Foreclosure Repos Blog

New Owner has to Pay the Association for Empty Lots sitting in Foreclosure

neha — Tue, 09 Feb 2010 11:42:06 +0000

It was not unknown to Tom Beard that he would have to be current on his homeowner’s association payments when he moved with his family into Tivoli Village home in Orlando (East). But he never imagined that he would have to pay for the balance dues of empty homes sitting in the middle of foreclosures.

Beard complained that his dues have gone up by 15%. He is in his early forties and a high school teacher. He said, “The reason is that so many of the other homes are in arrears, those of us who are left have to carry the burden for the whole. It’s not right, and it’s not fair.”

Beard is not alone. Thousands of others are in the same boat in Florida. This is an unexpected fallout from the foreclosure crisis. Attorney Gary Poliakoff of South Florida said, “It’s a lot like getting stuck with the bar tab of a roomful of people you never met” He is a writer and his focus is community-association legalities.

He explained, “Most people don’t understand that if they buy a home or condominium in an association, they’re not just buying their home. They’re signing a contract that says they’ll be responsible for the upkeep of all the common property. It’s one of the biggest problems facing homeowners today — they’re being saddled with other people’s debts.”

Poliakoff argued that this problem is not only in Florida but is stretching right across the country. In Florida there are 5 million who reside in some type of residence that is under the control of associations.

Tivoli Village has nearly 185 town houses. The association collects funds for looking after the private roads, the pools, and security of the gates as well as insurance payment for common areas. Beard explained that costs are escalating because the only 50% are owners. The others are either vacant or put up for sale.

The dues of Tivoli Village have shot up from by $375. In 2009 it was annually $2,500 but in 2010 it is now $2,875 to make up for the shortfall. There are possibilities of further increases if more of the units are foreclosed.

Kyle Sanders of Hanover Capital Partners linked with Tivoli Village Homeowners Association declined to return calls seeking comments. But papers from a recent HOA conference indicate that the association is battling a budgetary shortfall of $170,000. Some units are vacant while some of the occupants have stopped paying their dues.

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Foreclosures leave a long Stain on Credit Scores but there are other Worries about Errors

neha — Mon, 08 Feb 2010 11:55:07 +0000

Lenders do no want to foreclosure because of expenses while borrowers fear it because of the stain it leaves on credit scores for many years to come. It is easy to oversee this fact and remain sanguine about the infallibility of credit scoring.

Blake Allison is proud of his unblemished credit history – it being more than 800. But he enrolled by paying a monthly fee in credit monitoring services so as to be alerted to changes. Thanks to this service he found that a tax lien had by mistake been tagged on to his credit noting. The District of Columbia’s tax office had reported that he had not paid property taxes. It took about twelve months for him to solve the mistake and erase the lien from his records.

Scott Stevenson has founded Eliminate ID Theft – it being a monitoring agency that gives protection to identity theft and credit noting. Some of the mistakes like wrongly spelt names do not impact on credit qualities but according to the estimate of Stevenson over 25% credit reports are sprinkled with errors that are serious enough to cause harm. It is really bad news if one is hunting around for a mortgage. He said, “Most credit reports contain errors.”

Todd Huettner of Huettner is a mortgage broker. He commented, “Inaccurate credit reports can easily cost you thousands in higher rates. “Recent real estate mortgage loan guidelines make errors even more costly when buying or refinancing a home.”

Thus it is imperative that prior to applying for a mortgage one should review the credit history and erase the errors as soon as possible. The first thing is to be on the alert. The president of Bills.com Bill Ewing suggests that his clients should peruse thoroughly their reports starting from the very basics to the finer points. The spelling of the names, aliases and suffixes like Jr. Sr. as well as the middle and maiden names should be scrutinized.

Next check the birth dates and social security number – these being very important if there is a relation sporting the same name. The address matter comes next with details of former and present address. Simple mistakes can come from Maple Street and Maple Avenue. But if the address cannot be recognized then it indicates theft of identity. The names of past and present employers also need to be checked.

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Record Unemployment and Foreclosures undermining Obama’s efforts to Bolster the Economy

neha — Fri, 05 Feb 2010 11:35:37 +0000

USA has been hit by the worst crisis since the Great Depression. Obama’s efforts to bolster the economy are being undermined by record unemployment and foreclosures.

The apprehension is that foreclosures will touch 3 million in 2010 – crossing its pervious record of 2.82 million of the previous year. It would offset an anticipated sale of 448,000 residential units. This average forecast has been made based on the predictions of National Association of Realtors, Mortgage Bankers Association and Fannie Mae.

The pestering thorn for Obama is the housing sector as he debuts into his second year of office. The government assistance measures are nearing their expiry dates. The latest data is showing a drop in sale of homes as the end of the tax credit approaches.

Mark Zandi of Moody’s said, “The housing market is still on life support, and if government measures are withdrawn too quickly it could sink it, taking the economy down with it. Households have such high debt loads, in addition to their mortgages, that any reduction in income, including a job loss, could trigger a foreclosure.”

Employers have slashed jobs by over 7 million in the previous two years – it being the biggest loss since the depression of the 30s. In 2010 the average unemployment figure would most probably hover around 10% according to estimates calculated by 59 economists whom Bloomberg surveyed. It would be the steepest annual rate noted in government records since 1948. In 2009 unemployment was 9.3% - it being the most in the past 26 years.

The HAMP measure initiated by the Obama government caused 66,465 permanent modifications at the close of last year. It compares badly with the goal of 4 million expected to be modified by the end of 2012. 1.16 million borrowers participated in the programme and the terms were modified either on a trial or permanent basis for 900,000 borrowers reported the Treasury Department on 15th January.

Speaking to the Congress on 27th January (State of the Union speech) the president said, “We’re working to lift the value of a family’s single largest investment – their home.”

If HAMP is to show noticeable results then the plan would have to be altered to accommodate reductions in the principal so as to offset the fall of value in the properties concerned, commented Karen Weaver of Deutsche Bank AG of New York as well as Laurie Goodman of Amherst Securities Group.

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Planned Defaulting to Escape Foreclosure Crisis

neha — Thu, 04 Feb 2010 11:55:41 +0000

About twelve months after the new US government revealed its new strategies to control foreclosures, the number of foreclosed homes have alarmingly increased. Last year an excess of two million foreclosures were filed and this is a 120% rise from the total number of foreclosures listed in 2008. A steady rise in delinquent loans is going to create a record.

There are various reasons for foreclosures. In most cases it is seen that the purchase made is an unwise one because they can’t afford to pay off the loans taken. The other vital reason is rising unemployment. There is yet another cause – a considerable number of people are intentionally walking away from paying their loans even though they do have the power to pay. They are called strategic defaulters.

It has been observed that almost one fourth of the total number of foreclosures is strategic defaulting. It is interesting to note that a good lot of academicians are advocating the strategic defaulting.

Strategy defaulting is the direct outcome of the drastic drop in the value of the properties by 30%. Paying for a foreclosed property is now meaningless because the price of the house is less than the loan. Therefore, it seems wiser to stop payment totally. The situation is so grim that at least one among every four borrowers is opting for strategy defaulting.

Suppose a borrower bought a flat at $585,000 for a three bedroom flat in 2006. For this he paid a monthly loan of $4,300 dollars. Within one year the market price rose and the cost of education for his children, food, taxes, medical expenditures and other expenses increased constraining his finances.

Along with the rising costs the price of the property dropped. The neighboring houses also lost their value. As a result the price for the flat became more less than loan amount. In such situations the only option is strategy defaulting. The only negative aspect is that the walking away from the promised payment is dishonorable.

The argument against strategically defaulting is much more straightforward: You promised to repay the loan when you took out the mortgage, and it’s your responsibility to do everything possible to honor that commitment. Avoiding the guilt and shame that can accompany a foreclosure is one of the top reasons why struggling homeowners don’t strategically default, White writes. On top of that, a foreclosure significantly damages one’s credit—making it difficult, if not impossible, to obtain a mortgage for years afterward.

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To tackle Foreclosure related problems Obama requires to Concentrate on Employment

neha — Wed, 03 Feb 2010 13:11:57 +0000

The time has come to survey the ruins of the crisis. Even supporters of Obama’s domestic policy do not need to cover up the bitterness with a coating of white paint. The victory of Republican Scott Brown has sent down ripples of shock waves. It highlights the anger of the voters.

Their anger is justified. Out of every six citizens one is sans a job or underemployed. One fourth of those with mortgages have gone underwater – the worth of the properties having fallen to less than the loan amount. Meanwhile foreclosures continue to knock. To add to the woes other debts are also piling up with many failing to pay bills thanks largely to the sharks – credit card firms. These are operated by the rapacious banks.

The latest polls show that Obama is still liked. But his job approval late is low and support for some of his domestic agendas is lower still. Only 36% are in favour of the health care reform bill that would not in any case be making through the Congress. In priority ranking the health reform bill has been pushed back to number four. The ones in front are spending by the government, national security and of course right on top is the concern for jobs.

If the much bruised administration of Obama is to recover anything this year and avoid a complete disappointment in coming November that would place the Republicans in control of the Congress it must concentrate on employment. It can get the 51 vote from the Senate majority.

Obama should tour the backstage and shake hands with the employers and workers showing his genuine concern. Only a noticeable drop in the unemployment rate would bring about some hope for the Democrats.

It may be recalled that during 1982 to 1984 the approval rating of Reagan showed a poor 44%. Once it even fell to 35% as unemployment hit an all time high since the Great Depression to 10.8%. It came about following huge tax cuts. Full speed recovery helped Reagan win a second term and this was followed by 60% of the people being on his side.

Generally voters vent their ire on incumbents. But although the Republicans are gleeful they have not yet come forward with proposals that are meaningful. Negativism ultimately will not deliver the goods. Brown won largely because of the dismal campaign by Democrat Martha Coakley and the entering of outsiders who were determined to destroy Obama.

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Federal Government measure to stem Foreclosures slowly Picking up

neha — Tue, 02 Feb 2010 11:00:14 +0000

The US economy is on a tailspin what with unemployment at its peak. As people lose jobs, even those with sound credit rating are faltering on mortgage payments. Hence, foreclosures have become common. The Federal government had come up with a foreclosure mitigation program as part of which loans of people are being modified, first on a temporary basis and then permanently.

The program started off on a slow pitch. Now the program has picked up pace. The US Treasury has now taken the pledge to improve the program further. It has promised to extend help to many people who have delinquent mortgages. Help has been extended to 853,696 borrowers whose loan payments have been reduced. In November, the number of people whose payments were reduced was much higher at 728,408. This was revealed by the Treasury department’s latest report.

About 25 per cent of those eligible, received loan modification in December. In November, the figure was lower at 24 per cent. The process is a marginal one, opines Washington-based mortgage industry consultant Howard Glaser. He said of course the program is helping the delinquent borrowers but in itself the program is not a very significant one. The country should brace itself for a tide of foreclosures and such program cannot stem the tide.

It may be pointed out that mortgage foreclosures had increased by 21 per cent last year. It had touched 2.8 million, according to data revealed by RealtyTrac. The firm observes that the figure would touch 3 million in 2010. The foreclosure rates would remain high in the next few years.

The Treasury’s assistant secretary, Michael Barr said that individual servicers have not delivered results. The Treasury would definitely make the plan more effective. He also said that a lot needs to be enacted to make it more effective. However, he did not reveal the plans. According to the latest report, the number of loans that were permanently modified increased to 66,465 in December from 31,382 in November-end. What has hampered the program is unemployment. The servicers also face bottlenecks and are unable to collect the monthly loan payments.

In fact, only 7 per cent of the loans have been modified on a permanent basis. The Treasury revealed that loans of another 46,056 people are awaiting permanent modification. These papers need borrower signatures and that would increase the percentage to 12 per cent. That would definitely be good news.

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Foreclosure Problems Aggravated by Rescue Efforts

neha — Mon, 01 Feb 2010 10:47:27 +0000

There is a general view that the $75 billion programme launched by the Obama government to prevent foreclosures is having the opposite effect of aggravating it. The programme was launched last February. It has lowered, on a trial basis, the mortgage payments of thousands but has not been able to give permanent relief to a sizeable many. Critics contend that the programme of making homes affordable raised false expectations among those who just could not afford it.

These hopes led the desperate borrows to send payments to the lenders in chasing a futile dream. They could have rather saved these precious dollars and shifted to cheaper residential homes.

Some borrowers, under the impression that these loan modifications would not carry any negative credit report tags, have seen their credit ratings scarred.

There are arguments that the programme has retarded economic upturn by delaying the process of cleansing. The latter may have been painful but it would have opened the eyes of all involved to the dangers of risk taking in the housing sector. This day is coming in any case but the programme just delayed and prolonged the pain and realization. If truth had been allowed to dawn earlier then money would have started to flow again through clean channels once more.

Kevin Katari of Watershed Asset Management said, “The choice we appear to be making is trying to modify our way out of this, which has the effect of lengthening the crisis. We have simply slowed the foreclosure pipeline, with people staying in houses they are ultimately not going to be able to afford anyway.”

According to Katari the banks have been taking advantage of temporary loan modification clause to avoid a clean and honest accounting of the losses they have incurred due to mortgages that are clogging their books. House prices would drop to affordable realistic rates only when the banks accept their losses and allow the market to absorb the surplus units hanging in a state of limbo. He argued, “Then the carpenters can go back to work. The roofers can go back to work, and we start building housing again. If this drips out over the next few years, that whole sector of the economy isn’t going to recover.”

The Treasury has not however admitted failure and says that the measure is running smoothly. Meg Reilly a spokesperson of the Treasury said, “The Treasury Department publicly maintains that its program is on track.” But backstage the officials are agreeing that a good number of borrowers just do not have the means to run even the modified mortgage payments.

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Treasury Gearing to add more Teeth to Foreclosure Prevention Programmes

neha — Fri, 29 Jan 2010 10:26:47 +0000

The Obama government is planning to give more teeth to its foreclosure prevention programme in the last week of January. Already $75 billion has been targeted for it. More latitude would be given regarding documentation requirements from the borrowers who are seeking assistant from this measure – HAMP. Financial executives have had meetings with treasury officials.

HAMP has widely been considered a failure. These changes are being brought about at a time when it is coming under sharp criticism for having failed to even come close to the target. Pressure is mounting for the government to pay less attention to the banks and do more for the families struggling with foreclosures and unemployment.

The help being extended will take into account that for a good number of borrowers their pay cheques have either vanished or gone down considerably. As such they are failing to be current in their mortgage payments. This was reported by insiders from the banking industry that chose to remain anonymous as they do not want to court the ill will of government officials.

The banking personnel said that the Treasury would be mulling over the new methods which might either be in the form of direct cash help or allowing further grace period to the borrowers letting them postpone their payments.

Experts opine that the changes that are being planned would in all probability make the mortgage firms put in more speed in lowering the payment schedules of defaulting borrowers. This would be done at the cost of dragging on the foreclosure mayhem. There is also the point that my removing stringent documentation requirement there is the danger of allowing people who could not afford their houses again run the risk of re-defaulting.

A mortgage consultant, Edward Pinto, who had once been chief credit officer of Fannie Mae (late 80s) said, “They are turning this from a legitimate program to try to save people who have the ability to hang on their homes into one that says, forget the willingness and ability to pay, let’s just postpone foreclosures.”

The Treasury officials were reluctant to divulge details. Michael Barr, the Assistant Secretary of the Treasury said, “We expect to issue guidance to servicers next week to expedite conversions of current trial modifications and provide guidance on documentation

While declining to provide details, the Treasury confirmed its plans to alter the program at a meeting next week with mortgage companies — servicers, in industry parlance. We are continually reviewing our housing plan to ensure that it promotes stability.”

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Walking away from Foreclosures seems to be the Best Relief for Troubled Borrowers

neha — Thu, 28 Jan 2010 11:05:09 +0000

Unable to get their principal on the house loans reduced, borrowers are finding it the best option to walk away from foreclosures. In most of the cases these borrowers have gone underwater with the equity on their houses having fallen below the due loan amount.

A newspaper of repute in South Florida reported on this trend following the update by the Treasury on the HAMP plan of the Obama government. The report said there has been an increase in the numbers getting relief through permanent modifications. But the numbers are far short from the scheduled target. Nevertheless it is saving many of the homeowners from the clutches of foreclosures in South Florida and in other places.

Only 26% counting to 17,280 permanent modifications have been completed across the nation. In some cases the principal has been reduced but in other cases it has been tagged on to the end of the long term end of the loan till December 2009.

HAMP has been the busiest in California and Florida. Illinois ranks third. Rashmi Airan-Pace is an attorney dealing with real estate said, “What motivation is there for a homeowner to pay a mortgage that is three times more than the property is worth?”

It is now an acknowledged fact that lenders are hunting up pleas to negate the idea of principal modification. This problem has been growing. The $75 billion HAMP plan to help the borrowers is appearing to fail mainly because of this factor. It has not been able to tackle the problem of underwater mortgages.

In South Florida including the counties of Palm Beach, Broward and Miami-Dade nearly 46% of the mortgages have gone upside down in the third quarter of 2009 according to Zillow.com. The fears about more borrowers walking away from foreclosures are not unfounded. Airan-Pace said, “Many homeowners feel that if they take a modification now, a decade down the road, they’ll still be coming to the closing table with money.”

The media and the government have been talking about the moral side of the issue. Since the borrowers have promised to pay back the loan it is ethically incorrect to walk away from the mortgages. But many lawyers are saying that it is unfair to talk about ethics to the borrowers when banks and big financial entities often dump loss making enterprises half way without incurring further trouble. Moreover the question of ethics was not raised when the unfair mortgages were peddled.

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Borrowers Complain that Lenders are not Observing Loan Modification Rules

neha — Tue, 26 Jan 2010 10:54:30 +0000

Many borrowers are complaining that the banks and lenders are not observing loan modification rules. One of them is Nathan Reynolds who has experience regarding the foreclosure prevention plans of the government. Since 1998 he has been operating in the Chicago region and since then he has endured the value of his own house and business fall. After succeeding in getting a trial loan modification from JPMorgan Chase he has been helping others to steer through the plan.

But after have run on the trial plan for seven months Chase abruptly told him that he was not qualified for the permanent status. Chase argued that his financial problems were only of a temporary nature. Chase drew this conclusion because Reynolds had expressed his optimism about the government measures to stem the tide of the housing market. This would have led to a boosting of his income.

Technically a loan servicer cannot take this as an excuse to deny loan modification as per the rules laid down by the Treasury. Apart from Reynolds, according to an investigation carried on ProPublica interviewing two other applicants, servicers have set up intentional hurdles to transgress the guidelines of the loan modification programme initiated by the Obama government. Housing advocates are seeing repeated instances of applications of borrowers being rejected or kept pending in the trial period for dubitable reason. Diane Thompson of the National Consumer Law Center said, “There’s a real resistance on the servicers’ part to making permanent modifications.”

The initial goal of the government was to help nearly 4 million owners of residential houses through this loan modification programme for which $75 billion had been set aside. Treasury has mandated increasing number of rules for the lenders and the servicers to reconsider the applications and permit modifications. The monthly dues towards mortgages should not exceed 31% of the income of the borrowers. The government has also come forward with incentives for both the borrowers and the lenders.

The servicers who have signed up for the programme comprise of 85% of the housing market. The borrowers first have to pass through a trial period before the payments can be reduced permanently. But the servicers have been tardy in converting thousands of trial modifications into permanent ones. Till November only 31,000 loans have been made permanent. It prompted Treasury to openly criticize the performance of the servicers. It wants these rules to become effective as soon as possible.

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Foreclosure Repos Blog

New Owner has to Pay the Association for Empty Lots sitting in Foreclosure

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