Banks Push to Improve Foreclosure Procedures

Time is ticking for banks to improve their foreclosure methods. U.S. regulators have given 14 financial institutions until mid-June to create better processes on their servicing methods and another 60 days to implement the changes.

The changes will no doubt cost the banks a considerable amount of money to implement. Since the foreclosure mess erupted last year, JP Morgan Chase has already spent $1.1 billion to create and apply the changes and Citigroup predicts the changes will boost expenses by as much as $35 million a year.

On Thursday, Fannie Mae and Freddie Mac rolled out new protocol designed to increase the number of successful modifications. The guideline will require servicers to reach borrowers as soon as the first missed payment occurs and will continue to with the intention of modifying the loan. They'll also pay more to the servicers that meet certain benchmarks and establish timelines for banks to modify loans or process foreclosures.

The Regulators have asked the banks to create programs that establish a single point of contact, have deadlines that are "appropriate", and hire more people to facilitate the programs and assist it's borrowers. These are the minimum requirements and some have already made the necessary changes.

Last June, Wells Fargo began assigning two employees to each borrower seeking a loan modification. They found that the program "significantly improved customer communication and the modification process," said spokeswoman. Wells Fargo also plans to expand the same effort to foreclosures and short sales.

Ally Financial has assigned borrowers a team of employees to help them gather documents, execute a final loan modification or advises on other foreclosure alternatives.

J.P. Morgan is working on a software program to make it easier for employees and borrowers to track loan-modification requests. Last year, it started providing some borrowers with a "relationship manager" to advise on the process. No word yet on when the software will be available.

Citigroup now provides borrowers with a single point of contact for gathering documents and handling short sales. In the next months, it will roll out a "concierge" system that will assign a small team of employees to help delinquent borrowers and homeowners at risk of default navigate the system.

Bank of America has begun its version of a single point of contact but declined to provide details. For the past year or so they have used the Equator system that enables better communication and facilitation of short sales between real estate agents and the negotiator. Currently the time frame of the short sale, with the use of this system, is about 5-16 weeks. Bank of America is continues to make changes to their practices in order to reduce this time frame further.

As far as "appropriate" deadlines, the Los Angeles Neighborhood Housing Services says it takes an average of 141 days for borrowers it works with to get an answer after completing an initial loan-modification request. The nonprofit group says Wells Fargo has the fastest turnaround with initial reviews averaging 79 days. A Wells Fargo spokeswoman said 60% of borrowers receive a decision five days after the company receives a complete package, up from 45% a year ago.

Ally Financial said it responds to the average borrower within seven to 10 days of receiving a complete financial package.

At Citigroup, the goal is to give borrowers a final answer about a permanent modification within 22 days of their final trial payment. "On average, we do that," said Sanjiv Das, chief executive of the CitiMortgage unit.

When it comes to staffing, J.P. Morgan said it will add as many as 3,000 new home-lending jobs, BofA said it hired roughly 3,000 people in the first quarter to work on troubled mortgages and Citigroup said it will expand its loan-modification unit by 500 employees. Wells Fargo doesn't expect to increase staffing because according to their reports the number of borrowers behind on loan payments is declining.

As far as how these programs will affect the number of short sales or foreclosures we will have to just wait and see.

Don't Walk Away from your Home

There has been a lot of talk about short sales and loan modifications on various news channels, and in conversations with real estate agents, and those in the industry. But, what about the people who are dissatified with the value of their home and don't qualify for a short sale or modification?

With no solution in sight many homeowners dealing with underwater mortgages who can still afford to pay their mortgages are simply walking away from their mortgage, even when they can afford the payments.

The idea is known as a strategic default and the prospect of simply walking away has increased across the nation. In the past, lenders traditionally looked at the degree of a home's value depreciation to identify the risk of strategic default. But FICO Labs research now shows that these borrowers are only twice as likely to default as those whose home has managed to keep most of it's value.

In fact, true strategic defaulters are found to be savvy investors. They have higher credit scores, and fewer instances of going over credit card limits. The findings show a vast difference from their counterparts. There is even a rise of notable celebrities walking away from their mortgages.

The reality remains, however, that the ramifications of of simply walking away can haunt a homebuyer for years to come. "Walking away is a very serious matter," says Glamis Haro, a lending manager at Union Settlement, a credit union in New York City. "Just one late report on your mortgage can seriously damage you."

"In the past," Haro says, "a 30-day late payment on a home loan could result in 30 to 40 points being deducted from your credit score. But in today's unforgiving credit market, one late payment can now result in up to 100 points being deducted. And lest homeowners think they can take the heat, a late payment stays on the record for 7 long years. After 120 days of no payment, the delinquent homeowner enters what Haro calls "five fives" status – the notation (5-5-5-5-5) made on a borrower's credit report when they've gone beyond the point of no return. "You're considered unbankable," she says. "It could take years of working with a financial adviser to get back into lenders' good graces," she adds.

While there are some experts who claim that walking away is actually beneficial in the long run for struggling homebuyers, the risks often far outnumber the benefits. "A public record, such as a bank judgment or collections account, will affect a borrower's credit for 10 years from the last date of payment -- and any judgment is enforceable for up to 20 years," Haro says.

Karen Metoyer, a housing and credit counselor at Clearpoint, recommends that you work with a HUD-certified housing counselor, if your house is underwater, rather than try to work on a modification or refinance on your own. She says, "having a third party negotiate the modification or refinance helps give your financial situation credibility, because the banks tend to act more quickly in that case." These free counselors will also suggest if perhaps a reverse mortgage, refinance, or modification is your best option.

To find a HUD-certified housing counselor click here: http://portal.hud.gov/hudportal/HUD?src=/i_want_to/talk_to_a_housing_counselor

Short Sales and Taxes

With the tax filing deadline now passed, it's a bit late, but I wanted to give my readers a bit of information about short sales and taxes. If you sell your house via a short sale, is it true you have to pay taxes on the forgiven amount?

Frankly, it depends. Usually under the tax laws, if your debt is canceled or forgiven, it is defined as taxable income. However, Congress thought this didn't make sense: You lose a house by foreclosure (or short sale), and to add insult to injury, you have to pay tax on this phantom income? In response they created the Mortgage Forgiveness Debt Relief Act of 2007. This relief act allows the homeowner to exclude up to $2 million -- if that debt was on your principal residence.

Unfortunately, if the debt forgiven was on a second home/vacation/investment property, then you are out of luck; the amount that was forgiven (or canceled) is considered taxable income.

If your canceled debt was on a refinanced loan, the law gets a bit murky, if you used the refinance proceeds to substantially improve your house, then there is no tax to pay. But if you used those proceeds for other purposes then the cancelled debt is taxed.

The IRS has an excellent, free, publication on this topic, called "Canceled Debts, Foreclosures, Repossessions and Abandonments." It is Publication 4681, and is available on the IRS website -- http://www.irs.gov/pub/irs-pdf/p4681.pdf -- or by calling (800) 829-3676, or (800) TAX-FORM.

Since short sales are a part of the nation's market and will continue to be around for some time. It's important to know this fact. If you know someone who either has or may be considering the short sale option. Please send them this article or direct them to the IRS website for more detailed information.

New Home Builders plan to go "Green"

New Home Builders have announced that consumers can expect to see more and more green homes in the coming years. On Earth Day this Friday, Meritage Homes will begin offering "net-zero" homes or homes that produce as much energy as it consumes. Prices for the homes will start at $140,000-$160,000 and will be available in Arizona, California, Colorado, Nevada, and Texas. Meritage already offers a 9 panel rooftap solar-array as a standard feature, but for a $10,000 upgrade your home can have 24 additional panels that will reduce your utility bills to zero.

"Net-zero" properties are very common in Canada amongst large home builders, but this is the first time a corporate builder has been able to make the homes affordable with this kind of efficiency. With $4 a gallon at the pump, and the cost of living only going up you can expect to see a push to build homes that cost less to operate industrywide. “Shiny granite can only go so far to lure buyers from low-price foreclosures," says Nate Kredich of the non-profit U.S. Green Building Council.

Here in Las Vegas, we are already noticing builders going green. Shea Homes, a family-owned builder, has been providing solar powered options with every new home built for years! When the economy was at it's peak every one of their homes had solar panels automatically included, now they give you the choice. Their new active adult community in the Northeast part of the valley is offering it's consumers 3 choices. The "Complete" package, which is included in every home, offers homeowners a home with Energy-efficient gas forced air heating, energy efficient lighting low-flow fixtures that reduce water usage while maintaining a high-pressure performance, low VOC products, and eco-friendly flooring just to name a few. The "Plus" package adds solar-powered attic fans, an electric vehicle charging station, and a WeatherTrak Smart Sprinkler System. When you purchase a home with the "Ultra" option you can expect your home to be EFL Green Certified. Everything you can imagine that can be green has been put in this home. In addition to the above examples, you can expect windows, ductwork, appliances, solar roof tiles, sensor lights, insulated garage doors, and the ventilation system to be optimized for the lowest carbon footprint. Prices range from $147,000-$247,000 for the Complete, $154,000-$255,000 for the Plus and $177,000-$278,000 for the Ultra.

For more information about Shea Homes' new community, or where you can find more builders in the Las Vegas valley offering green options send me a message, I'd be happy to give you the information or show you what's available.

This just in... Prices at 1990 level, sales increase

Existing home prices here in Las Vegas have reached their lowest level in 21 years! Statistics show that due to the low prices, our city also found an increase in sales which we haven't seen in six years.

"The median price paid for existing single-family homes, condos and town homes fell 10 percent year-over-year in March to $108,000, and for the year is now $109,000," according to a report released by Las Vegas-based SalesTraq.

Buyers took advantage of those low prices in March when 5,114 housing units were sold, the average price per square foot of homes sold in March was $70.57, an 11 percent drop from March 2010.

Cash Investors still lead the pack as they accounted for more than half of sales. 7 out of 10 existing home sales were distressed properties accounting for about 42% of foreclosure sales, 10% were sold at a auction and 18% were short sales. Please note that these statistics account for properties that have actually sold. As of today's date we have over 14,000 properties currently listed, and just under 13,000 properties with accepted offers. A big percentage of these being short sale properties awaiting approval from the bank.

Housing statistics don't show a definitive recovery as of yet, but we're are seeing an increase in sales as seen in the above statistics. I'm also seeing that more people are willing to choose short sales as their option because the converstation is much easier to have amongst each other, the process is getting easier and better. Banks are more willing to accept short sales than they were last year, it's a win win.

In the existing home market, the median price of short sales captured the highest price at $120,000. That was followed by traditional sales at $108,500, foreclosure sales at $106,500 and auctions at $93,500.

Interested in purchasing a home in Las Vegas? Would you like more information about the Las Vegas market? Send me an email and let's get started!

What Canadians need to know about buying real estate in the US...

A recent survey conducted by the Bank of Montreal states 1 in 5 Canadians are interested in buying real estate in the United States. The National Association of Realtors reports that last year 23% of international buyers from Canada represented the largest portion of international buyers and have so for the past three years. Canadians are obviously taking advantage of the falling prices. Many of these buyers are "snowbirds" , trying to escape the harsh winters for the warm, sunny days of the southern states. Before YOU decide to take advantage, here are a few aspects to consider:

1. DETERMINE YOUR WANTS AND NEEDS
The first thing you need to ask yourself is “why do you want to buy a property in the U.S.?” Then, “Will the home be a vacation home, or do you plan on renting the property out?” Next, think about where you want to live. This is especially important if you intend to use this property as a vacation home. Think about the kinds of activities you and your family want to have: surf, ski, camping, etc. Do you want to live in a city, within a certain distance of the city, or do you want to be out in the country? What amenities does the property have to have? Think about everything you can possibly think of and determine what needs you’d like, but can live without.

2. LOCATION
Once you’ve determined your needs, it’s time to narrow down your search to a city and state. Ever hear that old real estate adage, "Location, location, location."? Aside from price, location is the most determining factor when purchasing a property. Every state looks completely different than each other so this is where the activities you decided you wanted will help narrow it down. More often than not if you are a "snowbird" you're probably wanting to be in warmer locals... try any of the southern states: Florida, Arizona, Nevada and California are the current Canadian favorites. When you've determined which states you are interested in go to sites like the city's chamber of commerce and contact a local real estate agent (like myself here in Las Vegas). The Chamber of Commerce site will have descriptions of all the city has to offer: schools, neighborhoods, amenities, etc. and in most cases will send you a booklet of their city for FREE. For more information about Las Vegas, Click on the Link on this blog located to the right of your screen under “Useful Links”.

3. SEE THE PROPERTIES
Be prepared to visit the city you are interested in and get to know the area first hand. Don't buy a property without visiting it in person, even if you don't intend to live in the property. It's important that you determine if the property is worth your investment. Find out if any repairs are needed, appliances need to be purchased, and make sure it's in an ideal location (i.e. no dogs barking, planes flying over head, not located near an airport, etc.). Drive around the area during both day and night. Check with your real estate agent to see if resale values are on the decline and look at local crime rates. Other questions to consider are "Do other investors report higher maintenance costs and repair bills than other neighborhoods? Is there a high rate of tenant turnover and a high vacancy rate? Are there any litigations going on within a development? Etc." Frankly your agent should be your main source of information. Either giving you this information, or directing you where it can be found. They should also give you an idea on the market as a whole, explaining what type of transactions you may encounter like Foreclosures, Short Sales, etc. This will help determine where to focus your efforts and keep you from wasting time and money.

4. TAXES- HIRE A LOCAL PROFESSIONAL
If you're a Canadian resident and spend less than 121 days in the U.S. in a given tax year, you are not considered a U.S. resident and do not have to file an income tax return. However, if you do stay longer and don't properly do some tax planning you risk having to pay tax in both countries. Property taxes may also vary as some states charge more if the purchaser resides outside of the U.S. The Bank of Montreal says its important to be aware of mortgage costs as interest rates also vary within the two countries. I suggest seeking professional help from an accountant within the state you are interested in buying property to answer any tax-related questions as tax laws vary both nationally and locally. Also, make sure to ask them how you’ll be affected if you decided to sell the property.

5. HIRE A PROPERTY MANAGER
If you plan to live in the property for part of the year, but plan to leave the property vacant or choose to rent out the property while you are gone, hire a property manager. This person will make sure the property is maintained, will make sure it doesn't get burglarized or vandalized, and will collect the rent from the tenant.

*If you're planning to rent the property out for all of the year, the U.S. IRS will consider you a "non-resident alien" and will require you to pay income tax on the rent that you collect. There is a 30% withholding tax on the rent you collect, and must be deducted by you or the property management firm you hire. In my experience, the property manager usually takes this out before sending you your check, but make sure you decide what you want to do before you hire the management company. This may help you determine the company you use.

6. FINANCING
For financing options, the Bank of Montreal suggests using a U.S. financial institution that has ties to a Canadian bank. "Staying within the family can save a lot of time and headache," says Laura Parsons, BMO mortgage specialist. "Alternatively, seek out Canadian banks that are already established in the U.S. and the area you are looking to purchase in." If you intend to pay for the property in cash you may need to open a U.S bank account. Ask the local real estate agent, or financial institution to advise if this is necessary.

7. INSURANCE
Insurance is another major consideration. Most Canadians may know that when traveling to the U.S. medical insurance is required but, may over look the need for home insurance. When insuring the property, be aware that some areas that often have hurricanes, flooding, or earthquakes often will have higher insurance costs. You'll also want to make your sure have adequate liability insurance. If you'll be hiring trades people to work on your property, make sure they are covered with workers compensation. Again, your real estate agent can help suggest insurance agents.

In summary, do a lot of research, ask a lot of questions, and when push comes to shove speak to local experts who can guide you step to step. Follow these steps, and you too can take advantage of these record lows and make a good investment.

New Foreclosure Bill looks to protect Nevadan Homeowners

In Carson City, a new bill focused on foreclosures looks to allow homeowners in Nevada the opportunity to walk away from a foreclosure or short sale without the threat of a lawsuit to pay back the deficiency. Under Senate Bill 346, discussed Tuesday in a Senate Judiciary Committee, loans would essentially be modified so single-family residences would be protected from judgments even after they no longer own the property.

Current law already provides some protection, but this bill would specifically target single-family homeowners whose property is their primary residence. Opponents argue the passage of this bill would result in a further plummet of prices and home values as there will be no consequences for the homeowners to simply walk away from their property.

Assemblyman Tick Segerblom, D-Las Vegas, feels this may be the only way to affect immediate mortgage issues and he dismisses concerns that the bill would have a significant impact on housing prices. His hope is that the homeowners will have leverage against the banks, and "if it's a choice between the bank suffering or the homeowner suffering, I'd rather it be the bank."

The other concern is that the passing of the bill would detract investors.
Showing that Nevada doesn't stay true to it's contracts. I disagree with this idea. Granted I have not read the bill, but the homeowners aren't the reason they can't pay their mortgages. They apply for mortgages with the intent to pay them back and I think ultimately they would prefer to stay in their homes. Unfortunately, the market tanked and jobs are scarce- they are simply unable to continue to pay their mortgages. Most people are trying to modify their loans, but to no avail. So their ONLY options are to either walk away from the property, or hope that the bank will forgive their deficiency with the use of a lawyer. To say homeowners are getting away scott free if the deficiency were waived is, I'm sorry to say, mistaken. Their credit is affected, they have to move out and find another home/job sometimes out of state, and unless the banks become more willing to work with homeowners this is the only "right" thing to do.

As for the idea that investors won't want to come to our state and invest?I disagree also. The only investors that would probably be affected by the passing of this bill are the ones that are buying up notes with the intent to go after the borrower. I'm sure these investors will be alright, they're smart people who can make money a different way.

As for the prices being affected, I would think that if the banks weren't allowed to go after the deficiency they would either hold out for more money at the time of purchase or would be more willing to work to modify the loan. Both good things for the economy, and homeowners. I guess time will only tell. Will this be the end of all problems? No, of course not, but personally, I think this is a step in the right direction. As of yet
no action was taken on the bill.

How to be competitive in a buyer's market:

Despite what is said on the news, you may be surprised to learn that not every market or even every zip code is distressed. Many areas, even here in Las Vegas, are finding a high percentage of multiple offer situations due to this very fact. So what can you do to be competitive?

First, come ready to buy. Before you head out on your search have a clear list of objectives which include your criteria. Know what amenities are must-haves, what you can live without, and what areas you are interested in.

Next, if you are planning to finance, get pre-qualified. This is probably the most crucial step in today's market. Many clients I've worked with miss out on their dream home because of hesitating on this fact alone. Pretend you are selling your home, if two offers are presented for the same amount of money, but one has already started the loan process and has documentation from the lender stating they are financed vs. a person who will get it to you when they get around to it... who are you more likely to want to do business with? The good news is that you only have to go through the process once, most people don't realize that the pre-qualification letter is "good" for thirty days. This comes in handy should interest rates go up in that time, you'll be guaranteed to keep the lower rate as you have "locked" it in.

Next, strategize with your agent . Your agent should be able to tell you if you'll be encountering a multiple offer situation as soon as the offer is submitted, so expect there to be some negotiations. Unfortunately, they won't be able to disclose how many buyers you are bidding against or what their offers may be, but together you can come up with a strategy that will give you the best opportunity to get your offer chosen. Your agent should discuss market stats that show what comparable homes have been selling for. This will be a good indication of where your offer should be at, above or a little less than list price. In this market, sellers, especially those that are "equity sellers", won't be as inclined to accept less than list in these situations. If paying over price isn't ideal Sellers may ask for certain concessions, such as closing costs, and requests regarding closing dates. Some of these requests may seem reasonable to you, but don't be afraid to stand your ground if others are too far-fetched.

And finally, stick to your guns. If the multiple offer situation goes back and forth, it's easy to get caught up in the excitement of a bidding war. Know what price you won't go above and stick to that price. I'm a firm believer in everything happens for a reason, and you should take the same approach when purchasing real estate. If the ideal home becomes unreasonably expensive or the seller/bank is asking for ridiculous concessions, don't be afraid to walk away. Don't let pride or ego take over. This is still a business transaction so maintain your composure, try to keep your emotions out of it. If it doesn't happen, you will find another... and sometimes it ends up being better than the original, so stay positive!

If you use these simple tips to help you navigate a tough market you'll be signing on the dotted line for your new dream home in no time.