Foreclosures

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 OccupyOurHomes.org.  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 OccupyOurCars.org 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 OccupyOurHomes.org (Link: http://occupyourhomes.org) 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.

Ideas For Transforming The Foreclosure Inventory

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With the Senate holding hearings allowing interested parties to propose their solutions for the foreclosures that still are a major part of our landscape,  it is time I weigh in with my opinion.  Not that I have not already offered these thoughts before over the last few years.  I just have not really thought anybody cared.  But, now I can see they do and I need to jump on board.   It is to bad I do not have access to a large staff that could prepare the paper work required for the RFP that the Obama administration issued.   I see that some large trade groups and public companies did have people to write and travel to D.C. to testify.  That is a good thing because most groups have their own self interest to protect.  Honestly, my ideas are not self-serving.  They are proposals from a 20+ year career that has shaped my understanding of the foreclosure issue in a way that is much more direct.  I have stood in the abandoned room of an 8 year old girl who did not get to bring most of her treasures wherever she was forced to move.  It is very sad and I really hope that the day comes soon when this part of our communities is not so common.

So, what would I share if I was given a chance to testify to Congress?

1. Stop selling properties in bulk.  I have years of history seeing that bulk sales do not provide a buyer who has an interest in alignment with local communities.  No matter how you twist and turn the facts, bulk sales by their nature, are usually homes that did not sell on the open market and now are pooled with a significant discount.  They often are never visited by the new owner and the play is that someday the market will get stronger and the investor buyer can then sell the property.  These bulk buyers are organizations with access to lots of cash..millions..as that is what it takes to buy.  There is not much going on but a play to buy an asset and wait for it to improve in value.  I know there are some exceptions, but bulk sales by nature encourage this type of distant ownership.

2. Invest the resources that trying to create a rental program will take into a community partnership in certain revitalization areas.  The goal of this partnership will be to help finance private groups to complete rehab of foreclosed homes.  Then create a special low down-payment, low interest rate, loan for buyers who purchase the home.  Gear the loan program so that certain credit issues associated with a previous loss of a home during this foreclosure crisis do not stop a buyer from participating.  This one program would do so much more to assist the restructure of communities.  So much more than a rental program.

3. In healthy neighborhoods and communities, homes should be sold not in bulk but one at a time.  Returning one very important loan program to the market would be the best solution for homes needing some repair.  Bring back the investor 203K loan offered by FHA.  Allow members of the community the chance to buy the home down the street, with funds to make the repairs, and then if the new owner deems it best to rent, they can become the landlord.  If, as I believe will often be the case, the home can then be sold, who better than local people to make that decision.

I will write more on this plan in the future.  Leave it to be said for now that I do not like the idea of allowing investor groups to purchase homes in bulk and then turn them into rentals.  I agree that providing a rental option once a home has been properly rehabbed is part of the solution.  But the plans being discussed currently are far to heavy on relying on the same group of bulk buyers that I have seen operate for many years.  I do not think these large investor groups interests can ever match those of the local communities.  The focus needs to be in creating the access to funds to allow local investors to fix these properties to local standards, with a local decision as to whether to then rent or sell.  Combined with a new purchaser loan option for certain areas that are agreed to be part of “revitalization” areas, and there will be an incentive to improve the neighborhood with an owner instead of a tenant.

Average Delinquency plus Foreclosure Time line Reaches 599 Days!

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As discussion picks up again as to how to fix the housing market, this news from a study completed by Lender Processing Services (LPS) should factor into the discussion. There are two ways to discuss this timeline. One, isn’t it great that struggling homeowners are being allowed so much time to try and recover their homes? I agree, and if it was working then there would be more good news in this elongated period of non-payment. Unfortunately, 38% of new foreclosures are second time filings. Second time filings are people who received modifications or some other change that removed their home from the foreclosure rolls. So, with a 599 day average timeline, it can be argued these borrowers are probably getting even more time. The other side of this argument is that 599 days is a very long time for a property to sit with probably little to no maintenance. Also, the Homeowner Associations can attest to the fact their fees are not being paid..usually filing liens against the title of the property and causing financial stresses for the services provided by the community. In comparison, I remember when we use to discuss 180 day time lines as being remarkable. It seems like part of the housing recovery will start by creating a more expedited transition for these properties so that new owners can maintain and occupy them without such a long period of neglect.

What Would You Do About Foreclosures?

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The headline screams and grabs my attention.   I think I have done a pretty good job sharing my thoughts on this issue for many years now…dating back to when George W was President.   But this time it is being asked for!  By the Obama administration!  The policy wonks are out of ideas?  Publicity stunt?  I am so confused in this world where right is wrong and down is up!  Now the Obama Administration wants my opinion?

As I read on I learn the Federal Housing Finance Agency, the Department of Housing and Urban Development, and the Treasury Department are looking for ideas for strategies to clear the high inventory of foreclosed properties owned by the government.  This is great!  But can I risk sticking my neck out..sharing my thoughts and opinions?  Is the risk higher than the reward when for almost twenty years I have served the default industry and actually might be able to offer some perspective…but if it is the wrong perspective could I risk losing business that is now dependent on this same government?

I am not sure anybody really wants to hear the ideas I have because they are not glamerous, wonkish, or even new.  As I learn more I find out the government wants to set up rent to own programs in which previous home owners (the ones who can’t make their payments) can lease their foreclosed home back on a path to purchasing it from Uncle Sam.   Or how about bulk sales to investors who commit to set up rental programs for these properties.   The same investors who buy these properties in bulk and two years later our “No Trespassing” signs are still in the windows?  Interesting ideas.  I have quite a few thoughts on how each of these ideas might turn out.  Maybe I can share them with the Obama administration since they seem interested in learning from little old guys like me.

I follow the  link to the place where I expect I can just enter a few thoughts and go on my way.  If they want to include me in the decision making, this will let them know I have some experience and knowledge about what is wrong (and right) in the process as it works today with the disposition of government owned properties.   After all, the way this announcement is written I believe they are interested in people like me.

The link takes me to the FHA website where a pdf document appears.   A five page Request for Information.   It starts out saying in the second paragraph that “comments are requested from all interested parties.”   By page three I realize this is not what I had hoped but a fairly complex document with a 23 point specific list of items to address.   It is to bad that they are missing the opportunity to simply get some feedback from the participants in this industry.  We have a full day with 23 tasks per government owned property due today so I am not going to find time to share my thoughts in this complicated format.  It also tells me a lot about who they are seeking opinions and input from..and it is not the small business people who are the workers in this industry.

If they want to know…they know where to reach me.  Hint..my suggestions are not that complicated.  One agency already has done a great job with creating structure.  Another agency has addressed the credit issue.  And the third has done it right for giving owner-occupant buyers security in their purtchase.  Instead of worrying about the effect of selling these homes on the market, they just need to combine these pieces and tap the hunger of home buyers who are waiting for the market to get better.   We assume they do not exist.

In the meantime, I have to go to work.

Foreclosure Delays Likely Drag Housing Market Into 2012

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Actual foreclosures are down 30% for the first half of 2011 compared to 2010.  Sounds like great news..right?  We only wish that is the case.  The drop in foreclosures did not come from an improving housing and economic climate.  It is the result of increasing delays in processing of foreclosures.  Simply put, it is taking lenders much longer to move against defaulting homeowners.  How much so?  On average a homeowner now has an average of 318 days from the time they receive a notice of default and an actual sale of their property.  Add to this that a homeowner behind or not making payments has access to several possible modification or assistance programs prior to any foreclosure notice being filed, and it is not unreasonable to believe that people are able to live up to 18 months without making a payment when they decide to let their home be foreclosed.

The potential results of these delays?  A housing market that drags its feet for up to another five years and resulting lack of appreciation of values from their current depressed levels.   The question remains..is this the best course for the economy and how many people are specifically being helped with these delays?   If the efforts are helping people to save their homes, then maybe it is worth it.  If these delays are resulting in more vacancies and blight in our communities, then clearly a faster approach is needed.

What do you think?