Why the Housing Market is 3 times worse than you think

All the hype about "Recovery", "the recession is over"; it is all true? These days we are hearing mixed reviews from the media, but the way the "experts" calculate new jobs, housing, unemployement change; YES they are changing the way the report or read the figures on the report. I have attached an article I found that talks about why our market is worse than we think. Did you know California is listed at 6th on the charts for being distressed! http://realestate.yahoo.com;promo/why-the-housing-market-is-three-times-worse-than-you-think.htm

Agent or Realtor? What is the difference?

I have run into many homeowners that do not know the difference between a Real Estate Agent and a REALTOR.

Here is an excerpt from Steve Goddard, 2010 President of the CALIFORNIA ASSOCIATION OF REALTORS®

"There are more than half a million licensed real estate agents in California, there are only 168,000 REALTORS® who voluntarily agree to subscribe to a strict Code of Ethics, and are members of their local, state, and national associations of REALTORS®."

INTERVIEW YOUR AGENT - the “EXPERT”:

INTERVIEW YOUR AGENT - the “EXPERT”:
1) Has your experience been as a buyers agent or a selling agent over your career?
2) How long have you been NEGOTIATING with the lenders?
3) Do you negotiate or do you have a company negotiate for you?
4) Are you in control of my paperwork or is the 3rd party?
5) What are your personal numbers, how many short sales have you personally done? Now what are your Agencies numbers and how many agents does your office have?
6) Do you have any referrals to a tax attorney, bankruptcy attorney, experienced CPA?
7) What should I expect at the end, what are the possible outcomes besides foreclosure?
The list can go on but this should give you a good idea of how much of an expert they are.

Short Sale "EXPERTS" (PART 2)

If the agent you are working with or thinking of working with can't answer these questions or hems and haws, keep looking. Especially about their own personal production numbers - if they can't prove it, give you referrals, or testimonials they aren't the "EXPERT" you are looking for.

INTERVIEW YOUR AGENT - the “EXPERT”:
1) Has your experience been as a buyers agent or a selling agent over your career?
2) How long have you been NEGOTIATING with the lenders?
3) Do you negotiate or do you have a company negotiate for you?
4) Are you in control of my paperwork or is the 3rd party?
5) What are your personal numbers, how many short sales have you personally done? Now what are your Agencies numbers and how many agents does your office have?
6) Do you have any referrals to a tax attorney, bankruptcy attorney, experienced CPA?
7) What should I expect at the end, what are the possible outcomes besides foreclosure?
The list can go on but this should give you a good idea of how much of an expert they are.

Short Sale "EXPERTS" (PART 1)

Short Sale “EXPERTS”

I just took an Ethics Class through Sacramento Association of Realtors; I have to say it was fantastic, the instructor Dave Tanner, Attorney and Real Estate Broker, was honest and to the point, which is my style. But I learned a heavy lesson today, it’s kind of sad. Let me set the stage for you.

Get to the class early, excited to learn and class starts on time at 9:00. Some agents straggle in late, going through ½ the class we get to Article 11, which basically states, it is unethical to be working out of your expertise. Here is my question to you, if you had cancer would you hire a heart specialist to cure you? Would you hire a graduate medical student? Would you hire a pre-med student? I think not, you would hire the specialist with the experience to back them up. This particular Article of the Code of Ethics and Standards of Practice of the National Association of Realtors states:
“ The services which REALTORS® provide to their clients and customers shall CONFORM TO THE STANDARDS OF PRACTICE AND POMETENCE WHICH ARE REASONABLY EXPECTE D IN THE SPECIFIC REAL ESTATE DISCIPLINES IN WHICH THEY ENGAGE”..then it gives specific’s commercial, appraisal, counseling, syndication, residential… this is my favorite part. “REALTORS® shall not undertake to provide specialized professional services concerning a type of property or SERVICE that is OUTSIDE THEIR FIELD OF COMPETNCE unless they engage the assistance of one who is competent…”

It drives me crazy the bad stories I hear about these “EXPERTS”. I have been working with Short Sales for 4 years, I have over 230 Short sales that I have worked on and I would venture to say that I AM AN EXPERT. Then you get these Agents or Realtors that have done one or 2 that say “EXPERT” or “SPECIALIST”, and people hire them, net result Foreclosure.

Coming NEXT WEEK Interview your "Expert"

Short Sale Pros and Cons

I have had many people ask me "why whould I do a short sale and not let it go into foreclosure?"

Well there are many reasons, some will think these are benefits and others won't it is for you to decide. First lest go over some terminology that is important.

RECOURSE LOAN: (about.com) Recourse loans get their name from the fact that lenders have power. They are allowed to go after you for amounts that you owe - even after they’ve taken collateral. If you default on a recourse loan, the lender can bring legal cases against you, garnish your wages, and try to collect the amount you owe.

NON-RECOURSE LOAN: (about.com) A non-recourse loan does not allow the lender to pursue anything other than collateral. For example, if you default on your non-recourse home loan, the bank can only foreclose on the home. They generally cannot take further legal actions against you. The bank is out of luck even if the sale proceeds do not repay the loan.

INSOLVENCY: when you owe more than you bring in.

If you have...
Primary Home, Never Refinanced - NON-RECOURSE
Primary Home, Refinanced - RECOURSE
Primary Home, got a 2nd at a later date - RECOURSE
RENTAL HOME, Refinancied - RECOURSE
Rental Home, Never refinanced - Recourse if non-owneroccupied

WHY a SHORT SALE???
Saves your Credit - Only late payments on a mortgage will show and an after sale mortgage will be reported as paid or negotiated. This will lower the score as little as 50 points if all other payments are being made. A short sales effect can be as little as 12 - 18 months. With a foreclosure score may be lowered from 250 tomore than 300 effecting it for 3+ years.

Deficency Notice - If you have a recourse loan then you want to have someone negotiating on your behalf to eliminate or reduce this debt. If you have a non-recourse loan then you don't have to worry about it. With a foreclosure you do not.

TAXES - with a short sale you have the blessing of the lender to sell your home short as well as a proven Insolvency claim. With a foreclosure you do not.

FUTURE PURCHASE: with a short sale you can get a fannie or freddie backed loan in as little as 2 years and qualify for the programs. With a foreclosure you do not.

What are the Cons of a short sale? The only real con in a short sale would be an inexperienced agent. This would be devistating.

Why Lenders Don't do Loan Modifications!!!

Here is an article published in the New York Times explaining why Lenders take so long to do loan modifications & short sales - if they do them at all. Published 7/29/2009.
Here is the Link: http://www.nytimes.com/2009/07/30/business/30services.html?_r=1&emc=eta1

This week, the Obama administration summoned mortgage company executives to Washington to demand they move faster to lower payments for homeowners sliding toward foreclosure. Treasury officials called on the companies to hire and train more people quickly to field applications for relief.
J. Emilio Flores for The New York Times

Alfred Crawford wants to sell his house in Los Angeles. As it adds fees, Bank of America has blocked his efforts.

But industry insiders and legal experts say the limited capacity of mortgage companies is not the primary factor impeding the government’s $75 billion program to prevent foreclosures. Instead, it is that many mortgage companies are reluctant to give strapped homeowners a break because the companies collect lucrative fees on delinquent loans.
Even when borrowers stop paying, mortgage companies that service the loans collect fees out of the proceeds when homes are ultimately sold in foreclosure. So the longer borrowers remain delinquent, the greater the opportunities for these mortgage companies to extract revenue — fees for insurance, appraisals, title searches and legal services.
“It frustrates me when I see the government looking to the servicer for the solution, because it will never ever happen,” said Margery Golant, a Florida lawyer who defends homeowners against foreclosure and who worked in the law department of a major mortgage company, Ocwen Financial. “I don’t think they’re motivated to do modifications at all. They keep hitting the loan all the way through for junk fees. It’s a license to do whatever they want.”
Rich Miller, a governance project manager at Countrywide Financial and Bank of America before he left in January, said Bank of America had been reluctant to modify loans, which hurt the bottom line. The company has been waiting and hoping the economy will improve and delinquent customers will resume making payments, he said.
“That’s the short-term strategy,” said Mr. Miller, who oversaw training programs at Countrywide, which was bought by Bank of America. He now works as an industry consultant.
Bank of America disputed that characterization. “To think that somehow or other we would jeopardize investor relationships and customer relationships for the very small incremental income we would receive by delaying seems ludicrous,” said Robert V. James, the bank’s senior vice president for mortgage operations and insurance. “It’s not the right thing to do.”
Mortgage companies, some of which are affiliated with the nation’s largest banks, are paid to manage pools of loans owned by investors. The companies typically collect a percentage of the value of the loans they service. They extract their share regardless of whether borrowers are current on their payments. Indeed, their percentage often increases on delinquent loans.
Legal experts say the opportunities for additional revenue in delinquency are considerable, confronting mortgage companies with a conflict between their own financial interest in collecting fees and their responsibility to recoup money for investors who own most mortgages.
“The rules by which servicers are reimbursed for expenses may provide a perverse incentive to foreclose rather than modify,” concluded a recent paper published by the Federal Reserve Bank of Boston.
Under the Obama administration’s foreclosure program, a servicer that modifies a loan for a homeowner collects $1,000 from the government, followed by $1,000 a year for each of the next three years. A senior Treasury adviser, Seth Wheeler, said these payments amounted to “meaningful incentives to servicers to help overcome the challenges and competing demands they face in considering and completing loan modifications.” He added that mortgage companies “are contractually obligated to the terms of this program, which require them to offer modifications to qualified borrowers.”
But experts say the administration’s incentives are often outweighed by the benefits of collecting fees from delinquency, and then more fees through the sale of homes in foreclosure.
“If they do a loan modification, they get a few shekels from the government,” said David Dickey, who led a mortgage sales team at Countrywide and Bank of America, leaving in March to start his own mortgage advisory firm, National Home Loan Advocates. By contrast, he said, the road to foreclosure is lined with fees, especially if it is prolonged. “There’s all sorts of things behind the scenes,” he said.
When borrowers fall behind, mortgage companies typically collect late fees reaching 6 percent of the monthly payments.
“For many subprime servicers, late fees alone constitute a significant fraction of their total income and profit,” said Diane E. Thompson, a lawyer for the National Consumer Law Center, in testimony to the Senate Banking Committee this month. “Servicers thus have an incentive to push homeowners into late payments and keep them there: if the loan pays late, the servicer is more likely to profit.”
She cited Ocwen Financial, which reported that nearly 12 percent of its income in 2007 came from fees to borrowers.
Paul A. Koches, Ocwen’s general counsel, said: “We’d prefer that to be zero. The costs associated with our delinquent loans are in every instance in excess of the late fees.”

Data on delinquencies reinforces the notion that servicers are inclined to let problem loans float in purgatory — neither taking control of houses and selling them, nor modifying loans to give homeowners a break.

From June 2008 to June 2009, the number of American mortgages that were 90 days or more delinquent soared from 1.8 million to nearly 3 million, according to the realty research company First American Core Logic. During that period, the number of loans that resulted in the bank taking ownership of the home declined to 245,000, from 333,000.
As a home slides toward foreclosure, mortgage companies pay for many services required to take control of the property and resell it. They typically funnel orders for title searches, insurance policies, appraisals and legal filings to companies they own or share revenue with.
Ocwen established its own title company, Premium Title Services, in part to keep more of the revenue from foreclosures, said Ms. Golant, who helped start it.
“It was hugely profitable,” she said. “Premium Title would charge for the title when it got transferred to Ocwen, then charge again when it got transferred to the new buyer, and then sell title insurance. It was easy money.”
Mortgage companies not only gain this extra business through their subsidiaries, but also collect reimbursement for the payments when the houses are sold.
The investors who own bad mortgages accept whatever is left. Investors typically do not notice how much they give up to the servicers, because fees are embedded in complex sales.
“It’s under the radar,” Ms. Golant said.
Ultimately, the benefits of delinquency erode incentives for mortgage companies to dispose of troubled loans quickly, say experts, allowing distressed houses to decay and fall in value — a fact of little interest to the servicer.
“At the end of the day, it doesn’t matter what the house sells for, because they don’t take that loss,” said Ms. Golant. “Meanwhile, they are collecting all these fees.”