Bank Foreclosures Blog

Just as the end of the housing crisis is far from sight, a new crisis begins. Commercial establishments are now beginning to enter the foreclosure situation. Malls in Georgia and Michigan are among the first to experience these foreclosures. Next in line are hotels in California and Arizona.

Analysts say that numbers are expected to double by the end of 2009. Commercial mortgages are paid over a period of only five to ten years, unlike residential loans where payments are not due until thirty years. The bigger amounts are due at the latter years for commercial establishments, that translates to the next couple of months for those which paid little amount at the start of their loans.

The commercial crisis has big repercussions. With businesses giving in to foreclosure, operations would stop, employees would be unemployed, taxes from employment would go down, and budget for government services would eventually decrease.

Adding to the dilemma is that investors are no longer interested in acquiring commercial foreclosures. Hence, banks refuse to provide these corporations with refinancing options.

Also, some banks have already sold mortgages to investors over the past few years which brings the situation out of their control.

Even worse, one of the last pieces of hope for these foreclosure-threatened commercial establishments has vanished. The US was supposed to shell out part of the $700 billion financial guarantee to redeem unsound assets from banks.

A recent announcement by Treasury Secretary Henry Paulson, however, declares otherwise. He said that the government does not anymore plan to buy problematic investments.

At the moment, the only piece of hope remaining for these businesses is a stable economy. They should start to expand and earn the trust of investors once again. Otherwise, there will be no seeing to an end to these foreclosure cases any time soon.

There are possible ways to prevent foreclosure:

• Prioritize what is important. There is a big difference between a need and just a want.
• Consider selling things that have value like jewelries, insurance policies or 2nd car to have loans reinstated. An extra job would be a help, too.
• Never fail to get in touch with the lender if something goes wrong as they may do some arrangements for the borrower. House counselors can give borrowers some options and may let them postpone the loan temporarily or lessen the payments. Borrowers can dial 800-569-4287 for house counselors near their area. Be sure the counselors are approved by the U.S. Department of Housing and Urban Development.
• Be updated with payments. Know what the current loan amount is, the consequences of not paying on time, late charges, collection charges and lawyer’s fees. Be sure to write down the name of the person giving all the information.
• Find ways to avoid foreclosure. Refinancing, Property listing, a short sale or having a particular investor to buy the house are some options to consider. As a borrower, it is important to be aware of the terms and conditions made by the lender to avoid any problems. Agreements should also be in a written contract. Use registered mail when corresponding to legal issues.
• Be cautious when looking for different alternatives because plans and rates in mortgage change everyday.
• Talk to a lender about short sale, where a lender can buy the property to accept an offer that is less than the total amount owed just to pay off the house.
• Sell the house if all else fails, rather than having it foreclosed.
• Beware of scams where agencies convince people about helping them prevent foreclosure. The homeowner will be required to sign a contract, stating that the agency can take actions on his behalf. When signing any documents, be sure to read and understand everything. Get advice from a lawyer or house counselor if possible.

Critics are worrying that the new loan modification plan initiated by the Federal Housing Administration and major financial institutions may not be sufficient to help a big number of homeowners in danger of losing their homes to foreclosures.

They have pointed out several cases of borrowers in trouble who are seeking help from their mortgage companies but did not receive any. These homeowners, who are waiting for help in making their monthly payments, would lose all hope upon receiving a failure notice from the company.

According to experts, mortgage servicers are focused mostly on loan payments, including the management and distribution of these loans. They lack the manpower and skills to deal with defaults, much more to handle requests from homeowners facing foreclosures. This failure to assist homeowners in their time of need have sown the seeds of distrust that created an impediment for homeowners today to participate in a new program to address this critical issue of foreclosures.

Federal officials have recently announced a new program to prevent foreclosures. This new program is offered to loans handled by Fannie Mae and Freddie Mac, the two mortgage giants that were recently taken over by the government. This new program was modeled after a proposed plan from the Federal Insurance Deposit Corporation who has experienced success when they took over IndyMac Bank.

The said program is targeting homeowners who are delinquent for more than 90 days. Their loans will be restructured to trim down their mortgage payments down to 38 percent of their monthly incomes. This would make their payments more affordable and will come from a reduction of interest rates, extended loan terms or deferred payments. With easier and regular payments, foreclosures could finally be averted.

The Federal Housing Finance Authority urged mortgage servicers and securities investors to follow this new government program and make it a standard for the whole industry. However, critics say that in order to get full support from servicers, the government should make loan modifications from these programs mandatory.

CitiMortgage, the fourth biggest mortgage lender in the United States, has launched a payment program aimed at helping homeowners who are having difficulty meeting their mortgage payments avoid the threat of foreclosure.

The homeowners assistance program targets about 500,000 customers of CitiMortgage who are still able to pay their monthly mortgage payments on time but who resides in areas where unemployment rates are increasing and prices of homes are rising.

CitiMortgage Chief Executive Officer Sanjiv Das assures borrowers that the lender will help modify their loans before they miss any payments that may lead to foreclosure of their properties.

The said plan is patterned after the modification program of the FDIC IndyMac. The FDIC program adjusts mortgages for homeowners who are delinquent so that their payments will not be over 38 percent of their total income.

CitiMortgage’s program calls for modification of mortgages that are at-risk to 40 percent. The lender will also adjust loans by cutting the principal owned by homeowners, extending the loan term or lowering the interest rate.

The lender can also modify the monthly payment of borrowers to make it affordable by extending the mortgage loan up to 40 years and then lowering the interest rate to at least 1 percent for two years. This option will allow borrowers to avoid foreclosure.

This program will not be offered to borrowers who are already behind their mortgage payments. It is only for those who are at risk of defaulting on their payments because of circumstances, particularly job loss.

Meanwhile, CitiMortgage has announced that its moratorium on mortgage foreclosures is extended. To be eligible for the extension, homeowners have to stay in their homes which are their principal residence, must be financially capable of paying affordable mortgage payment and must have a good business relationship with the lender.

The lender believes that extending the moratorium will help about 50,000 families avoid losing their homes to foreclosure.

The U.S. Department of Housing and Urban Development’s Neighborhood Stabilization Program has allocated $3.9 billion for states that were affected by the nationwide housing crisis. Part of this federal housing rescue package was aimed for Michigan foreclosures, to help the state bounce back on its feet.

The financial crisis has caused a staggering increase in the number of foreclosures for sale in this state, caused by delinquencies in mortgage payments triggered by recession and unemployment.

From the overall state fund, $47 million went to the City of Detroit, which city officials reported will be used in demolishing abandoned and run-down structures in Detroit’s several neighborhoods that were hard-hit by foreclosures.

These communities were severely affected by the mortgage crisis, resulting to several communities and neighborhoods with abandoned houses left to deterioration and decay. This restructure program aims to uplift these neighborhoods and bring in new occupants for these homes.

On a plan submitted to the City Council’s Planning and Economic Development Committee, $8 out of the total $47 million will be used in the rehabilitation of identified foreclosed homes. Another $4 million was allocated in the construction of new houses.

Target neighborhoods would be those with the highest rate of foreclosed homes, and those in the verge of prolonged decline. Part of the program may include guidelines for acquisition by new occupants which will be part of the city’s rehabilitation process.

Nine neighborhoods were identified by the Planning and Economic Development Department, which includes five from former Mayor Kwame Kilpatrick’s Next Detroit Neighborhood Initiative. These neighborhoods, with the highest cases of foreclosures, were identified as Brightmoor, North End, Osborn, Grand River/Greenfield, East English Village, Herman Gardens, Kettering, North Central and Ryan.

This program would be an initial move in a nationwide drive to stem the flow of further default in mortgage payments by providing a more comprehensive housing program. Doing so would put the housing market back on its feet, which experts and economists say is crucial for the country’s turnaround from the current financial crisis.

Most often, people losing their properties to foreclosure failed to pay their homeowners association dues. Association dues are essential for keeping neighbourhoods safe and conducive to living.

Also, failure to pay association dues by some members forced their neighbours to spend more to pay for basic services in their neighbourhoods, such as garbage collection, insurance payment and snow clearing.

Some homeowners’ association board members deal with this budget short-fall caused by the foreclosure crisis by looking for cheaper insurance and postponing repairs and maintenance in their neighbourhoods.

It is likely that some homeowners associations will deplete their reserve accounts that they are supposed to use for major repair projects.

The increasing number of foreclosure homes has also affected home developers who control homeowners associations until housing projects have been completed. Home developers fund an association’s reserves until the project’s completion to keep dues low to attract homebuyers.

However, unpaid association dues have forced home developers to provide more funds to maintain an association’s reserve account. It is expected that when the crisis is over, homeowners associations will be faced with large deferred maintenance costs with low reserves to be used.

Pia Trigiani, head of Virginia’s New Common Interest Community Board, explains that board members usually allocate 4 percent of association funds for unpaid dues. However, with the increasing amount of unpaid dues, board members have been allocating up 10 percent of association funds, Trigiani adds.

Because of the instability of their finances brought about by foreclosures, some homeowners associations were not able to provide their financial disclosures on time to homebuyers which are required by law.

Under Virginia’s law, sellers or real estate agents are required to give potential homebuyers a financial disclosure report from the neighbourhood’s homeowners associations. Homebuyers have the option to study the financial report for three days and to cancel the deal if the association’s financial status failed to satisfy them.

One of the risks in real estate investments is landing on a mortgage fraud. There are several reputable mortgage providers around but lengthy documents become sources of misunderstandings and could even increase risk of foreclosure. Before signing, read first on the following advices of attorneys Jeff Hogue and Jonathan Kurniadi to get you protected:

1. Read all the pages of the document.
Never get pressured in signing the loan documents. Take your time to check on every detail of the document, even the most obvious ones. Simply missing an incorrectly printed street address can take you around a tiresome correction process.
You should be prepared to turn back when something feels uncomfortable. You do not have to feel that you need to sign the documents. Seek for housing counselors from non-profit agencies approved by HUD for some help in reviewing loan applications and documents.

2. Make sure that the original document and the duplicate have similar content before signing them. Do not forget to have your own copy.
If the copies that you receive are not the same, it is the original documents that obligate you and not the other copies.

3. Ascertain that all the information you provided in your loan document is all true. Falsification of information is not worth the risk if you simply want to get your loan approved.
Giving false information has no valid reason and may subject you to penalty. If a broker tells you to do such thing, then let him document it for you.

4. Do a license background check on your loan broker.
Take time for a background review of your broker and real estate agent before providing some personal information or signing loan documents. Find out if they have complaints or pending litigations.

5. Inquire about the earnings of your mortgage broker on your loan transactions.
This is often not disclosed but it is important to know this because their compensation may correspond to the interest rates that you have to pay on your loan.

Multiple offers are submitted to the bank for the purchase of its REOs, but the bank chooses only the best offer.
Experts share the following tips to help you make the best offer:
1. Know the Property History - Find out how much the bank has purchased the property on the Sheriff’s or Trustee’s Deed in a title company or in the tax rolls. Compare it with the price the bank asks for. Check the amount of loans secured. The bank accepts a price between the foreclosure sale price and the original mortgage balance.
2. Find out Comparable Sales - Look at the comparable sales for the last three months. Use only those houses that match the REO according to land area, number of bedrooms, toilets, etc. Check pending sales to know the accepted offer price. See the active listings because it is more likely used by buyers in formulating prices.
3. Analyze Agent’s REO Listings - Search for the listings’ history to determine the ratio of the list-price to the sales-price. If mostly sell for 5% over list price, then a good offer can be 6% over list price, or vice versa.
4. Know the Number of Offers - More offers mean you have to offer more than the asking price. No offers mean you have to offer less than the list price. Banks prefer all cash offers. In obtaining financing, you must increase your price offer.
5. Submit Letter of Pre-approval - Submit pre-approval letter from the lender owning the property together with the letters provided by your own lender to the bank.
6. Never Ask about Inspections/Repairs - If there are any problems with the house, do the negotiations after your offer is accepted.
7. Cut down the Inspection Period - It makes you seem to be a serious buyer.
8. Suggest to Split Fees - Consideration of the appraisal consequences is a must.

An increasing number of homes are becoming part of the foreclosures in Portland. This continuous rise of foreclosure homes has been the major cause of the decline in property prices. With the prices of residential property at a low, and some respite expected in the form of federal funds, people are now looking at buying homes again. For these home buyers, foreclosure homes become a more feasible option because of the discounts generally associated with them.

Foreclosed homes can sell as either HUD foreclosures or Bank foreclosed homes. While HUD foreclosure homes are sold by the Department of Housing and Urban Development, bank foreclosures are sold by lenders who would have foreclosed upon the homes.

A lender would generally begin foreclosure proceedings against a home owner when payments of the home mortgage have not been received continuously. The home is first put up for sale at an auction as part of the foreclosure proceedings. When a house does not sell at the auction, its deed/title is transferred to the lender.

Once the property is transferred to the lender it becomes a Real Estate Owned property (also commonly referred to as a REO property). Lenders/banks do employ the services of real estate agents/agencies to sell their foreclosed homes from time to time. However, approaching a lender to buy a foreclosed home is very acceptable.

Finding REO foreclosures in Portland has become quite easy, thanks to the internet. There are innumerable web sites that provide foreclosure listings, and Portland listings are part of all the prominent ones. You can have budget specific searches in specified zip codes.

Once you have made a short list of the houses that interest you, inspecting them is very important. Only upon inspection of these houses will you know of their condition. While some houses might be in close to perfect condition, others might not. Knowledge of the extent of repairs that would be needed should be essential in deciding a buying price.

Once the inspection is complete, you would negotiate the houses price with the lender. When the lender receives more than one offer for a foreclosed home, the home is usually sold to the highest offer (this decision lies with the bank though).

One thing that makes buying REO homes a safer option is that you normally do not have to worry about arrears linked to the home. After foreclosure, lenders normally take care of any unpaid taxes or secondary liens attached to the home.

With the large range of foreclosure homes in Portland, do take the time to go though as many options as you can before buying a house.

While federal relief is on its way, a large number of bank foreclosures in Boston are already for sale. More houses will soon be foreclosed upon, while many others are at risk of facing bank foreclosures. With some relief expected, increasing numbers of people are looking at buying bank foreclosed homes.

A lender/bank would foreclose on a house if the home owner is unable to make the mortgage payments on time. The home owner is first given time to try and take care of the default. The home owner, during this period, can choose to sell the home in order to take care of the default. After a home is foreclosed upon, it is first put up for sale at an auction, and if it does not manage to sell at the auction, it is then transferred to the lender.

A home owner would want to sell the home during pre foreclosure, because by doing this, the lender/bank can be paid back. If the lender is paid back during the pre foreclosure stage, foreclosure proceedings come to a halt. Many times, home owners end up accepting rather low offers for their homes, only because time is not on their side and they cannot wait for better offers to come by.

A home is put up for sale through a public auction after foreclosure. While auctions are know to produce some very good results for home buyers, thorough understanding of the process is required if you do wish to get yourself a good deal. This stage of buying bank foreclosure homes should ideally be left for the experienced home buyers.

After the home does not sell at the auction, its title is transferred to the lender who holds the mortgage on the home. Lenders are usually in a hurry to sell foreclosed homes because as long as a foreclosed property is with a lender, the lender has to incur regular costs for the up keep of the foreclosed property. Also, lenders are known to take care of the past arrears that might be linked to a foreclosed home. These could be secondary liens or unpaid taxes. Banks are known to offer substantial discounts while selling foreclosed homes.

Finding bank foreclosures is not hard. You can approach banks directly and they would give you lists of foreclosed homes they have on their inventory. They could also give you details of upcoming foreclosure auctions, and some banks even give lists of home owners in pre foreclosure. The internet is also a good source for finding bank foreclosure homes.

While buying homes during all phases of bank foreclosures are known to offer some good deals, you must make sure you have the property inspected (or inspect it yourself). You would not want a good deal turning bad later on.