Mortgage Modification Failures! By Sohail A. Salahuddin

More failures for loan modifications hit our market.  The Banks still don't get it, which most of us don't get.  What makes sense to us doesn't make sense to them, or so it seems.  Most us understand that the banks that don't do a loan modification for a home owner have to file suit for foreclosure which cost them legal fees and in today's foreclosure world this is very costly and time consuming for the banks.  Now, once they are successful with the foreclosure they have to then get the house back on the market and who knows when it will sell.  If the property does sell, it's going to be for a minimum price.  What makes sense to most people is that if the banks modify the loan, the home owner can stay in the house, pay the bank some money still, the bank will have a loan out there still collecting some interest and it seems to all workout in the end.  Here's the kicker and what most people don't realize in less they are in the business is that an individual with home financing has front end ratio's (housing ratios) and back end ratios (total debt to income ratio).  What the banks look at are all the other bills that come into effect such as the revolving debt from credit cards which on average have the home owner at a back end ratio of over 60%.... WHICH IS A SLAM DUNK FOR FORECLOSURE!  Maybe the banks aren't so dumb and they really see the inevitable.  Here is my suggestion, stay away from loan modification companies and work diligently with your bank to stay in your home.  If that doesn't work out, you do have other options such as short sale, consent foreclosure, your one time right of reinstatement.  There are many options to avoid foreclosures.... speak to a real estate professional who has the knowledge to guide you in the right direction.


www.smartpropertyusa.com

sohail@smartpropertyusa.com

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Chicago Real Estate Still Has Years to Recover!

Chicago housing market won't recover until 2013. It is predicted that existing home sales will reach 95,000 a year by 2013. During the peak of the housing boom, that figure was over 50,000 higher. If we assume that the 95,000 figure is based on more sensible lending practices, it would seem to be a sustainable recovery if it happens.



One of the more disturbing quotes from the article is, "Chicago homeowners will have to get used to a new reality, where selling a house routinely takes six months or more and home appreciation just barely outpaces inflation." This indicates that real estate may not be the way to invest money for the long-term. When I was growing up, my father, a high school teacher "lucky" enough to teach a section of consumer economics, always told me, "Everyone should buy a home. You save your 20% down, you find one that won't have a mortgage payment greater than 40% of your monthly income, and you begin to build equity."


This is clearly not the case as it is projected that home values in Chicago will drop 5.7% by the third quarter of this year. Moreover, the price of a home in Chicago compared to income is upside down. The median home price was 3.3 times that of the median income in the third quarter of 2009. On average, from 1980-2000, this figure was 2.6. If the market takes a long time to rebound, we may see the City of Big Shoulders become the City of Big Rentals.


As we get into the underwater mortgage foreclosure wave, we may see housing values decrease even further. According to Crain's, 21% of mortgages in Chicago are underwater. As those homes go to foreclosure, we can expect them to further devalue housing. Since most people don't fight their foreclosures, we can further expect that the market will be flooded with judicial sale properties as well as even more REOs.


This may seem like a buyer's market, but since banks aren't lending as freely as they once did, the decreased cost of a home will not do much to drive purchases.

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Mortgage Rates At 9 Week Record Low!

Mortgage rates on a fixed-rate mortgage tracked by Freddie Mac hit new lows this week, with 30 year fixed-rate loans averaging 4.42 percent.  This is down from 4.44 percent the previous week and down almost 3/4 a percent a year ago.


"Investors in long-term bonds appear very confident that inflation will remain in check, and as a result long term fixed mortgage rates have continued flat", said Amy Crews Cutts, Freddie Mac's deputy cheif economist.


Rates on a 15 year fixed-rate mortgage aveaged 3.9 percent, down from the previous week.  This was a low dating back since 1991.


Rates on 5 year Treasury Inexed hybrid adjustable-rate mortgage (ARM) loans averaged 3.56 percent, down a full percent point from the previous year.


Rates have been dropping for 9 straight weeks to record lows, with no forecast for upward change anytime soon.

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How Do You Pick The Right Agent To Sell or Rent Your Property?

With so many real estates agent who have come and gone in the past decade as well as a giant shift in the market who do you choose to represent you in the sale or lease of your home and how do you choose the right agent for the job?  It can be a tough choice and you will need to choose wisely. 


You have so many real estate companies and agents to choose from and you will need to be aware of a few important things you will need to know when choosing.  The first and most important choice should how hungry, motivated and aggressive the agent is when selling or leasing homes.  You don't want an agent who practiced the three Ps: Put up sign, Put in MLS, and then Pray!  I see this far too often and it's not selling, it's wishful thinking.  You need an agent who will create a specific marketing strategy for your home as well as a target market.  You need to pick an agent who has the time for you property.  This means they have the time to show it, review their marketing, review the activity, follow up with prospects, networks with other agents in the area, open houses, time to take a close look at the property and give you ideas such as arrangement of furniture, landscape ideas to add curb appeal, and much more.  What you don't want is an agent who is sitting on a ton of listings and wants to add yours to his or her list of properties they are listing.   You need an agent who can put 110% into your property and focusing on finding a buyer and selling it.  Make sure you ask the agents you interview what their marketing plan to sell your property is. 


It's very important that you realize that the company you choose doesn't make a difference, the agent is what's important.  As long as you choose a good agent, it doesn't matter is you choose a nationally recognized firm or a small local boutique firm.  The most important deciding factor should be the agent you choose no matter the company is.  I will tell you that I personally know agents who work for firms that no one has ever heard of however these agents are some of the best in the business. 


If you are going to lease your property, find an agent who has different strategies to market your property: internet, signage, flyers, media, etc.  In today's leasing market, a good agent will have no problem use a non-exclusive listing agreement which gives you the freedom to try and lease the property yourself or use other companies as well.  You will not be locked into any agreement that you can't get out of.  A confident agent won't mind who else you list it with since they know who and how to market yout property.  Make sure that the agent is licensed and double check with the Illinois Department of Financial and Professional Regulations that their license is active.


Remember these important tips and choose wisely.   Take your time and interview each prospective agent.  You can even ask for a list of testomonials and referrences.

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Rent vs. Own Shift

There has always been the debate of rent vs own, should  I buy now or should I continue to rent?  There is definitely benefit to home ownership such as tax benefits, you own the home and don't have to worrry about moving or renewing a lease, and in the past there was home appreciation (not a current benefit in these times).  If you own your home you could make any improvements that you want, or make changes without any concern since your the owner. 


If you are renting, you cannot make any changes to the property without permission and I don't see why you would want to pay for any improvements yourself to someone elses property.  Every year or two you would have to renew your lease or prepare for a move.  The great thing about renting is that you don't have to worry about any real estate taxes, association dues, etc... you are only responsible for paying your rent which is less stressful and majority of the time a less expensive monthly payment.  You are also not responsible for any issues with the property.  For example, if an appliance breaks the owner will be responsible for repairing it. 


So, should you rent or own? In todays market it is a great time to buy with interest rates the lowest they have been in fifty years.  The price of homes are at a low, and there are so many great bargains out there that it's the deal of the century.  So why not buy?  The decision should be made depending on how long you live there.  If you plan on moving within the next five years then you may want to consider renting.  The first five years of your mortgage payment is almost all interest and there would be no real benefit if you plan on moving in a short time, so renting may make the most sense.  If you are planning on staying for a while, five years or more then it's time to buy! 


Now, consider your options and speak to a Realtor who knowledgeable in both home ownership and leasing real estate.  They should also have knowledge on the current home finance industry, rates, programs, or have someone on their team who does so they can guide you to make the right decision for you.

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Nationwide Foreclosures Up 6% Over Last Year

The number of U.S. homes lost to foreclosure surged in July, another sign lenders are moving quicker to take back properties from homeowners behind in payments. Lenders repossessed 92,858 properties last month, up 9 percent from June and an increase of 6 percent from July 2009, foreclosure listing firm RealtyTrac Inc. said Thursday. Banks have stepped up repossessions this year to clear out the backlog of bad loans. July makes the eighth month in a row that the pace of homes lost to foreclosure has increased on an annual basis.

Meanwhile, homeowners who are falling behind on their payments are being allowed to stay in their homes longer because lenders are reluctant to add to the glut of foreclosed homes on the market. The number of properties receiving an initial default notice – the first step in the foreclosure process – rose 1 percent last month from June, but tumbled 28 percent versus July last year, RealtyTrac said. Initial defaults have fallen on an annual basis the past six months.

The latest data reflect a foreclosure crisis that continues to drag on as many homeowners struggle to make their monthly payments amid high unemployment, slow job growth and an uneven rebound in home prices.
Economic woes, such as unemployment or reduced income, are now the main catalysts for foreclosures. Initially, lax lending standards were the culprit, but homeowners with good credit who took out conventional, fixed-rate loans are now the fastest growing group of foreclosures. Lenders are offering a variety of programs to help homeowners modify their loans, but their success rates vary. Hundreds of thousands of homeowners can't qualify or fall back into default.

The Obama administration has rolled out numerous attempts to tackle the foreclosure crisis but has made only a small dent in the problem. More than 40 percent, or about 530,000 homeowners, have fallen out of the administration's main effort to assist those facing foreclosure. That program, known as Making Home Affordable, has provided permanent help to about 390,000 homeowners, or 30 percent of the 1.3 million who have enrolled since March 2009. Still, RealtyTrac estimates more than 1 million American households are likely to lose their homes to foreclosure this year.

In all, 325,229 properties received a foreclosure-related warning in July, up 4 percent from June, but down 10 percent from the same month last year, RealtyTrac said. That translates to one in 397 U.S. homes. The firm tracks notices for defaults, scheduled home auctions and home repossessions – warnings that can lead up to a home eventually being lost to foreclosure. Among states, Nevada posted the highest foreclosure rate in July, with one in every 82 households receiving a foreclosure notice. The number of properties in Nevada receiving a foreclosure warning last month rose nearly 7 percent from June, but fell nearly 30 percent from the same month last year. Rounding out the top 10 states with the highest foreclosure rate last month were: Arizona, Florida, California, Idaho, Michigan, Utah, Illinois, Georgia and Maryland. Las Vegas continued to be the city with the highest foreclosure rate in the U.S., with one in every 71 homes receiving a foreclosure notice in July – more than five times the national average.

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Wells Fargo Must Return Overdraft Fees

A federal judge in California ordered Wells Fargo & Co. to change what he called "unfair and deceptive business practices" that led customers into paying multiple overdraft fees, and to pay $203 million back to customers.

In a decision handed down late Tuesday, U.S. District Judge William Alsup accused Wells Fargo of "profiteering" by changing its policies to process checks, debit card transactions and bill payments from the highest dollar amount to the lowest, rather than in the order the transactions took place. That helped drain customer bank accounts faster and drive up overdraft fees, a policy Alsup referred to as "gouging and profiteering."

The ruling detailed the experiences of two Wells Fargo customers who used their debit cards for multiple small purchases, and were then charged hundreds in overdraft fees because the order the purchases were cleared by the bank depended on the amounts. The judge found the customers, who were part of a class action, were not properly informed of the bank's policies on processing payments and were unaware the bank would allow debit purchases to go through when their accounts were overdrawn.

"Internal bank memos and e-mails leave no doubt that, overdraft revenue being a big profit center, the bank's dominant, indeed sole, motive was to maximize the number of overdrafts," Alsup wrote. That policy would "squeeze as much as possible" from customers with overdrafts, in particular from the 4 percent of customers who paid what he called "a whopping 40 percent of its total overdraft and returned-item revenue."

The judge dismissed Wells Fargo's arguments that customers wanted and benefited from the policies, and detailed evidence he said showed efforts to obscure the practices in statements and other materials. Wells Fargo's online banking system, for example, would display pending purchases in chronological order, "leading customers to believe that the processing would take place in that order."

"The supposed net benefit of high-to-low resequencing is utterly speculative," he wrote. "Its bone-crushing multiplication of additional overdraft penalties, however, is categorically assured."

Alsup also criticized the bank for allowing overdraft purchases after accounts had been drained by offering a "shadow line of credit" that customers were unaware existed.
The decision noted that the Federal Reserve has outlawed some of the practices detailed in the case, most notably debit card overdrafts permitted without customers agreeing to accept overdraft protection.


Judge Alsup ordered Wells Fargo to stop posting transactions in high-to-low order by Nov. 30 and to reverse overdraft fees charged to customers from Nov. 15, 2004, to June 30, 2008, as a result of the policy. A study cited in the decision by a Wells Fargo witness put the restitution at "close to $203 million."

Wells Fargo spokeswoman Rochele Messick said the bank is "disappointed" with the ruling. "We don't believe the ruling is in line with the facts of this case and we plan to appeal," she said.

Messick noted that Wells Fargo changed its policies earlier this year, and customers can no longer incur more than four overdraft charges in one day.

Wells Fargo shares closed Wednesday trading down $1.47, or 5.3 percent, at $26.30, as the broader markets dropped sharply on economic concerns, with banks being particularly hard hit.

The case, heard in the U.S. District Court for Northern California, is Gutierrez vs. Wells Fargo.

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WHY CAN'T I GET FINANCED TO BUY A HOME?

Do you want to buy a home however you are having problems getting financed?  Well, here are the top reasons you may not be able to be approved for home financing:


Poor Credit: Even if you have a large down payment and great income, if your credit is not up to par with the banks current lending standards  you will have a problem getting financed.  Even FHA loans, which cater to borrowers with a lower credit score, has increased its FICO score standards bringing the average credit score of todays home buyer to 693


Insufficient Liquidity: If you don't have a heavy down payment (20% to 30%) and a strong excess in liquidity the banks don't want to take the risk of funding your loan.  Even minimum down payments of 3.5% (FHA) loans still require you to have six months of reserves in liquid assets to offset the risk.


Lack of Inome: If you can't afford it with room for all of your other bills then you can't buy it.  In todays market, you will need consistent income for the past two years. 


Debt: If you have too much debt then you cannot qualify for more debt from the banks to finance your home purchase.  Your debt to credit ratios have to pass the banks qualifying guidelines


Self Employment: Thse of you who are self employed, pay attention because your gross adjusted income will determine what you can afford and can't afford.  This means that the more deductions you take the less money you show that you net, the less you have to spend on your home.

With the strict current lending guidelines  these days private lending seems to be the future for securing real estate funding. 

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Ben Bernanke Says Current Lending Guidelines Too Strict!

Finally, it's about time that someone with authority admits that it is becoming very hard for individuals to get home financing, causing more home owners to go into foreclosure.   Fed chairman Ben Bernanke announced that lending guidelines are too strict!  Well, we all new that right?  You did if you could not get financed to purchase a home in the last two years for reasons that you could not believe.  An example, an individual looking searching for homes finally finds a great home in which the home owner is in trouble and needs to sell.  The individual puts in an offer and the home owner agrees, both are very happy.  The buyer goes to get home financing and everything looks good, 780 credit score, good income, etc.  Now, during the process he goes and purchases a few small pieces of furniture with his credit card for the new home.... you know, planning.  Now the bank puts a big stop on everything!!  The buyers borrowed credit/debt has increased and they don't like it.  The deal is killed and the process has to start all over again, however this is too late for the seller.  His bank hears the news and moves forward with the foreclosure.  Another property foreclosed on and another buyer who can't believe the bank did that.  This is just one example and it happens everyday, the lending guidelines are so strict that they start to not make any logic sense at all.  Not to mention, the guidelines are becoming stricter every month.  The more foreclosures, the tighter the guidelines become.  The tighter the guidelines become, the more foreclosures.  Aren't we working backwords?  Hopefully we will see some new and positive light shined on our current real estate industry in the next few months so more people can get loand and buy homes, which means more sellers can actually sell their homes to buyers needing financing.

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Fannie Mae Releases New Website To Help Troubled Home Owners

Fannie Mae has just launched a great new website to assist home owners who have financial difficulty with their homes.  The new website, http://www.knowyouroptions.com/ is an easy to use site that provides individuals with options regarding their home and a decision they will have to make if they are in financial difficutly.  The site is a great source especially when there are tons of loan modification companies trying to provide you with advise which may be incorrect for your situation.  The site is interactive and very easy to use.  There is also a resoures page, advise from other homeowners and more. 

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Well known for sale by owner firm files for liquidation

Florida-based company that helped for-sale-by-owners market their properties around the country has reportedly filed for liquidation.
Buy Owner of South Florida Inc., which does business as Buy Owner, has turned over its assets to Michael Moecker & Associates, an auction firm that liquidates insolvent companies, DailyBusinessReview.com reported.

The auction firm says that it will continue operating the BuyOwner.com website and provide services to consume in order to pay off creditors.

The Deerfield Beach-based company does business in 10 markets, including Miami, Chicago, Dallas and Atlanta, Daily Business Review reported.

By Owner was established in 1984 and claims to be the first "by owner" company to provide nationwide radio, television, and magazine publications.
Buy Owner promises to provide exposure for clients' properties through an "ultra-aggressive advertising campaign" that includes highway billboards, television commercials and Internet advertising.  The majority of the home sellers who use Buyowner end up using a Realtor to sell their home and end up wasting time and money.

Buy Owner operates corporate offices and authorizes franchises, which it says distinguish the company from networks of "real estate agents just trying to make some extra money by associating themselves with a 'by owner' name."

Buy Owner and 18 affiliates filed an assignment for the benefit of creditors, or ABC filing, on July 26 in the Broward County 17th Judicial Circuit of Florida, DailyBusinessReview.com reported. An ABC liquidation is an alternative to filing for bankruptcy in federal court.



Buy Owner reportedly settled a class-action lawsuit last year that required it to pay refunds to many clients who were clients between 2002-08. The lawsuit alleged that Buy Owner hadn't allowed clients to cancel contracts, the story said.

Buy Owner reportedly owes more than $3.9 million to its only secured creditor, and $1.2 million in back wages to executives.



CEO Scott A. Eckert and other members of the Eckert family involved in running the company resigned on July 23, the publication reported.

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