An interesting dialogue from Yahoo Finance regarding the Fannie and Freddie situation:
See VIDEO HERE.
Weitz: Clearly, the 'recovery' has been generated by government intervention in the financing market via FHA, Freddie, and Fannie backing approximately 70-90% of all mortgages currently. Additionally, the home buyer tax buyer credit has clearly contributed to the increased demand for housing in the past 9 months. Moving forward, the tax credit and the buying of mortgage backed securities are set to expire within the next 2 months. It will be very interesting to see how the real estate market responds when the 'training wheels come off'. My best guess: the tax credit simply stole demand from future potential sales. I expect sales to drop rather sharply in the coming months, and for the inventory of homes to once again begin to rise as sellers who have been holding out for a recovery give up hope and seek short sales and/ or allow their homes to be foreclosed upon....time will tell.
From more information, contact a Seattle Foreclosure attorney.
Our Information:
Weitz Law Firm
Scottweitz@weitzlawfirm.com
(425) 889-9300
Tuesday, March 23, 2010
Monday, March 8, 2010
Should Banks write down 2nd Mortgages?
Realty Check Story on CNBC:
Click here for story.
Barney Frank requested that Banks write down 2nd mortgages to help modification of primiary loans.
Weitz: I think the real story here is that the banks do not have to 'mark their assets to market', thus there is no incentive for the banks to take the write down because they can pretend the loan still has value under current accouting rules which where changed at the peak of the crisis. That said, without the fraudulent accounting, the banks would likely be out of business thus its a 'heads you win, tails I lose situation'.
For more Information on the Foreclosure issues, consider seeing a Seattle Foreclosure Attorney.
Our Firm:
Weitz Law Firm
(425) 889-9300
scottweitz@weitzlawfirm.com
Click here for story.
Barney Frank requested that Banks write down 2nd mortgages to help modification of primiary loans.
Weitz: I think the real story here is that the banks do not have to 'mark their assets to market', thus there is no incentive for the banks to take the write down because they can pretend the loan still has value under current accouting rules which where changed at the peak of the crisis. That said, without the fraudulent accounting, the banks would likely be out of business thus its a 'heads you win, tails I lose situation'.
For more Information on the Foreclosure issues, consider seeing a Seattle Foreclosure Attorney.
Our Firm:
Weitz Law Firm
(425) 889-9300
scottweitz@weitzlawfirm.com
Sunday, March 7, 2010
Seattle Times: "Borrowers on the Hook after losing home"
Below is a Seattle Times article from 3/7/2010 that claims 'borrowers are on the hook after foreclosure'. This is one of the reasons you will hardly ever see a Seattle Times article on this site. They simply don't do their homework in my opinion. This type of issue is primarily in 'Judicial Foreclosure' states like Florida, yet the Times leaves the issue open so people in Seattle assume it will happen to them as well.
When John King stopped making payments on his home in Coral Gables, Fla., two years ago, he assumed the foreclosure ended his mortgage contract, he said. In December, a Miami-Dade County court gave collectors permission to pursue him for $44,000 stemming from the default.
King is among a rising number of borrowers learning that they can be on the hook for years after losing their homes. Amid a crisis that stripped $6.4 trillion, or 28 percent, from the value of U.S. residential real estate since the 2006 peak, lenders are exercising their rights to pursue unpaid mortgage balances. To get their money, they can seize wages, tap bank accounts and put liens on debtors' other assets.
Weitz: This only applies when banks 'judicially foreclosue' as is custom in Florida. In Washington, the predominate foreclosure action is to excersize non-judicial foreclosure. In these types of Foreclosures, the foreclosing party cannot pursue a deficiency.
Bailouts
"The big dogs get a bailout, and the little man gets no mercy," said King, 39, referring to the U.S. government's rescue of banks and other financial institutions.
While there are no statistics on the number of deficiency judgments approved by courts, the Federal Deposit Insurance Corp. (FDIC) tracks the amount banks collect after defaulted loans were written off.
These mortgage recoveries rose 48 percent to a record $1.01 billion in the first nine months of last year compared with the year-earlier period, according to the Washington-based regulator. Recoveries on defaulted home-equity loans almost doubled to $392 million, the FDIC data show.
The figures don't include money retrieved by trusts overseeing mortgage-backed securities, such as the one that holds the loan on King's former home, or efforts by distressed-asset funds and companies that buy bad loans to profit from collection rights. Judgments such as the one levied against King usually tack on court fees, fines and interest.
Deficiency judgments were rare in the 15 years since the last real-estate slump, said Ben Hillard, a former investment banker who now is a real-estate and corporate attorney at Hillard & Rogers in Largo, Fla.
"The banks have been too underwater with foreclosures to spend much time on deficiency judgments, but that's beginning to change," Hillard said. "This is going to be the next big crisis."
Almost 4.5 percent of mortgaged U.S. homes were in foreclosure during the third quarter, the highest rate in the 37 years of tracking the data, the Mortgage Bankers Association said Nov. 19. A record one in every 10 mortgages was at least one payment overdue in the same period, the Washington-based trade group reported.
The Obama administration is seeking to modify as many as 4 million loans by 2012 to prevent foreclosures through the Home Affordable Modification Program, which cuts monthly payments to about a third of borrowers' income. By the end of December, the program was responsible for more than 850,000 modifications, the Treasury Department said in a Jan. 15 report.
Weitz: this program has had mixed results. See previous post here on the HAMP program.
The federal government spent $230 billion in the year that ended in September to support homeowners, according to the Congressional Budget Office in Washington. Those efforts didn't help people who had already walked away from their houses.
In states such as Florida, courts give mortgage holders as long as five years to seek a deficiency judgment and, if granted, up to 20 years to collect. Usually, they have the option of renewing the judgment if it's not paid off within 20 years.
Weitz: Different story in WA!
About a third of U.S. states, including California and Arizona, prohibit collection efforts on primary residences after foreclosure. In some cases, homeowners waive that protection if they refinance. Most states allow collection on unpaid home-equity loans.
Weitz: This is much closer to the WA Law.
The laws in states that protect some borrowers stem from the Great Depression in the 1930s, when a lack of bidders at foreclosure auctions caused deficiencies that, with added fees and interest, sometimes were bigger than the original loan amount, according to a 1934 Virginia Law Review article by Sol Phillips Perlman. Today, many courts measure the shortfall using a property's market value at the time of foreclosure rather than auction results.
The likeliest candidates for deficiency judgments are so-called rational defaults, said Larry Tolchinsky, a real-estate attorney in Hallandale Beach, Fla. In those cases, people who are current on their mortgages decide to walk away from a property because its value has sunk so far below their loan balance they have no hope of recouping the loss.
About 21 percent of American homeowners owe more on their mortgages than their properties are worth, according to Zillow.com, a Seattle real-estate data firm.
"Walking away from a property comes with a cost, especially for people who otherwise have good credit," Tolchinsky said. "The bank is going to pull your credit report, and if you're current on your other bills they are going to come after you and potentially ruin you."
It's not just foreclosures that can trigger debt collections. Short sales also may lead to deficiency judgments years after former homeowners have moved on, according to Hillard, the attorney in Largo. In a short sale, lenders agree to let borrowers sell a home for less than the mortgage balance.
"Banks are being very careful to preserve their rights, either outright in the short-sale agreement or by using vague language that leaves that door open," Hillard said. About 90 percent of people who do a short sale think they are "off the hook."
Weitz: This is a big issue in WA. Banks can pursue deficiencies after Short Sales. You should always have all documents reviewed by a Seattle Short Sale Attorney if you do a short sale.
That was the case when two of his clients, Brigitte and John Howard, sold their home in New Port Richey, Fla., almost two years ago without using a lawyer to check the bank's short-sale agreement.
"Still paying"
"We got a call out of the blue saying we owed $20,000," said Brigitte Howard, 45. "It was a shock. There was no mention in the short-sale contract that the bank might come after us for the difference."
The money King owes to the Soundview Home Loan asset-backed security that holds the mortgage on his former Coral Gables condominium consists of $38,000 for unpaid principal and nearly $6,000 in legal fees and interest accrued before the ruling. According to the judgment, the security can charge 8 percent interest until he pays off the debt.
King, who said his default was caused by a reduction in his income, now rents near Fort Lauderdale, Fla.
"I thought the foreclosure was the worst of a bad situation, but it's not," said King. "The people who got sucked into the real-estate bubble are still paying for it, even after they've taken our homes."
For more information on your rights in Foreclosure, and Short Sales, consider contacting a Seattle Foreclosure Attorney.
Our Informmation:
Weitz Law Firm
5400 Carillon Point
Kirkland, WA 98033
(425) 889-9300
scottweitz@weitzlawfirm.com
When John King stopped making payments on his home in Coral Gables, Fla., two years ago, he assumed the foreclosure ended his mortgage contract, he said. In December, a Miami-Dade County court gave collectors permission to pursue him for $44,000 stemming from the default.
King is among a rising number of borrowers learning that they can be on the hook for years after losing their homes. Amid a crisis that stripped $6.4 trillion, or 28 percent, from the value of U.S. residential real estate since the 2006 peak, lenders are exercising their rights to pursue unpaid mortgage balances. To get their money, they can seize wages, tap bank accounts and put liens on debtors' other assets.
Weitz: This only applies when banks 'judicially foreclosue' as is custom in Florida. In Washington, the predominate foreclosure action is to excersize non-judicial foreclosure. In these types of Foreclosures, the foreclosing party cannot pursue a deficiency.
Bailouts
"The big dogs get a bailout, and the little man gets no mercy," said King, 39, referring to the U.S. government's rescue of banks and other financial institutions.
While there are no statistics on the number of deficiency judgments approved by courts, the Federal Deposit Insurance Corp. (FDIC) tracks the amount banks collect after defaulted loans were written off.
These mortgage recoveries rose 48 percent to a record $1.01 billion in the first nine months of last year compared with the year-earlier period, according to the Washington-based regulator. Recoveries on defaulted home-equity loans almost doubled to $392 million, the FDIC data show.
The figures don't include money retrieved by trusts overseeing mortgage-backed securities, such as the one that holds the loan on King's former home, or efforts by distressed-asset funds and companies that buy bad loans to profit from collection rights. Judgments such as the one levied against King usually tack on court fees, fines and interest.
Deficiency judgments were rare in the 15 years since the last real-estate slump, said Ben Hillard, a former investment banker who now is a real-estate and corporate attorney at Hillard & Rogers in Largo, Fla.
"The banks have been too underwater with foreclosures to spend much time on deficiency judgments, but that's beginning to change," Hillard said. "This is going to be the next big crisis."
Almost 4.5 percent of mortgaged U.S. homes were in foreclosure during the third quarter, the highest rate in the 37 years of tracking the data, the Mortgage Bankers Association said Nov. 19. A record one in every 10 mortgages was at least one payment overdue in the same period, the Washington-based trade group reported.
The Obama administration is seeking to modify as many as 4 million loans by 2012 to prevent foreclosures through the Home Affordable Modification Program, which cuts monthly payments to about a third of borrowers' income. By the end of December, the program was responsible for more than 850,000 modifications, the Treasury Department said in a Jan. 15 report.
Weitz: this program has had mixed results. See previous post here on the HAMP program.
The federal government spent $230 billion in the year that ended in September to support homeowners, according to the Congressional Budget Office in Washington. Those efforts didn't help people who had already walked away from their houses.
In states such as Florida, courts give mortgage holders as long as five years to seek a deficiency judgment and, if granted, up to 20 years to collect. Usually, they have the option of renewing the judgment if it's not paid off within 20 years.
Weitz: Different story in WA!
About a third of U.S. states, including California and Arizona, prohibit collection efforts on primary residences after foreclosure. In some cases, homeowners waive that protection if they refinance. Most states allow collection on unpaid home-equity loans.
Weitz: This is much closer to the WA Law.
The laws in states that protect some borrowers stem from the Great Depression in the 1930s, when a lack of bidders at foreclosure auctions caused deficiencies that, with added fees and interest, sometimes were bigger than the original loan amount, according to a 1934 Virginia Law Review article by Sol Phillips Perlman. Today, many courts measure the shortfall using a property's market value at the time of foreclosure rather than auction results.
The likeliest candidates for deficiency judgments are so-called rational defaults, said Larry Tolchinsky, a real-estate attorney in Hallandale Beach, Fla. In those cases, people who are current on their mortgages decide to walk away from a property because its value has sunk so far below their loan balance they have no hope of recouping the loss.
About 21 percent of American homeowners owe more on their mortgages than their properties are worth, according to Zillow.com, a Seattle real-estate data firm.
"Walking away from a property comes with a cost, especially for people who otherwise have good credit," Tolchinsky said. "The bank is going to pull your credit report, and if you're current on your other bills they are going to come after you and potentially ruin you."
It's not just foreclosures that can trigger debt collections. Short sales also may lead to deficiency judgments years after former homeowners have moved on, according to Hillard, the attorney in Largo. In a short sale, lenders agree to let borrowers sell a home for less than the mortgage balance.
"Banks are being very careful to preserve their rights, either outright in the short-sale agreement or by using vague language that leaves that door open," Hillard said. About 90 percent of people who do a short sale think they are "off the hook."
Weitz: This is a big issue in WA. Banks can pursue deficiencies after Short Sales. You should always have all documents reviewed by a Seattle Short Sale Attorney if you do a short sale.
That was the case when two of his clients, Brigitte and John Howard, sold their home in New Port Richey, Fla., almost two years ago without using a lawyer to check the bank's short-sale agreement.
"Still paying"
"We got a call out of the blue saying we owed $20,000," said Brigitte Howard, 45. "It was a shock. There was no mention in the short-sale contract that the bank might come after us for the difference."
The money King owes to the Soundview Home Loan asset-backed security that holds the mortgage on his former Coral Gables condominium consists of $38,000 for unpaid principal and nearly $6,000 in legal fees and interest accrued before the ruling. According to the judgment, the security can charge 8 percent interest until he pays off the debt.
King, who said his default was caused by a reduction in his income, now rents near Fort Lauderdale, Fla.
"I thought the foreclosure was the worst of a bad situation, but it's not," said King. "The people who got sucked into the real-estate bubble are still paying for it, even after they've taken our homes."
For more information on your rights in Foreclosure, and Short Sales, consider contacting a Seattle Foreclosure Attorney.
Our Informmation:
Weitz Law Firm
5400 Carillon Point
Kirkland, WA 98033
(425) 889-9300
scottweitz@weitzlawfirm.com
Wednesday, March 3, 2010
Federal Mortgage Modifcations Falling Short
Below is an execerpt from the Wall Street Journal regarding regarding the success (or lack thereof) of the Modification programs implemented by the Federal Government. For more information on your rights in Foreclosure or Short Sales, consider talking to a Seattle Foreclosure Attorney.
The Federal Reserve has pushed mortgage rates to near half-century lows, but millions of U.S. homeowners haven't benefited from that because they can't—or won't—refinance.
Falling home prices have left many owners with little or no equity, making it harder to qualify for refinancing. Moreover, stricter lending standards and higher fees by banks and mortgage giants Fannie Mae and Freddie Mac and declining incomes have made it tougher and less attractive for borrowers to seek new loans.
Around 37% of all borrowers with 30-year conforming fixed-rate mortgages—who collectively hold about $1.2 trillion of home loans—have mortgage rates of 6% or higher, according to investment bank Credit Suisse. Many could reduce their rates by a full percentage point if they refinanced at current rates, about 5%. More than half could lower their rates nearly three-quarters of a percentage point, according to Credit Suisse.
About a quarter of all mortgage holders are "underwater"—they owe more on the house than it's worth—which normally makes it impossible to get refinancing: Banks want collateral to back the value of home loans they make. The Obama administration recently extended a program intended to help underwater homeowners refinance, but few people have tapped it so far. The program has faced logistical hurdles, delays and confusion from brokers and lenders.
Some mortgage bankers say higher fees by lenders have undermined the effort to encourage refinancing. Fees that Fannie and Freddie began imposing in 2008, as loan delinquencies began to rise, have made it unattractive for some borrowers to refinance. For example, a borrower with 20% down and a 695 credit score seeking to refinance must pay fees equal to 1% of the loan amount. Those fees rise for borrowers with weaker credit scores, higher loan-to-value ratios, or other risk factors.
Overcorrecting for the abuses of financial institutions "has defeated the Fed's purchase program," said Alan Boyce, a mortgage-securities-market veteran. Those loan fees, he said, are partly "responsible for why there's been no refi boom."
The higher fees and tight credit standards show the tensions facing Fannie and Freddie. As the government-controlled companies try to raise revenue to offset their losses, those efforts can conflict with their basic public-policy mission: to help stabilize the housing market.
Fannie and Freddie have to strike a balance between risk and access to credit. Figuring out "where that line is involves some trade-offs," said Edward DeMarco, acting head of the Federal Housing Finance Agency, which oversees Fannie and Freddie.
The last time mortgage rates were at current levels, in 2003, refinancing activity hit $2.9 trillion, according to trade publication Inside Mortgage Finance. Last year, refinance volume reached $1.2 trillion, the highest amount since 2003 but not nearly as much as expected, considering how low interest rates have fallen.
Traditionally, borrowers have an incentive to refinance when they can reduce their mortgage rate by one percentage point or more.
Borrowers who are refinancing tend to be those who need it least. Fannie and Freddie refinanced 4.2 million borrowers last year. On average, borrowers who refinanced through Freddie Mac saved $2,600 annually. But the savings on the whole have gone to "very, very good credit borrowers and it really isn't going very far down the credit spectrum," said Michael Fratantoni, the head of research and economics for the MBA.
On Monday, the Obama administration said it would extend for a year a program launched last April to help homeowners with little or no equity to refinance. That program, which had been set to expire this June, was called a "failure" last week by analysts at Barclays Capital. While the administration had said it would benefit millions, so far just 188,000 borrowers who owe between 80% and 105% of the value of their homes had refinanced through December. Last September, it was expanded to include borrowers who owe up to 125% of their home value, but fewer than 2,000 borrowers have used that program through December.
The administration says it is also considering new ways to allow distressed homeowners to refinance through the Federal Housing Administration.
Unfortunately, many of the programs the government has created have been largely unsuccessful. Borrowers should know their rights in short sale, and the foreclosure process. For more information, contact a Kirkland Foreclosure Attorney.
Our Firm:
Weitz Law Firm, PLLC
Kirkland, WA 98033
(425) 889-9300
scottweitz@weitzlawfirm.com
The Federal Reserve has pushed mortgage rates to near half-century lows, but millions of U.S. homeowners haven't benefited from that because they can't—or won't—refinance.
Falling home prices have left many owners with little or no equity, making it harder to qualify for refinancing. Moreover, stricter lending standards and higher fees by banks and mortgage giants Fannie Mae and Freddie Mac and declining incomes have made it tougher and less attractive for borrowers to seek new loans.
Around 37% of all borrowers with 30-year conforming fixed-rate mortgages—who collectively hold about $1.2 trillion of home loans—have mortgage rates of 6% or higher, according to investment bank Credit Suisse. Many could reduce their rates by a full percentage point if they refinanced at current rates, about 5%. More than half could lower their rates nearly three-quarters of a percentage point, according to Credit Suisse.
About a quarter of all mortgage holders are "underwater"—they owe more on the house than it's worth—which normally makes it impossible to get refinancing: Banks want collateral to back the value of home loans they make. The Obama administration recently extended a program intended to help underwater homeowners refinance, but few people have tapped it so far. The program has faced logistical hurdles, delays and confusion from brokers and lenders.
Some mortgage bankers say higher fees by lenders have undermined the effort to encourage refinancing. Fees that Fannie and Freddie began imposing in 2008, as loan delinquencies began to rise, have made it unattractive for some borrowers to refinance. For example, a borrower with 20% down and a 695 credit score seeking to refinance must pay fees equal to 1% of the loan amount. Those fees rise for borrowers with weaker credit scores, higher loan-to-value ratios, or other risk factors.
Overcorrecting for the abuses of financial institutions "has defeated the Fed's purchase program," said Alan Boyce, a mortgage-securities-market veteran. Those loan fees, he said, are partly "responsible for why there's been no refi boom."
The higher fees and tight credit standards show the tensions facing Fannie and Freddie. As the government-controlled companies try to raise revenue to offset their losses, those efforts can conflict with their basic public-policy mission: to help stabilize the housing market.
Fannie and Freddie have to strike a balance between risk and access to credit. Figuring out "where that line is involves some trade-offs," said Edward DeMarco, acting head of the Federal Housing Finance Agency, which oversees Fannie and Freddie.
The last time mortgage rates were at current levels, in 2003, refinancing activity hit $2.9 trillion, according to trade publication Inside Mortgage Finance. Last year, refinance volume reached $1.2 trillion, the highest amount since 2003 but not nearly as much as expected, considering how low interest rates have fallen.
Traditionally, borrowers have an incentive to refinance when they can reduce their mortgage rate by one percentage point or more.
Borrowers who are refinancing tend to be those who need it least. Fannie and Freddie refinanced 4.2 million borrowers last year. On average, borrowers who refinanced through Freddie Mac saved $2,600 annually. But the savings on the whole have gone to "very, very good credit borrowers and it really isn't going very far down the credit spectrum," said Michael Fratantoni, the head of research and economics for the MBA.
On Monday, the Obama administration said it would extend for a year a program launched last April to help homeowners with little or no equity to refinance. That program, which had been set to expire this June, was called a "failure" last week by analysts at Barclays Capital. While the administration had said it would benefit millions, so far just 188,000 borrowers who owe between 80% and 105% of the value of their homes had refinanced through December. Last September, it was expanded to include borrowers who owe up to 125% of their home value, but fewer than 2,000 borrowers have used that program through December.
The administration says it is also considering new ways to allow distressed homeowners to refinance through the Federal Housing Administration.
Unfortunately, many of the programs the government has created have been largely unsuccessful. Borrowers should know their rights in short sale, and the foreclosure process. For more information, contact a Kirkland Foreclosure Attorney.
Our Firm:
Weitz Law Firm, PLLC
Kirkland, WA 98033
(425) 889-9300
scottweitz@weitzlawfirm.com
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