Bank of America Gives a Full Release For a Las Vegas Short Sale

BANK OF AMERICA JUST KEEPS ON GIVING

As previously reported in this blog, Bank of America (BAC) will sometimes completely release homeowners from all potential deficiency judgments and all claims resulting from a short sale, but usually only after extensive negotiation.

In February 2010, BAC provided a full release as follows:

Upon receipt of the agreed amount, BAC Home Loans Servicing, LP and/or its investors will waive the remaining balance due on the above referenced loan and release the borrower from further obligations therein, and waive all rights to pursue further judgment or deficiency. BAC Home Loans Servicing, LP will report the debt as “settled” and issue a 1099 for the remaining balance.

It took months of negotiation and a payment to BAC to obtain that release. Individual results may vary!

The bottom line in most short sale situations, is that the lender won’t get its money back from the homeowner- not now, not after foreclosure, not under a new federal bailout, not when the economy recovers, never.

Moreover, rejecting the short sale and instead foreclosing, will cost the lender tens of thousands of dollars; an expensive decision…even for a bank.

BAC knows all that since they have working for them the brightest, and most experienced deficiency judgment experts in the world. When push comes to shove, BAC knows its good business to take the short sale deal; they just want the homeowner to pay and work for it.

For more information on how we can be of service go to Las Vegas Law Firm Short Sale Services For Real Estate Agents and Homeowners

Nevada Housing Prices Are Still Unpredictable

THE EXPERTS ARE FORECASTING LAS VEGAS REAL ESTATE PRICES AGAIN
An outstanding piece regarding the Las Vegas housing market was reported in the Las Vegas Sun here. The Las Vegas Sun article reports that housing prices have stopped their decline.

Another article came out in today’s Wall Street Journal regarding room for cheer in the Las Vegas housing market. The Wall Street Journal Article highlights the difficulty buyers who intend to “occupy” housing are having competing for entry level housing in Las Vegas.

A DIFFERENT VIEW

The data upon which those optimistic articles are based is wrong, and prices in the high-middle and high-end still have a way to drop states a Metro Study Report here.

ANOTHER DIFFERENT VIEW

Let’s put it this way: with 80% of Las Vegas mortgage holders now upside down, the second highest unemployment rate in the nation (13 percent official rate), tourism, gaming and tax receipts in a complete free fall, and foreclosures rising, I see no end in sight (till around 2012 /13) for our local housing collapse states an article in Seeking Alpha here.

Housing prices are a false flag and prices will still continue to fall as 1) credit continues to tighten, 2) unemployment increases, 3) Alt A mortgage resets begin to pick up steam (through 2012), 4) uptick in strategic foreclosures (those who can afford to pay, but still walk away), and 5) banks begin to unload the tens of thousands of foreclosed homes that are being held off the market, states the Seeking Alpha article.

Vegas House Bargains Dry Up

SHORT SALES ARE HEATING UP THE VEGAS MARKET

Las Vegas is one of the foreclosure capitals of the U.S., with about one in four households behind on house payments or in mortgage foreclosure. Yet all three of these shoppers—a professional real-estate investor, a county official with federal funds designated for stabilizing neighborhoods and an installer of security systems who needs a new place to live—are frustrated.

“I thought it would be a heck of a lot easier,” said Mr. Iuso, a renter who wants to buy a home but has been outbid eight times, usually by investors able to pay cash.

Bargain hunters here and in many other metropolitan areas are up against a paradox. By far the biggest wave of foreclosures since the Great Depression was expected to be a bonanza for anyone with cash or the ability to get a loan. But prospective home buyers say it is increasingly difficult to find foreclosed homes at attractive prices in desirable neighborhoods states an article in the Wall Street Journal here.

Supply is shrinking largely because of federal and state efforts to help millions of distressed homeowners avert foreclosure, which have delayed many likely foreclosures, keeping the homes off the market for now.

The bargain chase is even tougher for those buying with a loan. Investors with cash have an advantage in that their offers aren’t conditional on obtaining a loan so banks often prefer selling to them than taking the risk that another offer will fall through. They are also often quick to react when bargains appear.

So while it is still relatively easy to find a home for a few thousand dollars in Detroit, few want to move there. In the more-desirable Orange County, Calif., bidding wars are the norm on foreclosed homes.

Although the percentage of borrowers behind on payments continues to grow, the number of homes lost to foreclosure in California—and thus available for resale—fell 19% in 2009 from a year earlier to 190,360, according to MDA DataQuick, a real-estate data provider. The number of foreclosed homes owned by banks or mortgage investors and available for sale nationwide dwindled to 617,000 in December from a peak of 845,000 in November 2008, estimates Barclays Capital.

To those frustrated by the drop in supply, John Burns, a prominent real-estate consultant based in Irvine, Calif., counsels: “Just be patient. They’re coming.” His firm, John Burns Real Estate Consulting, estimates that five million households, currently behind on mortgage payments, will end up losing their homes, dumping supply on the market over the next few years. In Las Vegas, this “shadow” inventory of pending supply is enough to last 18 months, the firm estimates.

But there is also lots of demand, especially from investors, for those homes. As a result, Mr. Burns says home prices are likely to level out rather than plunge further, assuming that mortgage rates don’t rise sharply and the economy continues recovering. But if mortgage rates do surge and the economy goes into another swoon, he says, there is a “massive risk” of a sharp drop in home prices.

Mr. Iuso, the installer of security systems, isn’t waiting. He is looking for a home priced at $120,000 to $150,000. “There really isn’t much inventory to chase,” Mr. Iuso said. His agent, Bryan Mitchell of Re/Max Associates, says some bank-owned homes have attracted more than 20 offers within days.

Investors have complaints, too. “This market has been kind of saturated” by people looking for deals, says Mr. Griffin, the investor, who bought camouflaged duck-hunting blinds to protect his employees from the wind and sun as they sit through foreclosure auctions held in a parking lot in downtown Las Vegas. More than 50 people show up daily for the auctions, about triple from the year earlier, says Mr. Griffin.

Mr. Griffin represents and advises scores of investors who are trying to buy foreclosures here. Among Mr. Griffin’s regular clients is Rutt Premsrirut.

“Last summer you could make good margins,” said Mr. Premsrirut. At so-called trustee sales of homes in foreclosure cases, he could win with bids at around 70% of the estimated market value. Now, he says, with more bidders, homes are likely to go for 85% to 90% of resale value. After accounting for real-estate commissions, repairs and other costs, that leaves little margin for error.

Also competing with the investors is Mr. Pawlak, head of community-resources management for Clark County, which includes Las Vegas. Mr. Pawlak leads a team charged with spending about $30 million of state and federal money awarded to the county to purchase foreclosed homes.

The federal money comes from the $6 billion Neighborhood Stabilization Program created by Congress in 2008. That program is supposed to help local organizations buy and repair foreclosed homes so they don’t drag down neighborhoods. Those organizations then sell or rent the homes to people with low or moderate incomes.

Mr. Pawlak says he is handicapped in vying with private investors. For one thing, federal rules require that he buy homes at a discount of at least 1% to appraised value. Appraisers are often more cautious than buyers in estimating values. He also can’t make an unconditional offer because the rules require his staff to check for toxic wastes, pests and compliance with building codes, among other things.

“We’re competing against people who say, ‘I’ll take 50 properties, sight unseen,’ and we just can’t do that,” Mr. Pawlak said.

Given strong demand from private buyers, why should the county be in the market at all? Mr. Pawlak says his program tries to ensure homes are occupied by stable owners or renters. Investors, he says, won’t necessarily repair homes thoroughly and find long-term occupants with a stake in the neighborhood.

Las Vegas Short Sales Are On Fire

Selling or Buying a Home With a Loan Under Water

Don’t wait until a foreclosure is imminent to consider a short sale. Many studies show a large number of consumers don’t talk to their lenders because they are embarrassed and worried they might start to foreclose. ”People need to make an objective decision before they run out of time,” says Rob Jenson with RE/MAX Central in Las Vegas.

“It used to take a year to get approval on a short sale,” said Leslie Carver, a real- estate agent in Las Vegas. “Now these deals are getting the green light from banks in a month and approval rates are way up.”

The Greater Las Vegas Association of Realtors announced that in January 21.1% of all home sales were Short Sales. This is a 2% increase over December. Rick Shelton, GLVAR president, called the Short Sale trend “promising” because it accompanied a similar decline in the sale of foreclosed homes.

Increasingly, financially strapped homeowners who owe more than their homes are worth are trying a so-called ”short sale” as an alternative to foreclosure. In a short sale the lender agrees to accept less than the homeowner owes on a mortgage states another article in the New York Times here.

Before 1990, short sales were rare. Last year, the National Association of Realtors estimates there were 500,000 short sales, about 10 percent of all sales. Still, there is a great deal of confusion and misinformation surrounding short sales, particularly regarding credit scores.

A short sale can hurt a borrower’s credit score as badly as a foreclosure, but won’t last as long. The blemish from a short sale depends, in part, on how the lender reports the sale to the credit rating agencies, Experian, Equifax and TransUnion. Occasionally, a lender will agree to report the loan as ”paid,” which according to Experian would not negatively impact credit scores. However, the agency also notes, that doesn’t happen often.

”Short sales are reported as either a charge off or a settlement. Either way they can have a catastrophic effect on credit,” says John Ulzheimer, president of consumer credit counseling at Credit.com.

An individual’s credit score is one factor that determines whether or not they qualify for a loan or a mortgage. Credit scores (often referred to as FICO scores) also determine the interest rate a borrower pays on credit cards as well as any type of a loan.

The good news is that after a short sale, a borrower’s credit score starts to improve within the first 24 months. One benefit of a short sale is that consumers usually can buy another home in two to three years, rather than five to seven as is the case with a foreclosure, states the article in the New York Times.

Normally, borrowers would have to pay a tax on amount the lender forgives since the IRS views this as income. If they meet of IRS description of insolvency at the time the debt is forgiven they are not liable for taxes. Until 2012, the Mortgage Forgiveness Debt Relief Act sellers will not owe taxes on the amount of debt forgiven for their primary residence. Second homes and investment properties do not qualify.

Short Sales Outnumber REO in January Purchases

IT REALLY IS THE YEAR OF THE SHORT SALE
Short sales accounted for 15.9% of home purchases in January, surpassing the share of other distressed property activity, when real estate owned (REO) properties are measured separately, according to a monthly Campbell/Inside Mortgage Finance (IMF) survey of more than 1,500 real estate agents, conducted by Campbell Surveys.

Despite a reputation for being slow and problematic, so-called short sales are quickly becoming the preferred way to dispose of distressed properties in 2010.

According to the latest Campbell/Inside Mortgage Finance Monthly Survey of Real Estate Market Conditions, short sales accounted for a substantial 15.9% of home purchase transactions in January. This was well above the share of other distressed property activity – damaged real estate owned or REO (13.4%) and move-in ready REO (13.8%) – and represented a big jump for short sales.

As recently as November of 2009, short sales accounted for 12.4% of the home purchase market, behind move-in ready REO at 12.6% and nearly even with damaged REO transactions at 12.3%.

Short sales are an effective method of resolving mortgages in default, both for large lenders and for the government agencies supporting lenders’ efforts. Short sales typically result in lower lender losses and houses left in more saleable condition. Moreover, borrowers that agree to a short sale can often buy another house with mortgage financing after only two years. For borrowers going though the foreclosure process, mortgage financing can be unavailable for a period of five to seven years.

Short sale properties are most often purchased by first-time homebuyers, the January survey results revealed. Currently, mortgage servicer approval on offers for short sale properties can take several months, making these transactions difficult for current homeowners who often need to conduct not one, but two, transactions in quick succession. In contrast, first-time homebuyers more often have flexibility around the timing of short sale closings.

“Short sales activity took a temporary dip in November around the expected expiration of the first-time homebuyer tax credit,” reported Thomas Popik, research director for the Campbell/Inside Mortgage Finance survey. “Few first-time homebuyers wanted to take the chance that their short sale transaction wouldn’t be approved by the November 30 deadline. But now that the tax credit has been extended, we see first-time homebuyers once again snapping up attractively priced short sales.”

Survey results showed that short sales typically sell for only 91% of listing price. In contrast, move-in ready REO sells for 99% of listing price, on average.

Obama Tells Vegas’ Homeowners to “Lay Off the Banks”

President Barack Obama will announce today during his visit to Las Vegas a new foreclosure rescue program, pumping $1.5 billion into Nevada and other hard-hit states to help large banks remain solvent reports the Las Vegas Sun in an article here.

A TIGER WOODS’ STYLE APOLOGY TO VEGAS

When asked by one local Vegas reporter about Tiger Wood’s apology, Obama joked, “I think we should take out a nine iron and smash the window out of big government. Vegas gambled and lost and that’s not my fault.”

The program is designed to address FDIC fears that more underwater homeowners will stop making their mortgage payments causing banks to get stuck in the rough. “We are asking that underwater homeowners pay the banks for a few more months before they default, because its the right thing to do”, pleads Obama, “we understand that the Vegas people need money, but so do the big banks.”

OBAMA GIVES VEGAS A MULLIGAN

“We think we got a hole in one, this time around. If anything, the program will give Vegas’ homeowners hope before they inevitably go into default and lose everything,” opined the President.

Homelessness in Las Vegas is straining shelters this winter as the economy founders and joblessness hovers at 13%, a “perfect storm of foreclosures, unemployment and a shortage of affordable housing,” jokes one White House staffer.

Nevada Has Highest Mortgage Delinquency Rate In Country

TRANSUNION PREDICTS 1 IN 5 NEVADA HOUSES WILL DEFAULT IN 2010

TransUnion’s quarterly analysis of trends in the mortgage industry found that mortgage loan delinquency (the ratio of borrowers 60 or more days past due) increased for the 12th straight quarter, hitting an all-time national average high of 6.89 percent for the fourth quarter of 2009. This quarter marks the first time the mortgage delinquency rate increase did not decelerate after doing so for three consecutive periods according to an article in Transunion here.

This statistic, which is traditionally seen as a precursor to foreclosure, increased 10.24 percent from the previous quarter’s 6.25 percent average. Year-over-year, mortgage borrower delinquency is up approximately 50 percent (from 4.58 percent).

Mortgage borrower delinquency rates in the fourth quarter of 2009 continued to be highest in Nevada (16.19 percent) and Florida (14.93 percent), while the lowest mortgage delinquency rates continued to be found in North Dakota (1.84 percent), South Dakota (2.46 percent) and Alaska (2.84 percent). Interestingly, areas showing the largest percentage drop in average mortgage debt were Alaska (-3.5 percent), South Dakota (-1.58 percent) and Nevada (-1.26 percent).

While Nevada had the highest default rate in the nation, it also had the largest average percentage drop in mortgage debt. As more uderwater Nevada homeowners default, brand new homeowners are taking on much less debt- and in many cases buying all cash.

The average national mortgage debt per borrower increased (0.29 percent) to $193,690 from the previous quarter’s $193,121. On a year-over-year basis, the fourth quarter 2009 average represents a 0.47 percent increase over the fourth quarter 2008 average mortgage debt per borrower level of $192,789, which further suggests stabilization in housing prices, traditionally seen as a key ingredient for a sustained economic recovery.

The continuing rise in foreclosures, in conjunction with low consumer confidence in the housing market, continues to hinder housing value appreciation and impede recovery in the mortgage industry. Furthermore, there is wave of adjustable rate mortgages (ARMs) that have yet to reset. Many of these are Option and Alt-A loans. When the interest rates on these loans reset many consumers potentially will not be able to meet their debt obligations.

“With regard to regional forecasts, Nevada is still anticipated to experience the highest mortgage delinquency rate by mid-2010, reaching as high as one in five mortgage borrowers.”

Strategic Foreclosures Test Moralists

Run, Don’t Walk Away From Your Mortgage

I knew that a discussion of strategic foreclosures on The CBS Early Show would invite lots of comments. Maggie Rodriguez and I discussed the trend of people who can afford their mortgage payments, but choose still to walk away, believing that it’s a better long-term financial decision states an article by Jill Schlesinger, on the CBS early show here and another similar article here and the video here.

When you hear that foreclosure filings fell 10% in Jan from Dec, don’t get too excited. RealtyTrac said foreclosure filings rose by 15% in January from a year ago, and there are more than 4 million homes in the foreclosure pipeline, with no sign of abating.

While many of these 4 million homeowners really can’t afford to stay in their homes, there’s an emerging group who are making a strategic decision to walk away from their homes. It’s hard to pinpoint the numbers but lawyers for mortgage companies are reporting increased incidence of strategic foreclosures.

Bankruptcy lawyers say that if homeowners are more than 20% under water, it may make more sense to walk away in order to improve cash flow. In many parts of the country, the monthly nut to carry the loan is often 2-3 times the comparable rent in the neighborhood. Homeowners are making the calculation that losing their down payments may be better than waiting 5-10 years to get their heads above water.

Additionally, many see financial institutions walking away from their obligations in the name of a “smart business decision” and wonder why they shouldn’t do the same thing. That’s what happened with the Tisch Company multi-billion default on Stuyvesant Town in New York.

Moments after appearing, I received an e-mail from a viewer asking about the responsibility of a commitment, which is of course what a mortgage is. He scolded me for presenting “a loss of ethically-based and responsibility-based decisions” that “focus only on making money.” states Ms. Schlesinger.