Housing prices continue to fall, albeit at slowing levels, housing inventory is also in decline, but plenty of buyers can’t find homes.  What’s going on and what does it mean?

The latest numbers on housing don’t appear to make sense given the number of buyers that want to buy, but can’t find a home or get out-bid on those they do find.

First, housing prices continue to fall as evidenced by this chart (credit to Calculated Risk):

Standard supply & demand economic principles would interpret this as a signal of falling demand or over supply.

Well, this next chart shows that housing inventory, or supply, is also falling:

Supply & demand economic principles would interpret falling supply and falling prices as meaning there was also falling demand.

Ok, that makes sense, but, what about all those buyers that can’t seem to find a home?

To explain that we have to fall back on the standard real estate line of, “location, location, location.”

It’s true housing prices continue to fall nationwide, but all locations are not being affected the same.  A lot of homes in southern California, south Florida and even the Detroit area, are being snapped up as soon as they hit the market.  Homebuyers are getting very particular about where they want to live, given rising gasoline costs and a greater focus on being frugal.  Areas that pass muster are in high demand and some are even experiencing rising home prices.  Less desirable areas are still seeing rapidly declining home values.

Another issue in play here are real estate investors.  In some areas of southern Florida over half the homes being sold are to foreigners who just plan to rent them out for now.  A lot of this is also related to location, but greed is in play here too.  How else do you explain foreigners snapping up brick 3 bedroom homes in even the worst areas of Detroit?  These investors are looking solely at what they think the projected rates of return are – while ignoring hard facts about vandalism and theft issues.

Lastly, we have the legal issues that halted hundreds of thousands of foreclosure actions in 2011.  This has affected housing inventory, but not really the real estate market as a whole.  If it did, housing prices wouldn’t still be falling in the face of lower inventory.  Foreclosure filings have been up in recent months though as the legal issues are being worked out.  More foreclosure should follow and then that inventory should hit the market and increase supply.  As pointed out above though, locations in demand should easily absorb this additional inventory.

The federal government still has to be concerned about the national rate of falling housing values as next year is an election year.  Unfortunately, this means that common sense will be ignored.  Instead of focusing on the areas the majority of people want to be in, the government will instead try to be everything to everybody and probably take the county deeper into debt.

The federal government recently figured out what mortgage experts (like us) have been telling them since they put taxpayers on the hook for FNMA & FHLMC – appraised values don’t matter when refinancing upside down homes!

Way back on February 18, 2009 when Obama’s announced his Home Affordable Refinance Program (HARP) and bragged it would help 4 to 5 million homeowners lower their payments to make them more affordable, we wrote the following in a post titled, “The Obama Housing-O-Rama, get Your Tickets Now!”:

“IT DOESN”T GO FAR ENOUGH! As I’ve been writing since October of last year, they need to just do away with appraisals altogether on no cashout refinances. HELP homeowners lower their payments and they’ll be more likely to stay as they have to live somewhere. If they can rent a comparable home cheaper than they’re paying to own, it makes more sense for them to walk-away and many more will.”

Over two and a half years later, we’ve been proven right.  A very shallow victory as no one’s talking about how many foreclosures could have been avoided if HARP had been launched as we recommended.

Before you get all excited and rush out to contact a lender to refinance your underwater home, you should know about the program limitations:

• Your mortgage must have been in effect prior to May 31, 2009.
• You’re only allowed one 30 day late payment on the mortgage in the 12 months preceding a refinance.
• You can’t have any late payments on the mortgage in the 6 months preceding a refinance.
• The program has been extended until December 31, 2013.
• You can read the entire FHFA press release here.

Oh, and the program probably won’t be available until the end of December or January.

One more important fact that many people are misunderstanding – appraisals have not unilaterally been done away with.  The new guidelines still require an appraisal if an acceptable Automated Valuation Model (AVM) is not available from FNMA or FHLMC.  We’ll comment more on this later.
Separating Truth from Political Hype

First, let’s start out by stating that it’s better late than never. 

This HARP 2.0, as many are calling it, will help many families save a few extra bucks each month on their homes, lowering the chances of them letting their home go to foreclosure in the future.

Now let’s look at some issues we have with the program and the political hype.

HARP is a DUD:  Overall the HARP program has not been the success Obama bragged it would be.  When HARP was first announced the political hype claimed 3-4 million homeowners would be helped.  To date, only around 900,000 upside down homeowners have benefited from the program.  This graph is right from the FHFA press release:

It’s obvious that HARP refinances have made up less than 10% of all FNMA/FHLMC refinances.

Big Banks Don’t Care:  One of the big reasons for so few refinances is that lenders don’t have to participate and offer the program to their mortgage borrowers.  The To-Big-To-Fail-Banks, Bank of America, Chase, Citi & Wells Fargo being the 4 largest, have not embraced HARP.  Wells Fargo for instance, will not refinance anyone with an LTV over 105%.

Income Proof Still Required:  We feel the second biggest reason is that a large percentage of homeowners can’t show enough income to qualify for a refinance of any kind.  HARP 2.0 should have removed this roadblock also.  

The argument that it doesn’t matter how upside down a borrower is in their home to justify waiving LTV as a refinance requirement, can also be used to justify waiving income requirements.  If the borrower is making their payments on time, who cares about their income! 

This requirement is even more perplexing as FNMA & FHLMC both had No Income Verification (NIV) programs for several years that were terminated with the Mortgage Meltdown.  How many NIV mortgages did they make that aren’t eligible for HARP because the borrowers can’t prove their income?  How many homeowners that proved their income when they got their existing mortgage, can no longer do so because of the economy?

Risk Premiums Raise Refinance Mortgage Rates:  The original version of HARP, while allowing refinances up to 125% of appraised value, penalized homeowners for being upside down by charging them higher mortgage rates.  For many upside down homeowners, the rate penalty took away any incentive to refinance.   Many phone calls to lenders went something like this: “Mr. Homeowner, your current rate is 6.5% but current rates are 5.75%.  If we add the risk hit because you’re upside down though, you’re only eligible to refinance at 6.25%”. 

Traditionally, higher risk has always meant higher interest rates – just look at junk bond rates.  What never made sense is with HARP is that FNMA & FHLMC already own the upside down debt, so what additional risk did they have on the refinanced mortgage? 

Chalk this one up to the syndrome of, “this is the way we’ve always done it”, and no one involved being smart enough to ask why!  When HARP 2.0 was announced the government indicated the risk pricing will be lowered.  It should really be just done away with altogether.

One-Shot at Refinancing:  Most people don’t fully understand the HARP requirement that to be eligible, the mortgage being refinanced MUST have been originated prior to May 31, 2009.  What this means is that any upside down homeowner that’s already refinanced cannot do so again.  Not only have mortgage rates dropped significantly since HARP started, think of all the upside down homeowners that were penalized by the HARP interest rate risk premium!  This limitation should really be removed in our opinion.

Stumbling over Second Mortgages:  HARP doesn’t care about 2^nd mortgages, but try telling that to 2^nd mortgage lenders.  HARP 1.0 only looked at an upside down homeowner’s first mortgage balance for the 125% LTV limit.  HARP 1.0 didn’t care if there was a 2^nd mortgage or how much was owed on it.  The problem was that the 2^nd mortgage lenders had to agree to subordinate their 2^nd mortgage to the new HARP refinance mortgage – and many didn’t care to do so.  So, many eligible HARP refinances weren’t done because 2^nd mortgage lenders either charged exorbitant subordination fees, took forever to do the subordination paperwork or just had a policy against subordinating their 2^nd mortgages if the homeowner was upside down.  HARP 2.0 still doesn’t address this issue so it will continue to thwart hundreds of thousands of upside homeowners from taking advantage of the program.

What’s sad is that this goes back to the ignorant mindset of, “this is the way we’ve always done it.”  Allowing an upside down homeowner to refinance and lower the payment on their 1^st mortgage, will free up money in that homeowner’s budget each month.  That additional money will make it easier and more likely that the homeowner will be able to make their 2^nd mortgage payment – lowering the risk of default to the 2^nd lender!  So, by not embracing HARP and aggressively subordinating, 2^nd lenders are being extremely short-sighted, if not stupid.

Worse-case, if we were a 2^nd mortgage lender solicited for a subordination to a HARP refinance, we would require the upside down homeowner to put some of the monthly savings from the 1^st refinance towards paying off their 2^nd mortgage faster.  This would require some type of modification agreement, but would make a lot of sense.

Private Mortgage Insurance:  This is another hurdle for many upside down homeowners taking advantage of HARP.  In theory, if you’ve got PMI on your mortgage the mortgage insurance company is supposed to reissue a new certificate for the HARP refinance.  In reality, the process is difficult and takes far too long.  Rate locks are often blown, application documents become stale and homeowners and mortgage originators just get frustrated and quit the refinance process.

Again this makes no sense as lower mortgage payments mean less likelihood of a mortgage default, which means less insurance payouts/losses for the mortgage insurance companies.

NOTE: the recent insolvency of the mortgage insurer PMI, means even more delays and frustrations for those looking to refinance using HARP.  Read more about this at our blog post, “Another Bailout Fiasco on the Way.”

All these hurdles to a more successful HARP program, that should be obvious to any mortgage expert, beg the question of why aren’t they being addressed.

As we pointed out above several times, there’s a severe issue with the mindset of “this is the way we’ve always done it.”  Our government is so big and complicated now, that no one is really fully in control.  Even the best politicians and bureaucrats are just “cat-herders”.  This is not an acceptable excuse.  What it leads to is special interests and big business taking advantage of the system.  And that is what’s stopping changes to HARP to make it more effective.

The To-Big-To-Fail on Wall Street don’t really want homeowners to refinance.  Same goes for the bureaucrats running FNMA and FHLMC.  Accounting standards allow lenders to book profits NOW on FUTURE loan payments.  So, all the existing mortgages have already been booked on some lenders profit & loss statement.  What do you think happens when a mortgage is paid off early?  The lender has to make an adjustment and take a hit to their earnings.  Even if they get the homeowner to refinance with them and put the new mortgage on their books, it’s at a lower interest rate and doesn’t offset the loss from the early pay-off.  Not only are Wall Street firms and the To-Big-To-Fail-Banks struggling to show profits, their executives have also become addicted to high bonuses and like any addict, they will go to great lengths to get their next “fix”.

Our government isn’t for the people, it’s only for the rich people.

Last week it was announced that PMI, the largest mortgage insurance company in the country, was effectively shut down by the state of Arizona due to insolvency.

Before we go any further let’s clear up some confusion – PMI the company, was in the business of selling Private Mortgage Insurance, also known as PMI.  Going forward in this article, we’ll refer to the company via PMI, while spelling out private mortgage insurance.

The company has suffered too many losses from the foreclosure crisis, paying out too many claims on loans it covered with private mortgage insurance on.  The state of Arizona announced that the company will only be allowed to pay out 50% on filed claims.

I’ve read a few articles since the announcement where the writers (one of them a self-proclaimed mortgage expert) asked why should mortgage borrowers with PMI coverage keep paying their premiums if the company isn’t going to pay full claims.  Well, that’s a real ignorant question for so called experts to be asking.  Private mortgage insurance doesn’t insure borrowers, it insures lenders against a borrower default.  Borrowers do pay the monthly premiums, but the only beefit they receive is the lender allowing them to put less than 20% down.

I do see a few issues with the failure of PMI and the way it’s been handled so far.

1.  More losses for FNMA & FHLMC – which means more costs to taxpayers as the government took them over more than 2 years ago.  When a loan with private mortgage insurance fails, the lender files a claim with PMI to pay the difference between what the borrower owes at that time and about 80% of the purchase price or appraised value at the time the loan was made.  Lenders count on this mortgage insurance coverage to offset the higher risk of making loans with less than 20% down.  So a lender that has coverage from PMI will now get 50% less than they expected, which means more losses for the lender.  FNMA & FHLMC are now the largest holders of mortgages with private mortgage insurance coverage in the country.  So, their losses will be even higher.  It’s interesting that both just asked for several billions of dollars more in funds to cover losses this week – money that’s coming from taxpayers.

2.  If the losses for PMI keep piling up, it’s highly likely that the company may get a Bernanke Bailout.  To protect FNMA & FHLMC?  No, it’ll be to protect the Too-Big-To-Fail banks from more losses on the rest of the PMI covered loans in this country.  The TBTF banks will pay their Bernanke Bribe and get another get out of jail free bailout when the federal government bails out PMI to keep it from failing.

3.  I find it interesting that the state of Arizona shut down PMI, when most of their business crosses state lines, so the company should fall under the domain of the federal government.  I’ve got two thoughts on this:

    a)  Arizona got tired of waiting for the federal government to act and is forcing the issue.
    b)  Or, the federal government put Arizona up to this to give the feds an excuse to step in and take over.

In the end it really won’t matter which direction this issue takes – the end result is that the taxpayers will get saddled with more debt.

This should be a rallying point of the Sit-in on Wall Street movement!

You are way underwater with the mortgage balance on your home. You’ve tried everything to get a modification from your lender and they’re still claiming they lost the documents. Unfortunately, you can’t modify your mortgage in chapter 13 because the U.S. Senate voted down a bill that would have allowed mortgage modifications in chapter 13. Why? Because the banking industry and Wall Street bribed them with campaign contributions to do so.

So your next best option is sell your home on a short sale. No problem. You hire a real estate agent, they find a buyer and you send all the required paperwork into your lender. Then they want more paperwork or they lost what you already sent and you wait for months – only to lose the buyer or find out that the bank wants an offer for more than your home is worth. So, you let your home go to foreclosure, as you have no other options, and further depress the real estate market, which leads to more homeowners starting the process.

According to research firm Campbell Communications, fewer than 23% of short sale transactions are actually successful. “Three out of four potential short sale transactions fail, principally because the mortgage servicer takes too long to respond to the offer,” said Tom Popik, author of a February survey of real estate agents. “When these same properties are later sold it further depresses real estate prices.”

The fix is easy – force politicans to pass a law allowing judges to modify mortgages as part of a Chapter 13 bankruptcy. 

With this “gun at their heads” banks will suddenly have a change of heart and miraculously stop losing paperwork (that’s really imaged and NEVER lost), and start approving loan modifications and short sales!

But that may never happen as politicians don’t really work for the American people.  They work for Wall Street, too-big-to-fail banks, and businesses in general.

What’s wrong with America?

Think about it – it’s long-term politicians that are more concerned with selling out to the highest bidder to get re-elected than doing what’s right for the American people.

Politicians that vote themselves raises when everyone gets pay cuts.

Politicians that have voted themselves the best healthcare plan for life, no matter how short a period they serve.

Politicians that have voted themselves exemptions from many of the taxes they voted to charge everyone else.

Politicians that are so out of touch with mainstream America that they can’t truly comprehend what Americans are upset about.

There’s an easy fix for all this – term limits for ALL politicians and removal of ALL special perks they’ve given themselves.

This won’t happen overnight so, it won’t your home, but it will save your children from having to go through the pain of this mess.

The news says those involved in the sit-ins need something to focus on to make something happen. Forward this to anyone you know involved. It’s a great place to start.

A quick rundown of the important real estate news from the week of September 17 – September 23, by the numbers:

22.5% – Percentage of homes that are “underwater” according to CoreLogic. That equates to 11 million home owners that owe more than their house is worth.

$10 Million – Listing price for former “American Idol” judge Kara DioGuardi’s Studio City, CA home. The 7,600 square foot home is on 3 and half acres was originally built in the 1920s and recently has undergone a major renovation.

7.7% – Jump in home sales last month according to the National Association of Realtors. On a seasonally adjusted annual rate, 5.03 million homes sold. However, the rise in homes sales were due in no small part to rise in foreclosure related sales, which were up 29% from the previous month.

$168,300 – Median home price for an existing home in August. That price is down 5.1% from the previous year. Despite the fall in median home price, home sales increasing 18.6% for the year .

4.09% – Average rate on a 30-year fixed mortgage this week according to Freddie Mac. The rate stayed the same from the previous week.

70% – Percentage in a recent Trulia survey who still believe that home ownership is part of the American Dream. The same survey also concluded that 80% 0f homeowners plan to buy again and that 59% of renters hope to be a home owner one day.

$17.995 Million – Listed price of the Hamptons estate Jennifer Lopez is in talks to buy. The 14,000 square foot home is on 2 acres and was built in 2009.

Compliments of BiggerPockets Blog
Posted: 18 Sep 2011 06:50 AM PDT

$23.68 Million – Sales price for a 7,700 square foot duplex in Manhattan. The seller, David Chu is the founder of fashion label Nautica and originally had the home listed for $32.8 Million.

4.09% – Average rate on a 30-year fixed mortgage according to Freddie Mac. That is down from last week’s record low of 4.12% and sets a new record low on rates.

7% – Increase in foreclosure fillings in August from July. However, fillings are still down 33% from last year.

33% – Increase in default notices in August from July. “The increase represents a nine-month high and the biggest monthly gain in four years. The spike signals banks are starting to take swifter action against homeowners, nearly a year after processing issues led to a sharp slowdown in foreclosures.”

17% – Net employment outlook in San Antonio. The percentage comes from taking the percentage of employers who are expected to add employees (25%) and subtracting the percentage of employers that plan to reduce their workforce (8%). San Antonio topped Forbes’ “The Best and Worst Cities for Jobs Right Now” survey.

-7% – Net employment outlook in the Bridgeport-Stamford-Norwalk, Conn., area. The area finished at the bottom of Forbes’ “The Best and Worst Cities for Jobs Right Now” survey.

$49,445 – Household income in 2010 according to the Census Bureau. It’s the third year in the row that household income has dropped and is at the same level as it was in 1996 when adjusted for inflation.

101 – Age of Detroit women Texana Hollis who was recently evicted from her home. She lost the home to HUD after her 65 year old son failed to pay any property taxes over the past few years. However, HUD has decided to pay the taxes and give Texana Hollis her home back.

57.8 – Reading on this month’s Thomson Reuters/University of Michigan consumer confidence poll. It rose from last month’s reading of 55.7 and was more than the 57 reading economist had predicted.

Word “slipped” out of Washington last week that the Obama administration is considering allowing homeowners with FNMA, FHLMC & FHA mortgage loans to refinance them at a 4%, 30 year fixed rate. 

Understand, that nothing “slips” out of Washington and this was basically the administration’s attempt to “test market” the idea.  If the feedback was negative, Obama could claim it was never his idea in the first place and never discussed seriously.  If the idea was well received the Obama administration would move to put it into action.  The jury’s still out on how well the idea has been received.  Homeowners obviously love it, academics & economists hate it.  Neither really matters as Obama only wants to know what Wall Street and the Banks think and if the idea will lead to them supporting him for re-election.

What’s Obama’s reason for considering this move at this time?

Purely a re-election ploy of course. 

He could have fostered this same plan back in 2009 when he announced HARP, HAMP and a host of other acronym programs to help underwater homeowners.  He didn’t then because he was riding his popularity wave from just being elected.  Now, his popularity at the polls is at it’s lowest, but more importantly, Wall Street isn’t too keen on supporting him for re-election next year. 

So, first and foremost, this plan is all about increasing public support and thereby “encouraging” Wall Street to back him again.

Analyzing the 4% Refinance Plan

Now that the political truths have been covered, let’s look at the plan itself, who it’ll affect and what ripples it will cause.

Who the Plan Will Help

With mortgage rates in the neighborhood of 4% already (disclaimer: you’ll need to pay points to get down that far at this time) many homeowners already have access to the rate Obama is offering.  Through HARP (Home Affordable Refinance Program), even homeowners with a mortgage balance up to 125% of what there home is worth have access to the 4% rate Obama is peddling.  Of course, Obama the politician never tells anyone about the risk-pricing that comes with HARP.  Meaning that if you owe more than 100% of what your home is worth and want to refinance to lower your interest rate & payment, you’ll have to pay a either a higher rate or higher fees than the rest of the market.  Don’t you like how they always leave that part out?  Shouldn’t Obama have to follow Truth-in-Lending disclosure statutes like everyone else? 

So who is this plan really going to help?  The homeowners that don’t qualify for HARP.  These are homeowners that owe more than 125% of their home’s current value, or can’t qualify for a refinance due to credit, income or liquid asset issues.  The question is, which of these will the Obama plan address? 

The easiest roadblock to refinancing to address is the appraisal issue.  Allowing an upside homeowner, that’s still got good credit and income, to refinance will cause the least amount of negative backlash from academics and economists.  We made this point several times when HARP was first announced.  FNMA & FHLMC were by that time taken over by the federal government, so the government really owned their mortgages.  The government has always insured FHA mortgage and owned VA mortgages and guess what?  Both FHA & VA allow homeowners to refinance without having to get a new appraisal – which means it doesn’t matter how upside down a homeowner is, they can still refinance.  Why Obama introduced HARP and only allowed homeowners owing up to 125% to be eligible is still a mystery that makes no logical sense.  It must mean then it was done for political reasons.

I don’t think the plan will allow those with significant credit issues to refinance.  The backlash would be quite large if people that weren’t paying their bills were allowed access to this plan.  The cutoff for qualifying would be ths same as it is now – around a 660 FICO score.  A better option for homeowners with credit issues would be a HAMP (Home Affordable Modification Program) loan modification.  Don’t get us started on the realistic chances of actually getting a loan modification under HAMP.  Read our other posts about that.

Allowing homeowners with good credit, but unable to prove enough income to qualify for the plan sounds like a logical idea – if they’re making their payments, they must have income somewhere.  The problem is the new Dodd-Frank statutes make it very difficult for a lender to give a borrower a loan they don’t demonstrate the income to qualify for.  But, hey this is Obama’s idea and he’s never let laws stop him from doing what he wants before!  Of course, the same can be said of many past Presidents also – another topic for another day.

Homeowners without the liquid assets to pay for closing costs are the last problem-children to discuss.  Many are living paycheck to paycheck and would welcome the extra savings per month a refinance could offer.  They could be allowed to roll the costs into their new mortgage, making them even further upside down.  Never underestimate the greed of some banks and lenders when it comes to refinance generated revenue.  A cap on the amount that could be rolled would have to be put in place to allow these homeowners to participate.  Even then, a few crooks will find a way around the system and screw a few thousand homeowners.

Of course, we can’t ignore that the 4% Obama Refinance Plan will help everyone in the mortgage refinance business by boosting their income for a period of time.  Loan originators, underwriters, mortgage staff, banks, appraisers, title companies, mortgage service providers, etc., will all think it’s the “good ol’ days” again in the mortgage biz.

Who the Plan Will Hurt

The winners were fairly obvious, but there will also be losers. 

The biggest will be those holding the current mortgages and getting the interest from them.  They’ll lose money every time a homeowner pays off a mortgage with a rate higher than the Obama 4%.  Who are these people & entities?  Banks, Wall Street investors, retirement funds, insurance funds, and oh, wait – our own federal government!

Huh?  How can Obama’s 4% Refinance Plan hurt the federal government?  Well, remember TARP and its sister bailout programs?  Our own wonderful Mr. Ben Bernanke & his Federal Reserve empire now owns around $900 billion of Mortgaged Backed Securities (MBS).  On top of that, remember above that we mentioned the federal government now owns FNMA & FHLMC, the biggest issuers of MBS?  They own almost $1.5 trillion worth of MBS they never sold off to investors. 

This is actually a very important matter.  Think of it this way, the federal government is receiving the interest from the $2.4 trillion in mortgages mentioned above.  Most of these mortgage have rates over 4.5%.  Compare this interest income to the interest rates the federal government is paying to borrower - the rates on the 30 year bond and 10 year T-Bills.  As of the writing of this article the 30 year bond was trading under 3.5% and the 10 year was around 2%.  What this means is that our government is borrowering at a lower rate than it’s receiving on the MBS it owns and this moey is helping our budget deficit.  Allowing the entire $2.4 trillion portfolio to refinance to a lower rate of 4%, will increase the federal deficit. 

Bet you didn’t see that coming!

Wall Street and institutional investors will experience losses in the same way explained above for our federal government.  For those who think it’s all fine and dandy to screw Wall Street and the Too-Big-Too-Fail Banks that caused the housing crisis (by the way, we’d like to see some of them in jail), don’t think it won’t hurt homeowners also.  Wall Street & Banks will lay workers off, cut interest rates they pay on deposits even more and homeowner retirement plans will have lower annual returns.  These are just a couple of the ripple effects.

The Economic of the Plan – Is it a Good Idea?

What a loaded question!  The Obama 4% Refinance Plan will be good for some, bad for others as briefly outlined above. 

Evaluating the plan should depend on comparing who it helps and who it hurts, along with what the overall effect on the economy will be.

Boiling it down the plan will put more money in the hands of homeowners – many who are struggling with unemployment, underemployment, high debt and are just hanging on.  Any benefit to homeowners will come at a cost to the federal government, Wall Street, institutional investors and the retirement plans of the those same homeowners. 

Will any of this improve the country’s employment issues?

How many homeowners will the plan save from foreclosure?

What effect will the plan have on growing the economy?

The answers are beyond our expertise.

Below is another article about homeowners getting scammed by so called “loan modification experts”.

We do our best to warn clients about the uncertain nature of loan modifications, especially about the possibility of being scammed.

We’re approached all the time with solicitations to refer our clients for loan modifications.  Extremely few of these companies are on the up-and-up.  Most start out with promises of how much they’ll pay us and how high their success rates are.  When we start asking questions about the average percentage payments are reduced by, a copy of their process flow, or ask to speak with a past client they gave a refund to, the conversation ends quickly.

We really don’t like some of the sales pitches of the 3 companies we feel comfortable referring clients to.  They’re run by honest people we’ve thoroughly checked out, but we think they should be more conservative when selling their services.

The bottom line unfortunately, is that desperate people will do desperate things – especially to stay in their homes.

We cannot recommend strongly enough to proceed with caution when hiring someone to handle your loan modification.  Large amounts upfront are a no-no.  Many states actually have laws against charging large upfront fees now, for a service that has yet to be successfully performed.  Paying a nominal amount upfront for a consultation, followed by a monthly fee while your loan modification is worked on, is acceptable.  The large success fee should only come after your loan modification is past all trial periods and finalized.

FULL DISCLOSURE - we charge a nonrefundable, upfront consulting fee of $500 to discuss and educate our clients about their loan modification.  We do NOT handle loan modifications, provide any other loan modification service or promise any success.  Our fee is to purely cover our time and expertise.

Long Island Judge Orders Shutdown of Loan Mod Firm

NationalMortgageNews

Justice John M. Galasso of the Nassau County Supreme Court in Long Island, N.Y. has issued a sweeping order shutting down one of New York’s largest mortgage scam operations pending trial. The order has been billed as one of the most substantial victories to date in a year-long legal campaign against “loan modification scams” in New York and nationwide. The court order ceases the operations of Homesafe America Inc. and its successor corporation, United Solutions Law Firm, which are alleged to have scammed more than 1,000 low- and middle-income homeowners by falsely promising to help customers modify the terms of their mortgages.

Judge Galasso’s order also prevents Homesafe’s two founders, Guy Samuel and Scott Schreiber, from engaging in mortgage-assistance relief services.

The case, Mook v. Homesafe America Inc., began on June 28, 2011, when a group of 15 homeowners sued the companies and nearly two dozen employees for fraud, deceptive practices, false advertising, and various other claims. The original complaint stated “with the help of fast-talking salespeople and masterfully deceptive websites, the operation specifically targets lower- and middle-income families desperate for a solution to their financial troubles.” Among their demands, the victims are seeking $1.5 million in punitive damages and an order permanently preventing all defendants from working in the mortgage assistance industry. The homeowners are being represented free of charge by the Lawyers’ Committee for Civil Rights Under Law and Davis Polk & Wardwell LLP.

Attorneys for the homeowners recently unearthed documents indicating that Samuel and Schreiber operated a string of companies that affected thousands of homeowners. On July 26, 2011, Justice Galasso ordered Defendants to turn over nearly 70,000 pages of customer files, which the Lawyers’ Committee and Davis Polk are currently reviewing to determine the breadth of the operation. These materials supplement documents discovered earlier this summer in which Samuel admitted to running an “illegal” operation that grossed more that $2 million in 2010.

“We are committed to fighting this scourge through lawsuits like this and through coordination with and assistance to federal, state and local law enforcement,” said Lawyers’ Committee Chief Counsel and Senior Deputy Director Jon Greenbaum.

Among other claims, the plaintiffs are alleging that the scam companies violated a New York statute known as the “Deceptive Practices Act,” which empowers injured consumers to operate as “private attorneys general:” under the Act, an individual victim may seek an injunction against an alleged scammer on behalf of all consumers. Using this forceful yet rarely used remedy, non-profit organizations like the Lawyers’ Committee, in partnership with the private bar, can step in and shut down scam operations when state and local enforcement agencies lack the resources to do so.00

3.5% – Decline in July existing home sales from the previous month. The decline puts existing homes sales at 4.67 million on a seasonally adjusted basis, down from 4.84 million in June according the National Association of Realtors. The number was well below the consensus prediction of 4.9 million sales.

7.8% – Rise in multifamily housing starts, to 179,000 units. Conversely, home starts are down 1.5% for July, to a seasonally adjusted rate of 640,000 units. “The rise in multifamily units reflects an underlying trend in which rentals are increasing while the national home ownership rate declines.”

4.15% – Average rate on a 30-year fixed mortgage this week according to Freddie Mac. It’s the lowest rate on record, dipping lower than the 4.17% rate record set in November of 2010. Last week, the average rate was at 4.32%.

$80,000 – Median home price in Hunter’s Creek Florida. With a median family income of $87,801, Hunter’s Creek tops CNNMoney’s list of “Where Homes are Affordable.”

$367,660 – Median family income in Great Falls, Virginia, topping CNNMoney’s list of “Top-Earning Towns.” The small affluent Virginia town boasts a population of only 8,757 and a median home price of $1,090,000.

$11.2 Billion – Amount U.S. Department of Agriculture has to lend over the next two months for its no-down payment rural development loan program. “Founded in 1949 to spur home sales and development in rural areas, the U.S. Department of Agriculture’s popular direct and guaranteed rural housing loans are one of the few places in America you can still get a mortgage with no money down at competitive rates.”

-30.7 – The Philadelphia Federal Reserve Bank’s August index reading. It’s at the lowest level since March 2009 and down significantly from July’s 3.2 reading. “A reading below zero indicates a contraction in the region’s manufacturing.”

95% – Percentage refinancing with fixed-rate loans during the second quarter of 2011 according to Freddie Mac.

Think you’ve got problems dealing with your “too big to fail” bank for a loan modification or short sale?  The maze of hoops they make you jump through a little frustrating?

Big banks are ruining peoples lives in other ways.

As the MSNBC article below discloses, Chase Bank has the power to “kill” a client faster than they can foreclose on one.  Undoing a mistaken “kill” though, doesn’t seem to be a priority to the “too big to fail”  bank.

Why all these issues?

Only one answer needed – greed.

Organizations grow to make more money.  It seems the bigger they get, tow things happen:

1. Executive management falls out of touch with what’s actually happening at the lower levels of the organization.
2. Executive management focuses more on profits/greed than building an organization that cares about its customers and does the “right thing” when necessary.

Just like Chase recently settled with members of the armed services they illegally foreclosed on, they’ll settle on the two cases mentioned below.  It won’t mean a thing to the executive management team though.  They’ll chalk it up to the cost of doing business rather than seeing, understanding, caring and finally addressing the issues as human beings.

Wrenella Pierre spent months trying to convince her bank she was not dead. Now, eight months later, bank executives say they’re looking into it.

Pierre has sued JPMorgan Chase, saying the bank has ruined her credit rating and hindered her ability to refinance her home, the Orlando Sentinel reports. She and her husband built a home in Oviedo, Fla., in 2007 and had two mortgages totaling $460,000 from Chase. When the value of her home declined, she tried to modify her mortgage. Later, she found out why she was unsuccessful.

Chase had reported her dead to several different credit agencies.

On Nov. 2, 2010, Chase sent Pierre’s family a letter of condolence and promised that they would be contacted within 30 to 60 days by one of the bank’s employees “who specialize in deceased care matters” to discuss “any outstanding balances.”

Pierre went to the bank to let them know, in person, that she was still alive, but a month later credit-reporting agencies were still reporting that she was dead.

“I think that this goes further than crappy records,” Billy Howard, Pierre’s lawyer, told msnbc.com. “They’re just worried about making money.”

Howard, who works with the Morgan and Morgan law firm in Tampa, said bank debt collectors increasingly pursue family members to try to make them pay the deceased’s debts.

Nancy Norris, a spokeswoman for JPMorgan Chase, declined to discuss details but told the Orlando Sentinel the bank was looking into the case.

“We’re investigating how it happened,” she said.

Last week msnbc.com reported that a Chase customer had been arrested and jailed for four nights after trying to cash a Chase cashier check at a Chase branch in Auburn, Wash.

The bank has apologized and settled with the customer in that case.