Services are available to prevent foreclosure

Jonathan Bowman, founder of Short Sale Association of America (SSAA),  recently stated that “Knowing that most distressed homeowners will not seek assistance on their own, it is our responsibility to reach out and assist homeowners who are in a pre-foreclosure situation.”

The unique tools and systems provided at SSAA help real estate agents identify the exact number of homeowners in their area who are 30, 60, 90, or 120 days late on their mortgage payments and provide assistance at no cost to the homeowner. SSAA released their interactive Pre-NOD heat Map in January 2011 to serve as a resource for real estate professionals working with homeowners who are in pre foreclosure.

According to the Mortgage Bankers Association, over 7 million U.S. homeowners are currently in default. Many are in the final stages of the pre-foreclosure process and now have limited options to avoid bank repossession. Based on current credit bureau data provided through SSAA’s Pre-NOD Map, there are over 1.5 million homeowners nationwide whose default status is new enough that it has not yet been labeled as public record. These homeowners are still in the early stages of pre foreclosure and, if identified early on in the process, have a much greater chance of avoiding foreclosure and bank repossession.

San Francisco area posts gain over two decades

San Francisco area has gained about 36 percent over the last two decades, according Bloomberg Businessweek.

Check out these statistics:

1990 Price: $433,030 ($259,300 in 1990 dollars)
2010 Price: $588,900
Change in Real Dollars: +36 percent

Population: 4,317,853
Year Home Prices Peaked: 2007

San Francisco housing prices rose in the 1990s during the tech boom. In the past decade, the fastest growth occurred in 2004 and 2005, when nominal prices increased by 15 percent and 11.5 percent, respectively. In 2007, prices peaked at $847,873 (in 2010 dollars). While prices are now 30.5 percent below peak, they remain well above 1990 rates and have been increasing recently. In third-quarter 2010, the nominal median sale price was up 9.4 percent year-on-year, according to data from the NAR.

2010 ends with less foreclosure filings

The first half of 2010 saw relatively good news for most participants in the foreclosure market, according to ForeclosureRadar.

Foreclosure cancellations rose as homeowners saw more short sales and loan modifications approved. Investors quickly flipped their foreclosure purchases for solid profits as buyers hurried to take advantage of tax credits. As the tax credits expired, however, the market began to slow.

Foreclosure cancellations also began to drop as the government push for loan modifications waned and short sales slowed with the rest of the housing market.

Finally, in the beginning of the third quarter, the robo-signing scandal led to dramatically lower foreclosure sales, including a complete halt by Bank of America for nearly two months.

For the first time since the foreclosure crisis began, Arizona, California, and Nevada saw a drop in the filing of new foreclosure actions.

Strategy for cutting mortgage payments

Homeowners looking to lower their monthly mortgage payments and reduce their interest rate may be able to do so without refinancing.  A little-known strategy called recasting or re-amortization is available through some mortgage lenders and servicers, and eliminates the hefty fees and daunting credit requirements of refinancing, according to the California Association of Realtors.

• Re-amortization requires borrowers pay off a lump sum of the principal amount on the mortgage and asking to have the monthly payments reset according to the original interest rate and loan terms.  The lump sum reduces the principal, so the new monthly payments decrease slightly and interest paid over the life of the loan is reduced.
• Lenders typically charge an administrative fee of $150 or more to re-amortize a mortgage; however, borrowers are not required to pay closing costs or submit to another credit check.
• Re-amortizing works well for homeowners unable to qualify for refinancing, especially those who are self employed or have low poor credit.
• Homeowners consider re-amortizing their mortgage should be aware that some lenders require a minimum amount to be paid toward the principal in the lump sum.  JPMorgan Chase, for example, charges a $150 fee and requires a minimum $5,000 payment toward the principal.
• Another challenge is finding a lender, or loan servicer, that offers re-amortizing.  JPMorgan Chase and Bank of America exclude loans backed by the Federal Housing Administration and Dept. of Veterans Affairs, and loans that were sold off and securitized may also need investor approval.

Some real estate definitions

Balance Sheet — A financial statement detailing the assets, liabilities, and net worth as of a specific date.

Balloon Mortgage — A mortgage which does not fully amortize over the term of the note and which becomes due at maturity. Often based on a 30-year amortization schedule, the unpaid balance becomes due in a lump sum payment at the end of a specific period (often 5 or 7 years).

Balloon Payment — The final, balance-due payment of a balloon mortgage, due a maturity of the loan.

Bank owned — Properties in which the highest bid at auction was the lender╒s opening bid and which have now become property of the bank that placed the opening bid. Also known as REO, or Real Estate Owned.

Bankruptcy — A legal declaration of an individual or organization’s inability to pay their creditors. This legal declaration severely impacts a persons credit and their ability to borrow money. Protections, in the case of homeowner bankruptcy filings, place automatic stays on all debt collection actions, including foreclosure. Bankruptcy does not stop foreclosure, it does delay the sale of the property until the homeowner resolves the debt, or in most cases, the lender gets approval from the bankruptcy court to continue the sale (see Order Granting Motion for Relief From Stay). As a secured debt, the lender has the right to take the security (property) if the homeowner lacks the ability to pay the debt as agreed. Bankruptcy is only an effective tool against foreclosure if the homeowner will have sufficient income to pay their home loan and make up past due amounts once the bankruptcy plan is completed.

California moving in right direction

Carole Rodoni, of Bamboo Consulting just shared this information with members of the Central Coast Women’s Council of Realtors:

Why Buy?

              Real estate builds wealth. About 46 percent of a person’s wealth comes from real estate. It is your biggest asset. What is an asset? It is a vehicle in which you put equity and increases in value over time. Real estate fits that bill. If you invest in real estate properly, real estate builds wealth for you.

Rent Vs. Buy:

If you calculate how much you spend on rent over a period of years, people can spend about $70,000. If people buy a home, they could spend that same $70,000 and have an asset (home). If you have a 30-year fixed mortgage, you will be building equity. And, if the property appreciates at least 1 percent, your equity increases faster. Additionally, you can write off your interested paid.

Are We at the Bottom?

We know we are closer to the bottom than we’ve ever been during the last few years. Typically, this area follows the trend of the Bay Area. Silicon Valley is booming because of companies like NetFlix, SalesForce.com and Zanga. And, the trickledown effect is helping this area. .

Overall, California is moving in the right direction.

Ruling could have big impact

The Massachusetts Supreme Court ruled on a case that is relevant to the foreclosure crisis, and the housing market, according to ForeclosureRadar.com

Unlike the robo-signing of affidavits that became an issue last year in judicial foreclosure states, this case dealt with whether or not two lenders had the right to foreclose on two homeowners at all. The homeowners claimed that the lenders did not have the right to foreclose because the underlying mortgages had never been properly assigned to the foreclosing bank. This is likely a frequent issue as securitization and other practices in the mortgage industry have made it common for mortgages to trade hands multiple times over the life of the loan. While there have been a number of lower court rulings throughout the nation on this and related issues, this was the first time, to our knowledge, that a State Supreme Court has ruled, thus giving us a settled opinion that cannot be appealed and on which further cases will rely – at least in Massachusetts.

Bottom line, the court found that the lenders had NOT properly assigned the mortgages and that the foreclosures were therefore invalid. The implications of this decision are huge, may affect thousands of past foreclosures in Massachusetts, and is likely a preview of what is to come elsewhere in the nation.

Pending home sales rise

Pending home sales rose again in November, with the broad trend over the past five months indicating a gradual recovery into 2011, according to National Association of Realtors

 The index rose 3.5 percent to 92.2 based on contracts signed in November from a downwardly revised 89.1 in October, but remains 5 percent below a year-over-year reading of 97.

 “In addition to exceptional affordability conditions, steady improvements in the economy are helping bring buyers into the market,” NAR Chief Economist Lawrence Yun said.

End of year sales encouraging

The up and down pace of sales that characterized the second half of 2010 appears to be ending on a high note.

The National Association of REALTORS® reports  that existing home sales during November rose  5.6 percent over the previous month.

Even though November 2010 sales are still 27.9 percent below November 2009 – the initial deadline for the first-time homebuyer tax credit – NAR chief economist, Lawrence Yun, notes, “Continuing gains in home sales are encouraging, and the positive impact of steady job creation will more than trump some negative impact from a modest rise in mortgage interest rates, which remain historically favorable.”

He adds, “The relationship recently between mortgage interest rates, home prices and family income has been the most favorable on record for buying a home since we started measuring in 1970.Therefore, the market is recovering and we should trend up to a healthy, sustainable level in 2011.”

Foreclosure truths

A few foreclosure truths:

• Foreclosures don’t drive price declines – price declines drive foreclosures.
• It only takes a couple of distressed sales to lower prices in even the best neighborhood
• Watching foreclosures offers you a front row seat into the real estate market ahead
• No matter how viscious the foreclosure cycle, a bottom will be found as affordability returns, and investors begin to scoop up rentals with positive cash flow.
• Active, pending and sold data from the MLS no longer provides a complete view. Foreclosure comps fill the gap by showing the other half of today’s real estate market.
• Foreclosure markets move faster than traditional real estate – what you believed to be true yesterday, may no longer prove true today.