Speeding Up Short Sales

With rules that take effect next month, federal regulators have hopes of greatly streamlining the short sale process.

Starting June 15, the Federal Housing Finance Agency, which regulates Fannie Mae and Freddie Mac, will require both agencies to give short-sale buyers a final decision within 60 days. (In a short sale, a lender agrees to accept less than the balance on a mortgage.)

Fannie and Freddie must also respond to initial requests for a short sale within 30 days of receiving the buyer’s submission.

“Short sales are huge right now,” said Peter Spino, the foreclosure services manager for Community Housing Innovators in White Plains, N.Y., a housing counselor certified by the Department of Housing and Urban Development. Distressed homeowners often prefer them to a foreclosure, he noted.

Expedited sales as a result of the new directive will benefit the entire housing market, said Michael McHugh, the president and chief executive of Continental Home Loans and the president of the Empire State Mortgage Bankers Association, a trade group. They could also remove some risks for buyers — many of whom previously had to wait months for a decision and then ended up not getting the house they wanted.

In March, the most recent month for which data were available, short sales represented more than 14 percent of existing home sales, according to CoreLogic, a data analytics company, compared with 12 percent for all of 2011 and about 10 percent in 2010. And as the number of short sales has risen, foreclosures have fallen. Completed foreclosures represented 25.3 percent of home sales in March, versus 34.9 percent in all of 2011 and 42.7 percent in all of 2010.

Lenders favor short sales because they are less costly and more efficient than foreclosures. Yet the homeowners, trying to exit as gracefully as possible, never know how long the process will take or how badly their credit will be hurt.

Although short sales have a reputation for being easier on credit scores than foreclosures, “that’s a fairly common misperception,” said Rod Griffin, the director of consumer and public education at Experian, one of the major credit bureaus. If there is a difference in impact, he said, it is slight. Both short sales and foreclosures remain on the credit report for seven years — but foreclosures don’t appear until the legal paperwork is filed, and that could take months, Mr. Griffin said.

The effect was measured in an analysis by VantageScore, a provider of credit scores used by lenders. The higher the credit rating a consumer has, the more points he or she would lose in a short sale.

If consumers started with, say, an 830 score, they would most likely lose 100 to 110 points from a short sale, 120 to 130 points from a foreclosure. But a homeowner with a 625 score, who is behind on his mortgage and some credit card payments, would lose 15 to 25 points from a short sale and 10 to 20 points from a foreclosure, the VantageScore analysis shows.

One major downside to a short sale has been the length of time it takes to process the transaction. “I have done short sales in 60 days, and I’ve also had them take a year,” said Peter J. Goodman, a real estate lawyer in Brooklyn. He typically tells clients to expect them to take 90 to 120 days.

Short sales today are being completed faster than they were a couple of years ago, Mr. McHugh said. About one-fourth of his mortgage business comes from short sales; five years ago it was almost zero.

Speeding up the short-sale process could be especially worthwhile in states like New York, where judicial foreclosures can take a year or longer. “There should be a significant improvement in the turnaround,” he said.

The New York Times

By VICKIE ELMER

Published: May 24, 2012

Foreclosures and resulting blight infest once-safe neighborhoods

Foreclosed homes invite drugs and crime. But the city of L.A. and lenders aren’t dealing effectively with the problem.

By Hector Tobar

May 29, 2012

William Perez has been waiting a long time to tell someone all the sad and crazy things he’s seen.

Perez runs a crew that crisscrosses Los Angeles and the Antelope Valley doing the dirty but essential job of cleaning up homes that have been foreclosed and then trashed by humans and neglect.
“The good news about this place,” he told me as we stood inside one such property on Wilmington Avenue in Watts, “is that there’s no fleas.”

No fleas, but plenty of trash, and an odor most foul. The people living there had been evicted six weeks earlier. They left behind mattresses, clothes and boxes of cereal. Some days later, thieves broke in, punched holes in the ceiling and stole about $100 worth of copper plumbing.

Cascading water then soaked everything the family had left behind. Drug users, pimps and assorted other criminals also made use of the vacant property. “My understanding is that there was a girl that was raped here,” said Perez, a subcontractor hired by a company that maintains bank-owned properties.

This is what happens too often when a foreclosed home passes to the ownership of huge, distant banks — in this case, the Bank of New York Mellon. There are tens of thousands of such properties in Southern California.

“I’ve gone to houses where people are literally setting fire to the house when I get there,” Perez told me. “The saddest thing is seeing the messages people leave on the walls.” In the Wilmington Avenue home, we found pictures of family gatherings — and the sickening detritus left by people abusing their bodies with methamphetamines.

All the filth I saw opened my eyes: to the devastation caused by people addicted to drugs, by banks addicted to profit, and by a city government too weak and ineffective to protect its poorer residents.

Perez told me the main reason foreclosed homes fall into disrepair is that there are simply too many for his crews to maintain. And the reason there are so many, we all know, is that during the last boom lenders doled out home loans like candy to people who couldn’t afford them.

If it were fixed up, the 1,200-square-foot house on Wilmington Avenue might now fetch $140,000. But in 2007, it sold for $281,500.

“At the top of the market,” said Jesse Alvarez, a broker who manages the property for the loan servicer, Bank of America. Unable to pay the mortgage, the owners were evicted April 5.

Apparently, it doesn’t take long for word to spread in a neighborhood that a property is open for criminal activity. Right away, neighbors on Wilmington Avenue said, they noticed new people entering it.

“You see prostitutes coming and going,” said Maria Algutria, a retiree and foster mom who owns a home two doors down.

Like an open sore, a vacant home can become the source of an infection. That’s why the city of Los Angeles passed an ordinance in 2010 that fines banks $1,000 for each day their foreclosed properties are “blighted.”

In theory, the vandalized home I saw on Wilmington Avenue should have filled up the city coffers with about $40,000 in such fines. But, surprise, surprise: The city never collects them.

“Under that ordinance, our people would be required to go out once a day to see the property,” said David Lara, a spokesman for the city’s Department of Building and Safety, whose inspectors are tasked with enforcing the law. “We don’t have the level of resources to do that.”

Call me naive, but I still find it shocking to hear a government official, in the United States, admit that a recently enacted law isn’t enforced. Why did the City Council pass it in the first place? For show? Is it governing that’s going on over in City Hall, or just theater?

I’d like to call it a farce, but it’s really a tragedy to the good people in South L.A. They deserve, at the very least, a city government that enforces a law designed to protect their families and their property values.

The Alliance of Californians for Community Empowerment and Good Jobs L.A recently conducted a survey of 400 bank-owned properties in South L.A. and found that about half were in a state of blight and half of those in “severe” blight.

Last week, they took me on a quick tour of three such homes, including the one on Wilmington Avenue. At each, we were greeted by outraged owners of neighboring properties.

“I told my kids, you can’t walk past this place,” said Julian Coria, 52, and the father of two young children, as we stood outside a home on West 56th Street. “They used to ride their bikes on this street. Now I won’t let them.”

When I arrived at the third foreclosed property, a little bungalow on South New Hampshire Avenue, Good Jobs L.A.’s Melissa Chadburn told me she had just spotted a woman in her 20s inside. The woman was wearing jeans, a red wig and an otherworldly smile.

“She was having a good day,” Chadburn said, with mordant irony. “Every day is a dream for her.” Stepping inside, I was greeted by a scent of decay and human waste so powerful that I gagged and took a step back. Then, at my feet, I saw a backpack with homework pages spilling out: a lesson in English grammar.

The neighbors spoke of seeing adolescent girls as young as 12 enter the vacant home during the day.

“When we started looking for these houses, I expected to find blight, to find squatters,” Chadburn told me. “But I didn’t expect to see these kinds of stories.”

Outside, in the backyard, all was pleasant. Trumpet-shaped lavender flowers grew from a trellis. You could almost feel the loving hands of the family that once lived there.

hector.tobar@latimes.com

Copyright © 2012, Los Angeles Times

 

Short Sale Incentive

Bank of America is offering to pay delinquent homeowners up to $30,000 if they sell their homes through short sale to avoid foreclosure.

The homeowners must start the short sale process by the end of this year and close the deal by Sept. 26, 2013, to be eligible for the incentive. The amount of assistance “will be determined on a case-by-case basis using a calculation that includes the value of the home, amount owed and other considerations,” the bank says. The incentive starts at $2,500.

For now, the program is only available to borrowers who have mortgages that are owned and serviced by Bank of America.

To qualify for the incentive, “the seller must work proactively with the bank to obtain a preapproved sales price prior to submitting a purchase offer to the bank,” according to statement by the bank.

Other large lenders, such as Chase and CitiMortgage, offer similar incentives on short sales.

It’s good to see that banks finally get it. My sources tell me that lenders have been much more willing to accept short sale offers.  Some are still taking long to process them but not as long as they used to. I’ve heard of short sales closing in less than 90 days, which is a big improvement compared to when lenders took a year to even reply to a short sale offer.

When banks allow borrowers to sell their homes for less than what is owed, they lose money. But they lose less than they would have lost if they had allowed the homes to go through foreclosure. Homeowners facing foreclosure benefit because a short sale isn’t as bad for their credit as a foreclosure.

 

Boomers and refis: a warning

It’s a mortgage problem that is likely to intensify as homeowning baby boomers by the millions shift into retirement: Though they may have significant financial assets tucked away in retirement accounts, their diminished monthly incomes may not be sufficient to meet some lenders’ hyper-strict underwriting rules.

Jim Eberle of McLean, Va., found this out the hard way when he applied to refinance his mortgage. After spending much of his career working for banking industry trade associations in Washington, Eberle, 68, decided to take advantage of this spring’s unprecedented low interest rates with a 2.89 percent adjustable-rate 30-year loan offered by a large Midwestern bank.

To his utter shock, Eberle was rejected — the first time in 45 years of homeownership and eight different home loans. The reason for the turndown: insufficient income. “To get rejected was incredible,” Eberle said in an interview, “because based on the extensive documentation he provided the bank, he looked highly qualified. He had substantial checking, savings and 401(k) holdings and a net worth he describes as “in seven figures.” The appraisal the bank did on his house showed it to be worth $664,700 — more than double the $322,000 refi he was seeking. His credit score, according to TransUnion, was 826, indicating minimal risk of default.

Yet the bank “told me it could not make the loan because, even though I have sufficient (liquid) assets and a high credit score,” his monthly Social Security payments, bank deposits, checking accounts and 401(k) plan “were not enough.”

How commonplace is Eberle’s experience? Conversations with mortgage lenders and analysts suggest it is happening more frequently, thanks to some large banks ratcheting up their underwriting standards so tightly that the old joke — they’ll only lend to people who don’t really need the money — is beginning to resemble reality for some borrowers.

Eberle says he was willing to pull out funds from his checking and banking deposits and set them aside to make up any perceived monthly income shortfalls. “I was willing to do whatever it took,” he said. But the bank still said no.

Mortgage market experts, such as Dennis C. Smith, co-owner of Stratis Financial in Huntington Beach, Calif., are not surprised at Eberle’s experience. Smith had a recent client — a physician seeking a $350,000 loan with $2.5 million in bank accounts — who was rejected by one lender because the deposits, which were proceeds from an inheritance, had been in his account for just eight months. This was too short a time period to satisfy the bank’s pristine and unyielding standard.

Part of the problem here, according to Smith, appears to be overcorrections by some banks to the lax underwriting that characterized the years leading up to the housing bust — especially see-no-evil practices such as “stated income,” where the loan officer accepted the monthly income number provided by the applicant with no verification. But another factor, says Bruce Calabrese, president and co-founder of Equitable Mortgage in Columbus, Ohio, is that some loan officers aren’t aware of techniques available for qualifying retirees who are asset-rich but income-deficient.

For example, Calabrese’s firm employs “annuitization” procedures acceptable to Fannie Mae to help borrowers over 59 1/2 qualify on income tests using their IRA and other retirement account balances. “We take 70 percent of the total value of the funds and then spread them out over 360 months if the loan is a 30-year fixed and 180 months if the loan is a 15-year fixed. We also gross up their Social Security by (a factor of) 1.25. So if they get $1,000 per month in Social Security income, we give them credit for $1,250 as long as they don’t have to pay income tax” on that income.

Jeff Lipes, vice president of Rockville Bank outside Hartford, Conn., uses similar income-qualification procedures sanctioned by Freddie Mac. Say you’re a senior with $1 million in a brokerage account. To help qualify you for a refi, Lipes would “discount the value by 30 percent to $700,000 and use a conservative rate of return — say 2 percent — and that would give the person (an extra) $14,000 a year in income.”

Some of the computations can get complex, but the message here is clear: Just because a homeowner’s post-retirement income is below what it used to be, this doesn’t mean he or she can’t refinance, get a new mortgage or buy a house, provided they have sufficient retirement assets. You just need to shop around and deal with experienced loan officers who know the ropes and are willing to work with you for your business.

Washington Report

By KENNETH R. HARNEY

Short Sale Is A Better Option Than Foreclosure

Las Vegas short sales will be a major part of the real estate market in 2012. The banks now realized that a short sale is a better option than foreclosure for them, the homeowner and the neighborhood. Daren Blomquist, vice president at Realty Trac, said: “We believe 2012 could be a record year for short sales”.

Market Watch is also optimistic and commented on the short sale state of affairs: “Fitch expects the increase in short sales to continue because of the potential benefits afforded to both lenders and borrowers. Some borrowers may prefer short sale because, though they cannot stay in the property, they often walk away with cash incentives from lenders and healthier credit reports unmarred by foreclosure. For lenders, short sales provide a more efficient and cheaper alternative to the increasingly lengthy and costly foreclosure process”.

CNN Money explained that banks get about 20% less for a foreclosed home. Foreclosure can take years to unload, during which expenses, like property taxes, insurance and other expenses, mount up.

JP Morgan has projected that over 500,000 short sales will be done this year. The NECN article shows that short sales are here to stay for some time. According to the Mortgage Bankers Association, there are nearly 3.5 million homeowners delinquent on their mortgages by at least one month, including 1.5 million who are 90 days or more behind on paying their mortgage. 12.5 million Homeowners still owe more on their mortgage than their home is worth.

The NAR research indicates that the number of short sale in the United States will increase by 9.2% in 2012. For the first time short sales surpassed the foreclosure deals. Jonathon Weiser, a vice president in the applied analytics division of Lender Processing Services, said: “It is a fairly recent phenomenon that short sales have been increasing. Short sales should be the dominant way of disposing of assets in distress”. Mr. Weiner also said that lenders are catching up to short sales after being slow to provide the staffing and incentives necessary to complete the deals.

Wells Fargo and JP Morgan began last year giving cash inducements as high as $30,000 to selected homeowners who agreed to a short sale as a way of speeding up the process. Bank of America paid $19.9 million in the first two months of this year for 22,534 homeowners to relocate.

Ira Rheingold, of the National Association of Consumer Advocates, said that Las Vegas Short Sales are mostly a good thing. Bloomberg News reported that data from mortgage tracker Lender Processing Services show short sales surpassed foreclosures. According to the indications and real estate market trends, the short sale process is better than the devastating process of foreclosure.

Source

:

Orange Realty Group Mix Merced Team

Sen. Dean Heller touts bill to speed up short sales

Sen. Dean Heller now has a hat trick of housing bills before the Senate, after formally unveiling a bill to help expedite short sales Wednesday.

Heller’s new bill is mostly an effort make all mortgage service providers subject to the same policies being implemented next month by federal lenders Fannie Mae and Freddie Mac.

The bill—like the policy that applies to federal lenders—stops short of forcing lenders to let more underwater homeowners complete short sales. Rather, it would prevent lenders from leaving underwater homeowners hanging for more than a month as they consider whether to approve a short sale.

“Home buyers, sellers and real estate agents have long observed that banks have been slow to approve home short sales,” Heller said Wednesday. “Delays can cause cancelled contracts and homeowners being forced into foreclosures. Though short sale is seen as a far better outcome than foreclosure finding ways to improve this process and make this process more efficient has been very very difficult.”

Heller’s bill would require mortgage servicers to respond to short sale purchase offers within 30 days and issue a final decision within 60 days — the same timeline as Fannie and Freddie must adhere to starting in June

By most casual estimates, it now takes between three and nine months to complete a short sale. According to an April report from the mortgage finance experts at RealtyTrac, the average time it takes from the start of the foreclosure process to when a sale is completed is 10.5 months—up from four months in 2007. Plus, only about a quarter of short sales ever actually go through.

Whether the changes in Heller’s bill could improve those statistic isn’t clear. But short sales are already on the rise.

RealtyTrac has identified a coming short sale tsunami in 2012, as more banks agree to start foreclosure proceedings — and favor the short sale option.

In Southern Nevada, short sales made up about 28 percent of all sales this January — a jump of about 38 percent over what it was a year before.

 

By Karoun Demirjan

Las Vegas Sun

BofA to buyback $330 million in Freddie Mac mortgages

Bank of America ($6.98 0%) will repurchase roughly $330 million in mortgages it sold to Freddie Mac due to “contractual matters,” according to a filing with the Securities and Exchange Commission.

The loan repurchase will be completed by the end of May, Freddie said.

Analysts at Barclays Capital noted the affected pools were mostly issued in 2010 and 2011, and originated entirely by Bank of America ($6.98 0%). The buyouts are for a variety of mortgage products such as 30-year, 15-year mortgages as well as ARMs. “Freddie Mac had mentioned a change in its rep and warranty sampling methodology in its latest Q1 filing,” wrote the analysts in a note to clients. “We suspect these rep and warranty buyouts may be related to its new sampling system.”

Data released by Freddie Mac shows prepayments on loans packed into mortgage-backed securities declined in April after rising in February and March, according to analytics firm Keefe, Bruyette & Woods ($15.41 0%).

Analysts expected additional refinancing opportunities from the government’s enhanced Home Affordable Refinance Program, or HARP 2.0, to increase prepayments within MBS securities in early 2012.

Full details on the pools affected by the buyouts were not released, but Freddie provided a list of pools for which the share of balance to be bought-out exceeds 5%. The pools represent an outstanding balance of $1.3 billion.

It is unclear if this is an isolated issue or a process that will be revisited at regular intervals. Also unclear is the motivations behind the buyouts. They do raise questions, however.

If these are representation and warranty repurchases on post HARP loans originated under a fairly tight underwriting regime, Barclays said, they will generate concerns around buyouts on newly originated loans.

And though this round appears to be entirely targeted at BofA-issued pools, it is unclear if other originators are being targeted.

“We hesitate to opine on valuations absent further clarification on these issues. However, this development is likely to raise policy-related buyout fears,” Barclays analysts wrote.

 

Judicial States Will Lag Behind Recovery: Capital Economics

While the housing market is starting to show signs that it is strengthening, for some states, recovery still seems to be in the very distant future. According to a report from Capital Economics, one factor that will determine the speed of recovery for individual states is the type of foreclosure procedure used.

“While the national housing market is in the early stages of a recovery, many of the judicial foreclosure States which are struggling to clear their backlog of foreclosures will lag behind,” said Paul Diggle, author of the report and property economist for Capital Economics.

The Mortgage Bankers Association (MBA) categorizes 21 states as judicial and 29 as non-judicial. In a judicial state, lenders must go through the courts to pursue a foreclosure whereas in a non-judicial state, lenders can foreclose on a property without court approval.

Since lenders in judicial states have to go through the courts first, this leads to a lengthier process when pushing foreclosures through the pipeline, leading to a higher number of homes in foreclosure inventory.

The effect of the buildup of foreclosure inventory can lead to lower home prices for those states. Capital Economics pointed to FHFA data which revealed the differences in home prices between judicial and non-judicial states.

The research firm stated that based on numbers from FHFA’s fourth quarter home price index, in judicial states, prices decreased 0.3 percent quarter-over-quarter and dropped 2.3 percent year-over-year compared to non-judicial states, which posted a 0.3 percent quarterly increase and a yearly decrease of 1.6 percent.

“We think that differences in foreclosure procedures will continue to affect State-level house price trends, with non-judicial States outperforming. After all, as foreclosure pipelines are brought down to healthier levels in non-judicial, high burn-through States, supply conditions can more rapidly tighten to the point that they support price growth,” the report stated.

Whereas in judicial states, Capital Economics stated that “the trickle of foreclosures onto the market over a much longer period will continue to keep supply conditions relatively loose.”

MBA recently reported in its first quarter 2012 delinquency survey that foreclosure inventory in judicial states is 6.88 percent, while in non-judicial states, it’s only 2.77 percent.

In response to the data, Michael Fratantoni, MBA’s VP of research and economics, in a release said, “The problem continues to be the slow-moving judicial foreclosure systems in some of the largest states. While the rate of foreclosure starts is essentially the same in judicial and non-judicial foreclosure states, the percent of loans in the foreclosure process has reached another all-time high in the judicial states.”

Rob Pitingolo, research assistant with the Urban Institute, emphasized that it’s not the judicial process itself that is the problem, and explained in states such as Florida, the reason why there’s a backlog of foreclosures is because of a lack of resources.

Florida has re-hired retired judges to help the courts manage the high number of foreclosures.

Pitingolo added that the judicial process is designed to protect borrowers by preventing fraud and allowing more time for homeowners to work with their lenders.

Source: DSNews.com

Illinois Cook County Real Estate Tax Assessment Started – CONTEST THEM

In 2012 – The Cook County Assessor will reassess all property located in Chicago.

Assessments will be mailed one township at a time – Rogers Park & Lakeview township notices have been mailed – Lake is expected to be mailed shortly.

Many commercial assessments are increasing even though property values are on the decline.

UNLESS CONTESTED – the tax assessment will be good for three years.
* If property owner missed the opportunity to file with the Assessor – they still have a second opportunity when they open the letter  with The Cook County Board of Review

Appeal deadlines can be found on the Cook County Assessor website
www.cookcountyassessor.com
www.cookcountyboardofreview.com

www.cookcountytreasurer.com  – helpful for checking on status of tax payments, exemptions and overpayments
http://cookcountypropertyinfo.com/Pages/pin-search.aspx  – great site for tax research

Mortgage delinquency rate falls in first quarter

The delinquency rate for mortgages on residential properties of four units or less declined 18 basis points from the fourth quarter to 7.4% in the first quarter, the Mortgage Bankers Association said in its national delinquency survey.

That rate is down 92 basis points from year-ago levels.

“Mortgage delinquencies normally fall during the first quarter of the year, but the declines we saw were even greater than the normal seasonal adjustments would predict, so delinquencies are clearly continuing to improve,” said Michael Fratantoni, vice president of research and economics for the MBA.

“Newer delinquencies, loans one payment past due as of March 31, are down to the lowest level since the middle of 2007, indicating fewer new problems we will need to deal with in the future,” he added.

The percent of loans tied to a foreclosure action launched in the fourth quarter hit 0.96% in the most recent quarter, which is down 3 basis points from the previous quarter and 12 basis points from a year earlier.

By the end of the first quarter, the percentage of loans in the foreclosure process stood at 4.39%, up 1 basis point from the fourth quarter and down 13 basis points from 1Q of 2011.

The serious delinquency rate, or the percentage of loans 90 or more days past due or in foreclosure, hit 7.44% in the first quarter, down 29 basis points from the fourth quarter and 66 basis points from the first quarter of 2011.

The only states to experience increases in their serious delinquency rate were Maryland, Delaware, New Jersey and Washington.