Central Valley Real Estate

'Loan mod' attempts not helping many distressed homeowners...

Even though everyone (the government and the mortgage banking industry) says they are doing their best to help do loan modifications--or 'loan mods' for short--for distressed homeowners, it is apparently not happening nearly as often as it should be. Why is this?

The first is from Yahoo! Finance and gives updated stats on just how few people are being helped in reality from the pipe dream that is loan mods.

The second is from the San Jose Mercury News and discusses some ideas why so few may be happening.

Have you thought of applying for a loan mod? Perhaps you have already? What has been your experience?

California Conundrum: More Defaults & Fewer Foreclosures?

"Mortgage Defaults Rise, But Homeowners Stay Put"
by William Heisel
L.A. Times, April 23, 2009

More Californians are failing to make their mortgage payments than at any time in the last 20 years, but fewer of them are losing their homes, according to new figures.

The drop in foreclosures follows moratoriums adopted by major banks and mortgage giants Fannie Mae and Freddie Mac. The increase in loan defaults, meanwhile, suggests that rising unemployment and the continuing recession are still claiming fresh victims.

But another factor in the soaring default rate could be that some struggling homeowners are purposely skipping their payments so that they can get their loans refinanced, industry experts say.

Lenders are so backlogged... (continue reading original article here)

Top 4 Reasons To Do Your Own 'Loan Mod'

There is currently so much advertising going around--most of it deceitful, illegal or both--that it is easy to think you need to pay a company to do a "loan mod" (or loan modification) for you. THIS IS NOT TRUE. There is little, if any value in having an outside company do this for you. These are the top 4 reasons why:

4. You Follow Up Better: Modifying loans is a complex process, and lender/servicer companies are usually grossly understaffed for all the workload. Also, it is a very paperwork-intensive process. As a result, some papers (or even the whole file, at times) can be lost or misplaced. Persistent follow-up is necessary, to make sure that all required documents have been received and reviewed. However, most companies that offer loan modification companies charge the homeowner substantial up-front fees for their services. If they collect most or all of their money up front, it stands to reason that they will not have as much of an interest in following up with the lender/servicer on your behalf. Why should they--they already have your money! Even if they state a refund policy if unsuccessful or even only pay upon success, the employee at such a company clearly does not have the same vested interest in your loan modification request going through successfully. You simply want it more than they do, and you will therefore do a much better job of following up yourself.

3. You Know How To Apply: Companies advertising loan modification services frequently assert that they know each lender's process, what is needed, and where to submit it. However, borrowers can easily obtain information on loan mods on their lender's website, or beginning with the Making Home Affordable website, which is an industrywide resource where borrowers can determine their own preliminary eligibility requirements. Another resource here has specifics information by lender (it is unknown how often information at this website is updated, so you're still better off checking directly at your lender's website.)

2. You Have Free Help Resources: Even if you find things tricky or complicated, there's no need to pay someone when there are free resources available to help. Two of these are

How long after a bankruptcy, foreclosure or short sale until I can buy again?

If you are a homeowner in distress, there are several reasons why you should attempt doing a short sale rather than simply allowing your home to be foreclosed on by your lender. Here is yet another reason--much less time before you are again eligible to purchase another home.

According to Fannie Mae Announcement 08-16, dated June 25, 2008 and implemented as of August 1, 2008, this is how much time must pass before a borrower can get another Fannie Mae-backed-loan:

Snag a great deal on a short sale

With the decline in inventory that has been occurring locally over the last several months, buyers may be surprised to learn that there are not nearly as many REO (bank-owned) properties for sale as compared to the year-ago period. This is especially so when talking about undamaged homes in decent neighborhoods in the popular under-$200,000 price range.

Part of the reason for the surprise is because, when doing an MLS search on a public site that doesn't distinguish between REO listings, short-sale listings, and traditional listings. The reality is, the percentage of current listings that are REO is much less than before. Meanwhile, there are still many of short sale listings to consider. But are they worth a buyer's time? It depends.

One truth is that short sales are much more feasible than they were before. Banks are no longer in denial as they had been, which means they are much more flexible in dealing with a possible short sale. The level of hardship the seller needs to have is not as extreme as before, and the expectations for a FMV (fair-market value) are much more reasonable these days.

These factors come together to suggest that buyers may wish to consider short sales more seriously than they had before. If you are working with an agent that is recommending that you do not consider short sales because they are a waste of time, its probably because that agent has not been involved with one recently.

At The Lewis Team, we are CDPE (Certified Distressed Property Experts) and deal with short sales on a regular basis. Whereas in the past it may have taken 2-4 months to get a final response from a lender with terms that were often unreasonable, the waiting period is reduced to only 1-4 weeks on average these days. If you're not finding anything in the REO space that fits your needs, a little more patience and work with a short sale expert could land you a great deal on a short sale.

There is a great article here on the CNNMoney.com website that chronicles the story of home buyers just up north in the Sacramento area and their experience in purchasing a short sale. Of course, it is a different kind of sale, and there are certain things that buyers should understand if and when considering a short sale, which the article explains very well.

Advance Fees for Foreclosure Consultants? (Probably $0)

In my work as a local REO agent, one of my most-disliked responsibilities I have is to make initial contact with the foreclosed home's occupants to clarify the home's status and bank-owned and arrange for a voluntary vacancy of the property.

The range of emotional reactions I see varies but often involves sadness, disbelief, and/or anger. Many times I'll hear the former owners tell me they had paid a foreclosure consultant or counselor to negotiate with the bank for them, to halt the foreclosure process or modify their loan. In most cases, this is illegal.

The California Department of Real Estate (DRE) clearly states on this page of its website:

California Civil Code Section 2945, which regulates "foreclosure consultants", forbids anyone who falls under the definition of a “foreclosure consultant”, as well as a real estate licensee, from collecting any advance fees for these types of services if a Notice of Default has been recorded against your property. If your lender has recorded a notice of default, do not pay an advance fee to anyone. There are non-profit agencies that can assist you without charging you a fee and real estate brokers who can represent you for a fee to be paid after they have completed their work.

However, if the Notice of Default (NOD) has not yet been filed by your lender, the DRE explains that "it may be permissible for a real estate broker to assist you in working out a loan modification or otherwise negotiate a possible resolution to your problem with your lender or loan servicer and ask you for payment in advance for their services." However, even that situation requires that the broker has already received explicit permission from the DRE, and homeowners are advised to verify with the DRE here to ensure that that broker is 1 of the 21 approved brokers in the state of California to perform such services.

The best thing to do if you are in default is to either consult with a Certified Distressed Property Expert (CDPE) as I am, and/or consult with a

  HUD-Approved Housing Counseling Agency (see the approved list here). Both my services and a HUD-approved agency will be free. There is no need to pay money to a real estate or mortgage broker for such assistance. And it's probably illegal.

If you or anyone you know is a homeowner in distress, be proactive and seek professional guidance that is free to you. But don't just give up--or worse, get ripped off.