Bank Owned Foreclosed Homes And Government Foreclosure Properties

Wednesday, December 10th, 2008

At the House Financial Services Committee hearing on Tuesday, Treasury Secretary Henry M. Paulson was rebuked by Democrats when he refused to budge on his department’s decision to use the $700 billion Troubled Asset Relief Program (TARP) funding on investments that would stabilize the financial system and not on anti-foreclosure spending.

Paulson insisted that the TARP plan was established primarily to prevent the collapse of the country’s financial system and was not meant to be used as an economic rescue package.

In their frustration, the Democrats bombarded Paulson with accusations of unfairly leaving individual homeowners out in the cold while warmly offering $290 billion to the big insurance companies and banks. He was also accused of baiting the lawmakers for bill approval and then ignoring their foreclosure concerns after the bill had their signatures.

Committee Chairman Barney Frank, a Massachusetts Democrat, was especially furious with Paulson. Frank took him to task by referring to a four-page document that lists the provisions of the original TARP bill. He asserted that the bill was full of authorization to Paulson to enable him to spend money to reduce foreclosures.

But Paulson was insistent. He stated that TARP should be invested and not spent.

In contrast to Paulson’s statements, Sheila Bair, head of the Federal Deposit Insurance Corporation, asserted that the nation could be plunged into a disarray of five million foreclosure homes over the next couple of years if the federal government did not do anything for the distressed borrowers.

The FDIC plan requires the Treasury to spend about $24 billion from the TARP program to help mortgage banks refinance the mortgage loans of homeowners in danger of foreclosure.

Paulson was not only censured about his stand on foreclosures; he was also denounced for his refusal to allocate money from TARP to help revive the ailing automobile industry.

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Tuesday, December 9th, 2008

Once a thriving neighbourhood within the Hillsborough community in California, Otay Ranch is a now a picture of desolation as 60 homes went into foreclosure from 2005 to August 2008.

The 295-home neighbourhood was designed and constructed by Pacific Coast Communities and Oakwood Development five years ago. During its peak, houses in the area with three to five bedrooms were valued as high as $500,000.

The increasing home equity then helped boost the neighborhood’s economy and spurred construction of restaurants and retail centers in the area. Today, home prices have fallen drastically with properties selling for as low as $300,000.

It is estimated that sixty houses, one per five households, went into foreclosure from 2005 to August 2008. Several small businesses in the neighborhood have closed while the remaining retailers are having difficulty keeping their businesses open.

School attendance went down as students leave suddenly because their homes were foreclosed. Olympian High School head counselor Julie Hitchcock said that an estimated 10 percent of over 1,300 students of the school had suddenly stopped attending their classes from January to February of the current school year. She believes that majority of student departures is a result of foreclosure.

Majority of the 60 houses were repossessed by lenders 2 to 3 years after their owners purchased them.

Sam Mendoza, a property agent, said that in 2007, about 36 sales in the neighbourhood were of foreclosed properties. He expects more foreclosed homes to be put on the market because of the increasing number of payment defaults in the area.

Meanwhile, some residents in the neighbourhood are complaining that the increasing number of abandoned homes has made the area a sad place to live in.

Some residents who purchased their houses and financed them with adjustable mortgages are concerned that their payments will go up as market value of properties in the area continues to decline due to the foreclosure crisis.

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Monday, December 8th, 2008

One of the effects of the current economic crisis is an increased in foreclosure activity. This year alone, more than 156,000 homeowners lost their homes. And the rate of foreclosure is not expected to go down in the coming year.

Here are some tips for homeowners who want to save their homes from foreclosure:

• Homeowners should look for help immediately when they feel that they have the inclination to go into foreclosure. Some indications that require a homeowner should seek for help are high mortgage payments, loss of job and high overall debt. The sooner a homeowner seeks help, the better it would be for him to avoid losing his home.
• Contact a mortgage lender. Homeowners can get information about their mortgage, such as how much they owe, past dues and late payment fees, from lender’s loss mitigation department. If homeowners have the capability to pay their mortgages and previous dues, their loans may be reinstated by their lenders.
• Organizing personal finances. Before asking for help, the homeowner must first organize his personal finances. He must know how much his monthly income is and how much he spends monthly on debts and personal expenses. This way the homeowner will know how much he can pay for his loan.
• Forbearance agreement. This agreement involves paying all past due payments at the end of a homeowner’s loan.
• For homeowners who think they could not continue paying their mortgage loans, it is recommended that they sell their properties before they could be foreclosed and transfer into a place they could afford. Real estate agents find it easier to sell a home with equity.

These tips will help homeowners fend off foreclosure. The best tip offered is for homeowners not to delay in seeking help to give themselves longer time and better options.

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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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Tuesday, December 2nd, 2008

There are possible ways to prevent foreclosure:

• Prioritize what is important. There is a big difference between a need and just a want.
• Consider selling things that have value like jewelries, insurance policies or 2nd car to have loans reinstated. An extra job would be a help, too.
• Never fail to get in touch with the lender if something goes wrong as they may do some arrangements for the borrower. House counselors can give borrowers some options and may let them postpone the loan temporarily or lessen the payments. Borrowers can dial 800-569-4287 for house counselors near their area. Be sure the counselors are approved by the U.S. Department of Housing and Urban Development.
• Be updated with payments. Know what the current loan amount is, the consequences of not paying on time, late charges, collection charges and lawyer’s fees. Be sure to write down the name of the person giving all the information.
• Find ways to avoid foreclosure. Refinancing, Property listing, a short sale or having a particular investor to buy the house are some options to consider. As a borrower, it is important to be aware of the terms and conditions made by the lender to avoid any problems. Agreements should also be in a written contract. Use registered mail when corresponding to legal issues.
• Be cautious when looking for different alternatives because plans and rates in mortgage change everyday.
• Talk to a lender about short sale, where a lender can buy the property to accept an offer that is less than the total amount owed just to pay off the house.
• Sell the house if all else fails, rather than having it foreclosed.
• Beware of scams where agencies convince people about helping them prevent foreclosure. The homeowner will be required to sign a contract, stating that the agency can take actions on his behalf. When signing any documents, be sure to read and understand everything. Get advice from a lawyer or house counselor if possible.

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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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