Bank Owned Foreclosed Homes And Government Foreclosure Properties

Friday, October 23rd, 2009

Foreclosures are a way lenders resort to in order to recover the amount outstanding on a defaulter by selling off or by taking control (repossession) of the mortgaged property. The process begins when the borrower defaults on his payment and the lender files a notice of default, also called a Lis Pendens, against him/her.

The foreclosure process can occur in four ways: The first is the borrower/owner repays the amount owed during the grace period, which is determined by the laws of the state. This period is also known as the pre foreclosure period. In the second way, the defaulting owner sells the property in the period of pre-foreclosure and pays the outstanding amount in order to spare his credit history a blot. In the third way, the property is sold off at an auction towards the end of the pre foreclosure. The fourth way could be the lender taking control of the property either by way of agreement with the owner, or by purchasing (repossession) it at an auction. Such repossessed houses are also called bank-owned, or real estate owned (REO) properties.

To buy foreclosed properties it is important first to identify them. This can be done by logging on to appropriate websites on the Internet and searching for the property status on the property search page. Next comes securing the financing for the foreclosure, then contacting a real estate agent who can guide one through the process of buying foreclosures and the last but not the least is contacting the owner during the pre foreclosure period, the grace period during which the owner can sell the house directly to a third party to spare his credit history a default stigma. One can buy pre foreclosure period properties at a good 20-40 percent discount to the market value.

One also needs to contact the trustee to confirm the date of auction, so that you can in between contact the owner who is in default and work out a last minute deal with him/her. If the property is bank owned, then one needs to contact the asset management department of the lender to know the process for making an offer for their foreclosures.

Finally, if one has never purchased foreclosures before it is advisable to hire the services of a real estate agent who will guide you through the process of making the offer. It is important to know bargain potential by knowing the market value of the property, the amount owed and any other liens or liabilities that the owner has in regards to the property. All this can be known from websites and doing a proper search under the property details section.

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Thursday, February 12th, 2009

Help is on the way for people wanting to buy a home amidst Brooklyn foreclosures. The Brooklyn Center has planned to help in excess of 100 home buyers in buying amidst the hundreds of Brooklyn foreclosures’ empty homes.

This program is to receive its funding from a commercial ‘tax increment district’ wherein every eligible home buyer will get up-to $10,000 to cover down payments, or closing fees for buying homes which are vacant and have been registered by the sellers within the city. This money comes in the form of an ‘interest free’ loan which will be pardoned off if the home is occupied by the owner for 5 years.

The city’s mayor, Tim Wilson, said that their objective is to obtain more ‘single family’ housing and encourage people to live in foreclosure affected homes. This move comes as part of a particular legislation that was passed in 2008 which gives Brooklyn Center the authority to use a portion of the funds created in a ‘tax increment district’ for this program that spans across the whole city.

This program also aims to help buyers with lower incomes; with single buyers or couples earning up-to the metro’s median income. Families with three or more members can have earnings up-to 115% of the metro’s median income.

The program will also offer funding of up-to $7,000 to help with repayment of loans taken out for home improvement, and will also provide funding to tear down buildings in run down conditions in order to encourage redevelopment in accordance with specific neighborhood requirements.

Therefore, if you plan to buy a house in the near future, and with prices of homes still being low, looking at Brooklyn foreclosure properties could very well get you a great deal.

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Tuesday, January 13th, 2009

A document detailing how much a borrower should pay in fees and interest rates and how much brokers will earn, is hailed by the U.S. Housing and Urban Development (HUD) as its answer to the country’s foreclosure crisis.

The HUD requires all brokers and lenders to use its Good Faith Estimate guidelines starting 2010 in an effort to abate the foreclosure problem.

The document contains several questions that brokers and lenders need to answer, such as their initial loan amount, interest rate, the possibility that their interest rate will increase, when the first rate increase will be, the maximum possible amount of increase and maximum possible monthly due.

Assemblyman Ted Lieu criticized HUD’s guidelines saying that it failed to stop the abuse of some industry incentives, such as the yield spread premiums (YSP). Lenders pay an YSP to brokers for making a deal with an interest rate higher than other rates in the market.

Lieu further noted that disclosure-based deregulation rules adopted by the Wall Street have only caused financial disaster.

Meanwhile, HUD Secretary Steve Preston explained that Real Estate Settlement and Procedures Act (RESPA) aims to give homebuyers transparent information to help them understand what they have agreed or signed to do, and thus protect them from foreclosure.

He adds that HUD wants to help homebuyers make an informed decision to help them avoid situations that might lead to foreclosure.

Preston also explained that HUD is trying to create a balance between the quality of information it is providing to homeowners and the mortgage industry’s ability to provide the needed information.

RESPA, according to Preston, is based on good faith estimate, a document that would outline what the loan is to help borrowers avoid foreclosure.

Preston believes that it is the responsibility of the HUD to improve the loan process to help the industry and homebuyers and eventually, alleviate the foreclosure crisis.

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Monday, January 12th, 2009

In a testimony before the U.S. House Financial Services Committee, Henry Paulson, secretary of the Treasury Department, rejected Democrat lawmakers’ proposal to use a portion of the Troubled Asset Relief Program’s (TARP) $700 billion fund to help reduce foreclosures.

Paulson argued that the federal government’s bailout program is designed to stabilize the financial industry and improve the flow of consumer credit. He adds that the program is not a solution for all economic problems of the country.

Representative Barney Frank pointed out to Paulson that the bill is also intended to reduce foreclosures.

Paulson also argued against a foreclosure relief plan, which was proposed by Sheila Bair, chairwoman of the Federal Deposit Insurance Corp. (FDIC).

Bair is seeking support for a loan modification plan using a portion of the bailout fund that she claimed could go a long way in protecting about 1.5 million homeowners from foreclosure.

She said that it is important to use the TARP to hasten the pace of the mortgage relief program in order to stop and reverse the increasing trend of foreclosure that is destroying the country’s economy.

Paulson has committed $250 billion from the $700 billion bailout for purchasing shares in banks. He pointed out that a contribution to a federal initiative for consumer finance and capital injections are some of the best uses for the bailout money.

However, Paulson clarifies that he has not closed his door for the idea of using the bailout money for foreclosure mitigation. He said that his department will continue to review and find programs that will protect the taxpayer. He had scrapped his initial plan for the relief program which was to buy distressed assets from financial companies to unblock lending.

The Treasury Department prefers to allocate a portion of the bailout funds to improve securitization in the secondary market and strengthen consumer credit.

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Thursday, January 1st, 2009

With the mortgage crisis caused by the mortgage blowup that has been brought about by increasing number of foreclosure properties, lenders and government agencies have found out that loan modifications are a mixed benefit for them, and it is the best possible solution for the banks and the consumers.

Loan modifications require a lot of effort. Though it has few requirements, its guidelines are kind of vague. Also, training bank agents on how to deal with modifications is hard since every case is different from the other. The entire process of loan modifications is time consuming, giving headaches to the mortgage industry.

The up side of the loan modifications for the lenders is that, their records will not show bad debts but show active and paying loans. Since investors prefer banks with less to no pending foreclosures and bad debts, banks make an effort to show profits instead of loan failures on their records to get customers.

Sometimes, the process of loan modifications is prolonged by consumers trying to negotiate on their own since they are not knowledgeable enough about it. Without financial counseling, a loan modification might be useless after a few months, making the homeowner ineligible to loan modification. This makes it better for lenders to negotiate with a professional negotiator because it streamlines business, it gives most of the consumers the best possible loans, plus it makes the entire process easier. Also, what makes it good to deal with professional negotiators is that they are open about the feasibility of the modification of the borrower.

What upsets the entire loan modification process and the industry as well is actually those negotiators who do it themselves and does not understand RESPA, TILA, and banking regulations governing the modifications of home loans.

Consumers facing foreclosures must be careful and diligent as they attempt to negotiate for possible loan modification.

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Wednesday, December 31st, 2008

The median price of U.S. home resale plunged to an unprecedented 11.3 percent to 183,300 from 2007, and is expected to continue decreasing over the next few months due to worsening credit conditions and foreclosure properties. This is the biggest decrease on a year-over-year basis since records in 1968 began. According to The National Association of Realtors, resale fell 3.1 percent in October to a yearly rate of 4.98 million units.

The Midwest has been leading falling home prices with a 6 percent drop. This is followed by a 3.2 percent fall in the South, a 1.6 percent drop in the West, and 1.2 percent decrease in the Northeast. In total, resales have plunged at a rate of 4.96 million this year. Experts predict a resale decrease to a national annual rate of 4.5 million to 5.2 million.

Meanwhile, the resale of single-family homes dropped 3.3 percent to a 4.43 million annual rate, while condominium and co-op resale decreased 1.8 percent to a rate of 550,000.

The problem has not been helped by increasing number of repossessed houses. According to foreclosure tracking firm RealTrac Inc., falling home prices have increased foreclosure filings to 25 percent last October compared to 2007.

U.S. homebuilders have also been affected greatly by increasing foreclosures. Figures show a 65 percent drop in home construction in October from a high in January 2006. Building permits have also fallen to its lowest since records began in 1960.

Stuart Miller, chief executive of the second largest U.S. construction firm, Lennar Corp. declared that foreclosures are dominating the homebuilding world and are more intense than in the past.

With the worsening housing scenario, it is unlikely that home resale will increase. Chief U.S. economist Maxwell Clarke from the New York-based IDEAglobal says that even more homes are expected to foreclose. Couple this with the already large number of homes on the market, and the possibility for improving housing market conditions seems nil.

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Monday, December 29th, 2008

The suspension in foreclosure properties announced by Fannie Mae and Freddie Mac last week received very positive feedback from the public.

Tiffany Edwards, a mother in Tampa, has been troubled by foreclosure until she heard about the suspension last week. At the moment, her husband is the only income earner in the family. She has just found a new job a few weeks ago, not in time for the scheduled foreclosure of their home. Thanks to the suspension, she and her husband can work out some plans so they can stay in their home for the time being.

This is the same scenario for the other sixteen thousand families in the country. They will be relieved of stress brought by foreclosure for the entire duration of the holidays.

Aside from the suspension, the two companies also offer a new loan modification program where mortgage payments would not exceed 38% (inclusive of taxes and insurance) of the pre-tax monthly income of a household.

Experts say, however, that while the measures might be helpful to some homeowners, its effects are not for the long run. The moratorium ends on January 9, 2009. After that date, families could be evicted all the same.

Also, the number of properties qualified for reprieve represents but a small part of the total number of homes to be lost to foreclosure.

The suspension covers only the loans under Fannie Mae and Freddie Mac which are only one-fifth of the total loans in the country. Furthermore, not the entire twenty percent satisfies the conditions for eligibility – the mortgaged home must be occupied by its owner, and delay in payments must be three months at the least.

Distressed homeowners might have been given a moment to breathe, but if the foreclosure crisis is to be fully addressed, long-term measures must be adapted.

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Thursday, December 4th, 2008

Just as the end of the housing crisis is far from sight, a new crisis begins. Commercial establishments are now beginning to enter the foreclosure situation. Malls in Georgia and Michigan are among the first to experience these foreclosures. Next in line are hotels in California and Arizona.

Analysts say that numbers are expected to double by the end of 2009. Commercial mortgages are paid over a period of only five to ten years, unlike residential loans where payments are not due until thirty years. The bigger amounts are due at the latter years for commercial establishments, that translates to the next couple of months for those which paid little amount at the start of their loans.

The commercial crisis has big repercussions. With businesses giving in to foreclosure, operations would stop, employees would be unemployed, taxes from employment would go down, and budget for government services would eventually decrease.

Adding to the dilemma is that investors are no longer interested in acquiring commercial foreclosures. Hence, banks refuse to provide these corporations with refinancing options.

Also, some banks have already sold mortgages to investors over the past few years which brings the situation out of their control.

Even worse, one of the last pieces of hope for these foreclosure-threatened commercial establishments has vanished. The US was supposed to shell out part of the $700 billion financial guarantee to redeem unsound assets from banks.

A recent announcement by Treasury Secretary Henry Paulson, however, declares otherwise. He said that the government does not anymore plan to buy problematic investments.

At the moment, the only piece of hope remaining for these businesses is a stable economy. They should start to expand and earn the trust of investors once again. Otherwise, there will be no seeing to an end to these foreclosure cases any time soon.

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Monday, December 1st, 2008

Critics are worrying that the new loan modification plan initiated by the Federal Housing Administration and major financial institutions may not be sufficient to help a big number of homeowners in danger of losing their homes to foreclosures.

They have pointed out several cases of borrowers in trouble who are seeking help from their mortgage companies but did not receive any. These homeowners, who are waiting for help in making their monthly payments, would lose all hope upon receiving a failure notice from the company.

According to experts, mortgage servicers are focused mostly on loan payments, including the management and distribution of these loans. They lack the manpower and skills to deal with defaults, much more to handle requests from homeowners facing foreclosures. This failure to assist homeowners in their time of need have sown the seeds of distrust that created an impediment for homeowners today to participate in a new program to address this critical issue of foreclosures.

Federal officials have recently announced a new program to prevent foreclosures. This new program is offered to loans handled by Fannie Mae and Freddie Mac, the two mortgage giants that were recently taken over by the government. This new program was modeled after a proposed plan from the Federal Insurance Deposit Corporation who has experienced success when they took over IndyMac Bank.

The said program is targeting homeowners who are delinquent for more than 90 days. Their loans will be restructured to trim down their mortgage payments down to 38 percent of their monthly incomes. This would make their payments more affordable and will come from a reduction of interest rates, extended loan terms or deferred payments. With easier and regular payments, foreclosures could finally be averted.

The Federal Housing Finance Authority urged mortgage servicers and securities investors to follow this new government program and make it a standard for the whole industry. However, critics say that in order to get full support from servicers, the government should make loan modifications from these programs mandatory.

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Tuesday, November 25th, 2008

CitiMortgage, the fourth biggest mortgage lender in the United States, has launched a payment program aimed at helping homeowners who are having difficulty meeting their mortgage payments avoid the threat of foreclosure.

The homeowners assistance program targets about 500,000 customers of CitiMortgage who are still able to pay their monthly mortgage payments on time but who resides in areas where unemployment rates are increasing and prices of homes are rising.

CitiMortgage Chief Executive Officer Sanjiv Das assures borrowers that the lender will help modify their loans before they miss any payments that may lead to foreclosure of their properties.

The said plan is patterned after the modification program of the FDIC IndyMac. The FDIC program adjusts mortgages for homeowners who are delinquent so that their payments will not be over 38 percent of their total income.

CitiMortgage’s program calls for modification of mortgages that are at-risk to 40 percent. The lender will also adjust loans by cutting the principal owned by homeowners, extending the loan term or lowering the interest rate.

The lender can also modify the monthly payment of borrowers to make it affordable by extending the mortgage loan up to 40 years and then lowering the interest rate to at least 1 percent for two years. This option will allow borrowers to avoid foreclosure.

This program will not be offered to borrowers who are already behind their mortgage payments. It is only for those who are at risk of defaulting on their payments because of circumstances, particularly job loss.

Meanwhile, CitiMortgage has announced that its moratorium on mortgage foreclosures is extended. To be eligible for the extension, homeowners have to stay in their homes which are their principal residence, must be financially capable of paying affordable mortgage payment and must have a good business relationship with the lender.

The lender believes that extending the moratorium will help about 50,000 families avoid losing their homes to foreclosure.

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