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Sacramento Foreclosures At Trustee Sale Still Slow

How long can this go on?

Loan Modification

I hear through the grapevine that over 90% of the Sacramento County Trustee sales are still being postponed at courthouse steps.

But it looks as if they haven’t scheduled that many?

The entire Government, Industry and powers that be are pushing hard to get homeowners to contact their banks/servicers and get a loan modification started, yet only 4% of the trial loan modifications become permanent.

This must have a lot to do with the fact that most loan modificatrions are only for 5 years, they fix the payment problem (reductions in payment have been about $500 Ave) for a while, but there is typically no reduction in principle.  The payment terms are typically changed to a 40 or 45 year loan, with 2 or 3% interest for five years and then reverting to todays rate. So, why do that? I see many homeowners are instead just throwing in the towel even if they can now afford the payment. 

Can’t blame them. 

The negative equity problem must be addressed.

Statewide, according to Default Research Inc.

California, the country’s most populous state, saw Notice of Default and Notice of Trustee Sale recordings drop by an average of 16.8 percent in 2009, and Los Angeles County, the country’s largest county, saw foreclosures decrease by 16.5 percent. The hardest hit cities with foreclosures in the state were Los Angeles (20,256), Sacramento (13,495) and San Diego (10,745).

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HAMP LOAN MODIFICATION SUCCESS RATE

Loan Modification Report for December–

How many homeowners have found a long term solution through HAMP?  The numbers show catastrophic failure!

At worst 4.5% at best 13%…

I have been keeping track of the two most important numbers in the Obama Administrations HAMP Progress report that comes out every month… The number of Trial modifications folks have entered into the program, and the number of permanent modifications, or folks that have been through the three month program and then qualified for and approved their final modification offer from the bank-

According to the charts: through November: (November’s numbers included)

Number of Active Trial Modifications
697,026


Number of Permanent Modifications
31,382

So only 4.5% of these loan modification starts have actually gone on th become a long term fix for families–

Now I’m sure this percentage will increase– Almost half of the 697,000 homeowners were added in September and October, so their numbers might start showing up as permanent modifications in January and February, but what about the 250,000 that were added before September, does this really mean that at best case only 13% of people will be able to find a long term solution through a loan modification?

Foreclosures and short sales will be the only solution for the other 87%?

I’ll keep you posted and revisit this on the 10th of January, when the December numbers come out…


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Some Short Sales are just ‘UNCLOSEABLE’…

 

 

The Sacramento Short Sale “Mirage”

Buyers pursue short sales to get a good deal. So when you see a price listed for a home that you think is too low for the neighborhood, before you jump, ask your agent to call the listing agent to find out if the home has already got offers and may be going Contingent. Also find out about how many banks, which banks, if the loans were purchase money  also, if there is a second, is it an original loan or  was it added later or refinanced. Are there full recourse loans involved? Will there be Seller Contributions? These questions and whether the home is owner occupied, if it is a second home, the owners financial situation… these all have an impact on whether or not the deal has a chance to be approved.
 
 
Click here for your free short sale guide and glossary.
 
 
Deficincy judgemnt
 
 “…May pursue a deficiency judgement for the difference…”
 
 
If the listing agent doesn’t have quick answers and a logical plan  when ask “what is your plan for getting short sale approval?”- This Short Sale may be a “mirage”- some are uncloseable… you might just walk away.
Find a better situation.
Because you might want to think twice about making an offer on a pre-foreclosure, short sale home. It’s not as simple as you may believe, some will never close and very few can close in 60 days or less.

Many of my Sacramento short sale home buyers have waited 4 to 6 months to close on a short sale, sometimes longer.

What is a Short Sale?

A short sale means the seller’s lender is accepting a discounted payoff to release an existing mortgage. Just because a property is listed with short sale terms does not mean the lender will accept your offer, even if the seller accepts it.Be aware that the seller need not be in default — to have stopped making mortgage payments — before a lender will consider a short sale. A lender may consider a short sale if the seller is current but the value has fallen. The seller may have over-encumbered, owe more than the home is worth, so a discounted price might bring the price in line with market value, not below it.

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SHORT SALE DEFINITION

Foreclosure Solutions Report

Stop Foreclosure With A Short Sale

Straight out of Wikipedia:

A short sale is a sale of real estate in which the sale proceeds fall short of the balance owed on the property’s loan. It often occurs when a borrower cannot pay the mortgage loan on their property, but the lender decides that selling the property at a moderate loss is better than pressing the current debtor. Both parties consent to the short sale process, because it allows them to avoid foreclosure, which involves hefty fees for the bank and poorer credit report outcomes for the borrower.

 Click Here For Sacramento Short Sale News

Stop Foreclosure with a Short Sale

Process

In a short sale, the bank or mortgage lender agrees to discount a loan balance because of an economic or financial hardship on the part of the borrower. The home owner/debtor sells the mortgaged property for less than the outstanding balance of the loan, and turns over the proceeds of the sale to the lender. Neither side is “doing the other a favor;” a short sale is simply the most economical solution to a problem. Banks will incur a smaller financial loss than foreclosure or continued non-payment would entail. Borrowers are able to mitigate damage to their credit history, and partially control the debt. A short sale is typically faster and less expensive than a foreclosure. It does not extinguish the remaining balance unless settlement is clearly indicated on the acceptance of offer.

Lenders often have loss mitigation departments that evaluate potential short sale transactions. The majority have pre-determined criteria for such transactions, but they may be open to offers, and their willingness varies. A bank will typically determine the amount of equity (or lack thereof), by determining the probable selling price from an appraisal or Broker Price Opinion (abbreviated BPO or BOV).

Lenders may accept short sale offers or requests for short sales even if a Notice of Default has not been issued or recorded with the locality where the property is located. Given the unprecedented and overwhelming number of losses that mortgage lenders have suffered from the 2009 foreclosure crisis, they are now more willing to accept short sales than ever before. This presents an opportunity for “under-water” borrowers who owe more on their mortgage than their property is worth and are having trouble selling to avoid foreclosure as a result.

Additional parties

Multiple levels of approvals and conditions are very common with short sales. Junior lien-holders – such as second mortgages, HELOC lenders, and HOA (special assessment liens) – may need to approve the short sale. Frequent objectors to short sales include tax lien holders (income, estate or corporate franchise tax – as opposed to real property taxes, which have priority even when unrecorded) and mechanic’s lien holders. It is possible for junior lien holders to prevent the short sale. If the lender required mortgage insurance on the loan, the insurer will likely also be party to negotiations as they may be asked to pay out a claim to offset the lender’s loss in the short sale. The wide array of parties, parameters and processes involved in a short sale makes it a relatively complex and highly specialized type of real estate transaction. Unsurprisingly, short sale deals have a high failure rate and often do not close in time to prevent foreclosure when they are not handled by a knowledgeable and experienced professional. 

The best sources of knowledge and expertise in short sales are short sale negotiators, loss mitigation specialists, and real estate lawyers who specialize in short sale.

 Consent

Short sales are different from foreclosures in that a foreclosure is forced by a lender, whereas both lender and borrower consent to a short sale. However, this consent may change at any time, and negotiations may be ongoing between the lender and borrower even while the short sale is on the market. The borrower may decide to remain and refinance their house, or become obstinate and force foreclosure. The bank may renege as well if they decide to stick with the current borrower, or if they disapprove of the sale price. Any short sale contract includes a contingency where the bank must approve the sale.

Changing consent can present a perilous situation for potential buyers. It can waste considerable time and money for a prospective buyer who anticipated a sale. Typically, deposits with the bank will be refunded but money for paid inspections or other services cannot be.

There are several defenses against this. If the seller has moved out of a property, that is a clue that they have no intention of staying or negotiating further with the bank. “Bank Approved Short Sales” are advertised by real estate advertisements, indicating that a real estate broker has verified the selling bank’s position. This still does not guarantee acceptance, and it often does not take junior lien-holders into account, but it is better than situations where the bank holding the mortgage has only been lightly involved in the borrower’s decision.

 Credit implications

Short sales are a type of settlement, and they adversely affect a person’s credit report, though the negative impact is typically less than a foreclosure. Like all entries except for bankruptcy, short sales remain on a credit report for seven years. Depending upon other credit information, it is typically possible to obtain another mortgage 1-3 years after a short sale.

While lenders sometimes forgive the remaining loan balance, other lien-holders likely will not. Further, it is common for a lender to omit updating mortgage balances zero balance after a short sale. However, willfully misrepresenting information on a credit report can constitute libel in some jurisdictions, and lenders may be sued in civil court for engaging in this behavior.

 Business

Short sales are common in standard business transactions in recognition that creditors are not doing debtors a favor but, rather, engaging in a business transaction when extending credit. When it makes no business sense or is economically not feasible to retain an asset, businesses default on their loans (called bonds). It is not uncommon for business bonds to trade on the after-market for a small fraction of their face value in realization of the likelihood of these future defaults.

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The Rise of The Sacramento Short Sale

 

Sacramento Foreclosure Solutions Expert Report

Sacramento Short Sales now 21.5% of Market

Well First of all, Let’s just quickly define short sales:

A real estate short sale is a sale of property in which the sale proceeds fall short of the balance owed on the property’s loan or loans.

Preforeclosurespecialist

Sacramento’s Real Estate Market has recently been a perfect storm for short sales.

There have always been short-sales. Since the beginning of real estate.  Market prices go up and market prices go down, and when a homeowner has to sell when they are upside-down… well, you get the picture.

Homeowners can have many reasons to sell their home in a Short Sale; any time there is a reduction in market value along with the need for relocation, sickness, job loss, death or divorce, there is no other way besides just letting the bank take it back.  So Short Sales are the best solution to keep a homeowner out of foreclosure when it is clear they cannot keep the home…

But in this economy, Sacramento shortsales most often occur when a homeowner just cannot pay the loan payment on their property. With Sacramento unemployment at 12.3% and a 41 month long drop in median home prices that has taken over 55% off  the 2005 highs in Sacramento County.  Sacramento Short Sales are now over 20% of the market!

Short sales in Sacramento have become a popular pre-foreclosure option to keep homeowners out of foreclousure, when loan modifications just don’t provide a solution to foreclosure.

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FDIC Considers Principal Writedowns for Failed Banks’ Loans

Sheila Bair 

Recovery-dot-gov

DSNews reports:

Lenders that step in to pick up the pieces of FDIC-insured institutions that go under may soon be required to write down the principal balances on the mortgages they acquire.

This sure makes sense! Think about it, if the new bank taking over a failed institution can write down the note and immediately start receiving income…  payments based on today’s value…  as long as the homeowner is able to make them – the new bank would save a ton of money on closing costs, inventory holding costs (insurance, market loss, vandalism etc) why weren’t they doing that all along? they already got the assets for pennies on the dollar with guarantees from the Government on any loss!

But  as reported, according to Bloomberg News, FDIC Chairman Shelia Bair is considering amending the agency’s loss-share agreements to include language that would allow the outstanding mortgage principal to be reduced for homeowners who’ve been hit by falling home prices and are underwater.

That seems so obvious!– why hasn’t that part of the deal anyway!?!

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Struggling Homeowners: 4% Get Mortgage Help

This just in from Chris McLaughin:

Treasury officials, in the first comprehensive tally of permanent modifications made, say that loan servicers have converted 31,382 people from trial adjustments to long-term assistance as of Nov. 30, but 30,650 people in trial modifications have been denied.  That means that only about 4% of troubled borrowers have received long-term help under the Obama administration’s foreclosure prevention program.  A nearly equal number of trial modifications have been denied permanent assistance, the report showed. The reasons include not making monthly payments on time, not submitting all the necessary paperwork and not qualifying for reasons such as insufficient income. 

Homeowners claim that banks keep losing paperwork, but banks claim they often don’t get it in the first place.  Around 375,000 people should be eligible to receive long-term relief by year’s end, but only one-third of homeowners who have made at least three trial payments have submitted all the needed forms, Treasury officials say, and some 20% have not submitted any paperwork at all. Banks and government agencies have hired outside companies to knock on borrowers’ doors to assist them with completing the paperwork.  None of this addresses the real problems, of course:  a lot of people are underwater and don’t see the point of making payments, and quite a few know they won’t qualify once their real income comes to light.

 

Along the same lines is This Article From DSNews:

Treasury released the highly-anticipated progress report on the government’s foreclosure prevention program Thursday afternoon – which for the first time includes details on the number of trial modifications each servicer has converted to permanent status – and as lenders warned earlier this week, the results were disappointing.

Of the more than 728,000 Home Affordable Modification Program (HAMP) trials under way across the country, 375,000 are scheduled to convert to a permanent modification by the end of the year, and only 31,382 have made the transition.

The Treasury Department said in a statement to the press, “According to servicer reports, most borrowers in modifications are meeting their responsibilities to make their payments. Servicers need to do their part to help borrowers complete the process and get to the finish line.”

A number of servicers have told DS News that the problem lies in the paperwork. They say an unsettling number of borrowers just don’t submit the required documentation for conversion once they complete the trial phase, or file incomplete or inaccurate information. Participating servicers say they’re ramping up outreach efforts to ensure homeowners who’ve successfully completed their trial phase get the necessary documents in for permanent assistance.

Molly Sheehan, SVP of housing policy for JPMorgan Chase’s home lending division told a congressional panel earlier this week that the focus of her group’s “immediate attention is finding ways to assist the 51 borrowers out of 100 that are missing some or all of the documentation.”

But on the other end of the process, homeowners and their advocates say it’s the servicers and their staff that cause the delays, and in some cases, even lose the paperwork.

Julia Gordon, senior policy counsel for the Center for Responsible Lending, testified to lawmakers Tuesday that servicers still lack the capacity to effectively administer a program of HAMP’s size and scope. It’s been nine months since HAMP began, and Gordon said, “Homeowners still have terrible trouble reaching their servicers, and when they do, they often encounter staff who are ignorant of the HAMP program, they sit through attempts to steer them into other products, and they are unable to get any firm decisions made in a timely manner.”

Timra Valentyne, a loan officer with United Homestead tells DSNews.com that she’s encountered similar problems helping homeowners work with their servicers on HAMP modifications. On numerous occasions, Valentyne said, the borrowers’ documentation gets lost in the shuffle or never gets tagged for the appropriate account.

She cited a particular case with Chase, in which the homeowner had successfully made his restructured payments through five months of a HAMP trial, but was denied a permanent modification because he cashed in a certificate of deposit (CD) to help cover the new payments and the bank ruled his hardship was only temporary. When Valentyne followed up with Chase, the bank representative told her the homeowner was never on the HAMP plan, although the homeowner had a rejection letter stating that he’d been denied for the “Making Home Affordable” modification program – a clear discrepancy in records and paperwork.

Gordon advocates requiring HAMP-participating lenders who are producing insufficient results to use specialty servicers working for the government to handle certain accounts. These companies specialize in intensive, “high-touch” approaches to working with homeowners in trouble, she says, and are much more effective at reaching borrowers than a mainstream servicer.

One specialty servicer says it’s exactly this type of high-touch method that has led to its HAMP success. Ocwen Financial has converted an industry-leading 74 percent of its trial mortgage modifications to permanent status. The Treasury’s latest HAMP report shows that Ocwen accounts for a disproportionately high 13.5 percent of all permanent modifications completed to date even though it services only 2 percent of the estimated HAMP-eligible loans.

Ocwen says its partnerships with homeowner advocacy groups have been indispensible in helping the company keep borrowers active in the process. Ocwen collaborates with a range of independent housing advocacy and grassroots organizations to reach out to homeowners and to help them gather the required documents for a modification.

Based on the December HAMP report GMAC Mortgage is having the most success with permanent modifications in terms of sheer numbers. GMAC has successfully made the conversion for 7,111 homeowners. The company has extended trials to 39 percent of its eligible borrowers.

Bank of America had the worst showing of all the largest lenders. It has finalized a mere 98 permanent modifications, and has extended trial offers to only 15 percent of its more than a million eligible homeowners.

The administration recently announced a new push to compel servicers to complete more permanent modifications, threatening to impose fines, withhold cash incentives, and publicly name those companies that fail to perform up to par

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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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Foreclosure snapshot

– More than 1.5 million homes have been lost to foreclosure, according to the Center for Responsible Lending.
– Goldman Sachs is projecting 13 million foreclosures of all types during the next five years.
– One in 10 homeowners are late with mortgage payments, according to the Mortgage Bankers Association.
– Owners owe more than the home is worth in nearly one in five homes, according to First American Core Logic.

More Scary Headllines:

•    Banks braced for record debt defaults in the New Year
•    Friday’s Jobs Report Will Set December Treasurys Tone
•    Treasury to meet with mortgage servicers Monday
•    Dubai Debt Woes Deliver Commodities Wake-Up Call

Around the world people are wondering where to park their hard earned cash during the coming year. So, what does the new year have in store for short sale investors? It depends who you ask…
According to the National Association of Realtors, prices are expected to rise 4 percent while home sales will rise by 700,000 to 5.7 million. Foreclosures will top out in the first six months of 2010 and the “fear factor” will fade to create a sunnier outlook for real estate by the end of the year.

On the other hand, less than optimistic projects are expected globally as the shock waves of recent Dubai debt hits the market creating a mini-panic among financials and bankers around the world. Loans to non financial business owners continue to decline and debt deflation combined with credit contraction continues well beyond 2010 according to the popular website “Seeking Alpha”.
Fox News reports commercial real estate is expected to continue to decline until later in 2010 at which point there is hope for optimism as the economy improves. Of course, should unemployment continue to rise that could be stalled for some time however, commercial property values are beginning to steady in many areas of the nation.

REIT’s are expecting a  promising year and a record number of trusts are seeing large gains. In fact, they are considered downright affordable in some cases while a rash of new REIT’s have recently hit the market as desperate stockholders seek investments backed by tangible assets.

Interest rates will remain low according to the majority of experts; the general consensus reflects the risk of rising interest rates to negatively impact real estate before a full recovery can get underway. With so much capital sitting on the sidelines, there is little incentive to raise rates prematurely.
Inflation will remain low throughout 2010 and perhaps through 2012 however, tightening credit will make it increasingly difficult to finance properties despite low rates and bargain prices.

Additionally, investors expect the Fed to stop purchasing mortgage bonds creating additional stressors on the market. Finally, new housing starts are expected to rise but continue to lag behind former highs for several years to come.

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. DSNews.com reported in October that the administration was readying guidelines for the program, and yesterday, they arrived.

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