We recently published a post about the government foreclosure review.  That review started yesterday.  The important thing to remember is that there is a deadline of April 30, 2012, for review requests.

Distressed homeowners who went through foreclosure in 2009 or 2010 may be affected.  There are 14 loan servicers, listed on the Office of the Controller of the Currency web site, who may not have followed proper legal procedures during the foreclosure process.

The loan servicers involved for this program include:

• America’s Servicing Co.
• Aurora Loan Services
• BAC Home Loans Servicing
• Bank of America
• Beneficial
• Chase
• Citibank
• CitiFinancial
• CitiMortgage
• Countrywide
• EMC
• EverBank/EverHome Mortgage Company
• Financial Freedom
• GMAC Mortgage
• HFC
• HSBC
• IndyMac Mortgage Services
• MetLife Bank
• National City Mortgage
• PNC Mortgage
• Sovereign Bank
• SunTrust Mortgage
• U.S. Bank
• Wachovia Mortgage
• Washington Mutual (WaMu)
• Wells Fargo Bank, N.A.
• Wilshire Credit Corporation

If you, or someone you know, lost your home to foreclosure during the specified period and one of the 14 loan servicers completed that foreclosure, you may have some money coming.

You may request an independent audit of your foreclosure at no cost to you.

If the independent audit determines that the foreclosure caused you financial harm due to loan servicer error, the government will order remediation (you get money back).

The important thing to remember is that a request for an independent audit DEADLINE IS APRIL 30, 2012.  The will not consider requests post marked after that date valid for this program.

We ask that you pass this information on to anyone you know who may have been harmed.  It is about time the little guy wins a round!

Select this link to review the full article and links for additional information:

http://www.occ.gov/news-issuances/news-releases/2011/nr-occ-2011-133.html

If you lost your home through foreclosure in 2009 or 2010 there may be a remedy waiting for you.  The Office of the Comptroller of the Currency (OCC) has ordered an independent review of foreclosures processed by GMAC Mortgage, HSBC Finance Corp., Sun Trust Mortgage and EMC Mortgage.

If one of these loan servicers processed your foreclosure, and you believe that you were financially harmed during their foreclosure process, you may have some cash coming! 

The government has determined that there may have been flaws in the foreclosure processing in some cases.  Homeowners/borrowers who feel that they were financially harmed may request an independent review.  If errors are found, the servicer will be required to compensate the borrowers for that financial injury.

Borrowers are eligible if:

• The home lost in foreclosure was the borrower’s primary residence
• The loan was at any step of the foreclosure process between January 1, 2009 and December 31, 2010
•  The loan was serviced by one of the organizations listed above
• The request for a review must be received by the independent reviewing authority by April 20, 1012. 

The review process is a free program, so there will be no charge to borrowers.

For more information, select this link:

http://www.federalreserve.gov/consumerinfo/independent-foreclosure-review.htm

This is the latest monthly report of a four-year study of bank owned home sales in El Dorado Hills, CA.  This report covers December 2011.

There were six bank owned homes sold in El Dorado Hills in December, down one from the previous month.  A low inventory is the primary reason.

The average days-on-market increased from 29 in November to 79 in December.  One of the homes had been on the market for over 100 days.  Some old inventory was cleared out.  None of the homes that sold had been on the market for two weeks or less, which is very unusual.

The six bank owned homes that sold represent only 8% of ALL homes sold in El Dorado Hills this month.  This is a much smaller segment than normal, despite the increase in inventory.

The available inventory of bank owned homes in El Dorado Hills spiked at a 2.4-month supply in December, the second highest inventory level in 2011…  The available inventory for ALL homes available dropped from a 2.9-month supply the previous month to a 2.2-month supply in December, the lowest inventory level in 2011.  Pundits advise that a 6-month supply is a neutral market, so we are still looking at a strong seller’s market for ALL homes in El Dorado Hills. 

The average cost-per-square-foot for Bank Owned homes was $ 150 in December, up considerably from $ 126 in the previous month, and the highest in the past fifteen months. The average cost-per-square-foot for ALL homes sold in El Dorado Hills in December remained $ 153 for the second month in a row.   

The overall sales price for bank owned homes was 94.9% of the final asking price and 87% of the original asking price.  Only one of the buyers paid the full asking price in December.  The banks did not do a very good job of estimating the market value of their “toxic Assets” that sold in December.

Bank owned homebuyers paid 98% of the cost-per-square-foot for their REO home when compared with the cost-per-square-foot for ALL homes sold in December.  That is only $ 3 pre-square-foot savings.  When applied to a 2500 square foot home that represents a savings of $ 7,500, much less than usual. 

If you have any questions about purchasing any home in El Dorado Hills, an El Dorado Hills Bank Owned Home, or a Bank Owned Home anywhere in the area, feel free to give us a call (916) 337-0658.

The data follows:

In the earlier posts in this series, we discussed the primary requirements a distressed homeowner must meet in order to obtain a short sale approval.  It might be helpful, at this juncture, to go into some detail with respect to the documentation that will be required if the bank before they will consider approving a short sale.  Borrowers contemplating a short sale should be aware of these document requirements.

As we indicated earlier, everything must be supported by documents that  will be used to verify the borrower’s claims. Therefore, one should take care that all of the information provided matches.

The first document that any bank will require is a written request for approval of a short sale. The bank has to know what you want to accomplish.  Second, is the borrower’s hardship letter, explaining in some detail the nature of the financial hardship that prevents that borrower from continuing to make their monthly payments.

The third document required will be the borrower’s authorization allowing the bank to speak to the borrowers Realtor©.  Without that signed authorization, the bank may not discuss your situation with your Realtor© or anyone else.

Almost every bank will require copies of the borrower’s tax returns as filed for the past two years.  The bank will require every single page and every single schedule filed with the IRS. They will match the data provided in the tax return with other documentation you will have to submit.  All W-2s and/or 1099s filed with the IRS must be included for the tax years involved.

The bank will also require documentation verifying all income streams, paycheck stubs, commission checks, documents reflecting bonus payments, tips or any other documentation pertaining to the borrower’s income.  If the borrower’s income comes from a business that they own, they will require copies of the books for that business.

The bank will require documentation reflecting all of the borrower’s liquid assets, checking accounts, savings accounts, money market funds, Christmas savings account funds and documents pertaining to stock, bond, mutual fund or other investment accounts.

They will also require documentation pertaining to non-liquid assets such as any other real estate owned, vehicles owned or leased or other major assets owned.

If, as frequently happens, the bank is slow in processing your short sale request, it may be necessary for you to provide more current documentation on your income or your assets. They always want the most up-to-date information.  In addition, the processors will not forward your file to a decision-maker unless all of the data is current. There is a no tolerance policy involved here. Space borrowers who are not diligent record keepers may find it necessary to contact their banks, investment companies to obtain the required documentation on that company’s letterhead. This process could take some time. It may be prudent to collect the documents in advance so that you do not delay the process of submitting your short sale package.

We reiterate that it is very important to select the right Realtor© to handle your short sale. A short sale package may exceed 110 pages of documentation when submitted to the bank. If it is inaccurate are incomplete, the bank will reject it.  Most distressed homeowners have not made their monthly mortgage payment for some time. Therefore, the foreclosure process has begun and time is of the essence. Delays on the part of the borrower only hinder their chances of success.

If you have any questions about the information covered in this post, or any of the previous posts in this series, feel free to give us a call at 916-337-0658. We will be happy to clarify any of the points made.

Stay tuned for more information on the subject.

The two huge government sponsored entities that own or control most of the mortgages in this country have announced a holiday eviction moratorium through January 2, 2012. 

The goal is to provide distressed homeowners who are about to be evicted a few days grace period.  Unfortunately, it is only a very short reprieve.  January 2^nd will be here very soon.  Let us hope that this will help some of these families at a very difficult time. Perhaps the extra few days will allow some to find better alternative placed to live as they struggle to get their lives back on track.

In recent months, there has been some positive momentum in the government’s Home Affordable Refinance Program (HARP), designed to help troubled homeowners refinance their home loans so that they can afford the monthly payments. 

In late October, the Obama administration announced a modification of that program, designating it HARP 2.  It applies to loans that purchased by Fannie Mae and Freddie Mac.  Those two government sponsored enterprises are now releasing the specifics of this new program.  The government hopes to simplify the program for both the distressed homeowner and the banks and loan servicers who are dealing with the defaulted loans.

By helping the banks and loan servicers, they will indirectly help the homeowner.  With that goal in mind, they are reducing or eliminating the risk-based fees Fannie and Freddie charge the loan originators for underwriting mistakes made when the loan was processed and originated.

They are also streamlining the underwriting process in an attempt to speed up the lending process.

Although many distressed homeowners will not qualify for this program, those who do will find it easier and cheaper to refinance.

Lenders will no be accepting loan applications until December 1, 2011, and will not be considering certain types of loans until March of 2012.

To Qualify:

•  The loan must have been sold to Fannie Mae or Freddie Mac on or before March 2009
• The loan balance must be more than 80% of the home’s market value
• There can be no late mortgage payments in the past six months and no more than one 30 day late payment in the past twelve months
• Loans refinanced under HARP 1 do not qualify

Some improvements over HARP 1 include:

•  Borrowers can refinance into a new fixed rate loan no matter how much they owe.  The HARP 1 program caps the loan amount at 125% of the home’s market value
• Borrowers can refinance into a new adjustable rate mortgage loan as long as the loan has a fixed rate for at least five years.  However, in this case the new loan has a cap of 105% of the home’s market value.
• The new program reduces or eliminates the fees Fannie Mae and Freddie Mac charge on loans based on risk (lower borrower credit score, higher loan to value ratio).  In the past, those fees could exceed 3% of the loan balance! Under HARP 2, the fees will be caped at .75% of some loans and will be zero on fixed rate loans with a term of 20 years or less.
• In most cases, the borrower will not have to pay for a new appraisal. Fannie Mae and Freddie Mac will use their automated in-house appraisal system
• In most cases borrowers will not have to meet a specific debt-to-income ratio or credit score level
• Borrowers who refinance with their existing lender will have reduced document requirements
• Second mortgages are permitted if the borrower qualifies

The government target is to refinance between one and two million loans through this program.

Qualified borrowers will benefit, but investors may suffer.  Since their investments are guaranteed, guaranteed payments may come with strings that require them to reinvest their proceeds at a lower interest rate.

For more information, select this link to the San Francisco Chronicle article:

http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2011/11/17/BUQM1M00BP.DTL&tsp=1&ao=2

A step by step process for distressed homeowners.

This is the seventh in a series of posts designed to be a step-by-step directory for distressed homeowners to use to try an avoid foreclosure.

We continue the discussion of various options that a distressed homeowner may have.  Some of these options only apply to homeowners in very specific situations and will not apply to most; however, if you meet the criteria you should take advantage of any opportunity that presents itself.

Bankruptcy

This option will stop the foreclosure for a period of time but may only delay the process.  Anyone considering this option should consult an attorney who specializes in Bankruptcy.  Be careful to select one who has a good reputation.  Call if you need a referral. 

There are several kinds of bankruptcy.  Chapter 7 Bankruptcy is a process to liquidate your assets.  Chapter 13 allows you to restructure your debt.  You may have 3 -5 years to catch up on your delinquent accounts.  

I major drawback is that you will find it difficult to sell your property during the bankruptcy process.  You will have to get the trustee’s approval to do so.  Also, if the homeowner is not able to make all of their payments after the bankruptcy the home will foreclose anyway.  All of the time and effort will have been wasted.

Note that a bankruptcy has an impact on your credit similar to that of a foreclosure.  Loan applications always ask in you have filed for bankruptcy, so there is a long lasting effect on your ability to buy on credit.

Short Sale

When a homeowner owes more on their home than it is worth and none of the other options listed in this and previous postings in this series do not apply, the Short Sale option may.  

In order to qualify for a Short Sale the homeowner must have a financial hardship that is acceptable to the lien holder.  Major loss of income, loss of a job, major medical, death in the family are some of the hardships that lien holder may accept.

As a result of the financial hardship, the homeowner must have a monthly short fall–more month than money.  

And Finally, the homeowner must be insolvent.  They can not have significant liquid assets that would allow them to pay their loan shortfall and expect the lien holder to forgive a portion of their loan commitment.

When a homeowner meets the lien holder criteria there is a strong possibility that a short sale will be approved.  The process takes time, a lot of documentation supporting the hardship, shortfall and insolvency; and a lot of work.  A majority of Realtors avoid short sales because of the amount of work involved and uncertainty that they will be approved.

There is also a strong possibility that the homeowner will owe taxes on the portion of the loan that is forgiven.  Not every attempt at a short sale is successful.  Each case is different and has to be examined in detail by a professional who specializes in helping homeowners avoid foreclosure. 

Those who do complete am approved short sale are able to purchase another home after two years.  The hit to their credit is not nearly as damaging as is a foreclosure or bankruptcy.  Loan applications do not ask if you have completed an approved short sale.  Long term this option is far superior to many of the others listed.   

The latest news is that most banks are now telling their borrowers in default that a short sale is their best option.  Of course, it is better and less costly for them than would be a foreclosure, but it is also much better for the borrower.

Here are links to a few web sites with helpful information for less specific situations:

                               http://portal.hud.gov/portal/page/portal/hud/topics/avoiding_foreclosure

                               http://www.ForeclosureStopper.ORG

                               http://www.CDPE.com

 Feel free to contact Mike West, Realtor, CDPE, if you have any questions or need help.

 (916) 337-0658              e-mail:   Mike@BMikeWest.com 

A step by step process for distressed homeowners.

This is the sixth in a series of posts designed to be a step-by-step directory for distressed homeowners to use to try an avoid foreclosure.

We continue the discussion of various options that a distressed homeowner may have.  Some of these options only apply to homeowners in very specific situations and will not apply to most; however, if you meet the criteria you should take advantage of any opportunity that presents itself.

Short-Refi

This is a relatively new option in which the lender may reduce either the principal on the loan and the monthly payment.  The qualification process is demanding and not all lenders will consider it.  It does show how far some lenders are willing to go to avoid foreclosure.  Make sure you have all of your documents in order and ready to submit.  Naturally, you will have to show on paper that you can meet the commitment on the new loan.

Deed-in-Lieu of Foreclosure

Known as a friendly foreclosure, in this option the borrower surrenders the deed to the property in exchange for a commitment from the lender not to pursue any further action against the borrower.  This usually only works when there is only one loan on the property.  If the owner has any equity in the property it is not a recommended course of action. 

The advantage to the lender is that they do not have to incur the cost of foreclosure.  Some lenders require that the borrower be up to date on their payments in order to qualify. 

Here are links to a few web sites with helpful information for less specific situations:

                               http://portal.hud.gov/portal/page/portal/hud/topics/avoiding_foreclosure

                               http://www.ForeclosureStopper.org

                               http://www.CDPE.com

In future posts we will discuss other options people may use to avoid foreclosure.  Those posts will be coming soon.

Feel free to contact Mike West, Realtor, CDPE if you have any questions or need help.

(916) 337-0658              e-mail:   Mike@BMikeWest.com 

A step by step process for distressed homeowners.

This is the fifth in a series of posts designed to be a step-by-step directory for distressed homeowners to use to try an avoid foreclosure.

We continue the discussion of various options that a distressed homeowner may have.  Some of these options only apply to homeowners in very specific situations and will not apply to most; however, if you meet the criteria you should take advantage of any opportunity that presents itself.

Refinance

This option may work if you can meet two critical criteria. First, you have to have sufficient equity in the property to be able to qualify for a refinance.  In this market that usually means at least ten percent of the current market value.  Lenders would like to see more.  Second, your credit can not have been too badly damaged.  Missed mortgage payments have a major impact on credit scores.

Few refinances result in a reduction in the monthly payment and/or a reduction in principal.  Even if you do meet the two primary requirements, unless you have a chunk of cash to contribute to reduce the principal, higher payments will be the most likely result.   

Also, unless the underlying hardship has been resolved, you may still have difficulty making the revised mortgage payment.    

Mortgage Modification

Homeowners who can prove that they can come close to affording their monthly mortgage payment may qualify for a loan modification.  Lenders are sometimes willing to change the terms of a loan if the modification will keep the loan producing.  The most common form of modification is an interest rate and payment reduction for a period of time, usually one to five years.  At the end of the adjusted period the terms revert back to those originally set.  Any short fall that the lender takes during the adjustment period is usually added to the principal. So in effect, the payments are reduced for a period of time and the term of the loan is extended to allow the borrower to repay the loan in full. 

There are very few instances in which the lender reduces the principal balance.  The borrower signed a commitment to pay the loan balance and the lender expects payment in full. 

Lenders are very cautious when considering loan modifications and will require extensive documentation as proof that the borrower will be able to meet the entire commitment of the modification.

A note of caution to those considering a loan modification.  Loan modification fraud is rampant in the marketplace.  Exercise great care before you pay any individual or organization to represent you in an attempt to modify your existent mortgage.  Those asking for payment in advance should be scrutinized even more carefully.  The California Department of Real Estate publishes a list of individuals and organizations that are suspected of fraudulent activities and the California State Bar has published a list of attorneys who have crossed the ethics line.  Dealing with individuals and organizations outside of California is even more dangerous.  The link to the HUD web site below should be helpful.

Here are links to a few web sites with helpful information for less specific situations:

                               http://portal.hud.gov/portal/page/portal/hud/topics/avoiding_foreclosure

                               http://www.ForeclosureStopper.org

                               http://www.CDPE.com

In future posts we will discuss other options people may use to avoid foreclosure.  Those posts will be coming soon.

Feel free to contact Mike West, Realtor, CDPE if you have any questions or need help.

(916) 337-0658              e-mail:   Mike@BMikeWest.com 

A step by step process for distressed homeowners.

This is the fourth in a series of posts designed to be a step-by-step directory for distressed homeowners to use to try an avoid foreclosure.

We continue the discussion of various options that a distressed homeowner may have.  Some of these options only apply to homeowners in very specific situations and will not apply to most; however, if you meet the criteria you should take advantage of any opportunity that presents itself.

Rent the Property

This is an option that will work if you can rent the property to a tenant who can meet their rental commitment long term.  The danger in an economy with over 10% unemployment and 26% underemployment is that the tenant can lose their job or take a pay cut in order to keep their job.  If that happens, the rent checks are likely to stop coming in while the mortgage payments are still due each month. 

Over 40% of home in foreclosure were not owner occupied, meaning that they were rentals or vacation properties.  When the rent checks stopped coming in the owners could not continue to make their payments and lost the property to foreclosure.  The F word has a major impact on their ability to buy anything on credit for seven to ten years.

The issue of cash flow is also important.  Not all homes will rent for enough to cover the mortgage, taxes, insurance and upkeep.  Many landlords try to cover the mortgage payment with rental income and have to cover some or all of the taxes, insurance and upkeep with income from other sources; a difficult thing for most of us to be able to do long term.    

Refinance

This option becomes increasingly more difficult as housing values decline.  A few years ago, when home prices were increasing in leaps and bounds 100% financing was easy to obtain.  Today, lenders want to see some equity in the property before they will even consider a loan.  Lenders want to see an 80% loan-to-value ratio; that is to say, that they will loan up to 80% of the current market value on a property if all other factors are acceptable.  Some will consider going up to 90% of current market value in rare circumstances, but they will charge higher interest rates.  It is the risk/reward issue.  The higher the risk, the greater the reward to the investor.

Unless you have an equity position of 20% or more given the present market value of your property, refinancing will be very difficult at best.

If your equity position is less than 10% it is not an option.

Here are links to a few web sites with helpful information for less specific situations:

                               http://portal.hud.gov/portal/page/portal/hud/topics/avoiding_foreclosure

                               http://www.ForeclosureStopper.org

                               http://www.CDPE.com

In future posts we will discuss other options people may use to avoid foreclosure.  Those posts will be coming soon.

Feel free to contact Mike West, Realtor, CDPE if you have any questions or need help.

(916) 337-0658              e-mail:   Mike@BMikeWest.com