Flash… Lenders DON’T want to modify!

As as Seattle real estate agent who specializes in short sales and negotiating with your bank I am coming to conclusions about the Home Ownership Made Affordable Program (HAMP) effort to help millions of American homeowners in getting their home mortgages modified.  Sadly the numbers are all too revealing.  Another reason why Seattle short sales will increase, over the coming years, as distressed home owners receive more foreclosure notices, it’s simply a smarter choice!

The numbers… the guise of the rubric of everyone wanting to “Help the Homeowners Keep their Homes”, “Save Our Neighborhoods”, “The Banks Care About Their Clients”, “Banks Give a S&*%”.

The numbers show what is happening … The program has enrolled over 850,000 homeowners who are seriously delinquent in their mortgage payments in a trial modification period but has encountered significant problems in converting those trials into permanent loan modifications.

From my experience what I see is that the Government has created a program to help distressed homeowners and banks have adopted a public personal of wanting to work with homeowners under the guidelines of the Government program.  After all, the banks want to resolve the problem also!  But then you get the numbers… The numbers don’t lie.

My next blog will deal with the duplicity of banks in their efforts to abide by the HAMP guidelines while preying upon the lack of understanding of the typical distressed homeowner (who is a lot like a deer in the headlights). An example of a homeowner will show how they have been preyed upon. Come on back!

“The Treasury Department reported Friday that 66,500 of the 902,620 homeowners who had started the trial modification period for its Home Affordable Mortgage Program (HAMP) had completed the three month trial and entered into a permanent modification by the end of December.  Another 46,000 have satisfactorily completed the trial and have been given final documents but have not yet signed and returned them.

Although only a 7.4% conversion rate, this is more than double the 32,400 signed permanent modifications reported at the end of November.”

*Actual increase may not be as high  due to data collection changes or improvements
**Collection of records classified as  NOD began in August 2009 because of change in state law
† Collection of some records previously  classified as NOD in this MSA was discontinued starting in January 2009
†† Collection of some records previously  classified as NOD in this MSA was discontinued starting in September 2008

About RealtyTrac Inc.
RealtyTrac (www.realtytrac.com)  is the leading online marketplace of foreclosure properties, with more than 1.5  million default, auction and bank-owned listings from over 2,200 U.S.  counties, along with detailed property, loan and home sales data. Hosting more  than 3 million unique monthly visitors, RealtyTrac provides innovative  technology solutions and practical education resources to facilitate buying,  selling and investing in real estate. RealtyTrac’s foreclosure data has also been  used by the Federal Reserve, FBI, U.S. Senate Joint Economic Committee and  Banking Committee, U.S. Treasury Department, and numerous state housing and  banking departments to help evaluate foreclosure trends and address policy  issues related to foreclosures.

FHA has been there providing Seattle home buyers with their home mortgages.

An increasing number of Seattle short sales or foreclosures may be the result of any changes in the FHA guidelines.

I remember back in 1977 I was buying homes with FHA mortgages.  FHA appraisers were in the nasty habit of calling out all kinds of deficiencies in homes which forced us to bring Seattle homes up to a standard which caused improvements in neighborhoods.  It was a good thing.

As time went by, so did FHA financing.  It virtually disappeared.  The FHA saw its share of the mortgage market fall to 2% in 2006.  When the housing market was booming, sub-prime lenders drew away many of the borrowers who traditionally used FHA-backed loans by offering even more favorable terms. Unlike the FHA, sub-prime lenders didn’t require borrowers to document their incomes.

With the collapse of the sub-prime market FHA took on a role as lender of last resort.  Suddenly, the FHA had an enormous chunk of the market.  Average credit scores of FHA borrowers dropped sharply at first. In last year’s third quarter, the FHA insured 25% of mortgages.

FHA-insured mortgages made in 2007 and 2008 are largely responsible for the agency’s precarious position, with default rates approaching 24%.

At a conference in November, Robert Toll, chief executive of luxury-home builder Toll Brothers Inc., referred to the FHA as “the new sub-prime” and “a definite train wreck” that will soon need a bailout, according to a transcript of his remarks.

Changes may well be in the offing.

So, what does this mean for Seattle area home buyers and sellers?

Short answer, sales will be detrimentally affected.  With fewer buyers qualifying for any loans, let alone an FHA loan with it’s 3.5% down payment, home prices will be held down and maybe even driven down.  Buyers will have to save more money for a down payment, home sellers will have to wait longer for a buyer and lower their prices if they want to sell sooner than later.  All we need now is for interest rates to increase, thus decreasing the amount of mortgage the first time home buyer (FHA’s target market) can afford.

Does this mean that home owners will be further under water?  Will this increase the number of home owners seeking relief from their over encumbered homes?  Do you think that there will be an increase in short sales?

Contact Us to discuss your situation.  There is no cost and you will walk away with insights into what you need to do.

The Federal Loan Modification Program-US Treasury Department

As a Certified Short Sale Specialist in the Seattle real estate market the current horror we are all living through has been in the works for a number of years.  Seattle homeowners came into the irrational exuberance rather late in the game and therefore our prices didn’t rise as rapidly before the collapse hit homes in my market of King and Pierce counties.

This is about the good intentions of a program that went nowhere.  But more on that later.

If you might be a distressed homeowner thinking about a Short Sale, Contact Us.

Hey, I have been working with real estate, providing mortgages to homeowners statewide and investing in Seattle real estate for over 30 years.  I enjoy talking about our local market, how we got here and especially would enjoy your comments or questions.  We learn from the interplay of ideas and comments, so play with me!

This begins a series of blogs designed to educate and update Seattle- Tacoma distressed home owners on what government programs are available and how those programs are faring, rather how Americas distressed homeowners are faring under these guidelines. 

The below video explains the details of the Federal Loan Modification Program implemented March 4 2009 by the US Treasury.  If you would rather see a good written explanation try this US News article “Obama’s Loan Modification Plan: 7 Things You Need to Know“. 

More to come.

Your credit has been severely impacted!

Have you noticed?  This is serious business.  In the past we might talk about credit and get a “Ho Hum”.

• Have you checked your credit score lately?
• Do you know what credit score you now need in order to buy a home?
• A car?  Something you have been waiting to buy?
• Credit cards interest rates looking frightening?

Well it may be time to become a bit of a student of credit issues.  Forewarned is forearmed.

Check out the below video and then sign up for our FREE newsletter from the experts.

Sign up for our FREE Credit Newsletter

As a financial professional I have watched as credit scores have emerged as one of the single most important factors in determining a person’s ability to get the best value from every financial commitment they make.

• Everyone knows that a strong credit score is the key to a favorable home loan or car loan, but did you know that insurance companies now pull your score to determine the type of policy to offer you?
• Did you know that prospective employers may very well use your credit score as a deciding factor a factor for whether or not you will be offered a job?

The decision-makers who have the power to positively impact your life and your finances all use your credit score as the main decision-making tool.

• As a result, your understanding of the makeup of your credit score and the factors that impact that score is crucial.
• In response to the increasing weight the credit score carries, I have elected to educate myself on the subject of the credit score and methods for its improvement. In doing so, I will become a credit specialist who will provide you all of the important information you need to understand your credit score and how you can improve it.
• Additionally, I have done extensive legwork to get access to the most current and accurate credit improvement information available today.

Beginning the first of next month, I will send you the first of a monthly (or bi-monthly, quarterly, etc.) newsletter that focuses on a specific theme regarding credit. Some of the aspects I will cover in the newsletters include:

1. what makes up the credit score,
2. how spending affects credit,
3. preventing identity theft,
4. how to recover from a mortgage or financial crisis,
5. and most important how to improve and maintain strong credit reports and scores.

Each issue of the newsletter will be packed with tips, advice and the primary steps you can take to protect your credit.

I am looking forward to helping you learn more about the components that make up your credit report and how you can improve and maintain the best possible credit score to realize your financial dreams.