Foreclosure News - Foreclosure1.com

Amidst Foreclosures, People hold Negotiations for Lower Mortgage Payment

Susan Pedersen — Fri, 20 Nov 2009 12:11:31 +0000

The US is going through one of its most challenging phases. Unemployment is at its peak. As people lose jobs, they are faltering on mortgage payments. Hence foreclosures have become common. Not only the jobless but even those who have decent jobs are threatened with home loss.

Take, for instance, the case of Charles and Rose Murssal, residents of Milwaukee County. They were on the right track despite the Recession. The couple had even bought a home four years ago and they had no problems in paying the monthly installment.

However, when the adjustable mortgage went up to $1,650 per month, the couple floundered. They were on the verge of losing their home. Earlier, they had to pay $950 and two years ago, the amount they had to shell out spiked to $1,200. Rose Murssal says that it became very difficult for them to pay the increased amount.

The couple then decided to sit with the lenders and a mediator. After listening patiently to the couple as to why they fell behind on mortgage payments, the couple got a new mortgage amount that was much lower than the previous amount that they had to pay.

Residents of Dane County may have a similar advantage soon. The Dane County Circuit Court has ruled that people be given the option to pay lower mortgage after mediation.

In fact, there are many counties in the US where talks are being held between homeowners and lenders for a lower payment. This arrangement is being made after negotiations between the owner and the mediator over a table. In fact, the trend has become common throughout the US. The latest to join the bandwagon is Wisconsin.

Sen. Lena Taylor of D-Milwaukee has now come up with a foreclosure mediation bill. The bill would help homeowners who are facing foreclosure. It may be mentioned here that Taylor’s district has been particularly badly hit by foreclosures. Of course, people have conflicting opinion about how these programs should be done experts say that mediation is quicker and less expensive than the traditional court hearing. Mediation takes two months instead of a year. It is also less gut wrenching, experts observe.

Connecticut, Ohio and New Jersey have initiated the proceedings. Many states are expected to follow suit. California has also started the process. It may be noted that in California, lenders can take over the property unilaterally. Experts, however, believe that the situation will improve only when the employment scenario improves.

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Tendency to Walk Away from Underwater Mortgages Facing Foreclosure has Increased

Susan Pedersen — Thu, 19 Nov 2009 12:07:14 +0000

The tendency to walk away from underwater mortgages facing foreclosure has increased. In underwater mortgages the value of the house has dropped below the worth of the loan.

One of the many who lost her job recently is Sharon Sakson. She used up her savings to run along with her monthly mortgage dues of $2,400 on her house But she soon saw the foolishness of continuing as her property was worth thousands of dollars less than the loan it carried.

When she refinanced in 2006 the house had been valued at $390,000 but today it is below $320,000 that she paid initially to purchase it in 2004. This prompted Sakson take the decision similar to what many others are doing – she stopped her payments and sat back allowing the bank to do whatever it wanted to do. She decided to walk away.

This move is called strategic default or voluntary foreclosure. It is fast challenging the efforts of the government to keep troubled borrowers in their homes. It is serious to walk away from a mortgage as it can erase 100 points from the person’s credit score. One becomes unqualified for a new mortgage for as long as 7 years.

Despite the gravity of taking such a move this is exactly what borrowers are doing. 588,000 borrowers took a walk from their homes in 2008 noted Oliver Wyman of Experian. Home prices are inching forward but it is insignificant compared to the fall it has endured since 2005.

Millions more are being thrown into the situation Sakson suffered. There is little chance of rebuilding of equity. If this walking away continues the housing recovery will become a remote hope. It will prompt lenders to further tighten credit and impact negatively on the entire economy.

Mark Zandy of Moody’s Economy.com said “It’s increasingly a more important factor driving the foreclosure crisis. As we move forward, the job market will stabilize, and the big thing will be strategic defaults. People are going to determin it doesn’t make financial sense to hold on to their homes. That’s going to be a significant problem. Strategic defaults mean foreclosures could be high for a long time.”

Sanjib Das the CEO of CitiMortgage observed that one out of every five borrows are defaulting intentionally. He said, “It’s a very large number, and it’s a very, very significant risk to the housing recovery.”

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The Middle-Class is now Being Affected by Foreclosures

Susan Pedersen — Wed, 18 Nov 2009 12:29:37 +0000

Today it is no longer the sub-prime mortgage borrowers who are the victims but the latest wave of foreclosures is attacking the middle-class – those who have lost their jobs. It is a reality knocking on the doors of many as the unemployment situation continues to worsen.

Previously unemployment used to last generally up to a maximum of 6.5 months. It is apprehended that before 2009 draws to a close 3.4 million houses will slide into foreclosure. In 2007 the number was 1.2 million according to RealtyTrac. Rick Sharga its senior vice president said, “We’re not out of the woods yet.”

Speaking about the various stages of the foreclosure storm Sharga said to Newsweek’s Nancy Cook that the first wave crashed because of defective loans. The second one is being driven by unemployment. At the moment the country is seeing the initial phase of the second wave. At this point none of the foreclosures are emanating from sub-prime mortgages.

It may also be noted that the demographics of this crisis is changing and blue collar as well as middling white collar workers are affected. The foreclosures are being placed on those properties that are of higher value than before. The unemployment rate is indicating the severity of the forthcoming foreclosure attack.

The third wave will attack those with ARM loans. In the latter the borrower had the option of deciding which mode of repayment schedule they would follow. Some were interest-only repayments. These loans are poised to go into default because of ridiculous initial rates. It will start making its presence felt from the middle of 2010 and continue till 2011.

The geography of foreclosure is also shifting. Till now the top states were Arizona, California, Florida and Nevada. It will remain so as the over construction had happened mostly in these states. The properties were overpriced and sold with the help of outrageous loans.

Today Michigan and Ohio foreclosures are increasing in numbers – these two states being devastated by unemployment. Ironically although foreclosures are continuing the housing market is showing signs of stability. If the financial entities manage these properties then this trend will continue till 2012 and there will not be any substantial fall in the real market.

But that does not mean construction will pick up. It had contributed largely to the generation of jobs. For a couple of years the housing market will not be healthy – the recession will have a tendency to linger.

From henceforth people will not rush into home ownership.

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Home Appraisal Codes Being Revamped so as to Avoid Rerun of Foreclosure Crisis

Susan Pedersen — Tue, 17 Nov 2009 12:53:43 +0000

Appraisal codes of houses have come in for sharp criticism. Plans are afoot to revamp the codes so as to avoid a rerun of the foreclosures crisis in the future.

The appraisal system had been imposed through the entire country by the jumbo mortgage giants – Fannie Mae and Freddie Mac in May this year. Many see that this is causing low valuation of properties and high fees for the consumer that is ultimately leading to stagnation in the housing sector.

With both the political parties agreeing on this point there is a slim hope that the change might be brought about. A bipartisan amendment was given the green signal on 22nd October by the House Financial Services Committee.

It was agreed that the Home Valuation Code of Conduct would be ended soon and replaced by a Consumer Financial Protection Agency.

By the amendment the director of the agency would replace the existing code with a better group of rules crafted by following regular administrative steps and allowing for public comments. This has been always followed by all the federal agencies.

In contrast the valuation code was reached because of a settlement between the Attorney General of New York, Andrew Cuomo, Fannie Mae and Freddie Mac together with Federal Housing Finance Agency.

Coumo decided to retreat from the investigations being done regarding the appraisal practices of Fannie Mae and Freddie Mac. The main purpose of the code was to see that the appraisers remained independent and were in no way influenced by loan officers, brokers and lenders. The latter group always wanted them to “hit the number” so that the mortgage funds got released even if it resulted in erroneous increase of the house value.

There is no second opinion about the appraiser being independent but the critics allege that the code fell over and generated problems of its own doing.

Protest petitions were singed by developers, realtors and consumers. The complaint was that the code has made it easy for lenders to make use of the appraisal-management firms. Some of the latter were owned or connected intimately by and with the lenders.

The firms started to pay the appraisers much less than the required fees but the buyers of homes and those who refinanced, had to pay much higher. In their defense the management firms contend that they add value to the equation by getting together a network of many appraisers, giving the assignments and managing all administration related matters.

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Lenders Seem to be Making more Money from Foreclosures than from Modifications

Susan Pedersen — Mon, 16 Nov 2009 12:00:38 +0000

It is becoming more and more apparent that lenders make more money from foreclosures than from mortgage loan modifications. Flipping on the television or radio there are innumerable ads of firms offering help in matters related to loan modification.

It is the same when one browses on the Internet. The snag is that it is difficult to know whether these firms will truly be able to be of help. A recent study has shown that the servicers rake in more money when a loan is foreclosed than when it is modified.

The servicers are the firms that collect the mortgage payments each month and send them to the investors. They have found that for them it is more profitable to foreclose even though loan modification might be a better financial option for the borrowers and lenders. This is the revelation of a report conducted by NCLC (National Consumer Law Center) – “Why Servicers Foreclose, When They Should Modify, and Other Puzzles of Servicer Behavior.”

Investors know that net profit is not only about return rate but also about how the expenses related with the investment are held down. Most of the borrowers are under the impression that foreclosures cause losses for lenders and investors. In a short sale the lender might endure a loss of about 10% to 20% of the investment.

But in a foreclosure the lenders will have to agree for 20 cents to 30 cents on the dollar. These calculations might indicate that the lenders and investors would lean more towards loan modifications. But the manner in which the system runs, there are different priorities for lenders, investors and mortgage servicers. They are compensated in different manners.

As per the findings of RealtTrac the third quarter registered the maximum number of foreclosures. Diane E. Thompson a lawyer with NCLC said, “The country is in the midst of a foreclosure crisis of unprecedented proportions. Millions of families have lost their homes, and millions more are expected to lose their homes in the next few years.” Thompson feels that fallen property values and increasing unemployment are pushing borrowers off the ledge. She argued, “With home values plummeting and layoffs common, homeowners are crumbling under the weight of mortgages that were at best only marginally affordable when made.”

Examining foreclosures from 1995 to 2009 it was noted that the servicers make more dollars by forbearance than by slicing off principal or reducing interest.

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Foreclosure Crisis Led to Recession Bringing Changes in American Capitalism

Susan Pedersen — Fri, 13 Nov 2009 13:19:07 +0000

It was primarily the foreclosure crisis and the housing sector that led to recession. This in turn will about changes in American capitalism. Already the impact can be seen in talks on banking reform, undoing globalization, wealth redistribution and rise of the public sector.

The Great Depression of the 30’s changed the trend of American capitalism. Similarly the Great Recession being experienced today has the potential to push the economy in another direction. The greatest pressure for change is being felt in the banking sector. Left and right have all closed ranks to raise a united cry for change by bringing about radical reforms.

Henry Kaufman a senior economist of Wall Street said that unless reforms are brought about the banks will be reduced to becoming “public utilities.” Kaufman can hardly be termed a leftist. In his latest book ‘The Road to Financial Reformation’ he has proposed that the jumbo financial entities should contract by getting rid of their assets. If not the 20 huge conglomerates will continue to remain too big to fail. This would make federal regulators would have a good reason to pamper them and have a positive hand in allocating credit to them. In 1990 these 20 giants were in control of 12% of the assets of the nation. Today they are in charge of 70%.

If these banking behemoths had not been saved in 2008 then there would have been mayhem and a depression. In a phone talk Kaufman said that with the fading of the intensity of the crisis, the will to bring about changes is also diminishing. Some however are keeping up the pressure on the politicians.

A recent study conducted by Service Employees International Union (SEIU), the largest union in the country, noted, “While ordinary Americans are still struggling to stay afloat, the bankers are back to business as usual, paying out billions in bonuses, making profits on the backs of taxpayers who bailed them out, and throwing out roadblocks to meaningful regulatory reform.”

According to the calculations of SEIU, the actual losses incurred by the taxpayer to bailout the banks amounts to $17.8 trillion. It is more than the annual GDP of America. This is making the union organize many demonstrations across the country to put pressure on the Congress to bring about meaningful reforms so that a rerun of this crisis does not take place.

Another change in the offing is de-globalization. Nations want more control over their own economy. Mark Weisbrot of Center for Economic and Policy Research dubbed it as “a return to sanity”.

Another effect will be greater equal distribution of wealth. From 2002 – 2007, 85% went to the top few comprising of 1%. But with reverses in stocks and property the trend is going back gear.

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Life Goes Flowing On Even After Foreclosure

Susan Pedersen — Thu, 12 Nov 2009 12:01:46 +0000

At the start of 2008 Jane Sullivan was still struggling to wipe the stains of foreclosure and bankruptcy and had no thought about purchasing a home again. In 2000 here ex-husband had decamped with all there was in her account while she was in hospital giving birth to her third child. In dire financial straits she could not manage her mortgage and the bank foreclosed on their house in Miami Lakes.

To survive, she needed somewhere to stay and be employed so as to bring up her children. But her tainted credit stood in the way.

With the escalation of foreclosure numbers in South Florida many are in the same boat as Sullivan. Together with their finances their emotions are in shreds. Even after a decade many cannot think of buying a house again.

Howard Dvorkin of Consolidated Credit Counseling Services of Fort Lauderdale said, “This is a traumatic experience if you have equity in your home, if you have children and you have to uproot them.” For many owning a house never happens again.

Sullivan however was made of sterner stuff and her resolution pushed her to through to achieve the impossible. In her mid fifties Sullivan said, “You do what you have to do to pay the bills. You’ve got to get yourself out.”

Sullivan could not afford a lawyer but took up her own case and declared bankruptcy in 2002. She persuaded the branch manager of Bank of America for a checking account and acquired two credit cards with limits up to $300. By paying them timely she improved her credit scores.

Hunting around for employment she got a job at Tools for Change in Miami. Her boss took the initiative to recommend Sullivan to a friend to let out to Sullivan an apartment. She remained a tenant for four years and never failed to make timely payments.

Following the devastation of Hurricane Wilma she trained herself at a non-profit centre about writing for grants and took up employment with Lauderhill City.

In 2007 she qualified to purchase a unit in ac affordable housing project. This was despite the stain of foreclosure on her card. Bank of America was satisfied with her explanation about being plagued by problems beyond her control in the past. But what really worked was her excellent record in never lagging behind in any dues thereafter.With a little bit of effort life can start flowing again even after foreclosure even if one does or does not buy another house

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Foreclosures and Unemployment Tries Out the Patience of Chicago

Susan Pedersen — Wed, 11 Nov 2009 11:24:28 +0000

Rampant foreclosures coupled with increasing unemployment have tried out the patience of Chicago. The cry is loud and clear – “Bust up the big banks” or “Too big to fail is too big to exist.”

These welcoming slogans are greeting the attendees participating in conferences of American Bankers Association. Generally these meetings are exclusive gatherings with seminars and talks on investment strategies. There are today frustrated young bankers who are hobnobbing with each other and hoping to curry contacts. Lobbying for legislation is usual on the agenda.

Recently as the ABA team conferred in Chicago the bankers were welcomed by thousands asking for their accountability. On Monday 26th October the city residents marched to Goldman Sachs’ offices demanding that the financial giant disburse the huge amount of $23 billion it has set aside for bonuses to the task of preventing foreclosures. On Tuesday thousands planned to send the message to the bankers that “enough is enough”.

Americans are justified in their anger. The crisis started from Wall Street when driven by personal greed the principal bankers divulged in a splurge of speculation that eventually led to the bursting of the bubble. This threatened the entire financial system and the ripples spilled over to engulf the entire world in a depression.

To repair the damage the then President Bush together with Federal Reserve chairperson Ben Bernanke and Hank Paulson (formerly of Goldman Sachs) made the Congress grant $750 billion to be given to the financial entities with the warning that if this was not done the situation would worsen. They reiterated that the money was for the banks to renew lending to the common man and thus allowing the wheels of the economy to run.

In reality behind this cover trillions from the taxpayer’s kitty has been granted to the financial sector without a nod from the Congress. The jumbo banks promptly put the money in their pockets directly. Indirectly the money flowed in as subsidies and guarantees. As a result these banks are surfacing from the crisis bigger, better and swollen with success. They are basking in the acknowledged dictum that they are too big to fail. Without wasting time they have gone back to their tricks of investing in risky speculation in derivatives. Huge amounts have been set aside for their own perks and bonuses.

Thus while Wall Street is swelling and soaring, the rest of the economy is once more floundering and drowning. It is time citizens took up the cudgel.

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Increase in Foreclosures has Led many Legal Personnel to Opt for Assistance Dealings

Susan Pedersen — Tue, 10 Nov 2009 12:54:23 +0000

The California Bar Journal has reported last August that there has been an increasing number of accusations against attorneys and legal firms offering help to homeowners in mortgage matters. After investigating 9 of these complaints that were made in 2008 the state bar is now scrutinizing 391 complaints involving 140 lawyers. What is the cause behind so many borrowers making allegations against so many attorneys?

Increase in foreclosures has led many legal personnel to opt for foreclosure assistance dealings. In many states loan mitigation firms are not allowed to take up-front fees from the defaulting borrowers. California is one of these states. But attorneys are permitted to take retainer fees that may run into thousands of dollars prior to doing any work for the borrower. This has made the foreclosure business a money churner and extremely luring for the corrupt.

A question arises about the fate of the legal personnel who had been behind the contracting of thousands of mortgages during the time of the housing boom. The title firms and the investors are not being seen nowadays. Many states are stipulating that the borrowers as well as the sellers are both represented by their lawyers. It seems that with the shutting down of one side of the business they have now entered the second phase by helping borrowers escape from the predatory loans that they themselves have created in the past.

At that time loans were forwarded that did not properly represent the borrowers. It was intentionally done. Sometimes the borrowers did not understand anything but relied on the agents. Lawyers who had been hired to ensure that the borrowers understood the contract did nothing about it but only collected hundreds and thousands at the time of closing. Their contribution towards making educated borrowers was practically nil.

The complaints made against these attorneys are identical to those made against loss mitigation firms. It is alleged that they have provided no services but collected initial fees. No refund has been made despite any work being shown. Positive harm was done by telling the borrowers not to contact the lenders. Sometimes the lawyers tried to directly take money out of the accounts of the borrowers.

It indicates that a good number of attorneys have entered into this business of loan modification with the sole purpose of misappropriating money from the heckled borrowers.

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There is a Huge Shortage of Lawyers Trained in Foreclosure Complexities

Susan Pedersen — Mon, 09 Nov 2009 12:02:45 +0000

Yolanda Paschal has just graduated form Miami University’s School of law. The house in which she grew up in Miami is battling foreclosure. She and her parents are lucky they have another house to go to. But the incident has made Paschal sit up to the severity of the foreclosure crisis.

Florida has the highest foreclosure rate in the country – 17%. She said, “I’m part of this community. I can’t escape how deeply this is affecting not just my neighbors, but me as well.” Her plans are to open a business dealing with business legalities. Meanwhile she will use her legal expertise to educate many in South Florida who are in the same boat.

She will make use of $10,000 ‘Foreclosure Defense Fellowship’ that she got from the law school. This novel grant plan has recently launched eight law graduates in October to help the locals steer through one of law’s most complex labyrinths – the foreclosure maze.

Although the help of Paschal and her colleagues are welcome – considering the staggering size of the problem, it is just a drop in the ocean. There is a huge shortage of foreclosure lawyers available for house owners.

Dissimilar to other legal fields like bankruptcy, foreclosure has never been so far the subject of a full time practice. It has generally been managed by real estate lawyers or agencies dealing with legal aid. But with over 3 million properties in foreclosure in USA in 2008 the scene has changed. This year another 150,000 is apprehended in comparison to less than 25,000 only three years previously.

Recently there has been an increase in modifications but according to National Consumer Law Center, based in Boston, the servicers are finding it more profitable to foreclose. To add to the confusion 86% of those facing foreclosure in the worst affected areas did not have legal representation in 2008 according to Brennan Center for Justice of NYU School of Law.

It is anticipated that these figures will attract more lawyers to show interest in foreclosure law even if it is a specialty for a short period. It should be able to motivate more attorneys to enter this field.

In the worst hit counties like Miami-Dade the bar associations are rising to the occasion by organizing foreclosure defense sessions for the local lawyers. The apprehension is that without such steps more people will be crushed under foreclosure and this will ultimately delay economic recovery and clogging of courts with foreclosure cases.

Foreclosure1.com provides new foreclosure listings everyday. Try to search foreclosures by state today!

Foreclosure News - Foreclosure1.com

Amidst Foreclosures, People hold Negotiations for Lower Mortgage Payment

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