Wednesday, July 31, 2013

Pluses and Minuses of the HAMP Loan Modification Program

The Home Affordable Modification Program (HAMP) has been something of a disappointment nearly from its inception. After loudly touting the program’s ability to help 4 million borrowers, the current administration was forced to concede it had barely helped a fraction of that number and some advocates and administrators in the program actually came right out and declared the program to be a failure. However, in recent months, there has been a lot of discussion about how HAMP is finally gaining momentum.  Hundreds of thousands of borrowers are getting the loan modifications that they desperately need. There is another, untold aspect of the story however. The untold story is that many home owners are defaulting on the modified loans. Sometimes the default is literally just a few months after modification.

loan modification paddy deighan

According to the Special Inspector General for the Troubled Asset Relief Program (SIGTARP), of the roughly 1.2 million mortgage modifications made through HAMP since its inception in 2009, 306,000 have re-defaulted.  This is a default rate on modification of over 25%. It is either good or bad..…it depends upon how you want to look at it.
 Furthermore, homeowners who entered the HAMP program in 2009 are re-defaulting at a rate of 46 percent. This statistic seems to be very alarming. “The Treasury needs to research why so many borrowers are dropping out of the program,” said head of SIGTARP Christy Romero. Her agency’s report indicates that homeowners who received only small reductions in their loan payments or overall debt, were still underwater on their mortgages, or had subprime credit scores and high overall debt at the time of modification were most likely to default. As of the end of April of 2013, taxpayers had lost roughly $815 million on permanent HAMP modifications that had re-defaulted.OUCHHHHHHH The U.S. Treasury originally allocated $19.1 billion to HAMP and, so far, has spent $4.4 billion. HAMP was recently extended to 2015.

Paddy Deighan J.D. Ph.D


Encouraging Foreclosure Statistics Indicate True Real Estate Market Recovery

There are some additional real estate recovery statistics that indicate more good news. In June of 2013 total foreclosure filings dropped to 127,790.  This number is a 35 percent decrease as compared to 2012. It is also the lowest monthly total since December 2006!!  CNN Money analysts have analyzed these numbers and CNN declared that “the long national foreclosure nightmare is nearing its end.
RealtyTrac vice president Daren Blomquist is also echoing this positive position. Mr. Blomquist  stated that “the housing market could be back to pre-mortgage meltdown levels before the end of the year”. Blomquist further observed that,  “it is becoming increasingly evident that foreclosures are no longer a problem nationally,” although he admitted that they might still be a small issue in “several state and local markets.”
Actual repossessions are down in 34 of 50 states last month as well. Arkansas, Oklahoma, and Maryland saw “significant increases” in these actions. If banks continue at their current rate, 2013 will see about 500,000 repossessions. This compares favorably to the 671,000 repossessions in 2012. Blomquist predicted that once the foreclosure timelines start to decline, the recovery will truly be fully underway.
Presently, it takes an average of 526 days nationally for properties to go through the entire foreclosure process. “Once that number turns the corner and starts going down, that will be a strong indication that the lenders and courts have worked through the [foreclosure] backlog and now…are dealing with the fresher vintage of foreclosures,” he said. However, I nned to point out that the “average” of 526 days for foreclosure is misleading if viewed by itself.  Two out of three foreclosures end in default and those cases take less than 45 days to adjudicate. Accordingly, the ones that are contested can easily take 4 years or longer. There are valid reasons for this as distressed home owners DO have options, such as Deed in Lieu, forbearance,  loan modification, short sale, quiet title and wrongful foreclosure actions.

Paddy Deighan J.D. Ph.D


Monday, July 15, 2013

New Fannie Mae and Freddie Mac Short Sale Guidelines

There are changes looming in the guidelines which Fannie Mae and Freddie Mac utilize relative to the multiple listing services (MLS). Beginning August 1st, each new short sale listing must maintain an “active” status for a minimum of five days. Additionally, the five days must a weekend.
“Along with our regulator, the Federal Housing Finance Authority (FHFA), we decided to take this step in response to Realtors’ concerns,” says Jane Severn, director of marketing at Fannie Mae. “We’ve had cases where a short sale property is listed in the MLS as ‘active’ and, in less than an hour, it goes into ‘pending’ status.”

“Realtors should identify any short-sale listings that would require approval by Fannie Mae or Freddie Mac,” Grant says. “If the new rules apply to a listing added to the MLS after Aug. 1, we recommend that agents put a disclaimer in MLS comments telling cooperating brokers that the seller must keep the listing active for five days, including a weekend. This disclaimer would allow cooperating agents to structure their offers accordingly.”
Grant says it’s important to remember two things: that the new rule only affects Fannie Mae and Freddie Mac short sales; and, though it directly affects sellers, it also indirectly impacts buyers’ offers.
fannie mae short sales
Severn says Fannie Mae wants their “short sale listings to be marketed in a manner that allows the market to see the listing.” She notes that their current policy for properties Fannie Mae owns (REO listings) reflects the same philosophy since Fannie Mae won’t evaluate offers until the listing has been in the MLS and “active” for at least three days.
Under Fannie Mae and Freddie Mac’s rules, the short sale property must be listed in an MLS that covers its geographic area, and a printed copy of the property’s MLS listing must be kept on file. If a property is located in an area not covered by an MLS, it must be advertised in a manner customary for the same period of time – at least five consecutive calendar days that includes one weekend.

Paddy Deighan JD Ph.D

Thursday, July 11, 2013

Number of Deficiency Judgment Lawsuit on the RISE!!

There are a dramatic number of deficiency judgment lawsuits being filed. Many experts predicted this and it is happening. There is just too much money sitting out there for the lenders to ignore.   Many states have lengthy statute of limitations and lenders are taking advantage of it. Additionally, many home owners who were in distress are now financially stable and this makes them an easier target.
Home owners quickly breathe a sigh of relief when the short sale is completed. However, for many owners, this is the start of their problems.  In the past, it was possible to get a “waiver” of deficiency as part of the short sale negotiation process. However, it is rare to receive a waiver today.  You can ask for a waiver, but in all likelihood, it will not be granted.

So, what can you do??

The first thing to do is determine what the lender must do in order to enforce its rights relative to the deficiency judgment. In some judicial foreclosure cases, the lender has also received the right to seek a deficiency judgment when it received its final judgment. In other situations, the lender must take the additional step and file a lawsuit in order to seek a deficiency judgment.  Many home owners transfer assets out of their name when they believe that they are going to be sued on a deficiency judgment.  By then, it is too late as the lender has already performed an asset check PRIOR to filing the deficiency judgment complaint.
deficiency judgment

It is also interesting to note that the junior lien holders are more likely to pursue a deficiency judgment!! The reason for this is that they frequently received a very small percentage of the loan balance during the short sale.   There is no seniority when it comes to a deficiency judgment. The junior lien holders have as much chance of receiving judgment as the superior lien holders.

There are measures that can be taken by prudent short sellers….

Paddy Deighan J.D. Ph.D

Saturday, July 6, 2013

New York Puts Foreclosure Abuse Settlement Funds to Good Use

New York is making best use of the money that it received from the Attorney General foreclosure lawsuit. New York attorney general Eric Schneiderman played a key role in negotiating the settlement and he earned significant money for his own state. In last year’s foreclosure abuse settlement with five of the country’s largest banks Mr. Scheiderman announced this week that he will I use $20 million of that money to “rebuild and restore neighborhoods hit hard by the housing crisis.” Schneiderman noted that his office has already provided “roughly $2 billion in relief to homeowners throughout the state, but it’s not nearly enough”. He believes that the key to truly effecting a recovery lies in empowering his state’s land banks, which can acquire vacant, abandoned, or foreclosed properties and then rebuild, demolish, or redesign them. Mr. Schneiderman believes that the land banks will best be able to truly “empower local communities to rebuild their own neighborhoods” and said that his office will “invite competitive proposals from land banks to directly address the effects and aftermath of the foreclosure crisis.”
 foreclosure settlement
Schneiderman is presently engaged in suing – and re-suing – several banks for foreclosure abuse in New York and for failing to honor the terms of the foreclosure abuse settlement from last year. His movement in support of landbanks actually could result in increased foreclosures in some areas of the state since land banks often seize control of property via tax delinquency. In Syracuse, nine percent of all property iseligible for seizure due to property tax delinquency at this time. However, land banks tend to focus on properties that are not being maintained or that have been abandoned rather than inhabited homes. The land banks have previously been reluctant to seize property because there were no ready buyers for the properties and they did not have the funds to rebuild, restore, or maintain on their own.

Paddy Deighan J.D. Ph.D


NEW Fannie Mae and Freddie Mac Loan Modification Programs

There is additional (hopefully) good news in regard to loan modifications. Fannie Mae and Freddie Mac want to change the terms of your mortgage – AND, best of all…they want to do so QUICKLY!!! Yes, Government and quickly can exist in the same sentence sometimes!!  
fannie mae loan modification
The Troublesome Twins may hopefully get something right and actually help many home owners with their distressed real estate. At least, that’s what many homeowners with GSE (Government Service Entity)-backed mortgages are hoping to hear this week as the Federal Home Financing Agency (FHFA) initiates its Streamlined Modification Initiative (SMI) this week. Lenders will be responsible for contacting homeowners and offering them modifications with no paperwork. The homeowner simply will have to make three months’ worth of on-time payments for the modification to become permanent. Although the GSEs will not actually reduce principals on loans at this time under THIS program, they could reduce interest rates or extend the life of loans by as much as a decade in order to reduce monthly payments by hundreds of dollars.

In order to qualify for the program, homeowners must have loans at least 12 months old, be no more than 24 months behind on payments, and have principal balances of at least 80 percent of the value of their homes. SMI is scheduled to last through December 2015. The GSEs are encouraging homeowners to contact their lenders if they are experiencing financial hardship rather than waiting for an SMI offer because “in many cases working with the servicer to document the homeowner’s financial situation [something left out of the “streamlined” process] will create a more affordable monthly payment than would be available under [SMI]”.
It is widely believed that this is a limited program and even though it will last for 2.5 years, the number of home owners that will receive loan modifications is unknown. It is also unkown the criteria to be utilized in the determination of who gets relief.

Paddy Deighan J.D. Ph.D


Ocwen Acquires Indy Mac / One West Servicing

I have been surprised that there is very little in the media about this. Indy Mac is selling its servicing to Ocwen. IndyMac is the mortgage management division for OneWest, a bank headquartered in Pasadena, Calif. OneWest is the successor to IndyMac Bancorp, which was seized by the Federal Deposit Insurance Corp. in 2008.  In my opinion, this will be a benefit to many home owners who are seeking Indy Mac loan modification or Indy Mac short sale.
OneWest Bank Group acquired of the banking operations of IndyMac in 2009. Last week, Ocwen Financial Corp. said it would buy mortgage servicing rights from OneWest Bank for $2.53 billion. The deal includes $78 million in loans.
ocwen loan modification

Unfortunately sources indicated that employees in Austin, Texas (one of my favorite places in the world) twould lose some employees. Their offices in the 9th Street office would remain open but will shrink from around 300 employees down to 30 and that they believe the mortgage services will be outsourced overseas.  GREAT, more servicing being transferred offshore. We all KNOW how fun that is!!!.
Other news sources are reporting that the company will also lay off 725 workers in Austin.
Overall, I would have to say that this is good news for many home owners that have Indy Mac loans and who are seeking loan modification of short sale of their home. Indy Mac and its successor, One West has been a bear to deal with and Ocwen is quite reasonable. 
It appears that many experts in the financial markets have been surprised by this acquisition. However, it was the stated goal of One West investors and management that they did not intend long term ownership of former Indy Mac loans and assets.  I wrote two years ago that George Soros made a sweet deal with the Obama administration when they agreed to acquire the toxic assets of Indy Mac.   Indy mac was incentivized financially to foreclosure and we tax payers absorbed the losses (as opposed to Indy Mac/One West).  Accordingly, the acquisition by Ocwen helps not only home owners but taxpayers as well!!! Yeah!!!

Paddy Deighan J.D. Ph.D

Top Markets for Short Sales, Part 2

Top Markets for Short Sales, Part 2.  Last week I wrote about Las Vegas (read the blog here). This week, I review two more areas. Many real estate investors believe that short sales are a thing of the past. There are so many local, state, and federal regulations that govern these transactions. Regulations include how much profit you can make and in what time frame you can make the profit. Consequently, many investors have opted to pursue other investing strategies rather than continue doing short sales. However, for investors who know the best markets, the short sale, can still yield significant returns on time and money Knowing the best spots in the country for short sales can also help maximize your success in this industry.  Here is the first area for hot short sales today:
Most of California
Although the housing markets out west are improving, large parts of California are still underwater, making the state a good one if you want to focus on short sale investing. Nearly a third of California homes are underwater (27 percent), and the state boasted five of AOL Real Estate’s “top 10” short sale cities (Bakersfield, Vallejo-Fairfield, Fresno, Visalia-Porterville, and Santa Barbara). California homes take an average of 235 days to sell via short sale from the time they hit foreclosure, so, as in most states, you will have to be in the game for the “long haul,” but real estate investor are netting between $20,000 and $55,000, on average, when they sell that short sale on the open market. Many of California’s formerly hardest-hit areas, like Los Angeles, were short-sale hotbeds just a few years ago and now are recovering with staggering numbers such as 23.7 percent appreciation in Los Angeles’ case. If the same holds true for some of these other cities, in a few years you could be happy you bought and held a short sale this state.

Grand Rapids, Michigan
Want a relatively brief short sale timeline and an average discount of around $40,000? Grand Rapids, Michigan could be the short sale capital of your real estate investing world. With “only” 191 days, on average, to close a short sale and a dramatic increase in the number of homeowners doing these transactions in the area (up 81 percent in Q4 2012), Grand Rapids homeowners and their lenders appear to be ready to make a deal with savvy short sale investors. With Michigan State University (MSU) starting to do some serious real estate development in the area, Grand Rapids also appears to be poised to enjoy some of the benefits of being a college town, such as relative insulation from real estate swings, a constant influx of new inhabitants, and the ongoing need for housing for students, professors, and research professionals.

Some real estate investors say that the time for short sales is over now that so many real estate professionals are involved in the business and the federal government is attempting to regulate how much profit can be made on the transactions. I believe that short sales will be around for a long time..especially since HALF of the homes in America are under water!!!
Paddy Deighan J.D. Ph.D

Wednesday, July 3, 2013

Top Market for Short Sales Part I

Many real estate investors believe that short sales are a thing of the past. There are so many local, state, and federal regulations that govern these transactions. Regulations include how much profit you can make and in what time frame yo can make the profit. Consequently,  many investors have opted to pursue other investing strategies rather than continue doing short sales. However, for investors who know the best markets, the short sale, can still yield significant returns on time and money Knowing the best spots in the country for short sales can also help maximize your success in this industry.  Here is the first area for hot short sales today: 

Las Vegas, Nevada

The "Giant Litter Box" as I am known to affectionaltely refer to Las Vegas is experiencing fantastic appreciation these days (28 percent year-over-year). However,  there is still a lot of potential for bargain-hunting investors in this hardest-hit area. If you’re looking to do short sales in Las Vegas, note that the average number of days it takes to negotiate a short sale on a home already in the middle of the foreclosure process is 358 days. This is certainly not a short period of time, but that the average short sale is coming in at $124,555 and median home price in the area coming in around $187,000 for the first quarter of 2013, it might be worth the wait. Also, consider optimistic new home builders who say that their segment of the market could reach a median price of $250,000 by the end of the year. Therefore, it seems likely that Las Vegas and the surrounding area could remain “hot” for short sale investors for some time to come.
Las Vegas certainly is hot right now...117 degrees in the shade hot!!! LOL  Record temperature highs and hot real estate!! Who could ask for anything more!!

Paddy Deighan J.D. Ph.D

Principal Reduction in Loan Modifications

Well, it seems there is a bit of hypocrisy coming out of Washington for a little change of pace. President Obama announced his nomination of congressman Mel Watt (D-NC) for director of the Federal Housing Finance Agency (FHFA).  Many homeowners around the country were delighted by this selection because Congressman Watt has a history of supporting principal reduction in loan modification programs.
The hope is that he will continue this position during his tenure as head of the FHFA. Current acting director of the FHFA, Edward DeMarco, has refused to allow Fannie Mae and Freddie Mac to include principal write-downs in their loan modification arsenals. Demarco argues that the practice not only jeopardizes the American taxpayers, but also rewards poor payment history and sets a bad example. Now Watt could be causing problems in this area himself. During his confirmation hearing in the Senate last week, Watt said that while he would not preemptively refuse to engage in write-downs, he also would not endorse the policy. Instead, he promised to “study carefully how that decision [to not do write-downs] was reached, what it was based on, and then I would build on that new information…and make a responsible decision.”

Not surprisingly, Watt’s apparent reluctance has upset many home owners who believed that he would definitely approve the controversial measure to engage in principal reductions as part of a loan modification program. He has been accused of backtracking and failing his constituents. This is particularly alarming since Watt was a vocal critic of DeMarco’s policies as a congressman. Watt responded that while it was his responsibility to support write-downs as a congressman because he had many underwater borrowers in his district, as director of the FHFA he would have to be “a strong advocate for taxpayers”. Watt is likely treading lightly around this issue because one presidential nominee to replace DeMarco has already been blocked.
As my Mother was known to say, “We will see what we shall see”

Tuesday, July 2, 2013

Litigation Reveals ASTOUNDING Claims of Abuse During Bank of America Loan Modification Applications

Well, the happy news out of BofA’ville just never seems to end. Last month I read that according to their CEO, Bank of America’ problems are behind them!!!! Really??  Wall Street is buying it but I am not!!! Recent litigation has revealed numerous statements by former Bank of America employees that are ASTOUNDING and SHOCKING!!!
According to Bank of America employees, the lender offered employees incentives for sending homeowners into foreclosure rather than modifying their loans!!! Special!!! The BofA employees stated under oath that they were “told to lie to homeowners about loan modifications and were rewarded for sending homeowners to foreclosure rather than modifying their loans”. The allegations and incriminating statements are part of the evidence being presented in a federal class-action lawsuit brought by homeowners against BofA. The homeowners say that the lender deliberately “thwarted their attempts to take advantage of the federal Home Affordable Modification Program (HAMP).” Former employees of BofA involved in the suit testified that they were “instructed to deny modifications for no reason, to pretend they had not received documents they received, to hold documents and then claim they were too old, and to cancel trial modifications for ‘nonpayment’ even when all payments had been received.” The employees also reported that the bank “drilled” into them that the longer loan modifications were delayed, the more fees the bank could collect, even if this meant “lying to customers.”

The mortgage workers reportedly received cash bonuses and gift cards for meeting quotas for sending distressed homeowners into foreclosure. Not surprisingly, BofA has denied all of these allegations and pointed to the fact that it has, so far, helped the most homeowners under HAMP of any lender. “[BofA] is committed to assisting customers at risk of foreclosure,” said spokesman Rick Simon via email. A former loan collector for the bank disputes this claim, saying that he received $500 for every 10 customers he put into foreclosure and adding that other collectors received gift cards to Target and Bed, Bath & Beyond for putting homeowners in trial modifications into foreclosure.

Paddy Deighan J.D. Ph.D