Orlando Short Sale Expert | Orlando Short Sales

Fannie Mae says it will begin fining loan servicers who take too long to complete foreclosures once it’s been determined that delinquent borrowers don’t qualify for a loan modification or other alternatives like short sales.

The fines — or “compensatory fees” — will be assessed when loan servicers can’t provide a reasonable explanation for failing to meet timelines for completing routine foreclosures that vary from state to state, Fannie Mae said in a bulletin to servicers.

The time allotted to complete a foreclosure, starting from the referral of a loan file to an attorney or trustee until the date of a foreclosure sale, varies from as little as 60 days in Georgia, Michigan, Missouri, Tennessee, Texas, Virginia and West Virginia, to 300 days or more in Illinois, Maine, New Jersey, New York, Vermont and Wisconsin.

The foreclosure timelines Fannie Mae has established for the four states hit hardest by foreclosure during the downturn fall in between: 120 days in California and Arizona, 150 days in Nevada, and 185 days in Florida.

Fannie Mae said the foreclosure schedules it’s established for each state represent the time “typically required for routine, uncontested foreclosure proceedings, given the legal requirements of the applicable jurisdiction.” The timeline in Florida, for example, was extended by 35 days to allow for a state-mandated mediation process.

Fannie Mae promised it “will not impose compensatory fees for delays beyond the control of the servicer, such as unavoidable mediation or court delays, or sales delays by sheriffs or other selling officers.”

When fines are levied, they will be based on the outstanding principal balance of the mortgage loan, the rate of return paid to investors in mortgage-backed securities backed by the loan, the length of the delay, and any additional costs directly attributable to the delay.

According to mortgage data aggregator Lender Processing Services, an estimated 2.02 million homeowners were in foreclosure in July nationwide. Another 5.02 million homeowners were behind on their mortgages.

On average, borrowers in foreclosure were 469 days behind on their mortgage payments, up from 351 days a year ago and 196 days in January 2009, LPS said.

Properties that are vacant and held off the market, combined with whatever portion of homes with delinquent mortgages that are not currently listed for sale, “represent a shadow inventory putting downward pressure on both home prices and rents,” Fannie Mae warned in the company’s most recent quarterly report to investors.

According to the report, 4.99 percent of the roughly 9 million single-family loans securitized into mortgage-backed securities guaranteed by Fannie Mae were seriously delinquent or in the foreclosure process as of June 30 — about 450,000 loans.

Of those, about 170,000 were in foreclosure. About two-thirds of seriously delinquent loans had been delinquent for more than 180 days.

In the first half of 2010, Fannie Mae’s loan servicers negotiated 276,059 loan workouts — more than three times as many as the same time period the year before.

Fannie Mae’s loan servicers also signed off on 38,841 short sales and deeds-in-lieu of foreclosure during the first half of 2010, a 171 percent increase from the same period a year ago that nearly matched the total for all of 2009.

Fannie Mae nevertheless acquired 130,767 properties through foreclosure in the first half of the year, up from 57,469 during the first half of 2009.

At the end of the foreclosure process, loan servicers schedule properties for auction. If nobody bids for a property, or if the bids that are received fall short of the properties’ estimated worth, Fannie Mae takes possession of the home and handles its resale.

The company was only able to sell 87,612 of the properties it acquired through foreclosure in the first half of 2010, leaving it with an REO inventory of 129,310 homes valued at $13 billion.

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Jerry LaRose is an Orlando Area Residential Real Estate Expert, who can assist you with the purchase and/or sale of Real Estate in Orlando, Windermere, Winter Garden, Kissimmee, St. Cloud, East Orlando, Longwood, Altamonte Springs, Maitland, Winter Park, Oviedo, Apopka, Lake Mary, Clermont, Ocoee  Florida or any place in the country. Jerry has created a team of professionals throughout Orlando and the country to ensure that you enjoy a smooth transition to your new area. Please visit http://OrlandoShortSaleExpert.com or www.JerrySellsOrlando.com for your Orlando real estate needs.  Please give me a call if you have questions about the Orlando and Central Florida real estate market.

P.S. If you are listing your home as a short sale in Orange, Seminole, Polk, Lake  or Osceola County Florida and Orlando, East Orlando, St. Cloud,  Davenport, Clermont, Longwood, Windermere, Winter Garden,  Kissimmee, Winter Park, Altamonte Springs, Maitland,  Apopka,  Lake Mary, Oviedo or Ocoee Florida make sure you hire an agent who knows how to do short sales and has the experience to get the job done. We are doing successful short sale packages. Call us at 407-580-7011 to find out more about Orange County Short Sales and Orlando Area Short Sales.

With today’s reduced property values and increased unemployment, it’s tempting for some homeowners to just throw their hands up in defeat, allow the bank to take their home in foreclosure and rid themselves of the monthly mortgage burden.

Even suffering through the paperwork and stress of a short sale may seem too much for an overwhelmed borrower to handle.

But Florida homeowners should be aware of unique rules in the state that make the benefits of a short sale typically outweigh the ease of walking away in a foreclosure.

The biggest difference between Florida and many other states when it comes to losing a home is the deficiency judgment.

While some states ban lenders from collecting the remainder owed on a loan after a foreclosure or short sale is completed, Florida law allows banks to go after borrowers for up to 20 years. That can lead to a garnishment of wages long after the home is gone.

In a short sale, where the bank agrees to take a lesser amount for the home than what is owed on a loan, lenders sometimes are willing to write off the deficiency on the front end.

In a majority of the cases I’ve handled, the bank has waived its right to seek a deficiency. However, we are seeing this year that the lenders are more reluctant to do so.

That was the case with Kissimmee resident Scott & Teresa, who in 2010 found themselves in a home the couldn’t afford.

Following a loss of employment, and with two children, Scott & Teresa bought a $235,000 home that they lived in comfortably for a 4 years. But then one of them lost their job.

Teresa remembers the day the bank served the notice of foreclosure.

“I cried my eyes out,” Teresa said. “That’s when I panicked because I really didn’t want it to happen.”

Scott & Teresa got advice from Jerry LaRose on doing a short sale.

Their bank, CitiMortgage, waived its right to seek a deficiency even though it ended up taking $150,000 less than what was owed on the loan.

Also, if a bank refuses to waive the deficiency in a short sale, it still would have to go back to court to seek a judgment.

In a foreclosure, at the end of the proceeding, a deficiency judgment is automatically awarded by the courts and the bank is free to seek a claim.

“In the past, people just wanted to move from the property and get on with their lives and didn’t understand what the lenders’ rights were in terms of pursuing a deficiency claim, I think people are more aware now about what can happen after the fact and that their nightmare can continue.”

Another consideration is the effect of a foreclosure or short sale on credit.

According to the Fair Isaac Corp., which developed the widely used measurement of credit risk called a FICO score, the negative effect of a foreclosure is  marginally worse than a short sale.

But in Florida, a deficiency judgment from a foreclosure is likely to have a much larger impact that will prohibit your ability to buy another home for many years. Currently, Fannie Mae states that you may purchase another home after only years after completing a short sale. Whereas a Foreclosure they say you would have to wait 5 Years.

There are a few situations where some experts believe it is better for someone to go to foreclosure rather than do a short sale. I always suggest to consult an attorney at that point.

To do a short sale, a borrower must give all of his or her financial information to the bank before it will decide whether to allow the short sale. The idea is that if a person can afford to pay the mortgage, the short sale may be denied.

“Now the lender knows everything about your finances and they can better decide whether they will go after you or not.
If a lender doesn’t know your finances, it reduces the chances it will go after you following a foreclosure.

You might fly under the radar, With the millions of people going through this, they are probably going to go after the low-hanging fruit.

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Jerry LaRose is an Orlando Area Residential Real Estate Expert, who can assist you with the purchase and/or sale of Real Estate in Orlando, Windermere, Winter Garden, Kissimmee, St. Cloud, East Orlando, Longwood, Altamonte Springs, Maitland, Winter Park, Oviedo, Apopka, Lake Mary, Clermont, Ocoee  Florida or any place in the country. Jerry has created a team of professionals throughout Orlando and the country to ensure that you enjoy a smooth transition to your new area. Please visit http://OrlandoShortSaleExpert.com or www.JerrySellsOrlando.com for your real estate needs.  Please give me a call if you have questions about the Orlando and Central Florida real estate market.

P.S. If you are listing your home as a short sale in Orange, Seminole, Polk, Lake  or Osceola County Florida and Orlando, East Orlando, St. Cloud,  Davenport, Clermont, Longwood, Windermere, Winter Garden,  Kissimmee, Winter Park, Altamonte Springs, Maitland,  Apopka,  Lake Mary, Oviedo or Ocoee Florida make sure you hire an agent who knows how to do short sales and has the experience to get the job done. We are doing successful short sale packages. Call us at 407-580-7011 to find out more about Orange County Short Sales and Orlando Area Short Sales.

Home owners who are “underwater” with their home loan and seek to come up for air by walking away from the debt, could still be gasping for relief years down the road.

There are occasions when walking away from your home — and down the road to foreclosure — is your only option, but seldom is it the best alternative.

Mortgages are “underwater” or “upside down” when the property experiences negative equity — the mortgage is larger than the current value of the property. Negative equity is caused by a decline property value, an increase in mortgage debt or, most likely, both.

The consensus among experts is to consider the alternatives before abandoning your home, talk with your lender and seek counseling from a U.S. Department of Housing and Urban Affairs (HUD) certified counselor.

Don Bisenius, the head of Freddie Mac’s home-loan guarantee business, recently asked borrowers to stick it out through the crisis.

Bisenius said foreclosures lead to degraded neighborhoods, more expensive mortgages and reduced home values.

“In the end, borrowers considering a strategic default should recognize the damaging impact their actions can have on others,” he wrote.

The Obama Administration’s frequently updated and strengthened multi-tiered MakingHomeAffordable.com program and other government efforts offer a good start with a host of options.

• Refinancing, turning in your existing mortgage for a new one, is perhaps the toughest option to accomplish. A refinance requires meeting stiff underwriting requirements — an excellent credit report, a high credit score of 720 or more, documented career level income and little debt, for starters.

Federal programs, including the Federal Housing Administration’s refinance effort, can be a good bet for those who haven’t yet faced hardship and can qualify for a new loan.

• A mortgage modification reworks the terms of existing loans to get the payment down to a more affordable level. To add greater affordability, lenders lower the interest rate, lengthen the term of the loan or reduce the principal — or do some combination of all three. Modifications can be used by qualified home owners who aren’t yet struggling as well as those who are in a pinch.

• Short sales

Modifications and short sales can impact your credit, but not necessarily with the force of a foreclosure.

Bottom line, exploring all the options is a better first step than walking away.

I understand feeling financial pressure is difficult and embarrassing, but there is a point at which everyone has time to explore the options. In just about every case, that’s much better than doing nothing at all. I strongly feel there is no reason for anyone to get a foreclosure”. If you’re in this situation and need help or have questions feel free to call me or e-mail me.    Jerry@jerrylarose.com or 407-580-7011

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Jerry LaRose is an Orlando Area Residential Real Estate Expert, who can assist you with the purchase and/or sale of Real Estate in Orlando, Windermere, Winter Garden, Kissimmee, St. Cloud, East Orlando, Longwood, Altamonte Springs, Maitland, Winter Park, Oviedo, Apopka, Lake Mary, Clermont, Ocoee  Florida or any place in the country. Jerry has created a team of professionals throughout Orlando and the country to ensure that you enjoy a smooth transition to your new area. Please visit http://OrlandoShortSaleExpert.com or www.JerrySellsOrlando.com for your real estate needs.  Please give me a call if you have questions about the Orlando and Central Florida real estate market.

P.S. If you are listing your home as a short sale in Orange, Seminole, Polk, Lake  or Osceola County Florida and Orlando, East Orlando, St. Cloud,  Davenport, Clermont, Longwood, Windermere, Winter Garden,  Kissimmee, Winter Park, Altamonte Springs, Maitland,  Apopka,  Lake Mary, Oviedo or Ocoee Florida make sure you hire an agent who knows how to do short sales and has the experience to get the job done. We are doing successful short sale packages. Call us at 407-580-7011 to find out more about Orange County Short Sales and Orlando Area Short Sales.

ORLANDO, Fla. – July 6, 2010 – With more than half of the Central Florida’s homeowners owing more for their homes than the properties are worth, the question for some has become: How do I get out of this?

Of all the existing-home sales reported by Realtors in the core Orlando market in May, 23 percent were short sales. They are called “short” sales because the sales price come up “short” of, or less than, the amount owed on the mortgage.

What these homeowners, whose loans are “underwater,” may not realize is that they could successfully complete a short sale of their house but then face a lawsuit from their lender for not paying off the entire loan, a shortfall known as a “deficiency.”

At particular risk of being hit with such a debt judgment are owners of second homes and investment properties, homeowners who haven’t faced any kind of financial hardship, and owners who have a second mortgage.

“That’s going to be a huge problem moving forward in the next few years,” said Orlando lawyer Matt Englett, who specializes in home foreclosures. “These people who use Realtors to advise them on the transactions can end up facing deficiencies, and the deficiency notes will go to third-party collections agencies, and they will start suing and progressively pursuing those people.”

Homeowners have several options if they wish to avoid getting calls and lawsuits from debt collectors.

In a mortgage document called the “payoff letter,” a lender may include a blanket provision stating that it reserves the right to sue the seller at any time for unpaid mortgage debt. At the very least, Englett said, sellers need to make sure they do not give lenders that right.

Some lenders, particularly smaller ones, have been willing to state just the opposite — that they will not pursue any mortgage debt from the seller, he added.

Simply asking the lenders to cooperate by removing any wording about collections isn’t enough, Englett said. The seller is usually faced with building a case that details errors and omissions made by the lender in its mortgage documents, to gain leverage and force the lender to forgive the debt.

A new option that emerged in June is a federal program that calls on banks to forgive some of the mortgage debt of certain, qualified short-sale sellers. To qualify, sellers must:

Meet the criteria of the federal government’s Home Affordable Modification Program.

Have the house as their primary residence.

Face a financial hardship, and their mortgage payment must be more than 31 percent of their gross income.

The new program makes short sales a good option for homeowners facing a financial hardship, though it’s not meant for homeowners who can afford their mortgage but want to walk away from an upside-down loan, said Frank Rubino, vice president of the Chase Homeownership Center in Orlando.

“It’s not right. It’s not moral. It’s not the right thing to do,” Rubino said. “Why should customers look to the bank to substantiate a loss for the house they bought? … If they bought the house and sold it for $100,000 more than they paid, they wouldn’t share those profits with the bank.”

The decision of whether to pursue a former homeowner for outstanding debt varies from mortgage servicer to mortgage servicer, Rubino said, and can hinge on such things as whether the customer mismanaged his or her finances.

Sellers with a second mortgage face particular challenges if they try to walk away from a short sale without any remaining debt.

Banks usually have five years in which to file a deficiency judgment, but they can sell it to a third-party collection agency — “and the collection firms can chase you down for 20 years.

In cases where the seller has a second mortgage or can’t qualify for the federal programs, I would direct  you to a real estate lawyer and a tax adviser.

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Jerry LaRose is an Orlando Area Residential Real Estate Expert, who can assist you with the purchase and/or sale of Real Estate in Orlando, Windermere, Winter Garden, Kissimmee, St. Cloud, East Orlando, Longwood, Altamonte Springs, Maitland, Winter Park, Oviedo, Apopka, Lake Mary, Clermont, Ocoee  Florida or any place in the country. Jerry has created a team of professionals throughout Orlando and the country to ensure that you enjoy a smooth transition to your new area. Please visit http://OrlandoShortSaleExpert.com or www.JerrySellsOrlando.com for your real estate needs.  Please give me a call if you have questions about the Orlando and Central Florida real estate market.

P.S. If you are listing your home as a short sale in Orange, Seminole, Polk, Lake  or Osceola County Florida and Orlando, East Orlando, St. Cloud,  Davenport, Clermont, Longwood, Windermere, Winter Garden,  Kissimmee, Winter Park, Altamonte Springs, Maitland,  Apopka,  Lake Mary, Oviedo or Ocoee Florida make sure you hire an agent who knows how to do short sales and has the experience to get the job done. We are doing successful short sale packages. Call us at 407-580-7011 to find out more about Orange County Short Sales and Orlando Area Short Sales.

Nearly one in five delinquent mortgages through the first half of 2009 was owned by someone who could afford to pay, but decided defaulting was a smarter financial play.

The decision to walk away, called “strategic default,” was studied by crediting agency Experian and international consulting group Oliver Wyman.

Their results were released in a report today that found 19 percent of mortgage defaults nationwide in the beginning of 2009 were strategic. The absolute number, 355,000, was a 53 percent increase from the same period the previous year.

Florida real estate experts were surprised by the 19 percent figure – not because it was so high, but because it was so low.

“Personally, I’d be willing to say it’s higher here,” said Boca Raton real estate attorney Marlyn Wiener. “Frankly, the majority of the clients who come into my office are strategically defaulting.”

Today’s report defined strategic defaulters as borrowers who miss six consecutive mortgage payments without missing multiple payments on other debt, such as car or credit card payments.

The theory is it’s more financially savvy in the long run to walk away from a devalued home than continue to pay on the mortgage.

The report pointed to Florida and California as states where strategic defaults are concentrated. From 2005 to the first half of 2009, the number of strategic defaulters went up by 52.8 times in Florida, it said.

A May report from the Federal Reserve Board found that when home equity falls below 50 percent, half of mortgage defaults are driven entirely by the lowered value.

Today’s news on strategic defaults comes as some predict a looming backlash against people who can afford to pay but don’t.

Last week, government-sponsored mortgage purchaser Fannie Mae announced it was banning strategic defaulters from getting new loans for seven years.

Wiener said two of her clients recently received calls from collection agencies seeking to collect on a mortgage default.

“It’s not like you just send them the keys and it all goes away,” said Bill Hardin, director of real estate programs at Florida International University in Miami. “It can come back, and it can come back for a while.”

In Florida, lenders are allowed to seek a deficiency claim for five years and have up to 20 years to collect.

Strategic defaulters gamble that banks won’t come after them because they are too overwhelmed with foreclosures. But banks are now hiring collection agencies, or even selling the deficiency claims to companies whose profit margin is based on recovering the debt.

Shari Olefson, a Fort Lauderdale attorney and author of Foreclosure Nation, Mortgaging the American Dream, said she blames lawyers for advertising strategic default as an option without telling clients of the repercussions. Wiener said she always tells clients a lender could pursue a deficiency claim.

Olefson also said that strategic defaulters are not just hurting themselves, that entire neighborhoods suffer from depreciated values when a homeowner walks away from a mortgage.

“It’s taking advantage of a national crisis,” she said. “Some people legitimately are unemployed and can’t afford the mortgage and they’re not getting any sympathy because of the strategic defaulters.”

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Jerry LaRose is an Orlando Area Residential Real Estate Expert, who can assist you with the purchase and/or sale of Real Estate in Orlando, Windermere, Winter Garden, Kissimmee, St. Cloud, East Orlando, Longwood, Altamonte Springs, Maitland, Winter Park, Oviedo, Apopka, Lake Mary, Clermont, Ocoee  Florida or any place in the country. Jerry has created a team of professionals throughout Orlando and the country to ensure that you enjoy a smooth transition to your new area. Please visit http://OrlandoShortSaleExpert.com or www.JerrySellsOrlando.com for your real estate needs.  Please give me a call if you have questions about the Orlando and Central Florida real estate market.

P.S. If you are listing your home as a short sale in Orange, Seminole, Polk, Lake  or Osceola County Florida and Orlando, East Orlando, St. Cloud,  Davenport, Clermont, Longwood, Windermere, Winter Garden,  Kissimmee, Winter Park, Altamonte Springs, Maitland,  Apopka,  Lake Mary, Oviedo or Ocoee Florida make sure you hire an agent who knows how to do short sales and has the experience to get the job done. We are doing successful short sale packages. Call us at 407-580-7011 to find out more about Orange County Short Sales and Orlando Area Short Sales.

Seven-Year Lockout Policy for Strategic Defaulters
WASHINGTON, DC — Fannie Mae (FNM/NYSE) announced today policy changes designed to encourage borrowers to work with their servicers and pursue alternatives to foreclosure. Defaulting borrowers who walk-away and had the capacity to pay or did not complete a workout alternative in good faith will be ineligible for a new Fannie Mae-backed mortgage loan for a period of seven years from the date of foreclosure. Borrowers who have extenuating circumstances may be eligible for new loan in a shorter timeframe.

“We’re taking these steps to highlight the importance of working with your servicer,” said Terence Edwards, executive vice president for credit portfolio management. “Walking away from a mortgage is bad for borrowers and bad for communities and our approach is meant to deter the disturbing trend toward strategic defaulting. On the flip side, borrowers facing hardship who make a good faith effort to resolve their situation with their servicer will preserve the option to be considered for a future Fannie Mae loan in a shorter period of time.”

Fannie Mae will also take legal action to recoup the outstanding mortgage debt from borrowers who strategically default on their loans in jurisdictions that allow for deficiency judgments. In an announcement next month, the company will be instructing its servicers to monitor delinquent loans facing foreclosure and put forth recommendations for cases that warrant the pursuit of deficiency judgments.

Troubled borrowers who work with their servicers, and provide information to help the servicer assess their situation, can be considered for foreclosure alternatives, such as a loan modification, a short sale, or a deed-in-lieu of foreclosure. A borrower with extenuating circumstances who works out one of these options with their servicer could be eligible for a new mortgage loan in three years and in as little as two years depending on the circumstances. These policy changes were announced in April, in Fannie Mae’s Selling Guide Announcement SEL-2010-05.

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Jerry LaRose is an Orlando Area Residential Real Estate Expert, who can assist you with the purchase and/or sale of Real Estate in Orlando, Windermere, Winter Garden, Kissimmee, St. Cloud, East Orlando, Longwood, Altamonte Springs, Maitland, Winter Park, Oviedo, Apopka, Lake Mary, Clermont, Ocoee  Florida or any place in the country. Jerry has created a team of professionals throughout Orlando and the country to ensure that you enjoy a smooth transition to your new area. Please visit http://OrlandoShortSaleExpert.com or www.JerrySellsOrlando.com for your real estate needs.  Please give me a call if you have questions about the Orlando and Central Florida real estate market.

P.S. If you are listing your home as a short sale in Orange, Seminole, Polk, Lake  or Osceola County Florida and Orlando, East Orlando, St. Cloud,  Davenport, Clermont, Longwood, Windermere, Winter Garden,  Kissimmee, Winter Park, Altamonte Springs, Maitland,  Apopka,  Lake Mary, Oviedo or Ocoee Florida make sure you hire an agent who knows how to do short sales and has the experience to get the job done. We are doing successful short sale packages. Call us at 407-580-7011 to find out more about Orange County Short Sales and Orlando Area Short Sales.

The pressure is all on second place.

Whether one calls it a second mortgage, second lien or home equity loan, the lenders who occupy the subordinate position in the debt stack on your home mortgage are finding out that being No. 2, quite frankly, sucks big time.

Back in the day, before 2007, when money was so cheap that even a grizzly bear wandering around the forest could get a mortgage for his cave, banks also were happy to extend home equity loans and lines of credit to single-family homeowners.
“Hey, Mr. Grizzly Bear, want to fix up that cave and make it a crib? Well, here’s some Benjamins.”

What’s that old joke: You walk in one door of a bank empty-handed and out another with a toaster and home equity loan.
Since credit flowed like water, banks were equally happy to do an 80-20 loan, which was basically a first mortgage for 80 percent of the value of a home plus a home equity or second mortgage for the remaining 20 percent. Whoopee, no money down for the borrower.

Now it’s time for banks to pay the piper. Here’s the big problem: If the home value is underwater or the homeowners are having trouble paying bills, the holder of the second mortgage or home equity loan doesn’t get paid back until after the holder of the first loan, which in those two scenarios almost never happens.
Those 80-20 loans by definition meant the loan-to-value was high, high, high, and now that home values have declined, collecting any money for the second-lien holder is slim at best.

If there is a HAMP (Home Affordable Modification Program) procedure or a short sale, the second-lien holder also gets wiped out. Needless to say, second-lien holders are in no rush to see loan modifications completed or jump into short sales, both of which would mean writing down the loans as full losses.
At most banks, home equity loans, no matter how precarious, for as long as possible are carried on the books at full value — a bit of a fiction, but it does make the banks look better.

In March, Rep. Barney Frank, D-Mass., chairman of the House Financial Services Committee, openly called for the major banks to start writing down second mortgages. His point being, reported the Wall Street Journal, was “the banks’ reluctance to write down second mortgages is hurting efforts to reduce the first-lien mortgage balances of many borrowers who owe far more on their loans than the current value of their homes.”
Indeed, one new change for the Obama administration’s HAMP is that borrowers who get reduced payments on the first mortgage through HAMP would automatically get a break on the second lien as well.

Underneath all the politics, however, are some serious problems in regard to home equity loans: Delinquencies are rising very rapidly.
Historically, delinquencies on home equity loans have been very low, but all that changed last year.
In 2005 and 2006, delinquency rates for home equity loans and home equity lines of credit remained under 1 percent. By the end of 2008, the delinquency rate for home equity loans crept above 2 percent. Then, over the course of 2009 those numbers vaulted to 5 percent, a major leap in percentage.
Most of the gain was in a one-year period, That’s a huge pick-up in delinquency.
The curve of home equity loan delinquencies mirrors that of the unemployment rate. Delinquencies will stay high as long as unemployment rates hover around 10 percent or climb higher.

As a result of home equity loan delinquencies, banks have taken some very large charge-offs. Net charge-off rates increased by 50 percent among the top five banks in 2009. Without naming names, One of the largest lenders of home equity loans took a $4 billion charge-off last year.
Behind the teller windows there’s a lot of confusion. The home equity product more often than not is considered a consumer loan and not a mortgage, which means it falls into a different section of the bank.

“The challenge,” Leonard said, “is that home equity is typically owned and managed in a different part of the bank from the mortgage loan silo. That means different systems, reporting, management, processes — in short, different everything. It’s become an ongoing challenge how the banks deal with home equity loans that are delinquent.”

Even the consumer is confused.

It would be assumed that borrowers would come to the logical conclusion that if they could pay only one of two home loans, they should pay the first mortgage because that would maintain the home. However, the trend is exactly the opposite: Homeowners with cash-flow problems opt to not pay the first mortgage and continue to pay the second.

The only rationale for such behavior is that the payment on the second is lower because the balance is smaller and the homeowner can afford only to stay current with that loan. Unfortunately, it’s the first mortgage that keeps you in the house. It doesn’t matter if you remain current on the home equity loan; if you don’t pay the first mortgage you will be staring into the heart of foreclosure.

The only good news in all of this, from the consumer standpoint anyway, is that origination volume has declined significantly, down 25 percent through the first three quarters of last year. That’s mostly because rates are higher and criteria much more stringent.
Back in the day, banks would underwrite a home equity loan with no documentation, no appraisals, no nothing except an ability to sign on the dotted line. (Mr. Grizzly Bear had to leave a paw print.)
Today, the pendulum has swung fully to the other side. Now, the process and documentation to get a home equity loan is about as long and thorough as getting a mortgage. Perhaps, that’s the way it should always have been.
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Jerry LaRose is an Orlando Area Residential Real Estate Expert, who can assist you with the purchase and/or sale of Real Estate in Orlando, Windermere, Winter Garden Florida or any place in the country. Jerry has created a team of professionals throughout Orlando and the country to ensure that you enjoy a smooth transition to your new area. Please visit http://OrlandoShortSaleExpert.com or www.JerrySellsOrlando.com for your real estate needs. Please give me a call if you have questions about the Orlando and Central Florida real estate market.
P.S. If you are listing your home as a short sale in Orange or Osceola County Florida and Orlando, Windermere, Winter Garden, Kissimmee, Winter Park, Altamonte Springs, Maitland, Lake Mary, Oviedo or Ocoee Florida make sure you hire an agent who knows how to do short sales and has the experience to get the job done. We are doing successful short sale packages. Call us at 407-580-7011 to find out more about Orange County Short Sales and Orlando Area Short Sales.

Effective today, the short sale process is simplified. The only problem: Many lenders don’t know it, and Realtors may have to convince them.

The Home Affordable Foreclosure Alternatives (HAFA) program gives $3,000 to borrowers for relocation assistance, $1,500 to servicers for administrative and processing costs, and up to $2,000 to investors who allow up to $6,000 in short sale proceeds to be distributed to subordinate lien holders. The program was created to help stabilize distressed inventory such as underwater homes.

Some lenders have already adopted HAFA rules, but April 5 was the deadline for participating servicers to implement HAFA. The program reportedly covers servicers handling more than 90 percent of all mortgages.

However, the National Association of Realtors (NAR) says that it’s already hearing complaints from members. Many servicers say they haven’t even heard about the program, Realtors claim, so it’s clear that they won’t “hit the ground running.”

NAR says it will carefully monitor HAFA implementation and report delays and other program problems to the Treasury Department. However, “patience will be needed.” Realtors can negotiate faster short sales by urging lenders to comply with the new procedures and deadlines.

NAR offers a webpage with information on how HAFA works at: www.realtor.org/shortsales.

NAR also offers other short-sale info (including links to a 45 minute Webinar and a 15 minute video on a separate webpage: http://www.realtor.org/realtors/basics_short_sales?wt.mc_id=rd0041.

NAR also produced a four-page HAFA informational brochure.

U.S. Treasury Department guidelines and forms (updated March 26, 2010):
https://www.hmpadmin.com/portal/programs/foreclosure_alternatives.html.

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Jerry LaRose is an Orlando Area Residential Real Estate Expert, who can assist you with the purchase and/or sale of Real Estate in Orlando, Windermere, Winter Garden Florida or any place in the country. Jerry has created a team of professionals throughout Orlando and the country to ensure that you enjoy a smooth transition to your new area. Please visit http://OrlandoShortSaleExpert.com or www.JerrySellsOrlando.com for your real estate needs.  Please give me a call if you have questions about the Orlando and Central Florida real estate market.

P.S. If you are listing your home as a short sale in Orange or Osceola County Florida and Orlando, Windermere, Winter Garden,  Kissimmee, Winter Park, Altamonte Springs, Maitland, Lake Mary, Oviedo or Ocoee Florida make sure you hire an agent who knows how to do short sales and has the experience to get the job done. We are doing successful short sale packages. Call us at 407-580-7011 to find out more about Orange County Short Sales and Orlando Area Short Sales.

A breaking new short sale trend for 2010 is shaping up that you need to know about…$500,0000+ deals.  That’s right, loans with principal balances above $500,000 are starting to default.  Bloomberg News recently reported that $500,000+ loans are defaulting more than twice as often as $250,000 or less loans.  What makes this so fascinating is that only a year ago, $500,000+ loans defaulted at a below normal rate of 4.7%.  This rapid rise in luxury house defaults is very predictable and the beginnings of the next wave of massive foreclosures that is going to slam the residential real estate market.

In 2007, we experienced the sub-prime meltdown.   The subprime debacle was the result of mortgage companies originating ARM loans to shaky borrowers.  Once the payments began adjusting upwards, the already shaky borrowers were sunk and unable to meet their new obligations.  Since the majority of these loans originated in 2005, the majority went into default at the same time and thus became known as the sub-prime meltdown.

In 2010, it is shaping up to be an Alt-A meltdown.  As you know, the peak of the real estate bubble occurred in 2005.  While subprime borrowers were slipping into ARM loans, homebuyers who wanted to buy a bigger home than they could afford began slipping into Alt A loan programs.  These borrowers were different though.  They had good credit, good income, and were a seemingly safe bet for lenders.  They just couldn’t afford the $500,000+ home that they really wanted so lenders invented interest only and option ARM loans.  These loans did not pay down the principal balance, and in the case of the option ARM loan, it actually made the loan bigger each month.  And these Alt A programs were on a 5 year clock. For example,  the borrower would have 5 years of low interest only payments and then at the 5 year mark, it would re-cast into a fully amortized loan.  That re-cast increased the payment considerably.  So do the math, 2005 plus 5 years equals…yap…2010.  So that is what is happening before our very eyes.  Great borrowers with great credit from 2005 who originated Alt A loans are now faced with a loan that is re-casting to a payment that they can’t afford.

But there’s more!  Nationwide, as a gross generalization (I know real estate is localized and this is not the case everywhere), most homes are worth less now than they were in 2005.  And interest only loans do not pay down the principle balance so whatever a borrower owed in 2005 is the exact same amount they owe in 2010.  For option ARM loans, they make actually owe more now than they did in ‘05.  Ouch!  So not only is the payment rising for Alt A loan borrowers, they are also stuck with a property that has no equity.  That’s why the number of defaults is skyrocketing.

So if you are facing any of these situations and you would like to get out but don’t know how then give me a call for a Free confidential consultation. Jerry LaRose 407-580-7011

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Jerry LaRose is an Orlando Area Residential Real Estate Expert, who can assist you with the purchase and/or sale of Real Estate in Orlando, Windermere, Winter Garden Florida or any place in the country. Jerry has created a team of professionals throughout Orlando and the country to ensure that you enjoy a smooth transition to your new area. Please visit http://OrlandoShortSaleExpert.com or www.JerrySellsOrlando.com for your real estate needs.  Please give me a call if you have questions about the Orlando and Central Florida real estate market.

P.S. If you are listing your home as a short sale in Orange or Osceola County Florida and Orlando, Windermere, Winter Garden,  Kissimmee, Winter Park, Altamonte Springs, Maitland, Lake Mary, Oviedo or Ocoee Florida make sure you hire an agent who knows how to do short sales and has the experience to get the job done. We are doing successful short sale packages. Call us at 407-580-7011 to find out more about Orange County Short Sales and Orlando Area Short Sales.

The news is spreading fast…  As reported out from FHA on January 15, 2010

HUD TAKES ACTION TO SPEED RESALE OF FORECLOSED PROPERTIES TO NEW OWNERS

Measure to help bring stability to home values and accelerate sale of vacant properties, perhaps this will start clearing the glut of homes in the Orlando area.

In an effort to stabilize home values and improve conditions in communities where foreclosure activity is high, HUD Secretary Shaun Donovan today announced a temporary policy that will expand access to FHA mortgage insurance and allow for the quick resale of foreclosed properties.

The announcement is part of the Obama administration commitment to addressing foreclosure. Just yesterday, Secretary Donovan announced $2 billion in Neighborhood Stabilization Program grants to local communities and nonprofit housing developers to combat the effects of vacant and abandoned homes.

“As a result of the tightened credit market, FHA-insured mortgage financing is often the only means of financing available to potential homebuyers,” said Donovan. “FHA has an unprecedented opportunity to fulfill its mission by helping many homebuyers find affordable housing while contributing to neighborhood stabilization.”

With certain exceptions, FHA currently prohibits insuring a mortgage on a home owned by the seller for less than 90 days. This temporary waiver will give FHA borrowers access to a broader array of recently foreclosed properties.

“This change in policy is temporary and will have very strict conditions and guidelines to assure that predatory practices are not allowed,” Donovan said.

In today’s market, FHA research finds that acquiring, rehabilitating and the reselling these properties to prospective homeowners often takes less than 90 days. Prohibiting the use of FHA mortgage insurance for a subsequent resale within 90 days of acquisition adversely impacts the willingness of sellers to allow contracts from potential FHA buyers because they must consider holding costs and the risk of vandalism associated with allowing a property to sit vacant over a 90-day period of time.

The policy change will permit buyers to use FHA-insured financing to purchase HUD-owned properties, bank-owned properties, or properties resold through private sales. This will allow homes to resell as quickly as possible, helping to stabilize real estate prices and to revitalize neighborhoods and communities. “FHA borrowers, because of the restrictions we are now lifting, have often been shut out from buying affordable properties,” said FHA Commissioner David H. Stevens.

“This action will enable our borrowers, especially first-time buyers, to take advantage of this opportunity.” The waiver will take effect on February 1, 2010 and is effective for one year, unless otherwise extended or withdrawn by the FHA Commissioner.

To protect FHA borrowers against predatory practices of “flipping” where properties are quickly resold at inflated prices to unsuspecting borrowers, this waiver is limited to those sales meeting the following general conditions: * All transactions must be arms-length, with no identity of interest between the buyer and seller or other parties participating in the sales transaction.

* In cases in which the sales price of the property is 20 percent or more above the seller’s acquisition cost, the waiver will only apply if the lender meets specific conditions.

* The waiver is limited to forward mortgages, and does not apply to the Home Equity Conversion Mortgage (HECM) for purchase program. Specific conditions and other details of this new temporary policy are in the text of the waiver, available on HUD’s website.

If you enjoy reading legalese, the waiver of 24 CFR 203.37a(b)(2) may be found here:

http://www.hud.gov/offices/hsg/sfh/waivpropflip2010.pdf

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Jerry LaRose is an Orlando Area Residential Real Estate Expert, who can assist you with the purchase and/or sale of Real Estate in Orlando, Windermere, Winter Garden Florida or any place in the country. Jerry has created a team of professionals throughout Orlando and the country to ensure that you enjoy a smooth transition to your new area. Please visit http://OrlandoShortSaleExpert.com or www.JerrySellsOrlando.com for your real estate needs.  Please give me a call if you have questions about the Orlando and Central Florida real estate market.

P.S. If you are listing your home as a short sale in Orange or Osceola County Florida and Orlando, Windermere, Winter Garden,  Kissimmee or Ocoee Florida make sure you hire an agent who knows how to do short sales and has the experience to get the job done. We are doing successful short sale packages. Call us at 407-580-7011 to find out more about Orange County Short Sales and Orlando Area Short Sales.