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Thursday, January 21st, 2010

Stricter Mortgage Lending Regulations Implemented

As many people now know, the current recession was touched off by the collapse of the real estate market, which ballooned out of control in the mid-2000s.

Now, according to CBS News, mortgage lenders have learned a tough lesson and are changing the way they do business. Here’s a look at some notable changes and why they’re cropping up.

Big-Time Losses

During the subprime lending boom, many lenders (including big players like Fannie Mae and Freddie Mac) offered high- or variable-interest loans, no-down-payment loans, and other types of loans that people were unlikely to pay off easily.

Now, many of those loans have gone bad, meaning that the borrowers were unable to make payments and the houses in question have gone into foreclosure. Lenders are thus writing off (that is, accepting as lost) billions of dollars in bad debts – and they have to do something about it.

  • Credit score requirement: In the era of subprime lending, people with low credit scores were often specifically targeted for high-interest loans. Now, according to sources, Fannie Mae will not issue loans to anyone whose FICO credit score is below 620.
  • Equity requirement: If you’re looking to refinance your current home loan, lenders now require you to have some equity (that is, some amount of the principal paid off) in your original loan.
  • Down payment a must: In the olden days, buying a house without a down payment was unheard of; the subprime lending "innovations," though, introduced loans with no down payment required. Major lenders, it seems, are returning to the traditional wisdom that you must pay a significant amount of money up front.
  • Debt-to-income ratio consideration: Fannie Mae has also reportedly announced that it will not lend to anyone whose debt-to-income ratio rises beyond 45 percent – that is, in order to get a loan, you must not pay more than 45 percent of your monthly income on all debt payments (including car, credit card, student loan, etc.) combined.

So what does this mean for people thinking about buying a home? Basically, it means you need to be at the top of your game financially. You should be checking your credit report regularly and making sure you’re an attractive candidate to home lenders – and if you aren’t right now, it’s time to take steps to become one.

Additional Resources

Home Buying Brochure

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Posted in Mortgage Foreclosure | 3 Comments »

Thursday, December 10th, 2009

Call Your Representative and Demand Mortgage Modification in Bankruptcy

An amendment being debated in the House of Representatives could provide powerful protections for homeowners going through bankruptcy. This legislation would allow bankruptcy judges to modify mortgages in Chapter 13 cases, providing a huge benefit for everyday hardworking Americans who are facing home foreclosure. The House may start voting on this amendment as soon as today!

Please take the steps below then share with your family and friends via email, Facebook, or any way you can get the word out!

  1. Phone toll free at: 877.354.4958
  2. Put in your zip code
  3. When you reach the receptionist:
    • State your name
    • Say that you are a constituent
    • Ask the Representative to vote FOR the Conyers-Turner-Lofgren amendment (#201) to the Financial Services Reform bill.

The amendment is being fiercely opposed by the business and financial services communities. By calling your representative in support of this amendment, you can fight corporate greed and help your fellow Americans. This amendment will cost taxpayers NOTHING and will save millions of homes from foreclosure! Take action today!

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Posted in Bankruptcy News and Events | 1 Comment »

Tuesday, November 24th, 2009

One in Four Mortgages Underwater

Nearly one in four home mortgages are burdening borrowers with negative equity, an article by the Wall Street Journal reports.

Underwater mortgages find homeowners with declining home values to the point that they owe more on their mortgages than the home is worth.

The situation has hit new homeowners in the past few years, especially those who were paying interest-only mortgages as their home values declined.

However, this is no longer the case, as a whopping 23% of all home mortgages—10.7 million households— are underwater, according to real estate information company First American CoreLogic.

5.3 million of those homes are tied to mortgages worth least 20% more than the home's value.

The hardest hit states include Florida, Arizona and Nevada, where 65% of mortgages have negative equity—nearly three times the national average.

Negative equity can become a financial disaster for homeowners, especially if it means turning down a promotion or job transfer because they cannot sell their home.

The underwater crisis is intimately tied to foreclosures (a category also led by Nevada), as rising foreclosure rates can cause neighboring homes to lose value, and as some homeowners choose to simply stop paying on underwater mortgages, known as strategic default.

An estimated 588,000 borrowers defaulted on mortgages last year even though they could afford to pay, double the amount from 2007.

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Posted in Mortgage Foreclosure | 1 Comment »

Friday, November 13th, 2009

October Foreclosures Dip from September, Soar from ‘08

RealtyTrac, a company that follows foreclosure data for the United States, released October numbers on Thursday. It seems foreclosure rates have decreased slightly since last month, but are still significantly higher than they were a year ago.

Foreclosure by the Numbers

Here’s a look at the statistical breakdown of recent foreclosure activity in the country.

  • 332,292 property filings in October: This number includes three specific types of action: notices of bank repossession, auction and borrower default. That means one in every 385 American households is in some phase of the foreclosure process.
  • Percentage changed: The numbers translate to a three percent drop from September of this year, but a 19 percent increase from October of 2008, suggesting that the moderate improvement is only relative.
  • Estimate for the year: Based on information gathered thus far, RealtyTrac is reportedly predicting as many as 3.4 million foreclosures this year, a 48 percent jump from 2008’s total of 2.3 million.

These numbers may seem astoundingly high, and they are – remember that this recession started in the real estate industry, and continues to plague homeowners.

So why are foreclosures still inching up even when the economy is showing signs of recovery? Most likely, sources suggest, the unemployment rate is to blame. Even though consumer spending may be on the rise, millions of Americans are still without jobs – and without serious hope of getting jobs in the near future, which means missed house payments.

Foreclosure Prevention or Just Delays?

The Obama administration has taken some action to try to ease the pain in the housing market. The Home Affordable Mortgage Program, an initiative designed to encourage lenders to offer mortgage loan modifications with cash incentives, apparently helped as many as 20 percent of eligible borrowers last month, up from 16 percent in September.

But those numbers still represent far less than the majority of struggling homeowners – and some other laws may be offering less help than they seem to be.

Nevada, for example, allegedly has a law in place that mandates foreclosure mediation for at-risk borrowers. And, while sources indicate that the state saw a drop in foreclosures this month, it could very well see a jump later on, if and when mediations have been completed and proven unsuccessful.

Additional Resources

Home Affordable Modification Guidelines

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Posted in Mortgage Foreclosure | 5 Comments »

Friday, October 30th, 2009

Stalemate in Real Estate Sector has Increased Bankruptcy Filings

Guest Author: Peter Gomes

The real estate sector received a jolt when the sub-prime mortgage crisis eroded the US economy. The mortgage market was in doldrums and the upheaval so great that the government had to intervene with its series of mortgage bailout programs.

Consumers bankruptcy filings increased, and so did the number of foreclosures. Many Americans considering bankruptcy filing received more information on bankruptcy by connencting with a bankruptcy attorney.

The Obama Administration introduced a series of mortgage bailout programs to assist homeowners facing foreclosure. The program, known as the Making Home Affordable Plan, was expected to help as many as 7 million to 9 million homeowners. However, due to few limitations, the program has yet to help as many homeowners as anticipated.

There is a vicious cycle of debt that has led to the recession, which has affected consumer spending as well as investor sentiment.

In the easy-credit boom, people started using their credit cards even for making payments for grocery shopping and for utility bills. As employers went on a cost cutting and job cutting spree, it became difficult for consumers to make ends meet.

For consumers considering filing bankruptcy, it can be Chapter 7 bankruptcy or Chapter 13 bankruptcy. In Chapter 7 bankruptcy, a court-appointed trustee will liquidate your non-exempt assets so that the proceeds can help in paying off creditors. As per the new federal bankruptcy laws, certain changes have been introduced. The prominent ones are Means test and credit counseling.

If you are planning to file Chapter 7 bankruptcy, you have to find out if you qualify for the same by taking the Means test. Consumers also must take a credit counseling session prior to filing bankruptcy.

In case of Chapter 13 bankruptcy, you are given a repayment schedule according to which you are expected to make payments to your creditors.

In either bankruptcy chapter, there is one advantage of filing: an Automatic Stay or Order for Relief that prevents creditors from coming after you for their dues.

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Posted in Bankruptcy and the Economy | 7 Comments »

Monday, October 26th, 2009

Foreclosure Auctions Finding Few Bidders in Detroit

A recent auction of foreclosed and abandoned properties in and around Detroit, Michigan, saw only one-in-five properties sold—despite an opening bid of only $500.

Almost 9,000 homes and lots were on the auction block at the Wayne County tax auction, according to Reuters, with a total land area almost the size of Boston. At the end of the four-day auction, less than 1,800 properties were sold.

The auction was held by Wayne County to recoup unpaid property taxes, many for homes that had been abandoned or foreclosed.

With unemployment over 27 percent, Detroit is by far one of the hardest-hit cities in America. Detroit's population has dwindled from a peak of nearly 2 million in the 1950s to an estimated 800,000 today. Despite efforts by the city to revitalize the downtown, much of the city is turning into a ghost town, according to Reuters.

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Posted in Mortgage Foreclosure | 6 Comments »

Monday, September 14th, 2009

Home Loan Modification Program Begins to Help

According to a New York Times article, the Obama administration’s Home Affordable Modification Program (HAMP) is on the road to achieving its goal of modifying 500,000 home loans by November.

What Is HAMP?

HAMP is a program designed by the Obama administration to incentivize home loan modifications for lenders. It’s backed by $75 billion and designed to end the foreclosure crisis plaguing American real estate. Here’s how it works:

  • Lenders reach out: For every home loan lenders and borrowers successfully modify, the lender gets $1,000 from the HAMP fund.
  • The payments begin: After three months of successful payments, the loan modification is considered “complete,” and cash incentives are distributed.
  • Maintenance is rewarded: For each year that the borrower (the homeowner) stays current on payments, the lender is given another $1,000.

In other words, HAMP attempts to lure lenders to modifications. Without this program, many lenders are financially incentivized (by the fee structure of the mortgage lending industry) to let mortgage loans slip into delinquency and the homes into foreclosure. In other words, late and delinquent loans earn lenders the most money through fees and penalties.

Who Can HAMP Help?

Borrowers are considered eligible if and when they’re at least 60 days behind on their home loan payments. Various economists have estimated that as many as two million American families can expect their homes to go into foreclosure before the end of the crisis if nothing is done to modify their loans.

Reports indicate that:

  • 19 percent of eligible borrowers have been offered modifications so far, which equals more than 570,000 loans.
  • 12 percent of eligible borrowers (about 360,000) have actually started the loan modification process.
  • Nearly eight percent of all U.S. homeowners are seriously delinquent on their mortgage payments, according to recent reports from the Mortgage Bankers Association.
  • 47 mortgage servicers have so far signed up with the Treasury Department to participate in the HAMP program. These servicers account for approximately 85 percent of all eligible mortgages.

Looking Beyond the Numbers

While the modification totals have been modest so far, these numbers show improvement from Bush administration efforts, when the FDIC announced explicit disapproval of the foreclosure-prevention steps taken at that time.

If more homeowners are able to engage in mortgage modification, the number of Americans filing bankruptcy to prevent foreclosure may start to drop off, a good sign of economic turnaround.

Additional Resources

Home Affordable Modification Program Guidelines (PDF)

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Posted in Mortgage Foreclosure | 22 Comments »

Wednesday, August 12th, 2009

Another ‘Foreclosure Wave’ to Come? Are We Even Off the First Wave?

With conversations swaying toward the July decrease in unemployment numbers and the excitement over the prospect of a teeter toward recovery, there is one major aspect to our current financial plight that's lacking in coverage: foreclosure.

When foreclosure is brought up, it's mostly talked about as though we have rode the first and mightiest of the waves and are settled into a set of less fierce waves of foreclosures, offering conjecture that the mend has begun.

Foreclosures Are Still a Top Issue

However, that might not be all that accurate of an assumption.

In fact, there are still many experts out there who believe we're just riding the first wave of the foreclosure epidemic.

Second Wave to Come?

Of the assumption of a ‘second wave’, Matt Padilla from the O.C. Register has a tone of indignation which might actually surmise the thoughts of most experts in the field: “To say there is a second wave implies the (current) wave has receded.”

Conceding to the same thought is Sam Khater, senior economist, First American CoreLogic, “I don’t see that the wave has receded.”

Some Foreclosure Prevention Measures Have Helped

Although Khater concedes to the fact that federal and state efforts have acted in delaying a relevant amount of foreclosures, he is vehement in asserting that these efforts only “prevented a few”.

More simply, it seems by all the true indicators that our foreclosure situation isn’t in the midst of a second wave but more in the spray of one giant one.

Another trusted economist and famed blogger who is not buying into the “second wave” theory is Barry Ritholtz.

Geographic Foreclosure Stats

In July, Ritholtz’s shows in his blog The Big Picture, a graph of staggering proportion. Wherein he examines the findings and offers that of all 50 states within the U.S, in the month of June, three of them (California, Florida, Nevada) account for nearly half of the country’s foreclosure-related activity.

To that fact, Ritholtz observes that the top 10 states accounted for 75% of all foreclosures for the month of June.

So if you are a resident of California or Florida you may not be so quick to agree with a second wave entering as much as you would the tsunami which has riveted your state.

Of course, those who would argue against these findings would say that the reason why California and Florida are at the top of the list and still climbing are because they are the top two states from the housing boom of the 90’s and early 2000.

While this may be accurate, it still does not negate the fact that foreclosures are in a perpetual rise.

Acquire additional information about bankruptcy and foreclosure.

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Posted in Mortgage Foreclosure | No Comments »

Sunday, August 9th, 2009

Why So Few Home Loans Have Been Modified

Since the collapse of the housing market in late 2007, leaders, policymakers and financial experts have been looking for a solution to the nation’s mortgage-based financial woes.

Despite economic incentives from the federal government, though, few mortgage lenders have offered the loan modifications necessary to keep borrowers away from foreclosure.

This New York Times home loan article details why. In brief, here’s what’s going on:

  • As part of recovery efforts, the Obama administration implemented a $75 billion program to reward lenders who modify troublesome home loans. The program essentially distributes $4,000 to lenders for each modified loan over a four-year period.
  • According to a report from the Federal Reserve Bank of Boston, though, only about 3% of seriously delinquent loans have been modified in the foreclosure crisis. The reason? Banks and mortgage lenders can collect fees on delinquent loans. After a home goes into foreclosure and is sold at auction, the mortgage company can collect fees from the proceeds for insurance, legal services, title searches and appraisals.

Interests of Lenders & Borrowers at Odds

Though bank officials and others involved in making mortgage loans have reportedly denied that they would act solely for profits, evidence seems to point toward just such behavior.

While most borrowers – and the housing market in general – would benefit from modified loans, many lenders stand to lose money from stopping foreclosure.

This trouble in home lending is really just the most recent manifestation of the system that allowed the market to get so out of control – and to collapse so heavily – in the first place. Here’s what happens:

  1. A borrower takes out a mortgage loan and agrees to pay a certain amount of interest.
  2. The loan is put into a pool of loans, divided and sold to investors in pieces.
  3. Every time a borrower makes a payment, some of the interest goes to each investor who “owns” part of the debt.
  4. Loan servicers, who act as middlemen in this process, collect service fees every time they have to service the loan in some way (e.g. by assessing late fees).
  5. Servicers acting in their best interest, then, often prefer to limit loan modifications and milk late and delinquent loans for fees.

Additional Resources

Why Don’t Lenders Renegotiate More Mortgages?

American Recovery and Reinvestment Act of 2009

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Posted in Mortgage Foreclosure | 2 Comments »

Sunday, August 2nd, 2009

FTC Announces Plan to Help Distressed Homeowners

Unfortunately, some people have seen the abysmal housing situation in the U.S. as an opportunity to take money from struggling individuals and families.

We’ve written often about the many guises of foreclosure rescue scams and how to protect your home from foreclosure.

In July, the Federal Trade Commission announced Operation Loan Lies, a “coordinated national law enforcement effort to crack down on mortgage modification scams.”

178 Companies Targeted for Scams

Operation Loan Lies includes four separate lawsuits, meaning that the FTC will have started action in 14 separate cases since April.

Typically, a foreclosure rescue scam works like this to separate unsuspecting homeowners from their money:

  • Promise to help: Scammers typically claim to be able to halt, prevent or delay foreclosure or modify the terms of your home loan. Their message attracts those who are having difficulty making payments and are growing desperate to save their homes.
  • Demand for money – or more: Once a scammer has promised to assist his victim, he asks for payment up front or assures the homeowner that he can only help if the deed to the house is in his name.
  • Fail to follow through: Scammers then do little or nothing to help the distressed homeowner. Some leave town with the money; others evict the family once they have the rights to their property.

While such a scheme may seem blatantly suspicious in writing, to those in danger of losing their homes, the promises of these scammers often sound like the only good news they’ve heard in a long time.

Learning from Others’ Mistakes

The FTC’s game plan goes beyond legal action: it has created and posted this foreclosure warning video, which features people who were victimized by foreclosure rescue scams and provides information about how to deal with the threat of foreclosure.

FTC is Following Through

In early April of this year, a number of consumer advocates (including Attorney General Eric Holder, FTC Chairman Jon Leibowitz, Treasury Secretary Timothy Geithner and others) announced that they planned to increase enforcement against people preying on distressed homeowners.

This move seems to be evidence that they’re following through.

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Posted in Mortgage Foreclosure | No Comments »

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