Foreclosures Are Ahead of Workouts

 Growth in Foreclosure Sales Outpaces Workouts
 
Real Estate Roundup
By Inman News, July 2^nd

HOPE NOW’s Latest Data on Loan Mods, ARM resets
Lenders are speeding the pace at which they conduct workouts with troubled borrowers, but foreclosure sales are rising faster, according to the latest numbers from the HOPE NOW coalition of loan servicers. Based on the 163,649 foreclosure sales reported by HOPE NOW in April and May, foreclosure sales were on a pace to hit 245,473 for the second quarter, up 24 percent from 198,172 foreclosure sales in the first quarter. Based on the number of workouts in April and May, servicers were on track to complete 519,291 workouts in the second quarter, up 7.5 percent from the first quarter.  

In engaging in workouts with troubled borrowers, HOPE NOW loan servicers are relying less on repayment plans, which some critics have said are a short-term fix, and increasing the number of loan modifications. Based on the numbers for April and May, HOPE NOW loan servicers were on track to put in place 202,003 loan modifications during the second quarter, up 18 percent from the previous quarter, and 302,287 repayment plans, down 3 percent from the first quarter.

HOPE NOW also announced the results of a separate survey of subprime adjustable-rate mortgages with rates resetting in 2008. The results, representing approximately 60 percent of subprime loans, showed 45 percent of the 718,000 loans scheduled to reset between January and May were paid in full because the homeowner refinanced the loan or sold their property. Another 5.3 percent were modified by lenders, and 0.5 percent of loans that were current at the date of reset entered the foreclosure process.

Paulson: Gov’t shouldn’t always come to rescue
Treasury Secretary Henry Paulson said today the Bush administration will continue
a policy of seeking to avoid preventable foreclosures without impeding “necessary correction” in housing prices. As the housing market works through “past excesses,” Paulson said, “U.S. foreclosures will remain elevated and we should not be surprised at continued reports of falling home prices. Our policy continues to be to work to avoid preventable foreclosures while not impeding the necessary correction because the sooner housing prices stabilize and more buyers return to the market the sooner housing
will begin to contribute to economic growth.”

Speaking in London, Paulson also said the financial regulatory system should be restructured to allow the government to intervene when events pose a risk to the entire system, without creating the expectation that the Fed will step in to prevent the failure of individual institutions. Paulson called the Fed’s decision to loan money to investment banks — after providing a $30 billion loan to facilitate the sale of Bear Stearns — an “extraordinary step” necessary to preserve the stability and of the financial system.

While it is clear that “Americans have come to expect the Federal Reserve to step in to avert events that pose unacceptable systemic risk,” Paulson said, “it is imperative that market participants not have the expectation that lending from the Fed, or any other government support, is readily available” because they will take too many risks. While there is widespread belief that some institutions are “too big too fail,” Paulson said “the real issue is not that an institution is too big or too interconnected to fail, but that it is too big or interconnected to liquidate quickly.”

Although Paulson did not mention Fannie Mae and Freddie Mac by name, legislation now pending in the Senate would create a new, independent regulator of the government-chartered mortgage financers, which would have the power to place the companies in receivership if they became insolvent.

To receive the article, “Buying Bank Owned Homes”, go to www.CentralValleyHomes.com

 

ANSWERS TO COMMON MORTGAGE QUESTIONS

Here are some answers for some common real estate questions.  It is useful
to be informed about the home buying process. Hope this is helpful!  

Some Answers to Frequently Asked Mortgage Questions
by Jack M. Guttentag
  

Below are answers to some of the most common questions I am asked by readers.

Does mortgage insurance protect me if I’m disabled or lose my job?

No, mortgage insurance protects the lender against loss in the event that you default. You pay the premium, but the lender receives the protection.

The sole benefit to you is that, with mortgage insurance, lenders are willing to make loans with down payments smaller than 20 percent of the purchase price or appraised value. I should add that a few mortgage insurers have experimented with programs that provide the kind of protection to borrowers that you are asking about, but they have never caught on.

What is the best type of loan to take if I know I will be paying it off within two years?

When your time horizon is very short, you want to minimize your upfront cost. The best way to do this is with a no-cost three-year or five-year adjustable-rate mortgage (ARM).

A no-cost loan is one with an interest rate high enough to command a rebate from the lender (negative points) that will cover your settlement costs. Avoid interest-only or option ARMs because these minimize your payments rather than your upfront cost.

How can I know whether a mortgage broker or loan officer is a predator?

You can’t; there is no directory of predatory loan providers. Checking the Better Business Bureau or the state licensing agency is usually a waste of time, because very few misdeeds are reported and predators change their names and locations.

But this question is only posed by borrowers who have allowed themselves to be solicited, which is a big mistake. Select your loan provider, don’t be selected. If you were a wild-mushroom fancier who lived in the woods, which are full of mushrooms, and a mushroom knocked on your door and said “eat me”, you wouldn’t, because it might be poisonous. What the mushroom fancier does is choose from among those he knows are safe, ignoring the rest. You should select a loan provider that way.

If I refinance two years after purchase, why do I need a new title insurance policy?

You don’t, but the lender will probably require a policy that protects him against the risk that some liens might have been placed on your property during the two years since the policy was written. Title insurance policies are backward looking; they cover incidents prior to the date of the policy. Anything that happens after that date is not covered.

If only a few years have elapsed since the previous policy, however, you are entitled to a discount, because the insurer doesn’t have to do a lot of work to bring the policy up to date. Be sure you ask for the discount; if you don’t, you may not get it.

Am I in trouble because I borrowed as an occupant, then changed my mind and rented the property?

 

Lying on your application is a fraud, but everyone is entitled to change their mind. If you occupy the house for a while and then rent it, you are probably in the clear. If you never occupy it, appearances are against you, but if you make all your payments on time, nobody is going to care, and the chances are that nothing will happen. If you never occupy the property and become a chronic delinquent, a flag goes up opposite your name, an investigation could reveal your transgression, and an action might be taken against you.

What is the major risk in buying a home under a lease-purchase contract?

The option to purchase a house under a lease-purchase contract is contingent on the buyer paying the agreed-upon rent every month. If the buyer doesn’t pay, the seller doesn’t have to sell. But the devil is in the details.

A contract that allows the seller to back out if the buyer is late only once, by a single day, is clearly unfair. The buyer should read the contract carefully to make sure that this provision is not unreasonably onerous.

What should I do if the lender mistakenly raises my tax escrow payment?

Pay it, and then make your own calculation of what the escrow should be and submit a “Qualified Written Request” under the Real Estate Settlement Procedures Act to get your money back. 

The worst thing you can do is refuse to pay, because the lender will place your insufficient payment in a suspense account, which means you are delinquent and on your way to having your credit ruined.

For Real Estate Information go to www.CentralValleyHomes.com