What the mortgage meltdown means to you

Although I'm sure the writer of this article is correct on some levels, I think it's also important to look at Real Estate on a regional and even local level in some cases. All of these news stories I hear and read these days reflect national news and the nation as a whole. What they fail to show is that some markets are actually doing well. When looking to buy you have to look at each market differently, and it's always important to talk & work with a local Realtor. They are your best source for information on the local area and whether or not it's a good time to buy. Sometimes you have to look beyond the news headlines!

Why is AOL running this as a top news story when it was posted three weeks ago. It just shows the media's agenda to truly make this into a housing "crisis". Housing will be just fine when the media changes their doom and gloom tune to the fact that it is a great time to buy based on lowering interest rates, good rents and an abundance of supply. This Peter Cohan is obviously some liberal academic who rents an apartment and wants to see the money good capitalist people have made in their properties dissapear.

I posted to this blog a while ago and have received a number of contacts from people literally desperate for information on how to avoid a foreclosure. The answer is the Short Sale. A Short Sale is a proven way for a homeowner who owes more than the house is worth to avoid a foreclosure and the subsequent credit hit.

I would advise anyone facing foreclosure to discuss their situation with an experienced Realtor. Short Sales are not a part of real estate basic training but there are a number of educational seminars a Realtor can take to get up to speed. Lenders will pay a reasonable selling commission so Realtors have an incentive to get involved in Short Sale situations.

The basic requirements for a Short Sale are a Listing Agreement with a Realtor and a Sales Contract from a Buyer which are submitted to the Lender along with a Hardship Letter from the Seller explaining why they cannot continue to pay the mortgage and supporting documents such as tax returns, bank statements, information and photos of the home and the Comps, or comparative home prices supporting the offer. The way mortgages are sold, the mortgage holder can be anywhere in the USA or even overseas and certainly not aware of local real estate conditions.

If the package is complete, the Lender will order a BPO, or Broker's Price Opinion, from an independent Realtor. Ths BPO is the key to the whole process. If it is too high, the Lender will not accept a low offer. Your Realtor can meet with the Agent doing the BPO and offer information supporting the offer, such as the average time on market of comparable homes, recent selling prices and point out any defects in the home. Most Lenders will accept an offer lower than the BPO, but usually not much more than 10% lower, though that will vary depending on the company.

The sales contract should specifically state that the offer is contingent on the Lender accepting the purchase price in full and forgiving the Seller the deficiency on the mortgage. There can be tax consequences but if the Seller is truly in a difficult financial situation they can be avoided - an accountant should certainly be involved in that question. This does all take time and Lenders are swamped, expect at least 2-3 months before a sale can be finalized, even if the Lender accepts the first offer. If they do not, the price can be negotiated.

I am a Realtor, a Broker Associate in South Florida and am involved in Short Sales. It is a detailed but fairly straightforward process that can work to benefit Buyer, Seller and even the Lender. The Buyer gets a good price on a home, the Seller gets to avoid the disruption and credit hit of a foreclosure and the Lender avoids the delay and expense of foreclosing on a property they don't want to own and that would negatively impact their ability to make more loans.
All this information is available on the web site
www.free-foreclosure-information.com or Ican be contacted at 561-818-1017.

the thing i would suggest you do is try to sell the home using a owner held mortgage. the reason for that is simple: most of the people defaulting are those that got in with no money down. if they had bought a relatively good home at an affordable price, they would be in much better shape. they would not have defaulted and you would still be receiving payments plus, you could sell it later, albeit at a discount, but you would still have sold your home.
the majority of the home defaults are those adjustable rate mortgages: get it while the price is low and lose it when the rates increase! these are they very same people who would have bought your home if they could have gotten that special financing that an owner held mortgage allows.

most of the foreclosures and defaults are from those who are real estate investors. their home sells are going down the tube and they can't build anymore and payoff the constructuion loan because of this. if people would consider their own situation rather than worry about a doom and gloom message, they could make more inteeligent decisions.

Aaron, pharo211, Mike Darling, and P Benscoter,

I'm not disagreeing with you that owning one's residence is generally a good thing, and that historically, that real estate is a way for people to build a nest egg over a long period of time.

However, because of the recent insanity in house prices in bubble areas (e.g. the southwest, FL, mid-atlantic/northeast large cities) and the very-recent current decline in real (inflation-adjusted) prices in these areas, it is NOT a good time to buy a house in these areas.

I'm not recommending at all that it is generally a good idea to rent vs. buy, but over about the last 2-3 years and for at least another couple of years, it is not a good time to buy a house in bubble areas when the renting costs are significantly lower than owning costs.

Over the next couple of years at least, in bubble areas, one or both of these factors will result in it being favorable to buy a house, but we're not there yet:

1) House prices declining

2) Inflation bringing salaries up (and rents)

I can say for sure that prices are declining (slowly but surely) where I live (Frederick County, Maryland). I'm talking about numerous specific houses that I've seen people buy in 2004-2006 and are selling for less than what they paid.

When the combination of declining house prices and/or increasing salaries makes it reasonably affordable to buy a house, then it WILL be a good time to buy a residence.

I want it to be a good time to buy real estate as much as you do, but again, it doesn't make sense at the moment to buy real estate in the bubble areas, and won't make sense until salaries are in line with house prices.

Your article asks rhetorically, "Doesn't the surprise Fed rate cut on Aug. 17 mean mortgage rates will fall?" The article's answer is:

"No. The Discount Rate cut applies to borrowing by big banks. It does not help small borrowers. If the Fed had cut the Fed Funds rate, it would have helped people trying to borrow to buy a house. But that rate has not been changed."

Only the "no" is correct. While the discount rate cut does indeed apply to member bank's borrowings at the Fed's Discount Window, the size of the borrower is not the issue. The reason it doesn't help mortgagees is because it is an overnight rate for short term borrowings and not a long-term rate. The Fed can only truly control short-term interest rates - not longer-term rates. Only the US Treasury securities market can through their demand for notes and bonds. If the Treasury market felt that the economic outlook was very weak, for example, longer term interest rates would decline regardless of what the Fed did, or, for that matter, what short term rates were doing. This is because an expected weakening of the economy would likely cause a future, general decline in yields, and investors would increase their current demand for longer-term securities before their yields decline, thereby causing pricres to rise and yields to fall.

Anthony

My son does the same thing, has for years. I admin I am a bit concerned for him, but he wouldn't say so, if he was. At one time, several years ago, he had 40 houses, renting or selling, after they are fixed up.

He's among many and hope all this mess gets settled for them.

the mortgage company have been sold to another company. before this happen my home was in foreclosure situation. after legal advisor, i was advisor there was something fraudlent with my mortgage agreement. this situation was place in lawyer hand. after 2 months, the situation was resolved out of court for 15,000.00. but, on my credit there is foreclosure and a judgement this bought my credit score down. i wanted to relocate to ohio, and sell my or turn it into duplex apartment? Oh, back to my mortgage situation, i am now being press by this attorney to the monthly payment to him.what's up with that!!!