Archive for 'Miscellaneous Foreclosures Articles'

Homebuilders have been struggling since the flood of foreclosed new homes began. After they were distressed by reports of large numbers of foreclosure filings in May, now they are further crushed by reports of the impending readjustment of adjustable mortgage loans, which will surely cause another large wave of foreclosures.

Bill Wheat, CEO of home builder D.R. Horton, said there is too much uncertainty in the home building industry because of the persistent foreclosure activity, the rising joblessness rate and other difficulties in the national economy.

Wheat expressed his expectation that the home building industry will continue to face challenges from foreclosed new homes for the rest of 2009 and the next year. He also mentioned the report that about 1 million adjustable-rate home loans will readjust in the next couple of years.

ARM readjustments are getting homeowners and others worried because the significantly higher monthly payments would certainly be beyond many borrowers’ financial capabilities, leading to more foreclosed new homes.

Richard Dugas, CEO of Pulte Homes, said the demand side of the home building market is being hit by lack of buyers with approved loans and that the supply side of the market is battered by oversupply. Aside from large inventories of unsold new homes, the supply of foreclosed new homes that are much lower priced is adding to the oversupply problem in the home construction industry.

To compete with foreclosed new homes, some builders have been offering incentives such as free upgrades and buy-downs on home loans.

Douglas Yearley, top executive at luxury home builder Toll Brothers, added that banks have made restrictions on their home lending activities, rejecting many applicants for mortgage loans and reducing the number of persons able to buy new homes.

Yearley predicted that about 50 percent of small and middle-sized home builders may have to close because of the current hardship. If the recession continues, home builders with high levels of debt will not be able to refinance and pay off their loans. Foreclosures on multifamily building projects have been increasing in recent weeks.

New-home sales have remained weak in 2009, as seen in home sales data.

This week, home builder Lennar Corp. released its report showing a quarterly loss, but it was encouraged by the optimism showed by investors who supported the stock because of improvements in its balance sheet.

These home building executives recognize the effects of foreclosed new homes on their operations, but they keep on finding ways to survive and ride out the recession.

The real estate industry experts were given a ray of hope that the housing market may be bottoming when April 2009 market data showed a slight increase in the construction activity at single-family homes despite a jump also in the number of bank foreclosed home.

However, with the continuous rise in the number of unsold properties, the unabated spread of foreclosure and the falling home prices, experts do not expect an immediate housing market recovery.

According to the U.S. Department of Commerce, construction of apartments and new homes declined 12.8 percent in April to an annual seasonally adjusted rate of 458.000 units. The numbers were the lowest in the construction activity record. Furthermore, new building permit applications also declined 3.3 percent to year-over-year rate of 494,000, still the lowest data on the record.

The biggest decline in building permit applications and construction activity last month was seen in the multifamily sector. On the other hand, single-family permit applications and construction both increased, indicating that this sector of the house construction is starting to get back on its feet and on its way to stability.

Despite the continuous increase in foreclosures in the country, single-family house construction performed a 2.8 percent jump, reflecting a yearly rate of 368,000 construction. In March, construction activity at the single-family home level showed a gain of 0.3 percent, but figures remained unchanged in February.

BMO Capita Markets economist Benjamin Reitzes said that the overall housing construction in the United States remains very weak. However, he pointed out that the show of stability in single-family home permit applications and construction is encouraging.

Meanwhile, multifamily home construction declined 46.1 percent to 90,000 units annually, with a 23 percent drop in March. Permit applications for multifamily construction also dropped by as much as 19.9 percent to 121,000 houses.

According to analysts, the apartment construction activity was severely affected by the flood of condominiums on the market and by strict credit conditions for the commercial real estate.

Analysts noted that the recovery for single-family home construction will be far from coming as massive unemployment and the unabated foreclosures continue to wreak havoc on this sector.

Paul Dales of Capital Economics said that low-priced bank foreclosed home and the excess new homes supply on the market have made new home construction less appealing.

A report from the Pew Hispanic Center on foreclosure rates in counties across the U.S. stated that there are more foreclosure houses in counties that have bigger share of immigrants.

Pew studied three major aspects of the U.S. housing sector: homeownership trends from 1995 to mid-2008 among ethnic groups, lending trends for blacks and Hispanics from 2006 to 2007, and foreclosure rates in 3,141 counties across the country.

The report also stated that foreign born Latinos accounted for the greatest share of all foreclosed homes formerly owned by immigrants.

Among the reasons cited by Pew are the probability that immigrants became attracted to areas where housing projects were booming, that immigrants found more jobs in counties with more housing development activities, and that immigrants do not have the background, skills and resources to save their houses from becoming foreclosed homes.

However, Pew researchers also acknowledge that there may be other factors that cause data to show that there are more foreclosed homes in areas with large numbers of immigrants. They said they cannot assert that immigration levels by themselves alone push up foreclosure rates in a county.

Nevertheless, the researchers cite the cases of Atlanta and Las Vegas which attracted a lot of immigrant workers during the construction boom and which are now battered by construction losses and large numbers of foreclosed homes.

According to Pew, the rise-and-fall cycle of the housing sector since 1995 has cut down the homeownership gap between white Americans and ethnic minorities. As of 2008, nearly 75 percent of white Americans own homes while about 59 percent of Asians are owners, nearly 49 percent of Hispanics own homes and nearly 48 percent of blacks are owners.

But Pew researchers found that more Latinos and blacks borrowed from the subprime market than whites. In 2007, nearly 28 percent of home mortgage loans taken out by Hispanic American borrowers and nearly 34 percent of loans given to black borrowers were high-rate mortgage loans while only 10.5 percent of mortgage loans given to whites were high-priced.

Also, the annual percentage rate given to blacks was around three points higher than the usual rate for a fixed-rate 30-year loan. For Latinos, the annual percentage rate given was around 2.5 points greater than the typical mortgage loan.

Additionally, blacks and Hispanics took out higher amounts of mortgage loans, increasing their risks of having their houses turned to foreclosed homes.

Lizette Morice, a 42-year-old businesswoman from Ewing Township, New Jersey, has been sentenced by a court in Philadelphia to ten years in prison for recruiting almost 2,800 people to invest money in her fictitious business of buying and selling repo homes.

Morice’s victims thought they had found a gold mine in repo homes because the investors who invested first in Morice’s enterprise got their money back and more.

As the early investors received between $50,000 and $250,000 as profits for their $1,000 initial investments, word got around, prompting many people to invest their money in Morice’s Philadelphia-based firm called Gaddel Enterprises. In only 15 months, Morice was able to collect $7.8 million from people who thought they were investing in repo homes.

While being sentenced in court, Morice sobbed and reiterated that her business plans involving repo homes were viable and that her motives were good. But District Judge Berle Schiller quickly waved her off.

Assistant U.S. Attorney Frank Costello said the strategy of paying the first investors is typical of financial scams. He said the scheme of paying the first investors with big amounts is a very powerful way to entice more investors.

There were several investors who testified in court against Morice. One of them said his life is destroyed because he has persuaded a lot of Hurricane Katrina survivors to invest their relief money from the federal government.

The judge ordered Morice to give back almost $7.3 million to the victims. But the money is almost gone. The judge also added he is considering a request to examine the possibility of making the early investors who received large payouts to repay the victims.

Public attorney Cathy Henry contended that Lizette Morice did not profit significantly from the enterprise. She explained that Morice spent $5.5 million to reward investors; $1.5 million to pay salaries and operating costs; $150,000 to finance two company parties and the rest to pay living costs for her and her two children.

Morice’s company operated offices in Morrisville and in Langhorne. The investigation began after two of her employees reported her to authorities when they saw Morice was not buying repo homes despite conducting regular meetings.

Morice is set to enter federal prison on June 5.

In April, Treasury Secretary Timothy Geithner held a press conference to announce a national effort to protect distressed homeowners from getting victimized by scams related to repo homes.

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Police sources have confirmed the news of the death of acting CFO, David Kellermann engaged with the well known mortgage firm, Freddie Mac but now faced with troubled times ahead.

Officials have found him dead in his Fairfax residence on this Wednesday morning and suspect it to be a suicide case with no foul play. However, investigations are still on in this case before reaching any final conclusions.

According to official sources, David Kellermann was employed with Freddie Mac and associated with this company for almost 16 years. He served the company diligently while holding important positions within the company as Vice President of the company.

Kellermann managed all the financial responsibilities of the company including financial planning, annual budgeting while looking after all the financial regulations and managing issues related to tax compliance.

It is believed that Kellermann used to report to the former CEO David Moffett and held several prestigious positions in the company as Senior Vice President, Corporate Controller and also as accounting officer. Kellermann, 41, was named the CFO of the company in last September when the federal government removed some of the high-level employees of the company after taking over the company.

Apparently, Freddie Mac had suffered huge financial losses reported to be in billions along with sister concern, Fannie Mae recently, after making huge investments in various mortgage related areas. Both these firms have received a bailout package amounting to $60 billion so far from the government.

As the number of foreclosed homes in New York state increases, more and more renters across the state are being forced out of their homes. One of these is Lisa Brown, a 44-year-old single mother of three young girls on Long Island, who has been paying her rent faithfully for the last six months, but who was suddenly given notice to vacate her place within ten days because the property has been foreclosed.

Brown is just one of many low-income renters being given only a few days to vacate foreclosure properties by mortgage lenders. Brown also represents the demography of families caught in the swirl of foreclosed homes nationwide. Many renters of foreclosed homes are single mothers with several very young children, just like Brown.

It is cases like Brown’s that New York State Senator Jeff Klein is trying to address with the law that he has proposed to mitigate the effects of foreclosed homes. Klein proposed that renters caught up in foreclosure filings are given at least another 30 days to find another housing and move their belongings. Current legislation allows lenders to force out renters of foreclosed homes in ten days.

Klein’s proposal requires mortgage banks or homebuyers to notify renters about the foreclosure within 30 days of the foreclosure filing. Moreover, lenders or new owners must also notify renters about any eviction proceeding 30 days before the actual eviction.

Klein argued that tenants should not become victims of the mortgage lending crisis, especially so that most renters of properties that usually become foreclosed homes are low-income families and families consisting of single mothers and very young children. Housing advocates also say that some landlords have not been paying utility bills, putting tenants in difficult situations of either moving out to the streets and shelters or putting up with cold water and lack of heat.

Manhattan real estate lawyer Lisa Urban said more than 500 renters in December 2008 and more renters in January have faced evictions and related difficulties because of the problem of foreclosed homes. Because of the prevalence of the problem, the Legal Aid Society has established a special program in Queens that focus on helping both homeowners and renters affected by foreclosed homes.

According to Urban, renters occupying rent-stabilized homes and rent-controlled apartments are luckier because there is already a law protecting them from the effects of foreclosed homes. But for Brown, the single mother who has no relatives in the community and who has no money to pay the deposit for a new housing if she is lucky to find one, the only alternative aside from the streets is a shelter. Under current law, she has to be out of the foreclosed property within 10 days, not enough time to find another affordable rental property in an area full of renters.

Despite the foreclosure moratorium and mitigation schemes offered by various entities, the foreclosure process is being replicated in cities, towns and counties across the country.

Mortgage banks naturally want to recover as much money as they can from the loan that they provided to the homeowner, so they let the foreclosure process follow its course. The goal is to get back the house free as soon as possible for sale to the highest bidder before the foreclosed house becomes dirtied and damaged.

At any point in the foreclosure process, you can go to your mortgage lenders, show them the money and the process will stop. But only for a while. You have to pay them the next amortization, or the foreclosure process will move again.

Mike Himes, a housing counselor for the nonprofit group NeighborWorks Homeownership Center in California, says that troubled homeowners need to be realistic about their ability to pay. He says that there have been many borrowers who have swiped their cards for $20,000 on their credit cards only to be forced out of their homes later on.

According to Debra Zimmerman, a lawyer with the nonprofit legal service provider Bet Tzedek Legal Services in California, the best move for you if you do not have money to pay the next amortization is to call your mortgage lender weeks before your due date.

If you have not made your payment the day after your due date, you are already considered delinquent. Usually, you have a grace period of up to 15 days to pay your due.

The day of the first call from your mortgage bank will depend on your payment history. According to Wells Fargo Home Mortgage executive Joe Ohayon, if you frequently pay in the middle of the grace period, you will not be called before that point. If you have been a good payor, the calls will just be reminders and not direct collection calls.

On the 30th day of default, the lender can send you the notice of default. But if your loan was taken between 2003 and 2007, your lender must contact you or visit you at least a month before sending the foreclosure notice.

When finally you receive your notice of default of foreclosure, you still have 90 days to negotiate with your lender to save your foreclosed home. You could still negotiate a loan modification, a short sale or a temporary moratorium. But when not one of these options pushes through, the painful foreclosure processes come after another like clockwork: the notice of sale, the notice to quit, the notice to vacate and the sheriff’s visit if you refuse to move out.

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There is no time to waste as the economic recession keeps on bringing the number of foreclosures and the unemployment rate into high numbers.

President Barack Obama urges lawmakers to act now and have the stimulus bill approved. He has strong case for the $800 billion stimulus package but legislators continue to debate in the Senate as the package cost keeps on increasing. There is no time to waste because each day that the stimulus is not yet there, the Americans are losing more and more jobs, homes, and savings.

With all that is happening to the economy, it is the housing problem that has to be fixed first. Obama has rejected the need for more tax cuts and piecemeal measures so better measures must be made.

To fix the housing industry, the Senate has to address the foreclosure issues, which keep on increasing as unemployment increases.

One of the actions of the Senate includes a housing tax break in the stimulus measure, which is estimated to cost about $19 billion.

Senate republicans are aggressive in adding tax cuts and reducing mortgage costs to keep homeowners from foreclosure. However, the bill’s cost was not cut back. On the other hand, Sen. Jim DeMint has made a proposal that could replace all the spending with tax cuts but it was defeated.

Another point of the debate also includes the Buy American provision which requires projects to be financed and built with local iron and steel, but Obama said the U.S. international trade agreement must not be violated. Also, the democrats turned back the attempt to provide up to $1,000 worth of tax cut for working couples even those who do not earn enough to pay taxes.

The bill’s new tax break for homebuyers and the 10 percent tax credit of the value of existing and new homes (limit of $15,000) are expected to help in reviving the housing industry, more especially in reducing foreclosures.

After several months of waiting, beleaguered homeowners with loans guaranteed by mortgage giants Fannie Mae and Freddie Mac will receive assistance from the federal government. The Federal Housing Finance Agency, recently announced this new plan to stop foreclosures, which is scheduled to start on December 15, 2008.

The new program, announced to representatives from the U.S. Treasury Department, the Department of Housing and Urban Development, Wells Fargo and Company and Hope Now, is estimated to help thousands of homeowners in danger of losing their homes to foreclosures.

The program is designed to restructure loans and reduce monthly payments down to affordable levels. Target amortizations should not exceed 38 percent of the family’s gross monthly income. To attain lower monthly payments, interest rates will be reduced, including loan term extension as well as providing deferred payments.

Customized procedures could also be implemented depending on the needs and situation of the homeowners, as long as it can help avoid foreclosures. Part of the program is for the government to pay loan servicers $800 for each modified loan.

The new program is offered to borrowers following a set of criteria. Borrowers are encouraged to start communicating with their lenders and banks to start this process and finally prevent foreclosures. The prerequisites for inclusion are:

a) the borrower is already delinquent by at least three payments
b) have loans that are at least 90 percent of the home value
c) living in these homes as their primary residence
d) have not filed for bankruptcy

The Association of Community Organizations for Reform Now (ACORN) describes the new program as heading in the right direction, although it criticized some of the program prerequisites too restrictive. In response to this, ACORN is calling for a 90-day moratorium on foreclosures to give time for homeowners while the program is still in process.

Still, organizations and lenders alike are hopeful that the new program will finally put a stop to this runaway foreclosures crisis. With affordable monthly payments, families are expected to stay in their homes and work to keep their loans current.

When Wall Street crumbled last month, it has made it almost impossible for homebuyers – even the supposedly qualified ones – to get approved for mortgages.

According to the National Association of Mortgage Brokers, the reason for this is simple. Lenders are making sure that you satisfy all their guidelines. For instance, if you have made a single late payment on your existing mortgages, you will be denied for a second loan. This is even if you have high credit score and substantial assets and income.

Some home buyers are turned down because of their slightly higher-than-average debt to income ratio. Again, even if they have credit scores in the mid -700s and can come up with the 20 percent required deposit; chances are the lenders will still not approve the mortgage application.

Unfortunately, the currently-high interest rates have also made sure that most of the applicants will have a higher debt-to-income ratio. Indeed, it looks like a lose-lose situation for interested home buyers.

To make matters worse, lenders are discounting the property’s appraised market value because they are assuming that home prices will continue to fall in the coming months. This will certainly increase the loan-to-value ratio, which could once again be the reason for the lenders’ disapproval of the loan.

If you look at what is happening in the lending industry, it would seem like nothing is making sense. For most experts and analyst, it remains to be a guessing game. Until the market corrects itself, there will still be a lot of inconveniences for both lenders and borrowers.

With the financial industry suffering from major losses in the last weeks due to the collapse in Wall Street, more homes are expected to enter some stage of foreclosure. By the end of the year, the number of foreclosure homes is estimated to reach over a million