Mortgage Rescue Cafe - Foreclosure Blog

Changes in the Air...

Mon, 08 Mar 2010 20:04:36 EST

Pretty soon, all the rumors and speculation is going to turn into something you can get your hands on. It's about time. Hardly anyone is getting a loan modification. Some people are getting loan mods offered that don't do much. Lots are getting the runaround.

As all this goes on with no resolution, more and more defaulting borrowers are balancing why big banks seem to get bailed out and regular people don't. Its not that the situation makes them angry--it does, but it makes us all angry--it's that the ethics of the whole arrangement are being reevaluated.

More and more people aren't seeing a lot wrong with stiffing their lenders. And lenders and regulators need to pay attention. Where once it was seen that paying your mortgage was a moral and ewthical obligation, that's becoming less so.

In a news item a couple of days ago, it was reported that Barney Franks is meeting with lenders to "do something" about second mortgages in default. Many defaulting borrowers don't just have a first, they have seconds (or HELOC's) as well. The lenders on the seconds are holding up short sales and other foreclosure avoidance.

So, the thing that has to break, IMO, is that principal balances are going to have to get written off. Seconds are a part of this discussion. It's the only way to incentivize people to pay their mortgages.

Distressed Properties Everywhere...

Tue, 02 Mar 2010 19:43:49 EST

I've been driving through some of Portland's high end neighborhoods lately. One of my favorites, Dunthorpe, struck me for some differences.

I'd been through weeks before and was struck by the number of homes listed for sale. Didn't used to be many. Some are listed as short sales. But this latest drive-through, I noticed that some of the For Sale signs had been replaced by For Rent signs. The time-on-market in high-end homes is long--one to two years.

I caught part of an interview on Bloomberg News. The interviewee (didn't get who it was) was complaining about the unreliability of FICO scores. It seems as though the mortgage defaults are happening more and more to people with very high FICO scores. If FICO was supposed to assess risk, this guy said, it wasn't working.

Is this opinion tied to what I'm seeing in high end Portland neighborhoods?

Job Loss Causing Late Mortage Payments? ...

Fri, 26 Feb 2010 00:29:05 EST

In what seems ironic to Yours Truly, the Mortgage Bankers Association (MBA) is suggesting a loan forbearance plan for delinquent borrowers who have lost their jobs. Under the proposal, lenders would cut mortgage payments of unemployed borrowers for up to nine months.

It's being called the "Bridge to HAMP." The hope is that during the nine months, these borrowers might find a new job and get themselves on the path to getting whole again. Under HAMP( Homes Affordable Modification Program), loan modifications can be provided to borrowers who have nine months of unemployment benefits. Critics say that's not enough, and with the job outlook the way it is, 10 million to 12 million more homes could enter the foreclosure process.

Okay, there's more to this, and anything that will really help people sounds good to me. The money for these extended benefits would come from TARP funding, which is, well, funded by taxpayers. To me, what looks like a good idea is just one more way for the government to bail out lenders, who got in a mess because of their bad decisions.

And more: I'm not dead set against bailing out lenders. It stinks, but if we have to toss them a lifeline to keep us all afloat, ok, I'm on board with that.

But the time has got to come when lenders man up and eat their losses. "Bridge to HAMP" may be an okay idea, but it would be nice to see these people offer some quid pro quo.

Just sayin".

Our Purpose...

Mon, 22 Feb 2010 23:59:57 EST

Lofty title, but this website has been getting three or four times the number of hits in the last few days than usual.

Are foreclosures up? Yeah, they are (rather, notices of default are up). More people trying to get loan modifications? More people getting frustrated over the process of lenders losing the paperwork, not calling back, putting borrowers through voice mail hell as well as HUGE waits?

People wondering about deed-in-lieu?

I don't know, but know this: We're about foreclosure avoidance. We don't take you to short sale, we don't charge you upfront for loan modifications, we don't do anything pre-determined. Your circumstances are unique to you.

Information first. Action next.

And don't let anyone take you where you're not comfortable going.

Does Foreclosure Avoidance Help?...

Mon, 22 Feb 2010 14:10:14 EST

Loan modifications, short sales, deed-in-lieu programs can indeed help many people avoid foreclosure.

The reality, though, is that the loan modification programs aren't really working for most people. Most short sales don't close. HAMP's new deed-in-lieu (see earlier posts) sounds really promising to me, but it's way too soon to tell.

Foreclosures are up. The year 2008 saw about 2.5 milion nationally, and RealtyTrac expects 2009 to come in at 2.8 million to 3 million. Forecasts go up dramatically from here, with the number expected to hit 5 million at the end of 2011 before reversing the trend. And they're hitting people with high FICO scores.

What happens if someone does nothing?

If you can do something, do it. Foreclosure is a horrible thing (see the video), and people need to do their best to avoid it. But what if they do all they can and nothing works?

Well, at that point, their credit is probably already trashed. Foreclosure happens to people for a reason--someone lost a job, a medical emergency happened, both of these and a lot of other emergencies--and they are where they are. Some people need to consider staying in their homes and letting the chips fall where they may.

In Oregon, foreclosure takes 120 days between the filing of a Notice of Default and the public auction. In most instances, lenders have been waiting for months before filing the Notice. If someone has done all that s/he can do, why not just stay in the home and wait for the foreclosure guillotine to fall? People have to live someplace, and the law allows them to stay in the home until the auction. Why not stay put and save a little money to get back on their feet?

Just sayin'.

Foreclosure Predictions...

Wed, 17 Feb 2010 20:01:25 EST

Rick Sharga, President of Realty Trac, Inc., made the following prediction: Foreclosures for 2009 will be 2.8 million to 3 million households when all the numbers are in, up from 2.3 million in 2008.

2010 willlikely exceed 3.5 million. The trne will not reverse itself until 2011, and foreclosure activity won't settle back down to "normal" until 2013.

Short sales? He feels that lenders will increase granting short sales if the Treasury Dept. presses hard enough. But a big problem is the number of second loans, and lenders in first position will begin foreclosing in order to use the second as equity.

If the lender in first position forecloses, all junior liens are wiped out.If you have a $150,000 first mortgage and a $30,000 home equity line of credit (the second), and the first forecloses, the $30,000 second is wiped out. Sharga is saying that first lenders will, in essence, foreclose and sell at auction to get their money back, since the sales price will be reduced.

Happenings in State Law...

Tue, 16 Feb 2010 18:37:07 EST

Remember the last legislature's law designed to slow down the foreclosure rate? It required lenders to meet with defaulting borrowers and try to work something out before foreclosing. The text of an unrelated article in the Oregonian said it wasn't working.

Kinda too soon to tell, isn't it?

But while we're on the subject: The Mortgage Rescue Cafe is about foreclosure avoidance advice. A part of Terradigm Real Estate Consultancy LLC, we talk to defaulting borrowers about their options. The reason is because loss mitigation (foreclosure-related stuff) is Sanskrit to most people. When they get behind in their mortgage payments, they have questions, and all they hear is gobbledygook when they ask.

No, you do not have to do a short sale. Yes, you can do a short sale if you already have a Notice of Default.

Most foreclosures can be stayed while you work out something.

Yes, you can do a loan mod on your own, and for free. We will help you with the paperwork, if you want, but you don't need us.

We can talk about the new deed-in-lieu of foreclosure program (it would really help if guidelines were finalized, but hey--it's government work).

We're here to talk about foreclosures and short sales and all that stuff. It's just a part of what Terradigm does.

Citi Short Sale Plan Announced...

Thu, 11 Feb 2010 18:38:15 EST

If your mortgage lender is Citi and you're behind enough in your payments to consider short sale or just go into foreclosure, it's a good idea to wait.

News sources are reporting that Citi has come up with a plan to aid home owners, whereby they'll let borrowers stay in their homes for up to six months, as long as the borrower tenders the deed back to Citi.

This is a deed-in-lieu of foreclosure program.

Details need to come out, but if it'strue, Citi would be joining Fannie Mae and Freddie Mac with these kinds of programs (see earlier postings).

Sometimes, the Feds Listen...

Mon, 08 Feb 2010 17:38:47 EST

I written repeatedly about paying firms upfront for loan modifications. States, including Oregon, have done what they can. Now the Feds are getting into the act.

A few days ago, the Federal Trade Commission proposed a rule that would stop for-profit companies who work with lenders and servicers on behalf of homeowners to modify loans or avoid foreclosure from collecting payment until the services were actually provided. Other restrictions were also suggested.

This is already the rule in Oregon. Moreover, anyone offering foreclosure avoidance services have to provide a clear and unambiguous contract.

I'm proud to say that at the Mortgage Rescue Cafe, we have aleways done so. I believe Terradigm Real Estate Consultancy, who set up the Mortgage Rescue Cafe, is the only licensed brokerage offering foreclosure avoidance advice, by contract, in conjunction with its other real estate activity.

But do not pay upfront. Retainers we collect go into a trust account until the service is provided. No service, and the client gets his or her money back. Pretty simple.

We have said we won't do loan modifications, Well, we might in some circumstances, because so many people are having trouble with the paperwork their lenders or servicers are requiring...then lose...and ask for again...and lose...and so on.

Our Homes, Our Toyotas...

Thu, 04 Feb 2010 14:43:29 EST

I own a 2007 Toyota Camry Hybrid. Quite honestly, I’ve been waiting since Day One for it to assert its inner Shogun. Accelerating is the least of its problems. Of all the qualities my Camry Hybrid has, speed and agility aren’t among them.

I bought this particular car because I knew it would get heavy duty use. Real estate agents drive a lot. It’s roomy, so lots of people can pack in for a home tour. It gets great gas mileage. Most of all, though, I bought it because of Toyota’s reputation for quality.

So, what happens? My car is suddenly worth poop because of defects. Hybrid models are not on the recall list, but effectively, so what? My car’s value was trashed anyway because of the publicity.

What does this have to do with our houses? If you’re a home buyer or seller, take note.

Lots of people I know, including me, bought new homes from 2005 on because they wanted “new.” They didn’t want to worry about plumbing going out, windows and roofs leaking, siding going bleahh and all the other maintenance calamities that can occur with older homes. What did they get?

First, big time construction defects. I remain convinced that for most homes in Portland Metro built since 1998 or so, construction defects are either (a) repaired, or (b) undiscovered. The choice (c), Do Not Exist, is very rare. Many experts agree with me. So much for the quality of new.

Second, trashed house values. Thousands of people bought houses they couldn’t afford with mortgages that shouldn’t have been offered, the result being round after round of foreclosures and notices of default. A nosediving economy exacerbates the spiral, and here we are: Owning houses of dubious quality whose mortgages exceed the value, even though we did what we were “supposed to do.”

Just like my Toyota.

When my wife and I bought our rowhome in 2005, we weighed the advantages of buying with a big mortgage and putting our saved cash into securities, or buying a home with virtually no mortgage instead. We chose the latter. As it turned out, it didn’t matter that much, except we do have a house free and clear. Defects repaired, btw. But it’s worth less than we paid for it.

At times, I feel like the guy who lost his job and then his wife. His house burned down and his dog got hit by a car. In desperation, he looked skyward and beseeched God, saying, “Lord! Lord! What have I done to deserve all this?”

A voice boomed down from heavens. “I don’t know, there’s just something about you that pisses me off.”

Fortunately, Dog is my co-pilot. My spaniel is as happy as she ever was.