Mortgage Meltdown: the Risks of Walking Away

Guest Post – an REO Agent Perspective

Guest Post

I had many inquiries and comments in response to the post Foreclosures, More Profitable than Loan Modifications?

Unfortunately, they came to my email instead of being posted here on the blog where everyone could read them.  Please comment here on the post if you can!

Rick Godbee, Foreclosure Broker and Team Leader for ReMax Realty Consultants wrote an excellent email response.  I asked his permission to put it here as a “guest post” and he, fortunately, agreed.

Thank you, Rick.  Here is his letter:

I’ll try to explain some things that may help your column and your clients better understand a different perspective.

The bank doesn’t necessarily make money (on a foreclosure) because of the huge expense of managing the foreclosure.   I’ll mention a few:  Eviction attorney, Asset Manager salary, Real Estate Broker Commissions, yard maintenance, winterization and de-winterization, repairs necessary to make the home qualify for a future loan, utilities while marketing, seller Closing Attorney, Title Company and it goes on and on.  Don’t get me wrong, I’m not a bank advocate, but I also don’t believe they are the big monsters most paint them out to be.  I believe it is a rare case the bank makes any profit on the resale, especially since the properties are generally over financed, which is the bank’s fault in the first place.  But, they do get the write-off!!!

Read more…

Had a Foreclosure? Are you still on Record as Owner?

Foreclosure
photo by respres

If your lender never completed the process, you could still be on record as owner of your foreclosed property.  That leaves you liable for the debt and the property.

Homeowners in many cities are currently victims of what are called “walkaways”.  This happens when mortgage service providers begin the foreclosure process but don’t follow through.

Under current law in most states, homeowners finding themselves in a walkaway position have little recourse.  There is proposed state level legislation to correct this in several states.

How can you know?  Pull your credit report and see if the property is still there.  If it is, contact the lender and find out why it hasn’t been removed or why it doesn’t show that it was foreclosed.

Lenders are very busy with foreclosures and you want to be sure you are not involved in a process that was never completed.

Worse Mortgage Crises Coming

The last mortgage crises was led by sub-prime loans. The next mortgage crises is being led by the “higher quality” loans; Alt A loans, interest only that are now converting to interest plus principle loans loans and Option Arm loans that started out with unreasonably low “teaser interest rates” that will now adjust up like the sub-primes did.

Mortgage Rate Resets

Here in 2009, we are only at the beginning of the next, many say, larger default wave.

The Housing Crisis is Nowhere Near a Bottom

Houses

I read this interesting blog post by Felix Santiago about What Lenders Won’t Tell You About Your Short Sale.  It’s a very interesting article.  Here are some highlights:

3) Lenders and investors make secret deals for billions of dollars every day behind your back! Many agents  want to see and believe that their real estate transaction is the only way the lender can move the property.   In fact, this is by no means the principal manner of unloading their inventory.  REO’s along with performing and non-performing notes account for the majority of their swaps.  However, those sales are never recorded in public records.  Most of them are sold for pennies on the dollar.

4) The housing crisis is NOWHERE NEAR A BOTTOM! The biggest reason for this is the tremendous amount of inventory.   I’m not simply talking about the inventory in the lender’s hands.   I’m talking about inventory yet to be taken back.   There are millions of homeowners living in their homes for free.   I  have clients going on 2 and 3 years without a mortgage payment.  The lenders and their investors are simply overwhelmed by this crisis and they would rather see someone in the property taking care of it.  Once they foreclose, they are responsible for all the bills on the house.  Only 30% of the lender inventory is even available for sale.  Nearly three times the current inventory is pending foreclosure. And unless everyone behind on their payments gets back to work and starts paying their mortgage, the crisis will not be going away any time soon.

Check out his entire article on Felix’s Blog and let me know here what you think about it.

Foreclosure Laws – State by State

Foreclosure

I just found this great site. It details foreclosure laws for all 50 states. I hope you don’t need it but, if you do, check out the Foreclosure Report.