In this new proposal, loan-servicing companies, which collect payments and handle foreclosures for the mortgage lenders (i.e. Aurora Loan Servicing), would have to give borrowers 30 days to respond after being denied a modification of their loan terms under the Home Affordable Modification Program, known as HAMP. During that period, it would allow borrowers to appeal against the decision, and the servicer couldn’t put the home up for sale and continue with a foreclosure auction.

Servicers also would be required to provide a “written certification” that a borrower isn’t eligible for a HAMP loan modification before a foreclosure sale could be scheduled again. 

The proposal calls for servicers to seek contact with all borrowers who are 60 days or more delinquent on their loans and meet the “eligibility profile” for HAMP in an effort to determine whether they qualify. The effort to reach borrowers would have to include at least four telephone calls and two written notices, including at least one by certified mail.  To meet this new demand of contact with all delinquent borrowers the servicing companies would need to hire more employees in order to meet this demand.

Servicers could deny a new application for a  HAMP loan modification received within six days of a scheduled foreclosure sale. But borrowers would have to be notified of the deadline for seeking a HAMP loan modification.  This is to deter last minute loan modification applications, the loan modification process can be a lengthy one expecially during the review process and a foreclosure sale date can’t be stopped last minute with a loan modification request.  If you are seeking a loan modification it is best to apply at least 30 days before your foreclosure sale date.

It is important to note that these new guidelines are NOT in effect yet, they have not bee approved by the servicers and implemented yet.  This is something that the U.S. Treasury is suggesting to them.  As soon as these new guidelines are in place we will post the information here.

With loan modifications being difficult to obtain, could this program really help?  I don’t know, anything is worth a try if you want to keep your home.  We know that under the Making Homes Affordable loan modification program by the Administration homeowners HAD to be employed to be considered for a permanent loan modification and with so many out of work and losing their homes, I personally hope that this new program can help.  I guess we will have to wait and see if the proof is in the pudding.

However, this program isn’t excatly helping distressed homeowners directly, what is going to be happening is that this program has been allowed $1.5 billion dollars in funding that will be allocated to the mortgage lenders, banks, state agencies and the like to reduce their fees that is normally charged to homeowners, thus reducing homeowners charges.  The draw for homeowners facing foreclosure is that this is supposed to increase loan modfications and reduce interest rates.  But isn’t that was supposed to be happening with the Obama HAMP program????  Hmmmm is this another half baked attempt by the government to look like they are trying tohelp homeowners or is this just another way for them to bail out these mortgage companies without the bad press? 

We will keep you updated.

The studies—both conclude that most efforts to modify loans with easier terms will delay, not prevent, the loss of homes to foreclosure as we have been reporting in the last five or so articles.  The lack of success with the governments and the mortgage lenders loan modification programs has delfated many professionals and homeowners hopes of saving these homes.

One study estimates that five million houses and condominiums on which mortgages are now delinquent will go through foreclosure or related procedures that put them on the market over the next few years. That would represent the bulk of the estimated 7.7 million households behind on their mortgage payments, very dim numbers.

This “shadow inventory” that we have been talking about ,of homes expected to hit the market is enough to last about 10 months, based on the average sales rate over the past decade, the Irvine, Calif., firm says, could be longer in hard hit parts of California like the Inland Empire and Central California.

Over the past nine months, home prices have increased modestly in areas after a three-year plunge. That is largely because efforts to avert foreclosures have slowed the flow of foreclosed homes onto the market, temporarily slowing the supply, plus factor in the banks moratoriums and general overwhelming lack of service on loans.

Some borrowers are catching up on payments after having their loan terms modified, but current trends show that 70% of such borrowers eventually will redefault or they are only in trial loan mods with the mortgage lender who has no intention of transfering it into a permenant modification and these homes will once again be on the market bringing prices down further and adding to the flood of inventory.

Loan modifications may be helping marginally, but they are not going to solve the whole problem, mortgage experts say.  I hate to say it, but I agree. 

Loan servicers, firms that collect payments and handle foreclosures, seem to have “nearly exhausted the supply of plausible candidates for loan modifications” and will find that many loans are too high risk of continued default, some just aren’t plain worth it.  Here in the Inland Empire where homes are worth one half of their loans and the average family only makes about $40,000 a year and most families have been hit with pay cuts, or job loss getting a successful loan modification is slim.

As a result, servicers increasingly are pushing “short sales,” in which homes are sold for less than their loan balances.  I get many calls from defaulted homeowners asking for guidance and they all ask the same thing; “Is a loan modification worth it for me?”  Most of them all have the same situation, they owe about twice as much as what their house could sell for, so they see that they could by the same house for much less then what they owe and that property would then have the chance at building equity giving them the financial cushion that draws homeownership.  The big issue with a loan modification is this…. banks are nearly never reducing pricipal they are only drawing out longer loan terms, and reducing interest.  So even though you could get a lower monthly mortgage payment you are still paying on a loan that is twice what your home is worth and thus it will take years before you can build ANY equity.  So it’s basically saving a sinking ship.  Why would you want to do that?  Most of my clients with this same problem end up short saling the home and buying or doing a lease purchase option at the current market rate giving them a much better financial future here in Southern California.

2. Down-payment help is widely available. While $0 down loans have disappeared, it is easy to find down-payment assistance for lower-income and first-time home buyers. Programs vary all over California, but one good way to find them is to search online for “down-payment assistance programs” and the name of your city or county.  Here in the Inland Empire we have Neighborhood Housing Services of the Inland Empire, Inc., San Bernardino Economic Development Agency, and County of Riverside Down payment Assistance Program to name a few in this area.
3. Your uncle (Sam) has money to share. Besides the $8,000 first-time home buyer tax credit and the $6,500 move-up credit, there are an array of energy tax credits that can make home improvements pay off in cash you better take advantage of this credit soon as it is scheduled to disappear.

4. Good help is available. Really talented real estate agents/brokers, contractors, and designers are available and eager for business.

The continued obstinate defiance of the mortgage banks to really deal with the foreclosure problem is shocking. There’s universal agreement that principal reduction is the key but the banks refuse to do it, and we are left with lame programs, like this one announced yesterday by CitiMortgage.  These banks are making not even half hearted attempts at rectifying the housing situation.  Homeowners don’t want to lose their homes here in Riverside County, but their loan has to be affordable for them.

From the banks’ greedy and lazy point of view, the longer they keep you on the hook, the better it is for them. Avoiding the mess of foreclosure allows them to keep the bogus values on their books and keeps them looking better to their investors. Some experts believe that a new round of foreclosures could trigger a double-dip in housing prices.

As if the foreclosure mess wasn’t enough, today there is also a new report from the Congressional Oversight Panel about the looming storm in the commercial real estate market. The report predicts a wave of losses, totaling $200-$300 billion, from commercial real estate loans could “trigger economic damage that could touch the lives of nearly every American.”  Here in the Inland Empire where commercial real estate sites have spouted due to previous contracts needing to be filled warehouses are sitting empty, office buildings are virtually vacant.  Businesses are still down sizing and cutting costs and more small businesses are closing their shops and turning to their home offices.

Here’s how the commercial experts say their analysis plays out: “when commercial properties fail, it creates a downward spiral of economic contraction: job losses; deteriorating store fronts, office buildings and apartments; and the failure of the banks serving those communities.” The report reminds us that the failure of community banks would further restrict small business access to capital, just the economic recovery is occurring.  Once again if lame attempts are not enough, we need real solutions for we are real people with real families to feed and house.  The big banks and government need to find real solutions.  As stated by former Alaskan Governor Sarah Palin, this country is ready for another revolution.

The Borrow Help Centers is providing borrowers with a dedicated counselor to review requirements under mortgage relief offered through Freddie Mac and Making Home Affordable.  These “workout requirements” (maximum income, debt ratio, hardship help clients apply for mortgage payment reductions, and provide the necessary paperwork or information needed to complete the difficult process.  Even with the help of these organizations the loan modification process is still a lengthy and difficult one.

There are still hiccups with these non-profit organizations and their devotion to help and that is that there are still homeowners who aren’t getting the help that they are asking for, some are simply falling through the cracks because these programs are severely understaffed compared to the overwhelming number of homeowners asking for their help.

For homeowners seeking help, there is more information here: www.freddiemac.com/avoidforeclosure/

Borrower Help Centers

• Chicago, IL: Latin United Community Housing Association, Chicago Neighborhood Housing Services;
• California – Inland Empire: Neighborhood Partnership Housing Services;
• Phoenix, AZ: Phoenix NHS, Chicanos Por la Causa;
• Washington DC: HomeFree-USA

Now for 2010 reports on Trulia real estate show the average listing price for homes for sale in San Diego, CA was $495,711 for the week ending Feb 03, which represents a decline of 0.2%, or $1,202, compared to the prior week and a decline of 24.5%, or $160,612, compared to the week ending Jan 13.  Prices are starting to come back up and locals hope that this will be signaling that the bottom is over and that neighborhoods will be stabilizing.

Fannie Mae and Freddy Mac reports show that there is a number of homes that will be coming up on the foreclosure market, the exact number isn’t known.  According to Trulia there are 6605 active foreclosed homes for sale in San Diego.  San Diego is a very desirable area that should bounce back from the market woes.  With lots of shopping, tourists spots, night life and activities and cultural centers San Diego is a California treasure and buyers will once again flock to it’s beach communities, desert hideaways and hill top homes.

With 80,000 new foreclosures in California and 8,000 of those hitting the market in Riverside County alone, according to RealtyTrac.com it is important for homeowners facing foreclosure to learn how to rebuild their credit.

Learning how to rebuild you credit is one of the most important things to learn after a foreclosure. A foreclosure can really devastate your credit and make it hard to get approved for anything. Rebuilding your credit is all about being patient and doing the right things every day over a certain period of time.  Here are a few steps to rebuilding your credit after a foreclosure.

Get Financials In Order

The first thing that you have to do is get your financial affairs back in order. Typically, the reason behind getting a foreclosure in the first place is that your financial affairs were not in very good shape. You took on too much debt or your payments were too high for you to afford your mortgage.  If you want to make sure that you do not have similar problems in the future, you need to make sure that you get everything in line.  Even if it hurts a little bit, you need to do your best to make it possible to pay your monthly bills again. If you do not take these necessary steps, you will end up in the same situation again.

Make Payments on Time

You then need to get on a schedule and make your payments on time every month. This one step is going to make the biggest difference in your credit score’s improving. When credit bureaus calculate your credit score, on-time payments make up 35% of the calculation. T

Eliminate Debt

Another step that you need to work on is eliminating your debt. Credit bureaus like to see that you have less than 30% of your maximum limit used up at any given time. Therefore, you should not max out your cards and carry the balances on them. Pay down the balances a little at a time, and it will make a big difference. 

Use Your Credit

While you should not rack up balances and just leave them, you still need to use your credit when you can. If you have a credit card, make small purchases and pay them off on time. If you do not use your credit, it will dry up. 

You can move on with your life after a foreclosure, the most important being credit rebuilding which we have given you some tips here to help.  Rebuilding your credit will help you qualify for a new home loan once again.  Here in the Inland Empire, California this is important to our housing future.

Here are some of the common mistakes sellers make with short sales:

Short Sale Mistake #1: Priced Wrong

Short sales that sell are priced appropriately.  The price should be attractive to the following parties: And remember to communicate with all 5 parties in the transaction at all times during the short sale process.  This is one way agents lose their buyers in a short sale is by lack of communication.

• The Short Sale Bank
• The Buyer
• The Buyer’s Agent
• The Seller
• The Buyer’s Lender

Short Sale Mistake #2: Inexperienced Listing Agent

Sellers should find out how many short sales a proposed short sale listing agent has actually closed apart from the number of short sales the agent has listed, this is important as the major obstacle for the short sale agent is the negotiations with the mortgage banks.  Unfortunately there is a large number of agents claiming to be short sale specialists who don’t know how to talk to the bank at all much less negotiate pricing and terms.

Short Sale Mistake #3: Bad Marketing

Some agents believe that price alone will sell a short sale, just because it is a short sale doesn’t mean it doesn’t deserve the same amount of attention as a standard sale! Not only does the price need to be reasonable, but the home deserves the same type of treatment as any other listing actually it needs a little extra attention becuase some buyers are put off by the sometimes lengthy process of a short sale.

Short Sale Mistake #4: Showing Restrictions

If the listing requires an appointment, a buyer’s agent might not choose to show that home in favor of a listing without appointment restrictions. Always be able to show the home, make arrangements with your realtor to be able to show the home if you aren’t there. You must be able to have a trustable working relationship with your realtor.

Short Sale Mistake #5: No Photographs

Submitting a listing with no photograph at all — is like saying you don’t want buyers. Buyers aren’t likely to return, you need to have a minimum of 4-5 photos: front of the house, kitchen, backyard, bedroom either living room or bathroom, bonus room something to make the house stand out.  Sellers need to think like buyers

#6: Poor Property Condition

Sellers need to prepare the home for sale and keep it in nice condition. If toys are scattered about and the kitchen sink is filled with dishes, buyers can’t see past the mess.  Understandably short sale sellers have no extra money to put into upgrading the home, but since they are going to be moving out eventually it is a good idea to start packing away unneeded items and storing them neatly in the garage or renting a storage unit.

#7: Uncooperative Sellers

Sellers need to submit required documentation to the bank in a timely manner. If the package is incomplete, the bank won’t process the file, and that will delay approval.   Many banks are revising their required documents and if it is a lengthy process they will ask for updated information.  Sellers need to know this upfront so they are aware that they can’t just turn in the first sheet and be done with it.  They can have ongoing participation and need to keep in mind that the mortgage lender won’t work for your unless you are working for them as well.

In a recent report from Fannie Mae and HomePath

Fannie Mae is offering a 3.5% incentive for buyers who purchase and close on a Fannie Mae-owned home between January 28 and April 30, 2010. Buyers purchasing Fannie Mae properties that are closed within this period may receive up to 3.5% of the final sales price for:

• Closing costs;
• The purchase of new Whirlpool® appliances by Fannie Mae; or
• A mix of closing costs and appliances, at the buyer’s discretion, up to the maximum 3.5%.

Neighborhood Stabilization Program (NSP)
Currently, some local housing authorities and housing non-profits have programs for homebuyers that use HUD’s Neighborhood Stabilization Program funds.

Fannie Mae supports NSP and offers some concessions to streamline the purchase of Fannie Mae properties for buyers using NSP funds. This includes:

• Deposit Waivers – Fannie Mae will waive the earnest money/deposit requirement for public entities using public funds to purchase a Fannie Mae-owned property. Individual homebuyers using public funds to purchase a Fannie Mae-owned property do not have to meet the full 5% earnest money/deposit requirement. Deposits can be as low as $500.
• Reserved Contract Period – Upon receipt of an acceptable offer, buyers have the ability to renegotiate their offer after obtaining an NSP-required appraisal.
• Extra Time for Closing – Buyer receives up to 45 days to close, 15 days more than is usually permitted for purchases of Fannie Mae-owned properties.

What does this mean for California?  This could help raise the market and local neighborhoods.  Fannie Mae foreclosed homes are typically better off then average foreclosed homes that have vagrants or damage to the property.  Fannie Mae has a fund designed for making their foreclosures habitable.  Anyone who has been shopping foreclosures knows the drawback to these deals is the amount of re-habilitation needed.  This makes it difficult for home buyers who are looking for a deal, find the foreclosure and then realize that they need to have $15,000 in cash for repairs.  As a buyer you can’t rely on investors picking up these properties and fixing it up and selling again for a deal, you will find that the investors have put in $10,000 and added a $30,000 mark up.  These people are in it for profit.  I have worked with investors before who flipped short sales and this is typical for them.  If you are looking to buy a foreclosure you have to weigh all the options and information.  If you are a home buyer I would say your best bet is with the Fannie Mae program especially since as reported in my January 31^st article Fannie Mae has the First Look program for buyers.  If you are looking to buy in the Inland Empire contact me and I will point you in the right direction or help you myself.