Cliff's Notes…on Real Estate

When faced with the threat of foreclosure it is very easy to assume that your bank or lender simply wants to foreclose on your home and it isn’t worth the fight to keep the home. This defeatist attitude will not help you keep your home, and the reality is that the bank does not want you to think like this! The bank really doesn’t want your home, and a bank never wants to foreclose. Ever. Having this information can help people that are in the process of being foreclosed on develop the right attitude and keep their homes instead of losing the homes that they have worked so hard for. The fact of the matter is that foreclosures are a pain in the side of banking or financial institutions. They do not want to mess with the court proceedings, with the auctions, and with the local laws in your state or county. They simply want the money that they lent you when you purchased the home, paid in full with interest. If they foreclose on the home they aren’t getting that. Sure, they are getting the home back, but that is not what they set out to do. Foreclosure costs the bank money and they aren’t in the business of spending money, they are in the business of making money. So, if you work with your bank you can stop foreclosure a good deal of the time because they are just as adverse to the process as homeowners are. The bank will often work to keep the home with the owner harder than the owner is willing to work to keep their home. While many of us feel contempt toward the bank while going through a foreclosure or when we are threatened with foreclosure, this needn’t be the attitude. Your bank wants to work with you to arrange for repayment, so start taking their calls and responding to their mailings. In the long run both you and the bank will be better off. The bank is so willing to work with most people that fall behind on their mortgages that they will often allow them to repay their debts before making current payments, they’ll help owners refinance so that they can more easily afford their monthly mortgage payments, and they’ll even waive late fees that can add up and make the situation even more overwhelming for those trying to get on top of their debts. Most of us don’t think about it, but foreclosure isn’t good for the bank, either. It takes time to foreclose on a house, and during this time the bank will not be making any money off the money that was borrowed from them by the buyer of the home. The home will be sitting, sometimes empty and uncared for and the bank will often have to repair the home to make it suitable for sale or to keep up with deed restrictions. All of this costs the bank money that they did not intend to spend on your home. Even when the foreclosure process comes to an end, the losing of money is not over for the bank. Many foreclosed homes are sold at auction, and while most of us assume that the bank makes back all of their money at auction, they often do not. The first buyer is usually required to pay the difference, but this is a debt that will commonly go unpaid for years because the foreclosed on owner simply cannot afford to pay back the money. So, the bank is still short the money that should have been paid on the principal, not to mention the interest that would have been paid over 13 or 30 years for the original mortgage. Many people that are about to be foreclosed on will file for chapter seven bankruptcy. While this provides the owner with the respite that is needed from over due bills and collection agencies, this is not what the bank wants you to do. In a chapter seven bankruptcy all of the debt is usually taken away, meaning that the owner will be allowed to keep the home, but the unpaid debts will never be paid. The bank is expected to just deal with the loss and go on. This is another reason that a bank or lender will usually try really hard to work with the owing party, because they would rather wait for the money than not get it at all. As you can see, the bank simply wants their money. They don’t like to foreclose on homes because it means that they won’t be getting their money right now, and they certainly won’t be getting the interest on the money that was borrowed from them, that they were planning on. Working with individuals that owe money gives the bank a better chance of recovering the funds that they are owed than taking a house. It is important for people to realize that the bank simply does not want your home. They want to work with you so that you can keep you home and they can get their money that is due to them, with interest. Because the bank is watching out for themselves and they want their money, this gives the individual in debt quite a bit of wiggle room to work out payment arrangements and keep the foreclosure process from going any further. With this knowledge you can change your attitude toward the bank or lender and pick up the phone and respond to mailings so that you can get the situation straightened out. If you make a reasonable attempt to pay off the debt you will realize that the owner actually has the upper hand because the bank is willing to avoid foreclosure just as much or more than the owner! Foreclosure simply costs everyone too much time and money, and this does not just apply to the owner, it applies to the bank as well!

by JAY ROMANO
Published: October 14, 2007
THE interest rates on some two million adjustable-rate mortgages will be reset over the next two years, according to an estimate from the Department of Housing and Urban Development, and of them, about 500,000 are expected to go into default. FHASecure, the plan announced by President Bush in September, is expected to help about 240,000 of those borrowers, but the rest may well find themselves on their own.
For anyone about to default on a mortgage, the first and most crucial step is calling or visiting the lender immediately.
“A HUD study found that half of all homeowners facing foreclosure are afraid to contact their lender for help,” said Adam Glantz, a HUD spokesman in Manhattan.
Mr. Glantz said that under FHASecure, borrowers who went into default when the interest rates on their loans increased may qualify for refinanced mortgages from the Federal Housing Administration.
To be eligible, they must have a sustained history of employment, sufficient income to make the refinanced mortgage payments and a history of on-time mortgage payments before the rates reset. The reset must occur between June 2005 and December 2008, the borrowers must have at least 3 percent equity in their houses, and they must pay for mortgage insurance.
Those who do not qualify for FHASecure may have other options. “The first thing you have to do is open your mail,” said Lisa Breier Urban, a Manhattan real estate lawyer. “People tend to ignore the notices they receive because they believe there is nothing they can do about their situation. But a lender will often make accommodations to keep you out of foreclosure.”
David Petrovich, the executive director of the Society for the Preservation of Continued Homeownership, a nonprofit loan-counseling organization in Oakhurst, N.J., said the lender might be willing to accept partial payments for a few months if the borrower’s financial problems are temporary and will improve.
Borrowers may also be able to persuade the lender to lower the interest rate or extend the loan’s term. “Lenders want to avoid foreclosure as much as borrowers,” Mr. Petrovich said.
Bruce Bergman, a Garden City, N.Y., lawyer who specializes in mortgages, said that there were other ways to avoid foreclosure but that they would require the borrower to give up the house.
One is what is called a “short sale.” “Suppose you have a house that is worth $300,000 but the balance on the mortgage is now $320,000,” he said. “The lender might be willing to allow you to sell the home, accept the $300,000, and forgive the rest.”
It is also possible, Mr. Bergman said, that a lender might accept what is known as “deed in lieu of foreclosure.” With such an arrangement, the borrower voluntarily deeds the property to the lender, who then waives the right to sue for the amount still owed. Another possibility is to persuade the lender to allow the sale to a qualified buyer who will assume the balance of the mortgage.
For additional assistance and information, those facing foreclosure can visit the housing administration’s Web site at fha.gov/foreclosure.

LOS ANGELES (Oct. 10) – Home prices throughout most of California will post modest declines next year while sales of existing homes will stabilize from the precipitous decrease experienced in 2007, according to the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) “2008 California Housing Market Forecast” released today. The forecast will be presented this afternoon during the CALIFORNIA REALTOR® EXPO 2007 (www.realtorexpo.org), running from Oct. 9-11 at the Anaheim Convention Center in Anaheim, Calif. The trade show attracts nearly 12,000 attendees and is the largest state real estate trade show in the nation.

The median home price in California will decline 4 percent to $553,000 in 2008 compared with a projected median of $576,000 this year, while sales for 2008 are projected to decrease 9 percent to 334,500 units, compared with 367,500 units (projected) in 2007.

“Tighter credit standards, affordability concerns, and a continued standoff between buyers and sellers will contribute to continued weakness in the market going into next year,” said C.A.R. President Colleen Badagliacco. “Now is not the time for homeowners to ‘test the waters’ – only serious sellers should put their homes on the market in what will continue to be a challenging sales environment.”

“Sales could decline more steeply in 2008 if the current liquidity crunch in the mortgage markets has a longer-than-expected duration or if interest rates unexpectedly increase,” she said

“Geographically, more affordable regions such as the Central Valley and Inland Empire will experience greater softness in the resale market because of the large number of new homes coming onto the market in recent years,” said C.A.R. Vice President and Chief Economist Leslie Appleton-Young. “Higher priced regions of the state, such as the San Francisco Bay Area and parts of San Diego, Los Angeles, and Orange counties will react more to affordability constraints.”

“By price-range, the highest-priced markets – those with medians over $1 million — will show less stress,” she said. “The lower-priced markets will continue to face fallout from the subprime crisis, tighter underwriting standards, and competition from new home developments where price-cutting has been even more severe.”

C.A.R. economists also projected a 23 percent decline in sales this year to 367,500 units compared with 2006, and a 3.5 percent increase in the statewide median price to $576,000. However, the projected increase in the 2007 statewide median stands in contrast to the situation in most counties, regions, and communities of the state, where slight to modest year-to-year percentage declines have become more prevalent and will continue next year.

Historically, the last time the sales level fell below 2007’s projected 367,500 units occurred in 1995, when annual sales totaled 342,540 units. Sales last fell below 2008’s 334,500-unit forecast in 1985, with 328,270 units. The last time the statewide median price fell was a 0.5 percent decline in 1996. The most recent statewide median price decline greater than 4 percent was a 4.5 percent decline in 1993.

“The real problem is not whether machines think but whether men do.”
– B. F. Skinner
“Freedom of the press is guaranteed only to those who own one.”
– A. J. Liebling
“It is during our darkest moments that we must focus to see the light.”
– Aristotle Onassis

“Wisdom is knowing when you can’t be wise.”
– Paul Engle