The Phoenix Area Foreclosure Experts

Metro Phoenix foreclosures -- real estate short sale listings continue to rise -- May 2009

Real estate short sale listings surpassed REO property listings (bank owned) for the first time in the Phoenix area real estate market. It appears more people are trying to avoid foreclosure and protect their credit rating as much as possible.

The chart shows 15,630 Metro Phoenix foreclosures to begin May 2009.   6,600 (42.2%) were REO property and 9,030 (57.8%) were real estate short sales. Although the total number of all Metro Phoenix foreclosures listed on the market dropped 4,326 from April 1,  short sales have been increasingly popular over the last 12 months.

Many realtors and potential buyers have tried to avoid real estate short sales over the last few years.  The reason: the excessively long time it takes to close a deal.  I've written about this many times on this blog, but the average time it can take to close a real estate short sale is between three to five months -- compared to 30 to 45 days for a normal sale.  There is no logic to this lengthy process, except to say lenders have been very busy handling the workload.  Also lengthening the process: various levels of lender management approvals, different opinions about property values, buyers and realtors not submitting all the forms required by the lenders, and different opinions about acceptable levels of losses on loan portfolios. 

Lenders claim to be working to shorten the process.  They are aware of the growing number of real estate short sales and are trying to manage their losses on the front-end -- as opposed to the back-end (the foreclosure process and trustee sale).

Common loan modification myths

 Federal Loan Modification Law Center spokesman,  Ralph Roberts, recently talked about the top myths concerning loan modification. He said many people  have  heard rumors which, sometimes, are perpetuated by passing them on to other people.   Here are the five myths he addresses:

1. "The bank wants me out of my house" -- Instead, banks make more money when you make monthly payments.  Going through the foreclosure process costs them lots of money to include: losing  the homeowners payments, attorney expenses, rehabbing the home, and selling expenses.
2.  "My credit score is so bad I won't qualify" --  Instead,  this is not a refinance.  Credit scores are not much of a factor in loan modifications.  The major factor in a loan modification  is your ability to make the payment.

3. "I am not late on my mortgage payments so I won't qualify" -- Instead, many lenders are now working out loan modifications with borrowers who are up-to-date on their payments.  This was true in the early days of loan modifications.  Some lenders required you to be at least 61 days delinquent.    However, lenders have had to change requirements to adapt to the market.

4. "I would be better off walking away or declaring bankruptcy then modifying my loan" -- Instead, you are better off to save your credit and  retain the chance to borrow money in the future.

5. " It's too late.  I have  already received a foreclosure notice" --  Instead, as long as you still reside in the home you may have time to work out a loan modification.  The sooner you take action, the more options you may have available.  Contacting the lender demonstrates a good-faith effort.

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.

Having Trouble Paying Your Mortgage Payments? 6 Things Your Lender May Do To Help.

by Tammy

With so many people having trouble making their mortgage payments, banks are staffing up in their "loss mitigation" or "loan modification" departments.  I have heard mixed stories recently about people who have tried to work directly with the lender -- some seem to be having success, some seem to only find more discouragement.

As we have said before, the most important thing if you see yourself having trouble making your mortgage payments is to talk to your lender first. 

When talking to your lender, here are a few of the ways that they could possibly help you if you are having trouble making your mortgage payments:

1. They could be willing to accept a partial monthly payment for a period of time and put the rest of the payment that you can't afford to pay into the principal balance of the loan.  Effectively, they will allow you to "tack on" money that you owe to the back of the loan.  This might be a good solution if you are experiencing a temporary situation such as job loss or a short-term illness or family situation.

2. They could allow you to "skip" a payment (or two?) and have the missed payment added into the total loan amount.  Again, this may be a solution if the financial problems that you are experiencing are temporary.

Short Sale – good! Foreclosure – bad!

On June 25, 2008 FannieMae introduced new policies defining the manual underwriting guidelines for borrowers with a credit history that includes a Deed in Lieu, Short Sale or Foreclosure. 

The new guidelines prevent a borrower from obtaining a FannieMae home loan for 5 years after a “Trustee Sale” (commonly known as a foreclosure). Without 10% down or a credit score of 680 or more a FannieMae home loan can not be obtained for 7 years.

If the home is given back to the bank with a bank approved “Deed in Lieu” a new FannieMae home loan can be obtained after 4 years. An owner can’t just send back the keys to the bank because the bank will generally foreclose upon the property anyway. In the industry this is now labeled “jingle mail” because mail “jingles” from the keys in the envelope. Deed in Lieu must be approved by the bank. Due to title and lien issues the bank usually does not take this option.

A “Short Sale” will allow a borrower to be a homeowner again much sooner. After a Short Sale a FannieMae home loan can be obtained after 2 years.

A “Short Sale” is a sale of your home for less than you owe to the bank. Short Sales are being approved by the bank every day, however they are complicated and often fail unless handled by a Professional Short Sale Transaction Manager. At Reliable Property Solutions we have been facilitating Short Sales for 6 years and have a 90+% success rate on foreclosure related sales.

Short selling while you are current on your mortgage is possible and we have one closing this month. This will minimize the damage to your credit score.

It is best to begin your Short Sale before you have missed your first payment, however they are very successful if you begin the process before the “Notice of Trustee Sale” has been filed (about 90 days after you quit paying your mortgage).

Our services are NO CHARGE TO THE SELLER. Our fee is paid by the listing agent or your bank and we do not get paid if your home goes into foreclosure. We require no upfront fees, however your cooperation is required. 

Let us work with your bank to facilitate your short sale now!

Call Georgi Stratton from Reliable Property Solutions

Direct: 480.695.6565, Fax: 480-699-8853, Email: georgi@reliablepropertysolutions.com

PROTECT YOUR CREDIT! Successful short sales are possible

by Georgi

Due to its’ complexity, many agents, buyers and sellers are afraid of a Short Sale. They can be successful when properly managed. FannieMae issued policies on June, 25, 2008 that can allow you to purchase a home 3 to 5 years sooner if you dispose of your property by short sale rather than by foreclosure.

A boatload of bad advice is being offered to people who are in trouble with their home loans. In order to cure some of the more common mistakes we offer the following observations:

1. In Arizona it is called a “Trustee Sale” (commonly referred to as a foreclosure) when the bank sells your home for non-payment.
2. You can short sale your home while you are current on your payments. Your credit report will show no late mortgage payments and after the sale they will report “Mortgage paid in full for less than agreed”.
3. It is best to call your bank and list your home before you quit making payments and move into foreclosure. The sooner we talk to the bank the better.
4. NEVER move out of your home or have your tenant move during the short sale or foreclosure process. The banks do not want the property vacant during the short sale process. Vacant properties can get vandalized.
5. Take good care of your home, it will allow it to sell quicker and keep your home out of foreclosure.
6. An agent can list their own home as long as they are not paid a commission.
7. The bank will not throw you out of your home until after they give you a 90 day notice in writing called a “Notice of Trustee sale”.
8. If you have a viable offer and someone working with the bank a “Trustee sale date” can be postponed.
9. “Buy and Bail” where you buy a new home, then go into foreclosure on your old home usually involves fraud that can be prosecuted with up to 3 years in jail. Agents and lenders who engineer “buy and bail” scams can be prosecuted for recommending this type of activity to their customers.
10. We will Professionally Transaction Manage your Short Sale for no cost to you. We are paid by the bank or the listing agent.

Prevent foreclosure – save your credit

Call Georgi Stratton from Reliable Property Solutions

Direct: 480.695.6565, Fax: 480-699-8853, Email: georgi@reliablepropertysolutions.com

Loan Modifications Covered By New York Times

by Tammy

Last week, I talked briefly about Loan Modifications and how they are helping people modify the terms of their loan who are in a situation where they cannot refinance for whatever reason.

Today there is a feature story in the New York Times talking about Loan Modifications and what is happening across America with lenders -- who is getting their loan modified, under what circumstances loans are being modified and a few specific cases of individuals who had their loans modified.

The featured company in the article is LoanSafe and it's CEO Moe Bedard.   According to the article, Mr. Bedard claims:

• His firm charges a flat fee to analyze loans and said that he has found problems in at least 80 percent of the 300 mortgages they have examined so far for clients.
• Among the problems found were notary problems, Truth-in-Lending-Act (TILA) violations and Real Estate Settlement Procedures Act (RESPA) violations.
• One common violation occurs when the interest rates or fees change between the time a borrower initially receives a cost estimate on the mortgage and when the borrower actually closes the loan.

According to Mr. Bedard:

"When presented with these findings, most lenders and servicers quickly agree to a loan modification and many of the deals that my firm has arranged have an initial interest rates in the 3 percent range."

I can't tell you how many times I have worked with someone who during the process said "the last time I worked with a mortgage person, they told my my rate would be 5% and when I got to the table, it was 6.5%!"

Does this sound familiar?  Was there something that "just wasnt' right" about your loan, but you needed to move in to your house, so you just signed the paperwork anyway?  If so -- let me know.  There may be people that I can put you in touch with who can help you.

Want To Refinance But Owe More Than Your House Is Worth? Behind On Your Mortgage Payments? Facing Foreclosure?

by Tammy

Generally speaking, if you are currently behind on your mortgage payments and currently owe more than  your house is worth, there are very few options.  You may find some relief from the FHA Secure program, but in reality, very few people are actually qualifying for this program.

You may be able to refinance if you are currently in an FHA loan -- you could do a FHA Streamline without an appraisal, but very few people are actually in FHA loans because they didn't become popular until recently.

So it is somewhat safe to say that if you are currently behind on your mortgage payments and currently owe more than your house is worth, there are very few options.

Combine that with today's article in the Arizona Republic that says Adjustable Rate Mortgage resets will peak in July and it paints a particularly grim picture.  Many people are currently in trouble.  Many more people will be in trouble soon.

What is going to happen?

Well, I can't say that it is going to be pretty... unemployment is rising, home values are falling (or at best, flat) and more and more people are facing serious problems with their mortgage.

Enter the concept of "Loan Modification". 

The idea of "loan modification" is not new -- it has been going on for years... IN SMALL NUMBERS. 

When a loan if "modified", the lender may do any number of things to make the mortgage more affordable for homeowners.  They may reduce the principal amount, reduce the interest rate, extend the term of the initial rate, or any number of other things.  Each situation is different and each lender handles loan modification differently.

The key to loan modification is communication with your current lender.  If you are having trouble making your mortgage payment, there has never been a better time to pick up the phone and talk to your lender than right now.

If your lender is non-responsive or you don't feel like it is worth doing, it may be helpful to get in touch with a legal firm who can represent you with your lender. 

This week, I met with a handful of companies who are having amazing success at helping homeowners get modifications to their loan terms so that they can stay in their homes and avoid all of the problems that foreclosure brings.

If you think that you are a candidate for a loan modification because you want to refinance but are currently behind on your payments and owe more than your house is worth, let me know -- I will be happy to put you in touch with the best in the business who can help you.

Behind On Your Mortgage? Want To Keep Your House? Follow These 5 Steps (Part 4)

by Tammy McHood

Step 5 – List Your House for Sale (Probably a Short Sale)
If you have done steps #1-4 and have not found a solution, it is time to be realistic and accept the fact that you are probably not going to be able to stay in your house forever when you are not making/can’t afford the payment. The best option at this point is to find a buyer for your house – even if the market value of your home is less than what you owe. If the market value of your home is less than what you currently owe on your home and you want to sell it, the best option is to list it as a “short sale” and you will want to be sure to find a Realtor who is experienced in doing short sales.

This person needs to negotiate on your behalf to have your lenders release some (or all) of your obligations so that you will be able to sell your home. Many Realtors avoid these kinds of transactions because they are difficult – so make sure you select someone with significant experience in this area.

If you end up in a short sale situation, be familiar with the tax implications involved in a short sale – this is something that your accountant can help you with.

Perhaps the most important point to consider no matter which step you are in during this process is to stay positive and solution-oriented. No matter if you are talking to your current lender, talking with other lenders about finding a different loan, talking to various other groups about foreclosure avoidance or listing your home for sale – you will have much more success in the process by focusing on the solution going forward and maintaining a positive attitude.

--Tammy

Other resources/articles on avoiding foreclosure:
Tips for avoiding foreclosure from HUD

Avoiding Foreclosure and Keeping Your Home – HUD

Behind On Your Mortgage? Want To Keep Your House? Follow These 5 Steps (Part 3)

by Tammy Mchood

Step 4 – Talk to a Housing Counselor.
If you have done step 1-3 and still haven’t found a solution, it is time to start exploring other options – and talking to a housing counselor is not a bad next step. Most FHA counselors are free or cost very little and a housing counselor can help you:

• Review your financial situation, determine what options are available to you, and negotiate with your lender
• Learn which of the various workout arrangements lenders consider makes the most sense for you and your family, based on your circumstances
• Call the lender with you or on your behalf to discuss a workout plan (I have heard of housing counselors having success where individuals did not)
• Protect you from future credit problems before you get too far behind on mortgage payments
• Give you information on services and programs in your area that provide financial, legal, medical or other assistance

You can find a HUD-approved housing counseling agency here.

It is important in this step to avoid foreclosure prevention companies. You don't need to pay fees for foreclosure prevention help-use that money to pay the mortgage instead. Many for-profit companies will contact you promising to negotiate with your lender. While these may be legitimate businesses, they will charge you a hefty fee (often two or three month's mortgage payment) for pretty much the same information and help that you can get at a HUD approved housing counselor – which will help you for free.

I'll finish this series tomorrow.
Tammy