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Luxury Short Sale Homes Are on the Horizon!

Mortgage Storm

…The Coming ARM Storm

First it was the sub-prime market and now experts agree, adjustable rate mortgages combined with rising unemployment and falling property values could create another economic storm capable of ravaging the weak economic recovery. Here’s a quick breakdown of the ARM Storm-Tracker for those savvy short sale investors to beginning their planning:

Resetting Rates: Current interest rates are at or near historic lows with 30 year fixed mortgages below 5 percent while ARM’s are likely to readjust and drive the cost of monthly mortgage payments to double their former payments. Unfortunately, many current ARM holders do not qualify for refinancing due to changes in employment status, high loan to value ratios and increased debt to income percentages.

Evaporating Equity: Not only did millions of Americans take out Adjustable rate mortgages but they built additions and over-improved their homes based upon loans. As home values fell, so did the equity reserves required to refinance their ARM mortgages. Whether it was a first mortgage with minimal down payment or a second (and even third) mortgage, lower property values have all but erased excess equity from a large number of buyers.

Cheaper to Walk: Many homeowners are finding it less expensive to simply walk away from rapidly rising mortgage, rent for awhile then repurchase. According to industry experts, a significant number of homeowners are capable of making the mortgage payment but simply don’t desire to do so given the cost of purchasing the same home after foreclosure. Current homeowners are eligible for FHA loans in as few as three years after default – creating an inverse incentive to continuing paying on a property worth tens (or even hundreds) of thousands dollars less than the existing mortgage.

Renting an Increased Option: Throughout the nation lenders are getting creative in order to reduce the inflow of defaulting properties on their portfolio; one of the more popular options among existing homeowners is the ability to rent your current property for a specified period of time.

ReFi with an ARM? It’s true, the FHA has a 3.87 five year adjustable rate mortgage option designed to help keep payments affordable. Unfortunately, it may simply delay the pain until interest rates continue to rise later. However, with a 2 percent cap on each adjustment/rate increase, it could conceivably buy time for those in unusual short term situations such as temporary illness, job loss of other large expenses. It also has the benefit of “buying time” for the banks and lenders who are in no hurry to acquire even more properties given the current backlog of non-performing properties in their portfolio.

What is a savvy short sale investor to do? Get ready for the coming wave of ARM properties to hit the market. Be sure your credit is in place and position yourself to solve problems for both homeowners and lenders in need of a new start.
See you  at the top!

Another article courtesy Chris McLaughlin

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Bank Of America As Second Lienholder… Is $3,000.00 Enough?

There are so many home retention/foreclosure avoidance programs with acronyms now, it’s hared to keep them all strait…

There’s the MHA program , the HAMP program,  the HFHA program, the NPV test, the HARP program, the HAFA program and now, the newest acronym and finally one that might make some difference for homeowners who need to sell; the HAFFAP program or Home Affordable Foreclosure Alternatives Program.

An article from DSNews included thisbreakdown of the program:

To entice servicers to accept a sale on defaulted properties for less than the outstanding mortgage balance, Treasury is offering incentive payments of $1,000 per completed short sale. Servicers will also receive $1,000 for each deed-in-lieu of foreclosure.

Subordinate lien holders will be paid to release their claims on defaulted properties, up to $3,000 of the short sale proceeds as long as the primary investor agrees to share the earnings, and for this concession, the investor will also receive up to $1,000 from the Treasury. For those second lien holders who want more than the $3,000 cap to relinquish their stakes, the Treasury said they can pursue a short sale outside of the federal program.

Homeowners who agree to a short sale or deed-in-lieu of foreclosure will get up to $1,500 to help with relocation, and must be “fully released” from any future liability, according to the guidelines.

The Home Affordable Foreclosure Alternatives Program (HAFA), as it is being called by the Treasury, was initially announced back in May, but was delayed because of concerns over legalities involved in the process and the rights of second lien holders to hold claim over the property. reported in October that the administration was readying guidelines for the program, and yesterday, they arrived.

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More than 18 percent of FHA borrowers are at least one payment behind

 FHA Foreclosures Surge

Mortgages in foreclosure

Did you read that?

FHA foreclosures? Holy cow; that means nearly one in five FHA loans are more than 30 days behind! Most of those FHA borrowers would have bought since the mortgage crash of 2007, since FHA loans were almost extinct before that…

The Mortgage Bankers Association also found recently that 14 percent of all homeowners with any type of mortgage were either behind on payments or in foreclosure at the end of September. It was a record-high figure for the ninth straight quarter.

As they say; even a dead cat will bounce– The media had it all wrong this summer; calling for a bottom and raising hopes of a housing turn-around… There are still many, many more homes coming through the fore closure pipeline…

Loan modification starts are way up, nearly 700,000 homeowners nationally (about 20% of those who qualify) have started the modification process. However, over 75% of those will default again, recent history shows us.  And of the 25% that don’t default, how many of them will re-consider when they finally realize that only 10% of loan modifications have any type of principle reduction… it may take 20 years in some areas to get back to ‘ground zero’ or where folks can sell without going short or bringing money to the closing table.

I am really not a pessimistic person, in fact I am too optimistic usually and it has cost me a lot of money and pain by seeing through “rose colored glasses” in the past.  I just really see too many signs of more problems to come and think we are a long way from the bottom

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DRE Takes Aggressive Action Against Scammers



SACRAMENTO, Calif. – (Business Wire) The California State Department of Real Estate (DRE), the state department that issues licenses to real estate professionals and protects consumers in real estate transactions, has intensified its efforts to ensure all consumers receive the protection they deserve.

See the Earth Times Article here

Real Estate Commissioner  Jeff Davi said recently “The economic downturn coupled with the unprecedented number of foreclosures has created a rich environment for scammers who have come up with a variety of schemes to take advantage of desperate and financially stressed homeowners, not only must we take aggressive regulatory action against these con artists but we must educate and provide homeowners with the necessary tools to protect themselves against scammers who have charged thousands of dollars in upfront fees and deliver nothing in return.”

Loan modification scams in particular are plaguing of course, California, Nevada and Florida, but also other states as well…

One of the biggest steps that the DRE here in Sacramento has done recently to combat these scams is to re-write the most recent Public Service Announcement in Spanish, the PSA is a comprehensive document warning consumers of loan fraud. Now the DRE has also expanded its Spanish language Website to educate consumers on how to avoid falling victim to a loan scam.

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More Community Banks Closed by FDIC

FDIC has taken over 120 banks so far this year…

Came across this article in DSNews this morning and thought I’d re-post it…

Bank failures continue to mount, even as the U.S. economy is beginning to show signs of improvement. Regulators on Friday shut down five more institutions – in California, Georgia, Michigan, Minnesota, and Missouri.

These latest closures bring the total number of FDIC-insured failures to 120 for the year so far – the most in a single year since the savings & loan crisis of the last decade. By comparison, 25 U.S. banks were seized by officials in 2008, and only three went under in 2007.

On Friday evening, the FDIC stepped in to help shut down San Francisco-based United Commercial Bank (UCB), the largest institution to be closed last week, whose failure is expected to cost the agency and estimated $1.4 billion. Last year, the Treasury gave $299 million in Troubled Asset Relief Program (TARP) funds to UCB’s holding company. Based on the Department’s most recent TARP transaction report, UCBH Holdings, Inc. has not yet repaid any of the capital injection and it is unclear how the investment of taxpayer dollars will be affected by the collapse.

The FDIC facilitated a deal with East West Bancorp, Inc., the parent company of East West Bank in Pasadena, California, to acquire all the banking operations of UCB. Under the terms of the transaction, East West will receive $10.4 billion in assets, including $7.7 billion in loans, and assume $9.2 billion in liabilities, including $6.5 billion in deposits of UCB. The FDIC and East West have entered into a loss sharing agreement covering substantially all acquired loans.

East West’s presence is concentrated in California, but it also operates several banking offices in Greater China. The Shanghai, China, subsidiary of United Commercial (UCB-China), and a Hong Kong branch of UCB were also part of Friday’s transaction. According to East West, its acquisition of UCB creates the second largest independent bank headquartered in California and the largest bank in the United States focused on serving the Asian American community.

The San Francisco Business Times reported that UCB fell under the weight of its construction loan portfolio. Thomas Wu, UCB’s former chairman, president, and CEO who stepped down just two months ago, told the paper earlier this year, “We’ve been doing construction lending for 20 years, but we’ve never experienced anything like what we have in the last 12 months. It’s unprecedented.”

United Security Bank headquartered in Sparta, Georgia, was also closed Friday. Ameris Bank of Moultrie, Georgia agreed take over United Security’s $150 million in deposits, $157 million in assets, and its two branch offices, including the branch in Woodstock, Georgia that operated as the Bank of Woodstock. The failure is expected to cost the FDIC $58 million. With United Security, 21 Georgia banks have failed this year, more than in any other state.

Home Federal Savings Bank in Detroit, Michigan, was shut down by the Office of Thrift Supervision. The FDIC brokered a deal with Liberty Bank and Trust Company of New Orleans, Louisiana to acquire all of the $12.8 million in deposits of Home Federal Savings Bank, its $14.9 million in assets, and its two branches. The closure will cost the FDIC an estimated $5.4 million.

Prosperan Bank in Oakdale, Minnesota was also seized by regulators. In a deal facilitated by the FDIC, Alerus Financial, N.A. of Grand Forks, North Dakota agreed to take over operations of Prosperan’s three branches, as well as assume $175.6 million in deposits and purchase $173.9 million of the failed bank’s assets. The FDIC expects Prosperan’s collapse to cost its deposit insurance fund $60.1 million.

Gateway Bank of St. Louis in Missouri was taken over by Central Bank of Kansas City. Gateway Bank had only one branch office, total assets of $27.7 million, and total deposits of approximately $27.9 million. Gateway Bank’s failure is expected to cost the FDIC’s insurance fund $9.2 million.

Federal lawmakers last week chastised the nation’s banking regulators for coming down too hard on smaller community banks, such as those shut down last week.

As reported Thursday, House Financial Services Committee Chairman Barney Frank (D-Massachusetts) accused regulatory agencies of punishing the wrong institutions for the financial crisis. He called their stringent oversight of small community banks – which he says are trying to respond to the government’s call to resume lending – an “overreaction” that could easily exacerbate the credit crisis.

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Fannie Mae / California Firm Says Delinquency Rates Up


Last Month’ 9129/09 from Calculated Risk;

Fannie Mae reported that the serious delinquency rate for conventional loans in its single-family guarantee business increased to 4.17 percent in July, up from 3.94 percent in June – and up from 1.45% in July 2008.

“Includes seriously delinquent conventional single-family loans as a percent of the total number of conventional single-family loans. These rates are based on conventional single-family mortgage loans and exclude reverse mortgages and non-Fannie Mae mortgage securities held in our portfolio.”

Just more evidence of some shadow inventory and the next wave of foreclosures.

Update: These stats include loans in trial modifications.

Than today from Chris Mcglaughlin;

According a report from California-based real estate market consulting firm Foresight Analytics, total delinquencies for first-lien residential mortgages grew to an estimated 11% during Q309.  The final figures for the third quarter are not due until the end of November, but Foresight’s report bases its data on earnings reports and call report filings from banks.  Residential delinquencies increased from 10.2% in Q209 and from 6.4% from the second quarter of 2008, according to the report. The delinquency rate rose approximately 1% every quarter since the Q108, except for a quick blip in Q408.  “We have been expecting the rate of increase to slow, but clearly this has not yet occurred,” said the report. 

Nonaccrual rates for residential mortgages also jumped to 4.7% in Q309 from 3.8% in the previous quarter, and delinquencies in commercial mortgages also ballooned for the quarter. The rate hiked to 4.7% in Q309 from 4.1% in the previous quarter and more than doubled the 2.1% rate a year ago, according to the report. “The delinquency rate has been increasing at an accelerated rate since Lehman Brothers’ collapse in September 2008 and the ensuing severe credit crunch and economic downturn.”  The delinquency rate in commercial loans is still well below the 8% delinquency rate in the third quarter of 1991, but the rate still worries analysts in light of a weak economy, constricted credit availability and a large number of commercial mortgages coming due the next few years.

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New Loan Modification Law May Shut Down Many Sacramento Loan Mod Shops

Loan Mod Scam


Effective immediately, SB 94, which became effective Oct. 11, will ensure anyone selling loan modification services will take money only after they do what they have promised. Also they must advise potential customers that they can actually negotiate a modification with their lender on their own or obtain help free of charge from nonprofit counseling agencies that are pre-approved by the Department of Housing and Urban Development.

The law includes penalties up to $10,000 and up to a year in jail for violation of the law for an individual and a fine of up to $50,000 for a corporation.

Consumer advocates called the law “a step in the right direction,” but say more needs to be done to make loan modifications easier to accomplish in order to reduce the frustration that leads homeowners to hire the unscrupulous.

No Telling exactly how Sacramento areaq Modification shops are dealing with the law… It’s too early to tell.

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Treasury Department Issues Guidelines Reinforcing Compliance with Fair Lending When Modifying Mortgages



MINNEAPOLIS–(Business Wire)–
Wolters Kluwer Financial Services announced today the company has expanded its comprehensive Loss Mitigation Service to include fair lending compliance consulting. The company`s experts with strong experience and knowledge in helping financial institutions avoid discriminatory lending practices can now be deployed on-site at mortgage servicers to help them meet all state and federal fair lending requirements when modifying loans for distressed borrowers.

As U.S. mortgage servicers ramp up their loan modification efforts to help slow the exploding number of home foreclosures, the primary focus on doing so is mitigating financial losses for both the financial institution and borrower. However, the Treasury Department recently issued guidelines reinforcing the importance of compliance with fair lending requirements when modifying loans  within its Home Affordable Modification Program (HAMP).

Wolters Kluwer Financial Services` compliance consultants can evaluate a
servicer`s loan modification policies and procedures to help determine how they can address fair lending risks more thoroughly and rapidly. Next, they can review a representative sample of loan modifications the servicer has completed and denied to determine if any disparate treatment of borrowers exists. And inally, the consultants can conduct a statistical analysis of all completed modifications and denied applications, identifying certain modification criteria that might lead the servicer to violate fair lending laws.

Wolters Kluwer Financial Services is also offering financial institutions a free
Webinar on how to prevent discrimination in the loan modification process and mitigate associated fair lending risk on Nov. 12.

“While modifying loans at risk of default as quickly as possible is paramount
for servicers and their borrowers, so is making sure everyone is treated fairly and equally in the process,” said Don Morrow, Ph.D., senior consultant and statistician, for Wolters Kluwer Financial Services. “Regulators have put forth notice they`ll intensify their scrutiny of servicers` fair lending compliance.”

“Wolters Kluwer Financial Services` fair lending compliance experts possess
decades of experience analyzing loan data. They have the skills and knowledge necessary to help servicers begin addressing emerging fair lending concerns immediately,” said Kurt Sames, vice president and general manager of Consumer Compliance for the company.

Wolters Kluwer Financial Services Loss Mitigation Service also helps servicers ensure compliance with requirements surrounding various loan modification rograms, including the government`s Home Affordability Refinance Program (HARP), HAMP and HOPE for Homeowners programs, and meet Freddie Mac, Fannie Mae, Treasury and Department of Housing and Urban Development guidelines, through its expansive library of mortgage compliance documents. In addition, the company can help servicers make the settlement process easier and faster through a complete,
online suite of settlement services. And Wolters Kluwer Financial Services can elp servicers record loan modification packages within any U.S. jurisdiction through a partnership with CT Lien Solutions, another Wolters Kluwer company.

For more information on Wolters Kluwer Financial Services` fair lending
consulting services tied to loan modifications, visit For more information on the company`s comprehensive Loss Mitigation Service, visit it`s Loss Mitigation Resource Center at

About Wolters Kluwer Financial Services

Wolters Kluwer Financial Services provides best-in-class compliance, content, and technology solutions and services that help financial organizations manage risk and improve efficiency and effectiveness across their enterprise. The organization`s prominent brands include Bankers Systems, VMP Mortgage Solutions, PCi, AppOne, GainsKeeper, Capital Changes, NILS, AuthenticWeb and Uniform Forms.
Wolters Kluwer Financial Services is part of Wolters Kluwer, a leading global
information services and publishing company with annual revenues of (2008) €3.4
billion ($4.9 billion) and approximately 20,000 employees worldwide. Please
visit our Web site for more information.

Wolters Kluwer Financial Services
Jennifer Marso, 612-852-7912
Director of Corporate Communications
[email protected]
On Twitter: @JenniferMarso
Charles Miller, 320-240-5457
Senior Public Relations Specialist
[email protected]
On Twitter: @CharlesWMiller

Copyright Business Wire 2009

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BofA Suffers Huge Loss- More Foreclosures…


Bank of America (BOA) announced today that it suffered a $2.2 billion loss in the third-quarter quarter.  Contributing to that was a $1.2 billion dividend payment to its preferred shareholders, including the U.S. government, credit losses within some of its consumer-related businesses, and $402 million after it agreed to eliminate a loss-sharing agreement it had struck with the government earlier this year.  “Obviously, credit costs remain high, and that is our major financial challenge going forward.”  Most of this quarter’s losses were in Bank of America’s mortgage and credit card businesses, which together lost more than $1 billion during the July-September period. 

BOA funded $95.7 billion in first mortgages, selling purchase or refinance loans to nearly 450,000 borrowers, including $23.3bn in mortgages to 154,000 low- and moderate-income borrowers during the quarter.  About 39% of all the first mortgages were for purchases. Year-to-date at the end of Q309, BOA modified the mortgages of approximately 215,000 customers, and an additional 98,000 BOA mortgage customers are in the trial stage of a Making Home Affordable Modification Program (HAMP) workout. The overall results were slightly worse than Wall Street was expecting.  Analysts had anticipated that the company would suffer a loss of 21 cents a share, according to Thomson Reuters, but in fact lost 26 cents a share.

Foreclosures up

Since government intervention began in September 2008, foreclosure sales remain stunted, dropping 8.6% from the previous month and 40.6% from a year ago. But the percentage of foreclosures sold to third parties, who are usually investors, grew by 215% from last year and 3.27% from August, according to ForeclosureRadar’s monthly foreclosure report.  Arizona leads all states with an increase of filings by 36.1% in September, followed by Florida (29.6%), Texas (24.3%), and Michigan (18.22%).  Filings in California increased only 1.08% in September, but the volume has grown by 123% from last year. 

Urban areas were hit hardest and spurred the increases.  In Arizona, the statewide increase was fueled by a massive 81.3% increase in Phoenix foreclosures.  Foreclosures in Las Vegas jumped 47.4%; Atlanta had a 39.9% increase; Chicago’s rates climbed 36.2%; and Houston had a 33.2% spike in foreclosures, according to ForeclosureListings.comRealtyTrac says foreclosure filings in Q309 increased to a level unseen since it began reporting the figures in January of 2005.

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California Bans Upfront Fees For Loan Mods-

Schwarzenegger Institutes Nine New Mortgage Laws

Gov. Arnold Schwarzenegger signed nine housing bills into law this week. One in particular, Senate Bill 94, consumer advocacy groups are calling a clear victory for California’s many troubled homeowners facing foreclosure.

The bill, sponsored by Sen. Ron Calderon (D-Montebello) aims to reduce fraud against desperate borrowers looking to save their homes. It bans all foreclosure consultants, including loan modification firms and attorneys who specialize in loan mods, from asking for any fees or compensation before fully completing the services contracted, whether the mod is successful or denied by the servicer.

Because it was labeled an “urgency measure,” the bill is effective immediately. It remains in effect until January 1, 2013. One local paper in Sacramento said the government’s swift action on the issue follows a colossal number of complaints made to the state’s Department of Real Estate by borrowers who said they paid up to $4,000 upfront to firms that abandoned them.

According to the Del Mar-based American Mitigation Law Group, the new law will force many loan modification companies to close their doors, while many others will scramble to come into compliance.

Assembly Bill (AB) 260, by Assemblyman Ted Lieu (D-Torrance), takes effect January 1, 2010, and caps yield spread premiums so mortgage brokers can’t “steer” borrowers into high-risk, high-interest loans. It also outlaws negative-amortization mortgages and limits prepayment penalties to no more than 2 percent of the loan balance.

The governor vetoed similar legislation last year at the urging of several industry trade groups, but Lieu successfully argued this go-around that the measure was now more important than ever to stem the tide of foreclosures in California.

According to Walnut Creek, California’s PMI Mortgage Insurance, a third bill – SB 291 – could provide regulatory relief to residential mortgage insurers in the state, and go a long way to support the market’s housing recovery.

The measure, which takes effect in California January 1, 2010, is similar to legislation enacted by Arizona last month and North Carolina in July 2009. It gives the state’s insurance commissioner added flexibility in assessing the strength of mortgage guaranty insurers, with discretion to permit such companies to continue to transact new business if capital falls below government-prescribed levels. Prior law required mortgage insurers to automatically cease conducting new business if they failed to meet the mandated capital levels.

Other mortgage-related bills signed by Schwarzenegger:

– SB 36, by Calderon, establishes standardized licensing requirements for all residential loan originators.

– SB 237, by Calderon, creates a registration program for appraisal management companies (AMCs).

– SB 239, by Sen. Fran Pavley (D-Agoura Hills), makes it a felony to commit fraud on a mortgage loan application, punishable by up to a year of jail time.

– AB 329, by Assemblyman Mike Feuer (D-Los Angeles), requires lenders to provide seniors with “a clear and informative” written disclosure of the risks and suitability of reverse mortgages.

– AB 957, by Assemblywoman Cathleen Galgiani (D-Livingston), allows buyers of foreclosed homes to choose local escrow officers, rather than being forced to use the company chosen by the seller.

– AB 1160, by Assemblyman Paul Fong (D-Cupertino), requires that mortgage loan documents be translated into the same language used in verbal negotiations.

Courtesy DSNews 

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