More Trouble In The Real Estate Market?

Housing Collapse. . .Again!?

For about the last 2 years now, most media and their housing experts have been reporting good news on the housing front. The number of distressed properties was decreasing, the number of foreclosures was decreasing, prices were (and are) increasing. This seems like good news all around, right? Well, it certainly would be IF IT WERE ACTUALLY TRUE!

I’m sure it comes as no surprise to most of my readers that things are NOT always what they are reported to be:

1.) “If you like your health plan, you can keep it!”

2.) “Al Qaeda is on the run!”

3.) “The Benghazi embassy attack was in response to a youtube video. . .”

4.) “The average family’s health plan will be reduced by approximately $2500 per year. . .”

5.) “There were a few rogue agents in our Cincinnati IRS office who were targeting their political enemies. . .”

Etc, etc, ad infinitum.

Well, now comes the news that “Housing Bubble Fears May Not Be Unfounded” and that “Low Inventories Conceal Hidden Vacancies, Threat Looms. . .”

These two news stories from DS News show what I have been telling my clients for the last few years. Yes, things LOOK like they’re turning around, when

Squatting Homeowners

you read the news. By when you actually work in the default industry, you know that things are NOT what they seem to be. Here’s the bottom line, and it makes all the difference in the world:

Many millions of mortgage holders who have not payed their mortgages for some time, are simply not being foreclosed on. You heard me correctly. There are millions of people living in homes that they haven’t payed for, in some cases up to 3 to 4 years!

Why is this happening? Because it is now politically incorrect to foreclose on people who haven’t payed their mortgages. Mortgage lenders were directed in no uncertain terms to simply “STOP FORECLOSING ON PEOPLE! You’re making things worse!”

I have been saying for years that politicians will continue to kick this housing can down the road as long as they can, and hide the data from the American people, to try to create more consumer confidence. Well, the plan hasn’t worked out too well. The news reports that consumers are more confident, but do you know anyone who has confidence in the housing market? the economy? our military prowess? our health care system? I certainly don’t.

Sooner or later, all these people who are not paying their mortgages are going to be removed from their homes. Those homes will hit the market. Then there are all the homes that homeowners have simply abandoned, but have not been placed on the market for sale, but are held “off the books” by lenders. Those will have to come to the market eventually as well. That’s a double whammy. It HAS to happen. It’s just a matter of WHEN.

So, now you know why your house price has increase by 20% over the last 24 months. There are very few homes for sale, and this contributed to creating a strong demand.

If only you could see below the surface, you’d see all those other thousands of homes just sitting vacant, WAITING to go up for sale.

Hello 2006!

Allen

Advertisements

Why Loan Modifications Fail

According to the latest report by the Dept of Treasury, loan modifications are failing at an alarming rate. Consider: of the 728,000+ attempted loan modifications done so far through the government’s HAMP program, only slightly over 31,000 have been successful.  Stated differently, if you attempt a loan modification, you have a 23% chance of success. Why can’t people get loan modifications completed?  Let’s take a look.

According to reports from banks, homeowners are to blame because they don’t turn in the paperwork required, nor do they make trial payments.  Homeowners, on the other hand, say mods are failing because lenders are losing paperwork, foreclosing on “accident,” changing terms mid-stream, simply ignoring them, or denying them loan mods based on some mysterious formula.

 There are in fact many homeowners who can qualify for a modification who have decided they don’t want one.  These people who “failed to complete the process,” probably came to the conclusion (after months of emotional hell) that it’s best to ditch the home and start over.  Once these families have been through 6 months of fighting with their lenders about a modification, they start to realize a few things:

 a.)    their credit is already ruined

b.)    the “fix” is somewhat iffy, and temporary

c.)    there is a real chance they’ll be going through this again in 5 years

 These facts add up fast, and signing on the dotted line to temporarily modify an already shaky loan is the last thing these people want. 

 Homeowner accusations of lost paperwork, accidental foreclosures, and unfair dealing are all absolutely true, when viewed in a certain light.  The reasons that banks appear to be unfair in their dealings is probably for a different reason than many think, though. What many fail to realize is that getting three huge bureaucracies to agree, in writing, to give away free money, and coordinate this free money give away on a specified date is no small feat. It can actually feel a lot like trying to trick a gang of bullies into poking each other in the eye while you make a quiet escape.  That’s not to say it can’t be done, just that it’s . . . tricky.  It really helps to understand the bureaucracy part of the equation to understand why you can’t get help from your bank.

 The servicing lender you send your bill to every month? They don’t actually own the mortgage to your house. They’re just “servicing” that mortgage for an investor. So already, you’ve got one road-block. Your servicer can’t actually make a decision regarding modifying or short selling your loan.  Oh, and that lovely and gracious representative on the other end of the line you call for help? She’s about 20 people down the chain of command in this organization that can’t make a decision anyway.  Not only that, she’s likely a low paid “temp” with little incentive to be helpful or friendly. And to make matters worse, she knows absolutely nothing about the process, your file, your problem, or the bank she works for! She’s just reading from a screen that contains very little information. She couldn’t help you even if she did have the best customer service skills in the world. I could actually write an entire book on the process, and the steps that have to be followed, and the executives who need to sign off, and this book would leave a lot of questions unanswered. Imagine, if you will, that you would like the federal government to send you a detailed report of every dollar you’ve paid them in taxes and what they spent it on.  Yeah. It’s kind of like that.

 The housing crisis is an absolute mess. The processes in place for helping troubled homeowners are very confusing, very time intensive, and anything but guaranteed.  Lenders will continue to blame homeowners, and homeowners will blame lenders for lack of progress on the issue.  There is one certain fact that everyone knows, but we’re hiding from and delaying at all costs: there will be millions of families moving out of their homes and renting in the coming years.  The millions of the homes sold between 2000 and 2008 are the crumbling, decaying, “foundation” of all of our household wealth. It is and has been crumbling. Those who abandon ship now will suffer for a time, then thrive and grow again. Those who continue to “re-arrange the deck chairs” on this sinking ship will be floating on a life-raft for quite some time.

Next time, I’ll detail for you the governments new program to “streamline” this process. . .

Free Loan Counsel Available Now!

By Phone: (602) 499-4798

or by Email: therealtybutler@gmail.com

*Disclaimer: We DO provide loan counseling services to our clients, but we NEVER charge the homeowner money. Please also remember: I am NOT an attorney, and neither do I play one on TV or the Internet. None of these pontifications should be construed as specific legal advice. If you need specific legal advice regarding your personal situation, give us a call. We can help you ourselves, or provide a list of housing counselors that are free! 

The Right Loan Modification Help

     Imagine for a moment that your wallet, purse, or handbag was stolen from your car. All of your personal and credit information was included in the “transfer” of ownership: your multiple IDs, social security card, home address, credit cards, spare house and car keys; everything. Now, you have some work to do. You need to cancel your credit and membership cards and get new ones, set up a credit monitoring or credit security service to lock credit activity, change the locks on your doors, go to the DMV and get a new license, dig through family photos for replacements, get a new cell phone and replace all your contacts, programs, music, etc. Getting your life back together is going to take awhile. You’ll be on hold for hours, talking with hapless bureaucrats, minimum-wage-earning call center human robots, jumping through hoops, providing documents to people who either don’t get them or lose them, and standing in line at the DMV.

     Processing a loan modification is a lot like this, only much worse. Whereas a dedicated and persistent person could recover from stolen personal effects in a few weeks at most, negotiating with a lender on a loan mod, short sale, or deed in lieu of foreclosure routinely takes months, and can take over a year. Real estate attorneys, agents, and short sale processors who have experience in dealing with lenders and negotiations on behalf of homeowners are not surprised by this; they expect it. They spend their days on hold, taking copious notes, demanding to speak to supervisors, “expediting” the process, verifying paperwork, and pushing through to the ubiquitous “next level” in the process. This is their job, and in most cases, they are paid well for it.

     There are now hundreds of businesses and “servicers” clamoring for the distressed homeowner’s attention, offering “help” with their foreclosure troubles. I get many of them myself, and I’m not even “distressed,” at least not about real estate! Needless to say, there are many scams being perpetrated on homeowners, and care should be taken. Selecting the right company, attorney, or agent to help you can be daunting and anxiety producing. The following are some tips when shopping for loan mod help:

Be Wary of Paying Money Up Front

     If possible, look for an agreement that provides payment if, and only if, the loan modification is completed on a permanent basis. It should be understood however, that this is a very labor intensive process, and there is no real guarantee of success. The company that worked on your behalf for all those months will likely want compensation if, in spite of all their best efforts, your modification is denied. Remember, there is risk involved for both the homeowner and the processor, and that risk can and should be negotiated, or shared. Perhaps you could work out a deal where only half the fee is due up front? Be very cautious about paying in full up front, with a promise of “your money back,” if the loan mod fails. Some suggest that you insist on paying with a credit card, so that charges may later be disputed if something goes wrong.

Make Sure the Processing Charges Appear on the HUD-1

     When and if the lender agrees to a permanent modification, new loan documents will have to be generated and executed by the borrower, the lender, and the Trustee (in AZ). This will usually happen at a title company, where the documents will be notarized, filed with the county recorder, and distributed to all parties. A regular HUD-1 or “Closing Settlement Statement” will be issued for the transaction. The party who processed your loan modification should be listed on the HUD-1, along with their attendant processing fees. You would then bring that fee to the closing table to as your cost for “settlement charges”.

Make Sure the Processor Understands the Process, and Can Explain

     Make sure that whoever you choose has a plan or strategy in place for fully educating you on the process. Whether this means they meet with you in person or on the phone, or send you a flow chart, graph, or handbook, you should be aware of milestones, what is coming up next, and where you stand with the over-all process. Someone with a good “bedside manner” is what you’re looking for here, as you are in trouble, and you need to feel confident that the process is under control by a competent professional.

Make Sure Communication Lines Are Clear

     You will need to have open lines of communication with your processor. They will have questions for you, and will need you to deliver documents to them periodically. The best practice is email communication, as it is an excellent way to keep records of who said what when, and what documents were sent and when. If you have the ability to scan and email documents through email, you should also do this. The documents will be attached to their original emails, and saved in the system. This is record that you have complied with all pertinent information and data requests. If you have to, use a fax machine for documents, and keep the “Transmission Record” of your having sent it. Only hand-deliver or mail documents as a last resort, and only if they are certified (i.e., someone has to sign for them on the other end). Bottom line: keep neat records of communication and documentation sent.

     Your communication lines will also keep you up to date on the progress on your file. You should receive weekly updates, in writing. This should be a log of all activity on your file. Good processors keep notes on a “transaction” or “processing” form of some kind. Any time they have a conversation with your lender, send some document, or make a call to any third party, the conversation is recorded in this log. You want an updated copy of this log each week. The log should show that the processor is contacting your lender at least once per week, what your lender said, what your lender wants, what the hold up is, etc. Depending upon your level of comfort, you may ask for this document, along with a call to discuss it, on a designated day and time each week.

Make Sure You Check for Experience and References

     You should ask any potential processor what type, and how much, experience they have with loan modifications, how many of their loan mods have been successful versus unsuccessful, and whether they can provide a list of potential references for you to call. You might also visit your local BBB web site to look up the company’s history. Sometimes, a simple Google search with “[Company Name] Scam” is sufficient to root out trouble makers. If there are several Web sites, Blogs, or news stories connecting the word “scam” with the company or person you have selected, well. . . I’ll leave you to your own judgment.

Moving Forward

     If you decide to hire someone to help modify your mortgage, follow the above guidelines to minimize your exposure to scams and ensure the best professional selection. Also remember, there are no guarantees that your loan modification will be successful. If you would rather complete the process yourself, in our next installment we’ll provide guidance and best practices for going it alone.

Free Loan Counsel Available Now!
By Phone: (602) 499-4798
or by Email: therealtybutler@gmail.com

*Disclaimer: We DO provide loan counseling services to our clients, but we NEVER charge the homeowner money. Please also remember: I am NOT an attorney, and neither do I play one on TV or the Internet. None of these pontifications should be construed as specific legal advice. If you need specific legal advice regarding your personal situation, give us a call. We can help you ourselves, or provide a list of housing counselors that are free! 

Arizona Foreclosure Process

Transcript:

Hello and thank you for joining us today at the Butler Blog.  As always, I am your host, Allen Butler, Managing Director of The Realty Butler LLC and agent of West USA Premier Properties. Today I want to examine some of the issues and strategies involving loan delinquency, mortgage default, and foreclosure affecting Arizona’s families.  

   For nearly everyone being affected by this foreclosure crisis, the foundation is almost always negative equity and financial hardship: If financial hardship comes, and you can’t sell the house because it’s “upside down,” you are likely about to stop, or have already stopped, paying your mortgage. This is when the process of foreclosure begins.

     It is absolutely critical that you know the process and timelines of delinquency, default, and foreclosure, and what your options are in dealing with them. The entire foreclosure process starts with your first missed payment. Let’s take a look at the timeline.

When you miss your first payment, you will likely start getting all kinds of communication from your bank. They want to know where their money is, and if you can’t bring your payments current very quickly (usually within 30-90 days), a “notice of default” will be issued.

The Notice of Default is a legal notice filed by your bank, indicating they have notified the courts that you are seriously delinquent on the loan. This notice also indicates that if you do not clear the delinquency within 90 days, the property will be scheduled for public auction.

When the home is scheduled for public auction, a Notice of Trustees Sale will be posted on the home itself, and filed with the courts. This notice identifies the place and time of the trustees’ sale, the loan servicer and/or legal office pursuing the sale, and the homeowner against whom this action is being taken. The auction date for the trustees’ sale is usually 30 to 90 days after the posted notice date. When and if the property is sold at auction, it now belongs to someone else, usually the lender who filed the action. 

The next step in the process is eviction. Once the home has transferred ownership at the trustees’ sale, the new owner is going to take possession. Sometimes, the lender will contact the occupants of the home, and offer a “Cash for Keys” deal in exchange for leaving the home within 15-30 days. If the occupant is uncooperative or not able to be contacted, a forcible detainer action will be filed, and eviction proceedings will commence.

Now, it is absolutely vital that you understand your “Action Zone.” This is the time during which you can act to contain and mitigate the damage to YOURSELF, your family, your credit, and your future. The Action Zone starts before you even miss a payment, and ends just a few weeks after the Notice of Trustees Sale. It is during this time that you absolutely need to contact someone for help with your situation, as there are several programs in place by lenders, and federal and state governments to help.

In our next installment, I’ll discuss these foreclosure prevention programs, how they work, who can do them, and who should do them. Until then, if you have questions or concerns regarding your personal pre-foreclosure situation, I encourage you to contact me. Both myself and my staff of highly trained and certified mortgage default specialists are always ready to take your calls or emails.

Until Next time, this is Allen Butler, Managing Director of The Realty Butler LLC, and agent of West USA Premier Properties, signing out.

The Latest on Arizona Short Sales

Hello Again, Folks,

I know it’s been a few weeks since I’ve been able to post anything about short sales and the like, and I wanted to keep you up-to-date on the current state of this aspect of the Arizona market. The reason I have been unable to post? I’m up to my eyeballs in short sales and foreclosure homes! So, what’s been going on?  I have determined a few things that may be helpful to both homeowners and real estate agents dealing with these nasty bits of real estate practice:

a.) If you can help it at all, stay the heck away from Countrywide if pursuing a short sale! I have written about the Blundering Nincompoopery of Countrywide before, and nothing has changed. These guys are the most inept bunch in the industry. For example, I have a short sale that was just accepted by Countrywide, in which the offer on the home was sent to Countrywide on February 19th, 2008. By the time this file closes escrow, it will have taken . . .uh. . .too long. WAY to long!

Interesting side-note: The last two short sales I completed with Countrywide were of a very interesting nature, and probably shouldn’t have been accepted in the first place.  On the first one, the homeowner never missed a single mortgage payment, and on the second, the homeowner never sent in any financials. No bank statements, W-2s, tax filings, income statements, not even a financial worksheet. Just a hardship letter. Do not try this at home. It will not work for you; I am simply THE MAN ;>)

Really though, and this brings me to point b:

b.) Short sales are won, or lost, on the tenacity of the listing real estate agent.  If you EVER take “No” for an answer, you are sunk.  I don’t know why, but I have always enjoyed having my way with bureaucrats. Some fun and pleasant memories: The power company calls to say that the power is being turned off for non-payment. By the end of the hour-long conversation, it is their fault, they are apologizing, waiving all fees, and I have a credit balance of $278.  Calling the credit card company, and demanding that they lower my rate from 13% to 6%.  Leasing an Infinity G35 for $187 per month, with no money down, and a full maintenance package thrown in, for uttering the magic words: “Oh. . .I thought you guys were a LUXURY car dealership!” 

Ass-holish? Maybe. Love to parlay? Absolutely! Maybe I should have been an attorney. In any event, don’t give up!

Allen

Making The Case For Blundering Nincompoopery.

Did I spell that right? Hope so. . .

So anyway, I’m back with more “tales from the dark side.” I am going to continue on my  Saga, while throwing Papa John’s Pizza into the mix. Let me just state flat out, in as clear a way as I know how, that CountryWide’s loss mitigation department is the most incompetent group of blundering nincompoops that I have ever seen.

Case #1: I have a certain short sale that Countrywide has had in their possession since February 19th. Two loss mitigators later, and they just ordered the appraisal yesterday.

Case #2: On another active file, newly minted, fresh outta loss mitigation school comes Paul Romero (the name has NOT been changed, so as to shame the guilty) . Now Paul, bless his little heart, indicates that he’s gonna “send the file to the investor” to get their response. Uh. . .Paul? Countrywide owns the loan.  He calls me back two days later to indicate that he was wrong. Problem? He’s suddenly discovered that there is PMI on the loan, and he’s “sending the file to them immediately.” That’s great Paul, but their is no PMI on this loan. He argues with me for awhile and says he’s gonna send it to the PMI company to get their response. In the meanwhile, I’m off to demonstrate conclusively that there IS NO PMI on this loan. Within about 3 hours, I have written confirmation that there is indeed NO PMI on this loan. Fast forward 24 hrs. Here’s Paul on the phone again: “Uh. . .the PMI company has denied the short sale. They think the property is worth more than the offer you have given them”. Ok. Paul, let me explain this to you again, real slow. . .: There is no pmi on this loan. He proceeds to tell me that he’s sorry, but the short has been denied. Okay Paul. Give me the policy number, inception date, & contact information for the person handling the case at the PMI company. “Uh. . .I don’t have that information.” Well then how did you send them our offer? “Uh. . .I’ll have to get back with you. Click.

So, I call today. The case has indeed been rejected. Case closed. The peons at the loss mitigation department can’t seem to figure out why, based on Paul’s notes. About an hour or 6 later, I get a call from Paul’s boss:

“We’re sorry Mr. Butler; there was a mistake. There is no PMI on this loan. We’ll have this file ready for you in a few days”.

Huh. I’m speechless.

Then there’s Papa John’s. My wife has unfortunately fallen in love with this new pizza they have. So I ordered some . . . . . . . . . .and waited for almost 2 full hours to receive it. When I did receive it, it was cold. THAT’S FABULOUS! So I call. They offer to deliver a new one. “When? A couple of hours from now?” No sir, it’ll be there in 30 minutes. Great. How about you throw in a little 2.99 desert thingy to make it up to me and my family? Sorry sir. The manager says no. FABULOUS.

I guess my point is this: when someone actually gives even adequate customer service, they are heralded as “amazing” and people marvel. What has the world come to?
Allen

A Question Regarding Short Sales

This question came in the in-box yesterday, and I wanted to share it with the other inquisitive folks out there who may be wrestling with similar issues, and I’m sure there are many! Remember, if you need help, don’t be afraid to ask for it! You can also look at The Realty Butler Foreclosure Help Resources Page. Talk to you soon. . .

Question:

Hi. My husband and I are considering doing a short sale on our townhome. We owe $195,000 on our home but cannot get that amount for it due to the comps in our neighborhood. We are current on our payments and have good credit but our realator said we could do the short sale to sell our home lower so we can move to Missiouri. My question is basically will we be able to buy once in Missouri with the short sale on our record? I know that with missed payments it damages your credit a ton but will it damage ours as much since there won’t be any missed payments? We just need to sell our house so we can relocate. Thank you!

Answer:

Thanks for the question. Generally speaking, lenders are very averse to allowing borrowers who are current on their payments to do short sales. The whole premise of a short sale is based upon hardship, however, and it doesn’t necessarily have to be a financial hardship. Let’s put it this way: is staying where you are causing a hardship that would be alleviated by moving to Missouri? If that’s the case, the lender may look at your need to move. It might depend on how far the townhome is “upside down”. Also, most credit damage resulting from a short sale is the result of missed payments. So, if your lender agrees to a short sale with your being current on the mortgage, very little, if any, damage will result. When I say very little, it is because of this: when your loan is payed off (in whole or in part), an annotation is made to your credit report. The note says something like “loan remitted.” Some lenders may make a small footnote to that footnote, that says, “remitted for less than amount owed”. There is some debate as to whether that little footnote will affect a borrower’s credit at all. Hope this helps.

Remember, I am not an attorney, nor do I play one on TV or the Internet. If you have specific questions about your unique legal situation, contact qualified legal counsel. If you think I may be able to help, send me an email: abutler@realtybutlerhomes.com