Answers For Owners Blog

Many homeowners are feeling the double pinch of being unable to make their monthly payment obligations. Many people refinanced their homes and used the appreciated equity to pay off high credit card balances. Unfortunately after the cards were paid off, many people charged up large balances again. What happened next? Refinance the house again and pay off the cards. Now, with the market in the toilet, their homes and their cards are maxed out and they are unable to make either payment.

See this report from the Associated Press about the sharp increase in unpaid credit card bills.

According to NJBIZ the number of building permits that were issued in New Jersey June and July 2007 fell by 33%. I guess the real estate slump, slow down, disaster, call it what you will, has taken hold in the garden state.

Builders are tuned into the real estate market. Accordingly when they believe that a real estate slump has started to end, they will begin to pull more building permits. They in turn will build more and more homes. However, when they see a glut of inventory in the market, are not able to sell their newly constructed homes, and are sitting on large tracts of property, they will stop paying to have permits issued.

If the builders have stopped pulling permits because they cannot sell their new homes, how are owners of older homes going to be able to sell their property in the near future?

Tags :building : construction : real estate : new jersey

Tonight Rutgers kicks off its 2007/8 football season against Buffalo at home. Good luck to Ray Rice and the rest of the Scarlet Knights. I'll be in the stands tonight, as well as for the rest of this season's home games, wearing red.

Tags: RUTGERS

The New York Times is reporting that the median price of American homes is expect to drop for the first time in 50 years. This eventuality is going to spell even more trouble for homeowners who are either trying to sell their home now, or will be forced to sell in the near future. The thing that is amazing about this story is that so many people in the real estate industry said that the nationwide decline in home prices would never happen.

From the NY Times:

In all, Global Insight expects a decline of 4 percent, or roughly 10 percent in inflation-adjusted terms, between the peak earlier this year and the projected low point in 2009. In California, prices are expected to decline 16 percent — or about 20 percent after taking inflation into account.

As of July 2007, the median home price of all homes for sale in New Jersey was $449,000. That means by these projections the median home price in 2009 may be closer to $404,000.

Need to sell now before time blows up 10% of the profit you stand to make? Call or email us today.

Tags : home prices : real estate : valuation : FSBO

One thing that I find amazing is that while the media pundits constantly remind us of the sub-prime meltdown, the bursting of the housing bubble, the record number of foreclosure filings and the general doom of the overall real estate market and U.S. economy, they have no problem accepting new advertising from Countrywide, Quicken, DiTech and other mortgage lenders.

Read this article from Saturday's New York Times.

Consumer advocates say many ads are at best misleading and at worst steer consumers into risky loans with promises of low introductory rates that do not make clear that they could pay significantly more in a few months or years.

Tags : subprime : mortgage : foreclosure : media : TV : advertising

Remember back in 2004 / 2005 when the market was red hot and if you owned a home you were constantly receiving solicitaions to refinance your existing mortgage into an low interest ARM? The come ons were all the same: Cash Out Your Equity - Pay Off Credit Cards - Take A Vacation - Remodel Your Kitchen/Bath. Nobody believed that the market value of their home was so off and was also no way that when the market corrected itself the amount they had mortgaged would be more than the home's value.

Unfortunately for many homeowners lured into borrowing cheap, low interest money, that is exactly what has happened. From the Consumerist - Subprime Meltdown: Doomsday Coming in October For The Subprime Mortgage Industry

Many consumers who signed up for adjustable rate mortgages in 2004 and 2005 will see their mortgage payments jump this October, according to CNNMoney. With foreclosure rates already as high as one foreclosure filing for every 656 households in the US, this can't be good news.

From CNNMoney:

"In October alone more than $50 billion in ARMs will reset," according to Mark Zandi, chief economist and co-founder of Moody's Economy.com. That's a record, according to Zandi.

So, what exactly will happen to the more than two million homeowners whose ARM's will reset in October?

A buyer in 2005 with poor credit and limited means might have signed on for a $200,000 2/28 hybrid ARM, locking in a fixed rate of 4 percent for two years. After paying $955 a month, his bill would now be set to spike to $1,331, a 39 percent increase.

The chief economist for the Mortgage Banker's Association estimates that about 600,000 of these homeowners will get into trouble, and about 300,000 of them will lose their homes. How did this happen?

"There were increasingly poor quality loans made starting in the spring of 2005," he said, "with the poorest of all made during the fall of 2006."

Lenders approved many borrowers who had little chance of being able to afford the payments two and three years out. They approved applications without any proof of income or assets ("liar loans") and others that barely could make the low teaser-rate payments. Some borrowers chose interest-only ARMs, which left the principal of the loan untouched

For an insider's look at the shady techniques subprime lenders used to foist ARM loans on unsuspecting people who did not know they couldn't afford them, check out this story from NPR about mortgage lender Ameriquest.

If you are a homeowner who has an ARM that already has, or is about to reset to a higher interest rate, and you do not have enough equity to refinance, talk to us about possible solutions that will prevent foreclosure and ruining your credit.

Technorati Tags - ARM : Subprime : Mortgage : Foreclosure : Credit

See story here.

According to this report from Reuters, Ohio's Attorney General Marc Dann is investigating whether Wall Street investment banks were involved with fraudulent subprime lending. Deceptive lending practices such as falsifying income on loan applications and providing loans to people that they were not suited for has attributed to the rash of foreclosures in Ohio.

According to the latest release from RealtyTrac, Ohio (along with California and Florida) documented the largest foreclosure totals in the nation in April 2007.

Ohio’s foreclosure activity surged in April, up 39 percent from the previous month and up 135 percent from April 2006, pushing the state’s foreclosure total to third largest in the nation. The state reported 11,431 foreclosure filings during the month, a foreclosure rate of one foreclosure filing for every 418 households — 1.9 times the national average.

According to Dann, it is possible his office may bring RICO charges against the investment banks if his investigation shows that they funded lenders who provided high-cost risky mortgages to people with weak credit.

The New Jersey Star Ledger is reporting that the state's housing slump seems to be reaching its bottom. Where are they getting this information from? Yep, you guessed it, the NAR.

The Ledger article is linked above for you to read and you can read why other industry professionals have a more guarded opinion as to New Jersey's housing situation. What I think will be of interest to readers of this blog are the pricing numbers across the state.

The strongest price increase in the state was in Mercer County, where the median price rose 7.1 percent, to $283,800, followed by Atlantic City at $264,600, up 5.1 percent, and finally, the Newark-Union area, which rose 4.5 percent, to $423,700. The Newark-Union area includes Essex, Hunterdon, Morris, Sussex and Union counties.

In the Edison area, which includes Middlesex, Monmouth, Ocean and Somerset counties, the median home price fell 3.4 percent, to $363,500.

I don't think that we are quite out of the woods yet in terms of house prices. It still is very much a buyer's market so if you are selling, you have to make sure you do everything you can to separate your house from its competition. For a good post on helpful selling hints take a look at what Jill (a.k.a. Kathy) has to say.

Following up on my 60 Minutes / Realtors post, the Inman News Blog posted a copy of an email sent by National Association of Realtors President Pat Combs to the association members.

One of the most difficult challenges we face is educating the news media about today's real estate industry.

Maybe the news media is a bit skeptical of the education NAR provides . Check out this post from the David Lereah Watch.

We have talked here before about the unbelievable rise in the number of foreclosures taking place in New Jersey and across the country. The foreclosure crisis has brought out the best in some as well as the wost in others. Unfortunately there are more people with their hand in the pocket of desperate homeowners than those extending their hand to help.

Two more stories about foreclosure scams here and here. The interesting thing to me is that these lowlife sharks preying on owners in foreclosure are not content to only screw the homeowner - they are going after the lenders too.

Homeowners please be aware of any person that offers to help you out of your situation. I am not saying that help does not exist, but you must be sure of the documents you are signing. If it is at all possible you will always want to have an attorney review any documents so you know exactly what is taking place.

New Jersey is considering increasing the level of scrutiny placed on mortgage loan officers operating in the state. State Senator Barbara Buono, D-Middlesex is the primary sponsor of a bill that if passed will require training, licensing exams and criminal background checks for loan officers.

While New Jersey is usually viewed as a progressive state, in this area we are really behind the curve. Most of the nation already have regulations that are placed on loan officers.

Other states have adopted similar requirements to deter fly-by-night loan officers. When Illinois enacted its regulations in 2004, 40 percent of the 29,000 applicants flunked the licensing exam. Another 800 failed the background check.

Currently in New Jersey a person only needs to pay a $100 registration fee to assume that role.

Housing advocates are saying that regulation and oversight alone are not enough to ensure the ethics of those working as loan officers. Wouldn't it be better to push the oversight of the loan officers onto the lending institutions that they are working for? By penalizing the lenders for inappropriate loans originated by their loan officers, the onus is placed back where it belongs and can be adequately overseen and enforced.

In the past five years, the number of New Jersey mortgage solicitors nearly tripled -- from 14,476 in 2002 to 42,433 as of earlier this year -- according to the state Department of Banking and Insurance. Average salaries for state loan officers exceeded $63,000 in 2005, Bureau of Labor Statistics show.

Thats sure is a lot of $100 loan officers out there - hmmm a lot of sub-prime loans failing too!

Read more here

Foreclosure rates in Philadelphia and its surrounding counties are lower than in the rest of the country while the number of foreclosures for Philly's neighbors in New Jersey have risen over 50%.

In the first quarter of 2007, pending existing-home sales for this region were down just 5.3 percent, or 685 houses, compared with the same period in 2006, according to data compiled by Trend, the multiple-listing service (MLS). It took about two weeks longer to sell a house this year than it did last year, but median prices continued to increase, the Trend data showed.

According to this article, one reason why the Philadelphia housing market is not experiencing the same high foreclosure rates as other cities could be attributed to borrowers in this region are more likely to have a 30 year fixed rate loan versus an adjustable ARM. Another reason could also be that the home prices in the Philadelphia market did not experience the same run-up during the height of the real estate boom over the past few years. New York, New Jersey and Washington saw their home values rise dramatically and many owners rushed to take equity out of their homes so they could pay off credit cards or take on renovations. Many of those homeowners are now upside down on their homes.

Top Ten Highest Foreclosure States
Nevada
Colorado
Georgia
Michigan
California
Florida
Arizona
Ohio
Texas
New Jersey

You are behind on your mortgage payments and your lender has stared the foreclosure process according to the rules of your state. When you take into account the principle amount of your loan along with the past due payments, interest and fees, you learn that you actually owe more than you can get if you sell your house. What do you do?

One option is for you, or someone on your behalf, to work with your lender to negotiate what is called a short-sale, where the lender will accept less than what you owe on your mortgage as payment in full. Great, you are able to save your credit by not having a foreclosure appear and the bank does not have the expense of foreclosing on the property and then managing it until they can find a buyer. Win-Win right? Maybe not because Uncle Sam is still there with his hand out, looking for the taxes he's owed on the money you profited when the bank accepted less than what you owed.

You are probably asking yourself "what profit? I didn't put any cash into my pocket" Under current tax law, when a bank agrees to take less than what is owed on a loan as payment in full, they are required to let the IRS know by filing a 1099-C form and you the homeowner are responsible for the taxes due on the discounted amount. Read this article from the Baltimore Sun for more information.

Homeowners who are considering negotiating a short sale need to know that there is a good chance that if they are able to strike a deal with the bank, they may still be responsible for the taxable amount of the difference. While a homeowner's initial reaction may be that they do not want to be on the hook for a $20,000 tax bill from the government, it is important to weigh that against the damage that a foreclosure on their credit report for years to come. If you have a large tax bill from the IRS you can always work out a payment plan - if you have a foreclosure on your report you will not be able to get on with your financial life for many years after.

I read an editorial in the April 9th edition of the New Jersey Law Journal that sums up the situation many homeowners facing foreclosure or considering bankruptcy are experiencing today. I've written about the need for lenders to be responsible when making loans, and here's a hat tip to the Law Journal's editorial staff.

They Used To Call It 'Usury'
It is commonplace for banks and other financial institutions to offer credit cards to "pre-selected" borrowers with low initial interest rates for extended periods of time. Is it too good to be true?

In 2005, banks and related financial institutions succeeded in securing the enactment of the Bankruptcy Abuse Prevention and Consumer Protection Act. President Bush declared it would make more credit available to poor people. In 1978 the U.S. Supreme Court ruled that banks were free to charge the interest rates in their home states to customers across the country. This set the table for a feast for financial institutions.

The new bankruptcy laws contain a provision which forces many debtors into Chapter 13 compulsory repayment plans rather than a discharge. A Housing Judiciary Committee report had stated that such compulsion might be considered involuntary servitude.

In the worst situation of a borrower's default, the lender can impose interest rates as high as 29.99 percent plus late fees. Lenders fall all over each other in extending loans to persons who are desperate for money, by offering no or low interest for loans.

Such loans carry many conditions. Among them, for example, is prompt payment of each monthly payment on a designated date. Failure to pay promptly results in canceling the favored rate and leaving the debtor with increased rates determined by the lender. People who fall into the category are called "revolvers". They are the ultimate targets of the extremely favorable rates. It is reported that a great many who seek relief in Bankruptcy Court could not repay any debts. Many of these became indebted for reasons beyond their control, like loss of a well paying job, large medical expenses, sudden emergency situations, etc. These people have little prospect of repaying loans that grow expansively at loan-shark rates and late fees.

A great many people do not have healthcare coverage. This aggravates the financial situation of middle-class people who live check to check and who do not have the means to pay health care providers for extraordinary care they may need. Students and seniors who live on pensions are particularly vulnerable.

There was a time when excessive interest rates were considered to be "usury". Easy credit and laws favoring lenders do not speak well for the free market. The rich get richer and the poor and middleclass get deeper and deeper in debt.

As a follow up to my recent post regarding the spike in Newark foreclosures, I am pointing to the White Collar Crime Prof Blog's post,Tough Times At Beazer Homes.

Beazer Homes is currently being investigated by the FBI, HUD, and IRS in respect to its mortgage lending to low-income borrowers. The investigation by the Federal agencies is a result of an investigation by the Charlotte Observer which determined that the foreclosure rates in several North Carolina Beazer developments ran at around 20 percent, compared with the national average of 3 percent.

Beazer is the 6th largest builder in the U.S. and regularly provided ARM mortgage financing for their properties. This is a common practice for larger homebuilders who want to maximize the amount of money they are able to make in their deals. Beazer happens to be the first but certainly not the last builder that will be called to task on their lending practices.

Earlier today a friend sent me a link to this New York Times Article, Behind Foreclosures, Ruined Credit and Hopes (RR) which highlights some of the personal stories of people facing foreclosure in Newark New Jersey.

Newark is a local example of a national trend - People with poor credit were given mortgages by lenders who knew (or at least, should have known) they would not be able to afford. Now those people who started with little savings or moderate income are defaulting on the "no money down mortgages" which allowed them to buy a home.

Don't get me wrong, I believe that everyone who wants to own a home should be provided every opportunity to become a homeowner. However, lenders need to be responsible in their lending practices and they bear a responsibility to making sure that the loans they write are suited for their consumer. When loans are made that are not suitable, people are unable to pay and the bank is forced to foreclose - this is a double whammy. The individual given a loan not suitable for them has their credit destroyed and will take many years until they are able to get another mortgage to buy a home while the bank is forced to keep anywhere between 2 and 8 times the amount of the mortgage the borrower is delinquent on, in their reserves and not lent out. With more delinquent mortgages there is less money in the marketplace to loan and less people qualified to borrow the money that is there.

Answers For Owners is a blog that was created by Clearwater Properties and plans to be focused on distributing helpful and timely information to homeowners. In the current housing market many homeowners have questions about how they can sell their home, stop foreclosure, refinance out of adjustable rate (ARM) mortgage and many, many other things. This blog's mission is to serve as a "one stop shop" where Owners can find the Answers they need.

Here's hoping you find the answers you need!