The Potentially Chilling Effects of a Nationwide Halt on Foreclosures

Recently, Bank of America, the nation’s largest bank, voluntarily halted foreclosure sales in all 50 states. Other major banks followed Bank of America’s lead, but stopped short of issuing a 50 state freeze on foreclosures. Not even two weeks later, Bank of America announced that its internal investigation into foreclosure procedures has been completed, opening the door for it to continue foreclosure sales. Now the FBI is investigating whether banks violated any laws during the foreclosure process that has left many Americans without homes.  

Although forcing banks to halt foreclosures nationwide may sound like a great idea, here are a few of the potentially chilling effects of halting foreclosures.

                                                                                                      

• The Deaf of Property Values: Let’s say you buy a $150,000 home today. If a nationwide halt on foreclosures happens, then your $150,000 home may become a $100,000 home because when the foreclosure freeze is over, those frozen properties will flood the market and bank’s will have no choice but to lower their prices to move inventory again. 

• Longer Imprisonment for Upside Down Homeowners: For homeowners who are trying to refinance but can’t due to underwater or upside down mortgages, another decrease in property values only lengthens the amount of time they will be trapped in those mortgages without options to refinance.

• Buyers Market Without Buyers: Even if it is a buyer’s market, no buyer in their right mind will purchase a home that they may have to walk away from later because they unknowingly purchased an illegal foreclosure.

• Decreased Home Sales to Non-existent Home Sales: With almost a year’s supply of real estate on the market, a halt on foreclosures would not only halt foreclosure sales but all real estate sales will be affected and the supply of real estate currently on the market will increase.

• Banks Receiving Bail-outs to Banks Going Belly-up: Banks have given homeowners going through hardships the run around in applying for modifications and short sales in hopes of saving their homes. And although Americans have bailed out banks and many are angry that the banks aren’t returning the favor, no one bailed out banks to see them go belly up and watch more Americans lose their jobs in the process. 

• A Real Estate Market that Never Fully Recovers: Unfortunately a mandatory halt on foreclosure sales will more than likely lead to longer recovery periods than initially predicted, and it’s possible the market will never fully recover to the level we were at prior to the housing crisis.  

There are so many different situations to consider when dealing with the issue of whether banks committed illegal foreclosures. However, we must balance the interest of homeowners that are current on their mortgage payments, past homeowners who were not in foreclosure but were illegally foreclosed upon, homeowners that purchased foreclosed homes, delinquent homeowners currently in foreclosure, and potential buyers. Without a doubt, banks should be punished for any crimes or civil violations they have committed, but we need to make sure innocent homeowners aren’t punished in the process.

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Banks Under Fire. Again.

Is Halting Foreclosures Delaying the Inevitable?

Update: October 8, 2010: Bank of America extends halt on foreclosure sales in all 50 states, meaning borrowers' homes currently in foreclosure will not proceed to judgment or a foreclosure sale.


Recently, Bank of America, the largest bank in the United States, announced it was halting foreclosures in the 23 states[1] where court approval is required. Although Bank of America has not announced how many homeowners will be affected, the voluntary halt on foreclosures comes in the wake of Bank of America officials admitting to signing foreclosure affidavits without verifying whether these legal documents contained accurate information. JP Morgan Chase and Ally (formerly “GMAC”) have also joined Bank of America in halting foreclosures in those 23 states. Foreclosures are still proceeding in the remaining 27 non-judicial foreclosure states, requiring no court approval, such as California, Georgia, and Texas.[2]

What Does Halting Foreclosures Mean for Homeowners?

Halting foreclosures doesn’t mean foreclosures will not continue at a later date. Banks are simply reviewing their processes. It should also be noted that no allegations have been made that these homeowners are not behind on their mortgage payments, and are being wrongly foreclosed upon. It comes down to a technicality of whether the information in the foreclosure papers is totally accurate. For instance, whether the lender’s name is correct on the documentation, or whether the correct lender is foreclosing upon the property. These inaccuracies unfortunately, have nothing to do with the more serious issue of homeowners failing to make their mortgage payments.

Things to Consider

Lastly, we should consider whether we are prolonging the recovery process by encouraging banks to halt foreclosures. Congress has been encouraged to look into ways of halting foreclosures in an attempt to force banks to work with homeowners. It has been reported that 52 million homeowners have outstanding mortgages on their homes in this country. Of that 52 million, 10% or roughly 5 million are delinquent or in foreclosure. Do you simply delay foreclosures for all these people, when the other 47 million homeowners are struggling to make their payments to avoid foreclosure? Has the government missed the ball by encouraging banks to help delinquent homeowners, essentially ignoring the homeowners that have continued to make their payments on time?

What are your thoughts on halting bank foreclosures?

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[1] The 23 states include: Connecticut, Delaware, Florida, Hawaii, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Nebraska, New Jersey, New Mexico, New York, North Dakota, Ohio, Oklahoma, Pennsylvania, South Carolina, South Dakota, Vermont and Wisconsin.

[2] The Attorney General’s in California, Connecticut, New York, Texas, and Massachusetts, are paying close attention to this situation, some taking steps to suspend all foreclosure proceedings until servicers have completed internal reviews.

Sources: 

Rooney, Ben, “Push to halt foreclosures gains steam,” CNNMoney.com, http://rss.cnn.com/~r/rss/money_realestate/~3/2VSg7rR5BVc/index.htm, (accessed October 6, 2010).

Shapiro, Adam, “Major Banks Suspend Foreclosures,” FoxBusiness.com, http://video.foxbusiness.com/v/4358465/major-banks-suspend-foreclosures, (accessed October 6, 2010).

Zibel, Alan, “Bank of America delays foreclosures in 23 states” The Washington Post, http://www.washingtonpost.com/wp-dyn/content/article/2010/10/01/AR2010100105392.html (accessed October 6, 2010).

Associated Press, "BofA halts forelcosure sales in 50 state," YahooNews.com, http://news.yahoo.com/s/ap/20101008/ap_on_bi_ge/us_foreclosure_mess, October 8, 2010. 


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Are You Ready to Purchase a Home?

Stop Listening to All the Doom & Gloom of the Housing Market and Call Your Realtor!

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You were so excited when you finally decided to take the leap into homeownership. You worked hard to maintain your credit score. You even saved a hefty down payment to purchase your new dream home. But then the housing market crashed and you decided it wasn’t the time to purchase a home. Fast forward 3 years later, the housing market is still up one week, down the next week, 1% better than last month, but 15% worst than this exact day one year ago, with foreclosures rising .2% higher than they were exactly one minute ago. Depending on what you’re reading and what channel you’re watching, it is understandable that you are scared to purchase a home. But you can’t allow your fear to stop you from buying the home that you’ve been waiting for.

Here are a few reasons why you should turn off your television, skip the real estate section of the newspaper, and avoid any real estate online content that’s discouraging you from buying your dream home:READ FULL ARTICLE: Are You Ready to Purchase a Home?

Homebuyer Tax Credit: The IRS Has Apparently Dropped the Ball

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At a time when the country is experiencing what some are referring to as the worst recession since the Great Depression, the IRS has apparently dropped the ball. Initially, the homebuyer tax credit was passed to stimulate the economy by bribing first-time homebuyers into purchasing the American Dream. In a previous article, “Homebuyer Tax Credit: Stimulating the Economy or Fueling False Hope?” the negative impact of the recent lapse of the homebuyer tax credit on pending home sales was discussed. Now what’s even more alarming is the recent news that the Internal Revenue Service (“IRS”) has no strategy for ensuring over 950,000 taxpayers purchasing homes in 2008 repay the $7,500 homebuyer tax credit that they were loaned interest free. READ FULL ARTICLE: Homebuyer Tax Credit: The IRS Has Apparently Dropped the Ball

If You Can't Sell Your Home, What Other Options Do You Have?

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If you’re trying to sell your home, the latest housing numbers released last week are nothing short of sheer disappointment. The month of July ended with a 27.2% drop in home sales, marking the worst drop in home sales since record keeping began in 1968. For previously occupied homes, the National Association of Realtors reported that home sales plummeted to their lowest level in 15 years.

So if you can’t sell your home, what other options do you have? The following is a list of the latest options that many homeowners are considering:

1. Home Tending: The idea behind home tending is that it is faster to sell an occupied home that is fully furnished, in comparison to a vacant home. READ FULL ARTICLE: If You Can't Sell Your Home, What Other Options Do You Have?

FHA Launches Short Refinance Opportunity Program to Rescue Underwater Homeowners

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Beginning on September 7, 2010, homeowners who have survived the housing crisis and continued to pay their mortgage payments despite drastic declines in their property values will no longer be ignored by the Obama Administration. Finally, the Federal Housing Administration (“FHA”) has unveiled a new program that will allow homeowners who owe more on their homes than they are worth to refinance their mortgages. This new FHA program is specifically designed to “encourage principal write-downs for responsible borrowers,” with negative equity or upside down mortgages.

Although, the program is projected to help up to 3 to 4 million homeowners experiencing financial hardship, the requirements are so stringent that it will certainly fall short of helping many of the homeowners it was designed to offer a “lifeline.” To qualify for the new FHA program, homeowners must meet the following basic requirements: READ FULL ARTICLE: FHA Launches Short Refinance Opportunity Program to Rescue Underwater Homeowners

Are You a Homeowner? 4 Easy Steps for Preserving Your Property Value with Foreclosures in Your Neighborhood

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No matter where you go, or who you talk to, there is no way to escape the reality of the current housing market. If you turn on your television, read your newspaper, or even walk out your front door, you know that there is still room for improvement. But, if you forget about all the experts, statistics, and predictions that you hear about everyday, the more compelling question is how do you preserve your property value with foreclosures in your neighborhood? Here are 4 easy steps that you can take right now:

1. Take Care of Your Own Home First
Have you taken a look at your home lately? When was the last time you painted the exterior, landscaped your yard, and cleaned or replaced your gutters? It is very easy to point the finger at the foreclosure next door when the value of your home is on a downward spiral. READ FULL ARTICLE: Are You a Homeowner? 4 Easy Steps for Preserving Your Property Value with Foreclosures in Your Neighborhood

Are You a Homeowner? Coping with the Realities of an Unrealistic Housing Market

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Many homeowners are coping with the realities of an unrealistic housing market in the aftermath of the housing crisis. Here is a list of some of those realities:

1. Declining Property Values
Homeowners everywhere are dealing with drastic declines in home values, ranging from as little as a few thousand dollars to hundreds of thousands of dollars. And no one knows exactly when the housing market will stabilize. In fact, the question of when the housing market will stabilize has gone unanswered since the housing market crashed.

2. Unfinished Neighborhoods
Many homeowners living in new subdivisions have been abandoned by their real estate developers and home builders that went belly-up as a result of the declining housing market. Vacant and overgrown lots, with unfulfilled promises of amenities such as clubhouses with state of the art fitness centers, playgrounds and pools to name a few, are still haunting many homeowners.

3. The Cheaper House Next Door
Homeowners living in unfinished subdivisions breathe a sigh of relief when they finally see new homes being constructed on vacant lots in their neighborhoods. However, shortly after breathing a sigh of relief, many of these same homeowners will experience feelings of shock and disbelief. The reality is that after the first house is built, you may notice a sign advertising the homes at $100,000 less than what you paid for your home. Unfortunately, thousands of homeowners are dealing with what I refer to as “the cheaper house next door”. READ FULL ARTICLE: Are You a Homeowner? Coping with the Realities of an Unrealistic Housing Market

Fannie Mae to Require Lenders Police Delinquent Loans

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Kicking Borrowers when They're Already Down?

On June 23, 2010, Fannie Mae announced policy changes designed (1) to encourage borrowers on the brink of foreclosure to work with their lenders, and (2) to penalize borrowers who strategically default on their mortgages. These policy changes were developed in light of the rising number of borrowers choosing to walk away from their mortgages and start over.

Good Faith vs. Bad Faith and Everyone Else
According to Fannie Mae, “borrowers facing hardship who make a good faith effort to resolve their situation with their lender will preserve the option to be considered for a future Fannie Mae loan.” These borrowers can be considered for foreclosure alternatives such as a loan modification, a short sale, or a deed-in-lieu of foreclosure. Borrowers who successfully enter into a foreclosure alternative program with their lender could be eligible to apply for a Fannie Mae-backed loan in as little as 2 years. READ FULL ARTICLE: Fannie Mae to Require Lenders Police Delinquent Loans

Homebuyer Tax Credit

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Stimulating the Economy or Fueling False Hope?

Recently CNNMoney.com reported that pending home sales fell a whopping 30% in May, according to the National Association of Realtors. Although experts are shocked by this seemingly large decrease, any decrease should come as no surprise in light of the lapse of the homebuyer tax credit on April 30th. However, to fully understand why home sales suddenly sank, we must understand the true purpose behind the Homebuyer Tax Credit.

Initially, the Homebuyer Tax Credit was passed to stimulate the economy by bribing first-time homebuyers into purchasing the American Dream. A bribe is simply something that serves to induce or influence. In the midst of the mortgage crisis where millions of Americans are losing their homes in foreclosure for various reasons, such as being bribed into no-money down, interest only, adjustable rate, ballooning home loans, that have sucked the life out of so many families READ FULL ARTICLE: Homebuyer Tax Credit: Stimulating the Economy or Fueling False Hope?

Residential Real Estate 101

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A Modern Day Breeding Ground for Your Everyday Hustler

The housing boom not only increased the number of first time homebuyers, it created a breeding ground for your "everyday hustler". From your overnight investors to flippers and equity skimmers, all qualify as hustlers. Now that the housing boom is over, the housing burst has revealed the innocent homeowners that fell victim to the everyday hustler. So before you even think about purchasing a home, you need to learn the ins and outs of the everyday hustler.

Flipper
There are two different kinds of flippers. The legal flippers that actually fix up houses and sell the homes at a profit based on the improved value. And then there is the illegal flipper, which you should be wary of. The illegal flipper makes no improvements to the property, but falsifies an appraisal by stating that the subject property is worth far more than the actual value. READ FULL ARTICLE: Residential Real Estate 101: A Modern Day Breeding Ground for Your Everyday Hustler

So You Want to Rent to Own a Home?

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WHY PURCHASERS CONDUCT TITLE SEARCHES AND YOU SHOULD TOO

With the current state of the economy, many people are opting to rent-to-own a home. Credit issues including bankruptcies and foreclosures, or a lack of sufficient credit history are all reasons to consider renting
before purchasing. Another reason, beyond credit concerns, may be your ambivalence towards purchasing a home in a market where houses are losing value everyday. However, if you are thinking about renting to own, the best advice is to treat your rental as if you were actually purchasing it with cash.

Conducting a Title Search

In a purchase sales agreement, purchasers are given a specified period of time, usually a 7 day window to provide proof of financing, conduct an appraisal, obtain a home inspection, and amongst other things conduct a title search of the property. A full title search is a detailed background of the history of the property including the chain of title which details the current and previous homeowners, a lien search to ensure no current liens are attached to the property, and a tax search to determine that all taxes are current on the property. The title search is the most important part of the home buying process because even if you obtain financing, the home appraises at the purchase price or higher, and the home inspection goes perfectly; if the owner does not have valid title to the property, then you can't buy it. And if you can't buy a home due to a title issue, why would you want to rent to own that same home? That was exactly the situation Cameron faced when he jumped head first into renting to own his first home.

Cameron's Story

Failing to conduct a title search was the biggest mistake that Cameron made when he decided to rent to own his brand new $305,000.00, 4-bedroom, 2 ½-bath home. Cameron rented the house directly from the builder through a three year lease with a one year option to purchase. Per the terms of their agreement, Cameron also paid a non refundable security deposit in the amount of $10,000.00 that would be credited towards the purchase price if Cameron chose to exercise the option to purchase. READ FULL ARTICLE: So You Want to Rent to Own a Home?

A Review of Various Circumstances Warranting Foreclosure

Knowing when to Walk Away from the American Dream

No responsible person could ever imagine walking away from the American dream. Responsible home owners understand that a home is more than shelter; it is your comfort zone after a long day of work. Your home is your hiding place, when you simply need to be alone. Your home is your family's staycation[1] when a vacation is not an option. From birthdays to family bar-be-cue's on the 4th of July, your home is an integral part of your life where memories are formed everyday. And contrary to the popular saying, "home is where the heart is," our heart is where our home is. But suddenly you wake up one day and realize that owning a home in today's market is no longer where your heart is. Knowing when to walk away from the American dream is not a decision that responsible Americans take lightly, but it is a decision that many of us are facing.

You Are Officially House Poor

Being "house poor" is not a new concept. Professor Michael Stone coined the term "shelter poor" in the late 80's to define households that could not meet their needs for food, clothing, medical care and transportation at some minimum level of adequacy after paying for housing.[2] According to the U.S. Department of Housing and Urban Development, "the generally accepted definition of affordability is for a household to pay no more than 30 percent of its annual income on housing.[3] The reality is that you are beyond house poor if your household is now paying 50% or more of your annual income toward housing costs.

Your Lender Refuses to Negotiate

For borrowers with piggyback loans or second mortgages, you may find that the process of negotiating with both of your lenders (or even the same lender holding both mortgages), is not only time consuming, but usually impossible.[4] However, your mortgage lender has various options when negotiating: READ FULL ARTICLE: A Review of Various Circumstances Warranting Foreclosure ORIGINALLY PUBLISHED ON Thursday, August 27, 2009

Casualties of the Mortgage Crisis

You had money in the bank for emergencies, a retirement fund, and/or stock investments when you decided to purchase your home;
You had a great job, with a steady income when you decided to purchase your home;
You had great credit when you decided to purchase your home;
You purchased what you could afford, and not a penny more; and
You even paid your mortgage on time.

So if you did everything right when you purchased your home, why are you a casualty of the mortgage crisis? This is the question that many Americans are asking themselves as they follow the endless coverage of the declining housing market.

Homeowners who pay their mortgages on time are having the hardest time refinancing mainly because their homes have declined in value. Homeowners with adjustable rate mortgages are stuck in a never-ending adjustable rate cycle every six months. Homeowners with the infamous 80/20 loans are stuck with two mortgages, with the second mortgage representing the negative equity in their homes. And homeowner’s with prime loans who refinanced or purchased when the market was up, are now upside down.

Unfortunately, many of these homeowners with declining home values fail to meet the criteria for Obama’s Making Home Affordable Program (makinghomeaffordable.gov) simply because their mortgages are not held by Fannie Mae or Freddie Mac. So if you can’t refinance, the question is what should you do? There is no easy answer to this question. However, if you can still afford your home, despite the declining home values, you should probably continue to pay your mortgage. Although you are upside down, I urge you to hang on in hopes that Congress will remember you... the remaining casualties of the mortgage crisis. ORIGINALLY PUBLISHED ON Monday, August 17, 2009.