OK, so we're less than 48 hours away from the federal-tax-credit deadline, and about 180,000 home buyers who have been in escrow for nearly two months are on the verge of watching that tax credit slip through their fingers. Why? Because, surprise, it might actually take more than 60 days to close a transaction.

The House and Senate have each passed their own versions of an extension for those who are teetering. But they can't seem to get their acts together and do what they were elected to do: LEAD.

Nearly one-tenth of those buyers are in my state. Two of my buyers are among the throng. I worry for them.

Here's a quote from National Association of Realtors President Vicki Cox Golder, taken from Realtor Magazine:

"We are strongly urging the Senate and the House to act quickly to pass this legislation and ease the minds and pocketbooks of these home buyers. These are not buyers who just entered into the market. These are buyers who previously met all the qualifications for the tax credit, but find themselves at the mercy of a workflow jam with lenders or other delays such as lapses in the National Flood Insurance Program, Rural Housing Service, and new home construction, and might not be able to complete the purchase of their homes by the current deadline. It would be a tragedy for them not to be able to complete the purchase in time to claim the credit.”

Rock 'n' Roll, Vicki!

I'm not sure I would personally classify it as a "tragedy" (Hey, it's $8,000; but hey, it's only $8,000), but it sure does suck, dude!

Is it OK to expect some cooperation and good faith on the part of our elected officials? Or is polarization and ineptitude the rule of the day on Capitol Hill? Hey, Barbara and Dianne! Hey Ken Calvert and Jerry Lewis! Hey Mary Bono! Get off your behinds and start working together. We're sick of party-line votes. We're tired of your excuses. We're looking for someone to step up.

(Brian Bean is a real estate broker and ambassador for Helping A Million Homeowners, a nationwide organization that is committed to helping alleviate the financial stress that so many homeowners face today. He can be reached directly at Brian@BigDreamInc.com.)

Brian Bean
Real Estate Broker
http://www.scott-brian.com/
http://www.orangecrestriversidehomes.com/
http://www.IEShortSalePros.com
http://www.HelpingAMillionHomeowners.com

Labels: Corona, Foreclosure, Home Prices, Inland Empire, Loan Modification, Moreno Valley, Murrieta, Real Estate, Riverside, Short Sales, Statistics, Temecula

This whole loan-modification thing is getting out of hand.

Are we really so easy to manipulate, or are desperate people just clutching at anything to keep from falling?

So many homeowners on the verge of losing their homes will do anything, listen to anyone, take any advice, as long as it's authoritative and the answer satisfies their wants. Why? Because even a flicker of hope can renew the enthusiasm of a condemned man. Problem is, loan mods, for the masses, are a Band-Aid on cancer.

But the voice of reason is drowned out by the shouts for rescue.

I'm all for hope, but it has be accompanied by action and a dose of reality. Homeowners in distress hope for miraculous results -- a loan mod that reduces the amount they owe and cuts the interest rate to below-market levels. Reality is, if you don't have a job, do you really think the bank is going to let you keep the house? Urban myths perpetuate the misplaced optimism. ("My uncle's accountant's niece found a non-profit that is 'getting good results' on loan mods.") And so, merrily they go, off to slaughter.

Sure, a precious few who fit the narrow guidelines and have their flawlessly completed applications fall on the right person's desk on the right day will reap rewards. It's happened to a little over 300,000 people. But the vast majority of applicants who are granted 3-month or 6-month trial modifications will never see permanent loan mods. Many shouldn't even be put through the trial programs. When their debt-to-income ratio with the trial payment is well above 50 percent? When they're unemployed? When they're drowning in unsecured debt and can barely afford to keep food on the table the lights on? I've talked to people who got the go-ahead for trial modifications with payments at nearly 90 percent of their take-home pay. That's frickin' ridiculous.

Less than 1 in 4 people who make it through trial payment programs actually get a permanent mod. And then 75% of those end up defaulting again within a year. Why? Because changing someone's payment doesn't change their habits. And the banks know it. But they can keep on collecting payments from those desperate souls who cling to the dream that they will be among the lucky few. And those homeowners will keep right on paying, even go farther into debt or worse to keep up their end of the bargain. Only to be crushed by a one-page letter summarily denying their application and requiring them to make up the back payments.

Here's the kicker: While these mod programs are running their course, so is the foreclosure. And so many times, riding shotgun with the modification denial is a notice of trustee sale. At that point, it's game over. Too late to attempt the other options, which were more likely to succeed, given the time. Options that were the most pragmatic, given the facts.

People who could have done a short sale, for instance, instead lose their home to a foreclosure, preventing them from buying another home for 5-7 years -- at the bottom of the market -- and gutting them emotionally. The banks actually lose more money than they would have had the property been liquidated in a short sale. The neighbors on the block suffer from a blighted home and further-reduced property values.

And everyone wonders what went wrong?

The voices are wrong. We have to make better decisions, based on facts and experience and the guidance of those with proven success. Not on the Pollyanna-ish opinions of those who don't have a stake in the decision. Don't buy in to the misguided claims of lawmakers who just want to keep their jobs. Don't listen to scamming companies who take an upfront payment to process your loan modification when your gut is telling you it isn't going to fly. Don't blindly follow the suggestions of your friends and neighbors. And don't let anyone keep you from doing what you know is the right thing in the long run. There's too much at risk.

We're adults and we have to start acting like it.

(Brian Bean is a real estate broker and ambassador for Helping A Million Homeowners, a nationwide organization that is committed to helping alleviate the financial stress that so many distressed homeowners face today. He can be reached directly at Brian@BigDreamInc.com.)

http://www.scott-brian.com/
http://www.orangecrestriversidehomes.com/
http://www.IEShortSalePros.com

Labels: Corona, Foreclosure, Home Prices, Inland Empire, Loan Modification, Moreno Valley, Murrieta, Real Estate, Riverside, Short Sales, Statistics, Temecula

Here's an interesting story from CNNMoney.com. Not a big surprise when you look a little closer. Lawmakers, in an effort to get re-elected, push for solutions that treat the symptom, not the disease. In this case, poor money habits fueled by disinformation spread by banks and credit-card companies have lulled society into thinking that debt is good, that credit scores are more important than equity. And when people get in too deep, instead of working on the real issue, lawmakers pass kneejerk multibillion-dollar bailouts for everyone (except, of course, those suffering in silence and making their payments).

Bulletin! Loan mods don't work. They are Band-Aids on cancer. Banks don't want to do them. Urban myths perpetuate misguided hope and third-party legend: "A guy I know told me about their Uncle who found a non-profit that is 'getting good results' on mods." Less than 1 in 4 people who make it through trial payment programs actually get a permanent mod. And then 75% of those end up defaulting again.

Because changing someone's payment doesn't change their habits. Let's work on the real issue, and in the meantime, we need to clear out this distressed housing inventory.

By Les Christie, staff writer
CNNMoney.com

NEW YORK -- Most borrowers who have had their mortgages modified through a government-sponsored program will redefault within 12 months, according to a report released last week.

Between 65% and 75% of loans that are modified through the Home Affordable Modification Program but not backed by the federal government are likely to go bad, according to the report released by Fitch Ratings, a N.Y.-based credit-rating agency.

The main reason these borrowers continue to struggle is that HAMP does nothing to solve the rest of their debt problems, the report added.

"Many of these borrowers still have very heavy levels of other debt," said Diane Pendley, a Fitch managing director, "auto loans, credit cards and other expenses. The HAMP modifications reduce housing expenses down to 31% of income but do not touch these other obligations."

On average, HAMP-modified borrowers, according to Pendley, have 64% of their monthly pretax income spent before they even buy a quart of milk. If even a small emergency arises -- an unexpected car repair, a medical bill or a loss of overtime income -- they're in trouble.

"We're talking borrowers who don't have cash reserves," said Pendley. "If they did, they wouldn't be in this position in the first place. It doesn't take much for them to get in the same situation again"

Jay Brinkmann, the chief economist for the Mortgage Bankers Association, finds nothing at all surprising about the Fitch finding. "Over the course of studying this over several years," he said, "we find re-default rates from 40% to 60% on modified mortgages. You have borrower behavior that keeps coming back."

When that happens, lenders are much more likely now to recommend that borrowers opt for foreclosure alternatives instead of modifying loans a second time.

Currently, according to the Fitch report, about half of prime borrowers who lose their homes now do so through foreclosure.

The other 50% go through short sales, in which they sell their homes for less than what they owe the bank, or deed-in-lieu, a transaction where the bank takes back the property directly and forgives the outstanding balance.

The servicers have been encouraged to rev up their short sale engines by the Treasury Department, which runs HAMP and its sister program, Home Affordable Foreclosure Alternatives (HAFA), which provides cash incentives to the parties who agree to short sales.

Now, when borrowers re-default on HAMP mods or other bank workouts, banks are much more likely to offer help to execute a short sale or deed-in-lieu.

"HAFA gave the servicers an indication that this is where they should take these [re-defaulting loans]," said Pendley. "The banks are now assisting borrowers; they're being much more proactive, like helping them find real estate brokers for short sales."

The benefit of these transactions for borrowers is that it lets them move on more quickly with their lives. They can get out from under the unaffordable mortgage payments, find a cheaper rental, start to, perhaps, save a little cash and start to rebuild their credit scores.

Brian Bean
Real Estate Broker
http://www.scott-brian.com/
http://www.orangecrestriversidehomes.com/

Labels: Corona, Foreclosure, Home Prices, Inland Empire, Loan Modification, Moreno Valley, Murrieta, Real Estate, Riverside, Short Sales, Statistics, Temecula

Here's an update on the federal tax credit, in which buyers who opened escrow on their purchase by April 30 were required to close on or before June 30. Looks like we may be closer to an extension ...

Inman News

The Senate has amended a bill to give homebuyers who were under contract on a home purchase by April 30 an additional three months to close the deal and claim the federal homebuyer tax credit.

Extending the deadline for closing from June 30 to Sept. 30 would allow lenders more time to clear a backlog of 180,000 homebuyers nationwide, said amendment sponsor Sen. Harry Reid, D-Nev.

The amendment to HR 4213, the "American Jobs and Closing Tax Loopholes Act of 2010" -- which primarily extends unemployment insurance benefits -- was approved in a 60-37 vote Wednesday. The vote was mostly along party lines, with only four Republicans in favor and one Democrat opposed.

"While I am disappointed that more Republicans did not support this common-sense measure to strengthen the economy and reduce the deficit, I am committed to ensuring that more Nevadans and Americans can become homeowners and that this amendment becomes law," Reid said in a statement.

The House passed an earlier version of the bill in December, and the Senate approved its own version in March. The Senate is currently working on resolving differences between the two bills.

The National Association of Realtors supports the amendment, saying Realtors have reported that as many as one-third of qualified applicants have been told by lenders that their loans will not close before June 30 because of the sheer volume of loan applications in the pipeline.

The amendment does not extend the deadline for homebuyers to qualify for the tax credit, NAR said in urging lawmakers to approve it, but simply extends the deadline for closing transactions already in contract.

"Since these applications were already in the pipeline and figured into the program's cost, the extension of the closing deadline should not incur any further government costs," NAR President Vicki Cox Golder said in a statement.

There has been some speculation that some homebuyers will attempt to submit fraudulent claims for the tax credit by backdating documents showing they were under contract by April 30, and that extending the deadline for closing would expose the government to more fraudulent claims.

Brian Bean
Real Estate Broker
http://www.scott-brian.com/
http://www.orangecrestriversidehomes.com/

Labels: Corona, Foreclosure, Home Prices, Inland Empire, Loan Modification, Moreno Valley, Murrieta, Real Estate, Riverside, Short Sales, Statistics, Temecula

Great news out of Sacto this week! What many people don't realize is that the banks can -- and will -- try to pursue a deficiency against a homeowner ... if the homeowner signs off on it during a short sale. In California, it's a four-year statute of limitations. Think you won't be back on your feet in four years? The banks think you will, and they are licking their chops! Don't make any assumptions. Ask your agent for evidence that they have gotten bank approvals for their clients that do not reserve the bank's right to pursue a deficiency. And get advice from your attorney before you sign off on ANY short-sale approval letter.

Measure protecting consumers from overreaching lenders now goes to Assembly

California Association of Realtors

LOS ANGELES (June 3) – The California Senate this morning approved SB 1178 (D-Corbett) by a 30 to 4 vote, extending anti-deficiency protection for consumers who have refinanced their original mortgage loans and now are facing foreclosure. The California Association of Realtors (CAR) is the sponsor of the consumer protection legislation.

“Currently, if a homeowner defaults on a mortgage used to purchase his or her home -- known as a 'purchase-money mortgage' -- the homeowner's liability on the mortgage is limited to the property itself,” said CAR President Steve Goddard. “Unfortunately, the original law did not extend the purchase money protection to loans that refinance the original purchase debt, even if the refinance only was to obtain a lower interest rate. SB 1178 corrects this inequity and extends the same protections to consumers who refinance their home loans.

“Today’s vote was a victory for homeowners in California,” he said. “SB 1178 now moves to the Assembly for approval. CAR is calling on our elected representatives to swiftly pass this much-needed legislation and send it to Gov. Schwarzenegger for signature.”

Leading the way…® in California real estate for more than 100 years, the California Association of Realtors (www.car.org) is one of the largest state trade organizations in the United States with nearly 160,000 members dedicated to the advancement of professionalism in real estate. C.A.R. is headquartered in Los Angeles.

Brian Bean
Real Estate Broker
http://www.scott-brian.com/
http://www.orangecrestriversidehomes.com/

Labels: Corona, Foreclosure, Home Prices, Inland Empire, Loan Modification, Moreno Valley, Murrieta, Real Estate, Riverside, Short Sales, Statistics, Temecula