OREGON REAL ESTATE ROUND TABLE

Category: Foreclosure

  • Can Home Buyers Get Help When Still Making Their Payments?


    Must a Borrower Stop Paying in Order to Get Help?

    by Jack M. Guttentag

    Inman News

     

    “Is it true that mortgage servicers will not help borrowers who are in trouble until they stop making their payments? I am a home retention counselor, and I keep hearing from people referred to me that they have received no response from their servicer because they have not yet missed a payment. I would hate to advise people that they have to stop paying if they expect to get any help if it is not true.”

    There is certainly much truth to this because I have heard the same story from numerous people I have counseled, whose stories I have no reason to doubt. The most common thing I hear is that they were told by the servicer to come back when they were two payments behind.

    There are understandable reasons why borrowers who are delinquent on their payments receive more prompt consideration than those who are current. To the degree that servicers are faced with more requests for help than they can handle at one time, they have to set priorities. The number of borrowers in trouble has ballooned over the past year, outstripping the efforts of servicers to expand their capacity to deal with them.

    Setting Priorities

    A plausible way to set priorities is in terms of the degree of urgency of the problem. A borrower 60 days behind in his payment is closer to foreclosure, and if he is going to be saved, he needs faster action than a borrower who is current. So borrowers who are current get placed at the bottom of the list of borrowers requiring special treatment, if they are even placed on the list at all.

    This tendency is reinforced by the fear of free-riders. All borrowers would like to get a better deal on their mortgages, whether they have trouble making their current payments or not. If loans are being modified to help borrowers, some borrowers who are not in financial distress will try to take advantage of the situation by pretending that they are. But potential free-riders may not be willing to become delinquent because that would hurt their credit. By only considering modifications for borrowers who are already delinquent, the servicer reduces the number of potential free-riders.

    In addition, the practice of dealing only with borrowers who are delinquent keeps loans in good standing for longer periods. Consider the borrower who loses her job but has savings sufficient to cover the payments for some months. Investors would prefer that the borrower make the payment out of savings for as long as possible, since she might find another job during this period, avoiding the need for any modification of the mortgage.

    Moving Up on the List

    If I were a borrower with reduced income but with good prospects of recovery, I would make the payment out of savings, avoiding the hit to my credit. If I considered the prospects of recovery to be poor, however, I would stop paying and husband my savings. This would move me up on the servicer’s priority list for special treatment. While it also moves up the hit to my credit, that is something that would happen anyway as soon as my savings were exhausted.

    If I did not have a problem making the current payment but would have a problem dealing with an anticipated payment increase, I would handle it differently.

    First, I would determine exactly how large the payment increase would be. If the increase stemmed from an interest-only loan reaching the end of the interest-only period, the new payment could be found using any monthly payment calculator (including calculator 7a on my Web site) inputting a term equal to the remaining life of the loan. If the increase stemmed from an ARM (adjustable-rate mortgage) adjustment, the new payment wouldn’t be known exactly until a month or two before the adjustment, but an estimate based on the current value of the rate index would provide a good estimate.

    A Detailed Budget

    Step two is to develop a detailed budget which documents the point that the expected payment is not affordable. Use the form provided by Genworth to show your income, expenses, and assets.

    Submit your document to the servicer well in advance of the anticipated payment increase. There is no guarantee that it will lead to a contract modification before the payment increase materializes. However, it gives you a good shot to move up in the servicer’s queue by providing the concrete detailed information that servicers require. It also keeps you out of the hands of the modification hustlers who want to be paid upfront for doing what you can do yourself.

     

     

  • How Long Will it Be Before the Foreclosed Homeowner Feels Relief From the 700 Billion Dollar Bailout


    Not soon enough if ever. Let me explain.

    Bush announced that the first 250 billion dollar infusion is targeted for the banks. Which will take time to do and time to see if it works. Which will mean that the balance of the money will not be used (350 billion dollar) until the next president is inaugurated in January 2009.

    However, the Bush Administration has unveiled additional mortgage assistance for homeowners at risk of foreclosure. The HOPE for Homeowners program will refinance mortgages for borrowers who are having difficulty making their payments, but can afford a new loan insured by HUD’s Federal Housing Administration (FHA). There are a lot of issues to be dealt with, plus pre-qualifications needed by the homeowner, which means it will take time to be effective.

    So what is offered by both candidates and when will it start?

    Barack Obama proposed more immediate steps to heal the nation’s ailing economy, including a 90-day moratorium on home foreclosures at some banks. Obama proposed that banks participating in the federal bailout should temporarily postpone foreclosures for families making good-faith efforts to pay their mortgage.

    Sen. John McCain proposed a plan to help millions of people around the country facing foreclosure by ordering the Treasury secretary to purchase and renegotiate faulty home loans.

    The plan is aimed at homeowners who owe more than their houses are worth or who are otherwise in danger of foreclosure. The government would use Fannie Mae, Freddie Mac and private mortgage brokers to pay off the troubled loans and refinance the homeowners, making their payments more affordable.

    Again, this will take time and concerted effort by the powers to be to implement any program before relief is felt by the homeowner who is facing foreclosure or who is in foreclosure.

    The common thread above is TIME, no matter what you like or dislike about the government, the presidential candidates, or what is going on in Washington (D.C.).

    Bankers/ Lenders, realtors, real estate investors, and all scam artists want you to believe that you do not have enough time and, especially, they do not want you to know how the foreclosure process works.

    You are nothing more than a new profit center for them, and they only have their best interest at heart (not yours).

    I have a short video that will show you how scam artists work, and it may help you understand what not to do. Check it out: http://www.AvoidForeclosurePain.com/Now.htm

  • Help Us Save The Housing Industry


    Dear Reader,

     I wanted to make you aware of an important petition that is being circulated in support of a new plan to save the housing industry. It was developed by a mortgage industry insider and we, at the Originator Times, believe it’s the only current plan to restore faith in the housing market and create profitability within our industry once again.

    If you are sick of getting calls from potential customers you can’t help because they are upside down on their mortgages; tired of loan programs that are here today and gone tomorrow; frustrated with volatile rates and increasing credit score requirements; and angered by plans that bail out the wealthy and powerful and do nothing to fix the real problem then join mortgage industry veteran Scott Messina and the Originator Times in making our voices heard in Washington.  

    Now is the time to act!  Sign the petition to support Messina’s “Save the American Dream” plan – the only plan that solves the root of the housing problem and sets the wheels in motion for a 2009 refinance boom similar to 2003 levels. 

    Click here to sign the petition, or visit http://savetheamericandreamplan.com to read about the complete plan, or scroll down to read a summary, then forward this e-mail to everyone you know in the industry.

     

    Sincerely,

    Melissa Sike

    Editor  

    ***

    Save the American Dream Plan

     

    The banks on Wall Street got their bailout. Now, what about all of us in the housing industry and those who work on Main Street?   

    Were still hurting because the big Wall Street bailout did nothing to address the root cause of the housing crisis.   We need a real solution instead of a band-aid.  The Save the American Dream plan is the correct solution and it isn’t being heard in Washington because the people on Main Street – whom would be helped – aren’t donating millions of dollars to a particular political campaign, and therefore, have no economic representation in Washington.  For two reasons, it’s our responsibility as mortgage industry professionals to speak for those that have no voice and make Washington listen to the plan that will save struggling homeowners …and ourselves.  It’s our responsibility because we were a part of the problem (along with many others, including borrowers) and because we are the ones that have the industry knowledge and expertise to really do what needs to be done.  We are in a unique position here to really solve this crisis.  Click here to join us in support of the Save the American Dream plan .

    The Save the American Dream plan will empower those millions of Americans who because of foreclosure and financial chaos have been living out their worst nightmares and provide them with viable refinance options to wake up and restore their dream. 

    By providing millions of Americans with a refinance option as an alternative to foreclosure, we’ll in turn create a refinance boom within the industry. 

    The Save the American Dream plan will save Wall Street by lending Main Street a hand and will rescue the U.S. housing market in the process.

  • Portland Tribune: Mortgage losses mounting, Steve Law


    More area homeowners at risk as foreclosure proceedings double

     

    Uncle Sam is bailing out Wall Street wheeler-dealers who invested in home loans, but there’s no relief in sight for the homeowners on Main Street.

    On Southeast Main east of 144th Avenue, stretching from outer Southeast Portland into Gresham, 14 homeowners have been hit with foreclosure filings in the past year, plus scores more in nearby blocks.

    • Judy Myer pawned her wedding ring and stopped taking prescribed medicines in a futile bid to save her Southeast Main Street home of 18 years, after husband Mark Myer lost his job and his unemployment benefits expired.

    • Judy’s son, Steve, who lives down the street, got socked with foreclosure after his 7-year-old daughter required heart surgery. Steve took out a second mortgage to cover the medical bills, then fell behind on house payments after suffering an on-the-job injury.

    • Across the street from the Myers, Ron Zitzewitz just got a six-month notice to vacate his mother’s home – one month after she died. Zitzewitz, 51, isn’t old enough to assume his mother’s reversible mortgage, and can’t refinance the loan because he’s permanently disabled.

    Portland is no real-estate basket case like Las Vegas or Phoenix. But the national foreclosure crisis that initially spared Portland has arrived here in a big way, bringing more human suffering and dampening housing prices.

     

     

    Foreclosure forum

    Oregon’s presumed next attorney general, John Kroger, along with state lawmakers and community leaders, will host a town hall for people facing foreclosure or who think they were victimized by deceptive lending practices.

    The event, called There’s No Place Like Home, takes place 9 a.m. to 2 p.m. Saturday, Nov. 22, at Portland Community College’s Cascade campus, Moriarty Auditorium, at the corner of North Killingsworth Street and North Albina Avenue.

     

     

    The number of Multnomah County residents in jeopardy of losing their homes has nearly doubled in the last year, based on the number immersed in foreclosure proceedings. Over the spring and summer, 300 Multnomah County homeowners a month got slapped with foreclosure notices – topping the peak levels reached in the last recession of 2001-02.

    In August 2007, the Portland area had an enviable 332nd-highest foreclosure rating among the nation’s 383 metropolitan areas. But by August 2008, Portland jumped to 254th-highest, according to First American CoreLogic, which provides real estate data services.

    “There’s a shakeout right now, and we’re failing on all cylinders,” said Portland real estate economist Jerry Johnson.

    Portland took longer than most cities to emerge from the last recession and didn’t get as overbuilt as other markets, Johnson said.

    But Portland home prices kept rising during the last recession, he noted. If banks and besieged homeowners try to dump too many discounted properties, he said, “you could swamp the market and kill the guys who are OK.”

    Home prices are sliding in large swaths of the metro area, especially in overbuilt sectors such as Portland’s condo market and suburban Happy Valley. In early October, in the 97086 ZIP code that includes Happy Valley, there were 247 homeowners facing foreclosure on top of 95 homes seized by banks, according to VisionCore, a division of First American CoreLogic.

    Short sales drive down prices

    Many overburdened homeowners, anxious to avoid foreclosures that soil their credit ratings, are resorting to “short sales,” in which they sell quickly for less than their home loan if the lender agrees to accept the lower amount. Banks also are auctioning off seized homes to investors looking for sweet deals.

    Dumping all those distressed properties on the market, sometimes at fire-sale prices, is depressing home values for neighboring residences.

    In a half-block stretch of Liebe Street southeast of Holgate Boulevard and 118th Avenue, four homes went into foreclosure in recent months. Investor Mark Bordcosh snapped up one of them, a three-bedroom townhouse appraised at $217,000, and offered it in an auction, with a minimum bid of $137,500.

    “I’m basically getting the house at a discount and I’m selling it at a discount,” he said.

    All parts of the city are seeing some foreclosures, though they are less common on the west side and close-in east-side neighborhoods, according to VisionCore. Portland working-class neighborhoods, especially in North Portland and the outer east side, are getting more than their share, as residents lose jobs or get burned by escalating interest rates on subprime loans.

    Main Street doesn’t necessarily have the highest proportion of foreclosures. But it is representative of the outer east side – meaning it is seeing plenty of angst and misery.

    Adversity is magnified

    Southeast Main east of 144th Avenue, dotted with modest one-story homes and towering firs, has long been known as an affordable place to buy a home. But it’s no longer affordable to many longtime residents.

    Mark Myer, 57, who lost his computer tech job after his company was sold, doesn’t expect any of the $700 billion Wall Street bailout approved by Congress Oct. 3 will trickle down to his end of the food chain.

    “The people that are stomping on the individuals are the ones that got bailed out,” Myer said. “If they share and start helping out some people, fine. History shows they’ll just turn around and stomp on us again.”

    Myer landed part-time work, but said employers have been reluctant to hire him now that there’s a foreclosure on his record. That’s despite 22 years’ service in the Navy.

    Judy Myer stopped taking medicines a year ago for her anxiety attacks, high blood pressure and cholesterol. After two heart attacks, two back surgeries and anxiety problems, she’s not in good shape to work outside the home.

    “I don’t know what’s going to happen. It’s just scary,” she said. “We’ll never be able to go out and have dinner and a movie.”

    Her son, Steve, an automotive technician, was denied workers’ compensation benefits after his 2006 on-the-job injury. The injury was deemed connected to a pre-existing condition. He qualified for short-term disability payments, but that only covered 60 percent of his salary. It wasn’t enough to make full mortgage payments and pay his $10,000 hospital bill.

    When his home lender demanded full payments on his mortgage, Steve threw up his hands. “I pretty much said, ‘Come and get it, there’s nothing I can do.’ ” he said.

    The lender backed down and offered him a payment plan, Steve said. He was able to save the house for now, but said he’s still tapped financially.

    A few doors down from the Myers, Trinidad Monje’s former Main Street home sits vacant, months after going into foreclosure. Judy Myer said it’s been languishing on the market at least two years.

    Down Main Street near 148th Avenue, Maxsim “Max” Lysack said he was forced into foreclosure after his roommate died. He wound up doing a short sale – selling the home for less than his mortgage – in a deal worked out with the lender.

    “I buy it for $285,000, and I sell it for $250,000,” Lysack said.

    Ron Zitzewitz has lived on Main Street off and on since childhood. He doesn’t earn much from disability payments and income from a knife-sharpening business, and moved in with his mother.

    Under her reverse mortgage, the lender takes a greater stake in the home’s equity each month, in lieu of mortgage payments. Zitzewitz can’t qualify for a new loan to refinance the $160,000 his mother owed.

    The house should be worth about $225,000, he said. But Zitzewitz doubts he can sell it for anything close to that because the market is so sour.

    Zitzewitz got married a few months ago, but so far his wife has been unable to find work.

    “We’re going to have to find somewhere else to live.”

    stevelaw@portlandtribune.com