Existing Home Sales Fall - Shadow Investory looms

Yikes. A report from CNBC on October Home sales.

Important Stats:
Sales fell 25% from last year
Inventories rose to 10.5 months




More tough News: Shadow Inventory estimated at 2.1 Million...and this only looks at distressed property!

Fannie and Freddie Update - Jame Lockhart

An interview with James Lockhart with Dylan Ratigan, who has intimate knowledge of Fannie and Freddie.

An Overview:

1) underwriting standards were lowered due to political demands
2) these government agencies were leveraged at 100-1. (ie. lending money they did not have)
3) Fannie and Freddie are requesting and actively pursuing having banks buy back these bad loans that were fraudulently transferred to Fannie and Freddie (this is really bad for banks).

Visit msnbc.com for breaking news, world news, and news about the economy

Homeowners vs. Banks

A clip from the Dylan Ratigan show interviewing some Foreclosure attorneys from Florida. Remember, Florida has a different foreclosure process than Washington, but its an interesting video nonetheless.

Visit msnbc.com for breaking news, world news, and news about the economy

If you'll note, the segment specifically points to Washington as one of the fastest growing areas in terms of those stopping payment of their mortgage....better pay attention folks. Its going to get interesting around here.

Washington Short Sale Law - An overview

So you want to do a short sale?

Short sales are becoming more and more necessary in this world of no-equity real estate.

Here are some typical questions and answers regarding the short sale process in Washington State:

Q: What exactly is a short sale?

A: A short sale is the sale of a property in which the proceeds that are available from a sale are less than the amount owed on the loan.

Q: I hear short sales a huge headache. Is that true?

A: Yes and No. Short sales require more paperwork to be given from the borrower -typically tax returns, pay stubs, bank account information, and financial statements are requested by the banks in order to approve a short sale. Additionally, the time frame of short sale is typically much longer than a typical sale as the banks do appraisal work on the property, and there is a period of negotiation. If the above two issues are not overly burdensome in your mind, then the short sale is nothing to fear.

Q: What happens to the potential deficiency? (amount owed (less) proceeds from the sale)

A: In our opinion, this is by far the biggest issue in short sales. IF THE BANKS DO NOT WAIVE THEIR DEFICIENCY RIGHTS, YOU WILL STILL OWE THE MONEY.

That said, banks are often willing to reduce the entire deficiency or a part thereof.

** This is truly a point of negotiation and every case has different arguments as to why the deficiency should be waived - whether it be potential bankruptcy or foreclosure protections allowed in your state. There are numerous arguments that can be persuading to the banks to waive or lower these deficiencies.

Bottom Line: short sales can be a terrific tool to assist you in getting out of your 'underwater' mortgage in a fashion you may not have expected. It could save you from bankruptcy, and/ or foreclosure.

The key is to fine a competent Realtor and/ or Short sale facilitator to protect your best interest, and push the deal through as effectively as possible.

For more information, consider contacting a Seattle Short Sale Attorney.

Our Firm:

Weitz Law Firm, PLLC

5400 Carillon Point

Kirkland, WA 98033

(425) 889-9300

weitzlawfirm.com

scottweitz@weitzlawfirm.com

Quanative Easing - A Cartoon Overview

These are entertaining videos regarding the Federal Reserve's Quanatative Easing, and past history.

Quanative Easing Explained:



A (Mock) interview with Alan Greenspan and Ben Bernanke:

Foreclosure Video Clip - Some fighting back

As he often does, Dylan Ratigan had a nice segment on the foreclosure issues faces the U.S.:



Highlights:
1) The foreclosure problem is growing
2) It is moving into higher wealth neighborhoods
3) Some governmental law officials at the local level are requiring higher standards for the foreclosure

Mortgage Modification Effectiveness - Update on HAMP

An Update on the Modification issue in the WSJ today:

The Obama administration's program to help struggling borrowers keep their homes is being hurt by the same miscommunication, botched documents and other snafus that caused the original foreclosure crisis.

After J.P. Morgan Chase & Co. agreed in January to her trial loan modification under the Home Affordable Modification Program, Stephanie Lulko made six $767-a-month mortgage payments, even though the bank said it had no record of her loan and then warned in a letter that she would be foreclosed on unless she paid $4,091.94.

The 44-year-old Ms. Lulko, of Oklahoma City, says bank employees told her to ignore the letter. Their tune changed in June, when J.P. Morgan said she earned too much to qualify for a permanent modification. The problem this time: The bank's numbers were wrong. "I wish I had never applied for this modification," she says.

In September, the bank rejected her request for a permanent loan modification for a second time. She faces foreclosure unless she pays nearly $5,000—the difference between her original and modified loan payments, plus late fees. Ms. Lulko has been unemployed since her temporary job at the U.S. Census Bureau ended in August.

Weitz - I see this ALL THE TIME. The modification allows for lower payments for a period, but if the loan is not approved for permanent modification (only 29% are approved for permanent modification), the bank will pursue the amount that was deducted from the original mortgage amount to create a modified payment. (ie. 2000/ mortgage is reduced to 1500/ month for the modification - If, after the trial period, the permanent modification does not go through, the bank will pursue the 1500 difference)

J.P. Morgan denies any wrongdoing related to Ms. Lulko's loan. "We worked with the borrower over a number of months and communicated the status of the loan modification during that time," spokesman Tom Kelly says. He adds that the lender has converted 29% of temporary modifications into permanently reduced payments as of September. Weitz - 29% seems outrageously low to me. Why let the trial payments begin in the first place?!

The foreclosure-paperwork furor is deepening criticism of the U.S. government's high-profile mortgage-restructuring effort, which has fallen short of its goal of helping three million homeowners. More than half of the 1.4 million borrowers approved for temporary modifications have fallen out of HAMP because they didn't qualify.

The program "has undoubtedly put people into foreclosure," says Neil Barofsky, the special inspector general overseeing the Troubled Asset Relief Program, which funds HAMP. "It's a parade of documentation horrors."

In a report to Congress on Oct. 26, Mr. Barofsky concluded that some borrowers seeking loan modifications through HAMP might wind up "worse off than before they participated." Back payments, penalties and late fees triggered when homeowners are rejected for a permanent fix can push some borrowers over the edge, he said.

As part of HAMP, mortgage servicers and investors get financial incentives to modify a borrower's loan payment to 31% of monthly gross income. Servicers typically hit that number by lowering interest rates or extending a loan's life. Borrowers must make at least three "trial payments" to be considered for a permanent fix.

Weitz- reduction of principal is often sought by clients, however, it has been extremely rare in my experience.

Borrowers who miss a payment or otherwise fail to win a permanent modification essentially are stuck with the original terms of their mortgage.

"The trial period provides homeowners an immediate reduction in payments at no expense to taxpayers," says Andrea Risotto, a Treasury spokeswoman. "It is the gateway for many homeowners to get the help they need."

The Treasury Department doesn't record how frequently errors occur with documentation on home loans submitted to more than 2,500 financial institutions and servicers empowered by the U.S. government to grant and reject HAMP requests. An outside review of borrowers denied permanent modifications disagreed with the servicer's decision in 4.8% of the loans during the fiscal quarter ended in August.

Meanwhile, anecdotal evidence points to a modification process at least fraught with miscommunication and misunderstanding.

Bank of America Corp. says it "inadvertently verbally reviewed" a loan-modification request by Lindsey Farnsworth of Sugar Hill, Ga., who started making reduced payments to the Charlotte, N.C., bank in May after being told she was "preapproved" for HAMP.

Loan servicers are required to follow government guidelines on loan modifications. Last month, the Treasury Department sent a notice "reminding them of their requirement to comply with all applicable state and federal laws," says Ms. Risotto, the Treasury spokeswoman.

Mr. Barofsky says the oversight is toothless, noting that no servicers have been fined for bungled paperwork or improper foreclosures. At the request of nine U.S. senators, Mr. Barofsky is auditing whether servicers in HAMP are correctly following Treasury's guidelines when deciding whether borrowers should get a loan modification. The inspector general also is scrutinizing how borrowers are notified that they failed to qualify.

Sometimes, it can be hard for borrowers to tell if a servicer is putting them through HAMP or its own loan-modification process.

Mr. Barofsky, a frequent critic of HAMP, says the foreclosure furor that erupted in mid-September convinced him even more strongly that mortgage servicers have wrongly denied permanent loan modifications to deserving borrowers.

"If there are problems like we've seen on one side of the shop, why would we expect anything different on the modification side?" Mr. Barofsky says in an interview.

For more information on your rights in Foreclosure, consider contacting a Seattle Foreclosure Attorney.

Our Firm

Weitz Law Firm, PLLC
5400 Carillon Point, Bldg 5000
Kirkland, WA 98033
(425) 889-9300

Seattle Real Estate Recovery?

CNN MONEY recently called Seattle the 2nd best market for a real estate recovey.

Here's the article:
Seattle has become a world-class city with a diverse, vibrant economy. As a home to manufacturers such as Boeing and software providers such as Microsoft, the job market has held up better than average, with a current unemployment rate of 8.8%.

Home prices had a softer landing as well, dropping just 15.2% over the past three years, about half the national average. However, prices do tend to be volatile, according to Mark Fleming, chief economist for First American CoreLogic. The lack of available land for development is one reason for that volatility, as are political restrictions on growth.

After another modest price decline of 2.3% in the next eight months, the market should begin to turn up. Between June 2010 and June 2011, the city should see a gain of 6.2%. Averaged out, that means a 3.8% gain over the next two years*.

And while that may not sound all that robust for those jaded by the annual double-digit returns recorded during the boom, that performance will be one of the best of any large city during that period.

Weitz - If you'll notice, this article has no statistics whatsoever to back up their their claim. In the hopes of being a realist (rather than a pessimist), I will simply point out that Foreclosures continue to rise dramatically, the number of sales is very close to post WWII lows with closed sales in October (down 25% from last year), and bankrtupcies still continue to rise (up 18% from last year)....not exactly the fundamentals of a solid recevery. In my opinion, this is a poorly thought out, poorly researched article. Be careful putting to much faith in the prediction of CNN-Money.

Strategic Default - the stealth stimulus

Weitz: A terrific article in the WSJ today about ‘the stealth stimulus’.

The mortgage-foreclosure mess could prove expensive for banks and investors. But in some states, it will also prolong an unintended economic stimulus: free housing for millions of defaulters.

Across the U.S., banks are running into problems foreclosing on homes because of flaws in their paperwork. Their main transgression involves the use of so-called robo-signers, bank employees who signed foreclosure affidavits without properly checking the required loan documentation. Major loan servicers—including Bank of America Corp., J.P. Morgan Chase & Co. and Ally Financial Inc.'s GMAC Mortgage—have at least temporarily stopped some foreclosure sales as state attorneys general probe their practices and loan servicers check to make sure their papers are in order.

The problems will be expensive for banks, and for investors in mortgage bonds, in terms of added processing costs and lost interest income. But for the millions of U.S. homeowners who have stopped making mortgage payments or who are already in the foreclosure process, the upshot is that they'll get to stay in their homes a bit longer. Given that they're not paying rent, that time has value.

Defaulters living in their homes are getting a subsidy worth about $2.6 billion a month, according to a Wall Street Journal analysis based on mortgage data from LPS Applied Analytics and rent data from the Commerce Department. That's 0.25% of U.S. personal income, roughly equivalent to the benefit top earners receive from Bush-era tax breaks.

The longer defaulters stay in their homes, the longer the stimulus lasts. The average borrower whose home is in the foreclosure process hasn't made a payment in nearly 16 months, according to LPS.

Weitz - 16 months of free living expenses - that is incredible. My concern is what happens when the well runs dry. Hopefully, folks have utilized this money and placed it in savings.

It's hard to know how much of that money will find its way into the economy through consumer spending. Some defaulters sock away their mortgage payments, in hopes that they'll strike a modification agreement with their bank and get current again. Others have lost their jobs and hence most of their income, though the free housing might allow them to make purchases they otherwise would have to forgo.

Some homeowners who have defaulted on their mortgage payments are cashing in by renting out their homes. Joe Mayol, a real-estate agent in Palmdale, Calif., estimates that in his area about two-thirds of houses with defaulted mortgages are occupied, and half of those by renters. "People are getting money out of these houses," he said.

Ms. Zelman says her research suggests defaulters do spend much of the money on consumer services and goods. "People are taking what they would have been spending on a mortgage and spending it somewhere else," she says.

To be sure, while the free rent might help some people through periods of unemployment, it's not particularly encouraging to people who keep paying their mortgages, and it's not going to drive a recovery. It's also painful for local governments and school districts, which typically can't collect property taxes from defaulters. The foreclosure troubles can also add to uncertainty in the housing market and delay its return to healthy growth.

Weitz - exactly. When will we have a true bottom? Probably not until the foreclosure cycle works itself out.

"I don't think that's the kind of consumer recovery we want, if the only reason they're spending a bit more is that they're not paying their other bills," said Joseph Carson, director of global economic research at AllianceBernstein in New York.
Another question is what might happen in the housing market if banks caught up in robo-signing controversy can't put as many foreclosed homes up for sale. By taking some supply off the market, it could help support prices at a time when demand has been exceedingly weak.

Given the number of foreclosed homes that have already piled up in their inventory, though, banks already have more ready-for-sale houses than the market can bear. As of September, banks owned nearly a million homes, up 21% from a year earlier. That alone would take 17 months to unload at the most recent pace of sales, and doesn't include the 5.2 million homes still in the foreclosure process or those whose owners have already missed at least two payments.

Weitz - these numbers are staggering, and the main reason why I believe there will be downward pressure on the real estate markets for the considerable future.

Meanwhile, banks and investors suffer. (Weitz - its really sad that the banks have to suffer...they will just have to make do with their on-going accounting fraud and free money from the Federal Reserve...its hard to feel sorry for them given the perks they have received to the dismay of taxpayers.) It's hard to estimate how much it will cost to fix the paperwork problems. But the interest they could earn on the money from selling all the homes they own, together with the ones attached to delinquent mortgages, amounts to more than $10 billion a year.

Still, at least some of the banks' loss is the borrowers' gain.