Thursday, October 14, 2010
Robo signing and the foreclosure freeze
I double-dog dare you to watch a TV news show or spend more than 5 minutes on the web without hearing about the massive "robo-signing" foreclosure scandal that is rapidly encompassing the biggest banks in the country. Here are 4 things home buyers need to know about this breaking real estate news, and how it impacts them.
(Hint: I threw in a couple of bonus items at the end!)
1. What is robo-signing is, and what all the fuss is about? The phrase robo-signing refers to what we’re now realizing has been a very common practice in the banks’ foreclosure document processing divisions, where one person was essentially given the job of signing as many 10,000 foreclosure documents per month, by hand. These individuals were supposed to be reviewing the files, making sure grounds for foreclosure actually existed, signing the docs in front of notaries. But because of the volume of documents, what they actually did was just sign thousands of documents at a time, without even reading them, and ship them off somewhere else to be notarized.
If you do the math on an 8 hour workday, you'll see that that only gives the staffer 1.5 minute to review each file and documents to make sure the foreclosure is warranted. That's not humanly possible, which is how these staffers got the nickname “robo-signers”
Government regulators are very concerned that the banks may have been taking people's homes without following the proper legal procedures. As a result, 40 states' attorneys general are teaming up to launch a multi-state investigation, and the federal Comptroller of the Currency and federal attorney general may also get involved in investigating this issue.
2. Will the freeze will make the banks cancel buyer contracts on REO properties? Currently, the freeze impacts bank-owned properties that are owned and/or serviced by Ally Financial/GMAC Mortgage, JP Morgan Chase, and some properties that were owned by Bank of America. Generally, contracts to buy these homes are being put on hold and extended for 30 days. As well, the banks are often reaching out directly to buyers and offering them the option to cancel their contracts and recoup their deposit money.
3. Is it safe to buy a foreclosed home? There's lots of talk right now about the "clouds" that this scandal will create on the titles to homes that were foreclosed by the banks' foreclosure mills. And that makes sense: if the home wasn't properly foreclosed on in the first place, then the legitimacy of the bank's resale can be called into question. Normally, I'd say: Don't worry about it, buyer - that's why you'll get title insurance! But last week, 3 of America's largest title company insurers declared that they will not offer title insurance on a number of the homes that may have been involved in this scandal.
In the vast majority of cases – when the foreclosure was justified and a bona fide purchaser, someone who was not involved in the bank’s wrongdoing, has purchased the home, courts will not reverse these foreclosures or their sale to buyers. But if you’re in the market for a foreclosure, get clear on which bank owns the place as soon as you can, and run the property past your title insurer before you get too far into the transaction to make sure they can write a policy of title insurance on the property before you spend too much money on inspections and appraisals. (And see my Bonus Buyer Advice at the end of this blog post!)
4. How the foreclosure freeze will impact American home values, say after you buy. In the short term, these freezes might cause prices to stabilize, as we expect to see the supply of foreclosures for sale start to shrink. However, if these freezes stretch out for a long period of time, they could simply be delaying many inevitable foreclosures, which could delay the recovery of the housing market and home prices, over time. I wouldn't expect to see the freezes cause prices to drop much beyond where they are now, but if they stretch out, they could keep appreciation flat for a longer period of time.
P.S. - Bonus Buyer Advice from Tara: Don’t underestimate the deals you can get on non-foreclosed properties. You can often get just as good of a price on a better property with more flexibility on the seller’s part in terms of repairs and other negotiation points if you buy a home from an individual seller, as opposed to a bank-owned property.
Tuesday, October 12, 2010
How Much Can I Afford? - http://wp.me/p146tm-4q
How much mortgage money can I qualify to borrow?
This is typically the number one question mortgage professionals are asked by new clients.
Of critical importance when considering mortgage financing: There is sometimes a difference between what a client ***can*** borrow and what they ***should*** borrow.
In other words, what makes for a comfortable long-term mortgage payment?
The Quick Answer:
If we’re simply considering the financial math, lenders will calculate your Debt-to-Income Ratio and generally allow for 28-31% of your gross income to be used for the new house payment with up to 43% of your gross income to be used for all consumer related debts combined.
Monday, October 11, 2010
SNEAK PEAK…a short walk from Park Ave - http://wp.me/p146tm-3N
Tuesday, October 5, 2010
Vote No on 4
In the upcoming November 2 election, Florida voters will determine the passage of Amendment 4 to the Florida Constitution. This is a statewide “Vote on Everything” — which will have devastating impact on our state’s economy and quality of life — and would require citizens to decide hundreds of technical land-use planning issues at the ballot box.
A strong grassroots campaign against Amendment 4 has been launched by Floridians for Smarter Growth. I encourage you to carefully review the proposed amendment and this group’s opposition position. Concerns they’ve identified include tax increases for homeowners; significant loss of jobs; and a weaker economy. I am urging you to join with me and the Florida Association of Realtors to “Vote No on 4.”
“Fewer jobs, fewer services, and longer recession? Amendment 4 doesn’t make financial sense in many, many ways,” says Florida Realtors Vice President of Public Policy John Sebree. “Voters who understand Amendment 4 recognize the danger, unfortunately not everyone understands the consequences yet. The amendment says it’s impossible to estimate costs, but that’s because the trickle-down effect will impact restaurants, schools and more – potentially every business and family in the state.”
Should you decide to support a “No” vote — which is strictly voluntary — you can:
· Solicit a “No” vote from your sphere, explaining how it will otherwise have a devastating impact on their lives
· Add a “Vote No on 4” logo to your email signature line Vote “No” at the polls on November 2
For more information about Amendment 4 and the negative implications to Floridians, visit http://www.florida2010.org.
Best Regards,
Clark W. Toole, III
President
Coldwell Banker Residential Real Estate, Florida
Drama-Free RE: Top 10 Ways to Finance a Home Without All the Drama
When I hear talk of fixing an ARM, or adjustable rate mortgage, I envision a mortgage broker hammering away at a broken loan, then stepping aside for the reality-show style reveal -- the ugly duckling ARM is now a swan of a fixed rate mortgage! While not every ARM is broken or requires fixing, if you have an interest-only or negative-amortization ARM, your payments could go up (even double!) when the loan adjusts. Wash the ARM drama right out of your hair with a simple action plan:
Who ya' gonna call? Your lender! These days, lots of lenders are fixing their current borrowers' soon-to-adjust ARMs just on general principle -- it has begun to dawn on them that a skyrocketing payment makes it pretty likely your home will end up in foreclosure, which costs them money. Don't hesitate to call just because you have little or no equity. Some lenders see that as a good reason to fix your loan voluntarily, because you probably won't be able to refinance with another lender. If you've tried to call your lender before and got nowhere, try again. After April 2009, the stimulus plan will literally pay lenders who help on-time borrowers fix their loans and lower their monthly payments, so you might have a better chance then.
Refi-fo-fum. Don't assume that refinancing your ARM into a fixed rate mortgage is impossible because you're upside down and mortgage money is scarce. Though the headlines blast the bad news that 10 percent of homeowners are upside down, that means that 90 percent of homeowners do have some home equity. So long as you also have decent credit, you might find it easier to qualify for a refi than you think! Get in touch with your mortgage broker and have them refinance your ARM into a fixed-rate loan at today's uber-low interest rates.
Your legal last resort. Upside down and your lender won't help? If you are also late on your mortgage or your original deal violated predatory lending laws, you might be able to nudge your lender into modifying your ARM into a fixed-rate loan. Rather than tackle the task of distinguishing the loan modification consultant heroes from the zeros, hire a reputable attorney with a track record of success at negotiating mortgage mods.
