Resources for preventing foreclosure

According to the AP, foreclosures and late payments are hitting a record highs, with the number of people losing their homes in the first three months of the year being a record. Unfortunately, it’s a reinforcing cycle as people scramble to recapture equity, selling their homes, and exacerbating the problem.

Nearly 1 percent, or roughly 447,723 loans, fell into foreclosure during the January-to-March period, the Mortgage Bankers Association said Thursday in its quarterly snapshot of the mortgage market. That surpassed the previous high of 0.83 percent over the last three months in 2007.

It only gets worse when it comes to late payments:

The report also found that more homeowners slipped behind on their monthly payments. The delinquency rate jumped to 6.35 percent — or 2.87 million loans — compared with 5.82 percent for the previous three months. Payments are considered delinquent if they are 30 or more days past due

This underscores the need to talk to your lender if you foresee problems. Banks don’t want to foreclose, they are certain to lose money, they’d much rather limit the damage and make deals.

A recent report from RealtyTrac shows that the foreclosure rate in ten communities near US military basis is rising at 4x the national average. RealtyTrac’s data showed that the areas around Fort Jackson in South Carolina and Marine Corp Base Quantico, Virginia had the biggest increase in defaults between 2007 and 2008 of the samples taken. Filings tripled around Norfolk Naval Base and Camp Pendleton Marine Corps Base in California.

If you are a member of the active-duty military, you should notify lenders that you are covered by the Servicemembers’ Civil Relief Act and see what recourse you have.

Source: Report: Foreclosure rates rise much faster near military installations

If you went through a foreclosure, new home financing rules states that you will have to wait five years and have a strong credit score before you will be able to get financing in the future. According to the new federal guidelines from the Federal National Mortgage Association and the Federal Home Mortgage Corporation (Freddie Mac & Mannie Mae), you’d have to have a FICO credit score of 680+ and a 10%+ downpayment before you could get financing. Favorable rates won’t even be available until you have a score of 720+.

Source: Foreclosure restricts future home financing [Bradenton Herald]

If someone offers you a way to protect your home through a “land grant,” don’t by it because it is a scam. The California Attorney General announced on May 22nd that it had shut down a team of scam artists operating under the name of the Federal Land Grant Company. Bill Hutchings, his wife Xiaoke Li and former wife Shawna Landis, acquired the deeds to hundreds of homes in a foreclosure related scam. They convinced desperate homeowners that they could save their property if they deeded their property to federal land grants.

Land grant transfers were once used hundreds of years ago when the US was buying land from other countries and no one in modern day recognizes those documents.

The ultimate lesson from this is that if it sounds too good to be true, it is.

Source: California AG Brown Announces Arrest of Foreclosure Rescue Scam Artists [All American Patriots]

If you’re going through the foreclosure process, one potential solution is to pursue a ‘deed in lieu of foreclosure.’ A deed in lieu of foreclosure is a deed instrument in which the borrower conveys all the interest in a mortgage to the lender. That means the borrower essentially gives the home to the bank and walks away.

Why would a borrower want to do this? First, you avoid the legal ramifications of going through foreclosure. Secondly, it releases the borrower from all responsibility. The advantage to the bank is that this is far faster than a foreclosure, repossession, and an ugly battle that will likely ensue.

Generally, banks won’t do this unless the debt is less than the fair market value of the house, which is not a common scenario these days, but it is far easier on both parties than a foreclosure.

Renters have had it good and they’ve had it bad.

On the one hand, the massive home inventory levels has made it a more attractive market for home buyers and those are generally going to be renters. On the other hand, renters who are renting from a landlord that was just foreclosed on often have little recourse than to pack up their stuff and move. They are one of the sad casualties of the mortgage crisis since they generally aren’t at fault when the foreclosure occurs and are very often given little notice (there’s no chance the landlord is going to be notify tenants that they could potentially be evicted, it only reduces a potential revenue stream for them).

What can a tenant do in a situation like this? Very litt.e You could bring the landlord to court for breaking a legal contract but if they’re being foreclosed on they often have other people going after them.

If you’ve been dealing with your loan servicer and not your lender, you’ve been talking to the wrong people. A recent CNN article, published today, discusses the story of Yolanda Cruz. Cruz had been negotiating with America’s Servicing Company (ASC) about getting current on her loan when she was told a $3,000 payment could catch her back up. She mailed the check and then ASC said it was for the wrong amount and “mailed it back.” Well the check got lost and cashed, she was out $3,000 and not in any better a position. All this only to find out that, according to Erin Kemple, the Connecticut Fair Housing Center’s Executive Director, that “the servicer doesn’t have the power to renegotiate a loan … because they don’t actually own the loan [they can't] make changes to the payment plan.”

Lessons Learned:

• Loan servicers can’t renegotiate your loan.
• Get everything in writing.
• If a check is being returned by regular mail, put a stop payment on it.

The Office of Federal Housing Enterprise Oversight, (OFHEO) announced today that it would be loosening the capital requirements on Fannie Mae and Freddie Mac such that an additional $200 billion in liquidity will become available to the mortgage pipeline. What’s that mean in english? Fannie Mae and Freddie Mac lend out money but need to hold a certain amount of reserve in the event of calamity, the OFHEA announced that that reserve amount has been reduced by $200 billion. That $200 billion will then go into the mortgage pipeline and trickle out to additional funds for lending, great news for folks who are fearful of a potential foreclosure.

The good news is that if you’re looking at an ARM resetting in a few months, now is the time to call your lender and negotiate a new loan. Every single day you wait means that $200 billion is trickling away and the probability you get a good deal gets smaller and smaller. The bad news is that if you’re already in foreclosure, it’s too late to take advantage of this change.

So, call your lender and face the problem head on. Please don’t wait and hope it’ll get better, this is the hope you’ve been waiting for - now go get it.

The Treasury Department and the Department of Housing and Urban Development will announced Project Lifeline today. Project Lifeline is a program that will allow those who have fallen behind on payments to work out a more affordable loan with their lenders, starting with six majors lenders. They would effectively suspend foreclosures for 30 days in order to work things out. The six lenders in the pilot program are Bank of America Corp, Citigroup Inc., Countrywide Financial Group, JPMorgan Chase & Co., Washington Mutual Inc., and Wells Fargo & Co.

Those six are also involved in an organized effort known as Hope Now. Hope Now seeks to freeze rates on subprime mortgages for five years to help borrowers with loans that will spike after an ARM resets. The plan seeks to help out people who have mortgages that are 90+ days late.

The group said it helped 545,000 subprime borrowers with spotty credit in the second half of last year, compared with its January estimate of 370,000. That works out to 7.7% of 7.1 million subprime loans outstanding as of September 2007.

Unfortunately, many borrowers can’t work things out even after getting a brief respite. If you think you can, trying one of these programs may give you the room you need to survive.

Source: CNN Money

Being a resident of the Baltimore-Washington D.C. area, I read the Baltimore Sun quite often and recently there was a blog post by one of their bloggers, The Real Estate Wonk, that contained a lot of valuable information for those looking for help in dealing with a potential foreclosure. She gave the usual “call your lender” advice but then followed it up with some valuable resources if you find that the loss mitigation department of your lender is, as many are, swamped.