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Real Estate: Finally a Good Investment?

January 22, 2011 By

As posted by: Smart Money

Real Estate: Finally a good investment?
The housing market still looks pretty bleak: There were a record 1 million foreclosures last year, home prices are still falling in many regions, and the number of “underwater” properties is at a record high.

And things don’t look much better in other areas of real estate. The number of construction jobs continues to decline, even as other parts of the economy have added jobs. And mortgage rates have moved higher as long-term Treasury yields have backed up during the past few months.

Basically, the real estate market remains a mess.

Real estate encompasses a wide range of markets – homes, apartments, hospitals, office buildings, strip malls, dormitories and other properties. But for our purposes, let’s focus on residential real estate, or homes. Here are four reasons to think residential real estate might represent a bargain – with one big caveat.

MAKING SENSE OF THE STORY FOR CONSUMERS

• Everyone hates homes – When the housing market is in the doldrums, people tend to avoid thinking about the value of their home. Sellers complain they’re not getting offers and buyers bemoan the strict lending requirements. However, prospective buyers should be contrarian and take advantage of a down housing market.

• Smart people are buying real estate – A prominent hedge-fund manager said in a speech last fall: “If you don’t own a home, buy one. If you own a home, buy another one, and if you own two homes, buy a third and lend your relatives the money to buy a home.” He believes that interest rates and home prices will rise this year, so real estate bargains won’t last much longer.

• Real estate performs well during inflation – Convention says Treasury Inflation Protected Securities, commodities, and real estate do well in an inflationary environment. Real estate performed well during the period in the 1970s, when persistent inflation and high unemployment occurred.

• Demand may be coming back – Job creation and getting people employed are the two major factors in the housing rebound. There’s much debate about when the job market will recovery. Optimists say the recovery will happen this year, while pessimists say it won’t happen for several years.

Read the full story… click here.

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Some condo owners may lose FHA financing

December 22, 2010 By

By Kenneth R. Harney – December 12, 2010
Reporting from Washington

Their ability to sell or refinance their units could be hampered if their condo projects missed a key deadline for recertification. Tens of thousands of condominium unit owners around the country may not know it, but their ability to sell or refinance could be jeopardized by a rolling series of federal government deadlines.

On Wednesday, an estimated 2,200 condominium projects missed an eligibility deadline involving sales or refinancings using Federal Housing Administration-insured mortgages. The deadline was originally set by FHA for recertification or approval of these projects, but at the last minute the agency agreed to extend eligibility for most of them — 23,000 projects — into next year, with a series of rolling expiration dates. A group of 2,200 condo projects around the country received extensions only until the end of this month.

What this means, say lenders and condo experts, is that unsuspecting unit owners nationwide could suddenly be cut off from an increasingly important source of mortgage money. In some markets where FHA accounts for 75% or more of first-time home purchases, condo sellers could be severely handicapped. In parts of the country with heavy concentrations of condos, such as California, Florida, New England, Washington, D.C., and the urban Midwest, the effects could even depress sales prices.

“This is a travesty” unfolding, said Jon Eberhardt, president of Condo Approvals LLC, a national consulting firm based in Torrance. “You’ve got thousands of people out there with no idea” that FHA financing could evaporate for them in the near future.

“This is going to be a big problem,” said Steve Stamets, a loan officer with Union Mortgage Group in Rockville, Md., with numerous condo clients. “I expect you will have frantic sellers pushing management companies” to get their condo buildings approved.

The eligibility issue dates to November 2009, when the FHA published new rules on the types of condo projects acceptable for mortgages on unit sales and refinancings. The rules were the outgrowth of a review that found the FHA — essentially a government-owned insurance company — had approved thousands of projects over the previous two decades but possessed inadequate current information on their underlying homeowners associations’ budgets, legal documents, insurance coverage, renter-to-owner ratios, delinquencies on condo fee payments, the amount of commercial space and a variety of other characteristics that could affect a project’s financial stability.

The 2009 guidance spelled out toughened standards in these areas and set up timetables for taking fresh looks at projects before sanctioning additional unit financings. Condo projects that had been approved by the FHA before October 2008, the guidance said, would have to submit the information required for renewed approval by Dec. 7, 2010, or lose eligibility for FHA financing.

FHA officials issued bulletins and notices during the last year to lenders, condo management companies and consulting firms warning them about the approaching deadline. Ultimately, however, according to FHA officials, roughly 25,000 projects nationwide missed the cutoff. Officials said they had no estimate on the number of individual units affected, but clearly it’s a sizable multiple of 25,000. For example, Eberhardt said, the average condo project in California contains 85 units.

Rather than abruptly eliminate financing for such a large and important segment of the country’s housing market, FHA relented and announced the revised schedule of expirations.

Though the precise expiration schedules were not immediately available, FHA officials said they planned to notify condo associations, management companies and lenders on the specifics shortly.

What can owners do? Tops on the list, according to FHA officials, is to get in touch with the leaders of your homeowners association. Ask them to do what’s necessary to get the project through the approval hoops. Large mortgage lenders can also get the ball rolling if they want to finance a unit in the project.

Costs for a recertification or approval can run from just under $1,000 to more than $3,000. Time for approvals may be a much more significant factor, however. Eberhardt says his firm can assemble documents and create a package for the FHA in about five days, but the process can extend for an additional 45 days to more than 60 days if the FHA staff is overwhelmed with applications. That just might happen in the coming weeks as unit owners begin learning about their financing cutoff deadlines.

Meanwhile, your sale or refinancing could be put on hold.

kenharney@earthlink.net
Distributed by Washington Post Writers Group.- Copyright © 2010, Los Angeles Times

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Banks are in a difficult situation…

December 21, 2010 By
Dangerous Waters sign at Dam


Banks and the government have struggled to get the current foreclosure situation under control. The modification programs have helped many families avoid foreclosure. However, the number is but a small percentage of those incapable or unwilling to pay their mortgage. This has resulted in an ever increasing number of bank owned foreclosures (REOs).

The banks are in a difficult situation. If they release this inventory of discounted properties to the market too quickly, it could crush prices causing even more foreclosures. If they release it too slowly, any housing recovery would be further delayed. Imagine a dam, and look at the foreclosures as water behind the dam. The banks needed to find the perfect amount of water they could release to feed the river below but not flood the valley.

This past summer banks finally found that perfect number – not too many, not too few – that the market could handle. Being confident that they had a handle on the challenge, banks increased their repossessions of delinquent properties. Repossessions were up 49 % in August. September set an all-time record for reposed homes. However, in their haste to build that inventory, they got sloppy with their procedures.

When this was revealed, both private and government institutions mandated that the banks declare a moratorium on foreclosures until the irregularities were corrected.

In essence, they put a cork in the dam.

The banks have now revised their procedures and feel comfortable with the accuracy of their paperwork. They will begin to release foreclosures after the first of the year.

The cork is about to be removed.

What will this do to prices?

Both the Bank of America and Fannie Mae have projected that house prices will fall dramatically at the end of the first quarter of 2011 and then slowly move upward through the rest of the year. Why the dramatic drop in values after the start of the year? Perhaps the people in control of the cork know exactly when it will be removed and realize the short term implications.

Bottom Line

There is currently a window of opportunity to sell your home before the discounted properties again re-enter the market and put downward pressure on prices. If you plan to sell within the next year, now might be the time.

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Luxury home prices are still heading down…

December 19, 2010 By
Author Anne Rice has reduced the asking price on her Rancho Mirage home by $350,000, to $2.95 million, because she wants a smaller residence. (Mariah Tauger, Los Angeles Times / November 19, 2010)

Very good and well written article with keen insight from some of Orange Counties well known agents. What are your thoughts?

While Southland housing values overall have rebounded from recent lows, those in the upper end of the market may not yet have hit bottom. Some experts don’t see a turnaround for at least another year.

Author Anne Rice has reduced the asking price on her Rancho Mirage home by $350,000, to $2.95 million, because she wants a smaller residence. (Mariah Tauger, Los Angeles Times / November 19, 2010)

Photos: Author Anne Rice downsizing from luxury home
By Lauren Beale, Los Angeles Times

On its glittering surface, the Southern California luxury housing market still has plenty of pizzazz.

A 48,000-square-foot Versailles-style estate in Bel-Air that sold for $50 million is believed to be the highest-priced sale in the nation this year. Actor Sacha Baron Cohen spent $18.9 million on a Mediterranean villa in the Hollywood Hills, a record for that area.

Luxury housing: In the Dec. 13 Section A, a graphic with an article about problems in the luxury housing market listed ZIP Codes for the highest-priced homes in Southern California. It showed two locations for Rancho Santa Fe on a map: the correct one in San Diego County and an incorrect one in Los Angeles County. —

These trophy deals, however, are masking a larger malaise in the luxury market. Most mansions put up for sale are lingering for months without nibbles from buyers, real estate agents say. And although Southland home prices overall have rebounded from lows hit last year, the luxury market is still trending downward.

The troubles at the top may seem small compared with the huge housing declines seen in areas such as the Inland Empire. But a turnaround in the luxury market was the first indicator of recovery in the 1990s down cycle. And many experts say the housing market won’t be healthy again as long as mansion prices are falling — which could be the case for at least another year.

“Good locations will be the first out, and luxury is generally in good locations,” said economist John Burns, who heads a real estate consulting firm in Irvine.

Why the continuing funk? Analysts say the foreclosures and short sales that depressed home prices in general are finally catching up with the high-end market. The day of reckoning just took more time.

“Formerly affluent people who borrowed far too much money” are running out of staying power, Burns said.

The Times examined monthly sales data in 20 Southland ZIP Codes with the highest home prices, from Beverly Hills to Solana Beach, using information provided by research firm MDA DataQuick of San Diego.

In 10 of those areas, home values are still lower than they were a year ago, suggesting that they have yet to hit bottom. Median prices were basically unchanged in five areas and showed modest gains in five. Overall, 19 of the 20 communities are still below their high points.

Anne Rice said she feels a little awkward complaining about the real estate market. As a bestselling novelist, she realizes she is far more fortunate than most.

Even so, Rice isn’t thrilled that she has had to reduce the asking price on her primary home in Rancho Mirage, near Palm Springs, by $350,000.

She hopes the new price of $2.95 million will attract a buyer, but it means taking a greater loss. Rice bought the six-bedroom, seven-bath home in gated Thunderbird Heights for $3.6 million in 2005.

“The market has been hard on us,” said Rice, who wants to downsize. “All my high-earning years, I invested in real estate…. I have lost money now on two — quite dramatically — selling an $8-million property in La Jolla for $6.5 million and a property in New Orleans for less than cost and improvements.”

Southland home values plunged 51% from 2007 to 2009. But they’ve shown steady improvement over the last 18 months, gaining back about 15%.

In contrast, home values at the upper end have not fallen as far but have shown few signs of recovery, according to MDA DataQuick figures.

There are 44 ZIP Codes in Los Angeles, Orange, Santa Barbara and San Diego counties where median prices exceed $1 million. Prices in these high-end communities dropped nearly 26% from their January 2008 peak to April 2010. They have gained back 5% since then.

Prices in Rancho Santa Fe, ranked by Forbes as the third most expensive community in the nation, have fallen nearly 31% since their 2005 peak, and they have yet to turn the corner.

Through October, Beverly Hills 90210 had the highest median of these top-priced neighborhoods at $2.7 million. That’s down a mere 18.7% from the 2008 crest, but it too has not shown any rebound.

While the overall drop in value has not been as severe as that at the lower end of the market, the fact that prices in many areas continue to fall acts as a brake on sales — as buyers hold off making purchases out of fear their investment will immediately decline in value.

Luxury real estate brokers are feeling the pinch, as fat commissions are fewer and further between.

“We’re seeing a lot more sales in the $1 million and below range,” said John McMonigle, president of McMonigle Group, an Orange County firm that specializes in selling luxury properties. “We had 121 homes close escrow in Newport Beach in September at an average of $1.15 million, but when you drill down, one thing is concerning: There was only one house over $5 million.”

Malibu’s Billionaires’ Beach enclave can boast of a $37-million closing in October, one of the highest prices there ever. But that and other marquee sales can’t make up for weakness elsewhere in the market.

“Malibu has taken the worst hit,” said Sandra Miller, an agent who tracks $1-million-plus sales on the Westside. Less than a third of listed properties are selling, she said, and median prices are down about 25%.

When will the market turn around, and what will it take?

Burns, the economist, believes that the housing market overall is headed back toward 2002 price levels, on grounds that the gains seen over the last year or so will be reversed as a new flood of foreclosures and short sales hit the market.

That would mean a small retreat for the general market, in which prices are now at 2003 levels. It would be a more dramatic downturn at the high end, where prices are about where they were in 2005. He predicted they won’t hit bottom till 2012.

Real estate agents say one reason the high-end market has taken longer to reach bottom can be summed up in one three-letter word: ego. Wealthy sellers may not need the money and refuse to reduce their price for fear they’ll look like they are in financial trouble, said Bob Hurwitz of Hurwitz James Co. in Beverly Hills.

The message he tries to hammer into unrealistic sellers these days: “You wouldn’t buy this house for this price yourself.”

Holding firm on an asking price keeps up the illusion that the house is worth more, Hurwitz said. “Some sellers are dreaming.”

Southern California’s posh neighborhoods are littered with examples of properties stuck at outdated prices. The most noticeable on the landscape is Fleur de Lys, a 12-bedroom estate in Holmby Hills that was listed at $125 million for 940 days before being pulled off the Multiple Listing Service late last year. The French Beaux Arts mansion on 5 acres is still being marketed on agents’ websites.

By comparison, its competition — the nearby $150-million Spelling estate — has been on the market only since March 2009. There has been no price drop on this 56,500-square-foot manse either, however.

The moneyed market of the Palos Verdes Peninsula is no different. Linda D’Ambrosi of Keller Williams had the listing on a turn-key ocean-view house that lingered on the market for more than a year with nary a price cut. Home prices on the peninsula are down 12.9% from their 2008 peak.

“The seller,” she said, “just couldn’t come to terms with today’s value.”

lauren.beale@latimes.com
Copyright © 2010, Los Angeles Times

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Mortgage Interest Deduction (MID) could be reduced or eliminated

November 22, 2010 By

Thursday, November 18, 2010 – Article by Ryan Smith – PWR Government Affairs Director

Make sure that you pay careful attention to this… MID Has Boosted Homeownership. Chairs of the President’s Deficit Reduction Commission recently leaked a draft of suggestions for reducing the deficit. Among the many proposals are recommendations that would reduce or eliminate the Mortgage Interest Deduction. This could negatively impact real estate transactions. The leaked draft was intended to show that drastic changes are needed if the deficit is to be reduced. The leaked draft is NOT the Commission’s final recommendation. A formal report is expected on December 1. Recommendations in it will become formal only if 14 of the 18 commissioners vote in favor of the proposal. Etc.

Deficit Commission Chairs Release Draft MID Proposal

The concepts in the draft range from full repeal of the MID to other, various reductions. One proposal would reduce the cap on interest deductions from its current level of $1 million of mortgage debt to $500,000 of debt. The MID for home equity lines would be repealed, and the deduction for second homes would be repealed. Another version does not target MID specifically, but would rather reduce all itemized deductions by a fixed percentage. For example, if an individual’s combined MID, state and local taxes and charitable contributions were $15,000 and a 20% reduction was imposed, that individual would be permitted to deduct $12,000 ($15,000 x 0.8). A third group of proposal would retain the MID and some benefits for low-income families.

The revenues derived from cutting or eliminating the MID would facilitate the reduction of tax rates from its current 35% top rate to top rates of 23 – 26%, depending on the depth of the MID reduction. NAR and PWR will continue to monitor this situation as it develops and the full Committee report is released. We strongly oppose any changes to the MID or any plan that makes it more difficult for people to achieve the American dream of homeownership.

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Refinancing rush helps banks amid foreclosure mess

November 4, 2010 By

Some good news in todays market…. reported by Jody Shenn, Bloomberg News – Tuesday, October 26, 2010

A rush by U.S. homeowners to refinance at near record-low interest rates marks a rare bright spot for the mortgage industry, under attack for choking the economy with shoddy loans and botched foreclosures.

Wells Fargo & Co., the biggest U.S. mortgage lender, received $194 billion of loan applications in the third quarter, the second-most in its history, Chief Financial Officer Howard Atkins said last week. About 80 percent were to refinance. Bank of America Corp. CFO Charles Noski said lending margins are up and demand should remain robust through year-end.

As the Mortgage Bankers Association opened its annual conference Monday in Atlanta, lenders that survived the real estate crash were finding the pickup in refinancings overshadowed by a national foreclosure investigation and fresh investor efforts to force loan buybacks. They are also concerned that new consumer-friendly regulations will be burdensome.

“After 22 years of fielding our survey of attitudes and behavior, I have never seen lenders respond with such uncertainty,” Jeff Lebowitz, founder of Mortech LLC, said in an e-mail after the research firm released its yearly survey of industry executives this month.

The report found that two-thirds of firms with annual lending volume of more than $5 billion expect that the issue affecting them the most in the next year will be adapting to rules created in response to the global financial crisis, which was caused by record defaults on housing debt.

Adapting to changes

Mortgage lenders feel like comic-strip character Charlie Brown, John Courson, president of the Mortgage Bankers Association, said Monday at the group’s conference. “We’ve got a lot of ‘Lucys’ in our life these days, people who, just as we think we’re moving down the field, pull the football out from under us.”

The Dodd-Frank bill passed this year seeks to rein in predatory lending by requiring banks to make a “reasonable and good-faith” determination that borrowers are able to repay some kinds of loans. It also instructed regulators to define which types of mortgages banks can make and package into bonds without retaining a slice. In addition, the bill created the Consumer Financial Protection Bureau, which will have the authority to regulate “unfair, deceptive or abusive” mortgage transactions and other credit products.

Changes related to mortgage disclosure and fee requirements in an update of the Real Estate Settlement Procedures Act are among the most challenging for lenders, said Wil Armstrong, chairman of Cherry Creek Mortgage Co., which made $3.4 billion in home loans last year.

“The industry can’t absorb change after change after change,” he said.

Refinancing applications have more than doubled since the start of the year, hovering for the past 10 weeks near levels not seen since May 2009, according to Mortgage Bankers Association data. Rates for 30-year fixed-rate loans declined to 4.19 percent in the week ended Oct. 14, according to Freddie Mac, the lowest since it began tracking the data in 1971.

More profit per loan

With fewer competitors in the market, per-loan profit on making and selling mortgages is rising, with the difference widening between average rates on new loans and yields on Fannie Mae-guaranteed bonds into which they can be packaged. The gap is about 1 percentage point, up from about 0.45 of a percentage point a decade ago, according to data compiled by Bloomberg.

Not all applications are turning into new loans. Many consumers can’t qualify because of tightened lending standards or because their homes are valued at less than their existing mortgages, a situation known as being “underwater” that is a major obstacle to a real estate recovery.

Depressed home sales

Completed refinancings in the third quarter were an estimated 56 percent below the second quarter of 2004, after applications earlier that year touched similar levels, data from the bankers group show.

Meanwhile, home sales remain depressed.

Compared with a year earlier, existing home sales were down 19 percent in September before adjusting for seasonal patterns, the National Association of Realtors said Monday. Sales fell to a 4.53 million annual rate, exceeding the 4.3 million pace that economists forecast, according to the median projection in a Bloomberg News survey.

Read more: http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2010/10/26/BUKB1G1NEU.DTL#ixzz144umAhcM

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Your credit score is constantly changing

November 3, 2010 By

A great article that address quite a few relevant questions.

It also varies depending on which of the three main credit repositories you check. Each has a different scoring formula and different information in its files. – By Lew Sichelman – October 24, 2010 – Reporting from Washington —

Here is a scenario that happens all too frequently: A would-be home buyer applies online to obtain his all-important credit score. It comes back at a healthy 720, good enough to qualify for the best rate in the mortgage market. But then, when he applies for a loan with a local lender, his score is much lower. So low, in fact, that he might not qualify, even at less favorable terms.

What gives? How can your credit score be one number on one day and a different figure the next? And why does your score vary from one company to another?

A lot of things could be at play here. Let’s start with the basics.
A credit score is a three-digit number that is considered an accurate predictor of whether you will make your house payments on time every month. The higher the number, the safer the bet that you will repay.

But your score is based on the information contained in your credit record. And because what’s in your file is fluid, so is your score.

“Credit is dynamic information,” says Greg Holmes, national director of sales and marketing at Credit Plus, a Salisbury, Md., company that serves the mortgage business. “It’s constantly changing. It’s up and down and constantly moving.”

Your record changes every time the company that has your car loan reports an on-time payment — or more important, a missed payment that’s now more than 30 days late. It changes each time your credit card balance changes. It changes every time you apply for new credit. And it changes when an old bankruptcy finally falls into the abyss, never to be reported again.

Because a credit record is a moving target, shifting on a daily or even hourly basis, your credit score is nothing more than a numerical snapshot of your file at the moment it is calculated. As such it can change from one moment to the next.

“It depends on how much information is coming and going in and out of that credit report,” Holmes says. “It’s whatever time of day and month you pull the report. There’s even a difference between an account that’s less than six months old and one that’s older.”

If you asked someone to pull your credit score today, exactly six months and 29 days after you closed a department store account, for example, the number would be different than if you asked tomorrow, when it has been seven months since the account was shut down. Maybe not by much, but perhaps enough to alter your chances to obtain financing.

But there’s more to your score than what’s in it. Another big factor is what’s not in it. Not every creditor reports information to each of the three main credit repositories.

Say your auto lender is a local bank that reports only to Experian because Experian has a bigger presence in your state. In that case, neither TransUnion nor Equifax will know whether you are current on your car payments. They wouldn’t know about your car loan at all. As a result, a credit score based on your Experian file will be different from one based on the records maintained by the other two big bureaus.

Also, each repository has its own credit-scoring formula. A Minneapolis analytics company known as FICO (formerly Fair, Isaac and Co.), from which the term “FICO score” comes, created all the formulas. But the algorithm used by each credit bureau is slightly different based on factors that each believes to be a more or less important component of risk.

So not only is TransUnion’s score different from Equifax’s and Experian’s because it is based on information only in its records; it’s also different because it uses a different analytical model. And even if each depository maintained the same files, their scores would be different because they use different formulas.

Next, it’s important to know that the mortgage industry isn’t the only business to use credit scoring to rate potential borrowers. Actually, housing finance came somewhat late to the technique. The insurance business has been grading potential customers for decades, and now auto lenders, finance companies, banks, employers and dozens of others use credit scoring to make decisions.

The key is that each business has its own scoring formula. And a score that may be acceptable to, say, the finance company offering to lend you $5,000 for a new roof probably won’t be acceptable to a mortgage company trying to decide whether to lend you $500,000 to buy a new house.

So if you received your score from one of the Internet sites that provide a free score — but try to hook you into paying a monthly fee to monitor your credit file — it’s a safe bet that the number, accurate or not, won’t be worth much if you are in the market to buy a house.

If you’re buying a house, you’ll want an industry-specific mortgage score. No other score will do.

“Anybody can calculate a score,” Holmes says. “Who accepts it is what really matters. Even the scores used in the mortgage industry wouldn’t mean anything if Fannie Mae or Freddie Mac didn’t accept them. Or if JPMorgan Chase or Wells Fargo or Bank of America didn’t accept them.”

You can obtain a free copy of your credit record from each of the three major credit bureaus at http://www.annualcreditreport.com. The law entitles you to one free report every 12 months from each repository, but there’s nowhere I know of to obtain a free credit score.

Many outfits offer “free” credit scores, but in most cases, you have to sign up — for a monthly fee — for a credit-monitoring service. You usually can opt out of the service after a trial period. But the companies are hoping that you won’t, or that you’ll forget and won’t pay much attention to your credit card bill when it arrives in the mail.

But remember, not every score is acceptable to mortgage lenders. I’m aware of only one online service that fits the bill: http://www.myfico.com. But even then, you’ll have to sign up for the Score Watch monitoring service that FICO offers in conjunction with Equifax. You’ll just have to remember to cancel the service before the free trial period runs out.

Beyond that, would-be home buyers can obtain meaningful credit scores by applying for a mortgage, either directly with a lender or with a broker who deals with several lenders. Once you apply, lenders are obligated by law to share the score they used as a basis to decide whether you qualify.

And once you obtain a satisfactory credit score, make sure that you don’t do anything credit-wise that will change it, at least not until after the loan closes. Remember, a credit score is a moving target, so if you run out and buy new furniture using credit, your score will suffer, and you may no longer qualify for a mortgage to buy your house.

lsichelman@aol.com – Distributed by United Feature Syndicate. Copyright © 2010, Los Angeles Times

Hope you find this article helpful… have a great day and thank you for checking back in.

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Lack of title insurance could slow sales of foreclosed homes

October 15, 2010 By
Enlarge By Joe Raedle, Getty Images Bank of America became the latest company to delay foreclosures due to possible documentation problems.

By Stephanie Armour, USA TODAY

Enlarge By Joe Raedle, Getty Images Bank of America became the latest company to delay foreclosures due to possible documentation problems.

Adds Rafael Castellanos, managing partner at Expert Title Insurance Agency in New York, “It is possible for a homeowner to come back and stake a claim to their property.”

Foreclosed homes could get harder to buy now that one of the nation’s largest title insurance companies has stopped insuring titles to homes foreclosed by JPMorgan Chase and GMAC Mortgage.
Old Republic National Title Insurance said last week that it will no longer insure title to any property foreclosed by Chase or GMAC after both mortgage servicers halted foreclosure sales in 23 states and said they are reviewing legal filings that may not have been properly verified or notarized.

Most lenders won’t issue a mortgage without title insurance, which ensures buyers have clear title to the property and protects theirs and lenders’ financial interests if ownership disputes arise.

Old Republic’s action is the latest twist in a growing controversy that has called tens of thousands of foreclosure cases into question in the 23 states that require court approval. Bank of America said Friday that it, too, will stop foreclosures in those states while reviewing its records for the same problems tying up JPMorgan and GMAC foreclosures.

Representatives of the three servicers have given sworn statements in lawsuits that they signed thousands of foreclosure affidavits without signing them in a notary’s presence or verifying the supporting documents, as the law requires.

STATES: Officials ask feds to investigate foreclosures by Chase, GMAC
PROBLEMS: Mistakes widespread on foreclosures, lawyers say

Questions about whether foreclosures were done legally could lead to evicted homeowners claiming they still own their houses after someone else buys them in foreclosure sales, says Mark Stopa, a Florida lawyer representing homeowners.

“The bank forecloses on a property, sells it to a legitimate third party,” Stopa says. “Two weeks later, the former homeowner says the paperwork was wrong and the judgment has to be set aside. The (new) owner is out.”

The American Land Title Association (ALTA), which represents title insurers, says possible flaws in foreclosure documents should have little impact on buyers of foreclosure-sale homes because they can argue they bought the home in good faith and the law protects them.

“It is unlikely that a court will take property from an innocent, current homeowner and return it to a previous homeowner who failed to make payments on the loan subject to the foreclosure,” the ALTA said in a statement.

But if other title insurance companies do follow Old Republic’s lead, that could prevent or delay more foreclosure sales. More than 151,000 bank-owned properties were sold in the second quarter — 15% of all home sales, according to RealtyTrac.

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A New Way to Cut a Mortgage!

October 14, 2010 By
Bread Loaf

‘Recasting’ Your Home Loan Can Lower Monthly Payments With Fewer Hassles homeowners who already have refinanced into low-interest-rate mortgages are using a little-known strategy to make their monthly payments even smaller.

Called “recasting” or “re-amortizing,” the strategy allows a borrower to lower the monthly payment on an existing fixed-rate home loan for a small fee without having to apply for a new loan and without having to pay reappraisal and other fees.

Recasting also may enable homeowners to save on interest paid over the life of the loan, merely by putting a large sum of cash against the principal, whether or not they have refinanced already.

The bad news? Banks don’t advertise the strategy, perhaps because it is less lucrative than refinancing a mortgage. And not all loans are eligible. To find out more, you will have to ask your lender directly.

At J.P. Morgan Chase & Co.’s Chase Home Finance unit, less than 200 mortgages a month are recast out of 10 million home loans outstanding, a spokesman says. At Bank of America Corp., about 200 to 300 a month recasting requests are received out of about 14 million home loans serviced by the company, a spokesman says. Neither bank has seen increased demand.

Here is how it works: A homeowner asks his loan servicer if he can put a large sum of money against the outstanding principal on the mortgage. Ordinarily, doing so would enable him to pay off the loan early, but he would still have to pay the same monthly note. But if the lender agrees to recast the mortgage, he may be able to reduce the monthly payment over the remaining term of the loan.

For example, a person with a 30-year $300,000 fixed-rate mortgage and an interest rate of 4.75% who recasted one year into the loan by putting in $60,000 toward the principal would trim his balance to $235,371. Assuming there were 29 years left on the loan, that would result in a monthly payment of $1,247 instead of the original $1,565.

Recasting can be a good choice for borrowers who have cash and want to reduce monthly payments but who can’t refinance, such as those with no-documentation loans, most of whom can’t get the same types of mortgages today due to tighter regulations, even if they have high income and good credit. (Self-employed professionals often find themselves in this boat.) And at a time of low interest rates on certificates of deposit and U.S. Treasury bills, paying off a mortgage early is a relatively safe investment that brings a return at least equivalent to the interest rate on the mortgage itself.

There are downsides to the strategy. Many financial experts advise against putting additional cash into one’s residence, arguing that higher returns historically have been available in the financial markets and interest rates on bonds are likely to rise eventually.

They also warn of the possible tax consequences of retiring a mortgage early, because mortgage interest on a primary residence can be tax-deductible.

Mortgage recasting resembles a “cash in” refinancing—a newly popular strategy in which a borrower pays down principal on an existing loan in order to qualify for a new loan with a lower interest rate. In a recasting, though, the interest rate and the number of payments remain the same, and there are no transfer and title costs.

Getting permission to recast a loan can be tricky. The loan must be in good standing, and you need to secure permission from the loan servicer, who may or may not be the original lender. If the loan has been sold to an investor, the servicer also must secure its approval.

Since nearly two-thirds of all outstanding mortgages have been sold to investors via mortgage-backed securities, some homeowners could find this step difficult, especially those with subprime and “jumbo” mortgages. (Jumbos are loans that are too big to receive government backing through Fannie Mae, Freddie Mac or the Federal Housing Administration.) If approved, the borrower will need to sign a modification agreement, a legal document recording the change of contractual terms.

Each lender sets its own fees and requirements. Chase requires a minimum $5,000 principal payment to recast a loan and charges a $150 fee, for example. Bank of America generally charges $250. It suggests at least $1,000 be paid toward the principal, but has no minimum.

John Henry Low, a fee-only financial planner in Pine Plains, N.Y., says homeowners should have one to three years in savings as an emergency fund before tying up additional cash in their homes, even if the account is “paying nothing.”

A financial adviser in Pennsylvania says he refinanced a $270,000, 15-year mortgage in November 2009 on a second home at a 4.25% interest rate. This year, he inherited some money and instead of having money “sitting around in a money-market fund earning a fraction of 1% interest,” he decided to put $75,000 to pay down principal on his mortgage.

So he requested a recast in a letter to Chase, which had acquired the loan. To get it, he paid a $150 fee.

With 14 years remaining on the mortgage, his balance was reduced to $170,020, factoring in additional payments he had been making toward the principal. This reduced his monthly payment of principal and interest from $2,032 to $1,322, excluding escrow payments—a savings of $710 a month.

If he puts the $710 monthly savings back into the principal, he will pay off the mortgage in a little less than eight years, saving $24,300 in interest. He also has the flexibility of a reduced monthly payment “in case I lose my job or something in the future,” he says.

You don’t need to recast your loan in order to save thousands of dollars in interest over its life. You can simply make additional payments toward principal on an existing mortgage without paying a dime in additional fees, or make a 13th mortgage payment each year—assuming, of course, the loan has no prepayment penalty.

One thing in homeowners’ favor: The recent overhaul of banking regulations has severely restricted prepayment penalties on new mortgages.

Write to M.P. McQueen at mp.mcqueen@wsj.com

Again… most banks don’t promote this; however I image they will work with you and recast a performing loan rather than not offer you that option! Your thoughts???

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Crooks Impersonate Foreclosure Counselors To Scam Homeowners

October 13, 2010 By
Scam alert

By Pamela Yip, The Dallas Morning News – This is just another awful aspect of today’s economic challenges. Please share this with the people you care about in order to ensure this doesn’t happen to them, and then feel comfortable introducing me so that they can get the answers they need from someone they trust!

Sept. 20—One of the ugliest effects of this economic downturn is how it’s brought out crooks who prey on financially distressed homeowners by ensnaring them in home-loan modification scams.
“Consumers are frightened and frustrated trying to solve their mortgage issues,” said JoAnn DePenning, statewide coordinator of the Texas Foreclosure Prevention Task Force. “Unfortunately this created just the right scenario for scam artists to come in and victimize people and endanger the homeowners with foreclosure.”

The task force is composed of representatives from government organizations, the financial industry and nonprofit groups all working to avert home mortgage foreclosures. The task force and other groups recently held a summit in Dallas on the problem of loan scams.

“They’re still pretty bad,” said Celine Thomasson, spokeswoman for NeighborWorks America, a national network of community development and affordable housing organizations.
“As unemployment or underemployment continues to hit American homeowners, the more scammers know they can prey upon vulnerable people,” she said.
Loan modifications typically involve a reduction in the loan’s interest rate, an extension of the loan’s term, a different type of loan or any combination of the three.
Loan modification scams come in various flavors. Here are some of the most common:

Phony counseling or foreclosure rescue scams: The scam artist poses as a counselor and tells you he can negotiate a deal with your lender to save your house, but only if you first pay him a fee.
He may even tell you not to contact your lender, lawyer, or housing counselor and that he’ll handle all details. He may even insist that you make all mortgage payments directly to him while he negotiates with the lender.

But once you pay the fee, or a few mortgage payments, the scammer disappears with your money.
To protect yourself, avoid a company or person who asks for a fee in advance to work with your lender to modify, refinance, or reinstate your mortgage. They may pocket your money and do little or nothing to help you save your home from foreclosure.

Also, don’t stop communicating with your lender. That’s the worst thing you can do. The minute you have trouble paying your mortgage, contact your lender.
And never send a mortgage payment to anyone other than your lender.

Fake government modification programs: Some scammers may claim to be affiliated with, or approved by, the government, or they may ask you to pay high, upfront fees to qualify for government mortgage modification programs.

The scammer’s company name and website may sound like a real government agency. You may even see words on the site like federal, TARP, or others related to official government programs.
Don’t be fooled. Before you sign up, contact your lender, who can tell you if you qualify for any government programs. And you don’t have to pay to benefit from these programs.
Bait and switch: The scam artist may try to convince you to sign documents for a new loan modification that will make your existing mortgage current.
This is a trick. You’re actually signing documents that surrender the title of your house to the scam artist in exchange for a so-called rescue loan.

Rent-to-own or lease-back scheme: The scammer tries to deceive you into signing over the deed to your home and promises that you can remain in the house as a renter and eventually buy it back
Usually, however, the terms of this deal are so demanding that the buy-back becomes impossible. The homeowner gets evicted, and the “rescuer” walks off with most or all of the equity.
A variation of this scheme has the scammer raising your rent over time to the point that you can’t afford it. After missing several rent payments, you’re evicted, leaving the scammer free to sell your house.

Don’t be afraid to report any scams.

“Many homeowners fail to report because they don’t see themselves as victims of a crime,” Thomasson said. “Instead they might think they made a poor business decision or that that they misplaced their trust. Even those who do acknowledge that there is crime realize that it is likely that the company or person who scammed them is gone and not going to be found and that they likely would not get their money back.”
If you find yourself the victim of a scam, report it so that more people aren’t victimized. It will help authorities build cases against the scammers.
–—
To see more of The Dallas Morning News, or to subscribe to the newspaper, go to http://www.dallasnews.com.
Copyright (c) 2010, The Dallas Morning News
Distributed by McClatchy-Tribune Information Services.
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Read more: http://www.houselogic.com/news/articles/Crooks-Impersonate-Foreclosure-Counselors-to-Scam-Homeowners/#ixzz124j0E2xc

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