Surviving The American Dream

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CNBC 2008 Financial Crisis in Review

The drop in home sales began in 2005 in the Sacramento area. We had seen rapid growth in housing demand and prices since the mid 90’s and a steep acceleration from 2000 through the fist half of 2005. What was not understood at the time was the housing market was funded by sub-prime products whose creators never expected them to last. Sub-prime loans with adjustable rates allowed investment banks to offload the Mortgage Backed Securities (MBS) and Collateralized Debt Obligations (CDO’s) before they would fail. The housing decline and subsequent growth in loan failures beginning in late 2005 wasn’t really apparent to the financial markets until 2008 when rates adjusted and people who never could afford a home ran out of money. This CNBC timeline does a nice job showing the unfolding of these events in press statements and news reports during September and October of 2008. I think it best to remember how vulnerable we are.  Read More →

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State of The Union:Obama Targets Mortgage Securitization Abuses

Obama Sets Sights on Mortgage Securitization Abuses President Obama announced a new task force during Tuesday’s State of the Union address focusing on Mortgage Origination and Securitization Abuses.  The unit will be co-chaired by New York Attorney General Eric Schneiderman and will focus on investigating the financial institutions responsible for the housing collapse. In the address Obama asked that federal prosecutors and Attorney’s General work together to expand the investigation. Things could get stressful on Wall St. “This new unit will hold accountable those who broke the law, speed assistance to homeowners and help turn the page on an era of recklessness that hurt so many Americans,” Obama said. In theory, this group will determine who broke the law, compensate victims and provide relief to homeowners.  while I remain skeptical about the about the ability to provide adequate compensation and relief to those harmed, I am encouraged that this is not being forgotten and wrongdoers could face consequences for their actions. Surviving The American Dream If you are not aware of the fraud and abuse of the housing market, check out my post at http://www.sacramentobill.com/0-home-page/2012/01/surviving-the-american-dream-is-it-ok-to-walk-away/ Sacramento housing has been extremely hard hit and local residents have suffered as much or more as any around the country.  What has been missing is any apparent interest by Washington to identify and address any wrongdoing.  That appears to be changing. This initiative is one that deserves our attention and support.  Read More →

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Short Sale Protection – Lender Recourse in Sacramento California

Short Sale Protection – Lender Recourse in Sacramento California Governor Brown has signed Senate Bill 458 (SB458) and effective immediately junior lien holders that agree to accept a short sale will not be able to pursue the borrower for additional payment (deficiency judgement) after the close of escrow.  Essentially, by approving the short sale, second loans will be considered to have been satisfied.  Earlier this year, underwater homeowners were given some protection from by SB 931 that provided this same protection on first loans. So, for now in California, if you can get your home sold and closed as a short sale, you can rest easy without fear of future deficiency judgments, litigation and further aggravation. However,  It remains to be seen if junior lien holders will agree to short sales or if they will demand higher payment amounts in order to approve short sales.  While this protection is great news providing protection for short sellers, it may have just made closing a short sale in California more difficult.  It is typical for second lenders get small payouts when they agree to a short sale, but often they will not include a full release or the borrower.  The borrower is still better accepting the short sale and taking the risk of the second lender pursuing a deficiency judgement if foreclosure is otherwise inevitable.  If the property were to foreclose the second lender have the opportunity to pursue a deficiency judgement anyhow. There has been a great deal of speculation about the future recourse on all these defaulting loans.  Will lenders, investors, insurance providers pursue deficiency judgements?  I have had bank negotiators argue it will never happen, but I suspect that guy will be long gone and no where to be found while the rest of us are getting served. The intent behind SB458 is of great benefit to struggling homeowners…hopefully it works as intended.  We will keep you posted here and at our Blog at SacramentoBill .  Read More →

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Mortgage Insurance ~ The devil hiding in your short sale details

If you are pursuing a short sale and have mortgage insurance on your loan, you may find an uncooperative partner looming in the shadows. Mortgage insurance providers are having to pay banks and investors for some portion of the loss if there is a short sale or foreclosure. But they also have the right to approve your short sale in the end. So just when you begin to think you are home free and the bank and investors are on board, the MI provider can demand a large cash settlement or that the borrower sign a note. It remains to be seen if MI providers have recourse or will pursue borrowers after foreclosure, but the threat gives them power in a negotiation with battle weary short sellers as they appear to approach the finish line. Find out if you have mortgage insurance early in the short sale process and ask questions from your lender contacts about likely requirements they may choose to impose in order to give you final approval on your short sale.  Read More →

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The Short Refi!! Like a Unicorn…Sounds Magical, But Elusive

An obvious solution for so many people would be a ‘Short Refinance’.  The ability to restructure a loan with a principal reduction to current market valuations.  Most home owners that short sell a property are simply escaping a high payment and negative equity position.  They don’t dislike the home or want to move.  Forcing owners to sell and leave really is only harming the home owner and the banks/investors even further by driving up transaction fees. Still, it is worth asking your lender about this solution.  Hopefully it will be something we see more of in the future.  Read More →

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Security Deposits after Foreclosure (California)

California law requires that property owners must return the tenant’s security within three weeks from the time the tenant vacates and document any deductions. When ownership is transferred to another, the former owner is required to either transfer the deposits to the new owner or return them to the tenant. But what happens when the property is foreclosed and the former owner that collected the security deposits is gone or even bankrupt? Under California Civil Code Section 1950.5, a successor owner is jointly liable with the former owner to retun the deposits once the tenant vacates. The idea is that the innocent tenant’s right to the deposit should be protected and that any disputes over this are between the current and prior owner, not then tenant. There is an ambiguity being argued by lenders that this obligation is extinguished by the foreclosure just as is the rental agreement itself. This may be held to be true where the post-foreclosure owner treats the rental agreement as extinguished. In that case, the tenant similarly has no obligation to pay the rent and so the situation may become a wash. But the result is reasonably different where the new owner treats the rental agreement as continuing and actually collects rent. There, most likely, the law will protect the tenant. Despite the above-stated ambiguity, all perties acquiring property through a foreclosure must anticipate that they will likely be liable for the tenat’s security deposit that was collected by the former owner. Further, they should make sure that they have a new rentail agreement signed by the tenant if the rental is to continue.  Read More →

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When can I buy again after foreclosure?

Our bank is unwilling to negotiate a short sale and we fully expect a foreclosure.  When can we expect to be considered for a home mortgage again? Answer: The waiting period to buy a home after a foreclosure has recently changed due to adjusted Fannie Mae guidelines. Buying after a foreclosure – 5 years up to 7 years Buying after a foreclosure with extenuating circumstances – 3 years up to 7 years Buying after a deed-in-lieu of foreclosure – 4 years up to 7 years Buying after a deed-in-lieu of foreclosure with extenuating circumstances – 2 years up to 7 years.  Read More →

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How does having two lenders affect a short sale?

Having a single loan makes for a simpler short sale than having two loans.  But, a second loan does not prevent short sales.  Read More →

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When Will My Home Be Worth What I Paid?

I bought in 2005 and paid $458,000.  Our home is now worth about $250,000..when should I expect to be back to even?  Read More →

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When Will I Be Able To Buy Another Home?

HUD, the Department of Housing and Urban Development, released a letter to lenders regarding borrower eligibility for a new Federal Housing Administration (FHA) mortgage after pursuing a short sale. New FHA Guidelines: FHA Guidance on Short Sales Borrowers are not eligible for a new FHA mortgage if they pursued a short sale agreement on his or her principal residence simply to take advantage of declining market conditions, and purchase, at a reduced price, a similar or superior property within a reasonable commuting distance. Reference:  For detailed information on converting existing principal residences into rental properties, see 4155.1 4.E.4.g Here is the exception: Guidance on Borrowers current at the time of Short Sale Borrowers are considered eligible for a new FHA-insured mortgage if they were current on their mortgage and other installment debts at the time of the short sale of their previously owned property, and the proceeds from the short sale serve as payment in full. If the homeowner didn’t miss a payment before the short sale and their overall credit history is favorable, they can conceptually buy immediately after a short sale using FHA financing. Guidance on Borrowers in default at the time of Short Sale  Borrowers in default on their mortgage at the time of the short sale are not eligible for a new FHA-insured mortgage for three years from the date of the pre-foreclosure sale.  Lenders may make exceptions to this rule under certain circumstances. In essence, you can use a new FHA-insured mortgage if you were current on your previous mortgage and other debts at the time of the short sale and if the proceeds from the short sale serve as payment in full. If a borrower executes a short sale while in default on their mortgage, they would not be eligible for a FHA-insured mortgage for three years from the date of the pre-foreclosure sale. Some lenders can make exceptions if the default was due to circumstances beyond the borrower’s... [Read more]

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Foreclosure – Is there any other way out of this?

 The property isn’t worth anywhere near what you paid and you struggle just to make the payments.  The fact is you will struggle for many more years just to end up where you started.  There comes a time for a homeowner to carefully assess the reality of their situation.  Read More →

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Short sale…is that the right decision for us?

  Right now, so many Sacramento area home owners are being faced with decisions…BIG decisions…on what to do with their real estate whether that be their homes or investments. One option, and probably the most confusing, is whether or not to short sale their property. Some of the areas hardest hit are Elk Grove homes, Natomas homes, Roseville homes…and in general Sacramento area homes. It’s not a simple yes/no question either…there are many steps to a short sale. So, how do you decide? The best answer I have for you is to read up, do your research, and talk to professionals. Here’s an article published by the National Association of Realtors that can be your starting point in your research. We are available to answer questions…or go to our website to get more information: BetterHomeLessMoney.com Navigating Short Sales: What to Do When the Sale Price Leaves You Short Bill Joyce, Better Home Less Money If you’re thinking of selling your home, and you expect that the total amount you owe on your mortgage will be greater than the selling price of your home, you may be facing a short sale. A short sale is one where the net proceeds from the sale won’t cover your total mortgage obligation and closing costs, and you don’t have other sources of money to cover the deficiency. A short sale is different from a foreclosure, which is when your lender takes title of your home through a lengthy legal process and then sells it. 1. Consider loan modification first. If you are thinking of selling your home because of financial difficulties and you anticipate a short sale, first contact your lender to see if it has any programs to help you stay in your home. Your lender may agree to a modification such as: Refinancing your loan at a lower interest rate Providing a different payment plan to help you get caught up Providing a forbearance period if your situation is temporary When a loan modification still isn’t enough... [Read more]

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