Seattle Real Estate / Foreclosure Attorney Blog

Seattle Real Estate: Is now the time to buy?

2012-01-02T13:35:00.000-08:00

A recent well-written article in the Seattle Times about ‘Testing the Real Estate Market’ in Seattle – obviously, I’ve got plenty to say on this one.

Despite declining prices — or is it because of them? — last year is shaping up as the Seattle area's best year for home sales since the real-estate market tanked in 2007.

Weitz- “Best since 2007” …. Not a very high bar to exceed!

Through November, closed sales of houses and condos in King and Snohomish counties were running 10 percent ahead of 2010's pace, according to Northwest Multiple Listing Service statistics (December's numbers are expected Wednesday).
That's still barely half the peak pre-bust volume. But market-watchers say the improvement is encouraging, especially considering 2011 was the first year in the past three with no federal-stimulus tax credits to entice buyers.

Weitz - ½ of the pre-bust levels – let me interpret…..still dreadful.

So who bought last year? And who's likely to be buying in 2012?
Renters who've decided low prices and interest rates now make buying more attractive than renting, brokers and other industry insiders say.

Weitz - For the first time since the crash, I have actually started to say that there are ‘SOME’ opportunities in the market place. Where are they, you ask? The low end of real estate has obviously been hit hard. We are seeing investors buying properties and easily being able to rent them and cash flow – namely, places like Everett and Tacoma seem to make sense with a lot of Single Family Homes and Condos falling to less than $150,000.

Investors who sense opportunity in deeply discounted distressed properties. Folks whose changing life circumstances — a new job, a growing family — dictate a move.

And, perhaps most important, people willing to live with the possibility that their home's value may go down still farther before it goes up — because they don't plan to sell anytime soon.

Weitz – while this can make sense, I don’t agree with this theory for a lot of folks. If you can rent and save a significant amount of money on a monthly basis, you are much better off waiting for opportunities in the housing market. It is my opinion that Real Estate has yet to bottom in the Seattle area in most areas – even if I am wrong on this fact, I find it hard to believe that rapid appreciation will be seen in the near future. As the only saying goes: ‘you don’t want to be the one to catch a falling knife’.

Buyers aren't purchasing homes as short-term investment vehicles anymore, says principal Jeff Bell of Cobalt Mortgage in Kirkland, and that's a huge shift.

"The whole system is different now," he says. "We're going back to the way real estate was 20 or 30 years ago."

Seattle economist Matthew Gardner, who analyzes the market for Windermere Real Estate, concurs.

Before the bust, he says, "it wasn't, 'This is my home.' It was, 'This is going to make me money.' "

Among buyers today, Gardner says, that expectation is all but gone.

No big change

Weitz – below are some ‘industry experts’ discussing the market – I’m going to comment on all their opinions, and then point out the obvious for everyone.

For the most part, industry observers don't expect any dramatic changes in the local real-estate scene in 2012. "The market's probably going to be struggling for a while overall," says Glenn Crellin, director of the Washington Center for Real Estate Research.

Weitz – agreed – with the amount of distressed Real Estate in the market, there is an incredibly high possibility of continued struggles.
"We'll be bouncing along the bottom," OB Jacobi, Windermere's president, told a recent industry gathering.

Weitz – note that OB is a Broker – Brokers will generally be overly optimistic as their paychecks gain as Real Estate gains.

Prices may slip a little more, experts say, or at best hold steady. Interest rates should stay at or near their record lows.

Weitz – Agreed.

Inventory probably will remain depressed — in part because so many homeowners are underwater on their mortgages, says Tim Ellis, who writes the Seattlebubble.com real-estate blog: "People who might otherwise be selling can't afford to."

Weitz – Agree with Tim (as usual) – check out his blog Seattle Bubble: it’s a great resource for Seattle Real Estate.

Tougher lending requirements probably will continue to short-circuit a significant number of sales, brokers say — financing obstacles are depressing sales by 10 to 15 percent, says John L. Scott Real Estate Chairman and CEO Lennox Scott.

Weitz – Agree with Mr. Scott for perhaps the first time ever.

Finally, observers say, foreclosures — which helped drive sales up and prices down in 2011 — will continue to play an influential role.

Weitz – Again – I agree.

Weitz – Note that you have a handful of experts in Seattle Real Estate indicating that things will not be improving (and most say that tougher times will be ahead). So please tell me why NOW is a good time to buy?

Sales of bank-repossessed homes were up substantially last year. They accounted for 17 percent of all King County sales in October, up from less than 10 percent in October 2010, according to Seattle-based real-estate marketplace Zillow.com.

Those homes sold not only for significantly less, but also at steeper discounts than other properties compared to a year earlier. The median price of repossessed houses sold in King County in November was down 18 percent from the same month in 2010, according to an analysis by Washington Property Solutions, a short-sale negotiating firm.

For nondistressed houses, the year-over-year drop was less than 3 percent.

Weitz – I’m not sure why ‘distressed’ and ‘non-distressed’ numbers always get separated. The reality is that a buyer has equal access to both. ‘Distressed’ homes are not some distinct sub-category of the market. They are the new reality.

The foreclosure pipeline probably won't dry up anytime soon, most analysts say, despite a recent slowdown in auctions and repossessions they consider merely a pause.

Weitz – Correct, the New Foreclosure Fairness Act has been a great ‘stalling’ aide for foreclosures. The FFA, coupled with the Recontrust issues (Bank of America’s Trustee for Foreclosures), has led to a recent slowdown in Foreclosures – don’t expect that trend to continue.

The percentage of Washington homeowners at least 30 days delinquent on their mortgages has nudged up from 7.1 to 7.5 percent over the year, according to the Mortgage Bankers Association.

And, according to Zillow's latest data, 29 percent of King County single-family homes with mortgages have "negative equity" — their owners owe lenders more than the homes are worth.

That's likely to keep foreclosures elevated, says Stan Humphries, Zillow's chief economist.

But their impact on prices doesn't reach across the board, he adds: Higher-priced houses, which face less competition from foreclosures and short sales, have declined much less in value over the past year than lower-priced stock.

Weitz – this has been true; however, it leads to my prediction for 2012: while the high end has fared better thus far, I expect that the lack of buyers will eventually lead to sellers doing more ‘strategic defaults’ and thus lowering the prices of those properties as well.

That's among the signs of stability in the Seattle market that Humphries says he finds encouraging heading into 2012.

"It's not a terrible time to buy," says Ellis, the blogger. "It depends on your situation."

He bought his first house last year, a short sale in Everett, after looking on-and-off for five years.

That's what Crellin, the real-estate researcher, concluded. He moved recently from Pullman to Seattle when his center switched affiliations from Washington State University to the University of Washington.

He's 61, headed toward retirement. When he considered what the real-estate market might do between now and then, Crellin says, he wasn't certain he'd recoup his investment if he bought.

Considerations like that drove buying decisions in 2011 and will continue to drive them in 2012, experts say.

"It's not 'Buy because you're going to get 10 percent appreciation over the next couple years,' " says Bell, the mortgage broker. "It's not what it used to be at all."

He plans to buy a new house this year — and stay there 15 or 20 years. "I'm not looking for the house to appreciate," he says. "I'm moving for my lifestyle."

Another likely 2012 buyer: Zillow's Humphries. He's not looking to make money, he says. He just wants a bigger back yard.

"With three kids, that's important," the economist says.

Weitz – bottom line: I tell clients the key in deciding whether to purchase a property (from a purely objective standpoint) is to focus on cash flow. If you can buy for the same amount or less of renting, then I think it’s a fine time to buy. If that is not the case, patience is a virtue and will be rewarded.

For more information on your rights in Foreclosure or Short Sale, consider seeking counsel from a Seattle Foreclosure Attorney.

Weitz Law Firm, PLLC

520 Kirkland Way, Ste 103
Kirkland, WA 98033

425 889-9300

weitzlawfirm.com

Underwater Mortgage News in Washington State

2011-11-11T09:46:00.001-08:00

Great Video from CNBC Realty Check above.

Some of the highlights:

1) 11 Million borrowers currently owe more than their homes are worth
2) The New Obama HARP program is currently the administrations response. Analysts believe the program will benefit 1-2 Million borrowers
3) When you take into account the costs to sell your property, nearly 50% of all loans could be underwater.

For more on your rights in Foreclosure or Short Sale, consider seeking counsel from a Seattle Foreclosure Attorney or a Seattle Short Sale Attorney.

Our Firm:

Weitz Law Firm, PLLC
520 Kirkland Way, Ste 103
Kirkland, WA 98033

425 889-9300

Large year over year housing price drop in Seattle

2011-11-06T07:15:00.000-08:00

AP: Excerpts from a recent Seattle Times article:

King County home prices tumbled to a new post-boom low in October, and no one is sure exactly why.

Weitz – no one can figure out why?!....hmmmm?.... Perhaps the greatest Asset Bubble in the History of America that we experienced in Real Estate is imploding? Perhaps the excessive un-employment? Perhaps the constantly rising cost of commodities because we continue to thrash the dollar via the Federal Reserve's QE programs? Perhaps the decreasing incomes for most of America? I can’t place my finger on it... Someday, we’ll figure it out.

As real-estate insiders offered a host of possible explanations for the drop Thursday, they also debated whether it's a harbinger of a new, long-term decline — or a one-time statistical blip.

The median price of houses that sold last month was $320,000, down nearly 15 percent from October 2010, according to statistics released by the Northwest Multiple Listing Service.

Weitz – 15%! That’s a large number. I’ve been writing on this for some time and don’t recall Seattle posting a YOY decline that bad.

The previous low, $334,000, came this March. The median had fluctuated in a narrow range, between $345,000 and $350,000, since then.

October's median condo price, $178,500, was down even more sharply year-over-year — 23 percent.

Weitz – Wow – a ¼ drop in 1 year –scary.

Single-family-home prices in Snohomish County were down 13 percent, to $235,000.

Glenn Crellin, director of the Washington Center for Real Estate Research at Washington State University, said he expects prices will continue to slip for another year.

"There's little pressure on buyers to be active, especially with interest rates not expected to rise for some time," he said. Mortgage rates have been at historic lows — even dipping below 4 percent for a 30-year term — for much of this year.

Compared with the same month in 2010, sales volumes were up in October for the fifth straight month. Buyers closed on 14 percent more houses and 30 percent more condos in King County, and 37 percent more houses in Snohomish County.

Weitz – that’s an odd dichotomy - Sales are up dramatically, but prices are down dramatically. Clearly, there is a dis-connect in the market. My conclusion: the high end is not selling. Conversely, cash buyers are coming in and collecting investment properties they can immediately cash flow with.

But those gains were overshadowed by the big decline in prices. King County's single-family median sales price was off more than 33 percent last month from its July 2007 peak.
The last time it was lower: March 2005.

Some possible causes of the October drop:

1) Tighter limits on "jumbo" loans: On Oct. 1 the limit on federally backed mortgages dropped from $567,500 to $506,000. That left buyers of higher-priced homes with fewer financing options, OB Jacobi, Windermere Real Estate's president, said in a prepared statement.

"It's only natural that this would cause downward pressure on October's median price," he said.

But Ellis, who also is a researcher for online brokerage Redfin, said homes likely to be affected by the new limit account for less than 4 percent of the King County market.

Weitz - I'm with Tim. I think it played a role (and will continue to play a role), but there are much bigger issues going on here.

2) "Distressed" properties: Bank-repossessed homes tend to fetch less from buyers, as do "short sales" for less than the seller owes its lenders.

Together, they made up about 31 percent of all King County single-family-home sales in October. That's about the same share as the last few months.

Weitz - this isn't going away - it's impractical to call this an excuse for a bad year. This is the new reality.

3) Cash offers: More buyers, especially investors, are making all-cash offers, Crellin said — and buyers are accepting them, although they often are lower, to avoid the uncertainties of financing.

Sellers of higher-priced homes also are starting to drop their asking prices, he added, and that could be pushing the median sales price lower.

4) Apples and oranges: The 1,489 King County houses that sold for a median price of $320,000 this October can't be compared accurately with the 1,309 houses that sold for a median price of $375,000 last October, some argue, because the mix has changed.

For instance: Ellis said that while Redfin's research also shows a big year-over-year drop in the median sales price last month, the price per square foot fell much more modestly.
That suggests "for whatever reason, people bought smaller houses," he said.

Weitz - See my comments on this below.

The geographic mix also shifted. Listing-service statistics show King County's lowest-priced areas — Southwest, Southeast and North King County — saw the biggest increases in sales last month. They also experienced the biggest price drops, and that brought the countywide number down.

In higher-priced Seattle and the Eastside, price declines were in the single digits.

Weitz – If I had to make a prediction, I expect the lower tier will continue to drop, but will be the first part of the market to recover as it simply makes sense to purchase these properties that can immediately provide cash flow via renters. Conversely, it is my opinion that the high end market will be much slower to drop (as has been shown), but will nevertheless drop and it will have a difficult time finding a bottom in the foreseeable future as incomes stay stagnant and the cash flow analysis vs. renting a similar property is way off – time will tell.

Our Firm:

Weitz Law Firm, PLLC
520 Kirkland Way, Ste 103
Kirkland, WA 98033
(425) 889-9300

Weitzlawfirm.com

New Foreclosure Review Program in Washington State

2011-11-06T06:43:00.000-08:00

Weitz- a new agreement was announced in which servicers (Banks) have agreed to provide “thorough” reviews of the foreclosure process for millions of homeowners. As usual, I’ll provide thoughts throughout.

WASHINGTON — More than 4 million borrowers who have faced foreclosure since early 2009 will have the chance to have their cases reviewed for potential wrongdoing, federal regulators and some of the nation's largest mortgage servicers announced last week.

The reviews stem from a deal earlier this year in which 14 servicers agreed to hire independent consultants to evaluate whether borrowers suffered financial injury during the foreclosure process. If a review finds errors or abuses by the financial firms, the consultants will determine what recompense wronged homeowners deserve.

Weitz – Note that the “Independent Contractors” are hired by those that they are conducting reviews of – how’s that for a conflict of interest?! You think these “Independent” contractors will have the incentive to be harsh on those writing their checks?

On Tuesday, servicers began mailing letters to the estimated 4 million borrowers whose loans were in the process of foreclosure between Jan. 1, 2009, and Dec. 31, 2010, detailing how to request a review of an individual case.

Officials at the Office of the Comptroller of the Currency (OCC), which crafted the April servicer agreement along with the Federal Reserve, said the mailings would continue through the end of the year and be accompanied by a large-scale marketing campaign to make borrowers aware of the effort.

Additional information is available at www.IndependentForeclosureReview.com or 1-888-952-9105.

Requests for review must be received by April 30.

"There is no cost to the borrower for this review," said Joe Evers, deputy comptroller for large banks at the OCC.

Under the agreement, the servicers are required to foot the bill for the outside consultants conducting the reviews. Evers and other OCC officials said Tuesday that "a great deal of effort has been taken to ensure that the independent consultants are truly independent" and that the servicers will be prohibited from influencing the findings.

Weitz – Riiiiiiight.

While eight consultants are working on behalf of the servicers involved, officials said they had spent months developing a common website and call center, as well as common branding and marketing materials, in an effort to make the process equitable for each eligible borrower.

Examples of financial injury might include unwarranted or miscalculated fees charged to borrowers, a foreclosure that happened while a borrower was already in bankruptcy protection, or a property that underwent a foreclosure sale even as the borrower was awaiting word on a loan modification from the servicer.

Details about how long it will take to conduct the reviews, what sort of redress homeowners stand to gain, and what rights they might have to sign away in exchange for compensation remain unresolved.

These will be thorough reviews, reviewing every aspect of the foreclosure," Evers said. He said officials hope to complete the reviews in a matter of months after the final deadline, but he acknowledged the mountain of work involved

OCC officials on Tuesday also said no decision had been made yet about what type of compensation borrowers will be entitled to if the reviews show they were the victims of errors or misrepresentations.

Weitz – another major pitfall of the program. How do you quantify an improper foreclosure? You can’t just get your house back – someone else is now the rightful owner of it. The only compensation will be monetary in nature and I’m guessing that the banks are not going to be proactive in writing large checks.

It also remains unclear whether borrowers might be required to waive their right to sue the financial firms involved in exchange for compensation.

The April deal also imposed a host of other requirements on the servicers involved, including that they provide a single point of contact for struggling borrowers, many of whom have complained of getting the runaround when they try to get help.

Weitz – Despite all my criticisms, I will still encourage clients to pursue this option if they have been foreclosed upon. Its free to apply and its certainly possible there will be some compensation involved.

For more information on your rights in foreclosure, short sale or other distressed property situations, consider contacting a Seattle Foreclosure Attorney.

Our Firm:

Weitz Law Firm, PLLC
520 Kirkland Way, Ste 103
Kirkland, WA 98033
(425) 889-9300

Weitzlawfirm.com

New HARP Guidelines overview

2011-10-29T07:30:00.000-07:00

The Home Affordable Refinance Program (“HARP”) was created to assist troubled homeowners in refinancing their loans to reflect current conditions within the housing market. Under the program, qualified homeowners were often permitted to refinance their mortgages at lower rates.

Restrictions on qualification and the general costs involved with HARP application lead to very few homeowners seeking relief under this program. In order to make HARP more accessible, the White House and federal regulators are implementing modifications to homeowner qualification requirements and reducing the costs associated with application this program.

Below is a brief outline of qualification requirements, the announced modifications to such requirements and the limitations of HARP:

(1) Who is eligible for HARP?
- Those whose loans are owned or backed by Fannie Mae or Freddie Mac, which the government took control of three years ago. Homeowners can determine whether their mortgage is owned by Fannie or Freddie by going online:
Freddie’s loan tool is at freddiemac.com/mymortgage;
Fannie’s is at http://www.fanniemae.com/loanlookup/

To qualify under HARP, a loan must have been sold to Fannie and Freddie before June 2009.

- Homeowners must be current on their previous six mortgage payments. One late payment within six months, or more than one in the past year, would automatically disqualify the homeowner from eligibility.

(2) What modifications have been made to HARP?- Previously, HARP only permitted homeowners who owed less than 125% of their homes fair market value to qualify for the program. Now, there is no restriction on how much value the home has lost in order to qualify if all of the other requirements are met. It should be noted that additional qualifications still exist if there are multiple mortgages on the property.

- Under the original program, many fees associated with closing, processing and appraisal were necessary costs borne to the homeowner. The modified program will eliminate certain fees for closing, title insurance and lien processing, making the refinance cheaper.

Additionally, loan fees will drop and will be waived for homeowners who reduce their loan term, and fewer homeowners will be required to have their homes appraised prior to seeking a refinancing. Lenders will also benefit in some instances because they won’t have to buy back the mortgages from Fannie or Freddie, as they previously had to when dealing with some risky loans.

- HARP was originally scheduled to terminate in June 2012. The modification has extended this program an additional 18 months, through 2013.

(3) The Major Limitation of HARP

Homeowners interested in HARP need be aware that lenders will remain free to reject a refinancing even if the homeowner meets all of the programs requirements, limiting the ultimate impact of this program.

For more information in your rights in modification, or other options including foreclosure, short sale, or bankruptcy, consider contacting a Seattle Foreclosure Attorney.

Our Firm:

Weitz Law Firm, PLLC
520 Kirkland Way, Ste 103
Kirkland, WA 98033

425 889-9300

weitzlawfirm.com

Washington State Emergency Home Loan Program

2011-10-29T06:12:00.000-07:00

Weitz - below is the my summary of the Department of Housing and Urban Development (HUD) Emergency Homeowner Loan Program. My initial thoughts are 1) that it is arguable a huge waste of taxpayer dollars that favors the banks more than anyone; and 2) for the right client, its a great opportunity to get some easy government money - I will explain in more detail below.

I found the picture to the right assuming for this topic - while amusing, its not too far from the truth.

Click here for actual report.

The Dodd-Frank Wall Street Reform and Consumer Protection Act provided $1 billion to HUD to implement the Emergency Homeowners Loan Program (EHLP) Program. The program will offer a declining balance, deferred payment “bridge loan” (non-recourse, subordinate loan with zero interest) for up to $50,000 to assist eligible homeowners with payments of arrearages, including delinquent taxes and insurance plus up to 24 months of monthly payments on their mortgage principal, interest, mortgage insurance premiums, taxes, and hazard insurance.

Weitz: Let me paraphrase for the government: “Come get your free money!” We will pay up to $50,000 of your arrearages and assist with future payments with a loan that is 1) secured by your property; but 2) NON-RECOURSE (this means that if you stop paying, they can not pursue you for the debt).

While I hate the ideology of the program because I truly think it simply 'kicks the can down the road' for many and there are considerable issues with ‘fairness’ in who qualifies and who does not, I would always encourage clients to take a $50,000 INTEREST FREE, NON-RECOURSE loan.

Looking big picture, I also hate the idea because the parties that benefits the most are the banks as they will be paid with taxpayer money IN FULL.

Below are the details of the program, its qualification, and other important issues.

Qualifications:

Income Thresholds: The homeowner a total pre-event household income equal to, or less than, 120 percent of the Area Median Income (AMI), which includes wage, salary, and self-employed earnings and income.

Significant Income Reduction: The homeowner has a current gross income that is at least 15 percent lower than the pre-event income.

“Pre-event income” is defined as the income prior to the onset of unemployment, underemployment, or medical emergency, while “current income” is the income at the time of program application, as well as income during the period that the homeowner continues to receive assistance from the fund.

Employment type: Both wage and salary workers and self-employed individuals are eligible.

Delinquency and Likelihood of Foreclosure: the homeowners must be at least 3 months delinquent on payments and have received notification of an intention to foreclose. This requirement can be documented by any written communication from the mortgagee to the homeowner indicating at least three months of missed payments and the mortgagee’s intent to foreclose. In addition, the homeowner can self-certify that there is a likelihood of initiation of foreclosure on the part of their mortgagee due to the homeowner being at least three months delinquent in their monthly payment.

Ability to Resume Repayment: Has a reasonable likelihood of being able to resume repayment of the first mortgage obligations within 2 years, and meet other housing expenses and debt obligations when the household regains full employment, as determined by: The homeowner must have a back-end ratio or DTI below 55% (principal, interest, taxes, insurance, revolving and fixed installment debt divided by total gross monthly income). For this calculation, gross income will be measured at the pre-event level.

Principal Residence: the homeowner must reside in the mortgaged property as principal residence. The mortgaged property must also be a single family residence (1 to 4 unit structure or condominium unit).

Termination of Monthly Assistance: Assistance is terminated and the homeowner resumes full responsibility for meeting the first lien mortgage payments in the event of any of the following circumstances:

1. The maximum loan ($50,000) amount has been reached;
2. The homeowner fails to report changes in unemployment status or income;
3. The homeowner’s income regains 85% or more of its pre-event level;
4. The homeowner no longer resides in, sells, or refinances the debt on the mortgaged property; or
5. The homeowner defaults on their portion of the current first lien mortgage loan payments.

Income re-evaluation: After initial income verification at application intake, the homeowner shall be required to notify the fiscal agent of any changes in the household income and/or employment status at any point throughout the entire period of assistance.

Forms of Assistance

Use of Funds for Arrearages: On behalf of the homeowner, the fiscal agent shall use loan funds to pay 100% of arrears (mortgage principal, interest, mortgage insurance premiums, taxes, hazard insurance, and ground rent, if any).

Homeowner Payments: Homeowner contribution to monthly payment on first mortgage will be set at 31 percent of gross income at the time of application, but in no instance will it be less than $25 per month.

Use of Funds for Continuing Mortgage Assistance: The fiscal agent will make monthly mortgage payments to the servicer of the first lien mortgage in excess of the payments made by the homeowner.

Duration of Assistance: If at any time the household’s gross income increases to 85% or more of its pre-event level, assistance will be phased out by the fiscal agent over a two month period. In any event, assistance with monthly payments may not continue beyond 24 months.

Repayment Terms

Transition Counseling: The designated counseling agent shall contact each homeowner that is approaching the last months of program eligibility and remains un/underemployed (3-6 months before the assistance ends) and require the homeowner to meet with a HUD approved counseling agent to explore other loss mitigation options, including loan modification, short sales, deeds-in-lieu of foreclosure, or traditional sale of home.

Repayment of HUD Note: Following the last payment on behalf of the homeowner, the fiscal agent will process the homeowner’s “HUD Note” and record a mortgage with a specific loan balance. The note and mortgage will be in the form of a five year declining

Repayment Terms

Transition Counseling: The designated counseling agent shall contact each homeowner that is approaching the last months of program eligibility and remains un/underemployed (3-6 months before the assistance ends) and require the homeowner to meet with a HUD approved counseling agent to explore other loss mitigation options, including loan modification, short sales, deeds-in-lieu of foreclosure, or traditional sale of home.

Repayment of HUD Note: Following the last payment on behalf of the homeowner, the fiscal agent will process the homeowner’s “HUD Note” and record a mortgage with a specific loan balance. The note and mortgage will be in the form of a five year declining 5 balance, zero interest, nonrecourse loan, and the mortgage shall be in the form of a secured junior lien on the property.

Terms for Declining Balance Feature: No payment is due on the note during the 5 year term so long as the assisted household maintains the property as principal residence and remains current in his or her monthly payments on the first mortgage loan. If the homeowner meets these two conditions, the balance due shall decline by twenty percent (20%) annually, until the note is extinguished and the junior loan is terminated.

Weitz – NO PAYMENT IS DUE FOR 5 years! In fact, it may never actually have to be paid back!

Events Triggering Note Repayment: The homeowner will be responsible for repayment of the applicable balance of the HUD note to the fiscal agent or its successor, if, at any time during the five year repayment period, any of the following events occur:

1. The homeowner rents out the property to a 3rd party;
2. The homeowner defaults on its portion of the current mortgage; or
3. The homeowner receives net proceeds from selling or refinancing debt on the home.

Net proceeds - after paying outstanding applicable brokers fees, first balances (and second lien balances, as applicable), and an allowance of $2,000 to the homeowner for relocation expenses when the home is sold -- will go towards paying down the HUD note. In the event that proceeds of a sale or loan refinance are not sufficient to repay the entire HUD note, the remaining applicable balance of the HUD note shall be considered to have been met, and the lien against the property shall be released.

Provisions for Underwater Homeowners: At all stages of the program, “underwater” homeowners2 will be encouraged to explore participation in short sale or short refinancing programs offered by their servicer and/or the federal government (i.e. Home Affordable Foreclosure Alternatives)3, which will not trigger repayment of the HUD note.

Note: Washington State received $56 Million dollars for this program!

For more information on your rights in Foreclosure or other alternatives, I would encourage you to discuss with a Seattle Foreclosure Attorney, or a Seattle Bankrutpcy Attorney.

Our Firm:
Weitz Law Firm, PLLC
520 Kirkland Way, Ste 103
Kirkland, WA 98033

425.889.9300

www.weitzlawfirm.com

The HARP Program - the skeletons within

2011-10-25T20:28:00.000-07:00

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

An overview of a terrific segment from the Dylan Ratigan show (video above):

1) Home prices down 3.8% from 12 months ago
2) The Government unveiled the HARP program today in Las Vegas (more on this soon)
Update: click here for further information on the new HARP program.
3) 11 Million homes (25%) are underwater (at least this many according to Mr. Black)
4) the government program will assist less than 10% (LESS THAN TEN PERCENT!!)
5) the deal gives the Banks a 'free out' from past liabilities

Our Firm can help guide you. If you are looking for a Seattle Foreclosure Attorney, Seattle Bankruptcy Attorney or a Seattle Short Sale Attorney, consider contacing us:

Weitz Law Firm, PLLC
520 Kirkland Way, PLLC
Kirkland, WA 98033

425 889-9300

New Government Mortgage Modification Plan

2011-10-18T22:23:00.000-07:00

A great interview with Beau Biden (the Attorney General of Delaware)

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

Here is the new Mortgage Plan Facts:1) its speculative right now; and 2) it applies to less than 20% of loans as 80%+ are owned by Fannie Mae and Freddie Mac

* Mr Biden has some other great facts regarding the current mortgage mess including some tough questions about Fannie and Freddie.

Why are Fannie and Freddie not doing more?
- they are 'owned' by the government as a Government Sponsored Entities (GSEs)
- thus, we the taxpayers have control over our mortgages - why are Fannie and Freddie not doing more to prevent foreclosure?...your guess is as good as mine.

Weitz - as usual, the 'government plan' falls dreadfully close and is misleading at best as most mortgages are even going to be considered

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

Our Firm:

Weitz Law Firm, PLLC
520 Kirkland Way, Ste 103
Kirkland, WA 98033

425 889-9300

401k withdrawls to pay your Mortgage? Know the facts.

2011-10-16T08:48:00.000-07:00

WASHINGTON — With hundreds of thousands of homeowners facing imminent foreclosure and estimates of 2 million or more in the wings, are there any financial tools available to distressed borrowers that haven't been tried yet? Equally important politically: Is there a way to help owners that won't rack up huge federal expenditures and add to the deficit?

Weitz - this is disgusting and I’ll tell you why: Did you know your 401k is entirely protected from creditors and in Bankruptcy? So your politicians (who probably are getting some rather large contributions from banks) are working to allow you to empty your fully protected retirement account so you can pay that money in the form of interest to a Bank for a loan that is likely more than what your property is worth.

Why don’t they simply tell you to go burn that money over a camp fire as that is essentially what you are doing if your property does not appreciate in the near future.

Anyone who is considering taking out money from a retirement account to pay their mortgage should seriously consider the pros/ cons of such a decision prior to acting. The reality is that there are many other options available if you can’t afford your mortgage that are worth exploring prior to liquidating your retirement account(s).

The Obama administration has been exploring options — including a new refinancing program expected later this month — but a concept has surfaced on Capitol Hill that might offer modest help with no revenue cost to the government: Amend the tax code to allow homeowners who have 401(k) retirement plans to pull out money to save their houses from foreclosure without the usual tax penalties.

The change would work like this: Under current rules, anyone making what's known as a "hardship" early withdrawal of funds from their 401(k) must pay the IRS a 10 percent penalty on top of ordinary income taxes. A new bill introduced Oct. 5 would waive the penalty if the purpose of the distribution is to make loan payments to avoid loss of a primary home to foreclosure.

Co-authored by Sen. Johnny Isakson and Rep. Tom Graves, both Republicans from Georgia, the bill would allow owners to pull out up to $50,000. The money could be used in a lump sum to pay down the delinquent mortgage balance or to fill shortfalls caused by reductions of household income. It could also be used as part of loan-modification agreements with lenders designed to avert a foreclosure. However the money is used to resolve the mortgage delinquency, it would need to be spent within 120 days of receipt and could not exceed 50 percent of the current amount of funds in the retirement account.

Owners would still be subject to income taxes on the amounts withdrawn, but would escape the penalty. Though neither of the co-sponsors claims the bill would actually raise revenues — they simply say it wouldn't cost the government anything — some pension-program experts say it might. Edward Ferrigno, vice president for Washington affairs at the Plan

Sponsor Council of America, a group that represents employers who offer workers 401(k)
accounts, said that by triggering taxable distributions from otherwise untouched, tax-deferred plans, the bill "should generate revenues." Ferrigno declined to comment on the bill overall, pending further review of its provisions.

Weitz – so let me get this straight – you take out your fully protected retirement money, you write and check to the bank so they don’t have to ‘write down’ the loss on the mortgage, and then you write a check to the IRS for the right to do it. Don’t do it, folks!

Titled the HOME Act, the proposal sheds light on the potential foreclosure-avoidance resources — and the drawbacks — connected with tapping employee pension accounts. Many, but not all, 401(k) plans allow for loans to participants, including for housing-related purposes. Retirement advisers generally recommend taking a loan from a plan because the money withdrawn is not taxed or penalized. Borrowers are required to pay interest on the loan, but in effect they are paying it to themselves to offset the earnings forgone on the balances taken out.

Many 401(k) plans also provide for "hardship" withdrawals. However, these come with much stricter rules, fewer eligible uses, plus the tax penalties. The Internal Revenue Code limits hardship distributions to situations where there is an immediate and urgent financial need, and there are no other funds available to meet this need. On top of that, the rules require that taxpayers must opt first for a loan from the retirement plan — if permitted — before pursuing a hardship withdrawal.

Though avoiding foreclosure is one of the permitted hardship uses under the code, the 10 percent penalty discourages potential users, Isakson and Graves argue. Their bill would remove that disincentive and provide an emergency escape hatch for owners sliding fast toward foreclosure.

Putting aside the potential positives, are there downsides to making a hardship withdrawal from your 401(k), even penalty-free? You bet. Pulling out 401(k) dollars early — with or without a tax penalty — is still an expensive way to raise money. Not only does it deplete the tax-deferred savings you've set aside, but in the case of hardship withdrawals, you are prohibited by IRS rules from making new contributions to your plan for six months.

Weitz – AND MOST IMPORTANTLY, THIS MONEY IS FULLY PROTECTED FROM CREDITORS!!
Even if the HOME bill makes it through Congress — and there's no assurance it will — taking the hardship route should never be your first choice. It should be your last resort, when there's nothing else that will save your house and you don't want to walk away.

However, also consider the pension plan alternative that may already be buried away in your plan documents: a save-the-house loan to yourself. If the numbers work, and you have a reasonable chance of avoiding foreclosure and repaying the loan, check it out.

It just might be your solution.

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

Our Firm:
Weitz Law Firm, PLLC
520 Kirkland Way, Ste 103
Kirkland, WA 98033

425 889-9300

Nationwide Foreclosure Update for Q3 2011

2011-10-14T05:39:00.000-07:00

Some interesting stats:

1) The average foreclosure process in non-judicial states (like WA) is about 330 days.

2) In judicial states like Flordia, it is over 700 days!

3) the notice of default filings (the beginning of the foreclosure process) are up 14% year over year nationwide

For more information on your rights in Foreclosure or non-foreclosure options, consider contacting a Seattle Foreclosure Attorney.

Our Firm:

Weitz Law Firm, PLLC
520 Kirkland Way, Ste 103
Kirkland, WA 98033

425 889-9300

Mortgage Financing Update - retreat of Fannie and Freddie?

2011-10-10T08:05:00.000-07:00

Three years after virtually nationalizing the U.S. mortgage market, the government has embarked on a pullback to see whether private industry picks up the slack.

Some people in the housing industry worry that Washington's move will cause fresh pain in many regions where demand has yet to recover amid the sluggish economy.

Weitz – this is a big issue that many may not consider. Obtaining a private loan has been increasingly difficult in the past 3 years. Should Fannie and Freddie exit the lending business, the ability to get financing will become even more difficult.

At issue are the loan limits that Congress expanded in 2008, allowing Fannie Mae and Freddie Mac to buy mortgages that exceeded the national cap of $417,000.

When the mortgage market melted down four years ago and sent private mortgage investors fleeing, interest rates rose sharply on "jumbo" mortgages—those too large for backing by Fannie, Freddie or agencies such as the Federal Housing Administration. That accelerated home-price declines in high-end markets throughout California and the Northeast, where many pricey homes couldn't be bought with a government-backed loan.

To stem the fallout in prices, Congress raised the loan caps to as high as $729,750 in markets such as Los Angeles and New York. It then passed a series of one-year extensions to keep the higher limits in place. But this year, Congress and the Obama administration opted against an extension.

As a result, the limits in hundreds of counties fell by 10% or more on Oct. 1. For loans backed by Fannie and Freddie, the limits declined to between $417,000 and $625,500 in about 200 counties.

More worrisome to real-estate agents are declines in the FHA limits, which fell to between $271,050 and $625,500 in 600 counties. Those changes are causing heartburn because the FHA allows buyers to make down payments of just 3.5%, and it has financed as many as half of all home purchases in recent quarters.

Weitz - Note that nearly half the loans issued as of late are 3.5% down FHA loans - if you take that government aide away, the demand side of the supply/ demand analysis will fall considerable - my estimate is that it will lead to further price declines.

Policy makers allowed the limits to fall because they want private companies to hold more mortgage risk, and dialing down loan limits is one way to carve out space for those investors. Fannie, Freddie, and the FHA currently back nine in 10 new mortgages. Taxpayers already are on the hook for $141 billion in losses at Fannie and Freddie, and the FHA's reserves have plunged to razor-thin levels.

Mortgages that don't qualify for government backing typically have higher borrowing costs, including interest rates around 0.75 percentage point above conforming loans.

Mortgage rates currently are very low, but jumbo loans also require bigger down payments—at least 20%—and can have tougher qualification rules.
"The net-net here is that the available pool of credit for housing is shrinking.

Prices will have to decline," said Christopher Whalen, co-founder of risk-management consultant Institutional Risk Analytics.

On one side of the debate are mortgage investors who say the government needs to give the private sector more room to compete if a vibrant market for nongovernment-backed loans is to re-emerge. "The banking industry, flush with excess deposits, will fund those loans," said Mike McMahon of Redwood Trust, a real-estate investment firm in Mill Valley, Calif.

Assuming a 20% down payment, the new limits still allow homeowners in parts of California to qualify for a government-backed mortgage on a $780,000 home. Critics say there's little public policy rationale to subsidize loans for those borrowers, who need substantial incomes.

On the other side are real-estate agents and some economists who say sellers are in for a nasty surprise when they find that fewer potential buyers qualify to purchase their properties. They say the changes also could hamstring "trade-up" buyers who typically used home equity, which has plunged during the bust, as their down payment to move to a bigger residence.

Gisella Olivares closed on a home in Upland, Calif., on the day before the new loan limits went into effect. Without the FHA-backed mortgage, "there would be no way I could afford to get the house," said Dr. Olivares, who qualified for a $448,000 mortgage. In California's Inland Empire region, the metropolitan area an hour east of Los Angeles, the FHA loan limit fell to $355,350 from $500,000.

If Dr. Olivares, a 42-year-old physician, had to make the $100,000 down payment for a jumbo mortgage, she said she would have waited at least two years to buy a home.

The seller, meanwhile, was able to avoid foreclosure by completing a short sale, where the bank allowed the house to sell for less than the amount owed.

The loan limits wouldn't appear to have much of an impact on the overall housing market. In 2009, about 1.5% of home-purchase loans backed by government entities wouldn't have been eligible under the new limits, according to a study by the Furman Center for Real Estate and Urban Policy at New York University.

But the same study emphasized the outsize local impact. Some 9% of purchases would have been affected in San Jose, Calif., and 5% in San Diego.

Meanwhile, banks would have to increase the number of jumbo loan originations by 56% to make up the gap, "which the private sector could be hard pressed to fill," said Mark Willis, one of the study's authors. "If you want to get the market moving, why would you decrease the availability of credit for any part of it?"

Ultimately, the loan-limit issue shows the broader challenge in bringing back private capital and reducing taxpayer exposure: Housing markets are shaky, and the government is still offering better terms than private lenders.

Steps that raise borrowing costs could attract private investors, but if that pushes home prices down in the process, it may do more harm to the economy and to individual housing markets still reeling from the real estate bust.

Weitz - this is a tough issue - Do we want to continue to 'prop up' and 'subsidize' real estate to prevent further declines in prices, or do we want capitalism to take hold and see how far prices will fall - I guess the answer to that question depends on your perspective (property owners vs. non-property owners). Whatever your position, this lending issue is one to keep an eye on as it will inevitably play a big role in property values.

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

Our Firm:

Weitz Law Firm, PLLC
520 Kirkland Way, Ste 103
Kirkland, WA 98033
(425) 889-9300

weitzlawfirm.com

Real Estate Debt and the General Economy

2011-09-29T07:58:00.000-07:00

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

A clip from the Dylan Ratigan show regarding the interplay between our Real Estate Debt problems and the general economy. Some high-lights include:

1) Trillions of dollars are trapped in the system in the form of debt in underwater mortgages

2) The root of our financial issues is an overwhelming amount of debt at the consumer level, the corporate level, and even the governments at all levels.

3) Fannie and Freddie became the primary source of financing to assist the housing boom as they issued loans with little or no capital requirements for borrowers – note that these governmental agencies warped the true capitalist economic principals.

Dylan discusses the potential of mass debt restructuring, which is an interesting idea that has been used in the past (Post Civil War, Post WWII).

Here is my take: there is simply no easy way to overcome the debt issues we face: in essence, we have two options, we can

1) print money to ‘monetize’ the debt – this is the route that we have choose thus far, and it negatively effects the dollars while spreading the printed dollars in an incredibly inequitable manner – to the banks and to the government – this does the people no good as while most of us will not benefit greatly, we see the negative effects of a depreciated currency at the gas pump, home energy costs, and at the grocery store; or

2) cancel debt at all levels – this would negatively effect the banks, but would it injure the American people? – it most certainly would be difficult and the unintended circumstances are uncertain, but I would argue that most people would probably benefit more from option 2 than option 1. At the end of the day, there is no easy way out of our mess. I believe the focus should be on focusing on a system that we can build from (rather than trying to save a financial system that is clearly broken and unsustainable).

Seattle Real Estate Update - hint...it was a bust

2011-09-26T18:15:00.000-07:00

WASHINGTON (AP) –

The home-buying season was a bust.

March through August are typically the peak buying months. But this time, Americans bought fewer new homes in that stretch than in any other six-month period since record-keeping began a half-century ago.

And sales of previously occupied homes didn't fare much better. They nearly matched 2009's total for the peak buying months. And that was the worst since 1997.
Combined, total sales this spring and summer were the weakest on records dating to 1963. The figures underscore how badly the housing market is faring and suggest that a recovery is years away.

Weitz – even with depressed pricing, the home sales were the lowest in 50 years! That doesn’t include the population growth – which makes things even worse by comparison.

Because the economy is barely growing and unemployment exceeds 9 percent, many people see a home purchase as too big a risk. Some worry about losing their jobs.

Others can't afford the 20 percent down payment that most lenders now require.
Not even shrunken home prices and the lowest mortgage rates in six decades are convincing would-be buyers.

"The job engine has really sputtered out, and without jobs, Americans really can't purchase homes," said Celia Chen, a housing economist at Moody's Analytics.
Plunging stock prices and renewed recession fears have led many economists to push back expectations for a housing recovery.

Chen expects prices to bottom at the start of 2012. And she doesn't expect sales and prices to make a healthy recovery until 2015 at the earliest. In hard-hit areas such as California and Florida, it could take decades for prices to return to normal, she said.

Pierre Ellis, an analyst at Decision Economics, said that until wages increase and hiring picks up, sales will languish.

The "bad news is the evident absence of optimism that sales will pick up to any degree," Ellis said.

Roughly 168,000 new homes were sold from March through August, the Commerce Department said Monday. That's fewer than the 180,000 for the same period last year -- and last year's sales were boosted by a temporary buyer's tax credit. Over the same period in 2009, roughly 208,000 new homes were sold.

In a healthy six-month buying season, about 400,000 new homes would sell.

Among re-sales, about 2.8 million homes sold from March through August this year.

That's roughly as many as in the same periods in 2009 and 2010. In a healthy market, about 3.3 million would be sold in that six-month stretch.
Michael McGrew, who runs McGrew Real Estate in Lawrence, Kan., said many families won't buy until the economy strengthens. Even in Lawrence, which had a low unemployment rate of 6.4 percent in July and is home to the University of Kansas, people are worried, McGrew said.

What would help most would be a relocated company that's ready to hire in the Lawrence area, McGrew says. But hopes for the housing market to turn around soon are dim, he said.

"We're actually seeing more people trading down their home or trading out of our market entirely," McGrew said.

Nationally, prices are still falling. Prices for previously occupied homes have sunk more than 5 percent over the past year to a median of $168,300. New-home prices have fallen even further, by 7.7 percent, to $209,100.

That suggests builders and Realtors are slashing prices to compete with low-priced foreclosures and short sales. Short sales occur when lenders allow homes to be sold for less than what's owed on the mortgage.

Combined, foreclosures and short sales are selling at an average 20 percent discount. And they're lowering neighboring home values.

Weitz – the combination of unemployment, stock market fall, and lack of financing is leading to continued struggles. As I’ve said since I started this blog- we must go through the pain before we can truly recover. Unfortunately, I see the pain continuing for awhile given the weak demand demonstrated in these numbers and continued distressed owners.

For more information on your rights in Foreclosure, Short Sale or Bankruptcy, consider contacting a Seattle Foreclosure Attorney.

Our Firm:
Weitz Law Firm, PLLC
520 Kirkland Way, Ste 103
Kirkland, WA 98033
425 889-9300

Federal Housing Finance Administration (FHFA) Sues Bank

2011-09-11T08:35:00.000-07:00

The FHFA is suing the banks for mortgage securitization practices. This is rather odd given that Fannie and Freddie (whom the FHFA's sole purpose is the regulator and oversee) are implicitly in bed with the banks as they have 'bought' (or been ordered to buy) trillions would of mortgage paper from the banks to help get the banks healthy.

Here is an interesting video from CNBC Realty Check:

MERS Update - its a bad argument

2011-09-11T08:02:00.000-07:00

Mortgage Electronic Registration Systems (MERS), the operator of an electronic registry of mortgages, and lenders won a U.S. appeals-court ruling upholding dismissal of claims by Arizona borrowers challenging their lending and foreclosure procedures.

Note my previous post on the issue:Mers problem in plain english.

An excerpt:

“My guess: Just as we don't depend on horses to transport us anymore or cook our meat over an open fire, we must adopt to a new era of technology and adopt the MERS system (warts and all). I think its fairly obvious that the courts/ politicians will take the easy way out and alter the law rather than create a tidal wave of title issues that could cripple the national real estate market.

Of course, they must first "investigate the problem" as they are now doing in all 50 states. This is purely my opinion, but I believe the investigation is mainly a political ploy to appease the constituents”.

The federal court in San Francisco ruled Wednesday that a district court properly threw out a lawsuit filed by three borrowers alleging conspiracy and fraud.

In addition to MERS, defendants included Bank of America and JPMorgan Chase.

"The plaintiffs' claims that focus on the operation of the MERS system ultimately fail because the plaintiffs have not shown that the alleged illegalities associated with the MERS system injured them or violated state law," the three-judge appeals panel said.

MERS, a unit of Reston, Va.-based Merscorp, bills itself as a provider of "support services to the mortgage industry," specifically tracking the servicing rights and ownership interests in mortgage loans.

The company lets banks electronically register their sales of home loans so they can avoid trudging down to the county records office.

The Arizona borrowers, who are Hispanic and didn't speak or read English, had executed deeds naming MERS as the "beneficiary" and "nominee" for the lender.

After the borrowers defaulted on the loans, MERS recorded documents assigning its interest in the deeds to a bank appointed by the lender as trustee to foreclose on the properties, which were sold at auction, the ruling says.

The borrowers sued, alleging that MERS members conspired to commit fraud by using the registry as a sham beneficiary, promoting predatory lending practices and making it impossible for borrowers or regulators to track when their loans changed hands.

The Arizona district court dismissed the case without giving the plaintiffs an opportunity to amend the suit to add wrongful foreclosure claims related to MERS' procedures.

"This is a very good opinion for MERS," said Janis Smith, a company spokeswoman.
"The court found that borrowers were in no way injured by any action taken by MERS," Smith said.

Robert Hager, a Reno, Nev.-based lawyer for the borrowers, said that while "these particular plaintiffs were denied relief because of the particular facts and because they're in Arizona, there's a great deal of good analysis and law about MERS and the recording system in general that will help" other plaintiffs in the San Francisco-based appeals court.

Weitz – Until I see otherwise, I continue to believe that Attorneys attempting to utilize the MERS argument are wasting their client’s money. The only advantage I can see is that the law suit, however frivolous could delay a foreclosure proceeding.
For more information on Distressed real estate, consider contacting a top seattle foreclosure attorney.

Our Firm:

Weitz Law Firm, PLLC
520 Kirkland Way, Ste 103
Kirkland, WA 98033
(425) 889-9300
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Seattle Real Estate Price to Income Analysis

2011-08-17T06:44:00.000-07:00

Weitz – Below is an interesting article from the WSJ on the link between home prices, and median income. This is a very important data set in my opinion. First, I will outline provide the entire article, and then we’ll compare it to the local Seattle Market market and see how the theory applies.

AP - Home prices in some of the nation's hardest-hit metro areas have fallen far below pre-bubble levels, stirring concerns that properties in those markets are undervalued.

In a recent analysis, real-estate firm Zillow Inc. studied the correlation between home prices and annual incomes over the 15-year period that ended in 2000, before home prices began to surge.

For decades, price-to-income levels have moved in tandem, with a specific housing market's prices rising or falling in line with local residents' incomes. Many economists say that makes the price-to-income ratio a good gauge for determining whether housing is undervalued or overvalued for a given market.

Zillow found property prices in one-third of nearly 130 housing markets across the nation were undervalued, when compared with residents' current income and the pre-bubble trend.

Weitz – that seems amazing; the issue is that with more un-employed currently than is historically expected, and the lack of down payment ability for many, I would argue that 1) the needed demand for the excess inventory of housing is simply not available financially for many, and 2) the lack of financing availability will be an issue for years to come. The banks have gone in the complete opposite direction from what caused this mess – 5 years ago, a pulse was all that stood between a buyer and a bank loan. Now, standards have gotten extremely harsh and loans can be much more difficult - certainly much more difficult than in the boom.
"At a broad level, it is helpful to understand that if people in certain markets paid three times their average income in housing before the bubble, those markets are probably going to get back to that level," said Stan Humphries, chief economist at Zillow.

The analysis underscores a broader point: While the nation's housing markets largely fell and rose together during the housing boom and bust, they aren't likely to hit bottom and begin recovery at the same time or pace. The Zillow analysis shows that many markets still appear to be overvalued.

For the U.S. as a whole, home prices were around 2.9 times incomes from 1985 to 2000. But during the housing boom, values increased at a much faster rate than incomes. The price-to-income ratio peaked at around 5.1 in 2005. Home prices have since fallen so that on average, nationally, prices are around 3.3 times incomes, or about 14% above the historical trend.

Of course, prices have fallen much faster in certain markets. In Las Vegas, home prices are now 25% below their historic price-to-income trend of 2.7. During the housing bubble, that ratio more than doubled to 5.6. Home prices have been falling for the past five years, and by March, prices were just 2.1 times household incomes.
Home prices are undervalued by 35% in Detroit; by 18% in Modesto, Calif.; and 13% in Fort Myers, Fla.

"Values dropped so far that there are just great bargains," said Dan Elsea, president of brokerage services for Real Estate One in the Detroit area. For years, layoffs in the automobile sector contributed to a "total freeze on activity," he said. But over the past six months, as the industry has recovered, "you have this dam burst of people saying, 'We're ready to buy.'"

Elsewhere, prices are so low that more investors are scooping up foreclosed properties and renting them out. Since March, Ron Leis, a real-estate agent in Sacramento, Calif., has spent about $500,000 to buy four foreclosed properties that have been converted to rentals. Investors can cover their monthly costs and make an 8% to 12% profit "pretty easily," he said. "We haven't seen that in 20 years."

Prices could keep falling in "undervalued" markets that are struggling with an oversupply of foreclosures or where high unemployment limits the pool of potential home buyers. "There's no iron law that says a market will return to its historical average," said Mr. Humphries.

Housing also has grown more affordable thanks to mortgage rates falling to near their lowest levels since the 1950s. Last week, the 30-year fixed-rate mortgage averaged 4.32%, according to a survey by Freddie Mac.

Aaron Holley hadn't even thought about buying a home until he looked into consolidating his student-loan debts and saw how interest rates and home prices had fallen. "I never actually thought there was going to be the possibility of me owning a home in the state of California," said Mr. Holley, 29, who last month bought a three-bedroom home in Santa Rosa, Calif., for $260,000. He locked in a 4.38% fixed rate on a 30-year mortgage.

Zillow's report shows that home prices in Santa Rosa are around 4.9 times area incomes, down from a peak of 9.4 in 2005 and back to levels not seen since 1999. Prices are still higher than the 1985-2000 average of 4.1 times incomes. The prospect that home prices will decline further "bothers me a little bit," says Mr. Holley, who works as a concept artist for a videogame company. "But at the same time, I feel like I got a good deal."

Some of the most overvalued housing markets, according to the Zillow analysis, include Virginia Beach, Va.; Honolulu; and Charleston, S.C. In Virginia Beach, for example,prices would have to fall by 50% to hit their traditional relationship to incomes.

Other areas where price-to-income levels show that housing is still overvalued, such as Washington, D.C., may not see prices fall further due to structural changes in the economy. Second-home markets that have more out-of-market homebuyers also tend to have more volatile price-to-income levels.

SEATTLE ANALYSIS BASED ON Price = 3x Income

For the purposes of this analysis, let's assume household median income for King County is $66,000 based on the 2010 projections of the Washington Office of Financial Management. 2011 numbers are not posted, but I think its fair to say the incomes would be relatively close to 2010 numbers.

Turning to Zillow.com for our Seattle Median Home Price, we have an average home price of $348,000 as of 8/1/2011.

Clearly, numbers are easy to skew in any direction you'd like, but I think these are relatively un-bias numbers from independent sources.

Bottom line: if home values are historically 3x income, Seattle's range of approximately 5.2 (348k / 66k) is still far above that 3x average. In fact, for prices to get in line (based on these numbers), we would be looking at a 44% drop in Real Estate prices. I'm not sure I'm willing to predict further declines that excessive as we are already 33%+ off of the peak, but it is certainly something to think about, and I'm not willing to entirely rule it out given the number of foreclosures and distressed homeowners in the market today.

Markets Collapse; Ratigan explodes

2011-08-10T08:34:00.000-07:00

Every so often, I see some non-real estate stories/ opinions that are worth sharing as the reality of our situation is that the Real Estate and the Economy are truly hand in hand. As one improves, so does the other. As one continues to fall, it will drag the other with it.

Below is a video clip from the Dylan Ratigan show where Dylan gets pissed. He calls out both Republicans and Democrats and focuses on the complete lack of response from BOTH sides, neither of whom address some of the underlying issues that continue to hinder a real recovery (both in Real Estate and the general economy).

Enjoy!

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

Washington State sues Bank of America

2011-08-06T13:39:00.000-07:00

AP - Washington state sued a subsidiary of Bank of America Corp. on Friday, arguing that the company has improperly handled thousands of foreclosures in the state.

Attorney General Rob McKenna claimed ReconTrust Company has repeatedly broken the law by failing to act as a neutral third party on behalf of both the lender and the borrower. He argued that the company has repeatedly broken the law and refused to cooperate in an investigation.

"ReconTrust's illegal practices make it difficult, if not impossible, for borrowers who might have a shot at saving their homes to stop those foreclosures," McKenna said.

McKenna said the company also violated state law by failing to maintain an office in the state where borrowers can go to make last-minute payments or discuss the process. He also said ReconTrust gave confusing information to borrowers about how they could go about curing their default.

Weitz - we've stopped numerous foreclosures from this very argument. Its a requirement that the trustee be located in Washington state. It's been a great stall tactic for our clients.

Bank of America spokeswoman Jumana Bauwens said ReconTrust operates in compliance with the law and that the company disagrees with McKenna's concerns. She said the company has added physical locations to provide in-person support for customers while also hosting events so that consumers can review all possible solutions to keep them in their homes.

"We make every effort to reach out to delinquent customers to offer home retention options as well as foreclosure avoidance programs," Bauwens said. "Foreclosure is always our last resort."

The lawsuit seeks civil penalties of up to $2,000 per violation as well as restitution for consumers. The attorney general's office believes ReconTrust failed to comply with state law in every foreclosure it has conducted since June 2008.

ReconTrust has issued 9,900 foreclosure notices over the past three years in King, Pierce and Snohomish counties, according to the attorney general's office, but the company operates around the state. McKenna's office said it doesn't know how many foreclosures could have been prevented if the company had complied with state laws.

The attorney general's office says it is investigating more than a dozen other trustees for suspected violations.

Myra Cole, a single mother from Spanaway, was in the process of working on a possible loan modification with her loan servicer when ReconTrust sold the home at foreclosure. She called it an injustice, saying they were taking the proper steps to try and save the home.

"I just can't believe that the company that's supposed to be helping me is foreclosing on me," Cole said in a statement provided through McKenna's office.

Weitz - This will be an interesting case to follow. My money is on a settlement that is minimally evasive to Bank of America's operations - that seems to be the status quo for governments of all levels...talk a big game in regards to the banks and then fold over when the Banks argue back.

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

Our Firm:

Weitz Law Firm, PLLC
520 Kirkland Way, Ste 103
Kirkland, WA 98033

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Uncle Sam as a Landlord?

2011-07-24T07:37:00.000-07:00

AP- The Obama administration is examining ways to pull foreclosed properties off the market and rent them to help stabilize the housing market, according to people familiar with the matter.

Weitz- Interesting- tell me more. Initial thoughts: I think it would help falling prices and would inevitably lower rents. Here is the scary part - I envision a country full of government owned rental properties - thus I'm feeling an overwhelming itch of communism in this plan. Further, lowering rents may encourage more people to walk away from their homes and take shelter in a low cost government rental, thus encouraging the very behavior they would lead to the very thing this plan seeks to prevent.

While the plans may not advance beyond the concept phase, they are under serious consideration by senior administration officials because rents are rising even as home prices in many hard-hit markets continue to fall due to high foreclosure levels.

Trimming the glut of unsold foreclosed homes on the market is "worth looking at," said Federal Reserve Chairman Ben Bernanke in testimony to Congress last week.
Nationally, home prices in May were 7.4% lower than a year earlier, but after excluding distressed sales, prices fell just 0.4%, according to CoreLogic Inc.

Weitz - I love this stat: "excluding distressed sales, prices fell just .4%" - this is the equivalent of saying 'excluding the summer, Phoenix is a very comfortable year round climate'.

Foreclosures and other distressed sales now account for about 30% of homes sold each
month and sales from government-related entities make up about one third of that number.

"Adding more stock simply increases that overhang. If that can be avoided, it should be," says Jared Bernstein, an economist who left the White House in April and is now a senior fellow at the Center on Budget and Policy Priorities, a liberal think tank in Washington. Because rents are firming up, "this idea could have some legs," he said.

Renting out homes could cover the costs of holding the properties until they can be resold once markets stabilize, potentially turning a profit for mortgage titans Fannie Mae and Freddie Mac or the Department of Housing and Urban Development, which handles foreclosures on loans backed by the Federal Housing Administration.

But scattered-site rental programs could require the government to become a national landlord, an area where the mortgage firms have little experience. They also pose accounting challenges that could produce big upfront losses.

One proposal winning support among some federal officials would sell thousands of foreclosed federal properties to private investors who agree to rent them.

Investors would rehab homes, run the leasing process, and contract with national property management firms to handle day-to-day tenant demands.

The government could keep a stake in the venture, modeled on loss-share transactions by the Federal Deposit Insurance Corp. Officials have received interest from around a half-dozen private investors, according to people familiar with the matter.
HUD owned about 69,000 homes at the end of April and sold 11,000 homes in that month. Fannie and Freddie held another 218,000 at the end of March.

Weitz - This is an important paragraph- note the 'modeled on a loss-share transaction by the FDIC' statement. This essentially means that investors will buy the home, and if they lose money, the government will pay them back. Great deal....for investors...not so great for the taxpayer when we write checks to investors who didn't have to take any risk. Its a classic 'heads, I win; tails you lose situation' that the government has mastered (for the benefit of banks) during this crisis (see TALF, TARP, PPIP, and FDIC small bank closings).

Analysts at Credit Suisse estimate that reducing Fannie and Freddie's foreclosed-property sales to around 30,000 each month, from the current rate of 50,000, would cut total distressed sales by one third and avoid a further 3% to 5% decline in home prices.

By flushing foreclosed properties onto markets with few traditional buyers, Fannie and Freddie are "undermining their own recovery," says John Burns, the head of a homebuilding consulting firm in Irvine, Calif., who backs the public-private rental approach.

Bank-owned properties are "concentrated in certain places where lower prices are not going to get more demand," says Kenneth Rosen, chairman of the Fisher Center for Real Estate Research at the University of California at Berkeley. Simply liquidating homes at "auction prices" will drop values for all homes by another 10% to 20%, he says, pushing more homeowners underwater. Fannie and Freddie, which were taken over by the U.S. three years ago, currently rent a few thousand homes to former owners and tenants.

But the Obama administration can't enlist Fannie and Freddie's participation in a wider rental program without the approval of the firms' regulator, the Federal Housing Finance Agency. An FHFA spokeswoman says the agency is "open to considering initiatives that are consistent with the goals of the conservatorship."

Two years ago, investors began scooping up cheap properties at auctions in the hopes of reselling them for a profit. But with home values declining, "flipping is tough to do," says Eric Peterson, a former homebuilder and co-founder of Praxis Capital of Santa Rosa, Calif., which has launched a $10 million fund focused on renting out foreclosures.

Meanwhile, as more Americans go through foreclosure, the number of households opting for single-family rentals over the past five years has grown at about five times the pace of that for overall shelter , according to research firm Zelman & Associates.

"Do you really think a 38-year-old with two kids and two cars who was foreclosed on is really going back to an apartment? It's not going to happen," says Ivy Zelman, the firm's chief executive.

Weitz - This is an interesting theory: if it happens, the consequences, whether good or bad, will likely be different from the the initial plans.

For more information on your rights in Foreclosure, Short sale or other Real Estate issues, consider seeing a Seattle Foreclosure Attorney.

Our Firm:

Weitz Law Firm, PLLC
520 Kirkland Way, Ste 103
Kirkland, WA 98033
(425) 889-9300

Can the Government help in the housing market?

2011-07-18T08:03:00.000-07:00

What can the government do to help out the housing market? Can anything they do actually help? Here are some of the ideas discussed in the above interview:

1) create more jobs
2) assist with financing of the housing market
3) a national moratorium of foreclosures - this would be an utter disaster that would actually encourage defaults and generally 'kick the can down the road'.

Weitz- In my opinion, the best thing the ghttp://www.blogger.com/img/blank.gifovernment can do is to get out; let the market do what the market is going to do and things will work themselves out in time. In sum, the faster we hit a bottom (wherever that may be), the faster we actually recover.

For more help with your rights in foreclosure or short sale, consider contacting a Seattle Foreclosure Attorney.

Our Firm:

Weitz Law Firm, PLLC
520 Kirkland Way, Ste 103
Kirkland, WA 98033
(425) 889-9300

weitzlawfirm.com
seattleshortsaleattorneys.com

Effects of Fannie and Freddie lowering mortgage caps

2011-07-07T20:26:00.000-07:00

The federal government is readying its first retreat from the mortgage market, with the size of loans eligible for government backing set to decline in October.

Weitz – as I’ve said awhile, the government is playing a huge role in propping up the real estate mortgage with tools like the FHA lending program, the tax credit, and Fannie and Freddie. If the involvement begins to wane, I question how the market will fair on its own. If I had to guess, I would estimate that we will be in for some difficult times ahead.

As an emergency measure three years ago, Congress raised to as high as $729,750 the maximum loan amount that Fannie Mae, Freddie Mac and federal agencies could guarantee.

That made it easier—and cheaper—for borrowers in pricey housing markets to obtain mortgages, because the government guarantees that investors receive payments on those mortgages even if homeowners default.

Weitz – A prime of the government propping comments above.

Now those limits are set to decline modestly in hundreds of counties across the U.S. as the government attempts to reduce its outsized footprint in the mortgage market and create room for private investors to compete.

Government-related (Weitz - 'related' should be omitted and exchanged for sponsored or backed) entities stand behind more than nine of 10 new mortgages, and taxpayers have sunk $138 billion into Fannie and Freddie, underscoring the eagerness to dial down the government's share.

The new limits will vary widely by location, but will drop to $625,500 in top-tier markets such as New York, Los Angeles and Washington, D.C.

Even though the new limits won't take effect until Oct. 1, some lenders are already warning borrowers that they will stop accepting applications for loans that exceed the new limits much sooner, to ensure the loans are funded before the cutoff date.

Industry groups are making the case on Capitol Hill that reducing current limits in some of the largest markets is "the exact wrong way to go," said Jerry Howard, president of the National Association of Home Builders. But Obama administration officials say the limits should fall as scheduled, and Republican lawmakers have introduced measures to shrink the Federal Housing Administration's reach more aggressively.

Weitz - I agree that this will cause trouble in the real estate market, but I also believe that it will eventually lead to a healthy market that will be based on true market fundamentals and provide the fundation for job growth as we truly do hit a bottom and start to rebuild our economy.

Had the lower limits been in place last year, Fannie and Freddie would have backed 50,000 fewer loans, according to the Federal Housing Finance Agency. The bulk of the affected loans —about 60%—are in California, with another 20% in Massachusetts, New York and New Jersey.

Parts of the country with less expensive homes also would be affected; their limits are scheduled to fall as low as $417,000 for Fannie and Freddie loans and as low as $271,050 for FHA loans.

Limits for Fannie and Freddie-eligible mortgages will fall in 250 counties, and FHA limits will drop in about 600 counties. While that is a fraction of the nation's 3,000 counties, economists at the National Association of Home Builders say those densely populated areas account for 27% and 59% of the nation's housing stock, respectively.

The possibility of lower loan limits is causing considerable anxiety in coastal California and other high-end housing markets that will serve as test cases for how the government's withdrawal from housing will affect the market and local economies.

Homeowners whose mortgages are too big to qualify for a government-backed mortgage must seek a so-called jumbo loan, which often carry higher interest rates as well as larger down-payment requirements, sometimes more than 20%.

Weitz - this higher downpayment and higher interest rate requirement will be very difficult on Seattle - which I would consider to be on higher end of real estate prices when compared to the rest of the country.

Mr. Barr, who owns a wine-making machinery company, said he has excellent credit but a recent divorce left him with little cash for such a purchase. "I don't have any other alternative," the 48-year-old said. Without the loan backed by the FHA, which allows for down payments as low as 3.5%, "the sale won't happen."

Scaling back loan limits underscores a broader challenge facing the government: It wants more private players to hold mortgage risk, but it doesn't want to destabilize fragile housing markets.

Craig Van Sant is looking to pay $500,000 for a home with a $20,000 down payment in Rancho Cucamonga, Calif. Once the FHA limit drops to $335,000, he would need to more than double his down payment. The only upside, he said, is that "home values slide even more, allowing us to buy more house, if we can pull together all the cash."

Investors and some academics say the government needs to shrink its footprint if private markets are to re-emerge, and that big loans for pricey homes are a reasonable place to start. "Credit unions, small banks, and hedge funds are all eager to buy these loans," said Brian Brady, a mortgage banker at World Wide Credit Corp. in San Diego.

For now, interest rates for jumbo loans are relatively low, which could cushion the impact of changing loan limits. Rates on 30-year fixed-rate jumbos averaged 5.07% last week, compared with 4.62% on government-backed loans, according to financial publisher HSH Associates. The jumbo rates are near the lowest mark since HSH began its count in 1986, and the spread is the lowest since mortgage markets seized up four years ago.

But rates are only part of the equation. Because jumbos aren't being securitized, banks must keep them on their balance sheets and are generally requiring larger down payments and stringent income qualifications."It'll be a real test of private lenders and their ability to fill the void," said Mark Zandi, chief economist of Moody's Analytics.

Weitz - note that 9 out of 10 loans are backed by Fannie and Freddie (see above)- do we really think the private lenders are going to fill that void? - don't count on it.

For more information on your rights in distressed real estate, consider seeing a Seattle Foreclosure attorney.

Our Firm:

Weitz Law Firm, PLLC
520 Kirkland Way, Ste 103
Kirkland, WA 98033

(425) 889-9300

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Emergency Homeowners Loan Program - Washington

2011-07-02T12:00:00.000-07:00

Weitz - Here we go again! The government has rolled out a new program - first we paid people to buy homes (See Homeowner Tax Credit)...now we're paying people to stay in there home. I see why they do it, I simply think its inherently unfair

Real Estate Opinion in WSJ - worth the read

2011-06-05T13:55:00.000-07:00

Weitz- a terrific opinion piece by ALEX J. POLLOCK in the Wall Street Journal.

It is nearly five years since the peak of the housing bubble, and that highly leveraged sector, with its $11 trillion in residential mortgage debt, continues to struggle. Home values just posted their biggest quarterly decline since late 2008, largely due to a steady stream of foreclosures.

But if we consider that the housing bubble inflated from roughly 1999 to 2006, that made seven fat years. An ancient authority would suggest that seven lean years should follow. That would mean two more lean years to go—not a bad prediction.

Actually, what we experienced was a double bubble: one in housing and a parallel one in commercial real estate, which has mortgage debt of $2.4 trillion. Both of these sectors used the opening years of the new century to run up leverage and asset prices to an unsustainable 90% increase, with housing peaking in the second quarter of 2006, and commercial real estate in the fourth quarter of 2007.

The causes of the housing bubble—subprime mortgages, adjustable-rate mortgages, government-mandated loans, etc.—are well known. The role of traditional lending by the heavily regulated banking system in the commercial real-estate bubble has received less attention, yet its toll in subsequent bank failures is apparent.

The inevitable bust brought a national price drop of 32% from the peak for housing, and an even steeper 42% drop from the peak for commercial real estate. These erased trillions of dollars of illusory bubble "wealth." The combined drop in market values was greater than $8 trillion—that's more than the GDP of China last year.

Why did house prices fall proportionally less than commercial real-estate prices after they both inflated to the same extent? In part, at least, this reflects large government programs and subsidies to support house prices. But even with this support, the asset prices on which huge amounts of debt had been built shriveled, leaving the debt under water. As an old banker told me long ago, "Just remember this, young man: Assets shrink—liabilities never shrink!" The credit markets for housing and commercial real estate obviously did not remember this classic principle.

We all know too well the result: huge defaults, losses, TARP and more than 350 bank failures—not to mention the failures of government-sponsored enterprises Fannie Mae and Freddie Mac. Even this long after the peaks of the double bubble, much of the debt overhang—or better, hangover—remains to be worked through. The industrial sector has recovered and is growing, with strong profits, cash build-ups, and a bull market in stocks. But the huge real-estate debt hangover continues to weigh down overall economic performance.

Perhaps with some poetic justice, this is the inverse of the situation in the early 2000s, after the collapse of the tech-stock bubble. Then we had an industrial recession and the deflationary pressure from past euphoric overinvestment. Japanese-style deflation was feared and widely discussed. And an answer was found by the Federal Reserve: A housing boom could balance the effects of the industrial recession.

This was the Greenspan Gamble, which intentionally fostered a boom in housing in the 2000s to counter the drag in the aftermath of the 1990s equity bubble. Then-Fed Chairman Alan Greenspan explained to Congress in 2002 that the negative wealth effect from the losses in the stock market was being offset by the positive wealth effect of the rise in housing prices. So it was, at that point. But the desired housing boom grew into another massive bubble.

We now have the Bernanke Gamble to foster high prices for debt and equity securities, thus a positive wealth effect to offset the negative wealth effect of the huge losses in real estate and real-estate debt. Fed Chairman Ben Bernanke's gamble is being wagered on a long period of zero short-term interest rates and by the remarkable expansion of the Fed's own balance sheet, including the purchase of about $1 trillion in mortgage debt—making the Fed, in a sense, the largest savings and loan in the world.

Will it work? Perhaps. But large unrealized losses still need to be realized and swallowed. We will continue to move sluggishly through an extended period of negotiating how these losses will be distributed. Who will take the hit? Delinquent borrowers, banks, investors (domestic and foreign), the government and government-sponsored entities, and the strapped deposit insurance fund are all involved in these contentious negotiations.

The negotiations also involve the role of Fannie Mae and Freddie Mac, which although hopelessly insolvent and having their losses paid for by taxpayers, are nonetheless funding the majority of new mortgage loans with government-backed debt. Their supporters want to continue having them fund mortgages as big as $729,750 to help prop up high-end housing prices. Opponents like me point out that this prevents the necessary return of private capital to mortgage finance.

As the debt hangover works its way through the system, the outlook is for housing to continue along an extended rocky and bumpy bottom, generally moving sideways in nominal terms. Since we will have an overall inflationary regime, real house prices will be falling. After working through the concluding lean years, housing prices can reasonably be expected to regain their long-term trend of increasing a little over 3% per year in nominal terms.

This would take them back to their highs in 10 years or so. If this happens, it will be far better than the performance of Nasdaq stocks, which a decade later have never even remotely approached their bubble high.

Weitz - As tough as it may be, I believe the government needs to stop trying to control the market and let it work itself out. Only then will we achieve a 'real' recovery.

National Real Estate continues slide - Seattle Real Estate up (barely)

2011-05-31T07:48:00.000-07:00

WASHINGTON (AP) -- Home prices in major areas have reached their lowest level since the housing bubble burst in 2006, driven down by foreclosures, a glut of unsold homes and the reluctance or inability of many to buy.

Weitz - sorry about the picture to the right - I couldn't resist for this article.

Prices fell from February to March in 18 of the metro areas tracked by the Standard & Poor's/Case-Shiller 20-city index. And prices in a dozen markets have reached their lowest points since the housing crisis began. Prices in March rose only in the Seattle and Washington, D.C., metro areas.

Weitz - this was interesting that Seattle had a rise in March - it should be noted that the 'rise' was .1% and March numbers were down 7.5% from this time last year. I don't expect notable rises for the indefinite future.

The nationwide index fell for the eighth straight month.

A record number of foreclosures are forcing prices down, and they are expected to keep falling through this year.

The 12 cities now at their lowest levels in nearly four years are: Atlanta, Charlotte, Chicago, Cleveland, Detroit, Las Vegas, Miami, Minneapolis, New York, Phoenix, Portland, Ore., and Tampa.

The Case-Shiller index measures sales of select homes in those cities compared with January 2000. For each of the areas it reviews, the index provides a three-month moving average price. By measuring the sales prices of the same homes over time, the index seeks to gauge market values and conditions.

The housing sector is struggling even as the overall economy is in the midst of a steady but slow recovery. Some of the worst declines in home prices are in cities hit hardest by unemployment and foreclosures, such as Phoenix, Tampa and Las Vegas.

They are flooded with homes sitting vacant, awaiting buyers. Many banks have agreed to allow homes at risk of foreclosure to be sold for less than what is owed on their mortgages. That trend has pulled down prices further.

Coastal areas, such as San Francisco, San Diego, Los Angeles, Washington and Boston, have fared comparatively better in the past two years. They have been aided by healthy local economies and low unemployment, desirable city centers and limited space for new housing.

But the damage is now spreading to areas that had long escaped the worst of the crisis. They include once-thriving markets, such as Dallas, Denver, Minneapolis and Cleveland. Economists regard them as housing bellwethers -- metro areas that are reliable indicators of where national prices are headed.

Denver and Dallas are on pace to hit post-housing bust lows in the next few months.

In the seven years before its peak in July 2006, the home-price index surged 155 percent. Since then, it's fallen 33 percent.

"We look for further declines to be registered in the quarters ahead," said Joshua Shapiro, chief U.S. economist at MFR Inc.

Weitz - not a big surprise - the government is calling it a 'double dip' - I would argue that we never really had a recovery in housing outside of faux government tax credit that brought demand forward and made things look more heathly than they truly were for a brief period of time.

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

Our Firm:

Weitz Law Firm, PLLC
520 Kirkland Way, Ste 103
Kirkland, WA 98033
(425) 889-9300

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Mortgage Insiders cry foul

2011-05-14T07:58:00.000-07:00

A clip from the Dylan Ratigan show on industry insiders 'blowing the whistler' on the foreclosure process.

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

Home Market takes a tumble

2011-05-10T21:03:00.000-07:00

Weitz – If you follow our blog regularly, this is old news. Nevertheless, a recent report regarding the continued falling of housing prices:

WSJ - Home values posted the largest decline in the first quarter since late 2008, prompting many economists to push back their estimates of when the housing market will hit a bottom.

Home values fell 3% in the first quarter from the previous quarter and 1.1% in March from the previous month, pushed down by an abundance of foreclosed homes on the market, according to data to be released Monday by real-estate website Zillow.com. Prices have now fallen for 57 consecutive months, according to Zillow.

Last year, the housing market showed signs of improving as price depreciation slowed in some markets and stabilized in others. In response, a number of economists began forecasting that housing would hit a bottom in late 2011, then begin to recover. But the improvements, spurred by federal programs that gave buyers up to $8,000 in tax credits, proved fleeting. Sales collapsed when the credits expired last summer, and prices in many markets have been falling ever since.

While most economists expected sales to decline after tax credits expired, the drag on the market has been greater than many anticipated. "We expected December and January to be bad" as the market reeled from the after-effects of the tax credit, said Stan Humphries, Zillow's chief economist. But monthly declines for February and March were "really staggering," he said. They indicate "a reflection of the true underlying demand, which is now apparent because most of the tax credit is out of the system, and it's being completely overwhelmed by supply."

Mr. Humphries now believes prices won't hit bottom before next year and expects they will fall by another 7% to 9%. Other economists revised their forecasts. In April, the chief economist at mortgage company Fannie Mae, Doug Duncan, said home prices in the second quarter would be 5.3% lower than the previous-year period, down from his earlier estimate of a 2.6% decline.

An abundance of foreclosed homes on the market is pushing down home values.
The estimates, which are based on data from the mid-1990s on, come from a proprietary computer program that takes into account sale prices for nearby homes that appear comparable, the size and other physical attributes of the home, its sales history and tax-assessment data, Mr. Humphries says.

Prices are decelerating in large part because the many foreclosed properties that often sell at a discount force other sellers to lower their prices. Mortgage companies Fannie Mae and Freddie Mac have sold more than 94,000 foreclosed homes during the first quarter, a new high that represented a 23% increase from the previous quarter. More could be on the way: They held another 218,000 properties at the end of March, a 33% increase from a year ago.

The companies are bracing for more bad news: On Friday, Fannie reported a $6.5 billion net loss, largely as it boosted loan-loss reserves in anticipation of falling home prices.

Paul Dales, a senior U.S. economist with Capital Economics, says prices could fall by as much as 10%, down from his previous forecasts of around 5%. A March survey of more than 100 economists by MacroMarkets LLC forecasts a 1.4% drop in prices this year, down from the December estimate of a 0.2% decline.

Other home-price indexes also show weakness. The widely followed Case-Shiller index published by Standard & Poor's showed that prices climbed from April 2009 until last summer, when they started declining as tax credits expired. Today, prices are on the verge of reaching new lows, the index shows. The Case-Shiller index tracks repeat sales of previously owned homes using a three-month moving average.

According to the Zillow index, a handful of California markets and Washington, D.C., saw price appreciation last year, but that has since reversed. Mr. Humphries attributes the "double dip" in those markets, which include Los Angeles, San Francisco and San Diego, to the way in which the tax credit stimulated demand from buyers. When the tax credit went away, markets were left with rising supply from foreclosures but with less demand from buyers.

Weitz- creating false demand for a product or asset never ends well. I don't recall the amount of wasted taxpayer dollars that went into the tax credit, but I know it was a rather large. Obviously, it created a short term increse in demand that brought forward future demand, and now we're in a period where the demand is likely lower than it should/could be as our policies encouraged many who would be looking at purchasing now to purchase during the tax credit.

Detroit, Chicago and Minneapolis posted the largest declines during the first quarter of the top 25 metro areas tracked by Zillow, while Pittsburgh, Dallas and Washington posted the smallest declines.

To be sure, steep declines in home prices along with mortgage rates near their lowest levels in decades have helped make housing more affordable than at any time in the past 30 years, according to Zillow. Markets that have lower levels of foreclosures, such as Dallas, and those with better job-growth prospects, such as Washington, are faring better.

However, credit standards remain tight, posing another challenge for the housing market. Just as many unqualified borrowers received loans during the boom, "there are people today who probably could afford loans but can't get them," says David Berson, chief economist at PMI Group Inc. The average credit score on loans backed by Fannie Mae stood at 762 in the first quarter, up from an average of 718 for the 2001-2004 period.

Weitz - Average credit of 762; that is awefully high for an 'average'.
Joe Sullivan, a real-estate agent in Stockton, Calif., is worried that more traditional buyers are seeing their loan applications canceled late in the process as lenders change qualification terms. If mortgage standards continue tightening, prices are "going to drop down to where only investors can get them, people with cash money," he said. Sales to absentee buyers, primarily investors, accounted for 47% of all Phoenix-area home sales in March, the highest level for any month in more than a decade, according to DataQuick, a real-estate research firm.

Christine Rice spent two years looking to buy a home in Los Angeles but found herself continually losing out to bids from investors offering to pay in cash. In September, she finally made a winning bid, paying $275,000 for a two-bedroom home.

The prospect of falling prices "doesn't keep me up at night, but only because it was so cheap," says the 43-year-old tailor, who says she and her husband needed to move to have more space for their family. Her mortgage payments plus taxes are less than the rent she had been paying. "If it had been a stretch, then maybe I'd be worried," she says.

Buyers who qualify for mortgages are demanding bigger discounts as added insurance against further declines in values. Sellers, meanwhile, are balking. "More often, they don't want to take the first offer," says Jeffrey Otteau, president of Otteau Valuation Group, an East Brunswick, N.J., appraisal firm. "What they don't realize is, in an oversupplied market, the next offer is for less."

While some analysts have argued that home prices need to fall to "clearing prices" that will attract more buyers, price declines could also complicate any recovery by pushing more borrowers under water. Zillow estimates that more than 28% of borrowers owe more than their homes are worth nationally. Those numbers are much higher in hard-hit markets such as Phoenix, where more than two-thirds of borrowers owe more than their homes are worth.

Fannie Bleeds anew as Housing Falters

2011-05-07T08:08:00.000-07:00

Tucked in the corner of the Wall Street Journal is a very concerning story...

AP- Fannie Mae reported a net loss of $6.5 BILLION for the first quarter as a weakening housing market dashed hoped that the company had stabilized.

Fannie said Friday it would ASK THE GOVERNMENT FOR a fresh TAXPAYER infusion of $6.2 billion after paying dividends to the Treasury. The loss follows net income of $73 million during the previous quarter.

Fannie's loss as it increased its loan loss reserves after it REVISED DOWN ITS HOME PRICE FORECAST for 2011, and took bigger than expected losses on the sale of foreclosed properties. The mortgage finance giant booked $11 Billion in credit related expenses, up from $4.3 billion last quarter.

"Right now, we're not seeing a lot of good thing in the residential real estate markets," said David Hisey, acting chief financial officer for Fannie Mae.

Home prices declines pose a big risk to Fannie and its smaller sibling Freddie Mac because the firms could take steeper losses on a rising number of foreclosed homes that must be resold. Fannie and Freddie owned 218,000 homes at the end of March, a 33% increase from a year ago.

Weitz - did you catch that?...they own 218,000 homes - there is that shadow inventory I always about. This is a problem that will be a drag on the market for years.

The rising losses came despite a decline in the share of single family loans that were 90 days or more delinquent. Those fell to 4.27% at the end of the March, down from 4,48% at the end of last year. Fannie had around $206 billion in delinquent loans on its books, "so with that much exposure, if you just have a little bit of negative things happening, it can have a big impact," said Mr. Hisey.

Fannie's report comes days after Freddie Mac reported net income of $676 million for the first quarter.

It is clearly too soon to say that they've turned a corner," said Jim Vogel, an analyst at FTN Financial.

The federal government has committed unlimited sums to prop the companies unlimited sums sums to prop the companies up and keep mortgage markets from collapsing. So far, taxpayers are on the hook for around $138 billion, with $86 billion for Fannie and $52 billion for Freddie.

The government receives preferred shares that pay a 10% dividend in exchange. At the current rate, Fannie must pay the government $2.3 billion each quarter. Fannie has posed losses for 14 of the past 15 quarters.

Weitz - the lunacy of Freddie of Frannie is mind-boggling. I have a few thoughts on the issue that you won't hear in most media:

1) All this talk by Congress about repealing Fannie and Freddie is insincere and they know it. Simply put, there is no way that the government can do away with Fannie and Freddie as they guarantee over 90% of all new loans issued on residential mortgages. Without this guarantee, the mortgage market would unquestionably collapse.

2) Fannie and Freddie have implicitly bailed out the banks (in addition to the other government programs like TARP, TALF, etc.) This essentially has put the losses faced by the banks on the shoulders of taxpayers as we are ultimately responsible for all these losses as they continue to incur quarter after quarter.

3) Please explain to me how this 'dividend' paid back to treasury makes sense. Let me get this straight, Fannie and Freddie pays the Treasury a dividend and then the Treasury turns around and writes a check to keep Fannie and Freddie alive. Skeptically, I think it allows them to 'tweak' their books for accounting purposes.

3) As I've said before- our government officials need to pick either pure capitalism or pure socialism. This quasi- capitalist system we have favors a hand few of those in elite positions while everyone else suffers. If we want to be a true capitalist society, we have to let Fannie and Freddie fail and let the system reset.

For more information on your options in Real Estate, Bankruptcy and Tax, consider contacting a Seattle Foreclosure Attorney.

Our Firm:

Weitz Law Firm, PLLC
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(425) 889-9300

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Celebrity Foreclosure

2011-05-03T10:24:00.000-07:00

A growing number of high-end homes are selling at a loss or facing repossession by lenders in Las Vegas, which already has the highest rate of foreclosure filings among large U.S. cities. The wave of defaults that began with subprime borrowers and the unemployed has spread to upscale homeowners who see no point of staying even if they can afford to.

Actor Nicolas Cage bought a home in Las Vegas, Nev., in 2006 for $8.5 million. By 2010, it was in foreclosure.

Nicolas Cage, the Oscar-winning star of "Leaving Las Vegas," bought a seven-bedroom home with a panoramic view of the city's casino-lined Strip in 2006 for $8.5 million. By January 2010, it was in foreclosure.

The next owner, who property records show paid $4.2 million, has put the house on the market for $7.9 million — an "unrealistic" price, according to Zar Zanganeh, the broker handling the listing.

"It's sad," Zanganeh said, his high-heeled boots clacking on the marble floor as he gave a tour of the 14,000-square-foot mansion featuring a six-person steam shower and a closet the size of a small apartment. "There's a lot of inventory, a lot of homes like this waiting for an owner."

A growing number of high-end homes are selling at a loss or facing repossession by lenders in Las Vegas, which already has the highest rate of foreclosure filings among large U.S. cities. The wave of defaults that began with subprime borrowers and the unemployed has spread to upscale homeowners who see no point in staying even if they can afford to.

In the 15 months through March, at least 25 houses in the Las Vegas area changed hands for more than $3 million, with at least seven doing so through foreclosure or by selling at a loss, according to the Greater Las Vegas Association of Realtors and Clark County property records. In 2009, 14 homes sold for more than that amount, with one trading at a loss.

In the first quarter, 30 Clark County homes with loans exceeding $1 million were repossessed by banks or bought by third-parties in foreclosure sales, up from 20 homes a year earlier, according to ForeclosureRadar.com, a Discovery Bay, Calif., company that tracks defaults. Short sales, in which the bank agrees to accept less than the loan balance, and bank-owned properties accounted for about three-quarters of all home sales, according to the Las Vegas Realtors.

"You feel like a sucker if you're paying a $5 million mortgage on a house that's worth $2 million," said Zanganeh while showing the grounds of an 11-acre Las Vegas estate built by Prince Jefri Bolkiah, brother of the Sultan of Brunei. "These days, there are no traditional sales. They're all short sales or bank-owned."

The estate — with 18 bedrooms, 36 bathrooms, a 20,000-bottle wine cellar, an 11-car garage and air-conditioned stables for 10 horses — sold for $14 million in 2004 to Eric Petersen, who owned Consumer Credit Services, a Las Vegas-based catalog-merchandising company that closed in 2008. Petersen said he spent $20 million to make it habitable.

It's back on the block for $25 million — $9 million less than his investment — with an offer "for considerably less on the table," Petersen said. He has slashed the listing price four times since October from an initial $37.5 million.

"I gave up on Vegas," Petersen said.

Another listing with Zanganeh's firm, Luxe Estates Collection, is a never-occupied, bank-owned mansion overlooking a Jack Nicklaus-designed golf course in the gated Ridges community west of Las Vegas. The asking price is $3 million for the 8,550-square-foot house, which was repossessed in 2010 and had a $3.2 million mortgage from the Community Bank of Nevada, a lender seized by regulators in August 2009.

About 100 homes in the county are listed for $3 million or more, according to the Las Vegas Realtors, a five-year supply at the current sales pace.

Strategic defaults

In Nevada, 23 percent of delinquent borrowers said they "strategically defaulted," or walked away from their homes by choice rather than necessity, according to a January report by the Nevada Association of Realtors.

"It's folks that feel the hopelessness of it all," Rob Wigton, chief executive officer of the state association, said in a telephone interview from Reno. "They've rolled the dice and lost."

The population of Clark County, home of Las Vegas, has fallen by about 16,000 from its estimated high of 1.97 million in 2008, according to the Nevada State Demographer. Almost 15 percent of homes in the county — 125,000 residences — were vacant, according to the 2010 Census, after a construction boom in the last decade that peaked with 39,000 housing permits issued in 2005.

Las Vegas home values plunged 58 percent from the 2006 high-water mark through February, the biggest drop of the 20 metropolitan areas tracked by the S&P/Case-Shiller index, and are the lowest since June 1999, the group said last week. Prices fell 7.4 percent in March from a year earlier to a median $125,950, the Las Vegas Realtors reported April 8.

Almost 70 percent of Las Vegas-area homeowners with mortgages were underwater at the end of 2010, meaning they owed more than the value of the property, according to CoreLogic, a Santa Ana, Calif., real-estate information company. Among cities with a population of more than 200,000, Las Vegas has led the nation in the pace of foreclosure actions since November 2009, with one of every 31 homes receiving a filing in the first quarter of this year, RealtyTrac, an information provider in Irvine, Calif., reported April 14.

About 20 percent of Las Vegas homeowners seeking short sales owe at least $750,000, said Jamie Cogburn, a Las Vegas plaintiff's attorney who said he has handled 350 such sales and is working on 200 more. One client is a doctor with a home now valued at about half of its $1 million mortgage, Cogburn said. The doctor earns enough to save for a 20 percent down payment on his next home within a few months at current prices.

"People with a higher income can go buy another house," Cogburn said. "You've got to cut your losses at some point, just like with a stock."

Cage, who won an Academy Award for 1995's "Leaving Las Vegas," in which he portrays an alcoholic who drinks himself to death in the city, stayed in the house now being marketed by Zanganeh for four weekends, according to the broker.

Actor's troubles

The actor sued his manager in October 2009 for placing him in "numerous highly speculative and risky real-estate investments, resulting in Cage suffering catastrophic losses," according to court filings.

The manager, Samuel Levin, countersued, saying Cage ignored advice and "set off on a spending binge of epic proportions," acquiring 15 homes, four yachts, an island in the Bahamas, a Gulfstream jet and millions of dollars of jewelry and art, according to a November 2009 complaint in state court in Los Angeles County. The case was settled out of court in August.

Cage "is working and not doing press at this time," his publicist, Samantha Hill, said in an email. He was arrested in New Orleans on April 16 for domestic abuse and public drunkenness, according to a statement by the city's police department.

Las Vegas's economic collapse has made it hard for many executives and business owners who own mansions to keep up with their mortgages, said Brian Gordon, a partner at Applied Analysis, an economic-consulting firm in the city.

"People on the lower end were forced out a long time ago," he said. "People on the high end had a longer staying power. Now they've chewed through their resources."

While high-end homes fall in price, total residential- property sales have accelerated, rising 8.2 percent in March from a year earlier to 4,316 units, the Las Vegas Realtors reported. More than half of this year's purchases were all-cash transactions, a sign that investors are finding bargains at the low end of the market, said Robert Lang, a professor of sociology at the University of Nevada, Las Vegas.

"Prices are below the cost of materials and labor," said Lang, also a senior fellow at the Brookings Institution in Washington, D.C. "If you're betting the U.S. economy won't go back to Armageddon, you might see one-third appreciation if you buy now."

Las Vegas's affordable housing and warm weather will be the theme of a promotional campaign the city plans to use to attract out-of-town investors and potential new residents, Mayor Oscar Goodman said.

"We're going to make lemonade out of this 'crisis' by promoting our foreclosures here," Goodman said.

The city, he said, will be "showing the opportunities to people who are freezing to death in the middle of the country in the worst winter imaginable — that they can come out here and buy a home at one-third what it cost five years ago and have a wonderful quality of life."

Weitz - Viva Las Vegas - these numbers are extraordinary. It will be interesting to see if Seattle has similar stories in the next couple years.

New Washington Foreclosure Fairness Act: House Bill 1362

2011-04-26T11:04:00.000-07:00

The New Foreclosure Law Effective July 13, 2011

Below is our outline of the new foreclosure law - it may be a bit scattered and requires a fairly in depth background in foreclosure law to understand some of the issues. Nevertheless, it may be something some of you find value in.

I. Requirements for Trustee’s Sale

a. Deed of Trust contains a power of sale
b. Property isn’t used principally for agricultural purposes
c. Borrower has defaulted
d. No currently pending action by bank to take the house because of borrower’s default
e. DOT has been recorded
f. Trustee present in WA before the date of the NOTS through the date of the sale
g. Trustee has proof the bank owns the note before NOTS is recorded, transmitted, or served
i. Declaration by the bank stating that it holds the note is sufficient.
h. Bank sends borrower aNODat least 30 days before notice of sale is recorded.

II. Requirements for Notice of Default

a. Issuance

i. 30 days after bank’s initial contact with borrower was initiated (33 days after date on letter) or 30 days after satisfaction of contact requirements with no response from the borrower OR
ii. 90 days after initial contact if borrower responds

Weitz - if you respond for intitial notice for mediation, you can have at least 90 days more in the home if the modification or other alternatives do not work.

b. Notice to Borrower

i. Sent to borrower’s last known address by first-class mail, registered or certified, with return receipt
ii. Copy posted in a conspicuous place on premises or borrower personally served

c. Contains itemized account of total amount necessary to reinstate DOT

d. Includes declaration from bank that it contacted borrower, tried to contact borrower with due diligence, or borrower has surrendered property. (Foreclosure Loss Mitigation Form)

III. Bank’s Obligation to Make Initial Contact

a. Due diligence contact requirements

i. First-class letter to borrower
1. Must contain certain information
2. Response: Borrower has 30 days to respond after initial contact (33 days after date letter sent). If borrower does not respond, NOD may be issued.

ii. Follow-up phone call to borrower

1. At least 3 times at different hours on different days
2. Automated dialing system ok if call is connected to a live rep when answered
iii. Certified letter (Only f borrower doesn’t respond within 14 days after the phone call requirements are satisfied)

b. Bank can proceed with NOD without contacting if borrower has filed for bankruptcy or surrendered the property

Weitz - note that a BK could take away the mediation requirement(s).

c. Contact requirements only apply to DOTs recorded against owner-occupied residentialreal property

IV. Role of Housing Counselor/Attorney

a. Duty to act in good faith to reach a resolution within 90 days after initial contact

b. Borrower can seek assistance from a housing counselor or attorney at any time

c. Good Faith Duty to Assist Borrowers
i. Prepare borrower for meetings with bank
ii. Advise borrower about what documents are needed for a resolution
iii. Inform borrower about foreclosure alternatives
iv. Provide advice and guidance as necessary

d. Mediation Referral: Counselor/attorney sends notice to borrower and HUD that mediation is appropriate

i. Requirements
1. Mediation is appropriate under the circumstances AND
2. Notice of Sale has not been recorded

ii. Mediation referral doesn’t preclude trustee from issuing NOD

e. Not liable for civil damages, unless gross negligence or wanton misconduct

V. Mediation

a. Timeline Requirements
i. If borrower requests a meeting, the bank must schedule it before NOD issued
ii. Referring counselor/attorney sends notice to borrower and HUD that mediation is appropriate
iii. Within 10 days of receipt of notice of mediation referral, HUD must

1. Sends notice to bank, borrower, referring attorney/counselor, and trustee that parties have been referred to mediation

2. Select a mediator and notify parties of the selection
iv. Mediator must send written notice of time, date, and location of the mediation session to the borrower, bank, and HUD at least 15 days before it is scheduled
v. Mediator must convene the session in the borrower’s county within 45 days after receiving the referral from HUD (parties may agree to extend this time limit)
vi. Bank and borrower must try to reach a resolution within 90 days after initial contact is sent and NOD issued.

b. Content of Discussion (issues mediator must require parties to consider)

i. Assessment of borrower’s financial ability to modify or restructure the loan and a discussion of options.
ii. Borrower’s current and future economic circumstances
iii. Net present value of receiving payments pursuant to a modified mortgage loan as compared to the anticipated net recovery after foreclosure
iv. Any affordable loan modification calculation and net present value calculation when required under any federal mortgage relief program

c. Attendance of Parties: In person, unless waived by the borrower

i. Person authorized to modify or agree to alternative foreclosure resolution may participate by phone or video as long as a bank representative is there in person
d. Any modification offered by borrower’s representative is subject to borrower’s approval

VI. Duties of the Parties (required for good faith mediation)

a. Homeowner’s Duties

i. Provide bank with documentation at least 10 days before mediation or pursuant to mediator’s instructions
1. Borrower’s current and future income, debts and obligations, and past 2 year’s tax returns

b. Bank’s Duties

i. Provide borrower with documentation at least 10 days before mediation or pursuant to mediator’s instructions:
1. Statement of loan balance (as of 1st day of the month of the mediation)
2. Copies of note and DOT
3. Proof bank owns the note (bank declaration is sufficient)
4. Itemized estimate of any arrearages
5. Payment history and schedule
6. Data relevant to net present value analysis
7. Explanation of any denials of foreclosure alternatives
8. Most recent available appraisal or BPO relied on by bank
9. Pooling and servicing agreement, if bank claims it prevents a modification

c. Other Ways Parties May Violate Duty to Mediate in Good Faith

i. Failure to timely participate in mediation without good cause
ii. Failure to pay mediation fees as required
iii. Failure to designate representatives with adequate authority to reach a resolution
iv. Bank’s request that borrower waive future claims in connection with the DOT as a condition of agreeing to a modification

VII. Mediator

a. Mediator must send certification to HUD and trustee within 7 days after session of
i. Date, time, and location of mediation session
ii. Names of persons who attended the mediation
iii. Whether resolution was reached
iv. Whether parties participated in good faith
v. Description and result of the net present value test used

b. Trustee cannot record the NOS before receipt of certification
i. If he does not receive it, he can record it 11 days after the date it was due. However, if the mediator subsequently issues a certification alleging that the bank violated its good faith duty, the trustee can’t proceed with the sale

c. Certification that Parties acted in Good Faith
i. Bank can proceed with foreclosure if no agreement is reached
d. Certification that Bank Failed to Act in Good Faith
i. Constitutes a defense to the nonjudicial foreclosure action
ii. Not a defense to a judicial foreclosure action or a future nonjudicial foreclosure action if a loan modification is agreed on and the borrower subsequently defaults

e. Certification that net present value of the modified loan exceeds the net present value of the anticipated net recovery at foreclosure
i. Constitutes a basis for borrower to enjoin the foreclosure

f. Certification that failed to act in good faith

i. Authorizes the bank to proceed with foreclosure

g. Fees: Mediator can charge reasonable fees (can’t exceed $400 for a 1-3 hour session unless waived or parties agree otherwise)
i. Mediator must provide an estimate before the mediation
ii. Fee must be equally divided between bank and borrower
iii. Bank and borrower must tender their half 7 days before mediation

h. Mediator qualifications
i. Attorneys, housing counseling agencies, retired WA judges
ii. HUD may establish a required training program for mediator approval

VIII. Foreclosure Fairness Account

a. Banks must pay HUD $250 for deposit into the foreclosure fairness account for every owner-occupied residential real property for which they issue an NOD.

For more information on your rights in Foreclosure, Short Sale or Bankruptcy, consider contacting a Kirkland Foreclosure Attorney.

Our Firm:

Weitz Law Firm, PLLC
520 Kirkland Ave, ste 103
Kirkland, WA 98033
(425) 889-9300

weitzlawfirm.com

Second Mortgage Loan Modification Programs (2MP)

2011-04-24T13:02:00.000-07:00

2MP Program:

If your first mortgage was permanently modified under HAMP and you have a second mortgage on the same property, you may be eligible for a modification or principal reduction on your second mortgage under 2MP. 2MP is designed to work in tandem with HAMP to provide a comprehensive solution for homeowners with second mortgages to increase long-term affordability and sustainability. If the servicer of your second mortgage is participating, they will automatically evaluate you for a second lien modification. Eligibility*

You may be eligible to apply if you meet all of the following:

•Your first mortgage was modified under HAMP.
•You must not have been convicted within the last 10 years of felony larceny, theft, fraud or forgery, money laundering or tax evasion, in connection with a mortgage or real estate transaction.•You have not missed three consecutive monthly payments on your HAMP modification.
•You owe more than $5,000 on your second mortgage.
•Your monthly second mortgage payment is more than $100.
*Eligibility criteria are for guidance only. Contact your mortgage servicer to see if you qualify for 2MP.

Program Availability

Servicers participating in 2MP are:

1.Bank of America, NA
2.BayviewLoan Servicing, LLC
3.CitiMortgage, Inc.
4.Community Credit Union of Florida
5.GMAC Mortgage, LLC
6.Green Tree Servicing LLC
7.iServeResidential Lending, LLC
8.iServeServicing, Inc.
9.J.P.MorganChase Bank, NA
10.NationstarMortgage LLC
11.OneWestBank
12.PennyMacLoan Services, LLC
13.PNC Bank, National Association
14.PNC Mortgage
15.Residential Credit Solutions
16.ServisOne Inc., dbaBSI Financial Services, Inc.
17.Wells Fargo Bank, NA

Our Firm:

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

Foreclosures drop - but for how long?

2011-04-23T07:46:00.000-07:00

Realty Check video below - Foreclosures fell nationwide in Q1 2011, but look out - the moratorium on foreclosures likely played a role. I would not be surprised to see an uptick in Q2 & Q3.

Foreclosure Fairness Act - New Washington Law

2011-04-21T17:01:00.000-07:00

AP (Seattle Times) Gov. Chris Gregoire signed into law on Thursday a bill that could help more homeowners in Washington state avoid unnecessary foreclosures.

The bill, the "Foreclosure Fairness Act," gives distressed homeowners working with housing counselors or attorneys the right to in-person mediation with the bank or company servicing their mortgage.

See our easy (easier) to read outline here: Washington Foreclosure Fairness Act Outline.

See SB 1362.

Washington, among the 27 states where court approval of foreclosures isn't required, becomes only the third state — after Nevada and Maryland — to adopt a foreclosure-mediation program in which a homeowner can seek to modify terms of their loan.

"There's no silver bullet, but this will at least be a competent response to the irresponsibility of the financial industry," said Bruce Neas, a Columbia Legal Services attorney who helped negotiate the bill.

State regulators, who receive hundreds of complaints each year against national mortgage servicers, have been stymied by federal rules that limit their power to intervene.

The only recourse for homeowners has been going to court, where they're usually outmatched by servicers.

Also Wednesday, federal regulators announced they had ordered eight national banks — Bank of America, Citibank, HSBC, JPMorgan Chase, MetLife Bank, PNC, U.S. Bank and Wells Fargo — to hire an outside firm to review all foreclosure actions from 2009 to 2010 and submit a plan to remedy "all financial injury to borrowers caused by any errors, misrepresentations, or other deficiencies" identified by outside consultants.

The move by state lawmakers to require mediation comes as the foreclosure crisis in Washington continues. In the first three months of the year, more than 5,600 homes were seized and more than 7,000 were headed to foreclosure auction, according to RealtyTrac.

In signing the bill Thursday, Gregoire noted that Washington state ranks 10th in the nation in the number of foreclosures and that more than 30,000 families this year face the risk of losing their homes.

The bill also provides an estimated $7.5 million for foreclosure-prevention efforts and more than double the number of housing counselors. Washington has just over 40.

"The real hope is that by adding the counselors, the banks and families would reach some kind of agreement before going to mediation," said Kim Herman, executive director of the Washington State Housing Finance Commission.

Under the new law, once a homeowner becomes delinquent, the servicer must send a letter asking the owner to contact the server and urging the person to call a housing counselor or attorney for help.

Homeowners who respond to the letter would be given 60 more days before the servicer could file a notice of default.

If the counselor or attorney couldn't resolve the issue with the servicer, they could refer the homeowner to a mediator through the state Department of Commerce.

The Commerce Department selects the mediator, who must hold a session within 45 days. The homeowner and servicer share in the cost of the mediator's fee, which can be up to $400.

Weitz - $400 split = $200 to have at least two more months in your property - money well spent even if you don't reach terms on the mediation.

If the mediator finds the servicer didn't participate in good faith, a homeowner can use that to ask a court to stop the foreclosure. The state Attorney General's Office also could pursue penalties against servicers.

When lawmakers opened negotiations on the bill, consumer advocates were surprised by the bankers' first move.

Without prompting, the Washington Bankers Association offered to pay a $250 fee for every default notice filed, with the stipulation that 80 percent of the money pay for housing counselors.

"It did surprise people," Herman said.

The association, which represents national and community banks, suggested the fee because it wants more delinquent homeowners to work with housing counselors, said James Pishue, the group's president.

National studies show that homeowners who work with trained housing counselors have much higher success rates in reaching an agreement with their servicer.

"We thought that would prevent the need for mediation," Pishue said. "Ultimately it results in fewer foreclosures."

Marc Cote, a housing counselor who oversees the state's foreclosure-prevention hotline, said he's pleased with the measure.

"The main thing I'm hopeful for is that the mediation piece will inspire servicers to resolve the hundreds, in my experience, of [loan] workouts that are still not resolved after months and months."

Weitz: like most government programs, I remain skeptical. That said, I'm quite certain the following will occur: 1) banks are going to lose a lot of money on this program - it is a huge pain for them; 2)borrowers are going to be able to extend the already lengthy foreclosure process; and 3) the number of Notice of Defaults issued in the next 90 days (prior to the bill taking effect) will ramp up dramatically. As someone who fights for homeowners, I think its a great law - but I don't think it fixes anything long term.

For more information, consideration seeking guidance from a Seattle Foreclosure Attorney.

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

weitzlawfirm.com

How to Avoid Loan Modification Scams

2011-04-15T21:52:00.000-07:00

With millions of Americans underwater on their mortgages and facing foreclosure, loan modifications have emerged as a potential solution to the housing crisis. But the push to modify loans has also provide new opportunities for con artists, according to fair housing advocates.

"All those people who did unconscionable things to people with the subprime and predatory lending…they're making their living now in these mortgage modification scams," says Shanna Smith, CEO of the National Fair Housing Alliance (NFHA), a consortium of more than 220 private, non‐profit fair housing organizations.

A recent investigation by the NFHA and three sister organizations found the loan modification industry as being "rife with corrupt practices."

Among the findings:

55% required an upfront fee to start work.
43% guaranteed or promised they could secure a loan modification before reviewing documents.
24% advised or encouraged homeowners to stop making their mortgage payments or to stop contacting their lenders.
12% discouraged homeowners from seeking free help from government-approved housing counseling agencies.

In the accompanying video, Smith describes the findings of the investigation and offers advice for homeowners on how to avoid being scammed.

First and foremost, "anybody who asks for upfront fees is probably a scammer," she says.

Second, Smith advocates homeowners work with their current lender and take advantage of counseling services offered by the Department of Housing and Urban Development (HUD). "It may take longer but it's free and they're not going to scam you," she says.

Third, Smith says it's a "myth" that you have to be behind on your mortgage in order to qualify for a loan modification. "Don't ever stop paying because someone advises you," she says. "Don't lie about your income. Be honest and forthright…with your lender."

Fourth, don't sign over your deed to a third party who promises to pay your mortgage while working out a modification with your lender. This relatively new industry practice typically results in homeowners having their home sold out from under them, Smith says.

Fifth, only use HUD-approved loan modification companies.

Whether it's a promise to refi at a very low rate or quickly get you a loan modification, "if it sounds too good to be true, it probably is," Smith says.

While this may all seem self-evident, millions of Americans got in way over their heads during the housing boom earlier this decade and were taken advantage of by scam artists. Many financial criminals are now returning to the scene of the crime.

Smith's organization has been sharing the results of its study with lawmakers and the new Consumer Financial Protection Agency. NFHA's hope is that state and federal law enforcement agencies will investigate the loan modification industry, where it's common practice for firms to frequently change their name, phone numbers and addresses in order to stay one step ahead of the law — and the consumers they've recently bilked.

"It's like whack-a-mole," Smith says. "People in America, you're at risk of being scammed."

Weitz - There is nothing these companies do that you can't do for yourself. Simply look into the HAMP program as most modification are accomplished through this government program.

See Makinghomeaffordable.gov

For more information on your rights with Distressed Real Estate, COnsider seeking guidance from a Seattle Short Sale Attorney.

Our Firm:
Weitz Law Firm, PLLC
413 14th Ave W
Kirkland, WA 98033
(425) 889-9300

The Real Houswives of Wall Street

2011-04-15T21:04:00.000-07:00

You won't believe this. By the way, Matt Taibbi is a terrific author - check out his book 'Griftopia'.

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

Home Construction Deep Freeze

2011-03-23T17:54:00.000-07:00

WASHINGTON (AP) -- Home construction in the United States is all but coming to a halt.

Americans are on track to buy fewer new homes than in any year since the government began keeping data almost a half-century ago. Sales are now just half the pace of 1963 -- even though there are 120 million more people in the United States now.

Weitz - Wow. That's really bad.

The sliding sales show just how far the housing market has fallen since the bubble burst four years ago. And they're a blow to the economic recovery as it draws strength from other places.

Weitz- let me paraphrase - "blow to the economic recovery as it draws strength from 'the Federal Reserve printing money and giving it to banks'".
Diminished sales have driven the median price of a new home down to about $202,000, the lowest since 2003. If the sluggish sales continue, analysts say, small homebuilders will fold, meaning less competition as the market improves and higher prices later.

Weitz - This is a terrible analysis - once the demand picks up as prices get to a true value, builders will be back at it again with new funding.

"The longer it goes on, the more builders will drift away from the industry altogether," said Paul Ashworth, chief U.S. economist of Capital Economics.

Ashworth noted that a surge in foreclosures is forcing down prices for previously occupied homes even faster than they're falling for new homes. As a result, new homes are less attractive to buyers.

"That's not going to change for at least another year or two," Ashworth said. "Under these conditions, you can't really see homebuilders willing to ramp up, and that's bad for buyers."

Weitz - buyers will just have to settle on the Millions of un-occupied bank owned properties.

Sales of new homes plunged in February to an annual rate of 250,000, the Commerce Department said Wednesday. It was the third straight monthly drop. The pace is far below the pace economists say is healthy, about 700,000 a year.

Last year, 323,000 new homes were sold -- the worst year on record and the fifth straight year of declines. Economists don't expect this year to be any better and say it could take two years or more before sales return to a healthy pace.

In 1963, when the U.S. population was about 190 million -- compared with today's nearly 310 million -- far more new homes were sold: 560,000.

New homes have accounted for just 5 percent of all sales so far this year. They typically represent closer to 15 percent. There were just 183,000 new homes available for sale in February, the smallest supply in four decades.

The median price of a new home is now 30 percent higher than that of a resold home, twice the typical markup in a healthy economy.

Builders have responded by scaling back. In February, they broke ground on only about 40 percent of the number of homes they typically do in normal markets.

That decline in activity is weighing down the construction industry, which in the past has fueled economic recoveries. It's also slowing the broader economy. Each new home creates an average of three jobs for a year and $90,000 in taxes, according to the National Association of Home Builders.

People are still looking at new homes, builders say. But many would-be buyers say they can't justify the cost.

For starters, it's cheaper to buy used -- especially if you can get a foreclosed home or a short sale, when lenders let homeowners sell for less than they owe on their mortgage.

Banks are imposing tougher standards for loans and requiring bigger down payments. And many people are nervous about entering the market, fearful that home prices have yet to reach the bottom.

Gregory F. Ugalde has been encouraged by increased foot traffic at his model homes in recent months. But Ugalde, president of Connecticut homebuilder T&M Building Co., is building only about a third of the homes he did before the housing boom began in 2003.

"Over the past year, we thought the recovery in our industry would be right around the corner," Ugalde said. "It's like they're teasing us."

Buyers say the same could be said for builders.

Tony Michaels wanted to buy a new home for his wife and 3-year-old son. He looked 35 miles north of Washington, in the town of Eldersburg, Md. In October, he found a home that could be built for $800,000.

But once he included a dishwasher, windows and other amenities, the cost ballooned to $950,000. And Michaels had trouble putting his current home on the market.

"We just started looking at houses that were already out there, and they weren't that bad at all," he said. "We've worked hard, and we wanted a home to call our own. But while an old home is not our first choice, we're going to save a lot of money."

The asking price for the home he found is nearly $425,000 less than the new home he had planned to buy.

The disparity has led homebuilders to cut their selling prices and build more inexpensive homes. New homes that cost between $150,000 and $200,000 now make up a third of sales -- the biggest such proportion in records going back more than a decade.

"Falling housing prices of existing homes are robbing demand for new houses, and until that changes, the housing market will be in trouble," said Yelena Shulyatyeva, an analyst at BNP Paribas.

Weitz - If you follow this blog, this is as expected. Unfornately, we see more of these types of articles ahaed.

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

Our Firm:

Weitz Law Firm
413 14th Ave W
Kirkland, WA 98033

(425) 889-9300

weitzlawfirm.com

Mortgage Modification Update - Banks Response to Administration Program

2011-02-26T10:13:00.000-08:00

The banking industry privately knocked the Obama administration's nascent proposal to force banks to modify mortgage loans, saying the plan won't help solve problems facing troubled borrowers.

The nation's largest banks haven't yet seen a proposal that is designed to help resolve mortgage-servicing errors that affected troubled borrowers. But industry executives are bristling at the administration's new approach, disagreeing that principal reductions will help borrowers and, in turn, the broader housing market.

Though a unified settlement is uncertain and would have to appease regulators, banks and state attorneys general, some officials are pushing for banks to pay more than $20 billion in civil fines or to fund a comparable amount of loan modifications for distressed borrowers.

The proposal "would bring with it enormous costs that would far outweigh any potential benefits," Chris Flanagan, a Bank of America Corp. mortgage strategist, said in a research note Thursday.

Even an amount of $20 billion "would accomplish little" in addressing borrowers who currently owe $744 billion more on their mortgages than their homes are worth, Mr. Flanagan added.

Weitz - What Mr. Flanagan is trying to say is 'if we have to write down principle, we won't be able to continue our accounting fraud that Congress has so graciously made legal in 2008. If we can't continue our accounting fraud, we won't be able to pay record bonuses, and I may not be able to vacation in Belize next Spring'.

Asking servicers to assume the costs of all write-downs is unfair unless the administration can pinpoint the "source of harm," said Bob Davis, executive vice president of the American Bankers Association. If the loans are going bad because of economic conditions and job loss, "it's not clear why servicers would bear the brunt because it's outside their control."

Weitz - Well Bob, perhaps because the taxpayers bailed you out in historic fashion, and then you proceed to kick folks out of their homes without a single bit of aid or assistance.

The pushback is the latest symptom of the warring interests in the housing market and the difficulty fixing problems that existed long before the foreclosure-paperwork crisis erupted last fall. Economists have said that the U.S. economy's recovery is threatened the longer the foreclosure process is delayed.
The proposal is the Obama administration's latest effort to revamp the way mortgage companies help troubled borrowers and address concerns that past initiatives didn't go far enough to help troubled borrowers.

The administration's signature Home Affordable Modification Program, or HAMP, helped more than 500,000 borrowers lower their monthly payments through interest-rate reductions. But it has fallen short of ambitious goals to modify millions of loans since its introduction two years ago. Last year, the White House unveiled new measures to encourage banks to write down loan balances, but they haven't been widely used.

Given the banks' track record in reworking loans, some attorneys who represent borrowers in foreclosure question whether the administration's proposal could work. "Requiring banks to eat the loss, and at the same time allowing them to administer the program, is a recipe for a program that will not do anything except raise people's expectations and frustrate them," said Gloria Einstein, an attorney at Jacksonville Legal Aid Inc. She said an independent third party should administer the program.

Banks have resisted reducing loan balances in part because of concerns that it could encourage more borrowers to stop making payments in order to receive a smaller loan.

Weitz - I can buy that argument as it does create a slippery slope. The problem is that these folks are going to stop paying anyways and allow their home into foreclosure. Modifications would cease the seemingly endless supply of foreclosures on the market.

The plan also may face some resistance on Capitol Hill. House Republicans on Thursday said they would prepare bills next week to terminate HAMP and similar programs. The administration's proposal appeared to be a ploy to "revamp" the HAMP program, said U.S. Rep. Patrick McHenry (R., N.C.). "If this is their attempt to create HAMP 2, then I find it deeply troubling."

The White House declined to comment.

"The administration's ongoing review is focused on getting to the bottom of the problems in the foreclosure process and holding appropriate parties accountable," said a spokeswoman for the Department of Housing and Urban Development. "Doing so will help homeowners, the housing market and our economy, and any suggestions to the contrary are simply wrong."

Any settlement that includes loan write-downs would require banks such as Bank of America Corp., Wells Fargo & Co. and J.P. Morgan Chase & Co. to complete modifications within one year from the settlement's date, said people familiar with the matter. Banks could face additional fines if they don't comply with the terms of the settlement, and they would have to hire independent auditors to provide monthly updates on their progress and compliance with the terms.

Penalties could be assessed depending on the volume of loans that are 90 days or more delinquent in each bank's servicing portfolio, and by the extent of any deficiencies uncovered by bank examiners, these people said.

Any settlement that includes loan write-downs would require banks such as Bank of America, Wells Fargo and J.P. Morgan Chase to complete modifications within one year from the settlement's date, said people familiar with the matter.

The push for write-downs likely would focus on loans that banks service on behalf of other parties, and not for loans that they hold on their books. The settlement would require servicers to comply with existing investor contracts, and some of those contracts could complicate efforts because they give investors authority to reject reductions of loan balances.

Banks consider their mortgage-servicing problems as technical matters, such as the filing of foreclosure documents that were never verified by so-called robo-signers, say people familiar with the situation. Bank executives also want any penalties to reflect the fact that few borrowers have been improperly ejected from homes, these people say.

But some state attorneys' general and federal regulators are pushing for as high a figure as possible, arguing that mortgage servicers have chronically underinvested in their operations, making it difficult for borrowers to get timely, effective help before falling further behind on their mortgages.

Susan Wachter, a real-estate finance professor at the University of Pennsylvania, said the proposed settlement would provide "disincentives for wrongful behavior" by mortgage servicers.

Weitz - For more information, see the Principle Reduction Alternative.

For more options on your rights in Modification, Foreclosure, or Short Sale, consider contacting a Seattle Foreclosure Attorney.

Our Firm:
Weitz Law Firm, PLLC
5400 Carillon Point, Bldg 5000
Kirkland, WA 98033

(425) 889-9300

weitzlawfirm.com

Principle Reduction Modifications

2011-02-25T17:15:00.000-08:00

An Overview of the Principal Reduction Alternative (PRA) program:

PRA was designed to help homeowners whose homes are worth significantly less than they owe by encouraging servicers and investors to reduce the amount you owe on your home.

Eligibility

You may be eligible for PRA if:
• Your mortgage is not owned or guaranteed by Fannie Mae or Freddie Mac.

Weitz - Ha!...nice work govrnment. "We'll reduce your principle as long as the loan is not insured by Fannie or Freddie which owns or guarantees a huge majority of mortgages in the country"...thanks for another worthless program! Nevertheless, if you're loan is not in this category - continue reading.

• You owe more than your home is worth.
• You live in the home carrying the mortgage you want to modify.
• You obtained your mortgage on or before January 1, 2009.
• Your mortgage payment is more than 31 percent of your gross (pre-tax) monthly income.
• You owe up to $729,750 on your 1st mortgage.
• You have a financial hardship and are either delinquent or in danger of falling behind.
• You have sufficient, documented income to support the modified payment.
• You must not have been convicted within the last 10 years of felony larceny, theft, fraud or forgery, money laundering or tax evasion, in connection with a mortgage or real estate transaction.
Program Availability

More than 100 HAMP-participating servicers are required to evaluate homeowners for principal reduction. Participating servicers are required to develop written standards for PRA application. The largest servicers include Bank of America, CitiMortgage, JP Morgan Chase, and Wells Fargo.

1. AgFirstFarm Credit Bank
2. Allstate Mortgage Loans & Investments, Inc.
3. American Eagle Federal Credit Union
4. American Finance House LARIBA
5. American Home Mortgage Servicing, Inc
6. AMS Servicing, LLC
7. Aurora Loan Services, LLC
8. Bank of America, N.A.1
9. Bank United
10. Bay Federal Credit Union
11. BayviewLoan Servicing, LLC
12. Bramble Savings Bank
13. Carrington Mortgage Services, LLC
14. CCO Mortgage
15. Central Florida Educators Federal Credit Union
16. CentrueBank
17. CitiMortgage, Inc.
18. Citizens 1st National Bank
19. Citizens Community Bank
20. Citizens First Wholesale Mortgage Company
21. Community Bank & Trust Company
22. Community Credit Union of Florida
23. CUC Mortgage Corporation
24. DuPageCredit Union
25. Eaton National Bank & Trust Co
26. Farmers State Bank
27. Fay Servicing, LLC
28. Fidelity Homestead Savings Bank
29. First Bank
30. First Financial Bank, N.A.
31. First Keystone Bank
32. First National Bank of Grant Park
33. First Safety Bank
34. Franklin Credit Management Corporation
35. Franklin Savings
36. Fresno County Federal Credit Union
37. GFA Federal Credit Union
38. Glass City Federal Credit Union
39. GMAC Mortgage, LLC
40. Golden Plains Credit Union
41. Grafton Suburban Credit Union
42. Great Lakes Credit Union
43. Greater Nevada Mortgage Services
44. Green Tree Servicing LLC
45. Hartford Savings Bank
46. Hillsdale County National Bank
47. HomEqServicing
48. HomeStarBank & Financial Services
49. Horicon Bank
50. Horizon Bank, NA
51. Iberiabank
52. IBM Southeast Employees' Federal Credit Union
53. IC Federal Credit Union
54. Idaho Housing and Finance Association
55. iServeResidential Lending LLC
56. iServeServicing Inc.
57. J.P.MorganChase Bank, NA2
58. Lake City Bank
59. Lake National Bank
60. Liberty Bank and Trust Co.
61. Litton Loan Servicing
62. Los Alamos National Bank
63. Magna Bank
64. MainstreetCredit Union
65. MarixServicing, LLC
66. Metropolitan National Bank
67. Midland Mortgage Company
68. Midwest Bank & Trust Co.
69. Midwest Community Bank
70. Mission Federal Credit Union
71. MorEquity, Inc.
72. Mortgage Center, LLC
73. Mortgage Clearing Corporation
74. NationstarMortgage LLC
75. Navy Federal Credit Union
76. Oakland Municipal Credit Union
77. OcwenFinancial Corporation, Inc.
78. OneWest Bank
79. ORNL Federal Credit Union
80. Park View Federal Savings Bank
81. Pathfinder Bank
82. PennyMacLoan Services, LLC
83. PNC Bank, National Association
84. PNC Mortgage3
85. Purdue Employees Federal Credit Union
86. QLending, Inc.
87. Quantum Servicing Corporation
88. Residential Credit Solutions
89. RG Mortgage Corporation
90. Roebling Bank
91. RoundPointMortgage Servicing Corporation
92. Saxon Mortgage Services, Inc.
93. Schools Financial Credit Union
94. SEFCU
95. Select Portfolio Servicing
96. ServisOne Inc., dbaBSI Financial Services, Inc.
97. ShoreBank
98. Silver State Schools Credit Union
99. Specialized Loan Servicing, LLC
100. Spirit of Alaska Federal Credit Union
101. Stanford Federal Credit Union
102. Sterling Savings Bank
103. Suburban Mortgage Company of New Mexico
104. Technology Credit Union
105. The Golden 1 Credit Union
106. U.S. Bank National Association
107. United Bank
108. United Bank Mortgage Corporation
109. University First Federal Credit Union
110. VantiumCapital, Inc.
111. Verity Credit Union
112. VistFinancial Corp.
113. WealthbridgeMortgage Corp.
114. Wells Fargo Bank, NA4
115. WescomCentral Credit Union
116. Yadkin Valley Bank

Effective Oct. 1, 2010 – Dec. 31, 2012.

Future of Fannie of Freddie - your governement at work

2011-02-13T08:55:00.000-08:00

A recent article in the WSJ regarding White House Proposal on Fannie, Freddie:

AP - The Obama administration outlined on Friday its plans to begin shrinking the government's broad support of the nation's crippled mortgage market, a process that officials said could take several years and would include phasing out Fannie Mae and Freddie Mac.

Officials portrayed a housing-finance system that would include a role for both the public and private sectors, but would be different from the current system in that the government's role would be smaller, underwriting standards would be tighter, and borrowers would be required to hold larger amounts of equity in their homes.

Weitz – allow me to translate – housing financing would be darn near impossible to obtain unless you are able to put down a significant down payment, strong income, and strong credit.

Rep. Randy Neugebauer, R-Texas, chairman of a key House oversight subcommittee, is encouraged by the Obama administration's proposal to restructure Fannie Mae and Freddie Mac. But he's disappointed there's no clear long-term reform plan.

The proposal offered a series of short-term steps that would help attract private capital into the mortgage market, including a reduction in the maximum loan sizes that Fannie and Freddie can purchase and gradual increases in the fees the mortgage companies charge lenders. Both of those steps could make it more attractive for lenders and investors to buy loans without government backing, but they could also raise borrowing costs for millions of Americans and weigh on the nation's home-building industry.

Weitz – How could is possibly encourage private capital if the government pulls its guarantees?! This will KILL financing of Real Estate in America – especially at the high end range (above $625,000) and make all loans more expensive.

"The cost of mortgages is probably going to go up, and home ownership is probably going to go down," said Daniel Mudd, the former chief executive of Fannie Mae who is now CEO of Fortress Investment Group. "Both of those things arguably could be a good thing."

Weitz - What?! costs of mortgages is going to go up, and home ownership is going down and that a GOOD THING?! For who?...That's some delusional rationale.

The administration said it would support allowing maximum loan limits to fall to $625,500 from $729,750 as scheduled on Oct 1. It also said it would push to increase minimum down payments to 10% on loans eligible for purchase by Fannie and Freddie. Insurance premiums charged on new loans backed by the Federal Housing Administration could also go up.

Administration officials said the process of transitioning to a post-Fannie and Freddie world would take at least five to seven years, in part because the housing market remains too fragile. Many analysts say the process, which includes dismantling, moving, or reassembling the firms' infrastructure, could take even longer.

The long-awaited proposal was thin on specifics about what would replace Fannie and Freddie, which the government took over in 2008, and which have racked up $134 billion in taxpayer losses. Instead, it outlined three options that were designed to frame what promises to be a prolonged and heated political debate over how to structure the nation's $10.6 trillion mortgage market.

Option 1:
The first of those would put the vast majority of the mortgage market in the hands of the private sector, where lenders would originate mortgages and securitize them without any government backing. The middleman role currently played by Fannie and Freddie would no longer exist.

The government's role would be limited to the FHA and a few other smaller housing agencies, and their reach would be sharply reduced from current levels. The FHA backed 20% of all new mortgages last year. Some conservatives have called for such a private market.

Weitz – this would hurt; Fannie and Freddie back an overwhelming majority of new real estate loan issuance's right now. For the private sector to get comfortable making loans, interest rates would have to go up dramatically as the risk tolerance for the private sector would be far less and they would expect a premium in return.

Option 2:

The second option, championed by a handful of economists, would also create a mostly private market with a limited government backstop that would primarily become active buying or guaranteeing loans in periods when private lenders retreated during financial shocks.

Weitz - great...but this 'period of financial shock' could last a long time

Option 3:

The third option would create new privately owned companies to buy mortgages from banks and sell them as securities. Those securities would be explicitly guaranteed by the government as long as they meet certain criteria. The government would collect fees for that backing, just as the Federal Deposit Insurance Corp. insures bank deposits and regulates banks.

These new companies would essentially replace some of the functions filled by Fannie and Freddie. An array of academics and industry groups have backed such a proposal, and senior Obama administration officials, such as Treasury Secretary Timothy Geithner, have publicly discussed its merits.

Weitz - the problem with this is that no private company is stupid enough to back these loans as the interest rates Fannie and Freddie are doing it. Quite simply, this would never work.

The housing industry greeted the proposal coolly, and some mortgage industry officials criticized the administration for not providing more detail. "It was a political football that they punted back onto Congress's side of the field," said Joseph J. Murin, the former president of Ginnie Mae, a government-owned corporation that guarantees payments on mortgages backed by federal agencies.

Republicans face their own divisions over what kind of role the government should play in the market, while Democrats have generally said a federal backstop function is needed to ensure broad access to homeownership and the 30-year fixed-rate mortgage, in particular.

Weitz – this is the problem – we need to government to prevent a further collapse of Real Estate, yet the economy won’t be truly corrected until we let it collapse; it’s a catch 22 that no one wants to talk about. Thus, the democrats admittedly want the government involved, and the republicans implicitly know the government needs to be involved (or the crash would occur). The problem is they are both trying to prop up a broken system, but politically feel that is necessary.

Many industrialized nations don't have institutions like Fannie and Freddie, and instead rely more heavily on their banking systems to fund mortgages.
But some economists have noted that the mistakes in the U.S. private sector were far greater than the mistakes made by Fannie and Freddie. For example, private-label mortgage securities, which are not government-backed, have performed more poorly than those backed by the mortgage giants. Nearly 45% of private-label loans originated in 2006 had been 90 days past due at least once, compared with 13% for Fannie and Freddie, according to a report from the firms' federal regulator published in September 2010.

"The part of the market that was the most private was also the worst," said Michael Barr, a former assistant Treasury secretary who left the Obama administration in December. He said the report should help remind lawmakers that the government has long had a role backstopping mortgages. "People seem to think there's a nostalgic world that we never had," he said.

Weitz – this is true, but there is a catch – Wall Street screwed up badly, and we didn’t hold them accountable. In order for true capitalism to work in the future, you have to allow the risk of failure as a self-controlling tool to lessen the risk taking. Without the risk of failure, we are destined for bubbles and subsequent busts.

The Obama administration outlined plans to begin shrinking the government's broad support of the nation's crippled mortgage market.

The proposals are likely to set off a furious effort by the financial-services industry to protect generous subsidies and seek out new revenue sources. Investors haven't been willing to buy mortgages that don't have government backing primarily because there haven't been enough steps taken to overhaul the market for private-label securities, said Joshua Rosner, of investment-research firm Graham Fisher & Co. "Investors are on strike," he said.

Weitz – What Josh is trying to say is that there is no support for mortgages from the private sector because 1) interest rates are not indicative of the risk involved (higher risk loans require higher interests); and 2) housing is still overpriced so the private side would rather trade commodities than invest tons of money for a 5% return in Real Estate.

His clients would buy securities without government backing "hand over fist" if the industry had adopted clear and transparent standards, said Mr. Rosner. "The industry isn't doing that, because it's playing for a guarantee."

Weitz – the real story here is that the real estate market is not even close to a point which would allow the government to not be involved. Some would argue that a further collapse would actually be a good thing so the prices get to a point where the typical consumer can buy a house without spending half his/ her paycheck on interest payments to the bank. That said, politicians see falling real estate as a negative and my guess is they continue to use the government (taxpayers) to prop it up with the FHA, Fannie, Freddie guarantees....the saga continues.

Our Firm:

Weitz Law Firm, PLLC
5400 Carillon Point, Bldg 5000
Kirkland, WA 98033

(425) 889-9300

Fed Up with the Fed

2011-02-10T06:56:00.000-08:00

Ben Bernanake (Head of the Federal Reserve) comes out today and defends printing money policy in front of Congress. To sum up - we print money, we send to Wall Street who gambles with it, and pays themselves huge bonuses while the rest of America continues to deteriorate as the job and housing situation continue fall apart. Meanwhile, interest rates remain are un-naturely low which deprives any folks looking for risk free investment, and the value of the dollar continues to fall so we can all get squeezed by the rising cost of commodities like food and gas. Great plan if you work on Wall Street....not so great for everyone else.

Thanks Dylan for getting this out to the masses!

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

Foreclosure Inventory - the elephant in the room

2011-02-05T08:41:00.000-08:00

A Post from one of our favorites: Diane Olick of CNBC Realty Check outlining the giant elephant in the room - phantom inventory.

AP - You can talk all you want of renewed interest in housing, slowly increasing sales and supposed stabilization in prices, but the elephant in the room is slowly growing, and banks, Fannie, Freddie and the government know it. I'm talking about foreclosures.

Economist Mark Zandi, often quoted by lawmakers on both sides of the aisle, told the Senate Budget Committee this morning that while he's "optimistic" with regard to the economy's prospects, "At the top of my list of concerns, at least in the near term (6 to 12 months), is the ongoing problem in the housing market and the foreclosure crisis."

REO inventory is rising, he proved through some slides. Four million seriously delinquent loans, out of 50 million first mortgage loans, "so that's a lot." And while he noted that the problems appear to have peaked, there are still over 600,000 properties in REO, which will only put more pressure on prices when they come to market.

Weitz - eventually, they banks have to sell these properties - this will lead to increased supply of homes and likely push prices further down. I'm not sure why the banks hold these foreclosed properities for so long. I suppose they're expecting some miracle in the form of a robust economic recovery to save them...I think they'll be dissapointed.

Zandi called modification efforts "inadequate," despite the 1.5 to 2 million modifications a year. "In the context of all the problems that we've got, it's still quite small," he noted. Zandi's biggest concern is that 14 million homeowners, according to his calculations, are underwater (owe more on their mortgages than their homes are worth), and 4 million of those are underwater by more than 50 percent. "That's deeply underwater," he elaborated.

This testimony just happened to coincide with a few blurbs of information I've noted over the

1. Chase announced yesterday that it has plans to add 25 new Chase Homeownership Centers in 19 states this year. "The best way to help borrowers find ways to stay in their homes is to sit down face-to-face and discuss their individual circumstances," writes Chase Home Lending CEO David Lowman in the press release.

2. Wells Fargo is holding 20 mediation events across the country this year, inviting more than 150,000 borrowers who are behind on payments. These will be held at hotels and convention centers, much like the non-profit Boston-based NACA has been doing for years.

3. Fannie Mae is expanding its loss mitigation efforts, trying to modify more borrowers, and if not, trying to find foreclosure alternatives, like short sales or deeds in lieu. They are also testing a program in Florida to negotiate modifications before going to court.

4. Earlier this week, the Hope Now coalition of servicers and investors reported it had done well more than twice the number of loan mods in 2010 than the government's Home Affordable Modification Program.

Bottom line: banks, Fannie, Freddie...they really get it now. Foreclosures are ramping up again and are endangering today's fragile housing recovery. Rick Sharga at RealtyTrac claims we have yet to see the foreclosure peak. Regardless, even if 2011's number is slightly lower than the peak, it is more critical now than ever before to stem the tide because housing is struggling to recover on it's own without government intervention (other than incredibly low mortgage rates, which don't appear to help much). Last year various government incentives helped mitigate the foreclosure losses to the overall market; the market doesn't have that benefit now.

Weitz - I would say rephrase to say the housing is 'failing' to recover despite enormous government intervention.

Zandi says one answer is for Fannie and Freddie to stop charging higher refi rates for borrowers with low credit scores and higher LTV's (loan to value ratios) in order to facilitate more refinancing, even when borrowers are underwater. These are loans the GSE's likely already own or back. "It will cost Fannie and Freddie in interest income, but they will benefit in the form of fewer foreclosures," argues Zandi.

Weitz - this is an interesting comment - I have client all the time ask me about the long term credit concerns of foreclosure/ short sale. While there is no magical ball to turn to, my personal belief is that the government is going to continue to 'lower lending standards' to prop up housing.

For more information on your rights with an underwater loan, consider contacting a Seattle Foreclosure Attorney.

Our Firm:

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

weitzlawfirm.com

Walking away from mortgage - Washington

2011-02-04T03:44:00.000-08:00

A great clip from the Dylan Ratigan show regarding 'strategic default' or 'walking away from mortgages':

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

Remember, all States have different laws regarding the foreclosure process, and deficiency rights of the banks. Further, many homeowners can get out from under their mortgages without actually having to have a foreclosure on their credit score.

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

Our Firm:
Weitz Law Firm, PLLC
5400 Carillon Point, Bldg 5000
Kirkland, WA 98033
(425) 889-9300
weitzlawfirm.com

Foreclosure Update in Seattle

2011-02-03T15:28:00.000-08:00

A CNBC Report on Foreclosure updates:

Of note is that Seattle has had the biggest turn up in Foreclosures in the nation (up 23%) - not a big surprise if you follow this blog.

Wall Street pay continues to soar

2011-02-03T09:36:00.000-08:00

A great clip with Dylan Ratigan and Michael Lewis (author of Liar's Poker).

What can you say about this?...other than it stinks. The guys that caused the problem walk away as the big winners while the general public gets fleeced via a dollar collapse, tax payer abuse, and the continued fall of their real estate.

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

The Highlights:

1) 2010 Pay up 5.7% to 135 Billion
2) Wall Street Revenue of $417 Billion – How? It’s obviously not from lending proceeds as lending as fallen off a cliff (see M3). Thus, it can only be 1) government handouts, and 2) trading profits (with taxpayer funds).

So I ask – what positive role do these institutions play in the economy? aside from giant leaches of capital? Anyone? Anyone?

Banks kicked in the Mass (Court)

2011-01-15T07:39:00.000-08:00

Big Case decision out of Massachusetts recently...I'll provide the article and my feedback as usual

AP

The highest court in Massachusetts ruled against Wells Fargo & Co. and U.S. Bancorp in two foreclosure cases that cast doubt over whether some home loans were properly handled when packaged into securitizations.

Justices in the state's Supreme Judicial Court upheld a lower court's decision to void foreclosure sales of two homes in Springfield, because owners of the loans couldn't prove that the mortgages had been assigned to them. Both loans were assembled into mortgage-backed securities sold to investors.

A Wells Fargo branch in San Francisco. Shares of the bank fell 2% on the ruling, and other banks saw share-price losses as well.

Weitz - It won't hurt the banks that badly. Most are simply servicing companies now. More than half the primary loans out there are held by Fannie Mae and Freddie Mac (officially called 'quasi-government agencies' - unofficially called cash pits of US Taxpayer dollars). You can thank your govt officials for using your tax dollars to bail out the banks.

Bank stocks fell on worries that Friday's ruling could make it harder for financial firms to foreclose on mortgages that wound up in securities. The defeat also might provide ammunition to mortgage-bond investors who have accused and even sued servicers for what the investors claim is systematically shoddy loan documentation.

The ruling against the fourth- and fifth-largest U.S. banks in assets came amid a delay in the crafting of new standards for mortgage lending as top U.S. regulators clash over protections for homeowners facing foreclosure.

The logjam is a sign of how strongly the financial crisis still looms as regulators work to implement the Dodd-Frank financial-overhaul law passed last summer. To help prevent another housing collapse, lawmakers included a provision requiring issuers of mortgage-backed securities to keep 5% of the risk, since investors would suffer losses when loans go bad.

Weitz - 5% of the risk? So my down side is 5%, and my upside is billions of dollars in fees to originate and sell the loan. The financial regulation touted by congress and the administration was largely worthless in my opinion. It did absolutely nothing to fix our problems and end the banks siphoning of capital in this country.

Six federal agencies must sign off on the provision before it is released for comment, but their tentative goal of completing a proposal by the end of December came and went with no agreement. The delay was caused partly by disagreement about whether to include new protections for homeowners on the brink of foreclosure within this so-called risk-retention rule or separately, people familiar with the negotiations said. The Dodd-Frank law requires that the regulators finalize the risk-retention requirement by April.

The snag indicates that implementing the changes triggered by the new law could be messy as regulators wrestle to reach consensus. Friday's court ruling brought even more anxiety to the mortgage-securitization market.

The Massachusetts case is a closely watched example of what some mortgage experts describe as "show-me-the-paper" cases over widely used procedures for transferring loans after they are made. Individual loans often are sold to an investor, with the new owner's name left blank in loan documents to minimize paperwork hassles as the loan subsequently changes hands before being combined with other loans into mortgage-backed securities.

Justice Robert J. Cordy concluded in a concurring opinion that the two banks showed "utter carelessness" when they "documented the titles to their assets." If the ruling is followed by lower courts in Massachusetts or emboldens borrowers and investors elsewhere, it could delay or even derail some foreclosures. That would make it harder for banks to recoup loan losses by selling homes that are seized through foreclosure proceedings.

"It's deeply disturbing to investors that it even got to this point, but it potentially strengthens any bondholder claim that the servicers are mishandling foreclosures," said Talcott Franklin, a lawyer representing bond investors.

Susan Wachter, a real-estate finance professor at the University of Pennsylvania, called the ruling a "landmark decision" with nationwide implications because Massachusetts loans wound up in many securities.

Shares of Wells Fargo, based in San Francisco, fell 2%; U.S. Bancorp, Minneapolis, slipped 0.8%. Betsy Grasek, an analyst with Morgan Stanley, wrote in a note to clients that the declines created "buying opportunity for bank stocks," adding that the court ruling "is not saying the foreclosure process is flawed."

R. Bruce Allensworth, a partner at law firm K&L Gates who represents U.S. Bancorp, said the decision would have no effect outside Massachusetts. In a statement, Wells Fargo said the ruling "does not prevent foreclosures on loans in securitizations."

Weitz - unfortunately, he is right...for now.

In the risk-retention spat, the Federal Deposit Insurance Corp. has insisted that forthcoming rules also contain new standards for mortgage servicers that collect mortgage payments and distribute them to investors.

Other regulators agree on the need for such changes but want to tackle them through a separate rule or possibly legislation. Those officials are concerned that the FDIC's approach wouldn't cover all mortgages, adding that it is unclear whether regulators have legal authority under the law to impose standards on mortgage servicers.

Industry officials are pressing for a delay, claiming that trying to define what kind of mortgages are deemed safe and therefore exempt from risk-retention requirements is complicated enough. "There should be a discussion on how you look at servicing standards and what they should be," said Paul Leonard, vice president of government affairs at the Housing Policy Council, a mortgage industry group. "We think they should be done separately."

The FDIC has the support of some top Democratic lawmakers, along with some investors in mortgage securities, economists and consumer groups. Supporters argue that servicing standards are a crucial part of the housing market's recovery and that the industry is long overdue for reform.

"We needed this three years ago; we needed it 20 years ago," said Alys Cohen, a lawyer with the National Consumer Law Center, a liberal consumer group. Including standards in the Dodd-Frank mortgage rules guarantees they will be in place by April, "which is lightning speed by federal rule-making standards."

Last month, the FDIC published a legal memo stating that servicing standards are "clearly permitted" under the risk-retention rules. Andrew Gray, an FDIC spokesman, said regulators were asked as part of the new law to "help ensure strong underwriting and a safe and stable securitization market, and the FDIC strongly believes that servicing standards are a critical part of this effort."

As a result of the recent foreclosure mess, regulators have been reviewing the mortgage-servicing system. Possible guidelines being discussed include a requirement that servicers establish a single point of contact for delinquent homeowners and disclose whether they own an interest in loans they handle.

Weitz - While the Mass Court decision is not a positive for the banks, I personally believe the effects will be minimal. The decision has no weight outside of the Massachusetts. Nevertheless, Rome was not built in a day and you can be assured the next 6 months - 1 year will have some very interested court decisions across the country.

Foreclosures top 1 Million in 2010

2011-01-15T07:21:00.001-08:00

The below article discussing the continuing problem of foreclosures that does not appear to be alleviating.

AP- Realty Check (CNBC)

Banks seized more than a million U.S. homes in one year for the first time last year, despite a slowdown in the last few months as questions around foreclosure processing arose, a leading firm said Thursday.

Banks foreclosed on 69,847 properties in December, bringing the year's total to 1.05 million, topping the prior record of 918,000 homes seized in 2009, real estate data firm RealtyTrac said.

Weitz - the banks typically slow down in December for the Holidays anyways, so I don't think there are many definite conclusions to be drawn from the December stats aside from - if the foreclosures were effectively halted for 2 months, yet we still had an annual record, the numbers are obviously terrible.

The number of foreclosure filings, which includes default notices, auctions and repossessions, was a record 2.9 million last year, including 257,747 filings in December.

Weitz - this is an important stat that shows the weakness is going to continue for the immediate future. Foreclosures 'filings' are obviously a precursor to a foreclosure in many cases.

"Total properties receiving foreclosure filings would have easily exceeded 3 million in 2010 had it not been for the fourth-quarter drop in foreclosure activity - triggered primarily by the continuing controversy surrounding foreclosure documentation and procedures that prompted many major lenders to temporarily halt some foreclosure proceedings," said James J. Saccacio, chief executive officer of RealtyTrac.

"Even so, 2010 foreclosure activity still hit a record high for our report, and many of the foreclosure proceedings that were stopped in late 2010,-which we estimate may be as high as a quarter million, will likely be re-started and add to the numbers in early 2011," Saccacio said.

December filings were 2 percent lower than November and 26 percent lower than December 2009.

The firm said Nevada, Arizona and Florida continued to post the highest foreclosure rates in the country. And just five states - California, Florida, Arizona, Illinois and Michigan - accounted for more than half of all foreclosure activity.

One in every 11 housing units in Nevada received at least one foreclosure filing in 2010, more than four times the national average.

Weitz - 1 in 11?!...that is extraordinary. Look out for ghost towns in the desert.

In 2005, before the housing bust, banks took over just about 100,000 houses, according to the Irvine, California-based company.

Weitz: Bottom line is the problem we have discussed at nausea on the blog is continuing to unfold. I predict foreclosures for 2011, 2012 and possibly beyond to exceed even these awful numbers of 2010. There are simply too many distressed homes on the market that have not been addressed.

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

Our Firm:

Weitz Law Firm, PLLC
5400 Carillon Point, Bldg 5000
Kirkland, WA 98033

(425) 889-9300

weitzlawfirm.com

Schiff- Home prices are still too high

2010-12-30T08:17:00.000-08:00

An Opinion piece by Peter Schiff in the Wall Street Journal today. The ironic thing is that Mr. Schiff is a notorious 'inflation' hawk. I've always disagreed with in certain respects, but this article indicates that he would probably be categorized in the skewflation camp.

Nevertheless, as pessimistic as it may seem, Mr. Schiff makes a lot of points that are awfully hard to dispute.

AP- Most economists concede that a lasting general recovery is unlikely without a recovery in the housing market. A marked increase in defaults and foreclosures from today's already elevated levels could produce losses that overwhelm banks and trigger another, deeper financial crisis. Study after study has shown that defaults go up when falling prices put mortgage holders "underwater." As a result, the trajectory of home prices has tremendous economic significance.

Earlier this year market observers breathed easier when national prices stabilized. But the "robo-signing"-induced slowdown in the foreclosure market, the recent upward spike in home mortgage rates, and third quarter 2010 declines in the Standard & Poor's Case–Shiller home-price index—including very bad October numbers reported this week—have sparked concerns that a "double dip" in home prices is probable. A longer-term view of home price trends should sharply magnify this fear.

Even those economists worried about renewed price dips would be unlikely to believe that the vicious contractions of 2007 and 2008 (where prices fell about 30% nationally in just two years) could return. But they underestimate how distorted the market had become and how little it has since normalized.

By all accounts, the home price boom that began in January 1998, when the previous 1989 peak was finally surpassed, and topped out in June 2006 was extraordinary. The 173% gain in the Case-Shiller 10-City Index (the only monthly data metric that predates the year 2000) in those nine years averaged an eye-popping 19.2% per year. As we know now, those gains had very little to do with market fundamentals, and everything to do with distortionary government policies that mandated loans to marginal borrowers, and set off a national mania for real-estate wealth and a torrent of temporarily easy credit.

If we assume the bubble was artificial, we can instead imagine that home prices should have followed a more traditional path during that time. In stock-market terms, prices should have followed a trend line. When you do these extrapolations (see lower line in the nearby chart), a sobering picture emerges. In his book "Irrational Exuberance," Yale economist Robert Shiller (co-creator of the Case-Shiller indices along with economists Karl Case and Allan Weiss), determined that in the 100 years between 1900 and 2000, home prices in the U.S. increased an average 3.35% per year, just a tad above the average rate of inflation. This period includes the Great Depression when home prices sank significantly, but it also includes the frothy postwar years of the 1950s and '60s, as well as the strong market of the early-to-mid 1980s, and the surge in the late '90s.

In January 1998 the 10-City Index was at 82.7. If home prices had followed the 3.35% annual 100 year trend line, then the index would have arrived at 126.7 in October 2010. This week, Case-Shiller announced that figure to be 159.0. This would suggest that the index would need to decline an additional 20.3% from current levels just to get back to the trend line.

How has the market found the strength to stop its descent? No one is making the case that fundamentals have improved. Instead, there is widespread agreement that government intervention stopped the free fall. The home buyer's tax credit, record low interest rates, government mortgage-assistance programs, and the increased presence of Fannie Mae, Freddie Mac and the Federal Housing Administration in the mortgage-buying business have, for now, put something of a floor under house prices. Without these artificial props, prices would have likely continued to fall.

Weitz - this is the story no one talks about. The measures taken to 'prop up' the market were unsustainable. Now, the tax credit has run it's course, and interest rates are creeping back up from historic lows. I still maintain that a second leg down in prices is imminent. The extent of the drop is hard to predict, but I would be very surprised if it did not exceed the 5% drop that many 'experts' are predicting.

Where would prices go if these props were removed? Given the current conditions in the real-estate market, with bloated inventories, 9.8% unemployment, a dysfunctional mortgage industry and shattered illusions of real-estate riches, does it makes sense that prices should simply fall back to the trend line? I would argue that they should overshoot on the downside.

With a bleak economic prospect stretching far out into the future, I feel that a 10% dip below the 100-year trend line is a reasonable expectation within the next five years, particularly if mortgage rates rise to more typical levels of 6%. That would put the index at 114.02, or prices 28.3% below where we are now. Even a 5% dip would put us at 120.36, or 24.32% below current prices. If rates stay low, price dips may be less severe, but inflation will be higher.

Weitz - if Mr. Schiff is correct, our "recovery" will most certainly be short lived and things will likely get worse before they get better...a scary proposition indeed.

From my perspective, homes are still overvalued not just because of these long-term price trends, but from a sober analysis of the current economy. The country is overly indebted, savings-depleted and underemployed. Without government guarantees no private lenders would be active in the mortgage market, and without ridiculously low interest rates from the Federal Reserve any available credit would cost home buyers much more. These are not conditions that inspire confidence for a recovery in prices.

In trying to maintain artificial prices, government policies are keeping new buyers from entering the market, exposing taxpayers to untold trillions in liabilities and delaying a real recovery. We should recognize this reality and not pin our hopes on a return to price normalcy that never was that normal to begin with.

Mr. Schiff is president of Euro Pacific Capital and author of "How an Economy Grows and Why it Crashes" (Wiley, 2010).

Higher rates threaten recovery

2010-12-24T08:28:00.000-08:00

A nice video on the overview of the recent uptick in mortgage rates. Higher rates will obviously lead to lower purchasing power for buyers, and presumably lower prices in housing. This will be an interesting trend to follow in the year to come.

Fannie and Freddie consider principle reduction loan modifications

2010-12-12T19:46:00.000-08:00

Fannie Mae and Freddie Mac are in talks with Obama administration officials to join fledgling government programs aimed at reducing loan balances of mortgages where borrowers owe more than their homes are worth, according to people familiar with the situation.

Weitz – while I commend the administration for trying to help out homeowners, I fear this would create a ‘slippery slope’. What about those that aren’t 'underwater', or those that have been renting during this crisis.

An agreement with the two government-owned mortgage giants to write down so-called underwater loans could reduce the threat to the U.S. housing market from the glut of homeowners believed at risk of default should their personal finances or home prices worsen. A deal would deepen losses at Fannie Mae and Freddie Mac, which already have cost taxpayers about $134 billion.

Weitz – Fannie and Freddie are explicitly backed by the US Government. Losses for them are irrelevant at this point.

Fannie Mae and Freddie Mac, which own or guarantee about half of all first-lien mortgages in the U.S., have been highly reluctant to reduce loan balances, especially for borrowers who are still making payments.

The Obama administration is pressuring Fannie Mae and Freddie Mac, through their primary regulator, the Federal Housing Finance Agency. The administration wants the firms to join a program run by the Federal Housing Administration that allows banks and other creditors, which agree to write down mortgages, to essentially hand off the reduced loans to the FHA.

Weitz – take note we’re going to use the FHA to absorb all these loses for banks, Fannie and Freddie. I’m OK with this, but would really want the banks to have share in the burden (rather than exclusively being the problem of the US taxpayer).

Federal officials estimate that 500,000 to 1.5 million homeowners could benefit from the program—a fraction of the estimated 11 million borrowers who were underwater as of June 30, according to CoreLogic Inc. That figure represents about 23% of all U.S. households with a mortgage.

Industry executives say the FHA program—as well as a related initiative by Treasury—will be only marginally helpful to the housing market without the participation of Fannie Mae and Freddie Mac. The program completed three loan modifications during its first three months and received 61 applications

Participation by Fannie Mae and Freddie Mac would put additional pressure on the nation's biggest banks to follow suit. Banks have shown little enthusiasm for the programs without the two mortgage giants.

David Stevens, the FHA's commissioner, said resistance by lenders has been exasperating. Obama administration officials have given lenders "a responsible way to address borrowers with negative equity, he said, "and if institutions are blatantly refusing" to participate, then that is "short-sighted."

The arm-twisting is the latest sign that loan-modification efforts aren't doing enough to address the threat that more borrowers will default on so-called underwater properties.

"Letting the status quo continue is going to be much more expensive than people think," said Kenneth Rosen, a professor of economics and real estate at the University of California, Berkeley. "We've got a downward spiral in housing here, and they'd better break the back of this with some shock and awe.''

Weitz – Mr. Rosen, what about allowing the market to self adjust. The government can do nothing but prolong the agony. Just look at the tax credit effectiveness...turns out it was a waste of taxpayer money.

The ongoing discussions underscore the sometimes awkward relationship between the Obama administration and FHFA, which has overseen Fannie Mae and Freddie Mac since their takeover in September 2008 and is charged with stemming taxpayer losses. An FHFA spokeswoman said participation in the FHA and Treasury loan-modification efforts is under review.

The two mortgage companies rarely reduce loan balances—only 10 of the 120,000 loans modified during the second quarter of 2010, according to the Office of the Comptroller of the Currency.

"We have historically counted on the fact that the vast majority of borrowers-even borrowers who are underwater-continue making their payments," said Don Bisenius, a Freddie Mac executive vice president.

Weitz – The question is how long people will continue to pay full price for a house that has dropped significantly in value. I’ve read articles that indicate when the home drops to 70% of the mortgage value, the chances of default rise dramatically…only time will tell.

Fannie Mae and Freddie Mac are reluctant to reduce principal because it limits their options to recoup losses. Typically, the companies collect claims from mortgage insurers or force banks to buy back certain loans when a loan defaults. Those options are relinquished when writing down loan balances.

In addition, Fannie Mae and Freddie Mac, along with other mortgage investors, are reluctant to approve principal reductions if banks that own second mortgages on the same properties also don't take losses.

Weitz – good point on this one. What’s the point of lowering balances on a first when a second still exists on the property that would keep the homeowner 'underwater'?

Unlike most loan-modification efforts, the FHA program is open only to borrowers who aren't behind on their payments.

Weitz- that I really like. An incentive that doesn’t benefit only those who default.

The Treasury Department initiative to reduce loan balances builds on HAMP, in which banks reduce monthly payments for distressed borrowers by lowering interest rates and extending loan terms.Starting in October, banks were able to receive additional subsidies if they first write down loan balances for borrowers owing at least 15% more than their home's current value. Fannie Mae has said it won't participate in the Treasury program. Freddie Mac says it is still reviewing whether to join.

Weitz - This is an interesting development that I will definitely keep track of and update the blog accordingly.

For more information on your options with distressed real estate, consider contacting a Seattle Strategic Default Attorney.

Our Firm:

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

weitzlawfirm.com

Banks Benefits extend beyond TARP

2010-12-01T21:30:00.000-08:00

Whoa!...this is big. A recent article from CNN-Money.

The Federal Reserve made 9 Trillion in Emergency Loans to banks during the Crisis.

Weitz - Yes, that would be Trillion (with a 'T')...Gee, I wonder how they paid back the 700 billion that Congress "loaned" to them via the TARP Program!! 700 billion looks like peanuts compared to this. I'm going to copy the text of this article below, and give a lot of my thoughts (and I've got many) throughout.

NEW YORK (CNNMoney.com) -- The Federal Reserve made $9 trillion in overnight loans to major banks and Wall Street firms during the financial crisis, according to newly revealed data released Wednesday.

Weitz – First, it is important to note that the “Federal Reserve” is not a truly government agency. It is actually a private organization that was created by powerful bankers. More importantly, we have NO IDEA what is actually on their books. They typically do not allow audits of the Fed so there is no way to truly know what they have “lent” out and what has been repaid.

The loans were made through a special loan program set up by the Fed in the wake of the Bear Stearns collapse in March 2008 to keep the nation's bond markets trading normally.

The amount of cash being pumped out to the financial giants was not previously disclosed. All the loans were backed by collateral and all were paid back with a very low interest rate to the Fed -- an annual rate of between 0.5% to 3.5%.

Weitz – This is just the beginning. The Fed makes HUGE loans everyday via at a interest rate which has been close to 0 for several years (See Fed Fund Rate). There is no way of knowing exactly how much the fed has lent out to the big banks.

Still, the total amount was a surprise, even to some who had followed the Fed's rescue efforts closely.

"That's a real number, even for the Fed," said FusionIQ's Barry Ritholtz, author of the book "Bailout Nation." While the fact that the markets were in trouble was already well known, he said the amount of help they needed is still surprising.

"It makes it very clear this was a very serious, very unusual situation," he said.

Weitz – the problem remains very serious. If forced to actually report the current valuation of assets (see easing of 'Mark to Market'), many economists believe the big banks would be forced into bankruptcy.

Sen. Bernie Sanders, the Vermont independent who had authored the provision of the financial reform law that required Wednesday's disclosure, called the data that was released incredible and jaw-dropping.

Weitz – Good for you, Bernie Sanders!! The fed would never have released this without you!!

"The $700 billion Wall Street bailout turned out to be pocket change compared to trillions and trillions of dollars in near zero interest loans and other financial arrangements that the Federal Reserve doled out to every major financial institution," Sanders said.

He said that even if the Fed was right to make the loans to keep the economy from toppling into a depression, it should have made stronger demands that the banks help American consumers and small businesses.

Weitz – Absolutely right. Amazing how the economy (see employment rate, record foreclosures & bankruptcies) is still in the dumps, yet the banks are paying record bonuses again.

"They may have repaid their loans, but that's not good enough," he said. "It's clear the demands the Fed made were not enough."

Weitz – there is zero chance they have repaid this. What actually happened is that the banks went directly to the real US government (the US Treasury), and let the government borrow the money from them….only the govt (taxpayers) have to pay the banks a higher interest rate.

The Wall Street firm that received the most assistance was Merrill Lynch, which received $2.1 trillion, spread across 226 loans. The firm did not survive the crisis as an independent company, and was purchased by Bank of America just as Lehman Brothers was failing.

Citigroup which ended up with a majority of its shares owned by the Treasury Department due to a separate federal bailout, was No. 2 on the list with 279 loans totaling $2 trillion. Morgan Stanley was third with $1.9 trillion coming from 212 loans.

"As we have previously disclosed, Morgan Stanley utilized some of the Federal Reserve's emergency lending facilities during a time of immense financial turmoil throughout the banking sector and the broader market," Morgan Stanley said in a statement Wednesday. "The Fed's actions were timely and critical, and we commend them for providing liquidity and stabilizing the financial system during that period.''

The largest single loan was by Barclays Capital, which borrowed $47.9 billion on Sept. 18, 2008, in the days after the Lehman bankruptcy. The loan financed Barclays' purchase of Lehman's remaining assets.

Weitz – Barclays?!?! They are a foreign bank (UK)!! Terrific, we paid $50 Billion to a foreign company to buy a crappy US company.

Some Wall Street firms disputed the way the Fed reported the numbers. An executive from one of the firms said that many of the overnight loans were rolled over for days at a time, and that each day it was counted as a new loan. "It's being double, triple, quadruple counted in some cases," said the executive.

Not all the major banks needed much help from the Fed. JPMorgan Chase received only three loans from this program for a total of $3 billion.

Weitz – No, Chase just does it every day from different, more ordinary programs.

The last loan was made under the program in May 2009, and the program, known as the primary dealer credit facility, was officially discontinued in February of this year.

The Federal Reserve revealed details of that program as part of a large scale release of data on all the steps it took to stabilize the nation's financial sector during the markets crisis of the last few years.

The central bank posted details of more than 21,000 transactions with major banks and Wall Street firms between December of 2007 and July of 2010. In addition to the loan program for bond dealers, the data covered the Fed's purchases of more $1 trillion in mortgages, and spending to back consumer and small business loans, as well as commercial paper used to keep large corporations running.

Weitz – this is ‘code’ for handing money to banks and other corporations by buying their crappy assets at full price. Think of it as someone voluntarily paying you $100,000 for your 2002 Hyundai…not a bad deal if you can get it (ie. Hidden Bailouts) .

The rescues of the investment bank Bear Stearns in March of 2008, and insurance behemoth AIG in September of that year, were also revealed in far greater detail, as were programs to make dollars available to foreign central banks in return for their currency, in order to keep international trade flowing.

Most of the special programs set up by the Fed in response to the crisis of 2008 have since expired, although it still holds close to $2 trillion in assets it purchased during that time.

Weitz – Shocking…maybe because the assets they ‘purchased’ are worthless.

The Fed said it did not lose money on any of the transactions that have been closed, and that it does not expect to lose money on the assets it still holds.

Weitz – To be closed, the account would have to be paid back…isn’t this obvious?? To clarify…the Fed hasn’t lost money on the accounts that have been paid back. As for the ones that haven’t been paid back?....those aren’t important;)

The details of which banks participated in the Fed's emergency programs, and how the banks benefited from the transactions, had never before been revealed.

The Fed argued that revealing the information could cause a run on the banks that needed to draw cash at the discount window. But under the financial regulatory reform act that was passed in July, the Fed will reveal future discount window transactions following a two-year lag.

Weitz - Here's the bottom line - with so many folks enduring so much pain, I find it incredibly difficult to see banks giving out record bonuses and not doing a darn thing to benefit the country or home owners in this foreclosure/ small business crisis. Simply put, it's inequitable and unjust the banks have received so much from the taxapyer with no strings attached. There is no easy solution to the problems we face, but I propose we force our leaders to at least be HONEST and TRANSPARENT about this financial issues in front of us... We can't fix what we don't acknowledge.

Existing Home Sales Fall - Shadow Investory looms

2010-11-23T11:55:00.000-08:00

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

2010-11-23T10:58:00.000-08:00

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

2010-11-23T10:32:00.000-08:00

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

2010-11-16T07:40:00.000-08:00

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

2010-11-13T07:35:00.000-08:00

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

2010-11-09T07:42:00.000-08:00

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

2010-11-06T11:05:00.000-07:00

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?

2010-11-05T21:42:00.000-07:00

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

2010-11-01T14:18:00.000-07:00

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.

Foreclosure Rights of Tenants and Landlords

2010-10-31T15:19:00.000-07:00

The rights of Tenants and Landlords in the foreclosure setting is an issue that I see arising more and more these days. Accordingly, I thought I would take the opportunity to provide an overview of the law. Please note that this is WASHINTON LAW as it currently stands, however, each state has differing laws, laws are subject to change.

Federal Law – Protecting Tenants at Foreclosure Act of 2009

Rule- the new owner of the foreclosed home must notify the tenant AT LEAST 90 days before evicting the tenant. (this law is currently set to apply until 2014).

Washington Law – RCW 62.24.143

The Washington Law requires the foreclosing party (lender or trustee) provide written notice to the tenant before the foreclosure sale. This notice must explain that the sale may be held 90 days or more after the date of notice; and state that the person who buys the home is required to provide at least 60 days notice before evicting the tenant.

So which is it? A 60 day eviction notice or 90 day eviction notice.

As you can see, there is a conflict in the federal and state laws. As such, the purchaser of the property at a foreclosure sale will be required to provide the renters 90-day notice prior to eviction because of the Federal Law.

How does the new law affect a Tenant’s current lease?

** UNLESS the new owner is going to move into the property, the tenant can stay in the property until the lease ends!! (**this is huge- if the property reverts back to the bank, the tenant can stay in the home until the lease expires!)

** This currently applies to ALL LEASES entered into anytime prior to the transfer of title at foreclosure (the banks argued that this should not apply to leases unless they were entered into before the notice of default and notice of trustee sale).

Who does the tenant pay rent to?

Rent should be paid to the new owner post foreclosure. If the tenant has not been provided with payment information, then tenant should save the rent money until it is clear how payment should be made.

There are obviously some issues that may not be touched on in this post, but I hope it has provided a general overview that will assist you make the most of an abnormal situation.

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

Our Firm:

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

What does the Foreclosure Crisis Mean for You?

2010-10-26T09:52:00.000-07:00

Weitz – an article from the Wall Street Journal this weekend:

WSJ - For the vast majority of homeowners, new questions about the state of foreclosures appear to be irrelevant. Few people seem to have been wrongly thrown out of their homes, and those who have been are generally months or years behind on their mortgage payments.

But the fallout from the crisis is beginning to be felt in real-estate markets across the country, particularly in places dominated by vacation homes and investment properties. Some of the worst-hit areas could be Western ski towns, because fall is the busiest time of the year for sales.

By the Numbers
• 27% - Percentage of total home sales in 2009 that were second homes.
• 30% - Percentage of total mortgage defaults attributable to second-home and investment properties.
• 4.57% - Percentage of mortgages in some state of the foreclosure process, June 2010. (Weitz - and the loans that are in default is much higher)
• 9.4 Months - The average amount of time from default until foreclosure proceedings begin on a "jumbo" mortgage loan.

Real-estate salespeople in some of those places are worried. "September and October are usually the height of the selling-season for us," says Rich Armstrong, who owns the brokerage Rare Properties in Jackson Hole, Wyo. "Now we are seeing a number of what we call 'fence sitters,' people who would have leapt in even a month ago, but now are waiting on the sidelines."

The "foreclosure crisis" is a result of the frenzied real-estate boom and bust of the past decade. Banks made foolish loans, and borrowers signed up for them—only to default later, as the economy slumped. Banks rushed to reclaim properties, launching a record number of foreclosure proceedings.

In the past several weeks flaws have emerged in that complex process. Because of the high volume of foreclosures, the documentation supporting legal actions was prepared hastily, and some homes were seized improperly.

Yet the far bigger worry is what happens next. A frenzy of lawsuits and banks' examinations of their own practices could throw more of the millions of foreclosures of the past few years into legal jeopardy. Attorneys general in all 50 states are investigating, and plaintiffs' lawyers are working hard to perfect their legal strategies for suits on behalf of people who have been foreclosed on.

The suits might well fail. But just the threat that past foreclosure rulings might be overturned could result in collateral damage. In some places, banks are rushing foreclosed properties to market. In others, buyers are stepping back, refusing to buy foreclosed properties or "short sales"—homes sold by owners for less than the mortgage balance. In markets already beset with large inventories of foreclosed properties, the result could be a slower recovery.

Weitz – I hate to sound pessimistic, but I genuinely believe we have yet to reach a true bottom based on the huge supply of properties for sale across the country, and meager demand for those homes. This econ 101 fact, coupled with less access to financing, and fewer qualified buyers will lead to continued struggles.

I constantly hear that 'interest rates are at all time lows...now is a great time to buy. My response: what happens when/ if interest go up? Prices come down since there is a direct correlation to prices, and borrowing costs.

Coastal markets and ski areas are feeling the most anxiety. Some already are littered with foreclosures—in part because they're dominated by second-home and investment properties. Those owners are more willing to walk away from a house that isn't their primary residence.

Weitz - Coastal Markets are also under the most pressure since they are the highest priced, and had the most excessive appreciation during the boom.

Foreclosure tracker RealtyTrac estimates that, nationwide, 30% to 35% of properties in foreclosure are owned by investors or were second homes. In Aspen, Colo., the figure is about 60%, says Kim McKinley, owner of McKinley Sales Real Estate in Basalt and Aspen, Colo. If foreclosure proceedings slow from here, inventory could jump, leading to price weakness later.

The foreclosure mess could hurt homeowners in another way: The costs of buying a home and paying off the mortgage are likely to go up, say housing experts.
The rising costs will come both during the closing and throughout the life of the loan.

At the closing, the cost of title insurance, which protects a property buyer from claims of ownership made by other people, is likely to rise, industry officials say. Title insurance is one of those annoying costs that can sneak up on a buyer during a close; premiums average around $2,000 across states, says Tim Dwyer, CEO of insurer Entitle Direct Group.

The foreclosure mess has sent insurers scrambling. One of the largest, Old Republic Title Insurance, told its agents on Oct. 1 not to issue policies on homes that have been foreclosed by GMAC Mortgage or J.P. Morgan Chase. And on Wednesday, the nation's largest title insurer, Fidelity National Financial, said lenders must vouch for the accuracy of their paperwork before it will insure properties.

Just like homeowners-insurance rates rise after a hurricane, the rates for title insurance are expected to rise, to compensate for the added risk.

Other costs could be felt during the life of the loan. Until the current mess, servicing loans was a low-margin, high-volume business. Servicers collect mortgage payments from borrowers and send them off to mortgage holders, and if the loan gets into trouble, they manage the foreclosure. Few doubt this process will get costlier now that it is under scrutiny from regulators and the courts. That higher cost likely will show up in higher interest rates for borrowers.

Both of these higher costs also would hit homeowners who refinance their loans.
How much the costs of buying a home will rise is unknown. Mortgage industry officials say it is too soon to tell. And no one believes the costs will significantly change the price of a home. But with the housing market still weak, the uncertainty is making the prospect of buying—or selling—a home that much dicier.

The timing of the foreclosure mess is especially inconvenient for ski towns, given the fall selling season.

Property owners are growing nervous. In Park City, Utah, lenders are quickly unloading foreclosed homes ahead of what could be a long, stalled foreclosure process, says Joe Trabaccone, a real-estate agent there.

On Oct. 11, for example, J.P. Morgan Chase put up for sale an 8,000-square-foot home adjacent to a private gated golf course. Mr. Trabaccone initially recommended the property be listed for $1.6 million, but Chase opted for $1.26 million. "They are offering these homes far too low just to hurry up and sell them," Mr. Trabaccone says.

Even so, it hasn't worked. A buyer made an offer and signed a contract, but then backed out.

In South Lake Tahoe, Calif., on Thursday, Freddie Mac, the big government-sponsored guarantor of mortgages, put a foreclosed home that had just been listed for sale on hold, freezing the property until paperwork could be straightened out. The foreclosure mess "seems to be filtering down and it could be an impact," says Doug Rosner, the broker who had listed the home. Three other properties in town were also frozen, another real-estate agent says.

The "sand states" of Arizona, California, Florida and Nevada are being hit as well. These areas, too, have a lot of vacation and investment properties—and a lot of foreclosures.

The possible foreclosure wars to come loom so largely over Florida markets that Ms. Speronis is urging condo sellers to consider any offer they get, even if it is far below asking price or what is owed on the mortgage.

Dianne Cloutier, a records supervisor in Chelmsford, Mass., had been looking for a retirement property in Cape Coral, but decided to wait because of the foreclosure mess. "It's left us on hold until we are sure the banks have legitimately foreclosed on people and that nobody can come back on us to get their property back," she says.
Foreclosures aren't the only problem. Short sales are getting more difficult to pull off, too.

In Bend, Ore., agents say buyers are avoiding short sales or even backing out of contracts because they don't want to deal with paperwork hassles or the chance of a court challenge later.

The short sales "can be very frustrating," adds Becky Ozrelic, of with Steve Scott Realtors in Bend. "You just have buyers waiting and waiting."
For sellers, lining up a short sale was tough even before the latest foreclosure crisis. Banks and mortgage "servicers," the outfits that process payments, already had been scrambling to handle surging workloads.

For more information on your rights in foreclosure or short sale, consider contacting a Seattle Foreclosure Attorney.

Our Firm:

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

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Legal Action against Bank of America...finally!

2010-10-20T08:31:00.000-07:00

Weitz - Let the games begin!!! As you know, I've been saying the bank mis-representation when selling off these loans was the biggest potential problem with 'foreclosuregate' (rather than robo-signers). Well, the first big case against this garbage was announced yesterday.

As Article from the WSJ today:

As banks restart foreclosures they had suspended, bondholders are stepping up efforts to recoup losses on soured mortgage portfolios amid concern about sloppy mortgage servicing and underwriting practices.

In a letter Monday, a group of institutional bond investors raised objections to the handling of 115 bond deals issued by affiliates of Countrywide Financial Corp., acquired by Bank of America Corp. in 2008.

Weitz - By the way, the plaintiffs include Fannie, and Freddie (ie. the US taxpayer).

The investor actions, which seek to have certain loans be repurchased among other things, come as Bank of America on Monday took steps to defuse claims that its foreclosure troubles are deep-seated. The bank on Monday said it was restarting the foreclosure of more than 100,000 homes.

Weitz - note the investors are seeking to to have these garbage loans re-purchased. If victorious in this action, and other like it, the banks will face severe financial difficulties (even with the on-going accounting fraud).

The letter, to Bank of New York Mellon Corp. and Bank of America, cited Bank of America's "failure to observe and perform, in material respects" its duties as the servicer for the bond deals. The failure to properly handle the loans "has materially affected the rights" of bondholders, the letter said.

The institutional investors, who include mutual-fund managers, government-related entities, insurance companies and investment partnerships, are seeking to have loans that didn't meet underwriting requirements repurchased and to be compensated for losses due to inadequate mortgage servicing, says Kathy Patrick, an attorney with Gibbs & Bruns, a Houston law firm representing the investors.

The group says it holds roughly $16.5 billion—or more than 25%—of the $47 billion in outstanding mortgage-backed securities from these deals.
"We are reviewing the letter," said a BNY Mellon spokesman. "It appears to be directed to Countrywide and does not ask BNY Mellon to take any action. We will continue to perform our duties as trustee." A Bank of America spokesman declined to comment.

As mortgage servicer, Bank of America is responsible for collecting loan payments and working with troubled borrowers. BNY Mellon, the bond trustee, is charged with administering the securitizations, or bond trusts, for the benefit of investors. Investors say they are concerned both about servicing and violations of representations and warranties made when the loans were packaged into bonds.

Monday's action lays the groundwork for what could be one of the first lawsuits by mortgage-bond investors seeking to enforce their contract rights, including loan buybacks, in response to the current foreclosure crisis. Investors have mounted other challenges based on alleged violations of securities laws.

On Monday, the Association of Mortgage Investors stepped up efforts to pressure banks by calling on state attorneys general to expand their investigation of mortgage-servicing practices to include violations dating back to the time when loans were packaged into securities.

Analysts are trying to tally up the costs of loan buybacks and foreclosure moratoria. In a report issued Friday, Barclays Capital said the current crisis could delay foreclosures by three to six months. Longer timelines could reduce yields on some bonds by as much as one percentage point, it said, and "drastically" reduce cash flows to some bond holders in the next few months.

In a separate report issued Friday, J.P. Morgan Chase & Co. bond analysts estimated that future losses from repurchases of loans that didn't meet sellers' promises could total $55 billion to $120 billion.

Even before the recent furor over "robo-signers"—back-office employees who approved hundreds of foreclosure documents daily without reviewing them—bond investors were raising concerns about servicer practices.

In August, a smaller group of investors in some Countrywide deals sent BNY Mellon instructions to investigate whether certain mortgages didn't meet representations made at the time the loans were packaged into securities. The group demanded that some loans be repurchased.

But the August letter, a BNY Mellon spokesman says, "did not comply with multiple requirements for giving direction to BNY Mellon in its role as trustee."
Recent disclosures of sloppy servicing practices follow questions about whether the processes for conveying loans to the bond trust were properly followed. Together, they "have exacerbated investor concerns and created delays and added costs that hurt investors," Ms. Patrick says.

Bond investors have been slow to press their claims, in part because of how the contracts for bond deals, known as pooling and servicing agreements, are written. Typically, these contracts require that bondholders gather 25% of the voting rights in the trust before they can enforce the contracts themselves. These provisions are intended to ensure that the action being requested will benefit bondholders as a group, rather than any one bondholder or subset of holders.

Earlier this month, a New York state justice dismissed a lawsuit by investors who argued they shouldn't bear any of the cost of an $8.4 billion settlement between state attorneys general and Countrywide Financial. The judge said the investors hadn't satisfied terms set out in the pooling and servicing agreements.
The Oct. 18 investor letter formally notifies BNY Mellon and Bank of America that investors believe that Bank of America has failed to meet its obligations as a mortgage servicer. The two companies then have 60 days to address the issues, says Ms. Patrick.

If the problems aren't resolved, that would trigger an "event of default" under the agreement, Ms. Patrick says, which would allow an investor to file a lawsuit against both companies. Investors "aren't trying to halt loan modifications for troubled borrowers," she added.

The move is one of a number investor actions seeking to recoup losses. In a separate action, a group of investors in 2,300 mortgage securities worth $500 billion this summer sent a letter to trust departments of several large banks expressing concerns about how loans are being handled.

David Grais, a New York securities lawyer, recently announced plans to hold a conference on "Robosigners and Other Servicing Failures." Mr. Grais represents Federal Home Loan Banks in San Francisco and Seattle that have sued Wall Street banks, seeking to force them to buy back mortgage-backed bonds. Similar lawsuits were filed last week by Federal Home Loan Banks in Chicago and Indianapolis.

But the time to pursue some of these claims is running out, Mr. Grais says. Under New York contract law, investors generally have six years from the time of a securitization to put back loans that violate representations and warranties, Mr. Grais says. State securities law generally gives investors one to four years after they discover a legal violation to put back bonds that weren't accurately described in disclosure documents.

"If people don't throw their hat in the ring, they are out of luck," Mr. Grais says.

Weitz- Let's get ready to ruuuumble!!

Banks Restart Foreclosures

2010-10-19T17:37:00.000-07:00

Two major lenders at the center of the foreclosure crisis took steps Monday to put the mess behind them by restarting home seizures that were frozen by documentation concerns.

Weitz – no surprise there. As we’ve said – they’d “investigate” and find no problems.

Bank of America Corp. reopened more than 100,000 foreclosure actions, declaring that it had found no significant problems in its procedures for seizing homes. GMAC Mortgage, a lender and loan servicer, said that it also is pushing ahead with an unspecified number of foreclosures that came under intense pressure.

Bank of America prepared to restart 102,000 pending foreclosure actions where court approval is required, applying new signatures to documents in 23 states.
Monday's moves are part of a growing counterattack by lenders scrambling to stem a financial and political threat over allegations that certain employees signed hundreds of documents a day without carefully reviewing their contents when foreclosing on homes.

Weitz- signatures are not the issue here. The problem is the MERS issue, and the fraud issues.

Bank of America, the nation's largest bank in assets, which imposed on Oct. 8 a nationwide moratorium on the sale of foreclosed homes, said it has begun preparing new affidavits for pending foreclosures in 23 states where a judge's approval is required. The paperwork will be submitted to courts by next Monday, and foreclosure sales will resume in those states starting in November, according to the bank. "This is an important first step in debunking speculation that the mortgage market is severely flawed," said Bank of America spokesman James Mahoney. More details will be disclosed when the company reports quarterly results Tuesday.

Weitz – haha. Thanks James…if you say so!!

Citigroup Inc. Chief Financial Officer John Gerspach said the bank has found no reason to halt foreclosures, calling its internal procedures "sound." "We have not identified any system issues," he said Monday.

Weitz – how about the fraud you committed when you sold these loans to fannie and freddie (ie. Taxpayers) and assured they met quality standards?

Restarting the nation's foreclosure machine puts the lenders on a collision course with state attorneys general, who announced last week a nationwide investigation of foreclosure practices. Some state officials have been pushing for a wider halt to foreclosure sales, but Bank of America's moves show determination by at least some lenders to get back to business while the investigation proceeds.

A Bank of America spokesman said the bank has found "no cases" thus far of foreclosures that should not have "gone through." Last week, James Dimon, J.P. Morgan Chase & Co. chairman and chief executive, said that no one has been "evicted out of a home who shouldn't have been."

Weitz – for the most part, this is probably true – but they are hiding the ball for the larger issues of fraud in the origination and securitization processes.

Some attorneys general said they have little confidence that problems with foreclosures have been fixed. "We've been in discussions with some of the major servicers, and as part of that they've assured us that they are fixing this problem, but we're not just going to take their word for it," said Patrick Madigan, a spokesman for Iowa Attorney General Tom Miller.

Weitz – I commend the AGs, but I’d like to see less talk and more action on the real issues.

It will be hard for lenders to declare the foreclosure crisis over and get back to business as usual. Bondholders are escalating efforts to recover losses on soured mortgage-bond deals containing loans with flawed paperwork. (Weitz – DING DING!!!....the context is wrong in this article... The fraud existed in the origination and securitization process)....but this is the BIG ENCHILADA!!..if the bond holders sue and force the banks to take back these fraudulent loans, it will cripple many of the banks Meanwhile, federal banking regulators are assigning additional employees to an ongoing review of large mortgage-servicing operations, according to people familiar with the situation. Officials want to make sure that documentation procedures are being followed and companies are meeting all legal foreclosure requirements.

Bank stocks surged Monday as investors reassessed last week's outlook for the cost of the foreclosure mess. Citigroup shares jumped 23 cents, or 5.8%, to $4.18 a share in New York Stock Exchange composite trading at 4 p.m., on better-than-expected earnings. Bank of America rose 36 cents, or 3%, to $12.34, while J.P. Morgan was up $1.05, or 2.8%, to $38.20.

Weitz – I’m no financial analyst, but I’d highly recommend taking profits if you own the stock of these institutions. They are, for the most part, black boxes…no one outside of these companies truly knows their financial situation because of the legalized accounting fraud I often refer to.

Bank of America is the only major U.S. bank that announced a halt to all foreclosure sales while it reviewed documents for errors. Bank officials say they're readying new affidavits for 102,000 pending foreclosure actions.

A company spokesman said the largest investors in mortgages serviced by Bank of America have signed off on the new timetable. The bank will continue delaying foreclosure sales in the 27 states where court approval isn't required until a review is completed "on a state by state basis." The bank expects delays on fewer than 30,000 foreclosure sales nationwide.

GMAC, a unit of Ally Financial Inc., declined to comment on the number of foreclosures it has reviewed so far, but said they included loans with affidavits signed by employee Jeffrey Stephan. His testimony in a deposition that he signed 10,000 foreclosure affidavits a month without reviewing the underlying documentation led GMAC to halt evictions in 23 states last month while it scrutinized its procedures.

Ohio Attorney General Richard Cordray, who last week filed a lawsuit against GMAC alleging hundreds of counts of fraud related to foreclosure documents, said he is suspicious of efforts to replace paperwork. "Substituting new evidence in [cases] where there's been fraud won't help prevent the court from sanctioning them for the fraud that has already been committed," he said. "It doesn't unring the bell."

Weitz – if the banks committed fraud, the penalties should be severe, but it does not prevent an eventual foreclosure. The real issues are not falsifying documents. I’m sure they exist, but they are rare (especially in non-judicial foreclosure states like Washington).

Our Firm:

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

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The MERS problem - in plain english

2010-10-19T07:51:00.000-07:00

Greetings Earthlings - Welcome to MERS!

Caution: do not read this post while driving a vehicle or operating heavy machinery as it may cause drowsiness.

MERS OVERVIEW

MERS ‘Mortgage Electronic Recording System’ has been a big issue in news as of late. There are a lot of complex legal issues involved with the MERS process that could lead to significant problems for the U.S. Mortgage Market.

In this post, I will try to simplify the issue as best I can and also provide an outline of some of the issues involved and why there may be problems moving forward for the banks. I have cited some authorities, but given that this is a blog post and not a law review article, I refrained on others.

The Background:

In the go-go years, Banks would create mortgage backed securities (‘MBS’) or Collateralized Debt Obligations (CDOs). They were simply a bundle of loans (or portions of loans) that were sold to investors (ie. pension funds, municipalities, etc.)

In every state in our union, a title and deed of trust (or mortgage) that is transferred is typically ‘recorded’ with the county recorder of register of deeds. This recording has provided a transparent vehicle for determining property ownership in our Country for generations. Typically, a fee is associated with recording of said documents. In King County, the fee is about $65.

In the mid-1990s, mortgage banks decided they did not want to pay the recording fees or create proper ‘assignments’ (ie. Transfer documents) when selling the mortgage to investors as that would obviously be incredibly cumbersome and expensive.

To avoid paying county recording fees, mortgage bankers decided to create a SHELL COMPANY that would pretend to own many of the mortgages in the county – that way, no assignment documents (or recording fees) would be necessary upon the transfer of a loan document.

Currently, about 60% of the nation’s residential mortgages are recorded in the name of MERS.

What exactly is MERS?:

In boilerplate security agreements included in mortgages or deeds of trust around the country, this clause is included:

“MERS”…..is a separate corporation that is acting solely as nominee for Lender and Lender’s successors and assigns. MERS is the mortgagee under this security agreement.

Essentially, MERS is claiming to be an ‘agent’ of the lender and a ‘mortgagee’ (owner with the right to foreclose). This raises two important issues:

1) If MERS is an Agent, it is uncertain whether MERS has the ability to list itself as the Morgagee.

2) If MERS is a mortgagee, both MERS and the companies that invested in these mortgages breach the longstanding precedent that a promissory note and mortgage are inseparable documents.

Court Cases: As of August, 2010, every state supreme court that has ruled on the issue has found that MERS is not a mortgagee or deed of trust beneficiary. (Arkansas Court; MERS v. Southwest homes of Arkansas)(Kansas – Landmark Nat. Bank v. Kesler); (Maine – MERS v. Saunders) which leads to the problem of conveyance of the mortgage.

MERS and the Problem with conveyance:

If MERS is neither a mortgagee, or a deed of trust beneficiary, the courts must soon confront the enforceability of the MERS security agreements as there is a compelling argument that loans originated through the MERS system fail to create enforceable liens.

The (Archaic) Legal Problem:
1) The Banks did not specify who the actual Mortgagee is (MERS is a shell company). This presumably breaks the chain of title, and breaks long standing precedent that a mortgagee must exist to enforce (foreclose) the document.

2) In many cases, the mortgage and the note may have been separated. This of course would violate the legal requirement that mortgage and note are inseperable.

Allowing either of these to continue would upset hundreds of years of legal precedent.

The Decision:
If the courts take a hard stand by invalidating liens because they do not specify a mortgagee, the markets very well may collapse.

Conversely, if they allow MERS to act as a ubiquitous national proxy system, they will alter the real property that has stood for generations.

My guess: Just as we don't depend on horses to transport us anymore or cook our meat over an open fire, we must adopt to a new era of technology and adopt the MERS system (warts and all). I think its fairly obvious that the courts/ politicians will take the easy way out and alter the law rather than create a tidal wave of title issues that could cripple the national real estate market.

Of course, they must first "investigate the problem" as they are now doing in all 50 states. This is purely my opinion, but I believe the investigation is mainly a political ploy to appease the constituents.

That said, there may be other issues looming similar in nature to this problem that will hopefully arise during these state "investigations" including: 1) fraudulent transfers/ misrepresentations by the bank in transferring these mortgages to the taxpayer (ie. Fannie/ Freddie) and other investors; and 2) the continuing accounting fraud in the banking industry that allows for record Wall Street bonuses while the rest of the country continues to struggle from a problem creating largely by Wall Street.

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Mortgage Issues Cloud Recovery

2010-10-16T00:02:00.000-07:00

Weitz - An article from the Wall Street Journal followed a Washington specific analysis of the mortgage issue.

Sales of foreclosed homes have helped lay the groundwork for housing recovery in many of the nation's boom-to-bust markets. Now, some real-estate agents say that recovery is at risk because of delays in bank foreclosures.

Weitz – what recovery are they referring to?!

Homes are being pulled from the market, and buyers—especially investors intent on quickly reselling foreclosed properties—are retreating to the sidelines amid growing uncertainty over the extent to which banks filed fraudulent foreclosure documents.

On Tuesday, Wells Fargo & Co. said it had started a review of all pending home foreclosures in states where certain paperwork was required but it did not suspend foreclosures or foreclosure sales, as have other big banks.

Meanwhile, GMAC Mortgage, a unit of Ally Financial Inc. and one of the first to suspend some foreclosures last month, expanded its review to all 50 states. Initially GMAC's review was limited to 23 states that require court approval for foreclosures.

Bank of America Corp. last Friday agreed to halt all foreclosures and foreclosure sales, the first bank to do so.

Uncertainty about the legitimacy of foreclosures threatens the market because about one in four homes sold during the second quarter was in some stage of the foreclosure process, according to RealtyTrac Inc., which tracks foreclosure filings.

Weitz – take note – ¼ of all homes sold in the 2nd quarter were at some stage of the foreclosure process. I’m seeing a lot of short sales in which the borrower has stopped paying the mortgage, and then tries to get a short sale for varies reasons including a smaller credit hit.

Some in Congress have called for a nationwide foreclosure moratorium, but Obama Administration officials said they didn't support such a broad move.

"If there is an empty house in the neighborhood that somebody has a contract on, and their closing date is next week, and there is a moratorium, that closing doesn't happen," Robert Gibbs, the White House press secretary, told reporters on Tuesday.

The administration's stance illustrates the policy conundrum: Officials say they want to root out possible wrongdoing by banks, but they also want to avoid policies that derail the fragile housing market by delaying inevitable foreclosures.

Weitz - Delaying foreclosures does not derail the fragile housing market...in fact, it helps short term as it would presumably keep some homes off the market at discount prices. The delay, however, would simply prolong the track to a true bottom.

The crisis has also put a cloud over whether banks can assert clear ownership of those properties. In the past week, two of the nation's largest title-insurance companies, Stewart Title Guaranty Co. and Old Republic National Title Insurance Co., have issued guidelines that could make it much harder to write policies on homes foreclosed by certain banks and in certain states.

"Title companies would be crazy to ensure title on anything remotely associated with a foreclosed property because we don't know how this is going to resolve itself," said Mark Hanson, an independent housing analyst in Menlo Park, Calif.

The result: Not only could sales slow on foreclosures now listed for sale, but it could also become harder to sell or refinance properties that have been foreclosed upon at some point in the past few years.

"Title-insurance costs can go up, purchasers can flee from auctions, and new home-buying families will decide to wait longer before re-entering the market," said Peter Swire, a law professor at Ohio State University who until August served as a top adviser on housing-finance issues in the White House.

So far, officials have downplayed those concerns. "We have not seen broad steps at this point by title insurers that would pose a significant risk to the market," said Shaun Donovan, the secretary of Housing and Urban Development.

But he said banks needed to correct their mistakes quickly "to give the market confidence that the...foreclosure process is working in the right way."

Weitz- good luck with that, banks. I bet your workers that you pay 12 dollar/hour will easily be able to sift through millions of documents and insure that properties have been transferred properly and abide by the ancient and complex real property laws of the U.S.....most attorneys couldn’t do this with one document, but I’m sure your staff will have no problem doing it with millions of documents.

Banks have begun discussions with title-insurance firms to prevent sales from
stalling further. Bank of America, for example, reached an agreement with Fidelity National Financial Inc., the nation's largest title insurer, last week to provide warranties that would indemnify the insurer against claims that resulted from foreclosure errors by the bank.

Real-estate agents are particularly worried about the situation's impact on investors, the buyers who fix up foreclosed homes for resale. Investors accounted for 21% of all home sales in August, according to the National Association of Realtors.

Some analysts say the loss of investors could be particularly damaging to the housing market because some they tend to buy large numbers of units at once.
"We're the lubricant in this recovery," said Gregor Watson, with McKinley Partners, a development company that has spent more than $35 million buying hundreds of foreclosed homes in California this year. "To create more doubt in investors' minds will have a dramatic impact on home pricing."

Mr. Mirmelli has already witnessed the downside of legal tangles between banks and homeowners. He said he purchased a Las Vegas home four months ago that remained occupied by the homeowner, who is suing his bank alleging that it shouldn't have foreclosed on the property because he had been pre-approved by the bank to sell it for less than the amount owed.

"It's frustrating," Mr. Mirmelli said. "The bank has taken our money, but we're still trying to get possession of our house."

Weitz – here’s the deal. I’m not terribly concerned with the ‘title issues’ in Washington State. (I say this because I assume the government will eventually let the paperwork problems slide as to hold the banks accountable to some of the more historic laws would create a title disaster).

Here’s why the title issues won't be an issue:

1) Washington is what is called a ‘race-notice’ state for solving title disputes. Thus, if you buy the home and record the title with the County Recorder before anyone else who makes a claim for the property.... You have won the ‘race’ to provide ‘notice’ to other potential owners…you will be the rightful owner. Period.

Here are the three situations that could arise in foreclosure:

a) Who holds title to the home before foreclosure? The home owner. That was easy.

b) Who holds the title if a buyer buys it at foreclosure? The buyer. There will be no issues with title assuming the title is properly recorded. That was easy too.

c) Who holds title if the bank forecloses, and no one buys the house at the foreclosure auction? The note holder. This one may get interesting, but there are very few foreclosures where the actual mortgage holder is unknown.

The issue, as I said, is whether the banks have the ‘right to foreclose’ because of the MERS issues, and whether the banks were fraudulent in this whole foreclsoure process (ie. fraudulent documents, bad notarization). (Look for a detailed post on the MERS issue later this weekend - I should warn you that you should not be operating heavy machinery when reading as it will cause drowsiness;).

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

Our Firm:

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

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State Attorney Generals Investigate Foreclosures

2010-10-15T23:28:00.000-07:00

AP - Attorney Generals from all 50 states agree to investigate foreclosure fraud.

Below is a video from the Dylan Ratigan show showing an interview with the Attorney General of Ohio.

One of the issues that many are not talking about is the potential for the investors of the loans and/or the government to file lawsuits against the banks and force them to take these loans back...this is not simply a 'robo-singing' problem, or notary problem....forcing the banks to void the previous sales would force many of these banks into bankruptcy, or a more likely solution, would be to acitvate the 'Resolution Trust' authority that would allow the Government to take over the banks and transition the assets to smaller banks over time.

This could get interesting!!

Wall Street Pay at Record High

2010-10-12T09:00:00.000-07:00

REALLY?!

Who do these people think they are!!

Its amazing what accounting fraud can do for your employee compensation:

Weitz - I love the argument that banks need to have huge compensation to "keep the best people". Are these the same "best people" that would have put these banks out of business had the government not bailed them out?!

There are a HUGE amount of law students, and MBA grads that find themselves un-employed in this market...I can assure you they could do an equally good job of taking government money, and then investing in government bonds (A huge revenue machine for many of these institutions. They certainly aren't making money by lending. Perhaps its the huge amount of bankruptcies and foreclosures that are lifting profits??...I say that sarcastically of course. The reality is they are taking money from the federal reserve at close to 0%, and either 1) gambling in the markets or 2) lending it back to the govvernment at 3.5%.

Bank fraud abundant in mortgage documents – How, Why and What’s next?

2010-10-07T21:39:00.000-07:00

Two of the best media sources (Dylan Ratigan and Karl Denninger) for spreading the truth of our current situation get together on the Dylan Ratigan show to discuss the mortgage fraud situation.

Weitz - Here's the situation in simplified form:

1. Banks make loans; bundle them together (Mortgage Backed Security ‘MBS’)

2. Banks sell this ‘bundle of loans’ to Pension Funds or other investment vehicles who buy them because the companies that "grade" these securities’ (ie. Moodys and Standard & Poors) have graded them ‘AAA’ (A+ in school terms)...probably because they are compensated by the very party who is asking them to grade them.
(this is the equivalent of students deciding how much money their professors make- do you think the professor might give better grades?)

3. Banks then bet against the those Securities (because they knew they were given to unqualified borrowers (presumably)). (bet that borrow will not actually be able to pay for the loan)

4. Securities then ‘blow up’ (homeowners default)

5. Banks make money on the bets against those securities

6. Banks try to foreclose on the properties that made up those loans (on behalf of the new true owner – typically either a government entity or pension fund that lost money on it)

7. Banks don’t have the proper paperwork to legally foreclose on these properties

The problem – the banks did not adequately document the transfers of the title when they ‘securitized the loan’ (there is no legal ‘chain of title’ maintained); and the Bank presumably ‘illegally packed these because the banks ‘foreseeably’ saw a default in the making (probably the reason they bet against that very security)

8. Next - ??? – ask your local judge or politician- my guess is that we allow the foreclosures to continue, and cover up the ‘fraud’ or ‘malpractice’ (depending on your level of pessimism) because fixing the problem would cause most of the banks to go under. I would argue this should be done so America can operate with new banks that are healthy (rather than the zombie banks that currently run our country.

For more information on your rights in short sale or foreclosure, consider contacting a Seattle Foreclosure Attorney.

Our Firm:

Weitz Law Firm, PLLC
5400 Carillon Point
Kirkland, WA 98033

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Higher Govt Loan Limits Extended

2010-10-07T10:38:00.000-07:00

An Article from CNBC RealtyCheck:

There wasn't much fanfare, and it literally happened in the cover of night, but sometime after midnight Thursday morning, the U.S. Congress passed an extension of the increased Fannie/Freddie/FHA loan limits for high cost housing markets to a maximum $729,750.

Big deal, right. Well, Yes.

The higher loan limits for high-priced housing markets were instituted back in 2008, when President George W. Bush signed the Housing and Economic Recovery Act.
At the time, the mortgage market had crashed entirely, and the only games left in town were Fannie, Freddie, and FHA.

They each had a loan limit of $417,000, which knocked an awful lot of potential borrowers out of the game. The move was designed to moderate the credit crunch and promote borrowing and buying.

Since the peak of the housing boom in 2006, home prices are down 28 percent (S&P/Case-Shiller). That means many higher-priced markets aren't quite so high-priced anymore. Of course there are still hot spots, many in California, where the median home price is well over $417,000, but the national median home price currently stands at $178,600 (National Association of Realtors).

More important than home prices, however, are the players in the mortgage market today, or, shall I say, the lack of players in the market. Fannie, Freddie and FHA are originating around 90 percent of all new loans today. Higher loan limits therefore afford higher risk to these entities. The Federal Housing Administration (FHA) reports that loans over $400,000 have a higher risk of default.
Government officials continue to claim they want to increase private sector mortgage activity, and they have to. In order for the Obama Administration to expunge Fannie and Freddie from the U.S. mortgage market successfully, they have to ensure there's a market in existence behind them. Right now there isn't. Investors don't want to touch anything that doesn't carry a government guarantee.

Weitz - 90% of all loans back by government agencies...that is truly remarkable! Sounds an awful lot like Socialism to me. Socialism has a place, and arguably would be more beneficial for our current economic situation. We use socialist policies to bailout companies, yet our government leaves the general public to fend for themselves. Its called crony capitalism. If we're going to act socialist, lets just do it, and send checks to the people as well. Don't get me wrong, I'm a believer in capitalism, but it doesn't work if you don't let it work. The whole premise behind capitalism is that companies/ individuals have to face the risk of failing. If they do not, they will take unnecessary risks that could make them very wealthy...all the while knowing that the taxpayer must bail them out if they fail. (Sound familiar?)

Letting the loan limits drop to the previously legislated $625,000 limit, some argue, would have at least been a little boon to the jumbo market, which is struggling for business right now. But would it really juice the private mortgage market?

Some claim the only way the private market will ever recover is to start rolling back the loan limits, at least slightly, because if we continue the government loan limit status, nothing will change and the government will control 90 percent plus of the mortgage market for the foreseeable future.

The trouble with that argument is that at the present time there are no investors for the loans. (Weitz- because they are still overvalued due to government intervention)

There has been exactly one jumbo securitization in the past year, and it wasn't all that big.

Why?

Because potential investors in potential private label mortgage securities need to know what the new structures of these loans will be; they need comfort that their interests are aligned with the interests of all the players that exist between them and the borrowers (servicers, appraisers, etc.).

The Dodd-Frank financial reform bill did not mandate risk retention by any of the intermediaries, at least not yet. Policy makers have a year to define what exactly is a "qualified residential mortgage." So bottom line, without the increase in the loan limits, a fairly sizeable part of the mortgage market would have ground to a halt.

Lawmakers had no choice.

Weitz:

What does this mean?

The government will continue to back most of the loans issued (under the threshold of 729,000), and we as taxpayers will be on the hook for the losses should they occur. The banks will get paid for originating the loans, and government officials can all pretend that the market is in 'recovery' while we completely move away from a capitalist market place. If that statement seems like an oxymoron, thats because it is.

For more information on your rights in Short Sale or Foreclosure, consider contacting a Kirkland Foreclosure Attorney.

Our Firm:

Weitz Law Firm, PLLC
5400 Carillon Point
Kirkland, WA 98033

(425) 889-9300
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TARP Bailout Ends - Don't believe the spin

2010-10-02T22:43:00.000-07:00

WASHINGTON — An unpopular government-rescue program credited by economists with preventing another Great Depression will go out of business Sunday, two years to the day it was created.

On Oct. 3, the Troubled Asset Relief Program (TARP), known as the bank-bailout bill, loses authorization to make new expenditures. From that point on, TARP will be in wind-down mode, although much of money lent out has been repaid and at a profit for taxpayers.

Weitz - They paid it back because we gave them money at 0%, and let them loan it back to the government at 4%...well done, bankers. You should give yourself a huge bonus for your genius.

This is the equivalent of giving your alcoholic, irresponsible friend $50 dollars, then allow him borrow $5000 from you. Next, he's loans it back to you (only you have to pay interest - say 5%). He makes $250 from the interest, and then is able to 'pay back' the original $50 dollars he 'borrowed'. No logical business person would ever consider this loan 'paid off', but we're taxpayers...so we get fleeced.

If you follow the blog, you know I am a big fan of Dylan Ratigan. He does a great job of showing what a haux a headline such as this is.

Originally envisioned as a blank check for the government to spend up to $700 billion to rescue the financial system, the cost to taxpayers is estimated now to be only one-seventh of that amount. The government has earned almost $13 billion in dividends from the bank stock it received in exchange for the taxpayers' investment, and it earned $8.2 billion more from the sale of preferred stock.

The Treasury Department estimates taxpayers are still on the hook for about $100 billion, a number expected to shrink with continued repayments and asset sales. The nonpartisan Congressional Budget Office (CBO) recently put the estimated total TARP cost at about $66 billion.

Still, TARP became politically poisonous. People considered it free money for Wall Street executives whose recklessness dragged the world into the Great Recession. Now those executives are wallowing in bonuses while taxpayers remain plagued by 9.6 percent unemployment. (Weitz - we're not stupid)

"Objectively, TARP has been an economic success. Politically, it's been a miserable failure," said Darrell West, director of governance studies at the Brookings Institution in Washington, D.C., a center-left policy-research center.

Even though TARP was a Bush administration initiative and got strong congressional support from Republicans in 2008, today's GOP has painted TARP alternately as a Wall Street bailout or a cash kitty to fund Democrats' wish list.

"TARP turned out to be a slush fund," said Sen. Mike Johanns, R-Neb. "I would come to the office in the morning and see the latest thing the president has spent money for out of the TARP fund. It just turns my hair gray."

West said, President Obama "has not done as good a job communicating as he should. He's allowed the opponents to frame the issue unfavorably."

In the recently released "Pledge to America," a campaign document from House Republicans, GOP lawmakers vow billions in savings by eliminating TARP.
The problem is, recently passed legislation to revamp financial regulation already did that, and set the Oct. 3 TARP expiration date. That legislation also prevents the Obama administration from taking repayments to TARP and directing them to other priorities.
Shift in gears

When first presented by then-Treasury Secretary Henry Paulson, TARP money was supposed to be used to buy toxic assets from banks to bolster their balance sheets, allowing them to resume lending. Soon after the Oct. 3, 2008, creation of TARP, however, Paulson shifted gears and chose instead to inject $245 billion directly into banks.

That infuriated politicians and taxpayers alike. In 2009, after taking taxpayer money, many of the financial firms paid their executives huge bonuses. Some $40 billion in TARP money also was used to backstop insurer American International Group (AIG), which was rescued by the Federal Reserve in September 2008 to shore up the financial sector.

In December 2008, President George W. Bush authorized some $17 billion in TARP funds to help General Motors and Chrysler avoid bankruptcy. Eventually, expanding under Obama, some $82 billion in TARP money went to rescue the two automakers and keep credit flowing to their suppliers.

Unsavory as it was politically, economists credit these TARP efforts with helping to stabilize the financial sector and preventing an even worse outcome.
"I think it was a great success. The bank bailout part of TARP was an astounding success. Couldn't have gone any better," said Mark Zandi, chief economist with forecaster Moody's Analytics.

For politicians who voted for TARP, however, the challenge remains how to sell voters on the idea it prevented something bad from happening.
"I don't know of a single person who says if we hadn't done this, we'd be better off today," said Senate Banking Committee Chairman Chris Dodd, D-Conn., who is retiring and won't face the voters' wrath in November.

Of the $245 billion injected into 707 financial institutions, all but about $54 billion has been repaid. Of that outstanding amount, $30.75 billion is owed by big global banks that were subjected to special "stress tests" by regulators last year. The federal government still holds $16.5 billion of common stock issued by Citibank, for example.

However, several large regional banks, including SunTrust Bank, Regions Bank, KeyCorp and Fifth Third Bank, respectively, still owe $4.85 billion, $3.5 billion, $2.5 billion and $3.4 billion. The Treasury Department expects to be fully repaid, with interest and profit from its TARP cash injections.

"These weren't made as individual investments to save individual companies. They were meant to stabilize the system and the overall economy. And in that regard, this program has really been a success, and I think anyone who looks at it objectively will realize that," said Tim Massad, the acting assistant Treasury secretary for financial stability.

TARP also is unlikely to be fully repaid for the rescue of GM and Chrysler. GM has bounced back better than expected, and the company has announced its intent to issue stock either this year or early next year. However, that isn't expected to recoup fully the $49.5 billion in taxpayer aid to GM. Full repayment will take longer.
So if the automotive rescue doesn't break even, was it still successful?
"Yes. If you believe that we should be keeping manufacturing going in America — because what you would have lost if we hadn't gotten involved was not simply General Motors, but a substantial part of the supply chain, and that would have had a negative effect on Ford," said House Financial Services Committee Chairman Rep. Barney Frank, D-Mass.

At a recent meeting, Frank said there's more involved than just a sum.
"The problem is, if you say you owe us $10 billion, it's a failure. OK, we would have had $10 billion and no significant automobile manufacturing in America and no affiliated set of industries in America," he said. "I think that would have been worse."

Weitz- is it just me or is real estate still in dumps and banks still lying about their balance sheets? The presumption that 'we've dodged a bullet' is repulsive. Notice how Mr. Dodd is retiring this year...think its because he doesn't want to be around when reality sets in?

Still, TARP is likely to lose money in the end. Forecaster Zandi expects the final sum to be about $90 billion. More than half of that will be TARP money designated for foreclosure relief and other mortgage-finance efforts.

While $90 billion to $100 billion in final TARP expenses seems likely, Zandi and other leading analysts think it was money well spent in preventing an economic collapse.

"Ninety billion dollars is obviously well below the $700 billion appropriated and well worth the price. We got well more than $90 billion out of TARP," Zandi said.

Weitz - TARP was great in itself, but we're not stupid as a society. Bankers, who played a HUGE role in the devastation, are the only ones who have benefited from this crisis. The bailouts were guided toward a group of people who led us into this mess. Its repulsive.

Our Firm:
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Kirkland, WA 98033

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Bank of America Foreclosure Delays

2010-10-01T17:12:00.000-07:00

Weitz - Don't get too excited by the title. Unforutnately, Washington is not included in the states effected (see below).

AP:

Bank of America is delaying foreclosures in 23 states as it examines whether it rushed the foreclosure process for thousands of homeowners without reading the documents. The move adds the nation's largest bank to a growing list of mortgage companies whose employees signed documents in foreclosure cases without verifying the information in them.

Two other companies, Ally Financial Inc.'s GMAC Mortgage unit and JPMorgan Chase, have halted tens of thousands of foreclosure cases after similar problems became public.

The document problems could cause thousands of homeowners to contest foreclosures that are in the works or have been completed. If the problems turn up at other lenders, a foreclosure crisis that's already likely to drag on for several more years could persist even longer. Analysts caution that most homeowners facing foreclosure are still likely to lose their homes.

State attorneys general, who enforce foreclosure laws, are stepping up pressure on the industry. On Friday, Connecticut Attorney General Richard Blumenthal asked a state court to freeze all home foreclosures for 60 days. Doing so "should stop a foreclosure steamroller based on defective documents," he said.

And California Attorney General Jerry Brown called on JPMorgan to suspend foreclosures unless it could show it complied with a state consumer protection law. The law requires lenders to contact borrowers at risk of foreclosure to determine whether they qualify for mortgage assistance.

Mark Paustenbach, a Treasury Department spokesman, said the Treasury has asked federal regulators "to look into these troubling developments."

A document obtained Friday by the Associated Press showed a Bank of America official acknowledging in a legal proceeding that she signed up to 8,000 foreclosure documents a month and typically didn't read them.

Weitz – 8,000/ month!! That is nearly 45 per hour!! Perhaps you should hire some more people, Bank of America!!! Unfortunately, foreclosures are not money makers for the banks, so they leave the departments dreadfully understaffed.

A lawyer for the homeowner in the case, James O'Connor of Fitchburg, Mass., said such problems are rampant throughout the industry.

"We have had thousands, maybe hundreds of thousands of foreclosures around the country by entities that did not have the right to foreclose," O'Connor said.

The disclosure comes two days after JPMorgan said it would temporarily stop foreclosing on more than 50,000 homes so it could review documents that might contain errors. Last week, GMAC halted certain evictions and sales of foreclosed homes in 23 states to review those cases after finding procedural errors in some foreclosure affidavits.

Consumer advocates say the problems are widespread across the lending industry.
"The general level of sloppiness is pervasive around the industry," said Diane Thompson, counsel at the National Consumer Law Center.

Mortgage finance companies Fannie Mae and Freddie Mac said Friday they're directing companies they work with that collect loan payments to follow proper procedures.

In some states, lenders can foreclose quickly on delinquent mortgage borrowers. By contrast, the 23 states in which Bank of America is delaying foreclosures use a lengthy court process. They require documents to verify information on the mortgage, including who owns it.

Those states are:

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.

Weitz - Note there is no Washington on this list. We use non-judicial foreclosure system (ie. No courts are involved)…so the paperwork is less and the errors are not as frequent. That said, the banks are completely overwhelmed by this crisis. Perhaps they should use that TARP money to hire some folks to tackle this problem....just a thought.

Delays on Foreclosures

2010-09-30T18:00:00.000-07:00

An Article from CNBC September 30, 2010

JP Morgan Chase told CNBC on Wednesday that it will delay more than 56,000 foreclosure proceedings due to paperwork that was signed, "without the signer personally having reviewed those files."

Weitz- great news for the strategic default crowd - this will delay the foreclosure process indefinitely for many of the major institutions. Your period of free rent/ mortgage just grew longer.

That came on the heels of GMAC halting foreclosures and evictions in 23 states for roughly the same reason. All this leads anybody with a heartbeat to figure that other large servicers will likely follow suit, as potential lawsuits abound.
So what will that mean to the larger foreclosure crisis and the already weakening housing recovery?

"It's clear the pace of foreclosures will slow down," says Laurie Maggiano, Policy Director in the Treasury Department's Homeownership Preservation Office.
"I would suspect that most responsible lenders are going to be looking at their processes and making sure that they've done everything properly, so they're not subject to the same accusations and lawsuits."

So far the largest lender/servicer, Bank of America has not returned my request for information, but you can imagine the level of scrambling going on right now at all the major servicers, now that a big name like JP Morgan Chase has made its move.

Whether or not the foreclosures are bad, and I suspect the majority of them are valid in their claims if not in their procedures, the potential for a much bigger mess is high.

"As of right now this is a policy and procedure issue until proven otherwise, but never underestimate mid-term electioneering," says mortgage consultant Mark Hanson. "If this does go to the next level (i.e. national foreclosure moratorium, fear that hundreds of thousands of foreclosures have been performed illegally, etc.), the unintended negative consequences on the mortgage market, MBS investors, banks' balance sheets and ultimately the housing market will be significant. "

We're already seeing threats of ratings agency downgrades on all the major servicers, not to mention the threat to housing's overall recovery. If the bulk of these cases are valid, then delaying them is only going to prolong the pain.

"Worst case is that the current foreclosure problems turn out to be industry-wide and trigger a landslide of legal challenges that lock up foreclosures resolutions for a year or more," says Guy Cecala, publisher of Inside Mortgage Finance.

That means all kinds of borrowers would sit in their homes free of charge, banks would be unable to get any return at all, and the housing market would still be facing the inevitable: "We may then see a [foreclosure] surge at some point in the future," notes Treasury's Maggiano.

We've talked an awful lot about artificial government stimulus skewing the housing recovery as it tries to help; that's nothing compared to the potential for this latest scandal to wreak havoc on housing yet again.

Weitz- Things like this simply prolong the process of getting to a bottom in real estate. That said, if you can't make the rules, use them to best of your advantage.

For more informationon the short short, or foreclosure process, consider contacting a Seattle Foreclosure Attorney.

Our Firm:

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

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The Big Tarp Lie

2010-09-26T17:23:00.000-07:00

Whenever I get into a conversation about banks, it is unnerving that so many people believe they have paid back Taxpayers in their entirely from the bailouts!! TARP was a fraction of the bailouts/ benefits bestowed upon the banks during the crisis.

Click here for a video that I believe truly characterizes how the banks benefitted from the Bailouts, how they continue to operate, and why we cannot and will not recover until we fix some fundamental problems in America.

CLICK HERE FOR THE BIG TARP LIE

To simplify as much as possible:

1) First and most importantly, Banks, as a result of a gift from Congress at the height of the crisis, DO NOT NEED TO FAIRLY VALUE THEIR ASSETS. The accounting term is 'mark to market'. Remember ENRON? Remember what liars and cheaters they were?

Guess what?...the very things that Enron did to deceive shareholders is A COMMON PRACTICE FOR BANKERS TODAY!!

2) Ever wish you could borrow at 0% and borrow hundreds times more than you are worth? Think how great that would be!...you could invest in United States Treasuries at 3.5% (risk free) and make more than any job could ever pay you.

Guess what...that is exactly what a select group of banks get to do. Go to Ben Bernanke at the Discount Window – take out a ton of money at slightly over 0% - then go to Tim Geithner at the United States Treasury and have the US Govt (taxpayers) pay them 3.5% to borrow that very money from the bank.

3) Fannie/ Freddie - wouldn't it be great if the government would assume (pay off) your debt from you? You could go to the Mall, spend a ton a money you don't have, but not have to worry about it because the government would 'flip the bill'.
Guess what? That is essentially what banks are doing!!..Here is how is happens. Banks borrow money from the Federal Reserve to issue home loans. They take fees for 'originating' the loan, and then pass the risk to the taxpayer when Fannie Mae, Freddie Mac or the FHA buy it from them...not a bad deal for the banks, heh?

In sum, here is how I see the US banking system in its current state. Many banks, if forced to actually account for their bad loans properly would be insolvent, and thus bankrupt. They know it… which is exactly why they are not lending money at their historically normal rate.

Instead, they use their money to 'gamble' in the stock market, and buy US Treasuries (sending the US government/ taxpayer further in debt)...why loan money at 5% (which has a chance to not be paid back) when you can loan money to the Government at 3.5%?! Not a bad gig...if you can get it.

That said, the banks, with the help of our political leaders (both republicans and democrats), get to siphone money out of the system from homeowners paying interest on loans that shouldn't have been issued, and continue to pay themselves enormous bonuses while the rest of the country is still in the dumps.

What can we do about it?

We must force our political leaders to be accountable. Either they are not bright enough to understand the issues we face or they are intentionally deceiving us. Neither is acceptable. As a country, we need to stop trying to cure a broken leg with band-aids. It won't work long term, and the longer we 'kick the can', the harder it will be to recover.