Archive for August, 2010

Jobless Claims Up

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  • Posted August 6, 2010 at 9:27 am

The Labor Department says there were 479,000 initial jobless claims filed in the week ended July 31, up 19,000 from a upwardly revised 460,000 the previous week.  The weekly figure is the highest since April 10, when 480,000 initial claims were filed.  The number of claims was higher than the 455,000 claims expected in a consensus estimate of economists surveyed by Briefing.com. 

The 4-week moving average of initial claims, which is calculated to smooth out volatility, was 458,500, up 5,250 from the previous week’s upwardly revised average of 453,250.  The government said 4,537,000 people filed continuing claims in the week ended July 24, the most recent data available. That’s down 34,000 from the preceding week’s upwardly revised 4,571,000 claims.   Economists surveyed by Briefing.com were looking for 4,530,000 ongoing claims. 

The 4-week moving average for ongoing claims climbed by 25,750 to 4,575,500 from the preceding week’s upwardly revised 4,549,750.  The latest claims data has little bearing on the government’s closely watched employment report for July, due on Friday, as it falls outside the survey period.

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20 Million Underwater Mortgages by 2012?

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  • Posted at 9:26 am

More than 14 million borrowers were underwater as of Q1/10, and with a further 10.8% decline in house prices expected relative to Q4/09 levels, another 6 million borrowers are likely fall into negative equity by the end of 2011, according to commentary today by Deutsche Bank.  The presence of negative equity goes hand-in-hand with an increased likelihood of strategic default, as borrowers may sometimes not be willing to pay the mortgage when the house has lost substantial amounts of value.  The firm noted that, even when strategic default makes economic sense, many borrowers resist on moral and social grounds, as well as from fear of legal consequences.  The existence of recourse — when a lender is able to pursue a borrower’s other assets — also acts as a disincentive against strategic default. 

Deutsche Bank noted 11 states are considered non-recourse — though not all explicitly forbid deficiency judgments on homes or on purchase loans. Underwater borrowers are more likely to default in non-recourse states. The greater the negative equity, the higher the cumulative default rate.  “Walk away or strategic default from a house with negative equity makes economic sense, especially in locations that have less expensive rentals,” Deutsche Bank researchers said.  “Many existing academic studies model homeowners’ default decision based on the theoretical hypothesis that a borrower would exercise a default when it is in-the-money, i.e., when the borrower’s house has negative equity. Therefore, a homeowner with negative equity would default even though they can still afford to make their mortgage payments.

A short sale can help save your credit and allow you to stay in your home longer. I specialize in helping homeowners avoid foreclosure by selling their home through a short sale. Please call me at 760.219.3964 or e-mail me at pam247re@hotmail.com for more information.

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The Short Sales Process

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  • Posted August 3, 2010 at 10:20 am

Short sales are becoming an attractive option to foreclosure for a growing number of homeowners. In the last year, short sales have overtaken REO properties as the most common type of listing found on the MLS. The reason for their popularity is that short sales make sense for both the homeowner and the banks when the only other available option is foreclosure.

 

Short sales make sound financial sense to banks and that is why they are willing to do them. The down the line savings are worth more to the lender than the one time loss they take when agreeing to short sale a property. The lender benefits in the long run because the loss taken on a short sale is less than the costs associated with holding REO properties. Additionally the freeing up of capital to lend to enables the bank to recoup its loss in a shorter amount of time. 

 

Homeowners get to sell a property that they cannot afford for market value which is usually significantly lower than what they owe on the property. Additionally homeowners avoid the damage a foreclosure can do to their credit and they face little or no tax ramifications. Most people who sell their home as a short sale can qualify to buy another house in less than 2 years.

But not every homeowner will qualify for a short sale. Before a bank will consider a short sale some qualifications need to be met. If a homeowner has ever applied for a loan or modification of the terms on their mortgage they are already familiar with what the bank needs to see before agreeing to short sale a property.

Lenders want to see that the homeowner is facing financial hardship and can no longer afford to make their payments. They also need to see that the property has decreased in value to the point where the homeowner is upside down (owes more than the property is worth) on their mortgage.

Lenders will require a hardship letter outlining the reasons for the homeowners’ financial hardship. This letter should be no more than one page and concise. The letter needs to state facts that support the claim of hardship and can be proven. The letter should be used as a cover sheet for documents that will support the claim of hardship. This package should include bank statements, tax returns, unpaid bills, and any other documents that provide evidence of financial hardship.

The next steps should be taken by the homeowners’ realtor. The agent will need to provide a signed listing agreement with a price that reflects the current market and neighborhood values. The agent must also provide evidence that supports the listing price. The agent will also need to provide an estimated HUD in order to show the lender what the proposed proceeds of the sale will be.

All of the paperwork that proves the hardship needs to be combined with the agent’s paperwork and submitted to the bank. This is known as a short sale package and it must be submitted to the lender’s loss mitigation team.

Only after a complete short sale package is submitted to the loss mitigation team will negotiations begin. Quite a few lenders require the short sale package to also include an offer from a serious buyer before they will begin the negotiation process. Have your realtor check the specific policy of the lender you are trying to short sale with to make sure the package is complete.

A complete short sale package will cut down on the time it takes to negotiate the short sale and shorter negotiation time is very important because time is of the essence.

Lenders will foreclose on a property if a short sale cannot be negotiated within a certain amount of time. If a property is in foreclosure and has a sale date the short sale must be approved before the foreclosure date. Some lenders will put off the sale date on a property that is in the short sale process but many do not–check with the bank you are trying to short sale with to find out their specific policy.

The short sale negotiation process takes between 60 days and 6 months so those selling need to pay attention to which stage of the process the sale is in. There are no guarantees about how long the negotiation will take and sellers should be aware that they will have to move when the transaction is closed. But it is also very important for the homeowner to stay in the property throughout the negotiation period because banks are more willing to consider a short sale when the property is lived in.

The decision to short sale a property that is facing foreclosure is a difficult one to make but deserves consideration because they provide a tolerable compromise between lender and homeowner. Despite the extra work involved with this type of transaction more homeowners in distress are choosing to short sell rather than face foreclosure.

Short sales provide an acceptable compromise for many homeowners and they work. Because they work short sales now account for the majority of listed properties for sale in the Bay Area and are having a major affect on every aspect of the market as a whole.

I’m a short sale specialist and can answer any questions you may have about the short sale transaction. I can help you avoid foreclosure by assisting you in short selling your home. I can also provide you with a detailed market analysis for your property at no charge.

I also have direct access to hundreds of REO properties in the Coachella Valley and am happy to assist any and all looking to purchase REOs. Please contact me with any real estate, mortgage, or modification questions you have. I may be contacted at pam247re@hotmail.com or 760.219.3964.

 

 

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