Seattle Real Estate Price to Income Analysis

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

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!

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Washington State sues Bank of America

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?

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?

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

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

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

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)

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

weitzlawfirm.com

Mortgage Insiders cry foul

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

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Home Market takes a tumble

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

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
520 Kirkland Ave
Kirkland, WA 98033
(425) 889-9300

weitzlawfirm.com

Celebrity Foreclosure

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

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)

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?

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

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

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How to Avoid Loan Modification Scams

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

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

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

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