Real Estate Information Archive

Here are 4 things Home buyers need to know about this breaking real estate news, and how it impacts them. 

1.  What is robo-signing is, and what all the fuss is about?  The phrase robo-signing refers to what we’re now realizing has been a very common practice in the banks’ foreclosure document processing divisions, where one person was essentially given the job of signing as many 10,000 foreclosure documents per month, by hand.  These individuals were supposed to be reviewing the files, making sure grounds for foreclosure actually existed, signing the docs in front of notaries. But because of the volume of documents, what they actually did was just sign thousands of documents at a time, without even reading them, and ship them off somewhere else to be notarized.

If you do the math on an 8 hour workday, you'll see that that only gives the staffer 1.5 minute to review each file and documents to make sure the foreclosure is warranted.  That's not humanly possible, which is how these staffers got the nickname “robo-signers”
    
Government regulators are very concerned that the banks may have been taking people's homes without following the proper legal procedures.  As a result, 40 states' attorneys general are teaming up to launch a multi-state investigation, and the federal Comptroller of the Currency and federal attorney general may also get involved in investigating this issue. 

2.  Will the freeze will make the banks cancel buyer contracts on REO properties? Currently, the freeze impacts bank-owned properties that are owned and/or serviced by Ally Financial/GMAC Mortgage, JP Morgan Chase, and some properties that were owned by Bank of America. Generally, contracts to buy these homes are being put on hold and extended for 30 days.  As well, the banks are often reaching out directly to buyers and offering them the option to cancel their contracts and recoup their deposit money.

3.  Is it safe to buy a foreclosed home? There's lots of talk right now about the "clouds" that this scandal will create on the titles to homes that were foreclosed by the banks' foreclosure mills. And that makes sense: if the home wasn't properly foreclosed on in the first place, then the legitimacy of the bank's resale can be called into question.  Normally, I'd say: Don't worry about it, buyer - that's why you'll get title insurance!  But last week, 3 of America's largest title company insurers declared that they will not offer title insurance on a number of the homes that may have been involved in this scandal.

In the vast majority of cases – when the foreclosure was justified and a bona fide purchaser, someone who was not involved in the bank’s wrongdoing, has purchased the home, courts will not reverse these foreclosures or their sale to buyers.  But if you’re in the market for a foreclosure, get clear on which bank owns the place as soon as you can, and run the property past your title insurer before you get too far into the transaction to make sure they can write a policy of title insurance on the property before you spend too much money on inspections and appraisals.  (And see my Bonus Buyer Advice at the end of this blog post!)

4.  How the foreclosure freeze will impact American home values, say after you buy.  In the short term, these freezes might cause prices to stabilize, as we expect to see the supply of foreclosures for sale start to shrink.  However, if these freezes stretch out for a long period of time, they could simply be delaying many inevitable foreclosures, which could delay the recovery of the housing market and home prices, over time.  I wouldn't expect to see the freezes cause prices to drop much beyond where they are now, but if they stretch out, they could keep appreciation flat for a longer period of time.

P.S. - Bonus Buyer Advice : Don’t underestimate the deals you can get on non-foreclosed properties. You can often get just as good of a price on a better property with more flexibility on the seller’s part in terms of repairs and other negotiation points if you buy a home from an individual seller, as opposed to a bank-owned property.  

P.P.S. - Click here for more direct access to the broker MLS system and listings.

Understandably, homeowners who apply for a loan modification tend to get a little antsy and perhaps even annoyed when they apply for a loan modification and then fail to hear anything for several weeks, especially if they continue to receive late payment notices and nasty phone calls from collection agencies.

Many homeowners wonder, “How long will it be before I hear anything?” and “What should I do while I’m waiting.” This article should help answer those very pressing questions.

How long will it take?

The loan modification process typically takes 30 to 90 days, depending mostly on your lender and your ability to efficiently work through the process with your attorney or other loan modification representative.

Note: The loan modification timeline is not set in stone. The more complex your situation or the greater the degree of concessions needed from the investor, the longer the process takes. Borrowers with a lot of collateral issues can see their loans take longer than what has become the typical 30- to 90-day timeframe.

A professional can often reduce the amount of time required by processing your paperwork efficiently, presenting your application exactly the way the lender wants it, and knowing from past experience what the lender is able and typically willing to agree to. Although each borrower’s situation is unique, knowing the measures the lender is willing to take for similarly situated borrowers can be a real time saver.

Whether you are dealing directly with your lender or through a loan modification specialist, ask several questions up front:

How long is the process likely to take? Find out the best- and worst-case scenarios and then count out the days and mark them on your calendar.

When can I expect to hear something about my case? Mark this date on your calendar.

If I don’t hear anything by the specified date, whom should I contact? Get the person’s name, employee identification number (if available), phone number, and any extension you need to dial to reach the person directly.

What should I do while I’m waiting?

Playing the waiting game can be agonizing, particularly when you have no idea of whether your application will be accepted or rejected or what the lender will offer in terms of a workout. It feels like your future hangs in the balance, and you remain in the dark. Knowing the standard timeline for processing a loan modification can certainly help relieve some anxiety. In addition, you can continue to make progress on your own by doing the following:

If you hired a loan modification specialist to represent you, do not speak with your lender or lender’s representative. Refer all matters to the professional who is representing you. Anything you say to the lender could confuse things or compromise your representative’s ability to negotiate the best deal on your behalf.

Log all phone calls and correspondence between you and your lender or representative. Write down the number you called, the person you talked with, what the person said, and what you said - not word for word, just jot down the key points.

Keep track of important dates. If you do not hear something back on the date promised, call the next day to find out what’s going on. Lenders almost never call you back with updates. If you hired a third party representative, they will (or should) keep you posted, but the lender simply doesn’t have the time to make follow up phone calls. If you’re dealing with your lender directly, you’ll have to be the one making the calls. Mark your calendar and schedule periodic update phone calls. Consistent follow up is paramount to a successful modification.

Explore other options. If the lender denies your request for a loan modification or presents an offer that you cannot accept, you will need a plan B (and maybe a plan C and a plan D). In addition, other options may be better for you than a loan modification. Consult a real estate agent about listing your Home for sale. Talk to a mortgage broker or loan officer about refinancing. Speak with a bankruptcy attorney to find out whether filing bankruptcy would be a better choice.

Don’t be surprised if you continue to receive delinquency notices or late payment phone calls. Lenders rarely put a stop on the foreclosure process until a workout solution is fully in place. You should ask your lender if your attempts to negotiate a solution will stop or at least postpone other collection actions. If they do not, you should find out what that means for you. If the lender is able to foreclose in 30 days and a workout takes 60 days, there’s a slight timeline problem. Push to have all default and foreclosure actions put on hold while your workout attempts are underway.

When your fate is in someone else’s hands, 30 to 90 days can seem like an eternity. By doing your part to keep the process on track, remain informed, and explore other options, you not only improve your chances of achieving a positive outcome, but you can also reduce the stress that commonly accompanies the waiting process.

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Loss Mitigation

Loss mitigation is the terms used by mortgage companies to describe their programs and department that can assist borrowers in bringing their mortgages current.

The number one requirement of Loss Mitigation is affordability of the mortgage.  To be able to assist you, the mortgage company must see a budget that demonstrates to them that the income coming into your Home is sufficient to support all of the household bills.

When speaking to your mortgage company, ask to speak to their Loss Mitigation Department, which is sometimes called the Loan Counseling Department.  These are the people that have the authority and knowledge to assist you with becoming current on your mortgage.  Request from them a Loss Mitigation Package for your loan.

Find out what type of loan you have (i.e. Freddie Mac, Fannie Mae, VA, or FHA).  When you contact your mortgage company, ask them who the investor is on your loan, or if you have mortgage insurance.

Options You May Have

         Repayment Plan

This is when the mortgage company can take the amount that you are delinquent and add it on to your regular payment, and spread it out over 3-12 months (some mortgage companies will allow longer).

         Loan Modification

This is when the mortgage company adds the amount that you are delinquent to the principal balance of your loan.  If they think that it is necessary, then they may consider extending your loan term to 30 years and/or adjust your interest rate.

         Partial Claim

This strategy is used on FHA loans or those with PMI insurance only.  This is when the insurer of your mortgage gives you a loan for the amount that you are delinquent.  This is a non-interest loan that does not require payment until the sale of the home or until you pay off the first mortgage.

For more real estate information, please call Tom Stachler directly at (734) 996-0000 or go to his web site.

First Month Missed Payment:  The first month your payment is missed your mortgage company is likely to contact you by mail and/or telephone to inform you of your delinquent status.  A late charge is assessed on the missed payment.

Second Month Missed Payment:  The second month your payment is missed your mortgage company is likely to begin calling the contact numbers they have for you, in order to discuss why you have not made a payment.  It is important that you not avoid their telephone calls.  Try to stay calm on the telephone and explain to them your situation and what you are trying to do to resolve it.  You still may be able to make one payment at this time to prevent yourself from falling three months delinquent.

Third Month Missed Payment:  At this point, you are likely to receive a letter from the mortgage company stating the amount you are delinquent, and that you have 30 days to bring it current.  This is called your “Demand Letter” or “Notice to Accelerate.”  If you do not pay the specified amount or make some form of arrangement by the date given, they are allowed at that time to refer you to foreclosure or accelerate your mortgage.  They are unlikely to accept less than the total due without prior arrangements if you have received this letter.  Foreclosure/acceleration means that they forward your account to their attorneys.  You still have time to work something out with the mortgage company.

Fourth Month Missed Payment:  Now you are usually nearing the end of the time allowed in your Demand Letter or Notice to Accelerate.  If this expires and you have not paid the full amount or worked out arrangements, then you will be referred to their attorneys.  At this time, you incur all attorney fees as part of your delinquency.  The attorney then schedules a Sheriff’s Sale, which is the actual date of foreclosure.  The Sheriff’s Sale will be scheduled for approximately six weeks after the attorney receives your file.  You will be notified of this date by mail, along with a notice taped to your door.  This is NOT a move out date.  The attorney publishes notice of foreclosure over four successive weeks in the local legal newspaper.  After the insertion on your property is published in the legal news, you have 4 weeks until the Sheriff’s Sale! Contact your lender NOW!

Sheriff’s Sale:  You have up until the date of the Sheriff’s Sale to work out arrangements with the mortgage company or to pay the total amount owed (reinstatement amount).  At the Sheriff’s Sale your house will be sold.  An outside party may bid on your Home.  If no bids are received, the home goes back to the lender.

Redemption Period:  If nothing is done to resolve the situation and the Sheriff’s Sale is completed then you enter the Redemption Period.  The redemption period starts from the date of the Sheriff’s Sale.  State Law requires that this period is not less than 30 days and no more than one year.  Most mortgages allow the homeowner six months to redeem property with the lender/bidder, paying the amount owed plus interest and fees.  If property is over 3 acres, you may have a 12 month redemption period.  You will be notified of your time frame on the same notice that states your Sheriff’s Sale date.  This is still your time to reside in the home.

End of Redemption Period:  If the homeowner has not redeemed the property, ownership is transferred to lender or bidder.  If the homeowner has not left, the new owner starts eviction proceedings.  An eviction hearing is held within two weeks, followed by a 10 day grace period for the former homeowner to vacate the premises.  When the grace period ends, eviction is certified.  Court bailiffs are notified and empty the premises.

In the wake of the subprime market fallout, lenders are making it tougher for consumers to get a loan. As a result, borrowers would be wise to try to raise their credit scores to qualify for loan products that have better loan terms and  lower interest rates.

Starting Over, borrowers can follow seven simple steps to raise their credit scores. The steps required to raise credit scores may appear counterintuitive. In fact, individuals should be warned that without knowledge of how credit scores are derived, individuals can be damaging their credit scores rather than raising them when taking such actions as closing credit cards.

It is generally recommended that borrowers wishing to raise their credit scores first check their credit limits and evenly distribute the balances they’re carrying to help increase their credit scores, or that they pay them off in full to get the highest score increase. Make sure your maximum limit is reported.  When no limit is reported, credit scoring software presumes the account is ‘maxed out’. The credit scoring software scores more favorably the closer a balance is to zero. Balances over 70 percent damage credit the most, followed by the next tier of 50 percent and again by the tier of 30 percent of the maximum credit limit. Rather than carrying a large balance in an unfavorable tier, redistribute outstanding balances over several credit cards.

I would generally advise keeping credit cards open. Closing credit card accounts can hurt your score unless the accounts were opened less than two years ago, and you have over six credit cards.  Also consumers should make sure to keep their old credit cards open as well. Fair Isaac’s credit scoring software assumes that people who have had credit for a longer time are at less risk of defaulting on payments.

Borrowers also need to get rid of late payments listed on the credit report. Contact the creditors that report late payments and request a good faith adjustment that removes the late payments reported on your account.   Since you are a customer in good standing, the creditor may work with you. This may require more than one phone call. If you’re frustrated, rude or unclear with your request, you’re making it very difficult for the creditor’s representative to help you.  There are lenders that can help you with this process as well.  Contact my office for more details on Ann Arbor Area lenders or mortgage brokers that I have found to be helpful and competent.

A very important step is for consumers to rid themselves of any collection accounts by paying them off provided the collection agency agrees to delete them in return. Paying it off can otherwise actually lead to a decreased credit score due to the date of last activity getting updated to the current date when you pay. The consumer should contact the collector and request a letter explicitly stating their agreement to delete the account upon receipt or clearance of the payment. Although not all collection agencies will delete reporting, it’s certainly worth the effort.

Next, consumers should pay off past due amounts on delinquent accounts that are not in charge-off status. After that, I would advise getting rid of charge-offs and liens that are less than two years old. Charge-offs and liens that are older than 24 months do not affect your credit score nearly as much as ones under 24 months. But if they’re newer than 24 months, they can seriously damage your credit.  If you have both charge-offs and collection accounts, but have limited funds, I would advise paying off the past due balances first, then paying collection accounts that agree to remove all references to credit bureaus.

Individuals can positively affect their credit scores in as little as three weeks if your ambitious. It's just a matter of getting educated and focused on the best, fastest and most reliable course of action to raise one’s credit score.  If you are looking for a new Home, you might want to view new listings using the Realtors mls system by clicking here.  Other helpful credit tips can be viewed by click on this link.