UpsideDownFlorida.com

OBAMA Program Announced March 06th Still NOT available at Most Banks

2009-04-30T10:18:00.001-07:00

At a time when struggling homeowners could benefit from lower payments NOW, the lenders have been unable or perhaps un willing to begin to accept applications under these new programs. Lenders Sucha as Citi Mortage, Courntrywide, Wellsfargo are just a few of the banks that are not offering the programs at this time. Calls to CITI got the standard response wait 3 more weeks after first being told April 1, then mid April. It is ridiculous that homeowners have to struggle to get help from their lenders when a majority of them are being funded by the common tax payer.

We will continue to provide updates on the major lenders as to when they expect the Making home affordable programs to begin.

UpsideDownFlorida.Com Founder Featured on NPR MarketPlace

2009-04-30T08:33:00.000-07:00

Hear about the housing crisis from UpsideDownFlorida.com founder:

http://marketplace.publicradio.org/display/web/2009/04/09/am_florida_condos/

Let us know what you think here

Las Vegas tops foreclosure list

2009-04-22T14:44:00.000-07:00

Metro areas in California, Florida, Nevada and Arizona topped the foreclosure filing list for the first quarter of 2009 in a report from RealtyTrac, an online marketer of foreclosed properties. A foreclosure filing includes default papers, auction sale notices and repossessions.

Las Vegas had the highest rate of foreclosures of any city, with one in every 22 homes subject to a foreclosure filing in the first three months of the year. The rate of foreclosure filings was 4.5%, seven times the national average.

Merced, Calif., had the second highest rate, with Cape Coral-Fort Myers, Fla., Stockton, Calif., and Riverside-San Bernardino-Ontario, Calif., rounding out the top five.

"The metro areas with the highest levels of foreclosure activity in the first quarter of 2009 paint a picture of concentrated problems in a relatively small number of hard-hit areas," said James J. Saccacio, chief executive officer of RealtyTrac, in a written statement.

Foreclosure rates have been very high in the 4 key states throughout the bursting of the housing bubble, and so it was to be expected that cities from those states would pepper the top of the list.

However, it was a surprise to see the list so top heavy, according to Rick Sharga, senior vice president at RealtyTrac.

"The concentration of troubled metro areas within the hardest-hit states, candidly, was even more severe than we expected it to be," Sharga said. "The degree to which those four states dominated the rankings surprised even us."

0:00 /0:48Should I sell my house short?

New problem cities: Meanwhile, some metropolitan areas had a surge in foreclosures. Boise City-Nampa, Idaho, in 27th place, Provo-Orem, Utah, in 37th, and Charleston-North Charleston, S.C., in 51st were examples Sharga gave of areas that had particular strong gains in filings.

Sharga said the rise of foreclosures in additional regions indicates new factors influencing the housing market as the recession drags on.

"What we believe we are seeing is some of the areas with unemployment problems," said Sharga. "These are people living paycheck to paycheck and, when the paycheck is gone, suddenly they can't afford to make their mortgage payments."

The data for RealtyTrak's metro area foreclosure report is collected from 2,200 counties across the nation, and those counties represent more than 90% of the U.S. population. Some 203 areas are covered by the report.

Across the nation, foreclosure activity in the first quarter hit a record high, according to another RealtyTrac report issued last week. Total foreclosure filings reached 803,489 in the first three months of the year, the highest monthly and quarterly totals since RealtyTrac began reporting in January 2005.

The national report also found that the worst of the foreclosures were centralized in a handful of worst-hit states. California, Florida, Arizona, Nevada and Illinois accounted for nearly 60% of the total foreclosure activity in the first quarter, with 479,516 properties received foreclosure filings in those states.

Mortgage delinquencies soar in the U.S.

2009-04-07T14:35:00.000-07:00

By Helen Chernikoff
NEW YORK (Reuters) - More U.S. consumers are falling behind on their mortgages, an indication that the housing market has yet to hit bottom, a top credit bureau executive told Reuters.
Dann Adams, president of U.S. Information Systems for Equifax Inc, reported that 7 percent of homeowners with mortgages were at least 30 days late on their loans in February, an increase of more than 50 percent from a year earlier.
He also said 39.8 percent of subprime borrowers were at least 30 days behind on their home mortgage loans, up 23.7 percent from last year.
"I'm trying to find optimism in these numbers, but I'm pretty hard pressed to do that," Adams said, despite a recent burst of relatively positive news that has fueled hope that the U.S. housing market has turned a corner.
Late last month the Commerce Department reported that sales of newly built U.S. single-family homes rose to a 337,000 annual pace in February, the highest in 10 months.
Such news has boosted homebuilder shares, which are up about 45 percent since March 6, according to the Dow Jones U.S. Home Construction Index.
But Adams said the continued increase in mortgage delinquencies revealed in his data foreshadows more foreclosures, short sales and home price declines as homeowners default and banks then repossess the homes to sell them at deep discounts.
LIFELINE OF CREDIT
The Equifax data also reveals the impact of the rise in unemployment, which is at its highest rate since 1983. Employers cut 663,000 jobs in March, sending the national unemployment rate to 8.5 percent, the Labor Department said on Friday.
The rising jobless rate manifests itself in consumers' increasing reliance on credit cards even as lenders try to restrict access to credit, Adams said.
Banks closed 8 million credit card accounts in February, reducing the number of open cards to 400 million from a July 2008 peak of 483 million, according to Equifax data.
Credit limits fell as well, to $3.27 trillion in February from a July 2008 peak of $3.59 trillion.
"Limits are falling because lenders are trying to minimize their losses," Adams said.
The data shows that lenders have good reason to be wary. Bank card delinquency is at its highest level in the past five years. Some 4.5 percent of total balances on bank-issued credit cards were at 60 days past due in February, a 32.7 percent increase from a year earlier.
"Their credit card is their lifeline," he said. (Additional reporting by Lucia Mutikani; Editing by Steve Orlofsky)

Loan modifications rise; many don't pare payments

2009-04-05T17:14:00.000-07:00

WASHINGTON — Though lenders are boosting their attempts to curb record-high home foreclosures, fewer than half of loan modifications made at the end of last year actually reduced borrowers' payments by more than 10 percent, data released Friday show. --> -->
WASHINGTON — Though lenders are boosting their attempts to curb record-high home foreclosures, fewer than half of loan modifications made at the end of last year actually reduced borrowers' payments by more than 10 percent, data released Friday show.
The report, based on an analysis of nearly 35 million loans worth more than $6 trillion, was published by the federal Office of the Comptroller of the Currency and the Office of Thrift Supervision. It provides the most detailed and broad analysis to date of efforts to stem the foreclosure crisis, which President Barack Obama is trying to combat with a $75 billion plan to promote loan modifications.
The report helps explain why many loans are falling back into default after being modified. Many borrowers and consumer groups contend that the modifications offered by the lending industry aren't very generous, despite more than a year of public prodding from regulators.
For instance, nearly one in four loan modifications in the fourth quarter actually resulted in increased monthly payments. That situation can happen when lenders add fees or past-due interest to a loan and spread those payments out over the 30- or 40-year period.
Perhaps unsurprisingly, the report found that loans were far less likely to fall back into default if a borrower's monthly payment is reduced by a healthy amount.
Nine months after modification, about 26 percent of loans in which payments had dropped by 10 percent or more had fallen back into default. That compares with about half of loans in which the payment was unchanged or increased.
"This new data shows that, in the current stressful environment, modification strategies that result in unchanged or increased mortgage payments run the risk of unacceptably high re-default rates," Comptroller of the Currency John Dugan said in a statement.
But regulators said they saw a positive trend in the data, collected from mortgage companies including Bank of America Corp., JPMorgan Chase & Co. and Citigroup Inc.
Traditionally, lenders have seen loan workouts as a way to get a borrower back on track after a temporary disruption in income. Now, with the economy sinking fast and foreclosures soaring, they are increasingly coming around to the idea to that more permanent changes are needed.
Among loan modifications made in the October-December quarter, about 37 percent resulted in a drop in payments of more than 10 percent, compared with about one-fourth in the first nine months of the year. Regulators saw that growth as a positive sign.
"The trend toward lowering payments to make home mortgages more affordable is moving in the right direction," John Bowman, acting director of the Office of Thrift Supervision, said in a prepared statement.
The Obama administration is aiming to help up to 9 million borrowers stay in their homes through refinanced mortgages or modified loans. Still, the faltering economy, driven down by the collapse of the housing bubble, is causing the housing crisis to spread.
Among the loans surveyed in the report, just over 10 percent were delinquent or in foreclosure, compared with 7 percent at the end of September, the report said. Delinquencies are increasing the most among prime loans made to borrowers with strong credit, it said.
A broader study of the mortgage market last month found a higher percentage of problem loans.
The Mortgage Bankers Association reported that nearly 12 percent of all Americans with a mortgage — a record 5.4 million homeowners — were at least one month late or in foreclosure at the end of last year. That's up from 10 percent at the end of the third quarter, and from 8 percent at the end of 2007.
The trade group's study includes more than 45 million loans, 10 million more than the government report.

One in 8 U.S. households late paying or in foreclosure

2009-03-05T08:11:00.000-08:00

With unemployment at a 16-1/2-year high and rising, more borrowers will be late paying or fall into foreclosure this year, said the group's chief economist Jay Brinkmann.

"While California, Florida, Nevada, Arizona and Michigan continue to dominate the delinquency numbers, some of the sharpest increases we saw last quarter in loans 90 days or more delinquent were in Louisiana, New York, Georgia, Texas and Mississippi, signs of the spreading impact of the recession," he said.

U.S. President Barack Obama's $275 billion housing stimulus program will standardize modifications for distressed loans and pave the way for more refinancing.

That should smooth differences caused by various moratoria by states and companies that temporarily curbed the surge in foreclosures in the fourth quarter, Brinkmann said.

"But keep in mind that there are three drivers to the housing problem, and this program of course addresses mostly the first one," relating to loan structure, underwriting quality and fraud, Brinkmann said.

The two other problems still loom large -- an oversupply caused by overbuilding and foreclosures, and unemployment.

Having one in eight households late paying or in foreclosure is "unacceptable in a country like ours," said Nicholas Bratsofolis, senior managing director of structured refinance at mortgage bank LendAmerica in Melville, New York.

"Instead of wringing our hands, I think we should start utilizing the tools that the government has given to us to remedy the ills that are facing many of these homeowners," he said. The administration housing rescue won't be a quick fix, however, he added.

A record 11.18 percent of loans on one-to-four unit residences were at least one payment past due or in the foreclosure process in 2008.

The delinquency rate jumped 2.06 percentage points from a year ago to a record 7.88 percent. The share of loans in the foreclosure process leaped 1.26 percentage point in the year to a record 3.30 percent. MBA started tracking the data in 1972.

Housing has yanked down the U.S. economy growth after being a key driver of it earlier this decade. In a vicious cycle, a weakening economy is now further siphoning demand for homes.

"In a recession like this, housing is never just about housing," said Jed Kolko, associate research director at the Public Policy Institute of California in San Francisco. "Unemployment leads to foreclosures, foreclosures contribute to lower tax revenues, less consumer spending -- it's all related."

MORE STATES WITH MORE PROBLEMS

As the economy sours, more states have joined the five that had been primary trouble spots for late payments and foreclosures.

"We see New York being influenced by the layoffs that we've been seeing on Wall Street and some of the rest of the industry associated with that," he noted.

"Some of the Southern states that had construction-related unemployment, whether it was forest product or plywood manufacturing. Some of the tourism industry is now being hit, certainly in Mississippi with the casinos, and in Florida."

Subprime adjustable-rate loans and prime ARM loans still drive the late payments, but that is shifting.

"We will continue to see, however, a shift away from delinquencies tied to the structure and underwriting quality of loans to mortgage delinquencies caused by job and income losses," Brinkmann said.

Of particular concern, he said, is a sharp pickup in joblessness among people with college educations.

By the end of last year, "we saw some sharp pickups in delinquency rates with prime loans and I think that's now going to continue as long as we see unemployment continue to climb among the people most likely to own homes," Brinkmann said.

How high unemployment in that segment of the population gets and how long it stays there will "determine ultimately how long the prime fixed loan delinquencies continue to climb," he said. "Some of these people do have adequate reserves to last maybe six months or a year without a job, but the longer this thing goes on the quicker they then run through those reserves and their loans go delinquent."

One in 10 American homeowners fell behind on mortgage payments or were in foreclosure

2008-12-05T14:30:00.000-08:00

Mortgage Delinquencies, Foreclosures Rise to Record (Update3)
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By Kathleen M. Howley

Dec. 5 (Bloomberg) -- One in 10 American homeowners fell behind on mortgage payments or were in foreclosure during the third quarter as the world’s largest economy shed jobs and real estate prices tumbled.

The share of mortgages 30 days or more overdue rose to a seasonally adjusted 6.99 percent while loans already in foreclosure rose to 2.97 percent, both all-time highs in a survey that goes back 29 years, the Mortgage Bankers Association said in a report today. The gain in delinquencies was driven by an increase of loans with payments 90 days or more overdue.

“Until we see a turnaround in the job situation, we’re not going to see these numbers improve,” said Jay Brinkmann, chief economist of the Washington-based bankers group, in an interview. “We’re seeing more loans build up in the 90-days bucket as lenders work to modify loans and states put in place programs that delay foreclosures.”

The U.S. economy has shed 1.91 million jobs this year, while falling home prices have made it difficult for people who can’t pay their mortgages to sell their property. Payrolls declined in each month of 2008 through November, the Labor Department said today in Washington.

New foreclosures fell to 1.07 percent from 1.08 percent in the second quarter as some states enacted laws to temporarily stop home repossessions and lenders increased efforts to modify the terms of loans, Brinkmann said.

Home Sales Sink

“Some servicers keep a loan in a delinquent state until they see customers carrying through on their agreements, and then they’ll switch it to performing,” Brinkmann said.

U.S. home sales and prices began to tumble in 2006 after a five-year boom, dragging the economy into a recession that began in December 2007, according to the National Bureau of Economic Research.

The median home price in the fourth quarter probably will be $190,300, down 19 percent from the record $226,800 in 2006’s second quarter, according to a Nov. 24 forecast by Fannie Mae, the world’s largest mortgage buyer.

Purchases of existing homes in October slid to an annual rate of 4.98 million, lower than forecast, the National Association of Realtors said in a Nov. 24 report. The median price fell 11.3 percent from a year earlier, the most since the group began collecting data in 1968.

Federal Reserve Chairman Ben S. Bernanke yesterday urged using more taxpayer funds for new efforts to prevent home foreclosures, saying the private sector is incapable of coping with the crisis on its own.

Bernanke’s Plans

The Fed chief outlined four possible options, including buying delinquent mortgages and providing bigger incentives for refinancing loans. He called for addressing the “apparent market failure” where lenders aren’t modifying mortgages even in cases where it’s in their own economic interest to do so.

Bernanke’s proposed changes would go beyond those announced last month by Housing and Urban Development Secretary Steve Preston, who oversees the FHA. The agency will change the amount of the loan a lender must forgive and allow banks to extend the payback time of a mortgage.

There were 111.7 million occupied housing units in the U.S. in the third quarter, 68 percent used by owners and the remainder leased by renters, according to the Census Bureau. One in three U.S. homes has no mortgage, the bureau said.

The bankers’ report cites percentages without providing the number of mortgages. The U.S. had $11.3 trillion of outstanding home loans at the end of June, according to Federal Reserve data. Mortgage lending fell to $80.8 billion in the second quarter, down from $764 billion a year earlier, the Fed said.

The Mortgage Bankers report is based on a survey of 45.5 million loans by mortgage companies, commercial banks, thrifts, credit unions and other financial institutions.

A break for some Mortgage Crisis Humor...

2008-11-20T04:51:00.000-08:00

I thought this was funny.

Delinquency Rates Soar According to Bloomberg...

2008-11-17T07:21:00.000-08:00

Bloomberg U.S. Mortgage Delinquency, Foreclosure Rates (Table)

2008-11-17 12:33:09.850 GMT

By Alex Tanzi

Nov. 17 (Bloomberg) -- The following table shows residential mortgage delinquency rates for U.S. loans as reported by the Bloomberg non-agency database comprised of over 45 million securitized loans.

=========================================================================

10/31/08 09/30/08 08/31/08 10/31/07 10/31/06 =========================================================================

Bankruptcy 1.35% 1.28% 1.23% 0.77% 0.85%

of which Prime 0.60% 0.53% 0.50% 0.18% 0.13%

of which Alt-A 1.06% 0.93% 0.87% 0.35% 0.02%

of which Subprime 2.52% 2.44% 2.38% 1.60% 2.08%

Foreclosure 7.20% 7.10% 6.83% 3.37% 1.34%

of which Prime 3.34% 3.25% 3.03% 0.87% 0.22%

of which Alt-A 6.04% 5.82% 5.56% 1.73% 0.37%

of which Subprime 12.54% 12.39% 12.03% 6.66% 2.80%

Real Estate Owned 4.20% 4.13% 3.96% 1.64% 0.49%

of which Prime 1.66% 1.54% 1.42% 0.37% 0.07%

of which Alt-A 2.89% 2.76% 2.52% 0.70% 0.13%

of which Subprime 7.96% 7.90% 7.67% 3.37% 1.03%

=========================================================================

10/31/08 09/30/08 08/31/08 10/31/07 10/31/06 =========================================================================

Delinq. (30,60,90,REO&Fore) 20.87% 20.22% 19.27% 11.48% 6.09%

of which Prime 10.12% 9.57% 8.80% 3.96% 1.78%

of which Alt-A 18.96% 18.10% 16.74% 7.95% 3.48%

of which Subprime 35.14% 34.23% 33.16% 20.37% 10.85%

Delinquency (30 days) 3.59% 3.56% 3.28% 3.09% 1.97%

of which Prime 2.02% 2.04% 1.81% 1.48% 0.85%

of which Alt-A 4.09% 4.06% 3.64% 3.22% 1.93%

of which Subprime 5.31% 5.18% 4.91% 4.73% 3.15%

Delinquency (60 days) 2.07% 1.99% 1.86% 1.50% 0.73%

of which Prime 1.15% 1.09% 1.01% 0.56% 0.21%

of which Alt-A 2.22% 2.14% 1.93% 1.24% 0.45%

of which Subprime 3.15% 3.02% 2.85% 2.58% 1.37%

Delinquency (60+ days) 17.28% 16.66% 15.99% 8.05% 3.53%

of which Prime 8.09% 7.53% 6.98% 2.26% 0.70%

of which Alt-A 14.87% 14.04% 13.10% 4.68% 1.32%

of which Subprime 29.81% 29.03% 28.23% 15.47% 7.18%

-------------------------------------------------------------------------

=========================================================================

10/31/08 09/30/08 08/31/08 10/31/07 10/31/06 =========================================================================

Delinquency (90 days) 3.80% 3.44% 3.34% 1.50% 0.97%

of which Prime 1.95% 1.64% 1.52% 0.44% 0.19%

of which Alt-A 3.72% 3.32% 3.08% 1.00% 0.36%

of which Subprime 6.12% 5.68% 5.64% 2.80% 1.97%

Delinquency (90+ days) 15.20% 14.67% 14.13% 6.55% 2.80%

of which Prime 6.94% 6.44% 5.98% 1.70% 0.49%

of which Alt-A 12.65% 11.90% 11.16% 3.44% 0.86%

of which Subprime 26.64% 25.99% 25.36% 12.88% 5.81%

=========================================================================

SOURCE: Bloomberg non-agency database of 45 million securitized loans.

--Editors: Alex Tanzi

Homeowners Find Loan Modifications Slow, Difficult

2008-11-14T11:38:00.000-08:00

SAN FRANCISCO (CBS 5) ― Ask anyone who has tried a loan modification, and chances are the process took months or wasn't successful.

The numbers say it all. HUD's loan modification program was supposed to help 400,000 borrowers. So far it's helped only 42. Countrywide's program was so ineffective the bank was sued.

Greg Jewell, a loan negotiator has figured out the only way to get heard is to go right to the top. He's bombarding bank executives. "That's the person I got a hold of Saturday," he explained to his client, Toni Dalrymple.

Dalrymple bought in Mountain House -- a town southwest of Stockton -- where the majority of homes are underwater. She paid $800,000 and it's now worth less than half that.

The clock is ticking. If she doesn't get payments reduced fast, she'll have to walk away. The delay is caused by a common problem for Bay Area residents. Many have big loans that were sliced up and sold to investors here and overseas.

"My mortgage loan was sold to another investor and there's a problem getting another investor to jump on board," said Dalrymple.

Glen Brown faces similar obstacles. The car salesman lost a third of his income, and went to his bank, Wells Fargo, to adjust his loan payments. The bank told him he wasn't eligible until he went late on payments. So he skipped two payments on purpose to get attention.

Five months later, "It was like a cat chasing his tail. There was always a roadblock. You never talk to the same person," said Brown.

Brown said that's because banks don't want to talk to the homeowner. The call centers are often filled with inexperienced operators. It's a complicated game that has taken him over a year to figure out.

FDIC lays out broad home loan modification plan

2008-11-14T11:33:00.000-08:00

By Karey Wutkowski

WASHINGTON (Reuters) - The federal agency that insures most U.S. bank deposits unveiled a plan to prevent about 1.5 million home mortgage foreclosures by promising to share any losses with mortgage companies that agree to refinance certain home loans.

The agency, the Federal Deposit Insurance Corp, said on Friday the plan would cost the government about $24.4 billion, which could be paid from the U.S. Treasury's $700 billion bailout program for the financial industry.

So far, most of the money in the bailout program, the Troubled Asset Relief Program, or TARP, has been injected as capital into banks.

FDIC Chairman Sheila Bair, who spent weeks unsuccessfully lobbying Bush administration officials for the foreclosure prevention plan, unveiled her agency's proposal two days after Treasury Secretary Henry Paulson dismissed the idea of the government underwriting failing home loans.

Paulson told reporters on Wednesday, "That (foreclosure plan) is a subsidy, or spending, program. The TARP was investment, not spending."

The FDIC pushed forward with its plan, posting it on its website Friday morning (http://www.fdic.gov/consumers/loans/loanmod/index.html).

"Although foreclosures are costly to lenders, borrowers and communities, the pace of loan modifications continues to be extremely slow," the FDIC said. "It is imperative to provide incentives to achieve a sufficient scale in loan modifications to stem the reductions in housing prices and rising foreclosures."

The FDIC said its plan would modify about 2.2 million mortgage loans by offering financial incentives to mortgage servicers. It would pay servicers $1,000 to cover expenses for each loan modified to the required standards, and would promise to share up to 50 percent of losses incurred if a modified loan defaults.

Eligible borrowers would include those who have missed at least two monthly payments on loans for homes they live in. Servicers would be expected to lower those borrowers' monthly payments to about 31 percent of the borrowers' monthly income.

The Treasury Department said on Friday that it was aggressively looking at ways to reduce skyrocketing home foreclosures under the TARP.

"We continue to aggressively examine strategies to mitigate foreclosures and maximize loan modifications, which are a key part of working through the necessary housing correction and maintaining the strength of our communities," Treasury Interim Assistant Secretary Neel Kashkari said in testimony prepared for delivery to a U.S. House of Representatives committee.

Upside Down? Go Short!

2008-10-09T05:30:00.001-07:00

http://www.sandiegoreader.com/news/2008/oct/08/city-light-1/

In San Diego’s hemorrhaging real estate industry, it’s better to be upside-down and rich than upside-down and poor. That may sound axiomatic — it’s always nicer to be rich than poor — but carriage-trade folks whose homes are underwater can work the system more easily than poor folks in the same sorry situation.
The key is the short sale, in which a lender agrees to discount a loan balance when a house is upside-down — that is, the home is worth less than the balance on the mortgage. In a short sale, the homeowner sells the asset for less than the outstanding balance of the mortgage on the property, and the bank is willing to accept the lower figure, often to avoid the expense and hassle of foreclosing and dumping the property on a glutted market.
A short sale can be a good deal for the seller because, generally speaking, one’s credit record is less damaged from a short sale than a foreclosure.
I checked HouseRebate.com for information on short sale and foreclosure homes that are currently for sale. I got information on average single-family home prices from DQNews.com. Generally, there are more short sales and foreclosures in the poorer areas than the richer ones. For example, in Encanto, there are 101 foreclosures and 191 short sales on the market. In the 92067 zip code of Rancho Santa Fe, there are zero foreclosures and 7 short sales. The ratio of short sales to foreclosures is higher in the affluent areas. On a relative basis, wealthier people are taking advantage of short sales more than poor and moderate-income people are.
On the surface, this would seem to be an anomaly. “Banks check out clients to be sure they need a short sale,” says John Smith of Old Mission Mortgage. “They are not going to let Donald Trump do a short sale. They do due diligence on the client. Possibly we [have had] some very unqualified borrowers in some big homes — people buying on speculation that they could flip [sell] the house in a year.” These flippers may or may not qualify for a short sale.
Here are some examples: listed are the name of the market, the median price of a single-family home there, and the ratio of short sales to foreclosures. Coronado, $1.3 million, 5 to 1; La Jolla, $1.8 million, 5.6 to 1; Scripps Ranch, $620,000, 4.4 to 1; Tierrasanta, $499,000, 9.3 to 1; Del Mar, $1.5 million, 2.8 to 1; and Carmel Valley, $865,000, 9 to 1.
By contrast, here are prices and ratios from representative lower-scale areas: National City, $212,000, 1.8 to 1; City Heights, $221,000, 2.25 to 1; Encanto, $245,000, 1.9 to 1; Logan Heights, $147,000, 2 to 1; Golden Hill, $178,000, 2.5 to 1; Paradise Hills, $260,000, 2.4 to 1; and Lemon Grove, $263,000, 2.1 to 1.
So why do the poorer people less often take advantage of the short sale? “Look at the socioeconomic base,” says Brian Yui, whose company runs the HouseRebate.com website. “People haven’t been informed about the short sale process.” Also, the foreclosure proceeding has its advantages. The family lives in the house for three or four months essentially rent-free. Then, before seizing the property, the bank pays the household $500 to $1000 to move out.
Banks take a long time to approve a short sale. “Most real estate agents steer away from short sales,” says Smith of Old Mission. “Banks are so hard to work with. However, agents get a bigger payday on a $1.5 million property than a $250,000 one.” So there is less aversion to a short sale in the upscale areas.
The affluent “have time to make a short sale,” says Sharon Hanley, market analyst for Oceanside’s New Housing Monitor. “They realize they are upside-down. Why sit here with a million-dollar loan when their house is worth $700,000? They are in a position where they can continue to make the payments” until the bank approves the deal. The opposite is true with people in poorer markets. “They were put into these crazy loans where payments are doubling and tripling.” There is urgency. Foreclosure is the easier route, and they can’t afford to worry about their credit rating.
Those blessed with prosperity “have more access to real estate attorneys or have better lender relationships,” says Peter Reeb, president of Reeb Development Consulting. “They are better able to negotiate on their own behalf.” The home may be the third or fourth or fifth they have bought through the years. “These people know how to better protect their assets, minimize losses,” while protecting their credit rating.
Agrees Peter Q. Davis, retired San Diego banker, “I would think…that those with higher home prices may have a better understanding of the tools available to them and a stronger desire to protect their credit ratings. A lot of times the high-end folks deal with friends or associates for their loans, and this could also affect their actions.”
“One reason short sales are more successful in upscale areas is that demand is higher,” says Stan Sexton of La Mesa’s New Horizons Realty. Sophisticated buyers “can afford a more expensive home and get 30 to 40 percent off.” Both buyers and sellers “are very sophisticated people with higher incomes; they know how to play the short sale game. People at the lower end are very strapped, unemployed or underemployed. Mexicans are leaving California for Mexico. They can’t get jobs here.”
Short sales can be complicated — one reason it takes banks so long to approve them. Sexton has one client with a $1.06 million mortgage. There is one offer on the property for $790,000, one for $810,000 and two for $800,000. But the bank is holding up the deal; there is a second mortgage on the property that must be unraveled. Sexton was showing property in EastLake on which the loan is $1.2 million and the bid is $639,000. “Can you imagine the amount of money these banks are eating in short sales? And they usually lose even more on a foreclosure.”
It may take eight weeks for a bank to approve a short sale, says Sexton. But the foreclosure “is approved very quickly,” he says. One reason the bank takes a long time on short sales is it doesn’t want to foster a sweetheart deal. The homeowner may sell the house to his brother-in-law at an excessively low price. Understandably, the bank wants to get all it can out of the transaction.
“Many people try the short sale first, then go into foreclosure,” says Yui. “The bank may decide [the offer] won’t qualify.”
However, a loan in the $1.5 million range “will get attention right away,” says Smith. “It’s in the bank’s interest to work with those [affluent] people” — as long as they are playing it straight.

40% Upside Down in Miami who bought in Last 5 Years

2008-10-09T05:28:00.001-07:00

WSJ: 1 in 6 homeowners upside down, and growing
posted at 3:00 pm on October 8, 2008 by Ed Morrissey Send to a Friend printer-friendly
The Wall Street Journal paints a grim picture of the housing market today in its analysis of debt-to-equity ratios in the residential market. The rate of homeowners who owe more than their equity has increased to 16% after a 30% decline in housing values. That’s almost three times the rate in 2007 and four times the rate in 2006, and it’s likely to keep going higher:
About 75.5 million U.S. households own the homes they live in. After a housing slump that has pushed values down 30% in some areas, roughly 12 million households, or 16%, owe more than their homes are worth, according to Moody’s Economy.com.
The comparable figures were roughly 4% under water in 2006 and 6% last year, says the firm’s chief economist, Mark Zandi, who adds that “it is very possible that there will ultimately be more homeowners under water in this period than any time in our history.”
Among people who bought within the past five years, it’s worse: 29% are under water on their mortgages, according to an estimate by real-estate Web site Zillow.com.
The majority of homeowners still have equity, and even among those who don’t, many continue to make their mortgage payments on time. The financial-bailout legislation could at least “keep things from getting much worse” by helping banks avoid the need to tighten credit further, says Celia Chen, director of housing economics at Economy.com. Still, she expects housing credit to remain tight and home prices to decline in much of the country for another year or so.
The problem is more regional than national, at least at the extremes. Texas and North Carolina are experiencing a slight increase in home values, at least at the moment. The hardest-hit areas are Florida, Los Angeles, Las Vegas, and San Diego. Percentages of under-water homeowners who bought in the last 5 years go over 50% in San Diego and Las Vegas, and above 40% in Miami and Phoenix.
What will this mean? The WSJ warns that a consumer-spending freeze is coming that will slam the economy. Right now, lenders aren’t interested in selling car loans or credit on other big-ticket items, and people aren’t likely to buy them anyway. The decline in sales will result in plenty of lost jobs, which will in turn hit the residential housing market all over again. Ad sales will drop as consumer spending declines, meaning that many who rely on that for revenue will find themselves gasping for resources. And of course, as foreclosures mount, they will deepen the decline on home values.
On a brighter note, the decline has brought home prices much closer to their historical relationship to income. As that point approaches, housing prices should hit bottom and start rebounding, assuming that a massive load of foreclosures doesn’t create its own revaluation.
In looking at the WSJ’s map, in fact, the problem appears mostly concentrated in Florida and California, with hot spots in Green Bay, up the West Coast, and to a less intense extent on the northern East Coast. What does that mean politically? Does it mean that the fallout from the housing bubble can be quarantined to these regions? Interesting questions, with no real answers at the moment.

Is Washington Mutual The Next one to Fail?

2008-09-11T07:50:00.001-07:00

Washington Mutual tumbles 30 percent to 17-year low

By Jonathan Stempel and Dena Aubin Wed Sep 10, 4:37 PM ET
NEW YORK (Reuters) - Washington Mutual Inc (WM.N) shares sank 30 percent to a 17-year low and the perceived risk of its debt soared on worries the largest U.S. savings and loan will not find a buyer or raise enough capital to combat soaring mortgage losses.
The stock closed down 98 cents at $2.32 on the New York Stock Exchange, and are down 44 percent in the last two days. It fell earlier to $2.30, the lowest since January 1991, according to Reuters data.
Analysts attributed the decline in part to anxiety that potential buyers might walk away because of a pending accounting rule requiring they value the assets of targets at market prices, and perhaps the need to raise capital.
They also pointed to Lehman Brothers Holdings Inc (LEH.N), which said earlier on Wednesday it plans to sell a majority stake in its asset management unit and spin off commercial real estate, and posted a $3.93 billion quarterly loss. The shares of Lehman, Wall Street's fourth-largest investment bank, fell 7 percent.
"Lehman failed to find anyone to invest capital. With Washington Mutual potentially needing some in the future, the market is taking the opportunity to punish that company," said Jaime Peters, a banking analyst at Morningstar Inc in Chicago.
Washington Mutual did not immediately return a call seeking comment.
Earlier this year, it raised $7.2 billion from investors, including private equity firm TPG Inc (TPG.UL).
On Monday, the thrift ousted the longtime chief executive, Kerry Killinger, and replaced him with Alan Fishman, the former chief of Brooklyn, New York's Independence Community Bank Corp.
Washington Mutual lost $3.33 billion in the second quarter, and said cumulative losses from subprime mortgages and other home loans could reach $19 billion through 2011. The thrift's shares have fallen 93 percent in the last year.
SHAKE-OUT
It costs $4.3 million up front plus $500,000 annually to protect $10 million of Washington Mutual debt against default for five years, Phoenix Partners Group said on Wednesday. The up-front payment increased from $3.2 million on Tuesday.
Wednesday's level suggests that investors see an 85 percent chance of default within five years, according to Tim Backshall, chief analyst at Credit Derivatives Research in Walnut Creek, California.
"The market's shaking out who's going to be able to survive over the next year, and this is just part of the shake out," said Mirko Mikelic, portfolio manager for Fifth Third Asset Management in Grand Rapids, Michigan.
On Tuesday, Standard & Poor's lowered its outlook to "negative" for its "BBB-minus" credit rating, which is one notch above "junk" status.
Washington Mutual this week announced an agreement with its chief U.S. regulator, the Office of Thrift Supervision (OTS), requiring improved risk management and compliance. It said the agreement doesn't require it to raise capital.
An OTS spokesman did not immediately return a call seeking comment. A Federal Deposit Insurance Corp spokesman said the agency does not comment on banks that are open and operating.
Morningstar's Peters said a falling stock price complicates Fishman's task to nurse Washington Mutual back to health.
"Fundamentally, nothing has changed at Washington Mutual since he was named CEO," Peters said. "He already has a very difficult task ahead of him. His primary task is to stabilize loan losses, and keep capital at a level that makes regulators happy."
(Additional reporting by Herbert Lash and Phil Wahba in New York, and John Poirier in Washington, D.C.)

U.S. Mortgage Foreclosures, Delinquencies Reach Highs

2008-09-05T12:11:00.000-07:00

More Bad News:

Sept. 5 (Bloomberg) -- Foreclosures accelerated to the fastest pace in almost three decades during the second quarter as interest rates increased and home values fell, prompting more Americans to walk away from homes they couldn't refinance or sell.

New foreclosures increased to 1.19 percent, rising above 1 percent for the first time in the survey's 29 years, the Mortgage Bankers Association said in a report today. The total inventory of homes in foreclosure reached 2.75 percent, almost tripling since the five-year housing boom ended in 2005. The share of loans with one or more payments overdue rose to a seasonally adjusted 6.41 percent of all mortgages, an all-time high, from 6.35 percent in the first quarter.

Tumbling home prices are making it difficult for even the most creditworthy owners with adjustable-rate mortgages to sell or get a new loan as their financing costs rise, said Jay Brinkmann, MBA's chief economist. Prime ARMs accounted for 23 percent of new foreclosures and subprime ARMs were 36 percent, he said.

``People chose the lowest payment option to get into some of the very expensive housing markets and now that prices are coming way down, they can't sell and they can't afford the higher payments,'' Brinkmann said in an interview. The unadjusted rate for new foreclosures was 1.08 percent, also a record, he said.

The three-year-old housing slump has slowed growth of the world's largest economy, caused more than half a trillion dollars of losses at banks such as Citigroup Inc. and UBS AG, and crimped earnings for companies such as Home Depot Inc. and Lowe's Cos. that rely on home purchases to fuel demand.

Economic Growth

The drop in home sales and values, along with tighter credit conditions and higher energy costs, probably will ``weigh on economic growth over the next few quarters,'' Federal Reserve policy makers said Aug. 5 when they decided to hold their benchmark rate at 2 percent. The central bankers cut the rate seven times in the last year in an attempt to avert a U.S. recession.

The Fed probably will keep the rate level for the next few months, according to the price of Fed funds futures. There's an 81 percent chance of no change at the Sept. 16 meeting and a 75 percent chance of no action at the Oct. 29 meeting, they indicate.

Foreclosures started on prime mortgages rose to 0.67 percent from 0.54 percent and the foreclosure inventory increased to 1.42 percent from 1.22 percent, the report said. The share of seriously delinquent prime mortgages was 2.35 percent, up from 1.99 percent.

Prime Mortgages

The share of new foreclosures on prime ARMs was 1.82 percent, triple the 0.58 percent in the year-earlier quarter, and the total foreclosure inventory was 4.33 percent, up from 1.29 percent, the report said. The share of seriously delinquent prime ARMs was 6.78 percent, rising from 2.02 percent a year ago.

New foreclosures on subprime loans rose to 4.7 percent from 4.06 percent in the first quarter, according to the report. The total foreclosure inventory increased to 11.81 percent from 10.74 percent and the so-called seriously delinquent share of loans that are 90 days or more overdue rose to 17.85 from 16.42 percent.

The bankers' report cites percentages without providing the number of mortgages. The U.S. had $10.6 trillion of outstanding home loans at the end of March, according to a June 5 report by the Federal Reserve. Mortgage lending fell to $320.9 billion in the first quarter, down from $782.6 billion a year earlier, the Fed report said.

Existing home sales fell to a 10-year low in the second quarter and the median price for a single-family house dropped 7.6 percent, according to the National Association of Realtors in Chicago.

Market Bottom

Tumbling prices and foreclosure sales by banks may be helping to form a bottom for the housing market, said Brian Bethune, chief U.S. financial economist at Global Insight Inc. in Lexington, Massachusetts.

``People who have been waiting on the sidelines -- and there have been quite a number of them -- are starting to see prices come down to the point where they perceive good value,'' Bethune said in an interview. ``Foreclosures do provide opportunities and induce some people to come back into the market.''

Sales of previously owned homes rose 3.1 percent in July to an annualized pace of 5 million, boosted by foreclosures that accounted for about a third of all transactions, the National Association of Realtors said in an Aug. 25 report.

The Mortgage Bankers report is based on a survey of 45.4 million loans by mortgage companies, commercial banks, thrifts, credit unions and other financial institutions.

Pay Option Arm- A Time Bomb

2008-08-16T08:09:00.000-07:00

An increasing number of our client that are upside down on their homes are Pay Option Arms. In Previous Blog Articles I have covered how those loans work. For those who need a refresher you can see the old posts here. While discussing the Mortgage Implosion on a sports message board another poster found an article that I thought I would share. We are at the VERY

Ticking time bomb

Aug 14th 2008
From The Economist print edition
A nasty mortgage product promises yet more misery
OPTIMISTS, look away now. Prices in America’s housing market may have slumped, but the pain for a significant subset of homeowners has barely begun. Even at Barclays Capital, which spotted some of the improvements mentioned in the previous story, there is still concern. The bank’s Nicholas Strand says that roughly 1.4m households, most of them in California, hold a particularly nasty type of adjustable-rate mortgage called the “option ARM”. Although the overall value of option ARMs is lower than that of subprime loans—some $500 billion, according to Mr Strand, compared with about $1 trillion in subprime loans—their sting is more venomous.
The option ARM allows borrowers to pay less interest than the formal rate for a limited period (the vast majority of customers choose this option). In return, the unpaid interest is added to the original loan, a process soothingly called “negative amortisation”. While house prices are rising, the product just about makes sense. If borrowers do get into trouble when they start paying off the loan in full, higher property values offer some wiggle-room. But when house prices are falling and refinancing is difficult, as is now the case, the option ARM is the financial equivalent of a bikini in winter. Homeowners end up owing more on a property that is worth less.

Delinquencies are already rising fast. Write-offs for option ARMs at Washington Mutual, a stumbling thrift, have zoomed from 0.49% in the last quarter of 2007 to 3.91% in the second quarter. But the real crunch will come when the mortgages “recast”, forcing borrowers to start making full payments. The loans recast after a set period (typically some five years after origination) or when the principal hits a predetermined ceiling. The biggest wave of recasts is due to happen in 2010 and 2011. By some estimates, borrowers’ monthly payments will then surge by 60-80% (see chart), at a time when property values may still be at, or close to, their trough.

Rating agencies were unusually alive to the dangers of option ARMs: they demanded more collateral to protect holders of securitised-mortgage bonds. Banks were slower to wake up to the danger. An option-ARM product called Pick-a-Pay (a name that gave fair warning it could lead to trouble) accounts for 45% of consumer lending at Wachovia, a large bank. Wachovia stopped originating loans that allow negative amortisation in June, and is setting aside heftier reserves to cope with expected losses. It has also waived prepayment penalties for existing product-holders and is marshalling its employees to help move these customers on to conventional mortgages. Such efforts are welcome. But they also signal just how protracted America’s housing woes are likely to be.
http://www.economist.com/finance/displaystory.cfm?story_id=11921871

More Details on the New FHA Bill Passed

2008-08-10T15:12:00.000-07:00

Good Article from the Sun-Sentinel:

New housing law full of trapdoors for borrowers and lenders.

Took a hard look at the new federal housing law and I had trouble seeing past all the strings attached to its offers of help for troubled homeowners.

Such as: If you use its provisions to refinance your mortgage and then sell your home at a gain, you'll have to share that gain with the government.

And this new program won't help anyone who can't pay off a home equity loan, either.

But — and this isn't easy for many who are in mortgage trouble — if you're a qualified borrower and could have gotten a mortgage before the lenders went crazy and stopped checking anything, then there may be something in this law to help you.

For now, I'm only going to focus on the question of how to refinance a mortgage using the Hope for Homeowners Act of 2008, to take effect Oct. 1. The Congressional Budget Office has estimated this new program will help as many as 400,000 struggling homeowners to avoid foreclosure.

From what I see, they'll be the lucky few, if there are that many who succeed in saving their homes. Here's what I learned:

Who can refinance?
The Hope for Homeowners Act won't work for an investor. You can only refinance a mortgage on your primary residence, not an investment property.

So much of South Florida's property sales were to speculators, but the law is designed to prevent them from being bailed out.

It won't work for someone who has a second lien on their home, such as a home equity loan. That has to be satisfied before this refinancing can take place.

It will work for borrowers who are a bit more heavily in debt than lenders generally recommend. The homeowner must be spending 31 percent of gross monthly income on housing (usually the definition includes the monthly money set aside for property taxes and insurance, as well).

How Will refinancing work?
Lawmakers expect borrowers will essentially have to meet the same guidelines as for a Federal Housing Administration mortgage. If you bought more house than you could afford, then you won't qualify.

Borrowers' income will be verified, something that wasn't done for some of the strange lending practices during the housing boom.

The trouble is that people who couldn't qualify for a traditional loan during the boom may not qualify today.

"That's where a lot of borrowers are banging their heads against the wall," says Ritch Workman, a Melbourne mortgage broker who is president of the Florida Association of Mortgage Brokers.

The lender side of the deal is even trickier.

The lender has to agree to accept a payoff that is less than the full value of the current mortgage. This is a voluntary program.

The payoff, according to the House Financial Services Committee, will be 85 percent of the home's current value.

Who profits?
Banks are expected to save billions of dollars by reducing their mortgage loan losses.

Here's how it would work: If you had a $200,000 mortgage on a property that is now worth $100,000, the lender would have to agree to accept $85,000. The lender would be taking a huge cut, "but they would get out. If they let the house go into foreclosure, they'd be lucky to get 35 to 40 cents on the dollar," said Steven Adamske, a spokesman for Rep. Barney Frank, D-Mass., who is chairman of the Financial Services Committee. The borrower gets a new mortgage that is guaranteed by the FHA.

If the homeowner then quickly sells the refinanced home in the first year for more than $100,000, the homeowner has to pay 100 percent of that gain to the FHA. This equity-sharing arrangement continues, but the percentage going to the FHA goes down over the next few years. After five years, it is 50 percent, for the next 25 years.
http://www.sun-sentinel.com/business/sfl-flhlpharriet0810sbaug10,0,4273919.column

Ask UpsideDownFlorida- Can You Get a Loan Modification if I am behind?

2008-08-05T14:44:00.000-07:00

Recently I came across this article and found it disturbing because it is NOT what we are experiencing at UpsideDownFlorida.com:

Q: I'm four months behind in my house payment. Can I still go to the lender and ask for a loan modification?

A: You certainly have the right to ask, but the odds are overwhelming that you will be foreclosed.

Like many borrowers you likely have an impossible situation. If you were current on your mortgage you would have no grounds to ask for a modification. Having missed four payments your credit may be so damaged that you no longer qualify for either a loan modification or a new loan with another lender.

Borrowers hit with rising payments or who cannot otherwise pay their mortgage should not wait for months to resolve the problem. Instead, try to refinance or modify the loan while you still have good credit, the time when you have the most leverage in the marketplace. The moment you see that a payment will be missed contact an attorney, legal clinic, your state attorney general or a community housing group and ask for help. Don't be embarrassed and don't delay.

As to national programs designed to "help" those with exploding ARMs and other toxic loan products, the odds are against you. As an example, in May HUD issued a news release that said that the "FHASecure product has helped 200,000 homeowners refinance their mortgages and avoid foreclosure." However, as of the end of April, HUD reported that only 2,276 delinquent conventional borrowers refinanced with an FHA loan. In other words, the sentence in the news release means that about 198,000 borrowers with good credit refinanced – and only about 2,300 borrowers were saved from foreclosure.

If you have a toxic loan, one which will surely lead to higher costs in a few months or in a year, think about refinancing now, before your credit is damaged. Gather your paperwork and be prepared to fully document your income, assets and debts. Also, be aware that many refinancing programs require little or no cash at closing - instead the new lender will pay the closing costs in exchange for a larger loan amount or a somewhat higher interest rate. This "higher" interest rate is not a problem if the new interest level is less than the rate you're now paying or will shortly pay.

A caution: Many toxic loans have stiff prepayment penalties that assure that borrowers must either pay higher monthly costs or face grossly unjustified penalties. Beat the system by planning ahead. Start saving now for higher payments -- and then refinance as soon as the prepayment penalty period ends.

http://www.nydailynews.com/real_estate/2008/07/08/2008-07-08_is_it_too_late_for_a_home_loan_modificat.html

I feel for all the people struggling with Mortgage problems that read this and give up.

Ask UpsideDownFlorida.com-What is a Short Sale?

2008-08-03T06:45:00.000-07:00

Recently I have gotten several emails asking:

What is a Short Sale?

Now one of the most popular topics in real estate we at UpsideDownFlorida.com are happy to now have some of our videos on our main site to explain short sales. These videos give great information on all the advantages of a short sale over foreclosure. They also explore the effects of a short sale on your credit and how long a short sale takes.

After doing some research I came across this Blog entry on John Barker's Web blog. I found it very helpful and knowledgeable and wanted to share it with you:

Friday, June 01, 2007

What is a short sale?

With the increase in foreclosures lately you may have heard the term “short sale” and wondered what it was. A short sale is when the lender will accept less than the full amount due on a mortgage when a property is sold. Usually, the lender will accept the short sale to avoid the time and expense of a foreclosure.

When a borrower is in default on a mortgage they not only owe the back payments but also may owe late fees, property inspection fees, attorney fees, etc. This can add up quickly to eat up all the equity the borrower had in the property. If the borrower is unable to bring the account current the lender will then foreclose on the property. With a foreclosure, the lender can lose up to 40% of the mortgage amount because of the extra costs involved with foreclosing on a property: attorney fees, court costs, lost interest, eviction costs, property maintenance costs, and selling costs. Foreclosing on a property can also take up to two years in some states. Therefore, it is sometimes in the best interest of the lender to accept the short sale.

It also can be in the best interest of the borrower. They will not have to endure the time and stress of a foreclosure and their credit may not be as adversely affected as it would with a foreclosure. It is quicker and easier and does not subject the borrower to the embarrassment of a foreclosure.

How does it work?

The first thing the borrower should do when they can no longer afford a property is to contact the lender immediately. The last thing a lender wants to do is foreclose on the property. Lenders typically have departments that work with people who are behind on their payments to resolve the situation. If you cannot resolve the default with the lender, and you want to see if they will accept a short sale, they will direct you to the department that handles short sales.

The lender will usually require the borrower to submit a lot of information to the lender in order to consider the short sale. The information required may include:
• Income documentation such as W-2s and pay check stubs to verify the borrowers’ income.
• Bank statements to verify the borrowers’ assets
• Hardship letter – this letter will describe for the lender the reasons the borrowers are in the financial position they are in and will ask the lender to accept the short sale. Borrowers should make this letter sound as sad as possible and back up the story with any documentation you may have such as medical bills, etc.
• Fair market value for the property – depending on the lender they may require an appraisal or may accept an opinion from a local Realtor know as a Comparative Market Analysis (CMA).
• Preliminary proceeds sheet from the sale of the property. This will show the proceeds of the sale of the property after the mortgage is paid off and all other closing costs and fees are paid. This will be negative in the case of the short sale and this negative amount is the amount of the shortage.
• Listing agreement and purchase agreement when they are available.

When the lender reviews all of this they may or may not approve the short sale. If they do not approve the short sale they will proceed with the foreclosure. If they do agree to the short sale you will close on the sale of your property and the lender will take the loss.

So, is the borrower off the hook?

Not necessarily. The lender still has options to try to collect this shortage. As a condition of the short sale the lender may require the borrower to sign a note to repay the shortage. They may also file a collection or a judgment for the amount of the shortage. This is something that an attorney with expertise in this area of real estate needs to be consulted.

Also, the IRS may come after the borrowers for income taxes on the amount of the shortage. If the shortage was forgiven, the lender will report the shortage as income to the IRS and the IRS will collect taxes on this amount. Again, for the specifics on this please consult a tax professional.
http://www.barkerblog.com/2007/06/what-is-short-sale.html

With the complexity of a short sale we STRONGLY suggest the use of a mitigation firm to assist you in negotiating with your lender. Like any negotiation there is no substitution for experience and having a professional negotiator on your side. Furthermore, a mitigation company can negotiate the terms of the short sale as to limit the effect on your credit, and pesuade the lender not to pursue a deficiency judgment after the short sale and to consider the account settled and PAID in FULL.

10 Things to Understand About the Housing Bubble

2008-07-31T10:18:00.000-07:00

I came across the article while doing some research today and thought it was very good. Below is the beginning. The rest can be found here.

In Westwood’s view, the following ten factors most significantly contributed to the housing bubble and mortgage crisis:

Residential mortgage and consumer credit more than doubled in the first six years of this decade. From the founding of the nation through 1999, our citizens amassed some $5.1 trillion of home mortgage debt and $1.4 trillion of installment and credit card debt. By the end of 2006, these numbers stood at outstanding amounts of $11.0 trillion and $2.4 trillion, respectively. In total, American individuals became indebted by an additional $6.9 trillion in six short years (the bulk of which was in the three-year period from 2004 through 2006) more than doubling the debt outstanding at the beginning of the decade. Apologists often cite increases in wealth and in home equity value as offsetting this unprecedented and crippling increase in our citizens’ indebtedness. But the truth is we live in a nation with one of the lowest savings rates in the world (it was actually negative in 2005 and was likely negative in the year just ended) and, as detailed below, a significant portion of the perceived growth in home values has been specious at best.
Cheap mortgage loans offered on lax lending terms were responsible for much of the ballooning of home prices. Let’s say that in 2000, you had $100,000 to put down on the purchase of a home. In the same year, with residential mortgage rates at 6% for adjustable rate mortgages, you were offered a mortgage for 80% of the purchase price of the home you were seeking to buy. The $100,000 you had available meant that you could afford a $500,000 home (80% of $500,000 = $400,000 in mortgage) and, interest only, your monthly payment would have been approximately $2,000 per month. Now, zoom ahead to 2006. With the same $100,000 in your pocket, and an adjustable teaser interest rate of 3%, mortgage companies nationwide were knocking down your door offering you mortgages at 90% of your purchase price (and more – often over 95% in some cases). With your same $100,000 and for the same $2,000 per month interest payment – voila – you could now afford to pay $1,000,000 for the same house for which you would have been able to pay $500,000 six years before. And of course, that is pretty close to what happened during this period – residential home prices increased by over 74% from 2000 through 2006. Does that mean the homes themselves were actually worth more? Of course not.
The growth in home prices during the first six years of this decade has been unprecedented and should have had our mortgage bankers, investment bankers, regulators and the Fed raising at least an eyebrow or two. As prices more than doubled in some markets and increased over 74% nationwide from 2000 through their peak in 2006, the stewards of our banking sector and their overseers in government apparently neglected to consider why. Pointing to “global reserves of excess savings” and “more efficient capital markets” as the new paradigms rendering previous market fundamentals obsolete, the best and the brightest ignored the fact that debt driven home prices had totally disconnected from median household income which has increased by a mere 15% during the same period, before adjusting for inflation (median income actually decreased after adjusting for inflation). If there had been a global glut of savings, we would have experienced a boom in the production of all capital goods – not just limited to housing – which would be fully sustainable by those real savings (in contrast to what was actually a debt driven spate of asset inflation in housing). More importantly, the purchase price of homes actually rendered it more expensive, even on an after-tax basis, to own rather than rent a residence – in some markets by more than 30%. This phenomenon is not only historically unprecedented, but any student of finance and economics can tell you that it is as unsustainable as any market that is based on pure speculation. And pure speculation is what ultimately developed in residential real estate market – the notion of ever rising value, so similar to the dot com boom.
Mortgage lenders, seeking to maximize lending, relied on aggressive appraisals to justify outsized loans – and appraisers cooperated by ignoring their own established methodologies. The Chicago-based Appraisal Institute, the gold standard in real estate appraisals with 22,000 members, maintains guidelines known as the Uniform Standards of Professional Appraisal Practice (USPAP). Among other requirements, the USPAP directs, generally, that appraisers consider multiple indicia of the value of any form of property being appraised, with value defined as the most probable price at which a willing buyer and a willing seller would agree to transact a fair sale, assuming (among other things) that “both parties are well informed, or well advised” and “the price [is] unaffected by special or creative financing…..granted by anyone associated with the sale.” In addition to considering recent sales of real estate, generally, Appraisers are regularly required to consider the value of properties based on the income they would produce if rented and based on the cost of replacing any improvements (buildings) to the property. They are then required to reconcile any differences among these three classic valuation methods. As it turns out, however, during the housing bubble, home prices completely disconnected from both rental values and from replacement costs. From 1960 through 1996, the ratio of average home rents to average home prices hovered in a band of 5% to 6% per annum. From 1996 to 2000, it declined to 4.6% and then, in a stunning drop this decade, the ratio fell to 3.5% by the end of 2006. Although common wisdom may have it otherwise, the fact is that construction costs barely moved at all during this decade, on an inflation adjusted basis, while home prices increased by 74%. If construction costs were constant and home prices ballooned, the only explanation – according to established valuation methodologies – could be that land was very suddenly worth dramatically more. But that much more, and that quickly? Appraisers couldn’t possibly reconcile these dramatically divergent indications of fair market value, so what did they do? Well, as it turns out – Fannie Mae, Freddie Mac, and pretty much all other mortgage originators, guarantors and investors, don’t consider income value as relevant to the appraisal of non-rental, residential real estate. Instead, appraisers merely conclude that recent sales are, for all intents and purposes, the only valid indication of fair market value. In doing so they enabled the entire market to ignore the impact of comparisons to rental properties and “special and creative” financing that – although it didn’t come from sellers – was demonstrably, and has now proven to be, uneconomic.

http://www.rgemonitor.com/us-monitor/253126/10_things_to_understand_about_the_housing_bubble_and_the_debt_crisis

NEW FHA BILL DOES VERY LITTLE FOR MOST HOMEOWNERS!

2008-07-28T08:16:00.000-07:00

Before everyone goes and pops the cork on the new FHA Housing bill as a savior to the housing Market Lets see who's eligible:

Qualified borrowers must live in their homes and have loans that were issued between January 2005 and June 2007. Additionally, they must be spending at least 31% of their gross monthly income on mortgage debt to be eligible for the program.
They can be up to date on their existing mortgage or in default, but either way borrowers must prove that they will not be able to keep paying their existing mortgage - and attest that they are not deliberately defaulting just to obtain lower payments.
Before homeowners can get FHA-backed mortgages, they must first retire any other debt on the home, such as a home equity loan or line of credit. Borrowers are not permitted to take out another home equity loan for at least five years, unless it's to pay for necessary upkeep on the home.
To get a new home equity loan, borrowers will need approval from the FHA, and total debt cannot exceed 95% of the home's appraised value at the time.

Well It looks like others agree according to the Seattle Times:

"This is not the end of the housing crunch," said Jared Bernstein, a senior economist at the Economic Policy Institute. "Housing prices have already fallen 15 percent and they need to fall 10 percent more. This bill isn't going to change that equation."

1 in 171 in US in Foreclosure: U.S. Foreclosures Double as House Prices Decline

2008-07-25T08:38:00.000-07:00

Well the news is not any better today as sales of existing homes has fallen below expectations as well as sales of new homes. Below is a Bloomberg Article detailing the malaise.

July 25 (Bloomberg) -- U.S. foreclosure filings more than doubled in the second quarter from a year earlier as falling home prices left borrowers owing more on mortgages than their properties were worth.

One in every 171 households was foreclosed on, received a default notice or was warned of a pending auction. That was an increase of 121 percent from a year earlier and 14 percent from the first quarter, RealtyTrac Inc. said today in a statement. Almost 740,000 properties were in some stage of foreclosure, the most since the Irvine, California-based data company began reporting in January 2005.

``Rising foreclosures are putting downward pressure on prices, increasing the possibility that homeowners will go upside- down on their mortgages,'' said Sheryl King, chief U.S. economist at Merrill Lynch & Co. in New York. ``That will cause more losses in mortgage portfolios and less willingness from investors to securitize mortgages and therefore fewer mortgages.''

About 25 million U.S. homeowners risk owing more than the value of the their homes, according to Bill Gross, manager of the world's biggest bond fund at Pacific Investment Management Co. That would make it impossible for them to negotiate better loan terms or sell their property without contributing cash to the transaction.

Falling home values, led by states such as Nevada and California that have the biggest default rate, have prompted RealtyTrac to almost double the projected number of foreclosures this year to about 2.5 million, said Rick Sharga, executive vice president for marketing.

Advantages of a Loan Modifications over a Refinance

2008-07-25T08:24:00.001-07:00

Today we will explore the many advantages to a loan modification over a refinance. With it nearly impossible to qualify for financing these days a refinance is not an option anymore for many struggling homeowners.

What is a Loan Modification? (video)

2008-07-15T13:44:00.000-07:00

I am pleased to announce our most recent set of videos discussing Loan Modifications. Hopefully these Videos will help you understand how they work and how we at UpsideDownFlorida can help you. We appreciate all the feedback and look forward to helping you!

1 in 10 Upside Down- You Are Not Alone!

2008-07-13T06:48:00.000-07:00

Well the news on the housing front has not gotten any better. Now over 11% of ALL homeowners are upside down on their mortgage. In states like Florida, Arizona and California the numbers are far worse. Below is a map of the country showing what parts of the country are struggling with foreclosures:

As you can see the areas that saw the greatest boom are now seeing the biggest bust.

INDYMAC Assets Siezed!

2008-07-13T06:37:00.001-07:00

Well we told you the other day that INDYMAC was facing major problems and it got worse over the weekend. The government sieze the bank in what is now the 2nd largest bank failure ever. Below is what you find now posted on Indymac's website...

FDIC Information for IndyMac Bank, F.S.B., Pasadena, CA

On July 11, 2008, IndyMac Bank, F.S.B., Pasadena, CA was closed by the Office of Thrift Supervision (OTS) and the Federal Deposit Insurance Corporation (FDIC) was named Conservator. All non-brokered insured deposit accounts have been transferred to IndyMac Federal Bank, F.S.B., Pasadena, CA ("assuming institution") a new FDIC-insured Federal Mutual Savings Bank. No advance notice is given to the public when a financial institution is closed.

The FDIC has assembled useful information regarding your relationship with this institution. Besides a checking account, you may have Certificates of Deposit, a business checking account, a Social Security direct deposit, and other relationships with the institution.

Please select the link below to read more about this event:

FDIC Bank Closing Information for IndyMac

The IndyMac websites are expected to be available Monday, July 14, 2008.

If the balance in your account(s) (this includes any accounts in which you have an ownership) is less than $100,000, no action is required on your part at this time. Your entire insured account(s) will be transferred to IndyMac Federal Bank and will be available for business as usual during regular business hours.

FDIC CALL CENTER
866-806-5919

CALL CENTER HOURS OF OPERATION:
Friday, 7/11/08, 3:00 p.m. - 9:00 p.m. Pacific
Saturday, 7/12/08, 8:00 a.m. – 8:00 p.m. Pacific
Sunday, 7/13/08, 8:00 a.m. – 6:00 p.m. Pacific
THEREAFTER
Monday through Friday, 8:00 a.m. – 8:00 p.m. Pacific

For ALL depositors under 100,000 there is very little risk that you will not have access to your funds, however accounts with deposits greater than 100,000 may face problems. Lastly, for all you INDYMAC mortgage holders....unfortunately...this doesn't mean you don't have to pay anymore.

The Effects of a Short Sale on Your Credit (part 3)

2008-07-09T07:29:00.000-07:00

Yesterday we saw a video on the definition of a short sale. Today we are going to look at the effects of a short sale on your credit and compare this to a foreclosure. Let us know if you like the videos.

US Treasury Secretary Paulson: U.S. home foreclosures to stay high

2008-07-09T07:24:00.000-07:00

Looks like the government is now trying to blame the little guy for the housing problem not artificially low interest and absolutely NO regulation of the mortgage market. Those counting on a government bailout See below:

Tuesday July 8, 3:27 pm ET ARLINGTON, Va (Reuters) - U.S. Treasury Secretary Henry Paulson said on Tuesday that home foreclosure starts may hit 2.5 million this year, many of them the borrowers' own fault for taking out loans they couldn't afford.

"There is little public policy-makers can, or should, do to compensate for untenable financial decisions," Paulson told a forum on mortgage lending to low and medium-income homeowners.

He said flatter sales of existing homes in recent months implied some stabilizing in home-buying demand but warned foreclosures stemming from a housing correction that began in 2006 likely will continue for some time.

Paulson said that Treasury is continuing its efforts to assist "preventable foreclosures," chiefly among low- and moderate-income people who fell behind on payments when their variable-rate loans reset at higher rates.

Since last July, about 1.7 million homeowners have completed loan workouts that have allowed them to stay in their homes, Paulson said.

Bye Bye Indymac...

2008-07-08T12:16:00.000-07:00

Well it doesn't come to a surprise to me that Indymac has ceased all lending operations and has immediately terminated everyone in those departments. Indymac notorious for their "Alt A" loans and Payoption ARMS has seen its stock drop to from the mid 30's a year ago to less than 50 cents. Below is more information about recent developments.

IndyMac stops new loans, to cut work force by half

July 7, 2008 - 7:20pm

In this Jan. 2008 file photo, a man leaves an IndyMac Bank branch office in Burbank, Calif. IndyMac Bancorp Inc. has stopped accepting new loan submissions in its retail and wholesale forward mortgage lending channels and plans to slash 3,800 jobs, or more than half its work force. (AP Photo/Reed Saxon)

266. Lehman Brothers SBF

265. IndyMac Bancorp
264. Mortgages Ltd.
263. Wilmington Finance - Wholesale
262. Accredited Home Lenders, Home Funds Direct
261. Assured Lending Corp. - Wholesale
260. Homewide Lending Corporation
259. Vanguard Mortgage & Title, Inc.
258. Chase Home Equity - Wholesale

257. Chase Subprime - Wholesale
256. Evergreen Investment & Carnation Banc
255. Casa Blanca Mortgage/Shearson - Wholesale
254. Guaranty Bank - Correspondent
253. Citi Residential Lending
252. Montgomery Mortgage Capital Company
251. E*Trade Wholesale Lending
250. Shearson Financial Network, Inc.
249. American Bank Mortgage Group - Wholesale
248. AmeriBanc Corp.
247. Washington Mutual - Wholesale
246. Century Bank, F.S.B. - Wholesale
245. Diversified Mortgage, Inc.
244. National Wholesale Funding
243. Centennial Mortgage and Funding, Inc./Award Mortgage
242. Fidelity Home Mortgage Corp. - Wholesale
241. LMI Funding, Inc.
240. Millennium Mortgage - Wholesale
239. Origen Financial, Inc. (Correspondent)
238. CitiMortgage - Home Equity Wholesale
237. Bear Stearns Residential Mortgage
236. East West Mortgage Co. of VA
235. New Vision Residential Lending
234. Washington Savings Bank, F.S.B. - Wholesale
233. Macquarie Mortgages USA Inc.
232. Global Mortgage, Inc.
231. Unique Mortgage Solutions (UMS, LLC)
230. First Franklin - Merrill Lynch
229. First National Mortgage Sources
228. Resource Mortgage (Wholesale)
227. KH Financial
226. Lydian Mortgage
225. OMG Wholesale Lending
224. Saxon Mortgage (Wholesale)
223. Beazer Mortgage Corp.
222. E-Loan (Wholesale)
221. Allpointe Mortgage (Broker Program)
220. Popular Warehouse Lending
219. Allied Lending Corp. (Wholesale)
218. BF Saul Wholesale Lending
217. Community Resource Mortgage
216. Lehman/Aurora Loan Services
215. Residential Mortgage Capital
214. Maverick Residential Mortgage
213. Countrywide Financial Corp.
212. First NLC Financial Services
211. First American Bank (Wholesale)
210. Soma Financial
209. National City Corp. (Wholesale)
208. Heartland Wholesale Funding
207. Homefront Mortgage Inc.
206. PNC Bank H.E.
205. Family First Mortgage Corp.
204. First Fidelity Financial
203. BSM Financial
202. 1st Choice Mortgage
201. Wescom Credit Union
200. Coast Financial Holdings/Coast Bank
199. WaMu (Subprime)
198. First Madison Mortgage
197. Southern Star Mortgage
196. TransLand Financial
195. Secured Bankers Mortgage Company (SBMC)
194. ComUnity Lending
193. Delta Financial Corp
192. BayRock Mortgage
191. Empire Bancorp
190. Option One - H&R Block
189. Citigroup - FCS Warehouse
188. Charter One (Wholesale)
187. Wells Fargo - Home Equity
186. Paul Financial, LLC
185. Webster Bank (Wholesale)
184. Fieldstone Mortgage Company
183. Tribeca Lending Corp. (Wholesale)
182. WAMU Comm. Correspondent
181. Marlin Mortgage Company
180. Countrywide Specialty Lending
179. UBS Home Finance
178. MortgageIT-DB (Retail)
177. Edgewater Lending Group
176. ResMAE Mortgage Corp.
175. Citimortgage Correspondent (2nds)
174. AMC Lending
173. Liberty American Mortgage
172. Exchange Financial (Wholesale)
171. FirstBank Mortgage
170. Bank of America (Wholesale)
169. Diablo Funding Group Inc.
168. Honor State Bank
167. Spectrum Financial Group
166. Priority Funding Mortgage Bankers
165. BrooksAmerica Mortgage Corp.
164. Valley Vista Mortgage
163. New State Mortgage Company
162. Summit Mortgage Company
161. WMC
160. Paragon Home Lending
159. First Mariner Wholesale
158. The Lending Connection
157. Foxtons, Inc.
156. SCME Mortage Bankers
155. Aapex Mortgage (Apex Financial Group)
154. Wells Fargo (various Correspondent and Non-prime divisions)
153. Nationstar Mortgage
152. Decision One (HSBC)
151. Impac Lending Group
150. Long Beach (WaMu Warehouse/Correspondent)
149. Expanded Mortgage Credit Wholesale
148. The Mortgage Store Financial
147. C & G Financial
146. CFIC Home Mortgage
145. All Fund Mortgage
144. LownHome Financial
143. Sea Breeze Financial Services
142. Castle Point Mortgage
141. Premium Funding Corp
140. Group One Lending
139. Allstate Home Loans / Allstate Funding
138. Home Loan Specialists (HLS)
137. Transnational Finance Wholesale
136. CIT Home Lending
135. Capital Six Funding
134. Mortgage Investors Group (MIG) - Wholesale
133. Amstar Mortgage Corp
132. Quality Home Loans
131. BNC Mortgage (Lehman)
130. First National Bank of Arizona
129. Chevy Chase Bank Correspondent
128. GreenPoint Mortgage - Capital One Wholesale
127. NovaStar, Homeview Lending
126. Quick Loan Funding
125. Calusa Investments
124. Mercantile Mortgage
123. First Magnus
122. First Indiana Wholesale
121. GEM Loans / Pacific American Mortgage (PAMCO)
120. Kirkwood Financial Corporation
119. Lexington Lending
118. Express Capital Lending
117. Deutsche Bank Correspondent Lending Group (CLG)
116. MLSG
115. Trump Mortgage
114. HomeBanc Mortgage Corporation
113. Mylor Financial
112. Aegis
111. Alternative Financing Corp (AFC) Wholesale
110. Winstar Mortgage
109. American Home Mortgage / American Brokers Conduit
108. Optima Funding
107. Equity Funding Group
106. Sunset Mortgage
105. Nations Home Lending
104. Entrust Mortgage
103. Alera Financial (Wholesale)
102. Flick Mortgage/Mortgage Simple
101. Dollar Mortgage Corporation
100. Alliance Bancorp
99. Choice Capital Funding
98. Premier Mortgage Funding
97. Stone Creek Funding
96. FlexPoint Funding (Wholesale & Retail)
95. Starpointe Mortgage
94. Unlimited Loan Resources (ULR)
93. Freestand Financial
92. Steward Financial
91. Bridge Capital Corporation
90. Altivus Financial
89. ACT Mortgage
88. Alliance Mortgage Banking Corp (AMBC)
87. Concord Mortgage Wholesale
86. Heartwell Mortgage
85. Oak Street Mortgage
84. The Mortgage Warehouse
83. First Street Financial
82. Right-Away Mortgage
81. Heritage Plaza Mortgage
80. Horizon Bank Wholesale Lending Group
79. Lancaster Mortgage Bank (LMB)
78. Bryco (Wholesale)
77. No Red Tape Mortgage
76. The Lending Group (TLG)
75. Pro 30 Funding
74. NetBank Funding, Market Street Mortgage
73. Columbia Home Loans, LLC
72. Mortgage Tree Lending
71. Homeland Capital Group
70. Nation One Mortgage
69. Dana Capital Group
68. Millenium Funding Group
67. MILA
66. Home Equity of America
65. Opteum (Wholesale, Conduit)
64. Innovative Mortgage Capital
63. Home Capital, Inc.
62. Home 123 Mortgage
61. Homefield Financial
60. First Horizon Subprime, Equity Lending
59. Platinum Capital Group (Wholesale)
58. First Source Funding Group (FSFG)
57. Alterna Mortgage
56. Solutions Funding
55. People's Mortgage
54. LowerMyPayment.com
53. Zone Funding
52. First Consolidated (Subprime Wholesale)
51. EquiFirst
50. SouthStar Funding
49. Warehouse USA
48. H&R Block Mortgage
47. Madison Equity Loans
46. HSBC Mortgage Services (correspondent div.)
45. Sunset Direct Lending
44. Kellner Mortgage Investments
43. LoanCity
42. CoreStar Financial Group
41. Ameriquest, ACC Wholesale
40. Investaid Corp.
39. People's Choice Financial Corp.
38. Master Financial
37. Maribella Mortgage
36. FMF Capital LLC
35. New Century Financial Corp.
34. Wachovia Mortgage (Correspondent div.)
33. Ameritrust Mortgage Company (Subprime Wholesale)
32. Trojan Lending (Wholesale)
31. Fremont General Corporation
30. DomesticBank (Wholesale Lending Division)
29. Ivanhoe Mortgage/Central Pacific Mortgage
28. Eagle First Mortgage
27. Coastal Capital
26. Silver State Mortgage
25. ECC Capital/Encore Credit
24. Lender's Direct Capital Corporation (wholesale division)
23. Concorde Acceptance
22. DeepGreen Financial
21. American Freedom Mortgage, Inc.
20. Millenium Bankshares (Mortgage Subsidiaries)
19. Summit Mortgage
18. Mandalay Mortgage
17. Rose Mortgage
16. EquiBanc
15. FundingAmerica
14. Popular Financial Holdings
13. Clear Choice Financial/Bay Capital
12. Origen Wholesale Lending
11. SecuredFunding
10. Preferred Advantage
9. MLN
8. Sovereign Bancorp (Wholesale Ops)
7. Harbourton Mortgage Investment Corporation
6. OwnIt Mortgage
5. Sebring Capital Partners
4. Axis Mortgage & Investments
3. Meritage Mortgage
2. Acoustic Home Loans
1. Merit Financial

Short Sales (part 2)

2008-07-08T08:56:00.000-07:00

Today we will be releasing a video on our most searched topic at UpsideDownFlorida.com. Short Sales. More specifically the effect of a short on your credit. I also encourage you to scroll down and read my prior post on the subject to give you an example from one of clients.

New Video FAQ's!!!!

2008-07-07T12:06:00.000-07:00

After much work we have finally compiled our FAQ's into video form. Feel free to comment on any of the topics or review us at Youtube. We appreciate the feedback. We hope these are informative and exciting to you as the rest of the blog. We will be posting one new video a day this week. Today: Why UpsideDownFlorida.com?

Miami Foreclosures Double & 5 Billion Loans Default in LA

2008-07-03T12:33:00.000-07:00

New foreclosures almost quadrupled in Los Angeles and doubled in Miami in the second quarter, with as much as $5 billion worth of loans going bad in L.A. alone, the online real estate data company PropertyShark.com reported.

The number of homes scheduled for auction in Los Angeles rose 14,505 compared with 3,797 in the same period a year earlier, PropertyShark said in a report distributed by e-mail. In Miami-Dade County, the number climbed to 2,677 from 1,282.

To put that in prospective See the graph below that I borrowed from the folks at Housingdoom.com

One doesn't have to be a scientist to see how severe the housing contraction has been. As you can see the beginning of 08 was worse than any year on the graph. Erasing all the gains from the boom in a matter of months.

The End of The Payoption Arm FINALLY!

2008-06-30T14:24:00.000-07:00

It amazes me that almost 1 year since the implosion of American Home Mortgage (that king of the pay option arm) that Wachovia was still offering their version of a "Pick-a-Pay" loans. Today, Wachovia finally stopped offering these destructive loans. Yes those famous loans with those tantalizing minimum payments that don't even cover monthly interest on the loans. In fact, with every payment your balance grows until in most cases your loan recast. This spells doom for homeowner and ultimately leads to high foreclosure rates among loan holders.

Below I will try to define some of the terms associated with a pay option Arm.

Option ARM loans have four major types of payment options:

* Minimum Payment

With the minimum payment option, your monthly payment is set for 12 months at your initial interest rate. After that, the payment changes annually, and a payment cap limits how much it can increase or decrease each year.

If you make the minimum payment after the end of your initial interest rate period, which usually holds only for the first 1 to 3 months, it may not be enough to pay all of the interest charged on your loan for the previous month and the unpaid interest will be added to the principal balance you owe (will be deferred).

* Interest-Only Payment

With the interest-only payment option, you can avoid deferred interest, when the minimum payment is not enough to pay the monthly interest due. The interest-only payment option, however, is not available if the interest-only payment would be less than the minimum payment. Please note, that this payment option does not result in your principal reduction.

The interest-only payment may change every month based on changes in the ARM index used to determine your fully indexed rate.

* Fully Amortizing 30-Year Payment

With fully amortizing payments, you pay both principal and interest and keep your loan on schedule. Your payment is calculated each month based on the prior month's fully indexed rate, loan balance and remaining loan term.

* Fully Amortizing 15-Year Payment

If you prefer to put your loan on an accelerated schedule and can afford higher monthly payments, the 15-year payment option allows you to repay your loan twice as faster and save more than half the total interest costs of a 30-year loan.

There are many variations of this innovative home financing product on the market: PayOption ARM, CashFlow Option Loan, 1-Month Option ARM, Flex 5 Home Loan, Pick-a-Paymentsm Loan, 12 MAT ARM, Option Power ARM, FlexPay® 12 MAT, FlexPay® 3/1 LIBOR ARM, OptPAY ARM, etc.

Option ARM loan programs vary in the initial rate, negative amortization and lifetime caps, ARM index, or optional features, however, when comparing one option ARM with another, pay close attention to the margin and the fully indexed rate. Keep in mind that the initial interest rate holds only for the 1st month. This is how so many homeowners got tricked into the loan.

Loan Term

Option ARM loans are available for 40, 30 or 15 years.

Initial Interest Rate (Note Rate)

Your Minimum Payment Rate or 'Start Rate'. It may vary from 1.25% up to 3.95% and depends on your Loan-to-Value Ratio (LTV).

With hybrid option ARMs, that use a different minimum payment calculation method, your initial rate is usually higher.

Initial Interest Rate Period (Introductory Period, Initial Fixed-Rate Period)

Option ARM loans are available with an initial introductory period, usually of 1, 3 or 6 months, after which the interest rate may change.

Notes:

* Some option ARM were offered without any introductory period, so the fully indexed rate (FIR) is effective immediately.
* The initial Fixed-Rate Period should not be confused with Initial Fixed-Rate / Fixed-Payment Period, a typical feature of hybrid option ARMs.

Examples:

* With 1-month option ARMs that have a 1-month introductory period, the first interest rate change occurs when the 1st monthly payment is due. Thereafter, the interest rate may change monthly.
* If you have a 1-month option ARM loan with a 3-month introductory period, the first interest rate change occurs when the 3rd monthly payment is due. Subsequent interest rate changes may occur each month thereafter.

During the introductory period: After the introductory period:
Monthly Payment = Minimum Payment
Interest Rate = Start Rate

Monthly Payment = Minimum Payment
or Interest-Only Payment
or Fully Amortizing 30-Year
or Fully Amortizing 15-Year
Interest Rate = Fully Indexed Rate

What is a Recast? A feature in some types of mortgages where the remaining scheduled principal and interest payments are recalculated based on a new amortization schedule. Some mortgages may allow for a recast in order to help a financially distressed borrower, in which case the interest rate might be reduced and/or the remaining term of the mortgage extended. Most often, a recast is associated with a negative amortization mortgage which must recast at some point so that the mortgage will be paid off by the end of its scheduled term.
Investopedia Says... Payment option ARMs are popular negative amortization mortgages with recast features. Most payment option ARM’s have a scheduled recast in month 61. Additionally, they have triggers that might cause an unscheduled recast to occur if a negative amortization limit is reached. For example, if the principal balance of the loan reaches a set limit through negative amortization, a recasting of the mortgage is triggered.

UpsideDownFlorida Founder Featured on NPR MarketWatch

2008-06-29T14:53:00.000-07:00

Although this was taped awhile ago many readers have mentioned the segment so I thought I would post it on here. It details the unintended consequences foreclosure can bring to a community. I am looking forward to doing a follow up to the alternatives to foreclosure namely short sales and loan modifications.

Just click on the button below to listen.

http://marketplace.publicradio.org/display/web/2008/04/29/condo_fees

Success!

2008-06-27T07:16:00.000-07:00

Today we got the exciting news that we got one of our clients approved for a loan modification with HSBC. The borrower originally started with a 7.45 rate that adjusted to 12.5 in just 18 months after his initial fixed period expired. The borrower was on a "2/28" or a loan that was fixed for the first two years and then became adjustable. In many cases these loans have rates that can adjust 1.5 points higher every 6 months. The worst part...they NEVER adjust below the floor rate or start rate of the loan. So even if rates go lower, they will not adjust down in all cases.

These loans are so toxic that they are no longer written by banks and lenders. In fact, many of these loans were paired in combo loans or 80/20's. In this case, many homeowners face an adjusting first mortgage payment and cannot refinance because their two mortgages total more than their home is worth. Until now, homeowners had few choices, they could either pay the higher mortgage payments or walk away. At UpsideDownFlorida we can help you determine if a loan modification will work for you while saving you hundreds of dollars monthly.

Short Sale and Your Credit Score

2008-06-26T10:05:00.001-07:00

Recently, I have been getting several inquiries into the effects of a short sale on your credit score. I do want to preface this by stating everybody's situation is unique and thus generalizing may be over simplifying the situation. If you have always had excellent credit and continue to pay your other accounts (Cars, Credit Cards, Student Loans, etc.) on time you are likely to see a relatively minor impact on your credit. One of our recent clients had a short sale approved on their home in March and currently has a 751 beacon score. That is down about 30 points from the 780 they had previously. Understand in this situation the borrower had impeccable credit entering the situation. In this case below from Americas Servicing Company (ASC) you can see how the account was reported:

Address:
AMERICAS SERVICING CO
7485 NEW HORIZON WAY
FREDERICK, MD 21703

Address Identification Number:
04xxxxxxx

Status:
Transferred,closed/Paid,Closed.

As for a Foreclosure the damage is much more severe.

With a Foreclosure or Deed-in-Lieu of Foreclosure your credit score suffers significantly more than doing a short sale.
Homeowners will take a hit of 300 to 350 points, depending on overall condition of credit. This means if a seller's FICO score before foreclosure was 680, it could dip as low as 380. In addition it becomes a public record and the judgment remains on your credit report for 10 Years.

Home Prices Take a Big Hit in South Florida

2008-06-25T08:37:00.000-07:00

With a 27 percent drop in Miami housing prices since 2007 (For the purposes of this report, Miami includes Broward and Palm Beach counties) we are now approaching a reduction in values of almost 40% from the highs in 2005. South Florida has been mired in a housing slump for more than two years with no recovery in Site. The real estate downturn, along with higher fuel prices and a shrinking job market, is taking a toll on consumers and the economy and thus adding to more fuel to the fire.

In today's Ft. Lauderdale Sun-Sentinel this was reaffirmed with a quote from James O'Sullivan, a senior economist at UBS Securities LLC in Stamford, Connecticut.

"There's such an excess of inventories that we certainly expect to see more price declines. The economy is still weakening and housing still looks pretty weak."

To most Floridians this unfortunately does not come as a surprise as the real estate crash has impacted so many families irrelevant of income, credit or profession. At UpsideDownFlorida we want homeowners to understand you are NOT alone and there are alternatives to simply walking away. We specialize in fixing your mortgage problems and you never pay if we can't help you. To see your city's depreciation in 2007 see below:

City	# of Homes	Sales Volume				Median
		2008 (YTD/projected)		2007	+/-	2008 YTD	2007
Atlantis	1,237	17	41	46	-10.9%	$ 275K	305K
Belle Glade	1,879	18	55	65	-15.4%	$ 69K	142K
Boca Del Mar	4,629	70	163	178	-8.4%	$ 275K	363K
Boca Raton	36,718	563	1190	1,571	-24.3%	$ 370K	420K
Boynton Beach	29,179	508	940	1,600	-41.2%	$ 161K	218K
Cloud Lake	43	0	0	2		$ 0	220K
Coconut Creek	19,551	434	800	1,328	-39.8%	$ 130K	215K
Cooper City	9,680	147	348	401	-13.2%	$ 300K	350K
Coral Springs	37,076	761	1803	2,384	-24.4%	$ 304K	291K
Dania Beach	8,720	143	267	562	-52.5%	$ 155K	225K
Davie	25,984	395	828	1,596	-48.1%	$ 272K	259K
Deerfield Beach	32,129	784	1654	1,787	-7.4%	$ 80K	179K
Delray Beach	26,847	420	848	1,170	-27.5%	$ 205K	250K
Fort Lauderdale	67,066	1494	3070	4,731	-35.1%	$ 285K	342K
Glen Ridge	73	1	0	0		$ 105K	0
Golf	144	2	0	5		$ 1.3M	856K
Greenacres	13,694	254	493	669	-26.3%	$ 140K	188K
Gulf Stream	453	4	6	22	-72.7%	$ 1.6M	1.4M
Hallandale Beach	21,994	541	1198	1,717	-30.2%	$ 185K	294K
Haverhill	528	12	25	28	-10.7%	$ 215K	240K
Highland Beach	4,033	77	175	187	-6.4%	$ 432K	568K
Hillsboro Beach	2,199	36	87	75	16.0%	$ 300K	397K
Hollywood	51,468	1068	2390	3,246	-26.4%	$ 208K	260K
Hypoluxo	2,050	46	95	83	14.5%	$ 172K	210K
Juno Beach	2,450	46	86	88	-2.3%	$ 260K	400K
Jupiter	23,903	492	1049	1,156	-9.3%	$ 269K	320K
Jupiter Inlet Colony	229	6	9	11	-18.2%	$ 726K	1.1M
Lake Clarke Shores	1,456	21	54	62	-12.9%	$ 283K	294K
Lake Park	2,067	40	88	82	7.3%	$ 150K	199K
Lake Worth	9,788	193	392	456	-14.0%	$ 136K	199K
Lake Worth Corridor	2,560	49	84	206	-59.2%	$ 307K	220K
Lantana	3,663	70	144	142	1.4%	$ 172K	207K
Lauderdale Lakes	11,755	215	390	580	-32.8%	$ 69K	110K
Lauderdale-by-the-sea	5,657	116	259	251	3.2%	$ 384K	400K
Lauderhill	23,069	393	820	1,380	-40.6%	$ 105K	135K
Lazy Lake	16	1	0	1		$ 800K	949K
Lighthouse Point	5,174	93	189	251	-24.7%	$ 528K	415K
Loxahatchee Groves	774	6	11	37	-70.3%	$ 200K	349K
Manalapan	191	11	22	10	120.0%	$ 2.0M	3.8M
Mangonia Park	443	4	8	26	-69.2%	$ 111K	80K
Margate	21,487	419	898	1,164	-22.9%	$ 152K	190K
Miramar	35,440	760	1557	2,507	-37.9%	$ 260K	300K
North Lauderdale	10,526	204	406	767	-47.1%	$ 137K	220K
North Palm Beach	6,585	106	249	226	10.2%	$ 240K	275K
Oakland Park	14,649	317	686	1,039	-34.0%	$ 142K	177K
Ocean Ridge	1,025	15	29	29	flat	$ 650K	850K
Pahokee	994	9	19	33	-42.4%	$ 75K	72K
Palm Beach	7,624	146	324	387	-16.3%	$ 1.1M	1.2M
Palm Beach Gardens	22,483	460	1056	1,233	-14.4%	$ 290K	320K
Palm Beach Shores	734	8	13	35	-62.9%	$ 350K	450K
Palm Springs	5,833	69	122	277	-56.0%	$ 79K	142K
Parkland	6,976	190	432	705	-38.7%	$ 640K	729K
Pembroke Park	1,353	47	67	149	-55.0%	$ 55K	60K
Pembroke Pines	54,370	1018	2098	3,189	-34.2%	$ 240K	270K
Plantation	29,229	447	1016	1,396	-27.2%	$ 215K	250K
Pompano Beach	42,690	872	1969	2,484	-20.7%	$ 165K	211K
Riviera Beach	11,657	238	437	699	-37.5%	$ 207K	250K
Royal Palm Beach	12,223	313	638	622	2.6%	$ 220K	264K
Sandalfoot Cove	4,564	67	156	210	-25.7%	$ 195K	266K
Sea Ranch Lakes	206	2	16	8	100.0%	$ 1.2M	1.4M
South Bay	550	5	14	20	-30.0%	$ 115K	119K
South Palm Beach	1,617	23	40	48	-16.7%	$ 295K	269K
Southwest Ranches	2,151	30	63	82	-23.2%	$ 500K	892K
Sunrise	33,119	666	1450	2,206	-34.3%	$ 139K	208K
Tamarac	30,138	610	1236	2,009	-38.5%	$ 154K	194K
Tequesta	3,100	50	122	120	1.7%	$ 235K	274K
Uninc. Broward	3,173	89	176	196	-10.2%	$ 144K	216K
Uninc. Palm Beach (East)	78,353	1336	2779	4,026	-31.0%	$ 130K	219K
Uninc. Palm Beach (North)	7,347	151	315	322	-2.2%	$ 246K	324K
Uninc. Palm Beach (Northeast)	19,811	322	640	835	-23.4%	$ 265K	345K
Uninc. Palm Beach (Southeast)	11,411	184	341	599	-43.1%	$ 304K	415K
Uninc. Palm Beach (West)	159	2	10	5	100.0%	$ 78K	70K
Wellington	18,756	398	833	1,165	-28.5%	$ 324K	380K
West Boca	44,335	726	1684	1,821	-7.5%	$ 191K	255K
West Boynton	26,039	432	849	1,138	-25.4%	$ 235K	305K
West Delray	31,235	592	1291	1,309	-1.4%	$ 100K	172K
West Palm Beach	35,703	716	1372	2,457	-44.2%	$ 221K	254K
West Park	4,090	75	161	292	-44.9%	$ 160K	215K
Weston	22,429	423	1276	1,629	-21.7%	$ 381K	401K
Wilton Manors	4,648	131	262	505	-48.1%	$ 219K	374K

Housing Crisis Worst in 50 Years

2008-06-24T13:15:00.000-07:00

Well the smart people at Harvard have chimed in on the housing crisis with the following:

Boston, MA (AHN) - The current housing crisis appears to be the worst faced by the nation in 5 decades, according to the Harvard University's Joint Center on Housing Studies released Monday.
In its yearly State of the Nation's Housing report, the university wrote, "The national median single-family home price fell (for) the first time in 40 years of recordkeeping, leaving several million homeowners with properties worth less than their mortgages."
Home prices have tumbled down by over 18 percent since the last two years, while foreclosure rates hit a 34-year record-high. As a result there are over 10.7-month supply of unsold existing units and another 11-month supply of new homes, which is a 30-year record.
The Harvard researchers do not yet see an end to the housing crisis plaguing the U.S

http://www.allheadlinenews.com/articles/7011358555

None of this of course will come as a surprise to struggling homeowners and anybody whose profession is impacted by the housing market. Whether you are in construction, a realtor or a title attorney everyone has felt the pain effects of the downturn. One thing at UpsideDownFlorida we stress is that you are NOT ALONE. The housing crisis has crippled families financially indiscrimenently and shows no signs of letting up. In fact, more than 1 and 10 homeowners are currently late on their mortgage. There are however options that will provide relief to homewoners and our team of mitigation specilaist will be happy to answer any questions you may have. 1-866-60-MODIFY or info@upsidedownflorida.com.

Is a Short Sale the Answer?

2008-06-24T07:53:00.000-07:00

What is a Short Sale? A short sale in real estate occurs when the outstanding obligations (loans) against a property are greater than what the property can be sold for. Short Sales are a way for homeowners to avoid foreclosure on their homes and still be able to pay off their loan by settling with lender. The benefits of short selling over foreclosure are obvious. A foreclosure puts a long-lasting black mark on your credit history and the process can be long and costly. Short selling can be much faster and less expensive, and it doesn't leave a black mark on your credit like a foreclosure.

How Can We Sell Our Home For Less Than We Owe? If you've taken out a large mortgage to pay off bills or do home improvements, have an 80/20 Combo loan, or one of those toxic teaser rate loans- you may find it hard to refinance or sell your home because you owe more than your home is worth. You may also find yourself unable to keep up with your mortgage payments because of a recent layoff, divorce or illness. As a result more and more people are finding they can only sell their homes for less than they owe on their mortgages. At Upsidedownflorida, we work with your lender(s) to accept a short sale so you can avoid foreclosure and minimize credit damage.

For all the homeowners who are upside down and can no longer make their mortgage payment (because of either a job loss, divorce, or an option ARM that’s resetting higher), up to now the only option was, well, letting the bank foreclose and walking away. That’s not a good option since a foreclosure sticks on your credit record for at least 10 years and becomes public record available to everyone including future employers.

If you find selling your house for less than you owe on the mortgage is an option, you'll want to find a real estate agent who understands your situation. At UpsideDownFlorida, we work with a network of agents that have experience with short sales. Typically our realtors will take a much lower commission on short sales. Our agents sympathize with financial problems brought on by unexpected circumstances, and do whatever they can to help solve your mortgage problems. If you are currently working with a realtor or have one in mind we can work closely with them too.

How Do You Get My Lender(s) to Approve the Short Sale? Your bank will have to be convinced that you deserve to be approved for a short sale. At UpsideDownFlorida, we work directly with your lender to expedite the process and get results. Our team has over 40 years worth of combined experience servicing our clients. We work frequently with all of the top servicers, lenders and banks and leverage these relationships to solve your mortgage problems.

While this may seem obvious, now is not the time to rack up the purchase of luxury items, like fancy cars or jewelry. Your lender will see these debts on your credit report and become convinced you're a loose spender who doesn't deserve a break. It may also be necessary to provide the lender documentation of your financial hardship, such as paystubs, bank statements and so forth. While this may seem like an invasion of your privacy, try to think of it as the fastest way out of an otherwise overwhelming debt. Short Sales can take longer to close than more conventional sales, so plan accordingly. At UpsideDownFlorida however, we do our best to make the process fast and easy. If it works, you've avoided foreclosure and an ugly mark on your credit report. If it doesn't work, you'll know that you've done everything you could to avoid foreclosure and/or bankruptcy.

Will A Loan Short Sale Affect My Credit? A short sale minimizes the damage to your credit that would be caused be a foreclosure. Typically, borrowers see a 50-100 point reduction in their FICO score following a short sale. This, however, is significantly less than a foreclosure which typically results in a judgment and remains on your credit for 10 years and a FICO score reduction of over 300 points. Please note that any reduction in credit score as a result of a short sale can also be impacted by your payment history on other accounts and other mortgages. Thus, borrowers with no other delinquent accounts see less of an impact on their score than borrowers with multiple delinquencies on their accounts.

What Are The Advantages Of A Short Sale Over A Foreclosure? There is far less damage to your credit for starters. A foreclosure is one of the most damaging things that can happen to your credit. A short sale will drop your credit score, but not nearly as much (350 points is the average credit score loss for a foreclosure). A short sale will release you from all further obligations under the mortgage as well. If your property were to go to foreclosure, the lender is able to get what is called a deficiency judgment against you. In this case after the foreclosure the lender can come after you for this Old debt. This amount can be thousands of dollars depending on the size of your mortgage and their loss.

Finally Relief for Homeowners!

2008-06-01T14:48:00.000-07:00

At UpsideDownFlorida.com we provide mortgage solutions for struggling homeowners. Even if you owe more than your home is worth or don't have the greatest credit we can help you with some of the newest alternatives for struggling homeowners- Loan Modifications. Today we will explore what a Loan Modification is and benefits of a Modification.

What Is A Loan Modification? A modification to an existing loan made by a lender in response to a borrower's long-term inability to repay the loan. Loan modifications typically involve a reduction in the interest rate on the loan, an extension of the length of the term of the loan, a different type of loan or any combination of the three. A lender might be open to modifying a loan because the cost of doing so is less than the cost of default.

What Are The Benefits to a Loan Modification:

Lower Monthly Payments
Freeze Your Adjustable Rate
Fixed Payments
Elimination of Stress Related to Your Mortgage Problems
Avoiding Foreclosure and Maintain Good Credit
Not Forced to Sell in Down Market
You Stay in Your Home!

Why Would My Lender Agree To Accept A Loan Modification? Your Lender Does not want your home. They are in the business of Lending Money NOT property management. It comes down to simple math the bank rather take a guaranteed return on their investment today over a possible recovery of part of their investment later.

What Are The Advantages Of A Modification Over A Refinance? Loan modifications do not require costly closing costs, title fees and points/broker fees. Most importantly however modifications do not have pre-set credit requirements or LTV restrictions that limit refinancing options for most homeowners.

Will A Loan Modification/Short Sale Affect My Credit? When obtaining a loan modification there is no adverse affect on your credit.