When a man showed up at her apartment building one night claiming to be a bank representative with only a paper written by hand, Liset Herrera was not only surprised but distrustful.

"He said that we had to pay for five months of rent or we faced an eviction," says the 36-year-old mother of three.

Liset Herrera speaks during a protest in front of the apartment building from which she was evicted. Property owners are not the only ones suffering due the foreclosure crisis.

It was the first time after nearly half a year that Hernandez learned that the apartment building in which she had lived since early 2008 had been foreclosed and a bank had taken ownership of it.

During all that time, no one had notified them of such a deal, nor when or to whom they would pay the $750 monthly rent on the two bedroom apartment at 5869 Whitnall Highway in North Hollywood.

The amount the bank wanted them to pay was simply out of their reach.

"It wasn't that we didn't want to pay, we didn't have the money to pay it," says Herrera about the five months of rent they owed the bank.

Without payment, they sought the help of the Fair Housing Council of the San Fernando Valley (FHCSFV), who provided them with a lawyer free of charge, who tried to stop the eviction.

Unfortunately, that lawyer didn't speak Spanish, and Herrera didn't speak English. She says the court didn't provide them with a translator, and the man who had come to their apartment asking for the back rent ended up serving as the translator at the court proceedings. The result was predictable.

"In the court they told us that we had until June 19 to get out of the apartment," she says. And so, the family was forced to seek shelter somewhere else. Fortunately, they were able to rent an apartment for $850 near downtown Los Angeles and for the past two weeks they have been slowly moving their possessions there. Still, their kids are not all that happy with the relocation.

"Angel (a two-year-old) still doesn't get used to the new apartment," says Herrera. "He tells us 'vamonos'(let's go)."

Cases like the one above are becoming increasingly common as apartment owners default on their mortgages, often without the renters knowing, with the latter ones end up paying the consequences of this.

Hermes Ayala, a case manager with FHCSFV, has seen it too often.

"The bank took possession of this property but they're taking over so many properties that they can't administer them. They never sent a representative in time to let the renters know what had happened," he says.

When they did send somebody, that person showed up on a weekend and at night, asking the renters to pay all the back rent in full. "These people never thought of not paying," he says.

And Ayala acknowledges the legal representation for the family was simply a "disaster."

"They just didn't have the chance to defend themselves," he says. Still, Ayala says, "Banks need to understand that foreclosures are not the solution. They can't keep evicting people."

Across the nation, some 2.5 million property owners will go into foreclosure this year, forced by declining home prices and tightening lending rules that leave refinancing and selling of the property out of the question. Many of these property owners are also landlords, whose inability to pay their mortgage extends far beyond their own families.

Trying to figure out if the property you rent is in foreclosure is not always easy, but a website is helping in this endeavor. In 2008, real estate agents Dave Madam and Shawn Shepherd of Las Vegas founded www.RentalForeclosure.com, which allows you to put in your address and find this information with the click of a button. According to the website, 161,187 renters have been evicted because of landlord foreclosures so far this year.

Recently, the federal government has been trying to stop such evictions. The Protecting Tenants at Foreclosure Act requires that in the event of foreclosure, existing leases for renters are honored, except in the case of month-to-month leases or owner occupants foreclosing in which cases a minimum of 90 days notice will be required. Parallel protections are put in place for Section 8 tenants. However, the law does not protect you if the property you rent is in default (foreclosure) prior to signing the lease.

Labels: Foreclosures Affect More Than Property Owners

At the request of the Federal Trade Commission, a federal court has halted a bogus mortgage foreclosure prevention operation that misrepresented both the "loss mitigation" services it offered and the earnings potential of the business opportunity it sold. The FTC seeks to end this deceptive scheme and make the defendants give up their ill-gotten gains.

According to the FTC's complaint, the defendants sold "loss mitigation" services to homeowners at risk of foreclosure, falsely claiming they could prevent foreclosure in 97 percent of cases and misrepresenting that they would make a full refund if they failed. Before performing any loss mitigation services, the defendants required homeowners to pay the equivalent of one months mortgage payment. Their contracts instructed homeowners not to contact lenders or their contract and its money-back guarantee would be voided. In some cases the defendants consultants told homeowners to stop making their mortgage payments while the defendants were working on their cases.

The FTC alleged that, contrary to the defendants claims, they completed loan modification in only about 6 percent of cases and routinely failed to return consumers repeated telephone calls. In numerous instances, the defendants had not contacted the consumers lenders or had made only non-substantive contacts with them, resulting in late fees, penalties, and other costs for the homeowners. After failing to secure loan modifications, the defendants also failed to honor their refund policies.

The FTC's complaint also alleges that the defendants sold a "loss mitigation consultant" business opportunity for up to $1,500, falsely claiming that purchasers ("consultants") could earn various amounts, including up to $6,000 per week, by referring homeowners to them and by recruiting new consultants. In fact, throughout the defendants’ entire operation, no consultant has earned that much money.

The defendants are charged with violating the FTC Act by misrepresenting that they would obtain a loan modification or stop foreclosure in all or virtually all instances; that they would give full refunds in all instances when they failed to obtain a loan modification or stop foreclosure; and that purchasers of their business opportunity could earn the levels of income claimed in their promotions.

The defendants are Freedom Foreclosure Prevention Services, LLC, Loss Mitigation Training Center of America, LLC, Jeffrey C. Segal, and Michael R. Workman. The Commission vote to authorize staff to file the complaint was 4-0. The complaint was filed in the U.S. District Court for the District of Arizona. On June 1, 2009, the court entered a temporary restraining order against Freedom Foreclosure Prevention Services, Loss Mitigation Training Center of America, and Segal. The court entered a preliminary injunction against those defendants and defendant Michael Workman on June 18, 2009.

NOTE: The Commission authorizes the filing of a complaint when it has "reason to believe" that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest. The complaint is not a finding or ruling that the defendants have actually violated the law.

The Federal Trade Commission works for consumers to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them. To file a complaint in English or Spanish, visit the FTC's online Complaint Assistant or call 1-877-FTC-HELP (1-877-382-4357). The FTC enters complaints into Consumer Sentinel, a secure, online database available to more than 1,500 civil and criminal law enforcement agencies in the U.S. and abroad. The FTC’s Web site provides free information on a variety of consumer topics.

Labels: FTC Stops Foreclosure Prevention

Many people have questions about foreclosures these days. One of the many questions frequently being asked is how long does a foreclosure effect my credit score.

A foreclosure will definitely negatively affect credit scores and will also affect the person who has a foreclosure on their credit when it comes time to qualify for a new home loan.

Part A of the answer is a foreclosure, like any negative recorded credit, will remain on your credit report for 7 years. The 7 year rule applies to any derogatory credit, (late payments, charge offs) except for bankruptcy which will remain on a credit report for 10 years. So the answer is the foreclosure will negatively influence credit for at least 7 years. A foreclosure is a serious derogatory on a credit report and will affect the credit score more than other derogatory marks.

There is another impact a foreclosure will have on a person's credit report and this will affect their ability to get another home loan. Most lenders will not consider a borrower who has a foreclosure on their credit reports qualified to borrow money for a new home for at least 2 years after the foreclosure has been discharged. This means that someone who has a foreclosure on their credit report in the past 2 years, no matter how qualified they currently are, will not, usually, be able to get a mortgage for a new home.

However there are some lenders who will disregard a foreclosure, or even a bankruptcy, a short time after the debts are discharged. The lenders who offer these programs usually charge much higher interest rates than those currently available, and commonly will charge points and fees on their loan programs; they do this to compensate for the extra risk involved with lending to someone who has a foreclosure or bankruptcy on their credit reports.

The smartest thing to do when facing foreclosure is to exhaust every option available to you in order to prevent going into foreclosure. A foreclosure on your record will have long lasting consequences and can affect a person's ability to purchase a home, obtain new credit, or extend existing credit lines for years to come.

Want to know what points are? Want to know about 1031 exchanges? Want to know if you have to pay a real estate agents commission when you buy or sell? Want to know if you're qualified to modify your home loan? Want to know how mortgage brokers can offer a "no points no fee loan"? Want to know why you need title insurance? I love answering your questions about loans, real estate, and any other question you may have about the industry.

Labels: Foreclosure and how it affects your credit.

Governor Bev Perdue and the N.C. Office of the Commissioner of Banks ("NCCOB") today announced that the State Home Foreclosure Prevention Project ("NC Foreclosure Project") has helped more than 1,000 North Carolina homeowners avoid foreclosure since the program’s inception in November 2008.

"North Carolina is committed to helping our citizens avoid foreclosure," said Gov. Perdue. "This program is critical to many families in our state as we continue to do all we can to help homeowners stay in their homes."

Last year, the General Assembly enacted the emergency program to reduce foreclosures on subprime loans and directed NCCOB to develop and implement the program (http://www.ncleg.net/EnactedLegislation/SessionLaws/HTML/2007-2008/SL2008-226.html). The program requires mortgage companies to file notices with the State in advance of foreclosure on subprime loans and authorizes the Commissioner of Banks to delay a foreclosure filing by 30 days, if the Commissioner believes a foreclosure can be prevented.

"The success of this program shows that foreclosures can be prevented if homeowners, lenders, counselors and the State work together," said Mark Pearce, Deputy Commissioner of Banks. "In these tough economic times, stopping unnecessary foreclosures not only benefits individual homeowners, but stabilizes property values for neighborhoods across the State."

Working with major mortgage companies, non-profit service providers, and state agencies, NCCOB developed a program to notify homeowners nearing foreclosure proceedings early and to make it easier for homeowners to access the existing network of over 150 certified housing counselors across the state. The NC Foreclosure Project also provides an opportunity for homeowners to have their subprime loans reviewed for potential violations of law by NCCOB-trained volunteers, who help NCCOB identify instances of suspected predatory lending and refer them to private or public enforcement. A network of legal service providers is available to assist homeowners referred by counseling agencies to provide further review of loans or foreclosure defense. In addition, NCCOB staff monitors the progress of loan work-outs to address communication breakdowns between housing counselors and mortgage companies.

In the first seven months of operation, the program has prevented more than 1,000 foreclosures and connected over 3,000 homeowners to housing counseling agencies for foreclosure prevention counseling. The economic impact of the program to date is estimated at $86 million.



Examples of success stories:

• A Cumberland County homeowner was behind in his mortgage payments after having to make excessive medical payments due to his wife's illness. Upon receiving the letter from NCCOB about the NC Foreclosure Project, the homeowner contacted a housing counselor for assistance. After assessing the homeowner's situation, the counselor submitted a loan modification request to the servicer. The servicer was unresponsive and there were only days left before the foreclosure sale. NCCOB contacted the servicer who agreed to postpone the foreclosure sale and approved the homeowner for a loan modification. The interest rate was reduced from 11.25% to 5.00% resulting in a $256.00 monthly decrease in the payment.

• A homeowner from Granville County had a 10-year pension that was ending in May 2009. Without the pension income, she knew she faced foreclosure on her home that she had owned since 1991. She reached out to NCCOB for assistance after difficulty communicating with her mortgage servicer. NCCOB contacted the servicer on her behalf and was able to negotiate her interest rate from 6% to 4.5% (fixed) and reduce her monthly payment by more than $250. The homeowner is extremely happy and says that without NCCOB assistance, she did not feel that she would have received assistance from the servicer.

• A Mecklenburg County homeowner met with a counselor after receiving the NCCOB foreclosure prevention letter. She was falling behind on payments due to a reduction in income. She obtained steady employment and was able to keep the home with a lower payment. To further assist the homeowner on managing her budget, the counselor completed a financial budget and submitted a loan modification request to the servicer. The servicer agreed to modify the loan lowering the payment from 7.250% to a 3-year step rate modification: 3.250% for first 12 months, 4.250% for second 12 months, and 4.650% for the remaining life of the loan.

• A Wake County homeowner purchased his home six years ago with an adjustable rate mortgage. Within a two year period, the rate increased in excess of 11%. This caused a severe financial hardship for the homeowner and ultimately caused him to be delinquent in monthly payments because his income was not enough to support the increased interest rate. The homeowner received a letter from NCCOB and contacted a partner counseling agency for assistance. The agency contacted the servicer and was able to negotiate a loan modification plan to lower the interest rate to 6%. The monthly payment was reduced from $996 to $677.

• A Guilford County homeowner faced financial hardship due to a job layoff. He was three months behind on his mortgage and contacted the NC Foreclosure Project for assistance. The foreclosure counselor contacted the mortgage servicer on the homeowner’s behalf and was able to work out an affordable loan modification. The monthly payment was reduced by 5% and the interest rate was reduced to 5.75%. The homeowner has been able to maintain his payments and recently received a job offer.

Labels: 000 foreclosures in NC, State Home Foreclosure Prevention Project prevents more than 1

• The FBI defines mortgage fraud as "any material misstatement, misrepresentation or omission relied upon by an underwriter or lender to fund, purchase or insure a loan."

  Common loan application fraud

Misrepresenting income, whether it is an exaggeration of income on a 'stated' loan or altering payroll documents, is illegal.

Over 27% of mortgage fraud in 2008 involved misrepresentation of assets, including tax returns and financial statements. Fake IRS filings, bank statements and asset declarations can be created, or manipulated, with numerous software programs.

Lenders offer higher interest rates and less favorable terms to non-owner occupants, because the lender's risk is higher. If you say a property is your primary when it is a secondary or investment property, it is considered mortgage fraud.

There are specific guidelines regarding the terms of gift money. Gift funds cannot be paid back. Often loan applicants refer to a down payment as gift funds when it is actually a loan.

The amount of the closing cost (fees) and the source of the funds used to finalize the transaction are inaccurate and, therefore, unverified.

• One common scheme is to stipulate a contract sales price that is higher than the list price. Often the real estate agent is asked to change the list price in the MLS.
• Another common scheme is "contract kiting," where the real estate professional generates two purchase contracts, sending the false contract, with a higher sales price, to the lender in the hopes of obtaining a higher appraised value, which allows for a larger loan. Another variation of the same scheme is to have the buyer and seller sign a separate contract addendum, but omitting the addendum when providing the contract to the lender.
• A straw buyer is a person who uses, or allows their credit to be used, for the purchase of a property they never intend to use or control. Straw buyers can also be used to purchase non-owner occupied properties by being paid for the use of their credit.
• Equity skimming is when a buyer swindles a property owner out of equity under the guise of a purchase. The ruse transfers the homeowner’s equity or property to the buyer, who deliberately defaults, diverts the equity and leaves the property owner with a financial loss.
• According to the FBI, 'air loans' are "non-existent property loans where there is usually no collateral. An example would be where a broker invents borrowers and properties, establishes accounts for payments and maintains custodial accounts for escrows. They may set up an office with a bank of telephones, each one used as the employer, appraiser, credit agency, etc. for verification purposes."
• A borrower without a down payment, who borrows the down payment from the seller, or procures financing from the seller, must disclose the mortgage and the terms to the lender. Any terms, conditions, kickbacks, credits or secondary financing must be disclosed on the purchase contract. If you make a deal with the seller to give you a credit or to give you cash at the closing table to pay for some upgrades, it must be disclosed to the lender or it is considered fraud.
• Inflated appraisal values accounted for 22% of fraud cases in 2008. Many overvaluations were modest enough to avoid detection, but large enough to get the loan closed, which exposes the lender to significant risk. It is illegal to provide deceptive documentation to appraisers, or to exert pressure on them, to distort value.

Fraud/False Statements - 5 Years/$100,000False Loan Application - 30 Years/$1,000,000Conspiracy to commit Fraud - 30 Years/$1,000,000Fraud/Swindles - 30 Years/$1,000,000Bank Fraud - 30 Years/$1,000,000

Labels: Tips to avoid mortgage fraud and loan scams Part II

The ongoing recession, coupled with rising unemployment, has put enormous pressure on American homeowners. Many have watched their equity dissipate for two years, often owing more on the mortgage than the property is worth. Many cannot obtain financing under the stricter credit guidelines. Many are unemployed, looking for work in a bleak job market and struggling to pay bills. Many are self-employed and can no longer access financing in the absence of 'stated' programs. May, 2009 posted the fourth highest foreclosure rate on record.

Labels: Tips to avoid mortgage fraud and loan scams Part I

Once a promising development in a blighted area, the $11.7 million Lamar Crossing Apartments has gone the way of so many other commercial properties in town - fenced in and foreclosed.

A chain-link fence surrounds the perimeter of the 7.13-acre property on Lamar Avenue just north of Interstate 240. Overgrown grass proves the property hasn't been cared for and a phone number posted on a sign outside the apartments for leasing information has been disconnected.

The developer of the 120-unit multifamily complex is Horizon Financial Group, operating in the transaction as Lamar Crossing Apartments LP. The company has defaulted on an $8.1 million loan dated June 1, 2007, and the property will be sold at a substitute trustee's sale July 16 at noon on the steps of the Shelby County Courthouse.

Calls to Horizon Financial Group were not returned, but Horizon senior partner Preston Byrd told The Daily News in 2007 that the company would retain ownership of the property once completed.

Troubled process

However, those plans fizzled in a sour economy. Lamar Crossing had multifamily housing revenue bonds under the Shelby County Health, Educational and Housing Facility Board, but the property is now mired in legal wrangling and financial woes.

John Baker, the HEHFB executive director, said the explanation behind Lamar Crossing's demise is not simple.

"The project had cost overruns early on," he said. "I don't know that they were adequately understood and recorded and communicated. And then, later on, there appears to have been - I don't know if it's correct or not - a misstep by a bank in terms of releasing funds. At least that's the claim in one of the suits. And the developer did not pass all the funds through, and a number of contractors and subcontractors didn't get paid."

Lamar Crossing is mired in liens and subordinate interests by companies that performed work on the complex.

Interested parties are Lawrence Abell doing business as Lawrence Abell, Architect; Patton & Taylor Enterprises LLC; Chris Barwick Roofing Inc.; Western Masonry Builder Services Group Inc. doing business as Quality Insulation; American Mechanical Contractors Inc.; BK Framing Inc.; L&W Supply Inc. doing business as River City Building Materials; Boston Capital Corporate Tax Credit Fund XXVI, a limited partnership; BCCC Inc.; Horizon Holding Co. LLC; and The Bank of New York Trust Company N.A., according to the attorneys’ notice.

'Just standing there'

Donald Bourland and Lancelot Minor of Bourland, Heflin, Alvarez, Minor & Matthews PLC were appointed substitute trustees June 16. Bourland, acting as real estate counsel, said the deed is now owned by Arvest Bank of Oklahoma.

"Arvest Bank had issued a letter of credit in connection with the bond issue, upon which they funded under," Bourland said. "Arvest Bank is standing as the bond holder. Arvest Bank is the one that dispersed funds under the bond issue."

HEHFB helped arrange the original financing on the development - whose current appraisal is $3.2 million, according to the Shelby County Assessor of Property - but that collapsed.

"We had put a PILOT (payment-in-lieu-of-taxes) into place on the development and the developer defaulted on the terms of the PILOT," Baker said. "So we went a ways with him hearing his appeals, but in the end we could find nothing else to do except, appropriately, withdraw the PILOT."

Bourland estimated that the project was 85 percent completed, while Baker estimated the project was about 90 percent completed and figured the developer was "headed toward interior finish" before the financing fizzled.

"What a shame," Baker said. "We don’t want to see something left just standing there. What we can do is limited, so we've tried to help in any way we could and tried to keep the thing alive when the previous group had it."

Potential's still there

Construction crews broke ground on Lamar Crossing in May 2007, before the economic crunch began wreaking havoc on real estate developments. The 120,000-square-foot complex, on the southeast side of Lamar and Dunn avenues, was slated to have five buildings and a leasing office.

While all the structures appear to have been built, it wasn’t immediately apparent how many, if any, of the apartment interiors were finished.

The complex was another feather in the cap for the stretch along Lamar north from Interstate 240. Aldi Inc. opened a store on 2.5 acres that serves as an outparcel of the apartment complex. A store manager said he had heard about the property's foreclosure and hoped that a new owner would revive the construction process and get the place leased.

And across the street, a Chattanooga-based company called KRT Development redeveloped the vacant land at 2930 Lamar Ave. - formerly Cherokee Lanes bowling alley - into a retail strip center.

Adam Slovis, principal of Slovis Associates LLC, handles leasing for the Lamar Crossing retail center, now owned by a New York-based company. He said occupancy at the center has been solid.

"The lineup is very traditional for that kind of market, the soft-goods users and the Dollar Tree (type stores)," Slovis said. "Those are all good, solid neighborhood shopping center kind of tenants."

Slovis said the center has just two vacancies, one bay at 2,500 square feet and one at 6,400 square feet. He said that if the apartments are finished and leased up, it would be a boon to the center.

"Anytime you can create new density in an area like that, you're going to at least provide some need for the center across the street or anywhere within that proximity because people will walk across the street for certain goods," he said

As for the fate of the Lamar Crossing apartments, Bourland said the trustee's sale July 16 on the courthouse steps will determine that. The hope, of course, is that a new owner emerges and finishes the project.

"It's an open question," Bourland said. "If they get a suitable bidder, as with any lender, I think they would be very happy with that result."

Labels: Lamar Crossing Development Faces Foreclosure

Thomas Kelly explains the foreclosure process to those outside the banking industry by likening it to a tube.

"You get put in the tube when you're 90 days late, and you might come out the other end of the tube six months later," said Kelly, spokesman for JPMorgan Chase & Co.

What Kelly's analogy doesn't explain is how, for the past three years, thousands more Phoenix-area property owners have been entering the tube each month than coming out of it.

At present, the system is backed up with more than 45,000 "pending" foreclosures, up from about 2,300 in June 2006, according to a historical analysis by the Information Market, a Phoenix research firm.

Most experts expect pending foreclosures to increase even more before leveling off sometime within the next 12 months.

There has been much speculation among real-estate professionals about reasons for the apparent backlog of houses and condominiums headed toward foreclosure.

There's a widespread belief that banks are purposely limiting the flow of foreclosure homes onto the market, which helps prevent home prices from sliding even further but could prolong the market's long-term recovery.

Likewise, some say lenders are dragging their heels on repossessing and selling extravagant homes, and to a lesser extent commercial properties, including raw land, because the demand for big-ticket real estate is too low and because selling off large assets at sharply reduced prices could cause some smaller banks to fail.

Lenders have been relatively quiet about their strategies for working through pending foreclosures, which has only fueled various theories.

But Kelly said such theories give the banks too much credit.

"We've got such an enormous portfolio of homes to deal with, we don't have time to say, 'Let's do this with this one, and let's do that with that one,'" he said.

Monthly foreclosure totals have risen and fallen a number of times since the housing market peaked in 2006, although the general trend has been upward.

However, the number of pending foreclosures, properties on notice for a trustee sale but not yet sold, has increased steadily without exception since April 2006. In the past year, it has climbed by anywhere from 500 to 5,000 properties each month.

As of Friday, there were 45,709 total pending foreclosures in Maricopa County, according to the Information Market. Those are in addition to the roughly 73,000 foreclosures completed during the past three years.

Also as of Friday, the county was on track to reach 5,000 foreclosures by the end of this month, which would be the second-highest monthly total on record, having reached a high of 5,240 in February.

Even if 5,000 properties complete the foreclosure process this month, an even greater number will enter it.

As of Friday, lenders had served pre-foreclosure notices on 5,700 additional properties, a net increase of at least 700 in pending transactions for the month.

Actual foreclosures in the past three years total about 73,000, according to the data.

Some Valley foreclosures may be taking longer than the usual 91 days from notice to sale because the borrowers are attempting to work out a loan-modification or "short sale" agreement with the lender.

In Maricopa County, short sales have increased in the past year but still account for less than 5 percent of property sales.

Modifications help

Colleen Gunderson, Tempe-based Century 21 All Stars owner and designated broker, believes banks have intentionally slowed the release of foreclosure properties onto the market at the behest of the federal government, which provided many banks with bailout funds.

"There is a process in place to sort of warehouse these properties until a time when it's more beneficial to place them on the market," she said.

It's the right approach, Gunderson added, because dumping 45,000 foreclosed-on properties onto the market all at once would deliver the knockout punch to a real-estate economy already leaning against the ropes.

New, standardized loan-modification guidelines issued by the Obama administration in March appear to be doing a better job of keeping some borrowers out of foreclosure than modifications made in 2008, according to two federal bank regulators, but it's still too early to know for sure.

More than half of loan modifications negotiated before the Treasury Department launched its $75 million Making Home Affordable program in early March were back in default within six months, according to a study conducted by the Federal Deposit Insurance Corp. and the Office of the Comptroller of the Currency.

Those same officials said in May that the rate of re-default fell by about 12 percent among those borrowers whose monthly payments were reduced.

However, the number of loans headed toward foreclosure has risen significantly despite better modifications.

In March, the Investigative Reporting Workshop at American University in Washington, D.C., conducted a study of the nation's roughly 8,000 banks with online-news service msnbc.com and reported finding a 150 percent increase in loans at risk of foreclosure compared with a year earlier.

Kelly said job losses are one likely reason for the continued high volume of foreclosures, in addition to people walking away from mortgages even though the payments are affordable because they owe far more than the home is worth.

Commercial is next

Although most Valley foreclosures thus far have involved residential property, commercial-property owners and lenders are preparing for apartment, office and retail foreclosures to rise sky-high in the coming months.

Selling those properties back to the market could take years in some cases, analysts said, because there is little interest in new office and retail space, even at the low-rent end.

Commercial real-estate broker Craig Henig of Grubb & Ellis in Phoenix said banks aren't in any rush to foreclose on commercial real estate because it forces the lender to adjust the property's book value to today's considerably lower market price.

Significant write-downs on a few multimillion-dollar commercial loans could put a small or financially stressed bank out of business, he said.

"I don't know how they could sustain the amount of markdowns," Henig said.

However, Kelly said the holding costs associated with thousands of foreclosed-on properties outweigh any benefit the bank might realize from waiting to sell them.

He also noted that the value of commercial real estate and high-end homes is still on the decline, which means waiting is likely to cost lenders even more.

"The goal is to get that asset back earning money for you,"

Labels: 000-plus Valley properties remain in foreclosure, 45

Last week I had the privilege of visiting the nice folks at Google's New York City office for lunch. Lair of creativity and Web savvy that it is, I wanted to know which of Google's tools fascinate their own ranks most. One of the fascinating answers I got: Google Insights, a little-publicized tool Google launched last summer to analyze search terms over time and location. It lets you plot search terms against each other, figuring out who is searching what, when, and where.

It sounds like obtuse data-slogging, but it's an intuitive concept: Insights tells you which searches are most popular where, allowing you to cull the kind of accurate self-report data that psychologists only dream of. Of course, it's all anonymous; you can't tell who's doing the searching, except that they live in certain cities, states or nations. But as far as societal bellwethers, you can't beat what Insights has to tell you--and if you're at all interested in marketing or advertising, the tool is a must-see.

Here's how it works. You pick keywords you're curious about, and enter them into Insights. Since we've heard a lot about foreclosure, insolvency and other fiscal disaster since last fall, I used "bankruptcy" as my first keyword. Predictably, searches for the term in the U.S. began rising slowly in the summer of 2008, when knowledgeable canaries like Peter Schiff were telling us that the economy was about to have a coronary. If you search that term against predictable stuff--keywords relating to real estate, law, stocks, and so on--you get a correlation. But what Insights is useful for is finding the correlations that you wouldn't necessarily expect.

So what happens when you map searches for "bankruptcy" against searches for, say, "guns"? I'll tell you what happens: you get worried. Gun searches spike hugely in November of 2008, and correlate with bankruptcy searches in areas like Nevada and Arizona.

Of course, that's the chicanery of Google Insights: Its results are correlative, not necessarily causative. November was also election month, so there's a good chance that the spike is attributable to people researching the presidential candidates' firearms policies. Indeed, if you use Insights' regional interest menu to see where "guns" searches were highest, the winning states (Wyoming, Alaska, Utah, Idaho) also have some of the lowest incidences of "bankruptcy" searches.

If you buy online advertising for your business or you're curious about a product's endemic popularity (or lack thereof), Google Insights should be your next stop. It's free, easy to use, and presents results in a sensible, graph-aided format (and downloaded in CSV format).

Before you hang your ad budget on something Insights tells you, be sure to read Google's support page on the service, so you have a good handle on what your results actually mean. Statistics, as any pollster can tell you, are often saying the opposite of what they seem to be.

[Google Insights]

Labels: What Are Googlers Googling?

The Center for American Progress, a nonpartisan research and educational institute, put out a report today that suggests states should offer mediation programs for distressed homeowners to avoid foreclosures.

The report says that nine million homeowners will face foreclosure in the next four years and states should step in and help keep people in their homes.

Mediation works like this: the homeowner and the lender meet with a neutral mediator who helps both parties come up with a solution for a mortgage that is in default.

From the report:

Requiring delinquent borrowers and servicers to come face to face at least once in the foreclosure process for mediation can significantly reduce foreclosures by creating an opportunity to both parties to negotiate an outcome superior to foreclosure. Jurisdictions that have implemented mandatory mediation report that more than seven in 10 cases are resolved short of foreclosure.

Not all resolutions, of course, lead to borrowers staying in their homes. But mediation also allows homeowners to arrange “graceful exits” in lieu of evictions. The upshot: mediation is beneficial for homeowners and mortgage servicers, as well as for the courts that are straining to keep up with the number of foreclosure filings in heavily impacted jurisdictions.

California is a state where the foreclosure process happens between the borrower and the lender only — no courts involved. In other states, foreclosure requires a court preceeding during which judges can intervene.

According to the report, the city of Philadelphia and the state of Connecticut both have had success with mandatory mediation programs.

One interesting fact the report points out is that the next wave of foreclosures will hit prime-mortgage borrowers. It seems as though it's fairly useless to keep blaming "irresponsible borrowers" for the real estate crisis that has spiraled into a major recession.

More homeowners are vulnerable now that unemployment continues to rise. It's time to look for effective and viable solutions to this enormous problem.

Labels: Mediation helps stop foreclosures

At the request of the Federal Trade Commission, a federal court has halted a bogus mortgage foreclosure prevention operation that misrepresented both the "loss mitigation" services it offered and the earnings potential of the business opportunity it sold. The FTC seeks to end this deceptive scheme and make the defendants give up their ill-gotten gains.

According to the FTC's complaint, the defendants sold "loss mitigation" services to homeowners at risk of foreclosure, falsely claiming they could prevent foreclosure in 97 percent of cases and misrepresenting that they would make a full refund if they failed. Before performing any loss mitigation services, the defendants required homeowners to pay the equivalent of one month’s mortgage payment. Their contracts instructed homeowners not to contact lenders or their contract and its money-back guarantee would be voided. In some cases the defendants’ consultants told homeowners to stop making their mortgage payments while the defendants were working on their cases.

The FTC alleged that, contrary to the defendants claims, they completed loan modification in only about 6 percent of cases and routinely failed to return consumers repeated telephone calls. In numerous instances, the defendants had not contacted the consumers lenders or had made only non-substantive contacts with them, resulting in late fees, penalties, and other costs for the homeowners. After failing to secure loan modifications, the defendants also failed to honor their refund policies.

The FTC's complaint also alleges that the defendants sold a "loss mitigation consultant" business opportunity for up to $1,500, falsely claiming that purchasers ("consultants") could earn various amounts, including up to $6,000 per week, by referring homeowners to them and by recruiting new consultants. In fact, throughout the defendants’ entire operation, no consultant has earned that much money.

The defendants are charged with violating the FTC Act by misrepresenting that they would obtain a loan modification or stop foreclosure in all or virtually all instances; that they would give full refunds in all instances when they failed to obtain a loan modification or stop foreclosure; and that purchasers of their business opportunity could earn the levels of income claimed in their promotions.

The defendants are Freedom Foreclosure Prevention Services, LLC, Loss Mitigation Training Center of America, LLC, Jeffrey C. Segal, and Michael R. Workman. The Commission vote to authorize staff to file the complaint was 4-0. The complaint was filed in the U.S. District Court for the District of Arizona. On June 1, 2009, the court entered a temporary restraining order against Freedom Foreclosure Prevention Services, Loss Mitigation Training Center of America, and Segal. The court entered a preliminary injunction against those defendants and defendant Michael Workman on June 18, 2009.

NOTE: The Commission authorizes the filing of a complaint when it has "reason to believe" that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest. The complaint is not a finding or ruling that the defendants have actually violated the law.

The Federal Trade Commission works for consumers to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them. To file a complaint in English or Spanish, visit the FTC's online Complaint Assistant or call 1-877-FTC-HELP (1-877-382-4357). The FTC enters complaints into Consumer Sentinel, a secure, online database available to more than 1,500 civil and criminal law enforcement agencies in the U.S. and abroad. The FTC's Web site provides free information on a variety of consumer topics.

MEDIA CONTACT:

Frank Dorman,
Office of Public Affairs
202-326-2674

STAFF CONTACT:

Lisa Schifferle,
Bureau of Consumer Protection
202-326-3377

Labels: Stop foreclosure

Lowest Priced Homes Going Fast

First time home buyers Ben and Brandi Kutsch are still unpacking boxes at their new Katy home.

Brandi just finished graduate school in Nebraska, and landed an oil industry job in Houston.

Brandi is stunned by how much home she and Ben were able to buy for their money.

"Getting such a big house is really scary in a way because I feel maybe I don't deserve it quite yet. It's the size my parents have," said Brandi, 31.

Interest rates are historically low, and the economy has driven down real estate prices. Now the market is heating back up for homes that are priced below $200,000.

"In the last couple of months a lot of the houses we wanted to take a look at were gone in a couple of days. We couldn't get to them," said Ben, 30.

Their Katy based realtor Christi Borden who says first time home buyers are driving the real estate market nationally, and here in Houston.

"First time home buyers are the ones who didn't get in trouble with the loans. They have not been in foreclosure because they are first time home buyers. So they are the people who can get the credit now," said Borden.

There is another reason first time home buyers are snapping up homes. They are getting a government tax credit of up to $8,000.

"They can actually apply it to their down payment instead of waiting to get it back as a tax credit. It is just moving this market," Borden said.

"We had to take advantage of it. We thought about renting, but we realized this was the moment," said Brandi.

Labels: Young People Heating Up Real Estate Market

Labels: we buy houses

Delaware officials said Wednesday the state could see a higher number of foreclosures in 2009 than in 2008. Gov. Jack Markell also announced a plan that he said will help people keep their homes.

State officials said that last year there were 4,500 foreclosures in Delaware. However, 6,000 foreclosures could be recorded in Delaware this year. according to state officials.

Under new plans announced Wednesday, the state will begin working with lenders and borrowers before homeowners enter the foreclosure process. State officials said they will help homeowners find emergency financing and help families recover if foreclosure cannot be avoided.

Bonnie Mowbray nearly lost her home to foreclosure, but received help from the Delaware State Housing Authority. Through the agency, Mowbray was able to secure funding to save her home.

"It's a real blessing. Without them I would have been homeless," she said.

Markell is urging anyone who has fallen behind on their mortgage payments to reach out for help.

The state has set up a hotline for residents facing foreclosure. That number is 1-800-220-5424.

Labels: Delaware Takes Steps to Stop Foreclosures

The nation has suffered 1 million foreclosures already this year and, with more than a million to come before year's end, the decline in home prices may be far from over.

The Center for Responsible Lending says the one million homes lost to foreclosure come with more bad news -- 12 percent of all mortgages are now delinquent, the highest level since the Mortgage Bankers Association started the measurement 37 years ago.

"The escalation of foreclosures on all types of loans is alarming," said Michael Calhoun, President of CRL.

CRL says there's a new foreclosure every 13 seconds in America.

"It's easy to think, 'Well, that's tough luck for the families that lose their homes.' The truth is that foreclosures are costing neighboring families hundreds of billions of dollars and dragging down the entire economy. Foreclosures started today's crisis, and foreclosures will keep the crisis going if this epidemic continues."

CRL projects 2.4 million foreclosure starts in 2009. Foreclosure fallout will reduce property values of some 70 million nearby households a total of $502 billion, or about $7,200 per family, according to CRL.

CRL says to expect at least 9 million foreclosures through 2012, costing 92 million neighboring families $1.9 trillion in lost home value.

CRL isn't alone spreading the doom and gloom.

With federal stress tests indicating a fall in housing prices of 41 to 48 percent from 2006 through 2010, Robert J. Shiller, professor of economics and finance at Yale and co-founder and chief economist of MacroMarkets LLC recently predicted the three year fall in prices could be just the beginning.

"Even if there is a quick end to the recession, the housing market's poor performance may linger. After the last home price boom, which ended about the time of the 1990-91 recession, home prices did not start moving upward, even incrementally, until 1997," writes Shiller in a recent New York Times editorial.

The one bright spot in CRL's report points to the Obama Administration's provisions for stronger incentives for mortgage lenders to improve repairs on existing mortgages.

"The mortgage industry's track record so far shows that loan modifications are not likely to succeed with superficial fixes that fail to lower a homeowner's monthly payments,"
the CRL reports.

Labels: One million foreclosures thus far in 2009

Fried, Frank, Harris, Shriver & Jacobson LLP's real estate department were awarded the Chambers USA Awards for Excellence 2009 for Real Estate Including Leisure and Hospitality. Awarded at a dinner held on Thursday, June 11th in New York, the awards are based on research for the 2009 edition of Chambers USA America's Leading Lawyers for Business. The Chambers Awards for Excellence honor outstanding lawyers and law firms across the USA, reflecting both pre-eminence in key practice areas, and achievements over the last 12-months.

Since 1990, Chambers and Partners has published the world's leading guides to the legal profession, building a reputation for in-depth, objective research. Their team of 100 highly qualified full-time researchers conduct thousands of interviews with lawyers and their clients worldwide. Together with Chambers editors, they identify and rank the world's best lawyers, defined as those which perform best according to the criteria most valued by clients -- such as technical expertise, business acumen, prompt delivery, value for money. On the basis of this research, Chambers and Partners hold award ceremonies to honor outstanding practitioners around the world. For more information about Chambers and Partners, visit www.chambersandpartners.com.

Fried, Frank, Harris, Shriver & Jacobson LLP is a leading international law firm with more than 550 attorneys in offices in New York, Washington, D.C., London, Paris, Frankfurt, Hong Kong and Shanghai. Fried Frank lawyers regularly represent major investment banking firms, private equity houses and hedge funds, as well as many of the largest companies in the world. The Firm offers legal counsel on M&A, private equity, asset management, capital markets and corporate finance matters, white-collar criminal defense and civil litigation, securities regulation, compliance and enforcement, government contracts, environmental law and litigation, real estate, tax, bankruptcy, antitrust, benefits and compensation, intellectual property and technology, international trade, and trusts and estates. The Firm has an association with Huen Wong & Co. in Hong Kong. More information on Fried Frank can be found at www.friedfrank.com.

Website: http://www.friedfrank.com

Labels: Real Estate Team Wins Chambers USA Awards

A dismal milestone was reached over the weekend: One million new foreclosures have been filed so far in 2009, according to estimates by the Center for Responsible Lending. This comes on the heels of a new report from the Mortgage Bankers Association, the first quarter 2009 National Delinquency Survey, showing that 12% of all mortgages are now delinquent -- the highest level since the MBA started measuring 37 years ago.

"The escalation of foreclosures on all types of loans is alarming," said Michael Calhoun, President of CRL. "It's easy to think, 'Well, that's tough luck for the families that lose their homes.' The truth is that foreclosures are costing neighboring families hundreds of billions of dollars and dragging down the entire economy. Foreclosures started today's crisis, and foreclosures will keep the crisis going if this epidemic continues."

CRL projects 2.4 million foreclosure starts in 2009, with these foreclosures reducing the property values of some 70 million nearby households a total of $502 billion -- about $7,200 per family. Through 2012, those numbers will rise to at least 9 million foreclosures that will cost 92 million neighboring families $1.9 trillion in lost home value.

The mortgage industry's track record so far shows that loan modifications are not likely to succeed with superficial fixes that fail to lower a homeowner's monthly payments. Recognizing that it is in the national interest to stop the foreclosure epidemic, the Obama Administration has put in a new plan that includes stronger incentives for mortgage companies to make more and better loan repairs. New guidelines encourage earlier intervention and loan modifications more likely to reduce monthly payments -- tools designed to stabilize the housing market and keep people in their homes.

As we await the results of the next wave of mortgage modifications, a new foreclosure starts every 13 seconds -- nearly 6,500 a day. We call on lenders and loan servicers to work with homeowners in good faith to dramatically increase loan modifications that actually stop foreclosures and keep people in their homes.

About the Center for Responsible Lending

The Center for Responsible Lending is a nonprofit, nonpartisan research and policy organization dedicated to protecting homeownership and family wealth by working to eliminate abusive financial practices. CRL is affiliated with Self-Help, one of the nation's largest community development financial institutions.

Website: http://responsiblelending.org

Labels: Foreclosure Starts Hit One Million So Far This Year