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Home Prices Plummet to 2003 Levels

Thursday, June 30

Using data that tracks home prices through April of 2011, Case-Shiller, reported a slight bump in home values. However, hold off on popping the cork on the champagne. It’s far too early to tell if this reflects a sea change in the housing market or is simply a reflection of the spring/summer buying season.

According to Robert Shiller, an economics professor at Yale University and co-creator of Case-Shiller home price index, he has a “tinge of optimism” but doesn’t believe the crisis is over. He cites, the 1.8 million pending foreclosures slated to come to market, the debt ceiling crisis and continuing unemployment. Shiller believes the slight bump in housing for the month of April may simply be an anomaly and that there is too little data to believe this is the beginning of a turnaround.

Amazing, the power of the press. In the beginning of the foreclosure crisis, the press couldn’t stop beating the dead housing horse. Now, as we drift or in the words of Shiller continue “in the doldrums” the press seems to frantically be searching for a ray of hope.

Does the press think that the power of positive thinking can make all this housing misery disappear? If Robert Shiller doesn’t think so, then I think not.

Short Sale â€“ An Investment Perspective

Tuesday, May 03

Investors often tell me that they own a home, tenants left or are not paying their rent, and the property is not cash flowing (mortgage is more than the rental income). What is an investor to do? Most tell me that they have put in too much money to let the house go via short sale or foreclosure. Without knowing the actual financials of a situation, it is worth considering whether the time value of money makes a short sale a better option than holding on until the market recovers. To illustrate, here is an example:

EXAMPLE
Investor buys a house for $350,000 in 2006. The tenant pays $1500 per month, the mortgage payments on $300,000 is $2,250 with tax and insurance.
The house is now worth $225,000. The investor loses his job. Tenant leaves and new tenant can only pay $1250. The investor can’t afford to pay $1,000 out of pocket each month, which is the difference between the rent and the mortgage.
The investor tries for a loan modification and is denied; he tries again and is denied several times before he gives up.
What does the investor do?
If the investor can show true hardship, he can either (1) use up all of his resources to keep the home; of (2) attempt to short sale the home.
Often investors will say, “I don’t want to lose the $50,000 I put into the property?” – they should consider the following. No Short Sale: Starting $125,000 in the hole, the owner pays $1,000 a month for 5-10 years for the value comes back to 2006 level and owner’s equity to return. Investor will have to pay $24,000 or more to keep the place from going to foreclosure (assuming 2 years without rent increasing).OR Short Sale: Sell the property and start over. If the lender will agree to waive any deficiency liability, the investor can walk away from $125,000 in unsecured debt. Investor can clean up his credit and buy again in 2-3 years. Instead of investing $24,000 to keep the payments up, the investor can use that $24,000 to invest in a property and at year 3 has $24,000 in equity in a new property that is appreciating instead of still being more than $100,000 in the hole.

Please contact a NextGEN representative if you have any additional questions at 877.647.3911.

Banks Quaking at U.S. Treasury Department Oversight

Monday, May 02

Finally, distressed homeowners and those looking to modify their loans are getting a chance to shake up the banks thanks to the US Treasury. Shock waves are rolling though the banking community as the Treasury Department causes fissures in the banks cavalier handling of underwater homeowners. Complaining to the Treasury Department forces the bank to expedite your request for a loan mod because the Treasury Department can shut a bank down. Your bank can be fined and is quaking over the idea that US Treasury agents could set up camp inside the bank eyeballing their every move. For the banking community this is akin to a 9.5 earthquake on the San Andreas. To fight the banks, preparation is crucial. File your complaint with the Office of the Comptroller, a subsidiary of the US Treasury. Within 48 hours the executive office of the bank will send your mod request directly to one of their finest escalation teams. You will get an almost immediate response.To file, got to www.OCC.gov and on the home page click on Dispute Resolution on the right column, then click on Consumer Complaint and under Customer Assistance Group, click the Online Customer Complaint Form link and file your complaint. Then sit back and wait as tremors cause your bank to spring into emergency mode. Wait 30 days after making your written request for a loan mod before you file the OCC complaint or the bank will say that you did not give them enough time to address your request. OCC regulates all of the big National Banks. If your bank is not a National Bank, then it will be handled by the Office of Thrift Supervision at www.ots.treas.gov. The website has no online complaint form, so you will need to print, fill it out and fax or mail it. This strategy is extraordinarily effective as the bank can be fined $10,000 for lack of response within 60 days. If the bank receives 10,000 complaints from the OCC at $10 grand apiece that is a loss of $1OO million dollars per year. The little guy wields uncommon power now that you can create your own natural disaster for the banking industry.

Foreclosure Forum in D.C. Today With Big 5 Mortgage Companies

Wednesday, March 30

Today, the Big 5 in mortgage servicing are meeting in Washington to discuss alternatives to foreclosure. One of the controversial options under consideration is requiring banks to facilitate the short sale process.Bank of America, JPMorgan Chase, Wells Fargo, Citigroup and Ally Financial will get together to try to pound out a settlement that could range from $5 billion to $25 billion. The settlement revolves around federal and state investigations into shoddy or fraudulent foreclosure paperwork. Banks may now be legally compelled to let delinquent homeowners sell for less than the loan amounts owed. In addition to requiring short sales, mortgage servicers may have to reduce the amount some homeowners owe on their loans. They would also have to dramatically change how homeowners are treated when they pursue a loan modification. Short sales provide a quicker and more economical way for banks to dispose of distressed real estate. Short sales also help stabilize the real estate market by clearing out shadow pending inventory, millions of homes that are on the brink of foreclosure. Short sales can be used in situations in which borrowers are so underwater that the more costly and time-consuming process of foreclosure would seem to be the only option.This is the first official meeting since attorneys general from every state in the nation and Justice Department officials threw down the gauntlet and presented the banks with 27 pages of demands calling for broad changes to mortgage servicing and how these transactions are handled. The Big 5 have countered with proposed solutions including single point of contact for distressed homeowners, timelines for loan modifications, online system for status checks of applications and third party review of rejections. Some sellers are in no hurry to push for a short sale as they would then have to find another place to live and begin paying rent. Lenders can and do withhold approval of a short sale if they don't like the price.Some House Republicans see this as a bailout for irresponsible behavior and are angered that possible payments of $20,000 to distressed homeowners “cash for keys” could be offered to homeowners they see as deadbeats. In Southern California, short sales made up an estimated 19.8% of the market for previously owned homes last month. That was up from an estimated 18.4% in February 2010 and 12% in February 2009, according to DataQuick Information Services of San Diego.Combined with foreclosures, short sales made up more than half of homes sold in the Southland last month. Without viable, workable solutions, the number of foreclosures we’ve seen so far will pale in comparison to what is to come. .

HR 861- House Acts to Cut Wasteful Spending

Tuesday, March 29

The House of Representatives has approved legislation to axe a bailout program for lenders and real estate speculators. The legislation, HR 861, the NSP Termination Act ends the so-called Neighborhood Stabilization Program (NSP). “Today the House acted yet again to end wasteful spending on a government program that does nothing to help homeowners facing foreclosure," said Financial Services Committee Chairman Rep. Spencer Bachus of HR 861. "In fact, this program creates perverse incentives for banks and other lenders to foreclose on homeowners. This program is not only bad for struggling homeowners; it’s horrible for taxpayers, too. It uses taxpayer money to bail out lenders and real estate speculators. We simply cannot continue to use taxpayer dollars to bailout those who made bad decisions.” The NSP provides taxpayer dollars to state and local governments, as well as non-profits, to purchase, rehabilitate, and resell foreclosed properties. Yet, giving these entities taxpayer dollars to buy foreclosed properties does nothing to help struggling homeowners stay in their homes. In fact, the program represents a costly bailout of lenders, servicers, and real estate speculators who made risky bets on the housing market and will now dump their foreclosed property onto the taxpayer. The NSP has had nothing but problems since its creation in 2008. The Inspector General of the Department of Housing and Urban Development has identified several misuses of NSP money at the state level. The Government Accountability Office questions whether HUD has the capacity of properly tracking the use of funds provided under this program. The NSP has received more taxpayer funding even though it was supposed to be a temporary program. The NSP was provided $4 billion at its inception in 2008, $2 billion more in 2009, and another $1 billion as part of the Dodd-Frank Act in 2010.

Personal Loss Mitigation-Think Like a Banker

Friday, February 18

We know what you are going though. It’s a kick in the teeth to be faced with foreclosure. You’ve done everything you can to forestall the inevitable. Okay, maybe you shouldn’t have done that last refinance. Maybe you didn’t need the new car. Maybe it was beyond your control, for example due to job loss, illness, divorce or injury.

Stop kicking yourself. Think instead of how to stem the hemorrhage to your lifestyle and personal finances. In short, think like a banker.

Bankers are not emotional about your home. Nor are they emotional about money. They make decisions based upon the financial bottom line. Take a look at our list below. Then think like a banker and make the best decision based upon what is best for you financially.

Foreclosure or Short Sale? You DecideForeclosure Pros:

1) No mortgage payments

2) Foreclosure takes a long time, the house is still yours until the foreclosure is final

3) No strangers walking though your home during Open House

4) Sometimes cash for keys is offered after the public sale

Foreclosure Cons:

1) You’ll have to find someplace to live so you will likely become a renter

2) A Notice of Public Sale may be prominently posted on your front door

3) Your credit goes into free fall, foreclosure will remain on your credit for 10 years

4) During that 10 years, employers may disqualify you for jobs or promotions

5) Under Fannie Mae guidelines, you will be ineligible to buy another home for 5 years.

Short Sale Pros:

1) Find solace in the fact that you sold your home, retaining control and dignity

2) Mitigate personal loss, don’t suffer the social and financial stigma of a foreclosure

3) You can meet and decide upon the new owners

4) Under Fannie Mae, you can buy again in 2 years

5) Credit will suffer temporarily but short sale is not recorded on your history

Short Sale Cons:

1) The wait can be frustrating

2) The bank will intrusively examine all of your financial records and will ask for a hardship letter

3) Traffic through your home, you’ll have to keep your house spiffy for weeks or months.

4) There is no guarantee the bank will accept a short sale offer

5) You’re credit will suffer from the effect of the mortgage lates

Remember, your circumstance will determine your course of action. A short sale won’t work for everyone. However, we urge you to face these decisions in a calm and calculated fashion, just as the bankers do. Don’t give up your home without a “good” fight. We don’t mean tearing the house apart or suing the bank. We mean an intelligent battle during which you make the best financial decisions for your future. You do have rights and options. Better a controlled burn than a crash and burn.

If you have any thoughts or comments on this blog, by all means let us know! We value your feedback.

Website:	http://www.nextgenrecorp.com
Phone:	877-647-3911
Fax:	866-497-7086

BiggerPockets

Home Prices Plummet to 2003 Levels

Short Sale â€“ An Investment Perspective

Banks Quaking at U.S. Treasury Department Oversight

Foreclosure Forum in D.C. Today With Big 5 Mortgage Companies

HR 861- House Acts to Cut Wasteful Spending

Personal Loss Mitigation-Think Like a Banker

Brent Houston

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