The Phoenix Area Foreclosure Experts

INSANITY - PART 2

by Craig

Well if you read part one then you know how insane banks can be. Here is yet another example of a tragically insane policy from a bank.

In a small city called Maricopa that is about 30 – 45 mins outside of Phoenix- a small community became a big one in a couple years.  The town quadrupled in home counts when there was no industry or jobs to speak of -- just cheap land that builders figured they could build on and sell since we were in a boom. Just build it and they will come.

Well you know the story… so now every builder has pulled out and subdivisions are left incomplete. Home owners are seeing their values sink because, without sustainable industry, why would anybody drive 30-45 mins outside the metropolitan area to live when they can now find extremely low priced homes in the Phoenix market on every block.

So one home owner decides to sell his home on a short sale – (short sale meaning that the home is sold for less or short than the amount needed to pay off the loan)  All you need is a willing buyer and seller and bank approval. The home owner had two loans on the home. 

To make numbers easy lets say the first mortgage was 225,000 and the second was 50,000.  Total = 275,000. Every home in that city is upside down. They found a buyer to pay 200,000.  So the buyer and seller agreed and sent it to the bank for approval.  The first mortgage holder said OK we agree to the price and we will pay the second mortgage holder 4,000 dollars from the 200K that we get.  Both the first and second lenders agreed so everybody seemed happy.
 
So here is where the insanity comes in  - the verbal approvals were given and all parties continued on to the closing. But the written approval from the second lien holder took a few weeks to arrive and when it did there was a very strange sentence.  It went something like this…”This approval is based on the seller being liable for the remainder of the loan amount”  Say what?

Let’s examine this…

• The second mortgage company is owed 50,000. They agree to accept 4,000.
• The first mortgage agrees in writing to give the second 4,000.
• The buyer and seller are willing to close at 200,000.
• So far everybody is happy and moving towards a closing. . .

• The buyer signed the docs and their lender funded the loan which means they wired the 200K!
• The seller can not sign unless he agrees to be liable for the remaining 46,000. 
• If the seller signs this he will owe 46,000.
• If the bank forecloses he will not owe the 46,000. What would you do?
• The second said they would not remove the wording and would accept the 4,000 only if the seller agrees to pay them back the remaining 46,000 as well and if not - - - then they will foreclose… (music cue / dun dun dun)

How insane is this – if the second mortgage company forecloses on this home and they are in SECOND lien position the home will be sold at auction or re listed and the money from the sale will go to …. The FIRST mortgage company!

That’s right if they sell it for 175 then the first mortgage company gets 175!  How much does the second mortgage get at that point – zilch – nada – zip – zero – nuttin' honey! 

So when a bank can take the 4,000 and move on, but instead threatens to either be paid ALL OR ELSE, they will foreclose.  If they foreclose they get nothing! That in my opinion is insane!

Our country needs liquidity right now – isn’t that the reason we had a 700 billion dollar bail out plan pass to give the banks liquidity? So here was 200,000 in the title company’s possession and within hours the first mortgage company would have been gotten 196K and the second would have gotten 4K – as of today they have nothing AND they are still sitting with non performing loans which costs them money every month on their books. ISN’T THAT A LIQUIDITY PROBLEM? 

What if they would take 50,000 more short sales and get 196K from each one of them wouldn’t that help banks liquidity? It would also remove 50,000 non producing notes off their books.  Common sense would tell you that banks would be better off with LESS non performing loans and MORE money in their accounts right?

When they start moving the short sales through the system with more sanity, then it would ease the liquidity crisis nationwide and reduce the number of foreclosures in the nation, reduce the non performing loans in the country, keep the housing prices from further sliding downward, stabilize the markets a bit more, create less credit problems for home owners, increase the number of homes coming off the market, increase the number of realtor commissions which would decrease the number of agents leaving the industry, increase more good loans, keep more lenders and title companies working… do I need to go on or do you get the picture?

Yes, you get the picture - - but the banks don’t.

Short Sale vs. Lender/Corp Approval in Listings

Here is a copy of an email all Relators received today. If all listings are handled correctly, there should be no problem keeping the foreclosure stats intact:

November 19, 2008

ARMLS has made some changes to the Special Listing Conditions field and has automatically updated any listings that would appear to be mis-categorized as a result of the redefinition of two options under that field.

Lender/Corp Approval is now Relo/Corp Approval.  It is to be used when approval by a Relocation/Corporate third party is required to go forward with escrow.

Short Sale Approval is to be used if approval is needed by a third party lender in order to go forward with escrow.

Some 4,750 Active, AWC, TOM and Pending Residential listings that indicated that they were short sales in one or both of the Remarks fields and had the Lender/Corp Approval in Special Listing Condition selected were changed by ARMLS to the correct selection of Short Sale Approval Required.  While we believe that all of the listings that we changed were in fact updated properly, if your listing was changed by ARMLS and it was not a short sale, we apologize.  Please contact us and we will manually change the listing to the proper category.

Builder confidence slips for multifamily market

Here is a summary of press release from the National Association of Homebuilders.

Builder confidence in the multifamily housing market sagged in the third quarter of 2008, pushing both the Multifamily Condo Market Index (MCMI) and the Multifamily Rental Market Index (MRMI) to their lowest levels since the National Association of Home Builders created the indexes in 2003.

“We have a serious supply/demand imbalance in the housing market, coupled with a weakening job market, and stringent credit market conditions, and that is negatively impacting the multifamily sector,” said David Seiders, NAHB’s Chief Economist.

The component of the MRMI that gauges supply was dramatically lower for both market-rate and affordable apartments, standing at 22.2 and 15.7 respectively for the third quarter. At the same time last year, the same component stood at 43.8 for market-rate and 44.3 for affordable apartments.

NAHB’s Multifamily Market Indexes are derived from a quarterly survey of multifamily builders and developers in which their responses are rated on a scale of 0 to 100, with a rating of 50 generally indicating that the number of positive responses is about the same as the number of negative responses.

Apartment builders are not optimistic about the next six months either—the component tracking expectations for supply for market-rate apartments fell from 47.1 in the third quarter of last year to 19.1 in the third quarter of this year.

Less multifamily units is good news for investors owning single family residences.

Insanity comes in many forms...

by Craig

You are going to read this and say "you've got to be kidding"

Well I'm not, so here goes. . . A home owner was wanting to do the right thing and continue to pay his mortgage even when there was not enough money coming in to pay all the bills! So he calls the lender holding his loan and says "can we talk about loan modification where we can reduce the rate or payments so as to avoid credit problems and also avoid foreclosure?"  The lender said that the loan modification dept would be able to help so he gets transfered to that dept. They tell him that they can NOT help him because he is NOT behind on his payments.  "Yes, correct" he explains and he would like to keep it that way and continue paying them on time if they could just modify the payments or rate.

NO - the loan modification dept will only work with you if you are behind in your payments. So the home owner -- after several calls -- decided that there was no help to be given in that dept unless he stopped making his payments ...which eventually happened. Two months past and he called them back.  He was "counseled" about his late payments history and was then told that the loan modification dept may be able to help him. So back with the loan modification dept. They said that they would consider him for modification if he would fill out a package of info including pay stubs, bank statements, income, and debts, credit report and (here's the insane part) he would also have to get his payments CURRENT before they could modify his loan. "you've got to be kidding"

Yes, you have to be past due in order to qualify for the loan modification (otherwise every American household would get a modification to a lower rate - that would not be fair)  then you have to be current before they will actually modify the loan.  Because if they are going to be so kind in helping you out the least you can do is get current on your loan payments. Makes perfect sense.

Is it possible that the POLICIES themselves are contributing to the downward spiral of the housing industry. Could it be that forcing people into NOT paying in order to help them  - - actually creates more foreclosures?

CitiMortgage seems to be trying to lead the pack with the possible moratorium on foreclosures along with Fannie and Freddie. However it sounds like the only people they are NOT going to foreclosure on are those who are currently NOT late but may be struggling. So much for the rest of the country who has already gone down this path. Here is a portion of a story that you can find on ABC news website at this link.

http://www.abcnews.go.com/Business/Economy/Story?id=6225660

Citi also announced that it will extend its moratorium on foreclosures on mortgages it owns. To qualify, a homeowner has to stay in the home, it has to be the principal residence, the homeowner must work in good faith with Citi and have enough income to pay a more affordable mortgage payment. Citi says it has already saved 370,000 customers from foreclosure in the past two years through this program. They believe extending the foreclosure moratorium will help an additional 50,000 families avoid foreclosure.

Citi owns nearly $200 billion in mortgages and the 500,000 homeowners it plans to contact represent about $50-55 billion.

You can google this article and do your own research and come to your own conclusions if it is good or bad etc... but let's all agree that banks who tell you to get behind in your payments so they can help you  - then tell you to get current so they can help you is ...are need of a straight jackets.

Tempe has recycling day

This is not a foreclosure post (disclaimer).

I attended the recycling event advertised by the city of Tempe. There seemed to be a lot of participation, as there was a steady stream of cars pulling into the parking lot while I was there.

I was excited to get rid of about 20 pounds of tax records and real estate records.  As you know, tax records must be kept for seven years.  Real estate records must be kept for five years.  This was my opportunity to purge ... and I did!

As I was driving to the event I tried to imagine how many shredders they would have and how many people would be operating them.  I was quite surprised to see the monstrosity pictured below.
Boxes upon boxes were loaded on to the conveyor belt. The cutting blades in this machine must be quite large and sharp to handle such a volume of paper.  It made lots of noise, but the end result was shredded paper all bundled up in tidy little squares.  I was not the only person who found this machine fascinating, as about 20 people stood by and watched it operate well after their documents had been shredded.  I'm going to start saving my documents for the next event.

 

 

Picture Sunday

Sunday's are days of relaxation, meditation, family, gratitude, and worship (if you are so inclined). I like to share my favorite photos on Sundays. I hope you enjoy this one. It was taken from my driveway looking at the rising sun. Two things impressed me about this photo: the contrast between the blazing sun and the blue sky, and the three rings around the sun as seen through the lens of the camera.

Glendale joins ranks of cities with homes selling under $100 per square foot

It's now official.  Glendale, Arizona has produced two consecutive months with home sales averaging under $100 per square foot. September 2008 sales averaged $96 per square foot.  October 2008 sales averaged $93 per square foot.

The city of Queen Creek and the Town of Maricopa have been under $100 per square foot for well over one year.

Care to guess which city is next? Phoenix averaged $114 per square foot in August 2008, $106 per square foot in September 2008 and $100 per square foot in October 2008.

(This information was obtained from the Arizona Regional Multiple Listing Service).

Short sales, bankruptcy and deficiencies

by Georgi

A ‘short sale’ is when a home is sold for less than owed to the bank.  With the current deflating home market, rising unemployment and the rising cost of living more people are faced with difficult decisions regarding their finances.  In attempts to minimize the damage to their credit or in hopes of buying another home in a few years, more and more people are deciding to do a short sale of their home.

Many of my customers have been living off of their credit cards and personal lines of credit to pay living expenses and the mortgage until they have no remaining credit.  In addition to short selling their homes many are also considering filing for bankruptcy.  Be aware that banks will not process your short sale during a bankruptcy!  I have customers waiting to file for bankruptcy until after their short sale has been completed.  Unfortunately, several customers have filed for bankruptcy during the short sale process and the banks closed the file and denied the short sale.  Please seek legal advice before beginning a short sale to make sure you understand possible deficiency or tax ramifications.  I can recommend several reputable bankruptcy and real estate attorneys.  Shop for your attorneys, beware of attorneys who require a large up front fee and remember to listen to your instincts even when choosing an attorney. 

Arizona is an “Anti Deficiency State”, meaning when a property is located on less than 2 1/2 acres and has 2 units or less then goes to foreclosure, the bank cannot collect the  loss  from the owner.  If the person losing the home damages the home or removes cabinets, lighting, an A/C unit or any attached items they lose the “Anti Defiency Protection” and can be obligated to repay the entire loss taken by the bank.

Once the bank approves your short sale they will send an approval letter outlining their terms. This letter should be reviewed by an attorney to determine if any future liability to the seller is present.  Some sellers will accept liability and often this can be negotiated.  I have seen a bank accept a $10,000 note at 0% interest for 20 years as payment in full for a $150,000 loss. Last week I had a bank remove the deficiency verbiage after I requested they issue us a new approval with no future liability to the seller.

Many realtors with little or no experience are performing short sales. Unfortunately navigating the banking system is an art of its own.  We can assist your realtor is facilitating your short sale with the bank and greatly increase your chances for avoiding foreclosure. 

Georgi Stratton
georgi@reliablepropertysolutions.com
Phone 480-695-6565
Fax 480-699-8853 

Glendale and Queen Creek first cities to top 60% foreclosure sales

The number of foreclosure type sales has been steadily increasing over the last 20 months in the metro Phoenix area. 51.4% of all sales were foreclosure type properties.

Glendale and Queen Creek were the first cities to top 60% foreclosure sales in the Valley. At 60.7%, Queen Creek edged out Glendale for this unfortunate honor.  Glendale weighed in at 60.5%. 

Were you wondering about the Town of Maricopa?  59% of all its sales were foreclosure type properties.  At 20.3%, Tempe has one of the lowest percentages of foreclosure type sales.

For a more complete report for 10 Valley cities, visit ValleyWideHomes.com.

Mesa homes for sale jump 29%; Phoenix jumps 31%

You can see by the column on the right that the active listings in Mesa and Phoenix have been fairly stable over the last year. However, there was a 29% increase in active listings from the beginning of October 2008 to the  beginning of November 2008 in Mesa and a 31% increase in Phoenix. These are the two largest increases in any city in the Valley over the last year.

What are the possible causes? Take your pick: the economy, rising foreclosures, and the election.

Source: Arizona Regional multiple listing service November 2008