Kris & Kim Darney Selling California » American Home Mortgage

Shadow Inventory Is Growing at Alarming Rates, more Short Sales and Foreclosures

Admin — Mon, 22 Nov 2010 20:58:49 +0000

Well, no surprise here…how do we get out of this? I have to agree with Diana Olick on the investor spin, with lending restrictions as tight as they are we need to get those cash buyers to get in the game and help eliminate some of this inventory. As real estate agents we see such a fight coming from the lenders that are holding the liens on homes we’re short selling when we have an investor wanting to purchase. It’s not what you think, we don’t submit low ball offers to these lenders. They just don’t like the idea of investors…well, I say get over it! Read the article, it’s full of great facts.

As of the end of August, there were 2.1 million properties either in the foreclosure process or headed for foreclosure, according to CoreLogic.

It’s come to be known as the “shadow inventory,” because it will be coming to market soon, but it’s not listed yet.

To put that in perspective, there are about 4.2 million properties (existing homes and new construction) currently, visibly on the market now. So add 50 percent more, and there’s your true inventory.

Rather than look at the absolute numbers, we like to look at months supply, which is how many months, at the current sales pace, it would take to sell all these homes. Add the shadow and the visible supply, and figure it into the sales pace in August, and you’re looking at a 23-month supply. Nearly two years. Six months worth of supply is generally considered “normal.”

“The weak demand for housing is significantly increasing the risk of further price declines in the housing market,” notes Mark Fleming, chief economist at CoreLogic.

Inventory is the key to predicting the future of home sales and prices. I’ve said this over and over. We know that there are investors out there looking to get into the market, and that’s a good thing, especially since investors are almost exclusively all-cash these days. But there aren’t enough investors to soak it all up, so we have to look to the demand side for regular, organic buyers.

Fannie Mae is doing everything it can to bring in these buyers, introducing a pilot program in Orlando, FL, Detroit, Mi and San Diego, CA that will allow real estate agents to submit offers online for foreclosed properties Fannie now owns and then track them through the sale. Fannie and Freddie are both taking back more and more properties, as their sales of said properties are actually declining slightly.
Other than that, government appears to be largely out of the housing subsidy business.

I’ve never been a fan of government getting too far into housing, because it inevitably results in doom and gloom when the subsidy expires.

But here’s the conundrum: Even as new loan delinquencies improve, they are improving slowly and are still far too elevated for comfort. On top of that, loan modifications are failing at an alarmingly high rate, which means ever more borrowers will go straight to foreclosure. Foreclosure inventories are still rising, as banks re-file and ramp up the process, which again means more inventory coming to market.

Perhaps it’s time to look at a new government incentive, this time for those previously dreaded real estate investors. More to come…

The "Super Prime" FICO Scorers More Likely to "Strategic Default"? …LOL

Admin — Tue, 06 Jul 2010 18:00:59 +0000

This article hit over the weekend in the Washington Post…

It’s enlightening…and some may even find it shocking!

Who are the folks more likely to “strategically default”?

The “Super Prime” FICO scorers! Yes, the snooty folks that look down on us with the less than 700 scores are 28% more likely to strategically default on their home mortgage.

What’s a strategic default?

It’s the action of choosing to walk away from your obligation or in this case, the mortgage on a home.

Why would an “Elite” Scorer strategically default?

Simple…the realization that the value of the investment has decreased and is now a true “liability”.

What are the liabilities of a strategic default?

Shows that you made no attempt to mitigate the loss.
7-10 years of negative reporting.
Inability to secure a mortgage for 5+ years

My thoughts are that these “Elite-ests” are simply making an educated decision to cut their losses.

The interesting thing I am not reading here is that these “educated” scorers are not taking the next step and seeking guidance on minimizing the hit or impact to their credit. This can be accomplished by completing a short sale.

Short Sale: The process in which your mortgage company agrees to accept less than what is owed on the mortgage.
- Often this is reported to credit agencies as “payed as agreed” and will only take a 50 to 100 point reduction to the credit score.

A new discussion is that of the the “Strategic Short Sale” and it’s acceptance by many lenders.

What is a Strategic Short Sale?

It’s the process of hiring a licensed real estate agent to sell your home for less that what is owed and working directly with your lender to accept the short sale…
- Doesn’t sound any different than a short sale…well that’s true…however, you are making an educated decision to sell the property and minimizing the loss to your mortgage company and reducing your potential liability.
- Did you say Liability??? Yes, you may be liable to resolve…much like the television commercials that claim “they negotiate on your behalf to reduce your IRS debt for pennies on the dollar”. You’ll find that most lenders will “negotiate” with you on your debt.
  - In California, if you did not refinance your home, you may not be liable for anything…but we’ll need to talk to you about that…this is better known as “non recourse”.
Think about this scenario:
- Purchased $1Mllion home in 2005.
- Home value is now $650,000
- That’s $350,000 in potential liability or unpaid debt.
- The bank in some cases may ask you to contribute 5 -10% of the amount or in this case up to $35,000 to eliminate the debt…Now…Thats a sweet deal to minimize your credit score liability.

This is just 1 scenario…however, you need to understand your options and Short Sell that property instead of burdening your self and your credit for years to come.

The Washington Post article is below for your entertainment.

New research based on data from 25 million active consumer credit files suggests the answer just might be no. Although people with the highest-ranking credit scores are less likely to default on their mortgage compared with people with lower scores, when they do default, they are much more likely to do it strategically: They simply stop paying with little or no warning.

In a study released June 28, researchers from credit-bureau giant Experian and the Oliver Wyman consulting firm found that borrowers with “super prime” credit scores accounted for 30 percent of all mortgages outstanding in mid-2009 but produced just 5 percent of all serious mortgage delinquencies.

However, 28 percent of those elite scorers’ defaults were calculated and strategic, versus 18 percent for the overall population of borrowers in the sample. This pattern, in turn, is forcing lenders and the credit industry to seek new ways to evaluate risk beyond traditional credit scores.

Charles Chung, Experian’s general manager of decision sciences, said in an interview that “lenders not only are looking at creditworthiness,” as measured by traditional credit scoring models, but also at applicants’ likely “ability to pay” under scenarios in which real estate values drop. Lenders might need to adjust underwriting and risk-rating rules — requiring higher minimum-down payments or higher interest rates — to deal with loan applicants who fit the profile for walkaways in a depreciating real estate market.

The latest study, which follows up on research involving credit files where consumers’ personal identifiers had been removed, tracked strategic defaulters in 2009. By examining payment patterns in individual credit files, Experian and Oliver Wyman estimate that about 19 percent of all mortgage defaults last year involved intentional, strategic walkaways.

Although there was some evidence that total defaults might have peaked at the end of 2008, the walkaway issue remains a costly and controversial one for the mortgage industry. Fannie Mae announced late last month that strategic defaults have become such a problem that it is toughening its policy and will pursue walkaways for unpaid balances and penalties wherever permitted by state law.

The Experian-Oliver Wyman study confirmed that geography plays a significant role in the strategic default phenomenon. Homeowners in volatile boom and bust states. includings California and Florida, have been especially prone to walk away from deeply negative equity situations.

A separate study by three researchers at the Federal Reserve found that not only is geography crucial but also that state laws’ treatment of unpaid mortgage balances after a walkaway might play a major role. The Fed study examined 133,281 loan histories in Arizona, California, Florida and Nevada where borrowers were underwater on their loans.

According to the researchers, in California and Arizona, where state law restricts lenders’ abilities to collect post-foreclosure deficiencies on mortgages, borrowers were more prone to walk away from their homes at lower levels of negative equity than borrowers in Florida and Nevada, where lenders face fewer restrictions.

“This result suggests,” the Fed study said, “that borrowers may factor into the costs of default the potential legal liabilities resulting from a foreclosure.”

The Fed researchers concluded that the depth of borrowers’ negative equity is an important tripwire to their decision to send back the keys. Borrowers whose negative equity is relatively modest appear to be much less willing to strategically default, probably because they hold out hope that market conditions will improve enough to restore them to positive equity.

But as negative equity approaches 50 percent — and borrowers see no prospects for higher real estate values — roughly half of all defaults are strategic.

The Fed researchers cited a hypothetical case in Palmdale, Calif., to illustrate the economic logic of strategic defaulters: Purchasers there in 2006 paid $375,000 for a median-priced single-family home. By last year, it was worth less than $200,000. Meanwhile, a three- to four-bedroom house rented for $1,300 a month at the end of last year, far less than what the borrowers were paying.

Why stay in a hopeless situation? Both studies document that many borrowers asked themselves that — and decided to just stop paying.

Mortgage Delinquencies On the Rise…First Time Mortgage Defaults UP 10%

Admin — Tue, 06 Jul 2010 17:58:34 +0000

California Hot Spot for Foreclosures…CNBC Video…Short Sales Stop Foreclosure

Admin — Mon, 03 May 2010 07:38:20 +0000

Although California remains in the top 20 foreclosure activity, numbers are shifting into new areas. With the HAFA roll out April 5th Short Sales for homeowners that are upside down in equity have a realistic alternative to foreclosure.

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Tax Credit Bill Passed for New Home Buyers…and Move Ups

Admin — Sun, 08 Nov 2009 20:12:17 +0000

As promised….here are the details for the home buyer tax credit.

It’s official. President Obama has signed a bill that extends the tax credit for first-time homebuyers (FTHBs) into the first half of 2010. This program had been scheduled to expire on November 30, 2009.

In addition to extending the tax credit of up to $8,000 through June 30, 2010, the extension measure also opens up opportunities for others who are not buying a home for the first time.

So Who Gets What?
The program that has existed for FTHBs remains intact with the one exception that more people are now eligible based on an increase in the amount of income someone may now earn.

Additionally, the program now gives those who already own a residence some additional reasons to move to a new home. This incentive comes in the form of a tax credit of up to $6,500 for qualified purchasers who have owned and occupied a primary residence for a period of five consecutive years during the last eight years.

Deadlines
In order to qualify for the credit, all contracts need to be in effect no later than April 30, 2010 and close no later than June 30, 2010.

Higher Income Caps in Effect
The amount of income someone can earn and qualify for the full amount of the credit has been increased.

Single tax filers who earn up to $125,000 are eligible for the total credit amount. Those who earn more than this cap can receive a partial credit. However, single filers who earn $145,000 and above are ineligible.

Joint filers who earn up to $225,000 are eligible for the total credit amount. Those who earn more than this cap can receive a partial credit. However, joint filers who earn $245,000 and above are ineligible.

Maximum Purchase Price
Qualifying buyers may purchase a property with a maximum sales price of $800,000.

First-Time Homebuyer Tax Credit – Frequently Asked Questions
Here are answers to some commonly asked questions about the tax credit.

What is a tax credit?
A tax credit is a direct reduction in tax liability owed by an individual to the Internal Revenue Service (IRS). In the event no taxes are owed, the IRS will issue a check for the amount of the tax credit an individual is owed. Unlike the tax credit that existed in 2008, this credit does not require repayment unless the home, at any time in the first 36 months of ownership, is no longer an individual’s primary residence.

What is the tax credit for first-time homebuyers (FTHBs)?
An eligible homebuyer may request from the IRS a tax credit of up to $8,000 or 10% of the purchase price for a home. If the amount of the home purchased is $75,000, the maximum amount the credit can be is $7,500. If the amount of the home purchased is $100,000, the amount of the credit may not exceed $8,000.

Who is eligible for the FTHB tax credit?
Anyone who has not owned a primary residence in the previous 36 months, prior to closing and the transfer of title, is eligible. This applies both to single taxpayers and married couples. In the case where there is a married couple, if either spouse has owned a primary residence in the last 36 months, neither would qualify. In the case where an individual has owned property that has not been a primary residence, such as a second home or investment property, that individual would be eligible.

As mentioned above, the tax credit has been expanded so that existing homeowners who have owned and occupied a primary residence for a period of five consecutive years during the last eight years are now eligible for a tax credit of up to $6,500.

How do I claim the credit?
For those taking advantage of the tax credit in 2009, you may choose to either apply for the credit with your 2009 tax return or you may apply for the credit sooner by filing an amended 2008 tax return with Form 5405 (http://www.irs.gov/pub/irs-pdf/f5405.pdf).

Can you claim the tax credit in advance of purchasing a property?
No. The IRS has recently begun prosecuting people who have claimed credits where a purchase had not taken place.

Can a taxpayer claim a credit if the property is purchased from a seller with seller financing and the seller retains title to the property?
Yes. In situations where the buyer purchases the property, even though the seller retains legal title, the taxpayer may file for the credit. Examples of this would include a land contract, contract for deed, etc. According to the IRS, factors that would demonstrate the ownership of the property would include: 1. the right of possession, 2. the right to obtain legal title upon full payment of the purchase price, 3. the right to construct improvements, 4. the obligation to pay property taxes, 5. the risk of loss, 6. the responsibility to insure the property and 7. the duty to maintain the property.

Are there other restrictions to taking the credit?
Yes. According to the IRS, if any of the following describe your situation, a credit would not be due.

You buy your home from a close relative. This includes your spouse, parent, grandparent, child or grandchild.

You do not use the home as your principal residence.

You sell your home before the end of the year.

You are a nonresident alien.

You are, or were, eligible to claim the District of Columbia first-time homebuyer credit for any taxable year. (This does not apply for a home purchased in 2009.)

Your home financing comes from tax-exempt mortgage revenue bonds. (This does not apply for a home purchased in 2009.)

You owned a principal residence at any time during the three years prior to the date of purchase of your new home. For example, if you bought a home on July 1, 2009, you cannot take the credit for that home if you owned, or had an ownership interest in, another principal residence at any time from July 2, 2006, through July 1, 2009.

Can you buy a home from a step-relative and be eligible for the credit?
Yes. Provided the person you are buying a home from is not a direct blood relative, the purchase would be allowed.

Can parent(s) who will not live in the property cosign for a mortgage for their child and the child that is a qualifying FTHB still be eligible for the credit?
Yes.

Can a separated spouse who has not owned a home for four years qualify for the FTHB tax credit if the spouse has owned a property anytime in the last three years?
No. However, the spouse may be eligible for the repeat buyer credit. The best path to take in any situation regarding income taxes is to speak with a professional tax preparer or CPA.

http://timandjulieharris.com/2009/11/06/home-buyer-tax-credit-bill-passed-home-buyer-tax-credit-faq/

Senate Overwhelmingly Approves Homebuyer Tax Credit Extension

Admin — Thu, 05 Nov 2009 00:27:29 +0000

As predicted, the Senate approved the extension of the Home Buyers Tax Credit until April 2010.

The approval is as follows:

$8,000.00 for 1st time buyers
added $6,500.00 for “Move-up” buyers
An increase in qualified incomes were doubled from $75,000.00 to $125,000.00 for a Single purchaser and from $150,000.00 to $225,000.00 for Couples.

The extension passed the Senate 98 to 0…a true bipartisan message.

The extension is expected to pass through the House with haste and be “rubber stamped” by President Obama by this weekend.

Bravo to the Dems and Elephants for getting on the same page.

Take Action on this opportunity.

Kris Darney

Short Sell and Buy Another Home At the Same time! It's Here!

Admin — Wed, 04 Nov 2009 15:39:48 +0000

The proceeding story is copy write protected:

Breaking News*********Kim and I will be talking about this program this week on our coaching calls with Harris Real Estate University Sign up and Log in to the Thursday Call 10:00AM PST

As our subscribers know…Kim and I are always looking for the latest and greatest news on Short Sales.

I liken this news to the Sounds extreme I know but this is just the beginning.

A lender from California is offering an FHA 3.5% purchase program for current homeowners that are selling their property on short sale.

The program works like this… The short sale of the current home and timing the purchase of the next home run simultaneous. The day after the “short sale” home sells, the closing of the “new” home takes place.

This can be a bit tricky with the unpredictable length of the short sale approval and placing an offer on a property on today’s market…however a huge win and step in the right direction for our Short Sale sellers.

And, the program is currently available in 45 states… (program not currently available in Alaska, Michigan, Missouri, Ohio and Wisconsin).

It doesn’t stop there.

If you have a client that sold their home on a short sale that wants to buy another home, as long as they meet some additional criteria…paying their rent on time for a year…they may also qualify for this program.

Your asking…what is the criteria?

Here it is:

(1) Purchase price of new home cannot exceed original (short sell) home loan(s).

(2) Minimum 640 FICO Credit Score throughout the Short Sell and New Home purchase process

(3) Adhere to HUD County Limits on New Loans

(4) No Mortgage “lates” last 12 months, nor through the new home purchase

(5) There are no income limits

(6) Non owner-occupant, co-borrowers are allowed

(7) Competitive FHA lending rates available for this program

(8) Must qualify with normal income ratios

(9) 3.5% minimum down payment on new home ~ Gifts are OK

Bank of America/Countrywide Streamlining Short Sale Process

Admin — Wed, 04 Nov 2009 10:28:49 +0000

BofA (Countrywide) have begun utilizing the Equator system (REOTRANS) to streamline the short sale process.

This is great news for all homeowners that are strapped with a one of the formidable Countrywide Short Sales.

We learned of this about 6 weeks ago and we are excited to announce that it is hear…

Below is a link to the details:

Bank of America/Countrywide Streamlining Short Sale Process

The Short Sale Good News Train keeps on rolling.

Take Action,

Kris & Kim Darney

Now You Can Short Sale Your Home and Buy Another Home…At The Same Time

Admin — Tue, 03 Nov 2009 16:00:35 +0000

Breaking News*********If you are a Real Estate Agent: Kim and I will be talking about this program this week on our coaching calls with Harris Real Estate University Sign up and Log in to the Thursday Call 10:00AM PST

To our clients…you’ll be receiving an email soon.

As our subscribers know…Kim and I are always looking for the latest and greatest news on Short Sales.

I liken this news to “Mans First Steps on The Moon”…Sounds extreme, I know, but this is just the beginning.

A lender from California is offering an FHA 3.5% purchase program for current homeowners that are selling their property on short sale.

The program works like this…

The short sale of the current home and timing the purchase of the next home run simultaneous.
The day after the “short sale” home sells, the closing of the “new” home takes place.

Yes…this can be a bit tricky with the unpredictable length of the short sale approval and placing an offer on a property on today’s market…however a huge win and step in the right direction for our Short Sale sellers.

(Real Estate Agents) This part is for you…..!

Imagine…you could actually “quadruple end” a sale.

How does that work?

You list short sale #1.
You find the buyer for short sale #1.
You List short sale #2.
You Sell property #2 to the seller of the property #1.
Everyone Wins!

And, the program is currently available in 45 states… (program not currently available in Alaska, Michigan, Missouri, Ohio and Wisconsin).

Scenario:

The Smiths bought their home in 2005 for $400,000 with 5% down. It’s now worth $200,000+, but they still owe $390,000. You negotiated to short sell it for $225,000. During the short sale process you got them approved for a new maximum loan of $376,000. Upon closing the short sell of their home, they closed on their new nicer, bigger home for $375,000 and didn’t have to move into a rental apartment for 2 to 3 years.

It doesn’t stop there… Past Short Sale Clients…

If you have sold a home on a short sale and want to buy another home, as long as you meet some additional criteria…paying your rent on time for a year…you may also qualify for this program.

Your asking…what is the criteria?

Here it is:

(1) Purchase price of new home cannot exceed original (short sell) home loan(s).

(2) Minimum 640 FICO Credit Score throughout the Short Sell and New Home purchase process

(3) Adhere to HUD County Limits on New Loans

(4) No Mortgage “lates” last 12 months, nor through the new home purchase

(5) There are no income limits

(6) Non owner-occupant, co-borrowers are allowed

(7) Competitive FHA lending rates available for this program

(8) Must qualify with normal income ratios

(9) 3.5% minimum down payment on new home ~ Gifts are OK

Houston….we have lift off!

Sellers…this is huge!

Agents…this is huge!

Best,

Kris

Loan Mod Experts…Whatever you do…Don't Piss Off Your Client…Or Else!

Admin — Fri, 30 Oct 2009 22:13:00 +0000

This story only gets better…

It appears that ywo Loan Modification Scam victims took their anger out on the perpertraitors…now they are facing Life in Prison!

It appears that these two Sothern California homeowners who had hired “Loan Mod Experts” felt that since nothing was happening with their modification that they would simply get their money back or beat it out of them.

Well that back fired and the 2 home owners along with 3 assailants are facing:

False imprisonment
Robbery
Extortion
Yada,Yada, Yada

Lesson Learned…

“Vengence is Mine…Sayeth the Lord”

As seen in Mortgage Ledger:

“One California couple facing foreclosure decided to violently take their desperation and frustration out on the very people they hired to help them save their home.

Daniel Weston and Mary Ann Parmelee, both 52, and three other people are charged with torturing two loan-modification agents they hired to help them try to save their home, authorities said.

The two are accused of luring their two victims, who they suspected of fraud, to an office where they tied the men up, held them against their wills for hours and beat them, according to a spokeswoman for the Los Angeles County district attorney.

According to court documents, the five assailants, who have all since been arrested, set out to “cause cruel and extreme pain and suffering for the purpose of revenge, extortion, persuasion and for a sadistic purpose, inflict great bodily injury.”
Both victims were treated at a local hospital and have now been released.

Weston and Parmelee own a home in La Canada-Flintridge, a suburb outside of Los Angeles, that fell into foreclosure.

The pair then allegedly sought loan modification assistance from the victims but eventually came to believe that nothing was being done in their favor and then requested their money back, as was written in a statement from the Los Angeles County district attorney’s office.

Weston, Parmelee and the three other defendants were each charged with two counts of torture, two counts of false imprisonment by violence and two counts of second-degree robbery, according to a criminal complaint filed against them.

Weston and another defendant are accused of carrying out the beatings while their three co-defendants watched, prosecutors said.

Each count of felony torture, defined as inflicting “great bodily injury” for the purpose of “revenge, extortion, persuasion and for a sadistic purpose,” carries a maximum penalty of life in prison.

The case became publicly known as Los Angeles officials and community groups began a national public-awareness effort urging homeowners to beware of bogus loan-modification programs and to report suspicious activity to authorities.”