Bank Programs

Occupying Homes As A Solution?

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Seriously..I am torn.  I just don’t believe this is the right way to deal with a lender when you can’t make your previously AGREED TO payments.

I recently became aware of the website  The site is full of heart tugging stories of people who can’t make their mortgage payments and the issues they have had with the banks in attempting to get a modification or stop an eviction.

I have to start with a basic idea here.  All of these people signed mortgage contracts under lawful circumstances.  If it could be ruled they were not of a right mind, or capable of understanding what they executed, then by now the attorneys would be attempting to void out mortgages based on the incompetence of the borrowers.  Not heard that case being made.

As I wander through this site, I see that the one thread that ties all of these people together is that they can’t make the payments they agreed to make, and getting to live in their homes at a lower cost (or even no cost) is a right extended to them by living in America.  Or under God..or some other deity.   The theme, as we now have heard it from the media so many times, is the 99% will have their voices heard.

The reasons I am torn?  A bunch really.

1. I do feel bad for people who are able to enter agreements (contracts) and really not understand the possible repercussions.  On a different scale..I assume most of these folks purchased cars on credit and signed notes for the cars.  If they can’t make the payments, the car gets repossessed.  No modification programs are being advocated by the government for car buyers.  I have heard talk of them for student loan borrowers.  I suppose cars are next..and I guess has already been acquired.

2. Admitadely, the banks have not shown a lot of excitement to provide modifications.  They have done it under the strong arm-twisting of the federal government..but the reality is they are complicated beasts with a VERY high rate of failure.  As I have witnessed so many times, the people who are unable to make their house payment also often choose to not spend money on maintenance.  The longer the situation exists, the more the value of the home drops (as do the ones around it).  Modifications, due to the high rate of failure, don’t stop this cycle..only prolong it.

3.  As I review the website, it appears there is a lot of good money being spent on this cause.  It in fact troubles me as to where the funds are coming from.  Yesterday, a press release found on AOL Real Estate brought me to my tipping point on this issue:

NEW YORK – Aug. 22, 2012 – The “Occupy Our Homes” movement is taking its anti-foreclosure message to the airwaves. The protesting group, part of the Occupy Wall Street movement that has a network of participants across the country, announced it has launched a national television ad campaign to speak out against foreclosures and show struggling homeowners how they can fight against evictions.

In recent months, the group has staged “sit-in” protests at properties of homeowners facing foreclosure.

The TV ads direct viewers to the (Link: website for a field manual on how to “start an occupation,” which details how homeowners can protest a foreclosure using sit-in strategies.

The ads are set to appear on networks like CNN, FOX and MSNBC.

This is not inexpensive advertising!

The great thing about America and our system is there is plenty of room for groups like this to exist.  We do have laws and at some point those laws will need to be enforced.  There are thousands and thousands of people involved in the housing business who have all kinds of empathy for people who made bad decisions.  Nobody really wants people to be put out on the street.  Don’t worry..they won’t be.  There are so many options for renting and public assistance today.  What I have on my mind is who is funding this anti-capitalism, anti-law, protest movement?  And why?

That is what we all should start to be concerned about.   If you have information on this please comment and share so we can all draw our own conclusions.

Fraudulent Values Threaten Short Sales

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There is a number of real estate agents who today are trying to make a living by advertising themselves as “short sale specialists.”  Besides the fact that the banks themselves could care less that you claim yourself as a specialist in this area, the agents making this claim are pointing it to home sellers.   Once people start trying to use this sales process to their marketing advantage, the next thing will most likely be the inevitable introduction of fraud to the equation.

A short sale is a home that has an accepted contract between a buyer and seller for less than the amount of debt owed against the property.  Since the introduction of home equity loans, and the ease that one could be obtained, this problem started to develop.  With the loss in value many homeowners have experienced, it now is more frequent that debt exceeds value…or the amount a purchaser will offer.

The problem for the lender is what is the property really worth?  Lenders try very hard to analyze this part of the decison when considering short sales but the human element seems to be a necessary evil.  Unfortunately, the reliance on real estate agents to help develop an opinion of value is opening the door to the hen house for the wolves!

Why are banks making decisions in this way?  I can tell you most have no choice but to employ brokers to produce inexpensive broker price opinions in these situations where the losses are stacking up.  It should not be hard to separate the agents involved in a short sale from an agent who prepares broker price opinions.  Except…

It would not be that difficult to convince an agent to participate in such a scam.  Why?  Because the agents preparing fee-based broker price opinions are doing so because they are needing the $40 that 2 to 3 hours of their time will pay.  In other words, there are so many agents struggling today, temptation is going to be high.   It shouldn’t be this way, but as the story from CNN-Money tells is.

The writer of this story interchanges the words appraiser and agent when discussing values.  Rarely are appraisals completed for short sales.  These are agents who are trying to supplement their incomes with broker price opinions.   Calling another peer agent to work out the value needed to get the sale completed.   Of course, there is a code of ethics that prevents these things.   There are a lot of hungry agents though and short sales are a ticket for the unethical to survival.   Appraisals are too expensive for a situation that has way to many hurdles to add more cost that may never be recovered.  Then there are all the approval and closing related issues that may exist.

Which is one of the big reasons why short sales will likely never be a significant  solution to the housing problem.

If you are a homeowner, don’t give up on the idea of using a short sale.  Start with your lender though and discuss their position on accepting a short sale offer.  Ask if they are a participant in Home Affordable Foreclosure Alternatives (HAFA) and whether a sale under this program might be an alternative for you.  Be wise as to your home’s value.  Do not be the apathetic sellers in the story.  Ultimately, these short sale scams are costing all of us.

Monday Morning-Do You Know Where The Recovery Is?

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A morning of interesting news that in a matter of just a few minutes says it all about the fact that no matter how you spin it, the economy is not getting stronger.  The interesting part is that it all reflects on housing.  Eight of the last nine recessions were fixed only when housing improved.  Housing is such a huge part of the economy, there is little to accelerate the engine if it is fighting  sludge.  Yet, we continue to go down the  path that if we punish all the mortgage lenders (because they are to blame for the entire Great Recession) they will never lead our country off the cliff again.  If you believe this, then I ask you to reconsider for the good of all of us.

First, I do not see Wall Street firms being set out as the villain when they were the ones who marketed and sold the mortgage backed securities that created a bubble in the 2002-2006 period.   The government is all about punishing the mortgage servicers (who are often just an affiliate of a mortgage origination operation-you know the folks that make mortgage loans).

Type into your favorite search engine the term “shadow inventory” and see what the fear of regulators is doing to housing.  Every neighborhood has vacant homes now..overgrown and left to decay.  We use to get these properties title’s back to the bank and start maintenance and marketing as quickly as the law allows.  Today, they sit for many reasons that I could only speculate.  Go ahead and read all the speculation about the huge number of deserted homes and consider the affect on home values.  Is it really better to let the homes rot away than to sell them as a foreclosure?

Now, just to make my point as to where the energy is misplaced today, consider these two articles from the weekend news:

Principal Write-Downs Bad for Housing– the debate that never ends.   Lets somehow help the poor unemployed homeowners stay in their homes by forgiving part of their mortgage balance.  What about the people who make their payments?  They are still maintaining their homes and paying their taxes and homeowner association dues?   I have said it for years, principal reductions will help a very narrow part of the economy..those who borrowed up to the hilt during the bubble years on values that were not real..often not as part of their purchase money for a primary residence but for a refinance and cash out.  I feel for these folks, but these proposed write-downs only help a small number of people who likely have other assets or funds.

Second Chance for Owners Who Lost Homes– I guess if we throttle the mortgage servicers and make them give their defaulted borrowers more money (after these folks lived housing payment free for 18 months on average and received several thousand dollars in “cash for keys” assistance) this will teach them to never make these mistakes again.  Maybe they also won’t try anymore to make many loans to people who are not golden credit risks.  Oh wait, that is happening now. 

And then we find out that while demand for housing is down, rates are going up!  If you have a home you need to sell, here is a recommended strategy, drop the list price to 10% under market.   If you can figure out what the market price really is!

There you have the news you need to know as you consider whether getting those evil mortgage guys is really the best thing to eliminate the stress this country has economically been experiencing for the last four years.  What do you think?

Not Surprising To Me

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For almost three years I have said the economy is not getting better until we let the market work the housing mess out.   For three years,  policies have worked in a different, opposite fashion.  I quietly continue in this belief..but today found some evidence that adds fuel to my fire.  I just had to share it.

There now is evidence that the more interference in the default process, the more that we just keep working toward a much longer crisis.  Similar to how tax incentives or new taxes artificially create behaviors in the public that would not have been taken if not for taxes, evidence now points to availability of mortgage modification offers creating strategic defaulters who otherwise would have had the ability to pay their mortgage!  I know for many this news will not come as much of a surprise but it is unusual to see research like this made available for discussion.   In other words, Tom and Betty are not happy that their mortgage is more than their home is valued, but they have good jobs and can make timely payments.  Yet, when their lender publicizes modification programs that reduce payments, interest rates and even principal reductions, Tom and Betty decide to fall behind on their mortgage in order to take advantage of the opportunity.  Now I understand this does not happen every day..but it supports a point.

Another quick example.  It has become widely known that most areas now can take a year or more before a foreclosure will occur from the time the first payment is missed.  Owners often no longer move knowing this long backlog exists and their cost of shelter is so small.  Owners or occupants are also keenly aware that not moving will likely result in further profiting.  Used to be when a foreclosure was completed (meaning the defaulted owner no longer owned the home), the new owner gave an occupant 15 days to leave.  Now,  negotiations that allow occupants to stay for 30-60 days and get a check for $2000 to $3000 for leaving the property in good condition are the norm.  So, you get the idea…why leave?  wait for your deal.  And that is what is occurring.

Any more questions why the housing market is not recovering?

Here’s Your Check from Uncle Sam…Now Give Me Your Keys

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The country is nearly bankrupt but we still have people in authority making proposals like this! Do you think folks that can’t afford their mortgage payments should get a $21,000 grant for relocation from Uncle Sam?