WSJ - tax liens triggering foreclosures

A report released this week by the National Consumer Law Center (NCLC), says the number of foreclosures tied to delinquent tax payments is climbing. The NCLC, an advocacy group, estimates that $15 billion of tax-lien foreclosures happened in 2010, the latest year for which data are available. Rising tax-lien problems stem from two overlapping trends associated with the weak economy: To close budget deficits, some local governments are increasing proxy taxes to raise additional revenue. But a growing number of homeowners, many unemployed or living on fixed incomes, are finding those tax bills—even before rate increases—a strain. When homeowners fail to pay, municipalities have the legal authority to foreclose or auction off the tax lien to debt collectors, who can charge interest rates as high as 50% on the outstanding balances. If the homeowner doesn't pay—the deadlines to do so vary across the nation—many states allow the tax-lien holders to take ownership of the properties and resell them. While the sales are causing distress for some homeowners, they reflect hard fiscal realities at the state and municipal level. "Cities and towns are facing their own budget problems and of course need homeowners to make prompt tax payments," says John Rao, an NCLC attorney who wrote the report. Homeowners are slipping on tax payments for the same reasons they are falling behind on mortgage payments, Mr. Rao said: "They're unemployed, or underemployed, expenses have gone up, and you don't have enough money." Advocates for the elderly and the unemployed, the groups most at risk of losing their homes, say it isn't uncommon for consumers with homes valued at hundreds of thousands of dollars to lose the properties after failing to pay a few thousand dollars in taxes. "The system is really counterintuitive," said Laura Newland, an attorney with AARP, an advocacy group for people age 50 and older. "Some of the properties that are most vulnerable are the ones without a mortgage." (Local taxes on homes with a mortgage are often paid by the mortgage lender, which collects taxes from homeowners in their monthly payments.) Frank Alexander, a professor who specializes in tax-law foreclosures at Emory University's law school, said municipal governments selling tax liens are being shortsighted. "It creates short-term cash, but generates long-term problems," he said, pointing out that tax-lien sales and tax foreclosures often spark legal challenges that can last for years and prove costly for homeowners and municipal governments.

Surprise! Dodd Frank cost passed on to consumers

Bank of America CEO Brian Moynihan defended the bank's decision to impose a $5 debit card fee on customers next year, saying it was needed, in part, to recoup billions of dollars in costs from complying with Dodd-Frank law. "I have an inherent duty as a CEO of a publicly held company to get a return for my shareholders," he said at the Aspen Institute in Washington. "At the same time, I have an inherent duty to do a great job for my customers." He wouldn't say if other Bank of America fees would be raised. He said the bank — the nation's largest mortgage lender through its purchase of Countrywide Financial — is trying to work through the backlog of its mortgage foreclosures and "find a resolution" with the state attorneys general suing Bank of America and other banks over their mortgage practices.

Mortgage markets in the U.S., which remain on government life support, could be rattled by the downgrade of the U.S. credit rating, potentially raising borrowing costs for consumers. Given the "sufficiently perilous" state of the U.S. mortgage market, a downgrade "can do nothing but harm the market," says Karen Shaw Petrou, managing partner of Federal Financial Analytics, a research firm in Washington. "The question is how much?" To be sure, no one knows for certain the impact of the unprecedented downgrade on the mortgage market, even if that market is fundamentally intertwined with the federal government.

One concern is that downgrades may trigger forced selling by mutual funds or foreign investors to comply with investor-specific capital requirements restricting them to assets rated triple-A. But analysts said that most institutional investors' rules for investing in government-backed mortgage debt aren't contingent on ratings. And with investors seeking traditional safe-haven assets such as Treasury and government-backed mortgage securities, "there just doesn't seem to be much else to invest in," says Andrew Davidson, a mortgage-industry consultant in New York. "What would people put
their money in if they sold their agency mortgages? It's hard to see what the trade is."

Mortgage rates are closely tied to yields on the 10-year Treasury note. Rising demand for Treasurys pushed down yields over the past two weeks, even as the threat of a U.S. default from the debt-ceiling debate in Washington dragged on, because investors looked for less risky assets amid concerns over the European debt crisis and the sluggish U.S. economy. Mortgage rates dropped to an eight-month low last week, with 30-year fixed-rate mortgages averaging 4.39% for the week ended Thursday, according to a survey by Freddie Mac. Still, the uncertainty created by the downgrade has nvestors on edge. The interplay of a downgrade, on top of the euro-zone crisis and renewed fears over a double-dip recession in the U.S., could lead to increased volatility in mortgage markets. "There are so many moving parts to this that no one really knows how it will go," says Mr.Simon.

URGENT!! WE NEED YOUR HELP

The Federal Reserve, which received sweeping new authority under the Obama regulatory reauthorization, wants to effectively eliminate seller-held (a.k.a. purchase money) mortgages. It will do this by enacting a rule for the Dodd-Frank Act prohibiting property sellers from taking back a mortgage unless the buyer essentially can qualify for conventional financing!

What's more, Ma and Pa Homeowner, who create 95% of seller-held mortgages, won't be able to qualify buyers under the same underwriting standards that banks are required to perform, and therefore the cash flow notes won't be created.

If this is enacted it also will remove access to housing for millions of Americans, because seller "financing" is the only way people who can't qualify for conventional loans can buy a house.

Moreover, it would allow a buyer a three year right of rescission (they can cancel the sale) if the seller did not properly qualify them. The right of rescission also applies to anyone who buys the note.

We have precious little time to try to stop this. The deadline to comment is FRIDAY, July 22.

Go to: http://snipurl.com/t2cfq
Then go to snipurl.com/AbilityToRepay to submit your comment to the Federal Reserve.

Please do it TODAY!!

(Thanks to Ric Thom [ www.SecurityEscrow.com] for alerting us.)

Submit your comments at snipurl.com/AbilityToRepay -- scroll down that page for the comments link. THE DEADLINE IS FRIDAY, JULY 22!

Here Are Some Points You Can Make In Your Comments:

• Seller "financing" provides housing for millions who otherwise could not qualify for conventional loans.
  
  
• Homeowners are not bank officers or mortgage lenders. By requiring them (many if not most of whom who take back a mortgage are elderly) to qualify buyers using bank standards means they will simply refuse to sell with owner financing. Thus millions of people will be deprived of home ownership.
  
  
• Why should the buyer be required to divulge their income and assets to the very person with whom they are negotiating the terms of a sale? This is not required when there is a 3rd party lender.
  
  
• Requiring the buyer to turn over all their financial information to a stranger opens the door for identification theft and fraud.
  
  
• This also creates the opportunity for predatory borrowing. This is where an unscrupulous buyer knowledgeable about the Dodd-Frank Act leads an uninformed seller (and this will be the majority of sellers) into negotiations not in compliance with the ability-to-repay requirements. (An example of that could be a balloon, an interest rate greater than 1.49% above a standard mortgage, or the seller did not know how to calculate the income-to-debt ratio correctly, or know what residual income means). That buyer lives in the property trying to resell it for a profit and if they are not successful within three years they rescind the sale and get all their money back.
  
  
• By not allowing them to negotiate a balloon payment, there is a good chance that a seller 55 years or older will die before receiving all their equity. A lot of seniors have invested in real property with the intent of selling it using seller financing (an installment sale) in order to supplement their income in retirement, but also with the hope that they would not be stuck with a 30 year investment. The Dodd-Frank Act does the same thing insurance companies do who sell 30 year annuities to seniors. Our government has criticized this deplorable practice because seniors will die before they receive all their investment.
  
  
• The restriction of no balloon doesn't affect just seniors, it has financial consequences for anyone using seller financing. Under the Dodd-Frank Act community banks are allowed to originate fully amortizing loans with a five year balloon. The rationale is that they hold these loans in their own portfolios and the government recognizes their need to hedge against inflation and rising interest rates. Yet, the Act does not recognize that private property owners who have 100% skin in the game need the same protection. A five year balloon is predatory lending. If there has to be a restriction it should at the very least be the same allowance given to community banks of a balloon in 5 years.
  
  
• There are a lot of small builders that have a spec house or two that they can't sell unless they offer great terms using seller financing. Otherwise they have to let these properties go back to the bank, which does not help housing or the economy.
  
  
• It has been said that a seller financing the sale of his or her own property would completely avoid the issue of licensing by retaining the services of a licensed loan originator. If a mortgage loan originator (MLO) fails to properly follow the ability-to-repay guidelines the buyer still has three years in which to rescind the sale which leaves the seller at risk and will most likely bankrupt them.
  
  Go to http://snipurl.com/t2cfq
  Then submit your comments at snipurl.com/AbilityToRepay -- scroll down that page for the comments link.

THE DEADLINE IS FRIDAY, JULY 22!

Home prices up

According to the S&P/Case Shiller 20-city index, prices rose 0.7% in April compared with March, although they fell 0.1% when adjusted for the strong spring selling season. Prices were down 4% year-over-year. "In a welcome shift from recent months, this month is better than last -- April's numbers beat March," said David Blitzer, S&P's spokesman, in a statement. "However, the seasonally adjusted numbers show that much of the improvement reflects the beginning of the spring-summer home buying season. It is much too early to tell if this is a turning point or simply due to some warmer weather," Blitzer added. Any hint of good news in the troubled housing market will likely bring cheer to the industry, and there are some signs that market conditions are not quite as dire as some of the statistics may indicate.

Much of the price drop over the past year can be blamed on severe price slashing for homes in foreclosure, as Federal Reserve chairman Ben Bernanke pointed out in a press conference last Wednesday. Prices for homes sold by regular sellers have held up much better. Metropolitan Washington continued to be the strongest of the 20 cities covered by the report. Prices rose 3% in April there and have been on the plus side year-over-year, up 4%. The worst performing market for the month was Detroit, where prices fell 2.9%. The biggest year-over-year drop was recorded by Minneapolis, where prices have plunged 11.1% since last April.

why should we care about foreclosures?

"Earlier this week, when we got the report of a bump up in sales
of newly constructed homes, I cautioned that the home builders
are still facing huge competition from distressed properties
(foreclosures and short sales). Today we have some new numbers
showing just how big and how widespread that competition is.
Foreclosed properties made up 28% of all home sales nationwide in
the first quarter of this year, according to RealtyTrac. That's
up slightly from Q4 of 2010, but not the record 29% we saw a year
ago. More than 107,000 bank-owned (REO) properties sold, which is
actually a drop from the previous quarter and a bigger drop (36%)
from a year ago. Foreclosed properties sold at a 35% discount to
their non-distressed counterparts.

So here we have fewer selling but making up a larger share of
total sales. That's not particularly healthy. We need to get more
of these properties sold, because as I showed you on the blog
Tuesday, there are hundreds of thousands of them and millions
more in the potential pipeline. This is not exactly news, but
every time I report it I get the argument back here on the blog
that these distressed sales are only happening in certain states
and don't affect the overall housing market. There is some truth
to that, at least the first part. I asked RealtyTrac to pull some
other numbers for me to show what I'm talking about. More than
three quarters of all distressed sales (78%) were in just ten
states. You can see the usual suspects, California, Florida,
Arizona, Nevada and much of the Mid-West. That's a problem for
the builders because so much of their most recent inventory is in
those states. But what about the rest of us? It begs two
questions: 1) If I don't live in these states, why should I care?
2) If the worst is only in a few states, then why are home prices
falling nationwide?

Here's RealtyTrac's Rick Sharga's explanation: 'The 10 states
include several of the states with the highest number of overall
home sales; driving prices down in California and Florida has
much more impact on national averages than fluctuating home
prices in Alaska and Wyoming. It's not all about geography.
While foreclosure sales obviously depress the price of homes
nearby, they also affect prices by limiting new home sales, which
typically help drive home prices up. But foreclosure sales are
only one of the factors behind falling home prices. Weak demand
is probably the biggest driver.'

And I contend that weak demand is driven by several factors, not
the least of which are credit and confidence. The banks are
looking at their overall book of business and the losses they're
still taking; the losses are concentrated in those states that
are continuing to suffer the most. Regardless, they spread that
pain nationwide in their lending standards, tightening up to the
point that many borrowers far far away from California can't get
a loan. Confidence, or lack thereof, is a bigger factor than we
often give it credit. Yes, the big bad media report all these
numbers, and yes, some of the worst of it is nowhere near where
you live, but you see and process it. It affects your confidence
and consequently how you act.

Housing demand is nowhere near where it should be, and the mix of
what is selling is all on the low end. Investors with cash and
first time home buyers are bargain hunting, and that pushes the
price average/median down in every market. As prices fall on real
sales, thousands of borrowers fall underwater on paper...on their
mortgages, and that puts them at higher risk of foreclosure.
'Residential home sales fell by 18% in Q1 2011 compared to Q4
2010 and by almost 32% from Q1 2010,' notes Sharga. Foreclosures
and distressed sales, even if they're not in your back yard or in
your state, affect your home's value because they affect the
overall demand for your home."

Existing homes sales up

Existing homes increased 2.7 percent to a seasonally adjusted annual rate of 5.36 million in January from a downwardly revised 5.22 million in December, and are 5.3 percent above the 5.09 million level in January 2010. This is the first time in seven months that sales activity was higher than a year earlier. A parallel NAR practitioner survey2 shows first-time buyers purchased 29 percent of homes in January, down from 33 percent in December and 40 percent in January 2010 when an extended tax credit was in place. Investors accounted for 23 percent of purchases in January, up from 20 percent in December and 17 percent in January 2010; the balance of sales were to repeat buyers. All-cash sales rose to 32 percent in January from 29 percent in December and 26 percent in January 2010. All-cash purchases are at the highest level since NAR started measuring these purchases monthly in October 2008, when they accounted for 15 percent of the market. The average of all-cash deals was
20 percent in 2009, rising to 28 percent last year.

The national median existing-home price3 for all housing types was $158,800 in January, down 3.7 percent from January 2010. Distressed homes edged up to a 37 percent market share in January from 36 percent in December; it was 38 percent in January 2010. Total housing inventory at the end of January fell 5.1 percent to 3.38 million existing homes available for sale, which represents a 7.6-month supply4 at the current sales pace, down from an 8.2-month supply in December. The inventory supply is at the lowest level since December 2009 when there was a 7.3-month supply. Single-family home sales rose 2.4 percent to a seasonally adjusted annual rate of 4.69 million in January from 4.58 million in December, and are 4.9 percent higher than the 4.47 million level in January 2010. The median existing single-family home price was $159,400 in January, down 2.7 percent from a year ago.

Existing condominium and co-op sales increased 4.7 percent to a seasonally adjusted annual rate of 670,000 in January from 640,000 in December, and are 7.9 percent above the 621,000-unit pace one year ago. The median existing condo price5 was $154,900 in January, which is 10.2 percent below January 2010. Regionally, existing-home sales in the Northeast fell 4.6 percent to an annual pace of 830,000 in January from a spike in December and are 1.2 percent below January 2010.

The median price in the Northeast was $236,500, which is 4.0 percent below a year ago. Existing-home sales in the Midwest rose 1.8 percent in January to a level of 1.14 million and are 3.6 percent above a year ago. The median price in the Midwest was $126,300, which is 3.2 percent below January 2010. In the South, existing-home sales increased 3.6 percent to an annual pace of 2.02 million in January and are 8.0 percent higher than January 2010. The median price in the South was $136,600, down 2.1 percent from a year ago. Existing-home sales in the West rose 7.9 percent to an annual level of 1.37 million in January and are 7.0 percent above January 2010. The median price in the West was $193,200, down 5.7 percent from a year ago.

Providing Help to Homowners by Handling Short Sales of Properties

Providing Help to Homeowners by Handling Short Sales of Properties
A home seller who owes any lender a huge amount of money that may be more than their property's value has no choice other than to negotiate a "Short Sale" with their lender. Why would a bank accept a "Short Sale"? Banks grant short sales for 2 reasons: the seller has a hardship, and the seller owes more on the mortgage than the home is worth.

When a "Short Sale" is negotiated with the lender, it means that original homeowner allows the property to be sold at or below market value. With the approval of the lender, the proceeds of the sale will be accepted as payment in full of the mortgage, even if the sales price is lower than existing mortgage. However, on the lender's part they are not allowed to negotiate payoffs that are discounted.

The Realty Factor, Inc. has 19 years of experience, education, and a full understanding of the real estate market. To learn and be aware of the procedure in this kind of real estate transaction, not only are the mortgagee, real estate broker educated in the area, but the homeowner themselves should understand the process.

As a "Short Sale" specialist in the Orlando market: The seller will need to prepare a financial package for submission to the short sale bank/lender. Each lender has its own guidelines but -- the basic procedure is similar from bank to bank. The seller's short sale package will most likely consist of:

•Letter of authorization, which lets The Realty Factor, Inc. negotiate with the bank direct.
•HUD-1 or preliminary net sheet
•Completed financial statement
•Seller's hardship letter
•2 years of tax returns
•2 years of W-2s
•Recent payroll stubs
•Last 2 months of bank statements
•Comparative market analysis or list of recent comparable sales, prepared by us (The Realty Factor, Inc.)

As a "Short Sale" Specialist in the real estate business I will help to sell your home and save your credit. To offer anything else would be an injustice in light of your financial crisis.

Loan Modification are nice “IF” you can get the right deal, however, think of this: If your house is worth 50% of the value of the home next door (ex: owe $250,000 house now worth $150,000) is it worth paying on and waiting 20 years to have your value come back, or is it better to divest yourself of this upside down situation, go across the street and buy that house at 50%?


Troy S. Blanchard
Realtor/Consultant
The Realty Factor, Inc.
www.Orlando-Today.com


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