, you own the property free and clear. If, however, it's the third mortgage, you also own the property--and the priviliege of owing and having to pay the former first and second mortgages. You need to do your homework. A title company or real estate attorney can help you with this task.

More tomorrow.

Attention all investors: As foreclosures continue to mount to record numbers, there are any number of opportunities for investors to acquire foreclosed properties relatively inexpensively. One of these that is seeing more and more use with the rising tide of foreclosed properties is the auction. Frequently, large lenders will bundle chunks of their REO portfolio of properties together and have a professional real estate auction firm dispose of the properties by public auction. Advertised in advance, they usually provide catalogs of the properties to be sold at a given auction, along with times and dates of not only the auction, but also when the properties can be viewed by prospective buyers before the auction date.

These can be very worthwhile ways to obtain real estate below market prices. As an example, I listed a foreclosure in northern California for $575,000. Only a year earlier it had been purchased by the folks who lost it to foreclosure for $605,000. After three months with only minimal interest from potential buyers and their agents, the owning bank added it to an auction. It sold there to its present owner for $416,000! That's not a misprint! Roughly 1.5 years after going for $605,000, it was purchased by an investor for nearly one third less than its former price. There are many other similar opportunities in some of the auctions now happening. Check on-line for info.

This is for those facing possible foreclosure and still able to obtain a new loan. Usually, if you fall into this group of defaulting owners, this is your first time in these straits, and your credit is, with the exception of your present circumstances, still fairly good. You can still qualify for a loan, although the new loan will likely be higher than the rate would be for someone not in your situation. Having said all of that, as rates continue to come down into the high 5's for 30 year fixed rate loans, this is definitely the time to seek a new loan to pay off the one that is currently causing you problems. Assuming you are employed and have resolved whatever issues led to your current default, you should immediately get in touch with your lender to see about replacing the existing loan with a new one at a lower rate than your current rate. You may be pleasantly surprised.

Are YOU in Trouble?

As the foreclosure tsunami continues to roll forward, many folks are unaware of the fact that they CAN do something to stall or avoid completely the potential loss of their home by foreclosure. The MOST IMPORTANT THING TO DO: As soon as you miss a payment, or think you're going to have problems keeping up with the payments for whatever reason, CALL YOUR LENDER!! Put them on notice of your problems and ask to speak to whomever oversees such situations. It is in the bank's interest to help you avoid losing the house to them. If they foreclose, they lose money, have more regulatory scrutiny and the problem of selling your home, none of which they want.
Although it varies by state, once you miss a payment, the bank must formally record a notice of default to actually start the foreclosure process. Once that is done, they have about three month and change that must pass before they can actually have the house sold at public foreclosure auction. So, the sooner you take control and call them, the better your chances will be at keeping your home. They may agree to change the type or terms of your loan; they may agree to defer some of your payments--but you MUST MAKE THE CALL!

Just a quickie! For those of you facing default and/or foreclosure in the state of Colorado, a new state law has just been passed that may give you a small breather. It extends the time you are permitted from when you are initially declared in default until the time the lender holding your note can foreclose. It also allows you a little easier time on reinstating your loan--you may not have to pay the not in full to avoid foreclosure under the new terms. Interested? Contact your attorney in Colorado or drop us a line.
Most important of all--Have a Happy and Healthy New Year!!