The Good & Bad on Loan Modifications

Good news on the loan modification front! Loan modification approvals are up 69% in the 3rd quarter of 2009. Why are banks increasing the approval rate?

a) they have the Christmas spirit
b) they have so much money they are giving it away for the holidays
c) they are getting heat from the government and media

I think we all know what the answer is. There is also bad news. All approved loan modifications have had a 40% default rate. Why? Well, because a lot of the loan mods have the same or higher payment amounts than the original payment that was defaulted on! It's all about manipulating the numbers to make it look good when the government regulators start asking questions. My advice, keep up the pressure and write to your local Governor, Senator, and Representatives, and pull your money out of from the likes of B of A and Wells Fargo!

Upon further review... New short sale program lacks teeth!

I posted a couple of weeks ago about the government passing a new streamlined short sale program. I'd like to go over my thoughts on the program now that I have had some more time to evaluate it.

The key aspects of the program are:
1. The banks participating in this program have 10 days from a submitted offer to accept or deny the offer. Currently this time frame ranges from 30 days on the good side to 2 yrs if its Bank of America.
2. The banks would have no recourse after the acceptance of the short sale. Currently, if the short sale approval does not have the correct "verbiage" the bank can and will on occasion sell the deficiency to a collection agency.

This is a start and I have been preaching about reform for 3 yrs. The problem with this program however, is it does not address secondary lien holders which are in many cases the banks themselves, that usually hold up the transaction. The program allows secondary lien holders to receive a maximum of $3k. Right now secondary lien holders are asking much more than $3k. This is also a voluntary program, how realistic is it to think that the banks are going to be nice and agree to $3k when they are owed $100k and they know they can hijack the deal unless someone gets them some additional money? That will never happen. I applaud the government for trying but this program lacks the teeth that is needed when dealing with the likes of Bank Of America!

New guidelines for banks for carrying out short sales

I have been preaching for 3 years now about the callous and deceptive practices of banks. In the last 2 days, we see the Government finally setting rules for banks to follow regarding loan modifications and short sales. Tuesday, I posted an article about loan modifications and today here is the article for short sales.

http://www.dsnews.com/articles/treasury-releases-guidance-for-making-home-affordable-short-sales-2009-12-01

I am hopeful that this will help quicken the response time for banks regarding short sales decisions but I can already see quite a few things regarding the guidelines that concern me. I'd like to go deeper into the possible problems in a future post but I'm still glad to see at least they seem to recognize that the problem exists. Let's hope we see some positives from the new guidelines!

Stricter regulations for banks, finally!

So I got a call from a local politician asking me if my bozo bank videos were based on real stories. I told him absolutely and after about a 2 hour conversation, where he was amazed that such practices were happening even here in Portland, he thanked me and told me to keep up the good work. Honestly, it was a satisfying feeling for me to know that maybe the message is starting to get heard by the higher ups.

I came across this article yesterday and it seems the white house is going to be cracking down on banks to push forth more loan modifications with stricter regualtions. Now obviously there is no connection regarding my phone call with my local government official, but I thought the timing was pretty intriguing. Let's hope they are starting to listen to the masses and we will see if this is just political hyperbole or the start of real change.

Here is the full article: http://www.dsnews.com/articles/servicers-face-penalties-ill-repute-as-administration-rallies-for-more-modifications-2009-11-30

Is the uptick in home sales for real?

Home sales shoot up in October. The expiring tax credit, low interest rates and affordable prices all contributed to the uptick nationally as well as locally here in the Portland real estate market. I personally sold 15 homes in the month of October.

What looms ahead? I think we will see a seasonal lull with February and March of 2010 being big months with the April deadline for the extended credit. It is the months following that are a little worrisome. Is the tax credit keeping prices up and when that goes away, will we see like in the car industry a screeching halt?

Here's the full story: http://www.bloomberg.com/apps/news?pid=20601068&sid=at8txtF7KVaA.

Home buyers tax credit extension!

This week, the Senate is expected to pass an extension of the tax credit that was originally going to expire Nov. 30. Buyers who sign a purchase agreement by April 30th and close no later than June 30th can now claim the credit. The extension will apply to higher income buyers. Previously, the credit was available to individual filers making $75,000 a year or less. For couples the limit was $150,000. The new income limit will be $125,000 for individuals and $225,000 for couples.

There’s also something in it for move-up buyers: Before, you couldn’t claim the credit if you owned a home in the past three years. Now, if your last home was your primary residence for at least five years, you can claim $6,500 in tax credit if you buy a new home. However, the new house can’t cost more than $800,000. Hip hip hooray! I think that this is one of the few ideas that our government has actually made a good decision on. You might say: "Of course you do Nick! You are a Realtor!" But why should I, as a tax payer that is not buying a home, have to pay the bill? History, my friend. Every recession and boom has led with housing, and trust me this will help sales.

In the last three months we have had a giant increase in sales on Portland homes priced under $300k, and that is the general feeling across the country. With the added tax credit for buyers upgrading, low interest rates, and a hot market under $300k, this will spur sales in a price point that was dead. So my vote is for giving the stimulus money to the American people and let us take ourselves out of this recession. We all know the national banks are not going to.

Shadow inventory. What? Where? When?

Shadow inventory. We wrote about this 2 months ago. Where is it ? What is it? It is around the corner like the experts say? This is where the banks do not re-list properties that they have foreclosed on, or they just don't foreclose at all. The debate is about if this is the right thing to do. I think it might be one of the only smart things the banks are doing right now. Common sense says why flood the market when that will only drive prices down instead of limit the inventory. Look at the diamond industry, diamonds are not rare stones and I would say they have done a pretty good job at keeping prices high. Is it ethical? I will leave that up to you!