California has been one of the hardest hit states by the mortgage crisis. California has the second highest foreclosure rate in October with 85,420 California properties receiving a foreclosure notice which represents a 1 per cent improvement from September.
Nationwide foreclosure filings have dropped by 3 percent in October, a slight improvement but still 19 percent higher than last year.
This has caused a financial crisis devastating families and whole communities. The thousands of troubled homeowners could have some extra help going their way. New legislation is being proposed by a Democratic candidate for state attorney general.
The plan is backed by Assemblyman Pedro Nava, who wants to allow homeowners who have been served a foreclosure notice the chance of employing a state appointed monitor to help them lower their monthly payments.
When preparing for the bill, the Assembly Banking and Finance Committee headed by Nava heard testimony about loan modifications and the housing crisis as a whole. The results indicated that loan modifications have been ineffective and the families benefiting from them are very few.
One of the principle features of the Assembly Bill 1588, the loan modification under study, is that lenders would not be able to foreclose on homes that were undergoing loan modification procedures.
Nevada, which has the highest rate of foreclosure notices in the U.S, worked through a similar program to that proposed in California and the bill was enacted in May.
Barabara Buckley, Nevada Assembly Speaker gave her testimony in Sacramento, California when providing information on the results reaped by the program in Nevada: “Our program in Nevada has shown initial success in stemming foreclosures. While I understand the obstacles California faces as a non-judicial foreclosure state, I look forward to working with the California Legislature to find ways that a similar program could be implemented”, she commented.
Nevada’s results although far from a quick fix are encouraging. In just one month 3,330 homeowners have requested mediation, 1514 were processed, 888 cases assigned to mediators and 106 completed in that same month.
It is hard to see how this bill will help with the larger problem of homeowners that have good loans but are unemployed so any mortgage payment is too expensive. However if the only feature that is kept of this bill is that lenders can’t continue with foreclosure measures during the loan modification it will provide a much needed respite to troubled homeowners who just want a chance to pay their mortgage at an affordable rate.
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Over the past few years the real estate industry has gotten a somewhat unsavory reputation. Being in the industry myself, I’m biased to tell you that most real estate professionals are high quality, upstanding “business citizens.” However, as with any big purchase or transaction, smart consumers do research independent of people who stand to benefit in some way. Here’s some tips on ways to protect yourself and identify some potential problems from the start as opposed to looking back after getting shafted and thinking “If only I would have checked that!”
Check to be sure the company you’re working with is in the Better Business Bureau.
Visit the Better Business Bureau’s website and go with a company that is listed. This really should be standard practice when you’re considering making any larger purchase. The BBB is a clearinghouse of any negative feedback and in my experience it’s generally extremely accurate. The only warning here is not to let a single, irate complaint hold too much value as it could be a competitor or crazy-ish person but definitely take repeated negative feedback into account.
Call your state Real Estate Commission or Department of Real Estate.
Mortgage companies and the loan officer you were work with generally are required to have a license to broker your mortgage. It would take a pretty brash person to do so without such a license but stranger things have surely happened. I’d recommend taking a moment to Google “Your State” Real Estate Commission and calling to inquire about any possible violations or complaints filed against the company you’re planning to work with.
Ask the company if they’re properly bonded and insured.
You probably here the phrase “bonded and insured” all of the time but do you really know what it means? Bonded refers to the fact that the business holds a surety bond. In the case of a mortgage broker, ask if they have a mortgage broker surety bond. If your broker looks at you puzzled and can’t answer the question, it’s probably best to head down the road to your second choice. Insurance refers to the fact that the broker has errors and omissions insurance that will protect you should they make some sort of error (kind of self explanatory!).
The moral of the story is to be a smart consumer and don’t take anyone’s claims at face value. That’s what got us into this mess! At every point in the mortgage process, take a step back and spend a few moments verifying what you’re doing and doing a bit of quick research online. Good luck and happy home buying!
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It has been a surprise to see the number of comments on this blog that have revolved around the issue of ethics in mortgages and loan modifications. A pleasant surprise, but a surprise nonetheless. It is the single most popular controversy.
Are easy roll-over Bankruptcies morally wrong?
When should someone default on their mortgage payments if he is unemployed and with an underwater mortgage but still has cash in his bank account?
How easy should banks make it for clients to get loan modifications, or how “troubled” should homeowners be before they “deserve” them?
And, finally, what is probably the queen of controversy in the mortgage world. Should the government bailout homeowners that can’t afford their mortgage or simply let the natural market forces do their job?
I doubt any two people would agree on all those issues which is what makes ethics and mortgages such a controversial issue. What makes it even closer to the heart of all of us is that mortgages deal with homes, a basic need for our families and symbol of our identity.
Benjamin, from the http://thephoenixrealestateguide.com for example, commented that mortgages are simple contracts and that much of the ethical issues built around mortgages and bankruptcy exist only in our minds. The comment was a reply to a rather angry man that disagreed with the advice another reader was offering to underwater borrowers to call it a day and strategically foreclose and declare bankruptcy to get a fresh start. This is his comment with some very gentle editing:
It’s hard to argue the ethics of making such a decision. The fact is that when someone buys a home, they enter into a contract. If they pay the mortgage, they get to stay in the nice home. If they don’t pay the mortgage, they lose the house. Those are the rules. The bank agreed to them and the homeowner agreed to them. If everybody agreed to them at the time of purchase, then a strategic foreclosure or default is still playing within the established rules. Morals have nothing to do with it in my opinion. It is black and white. Imagine you rent a movie a movie from redbox. You spend $1 and enter into a contract to rent the movie for a night. You decide to keep it for a week instead. Redbox will charge you for every night you keep it. It was in the contract that you originally agreed to. Walking away is simply a tool in the tool box.I am not sure about the Redbox illustration, it would seem to me that those that are strategically foreclosing a mortgage and then declaring bankruptcy would be more like someone who rents a movie with Redbox never takes it back and cancels the credit card they used, when asked to pay for the rental sells the DVD on the second market and gives whatever he gets to Redbox.
Nevertheless the point is in my opinion well made. If foreclosure is an agreed consequence to not paying your mortgage then there is no moral issue. The bank knew it was a possibility when it agreed to provide the loan. I think most people would agree with that.
However the issue, as I see it is more to do with the effects of bankruptcies caused by foreclosures on unprotected (i.e. with no collateral) loans, and if this is fair. Our view of bankruptcies has changed through the years. In the middle ages up to the 18th century prisons were mainly for criminals waiting to be banished or executed and for people who couldn’t pay their debts.
Today we generally don’t feel debtors deserve prison unless they commit fraud. However bankruptcy has kept much of its stigma, associated with dishonest and untrustworthy people. This has changed with time, bankruptcy becoming in many cases a logical financial tool to be used when things go wrong. Some would argue that it has become too easy to “get out” of debt while yet others would point out that current bankruptcy rules are stringent enough to make it a final resort few are happy to enter.
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Loan Modifications have been sold as the way out of this credit mortgage crisis. However delinquencies and repossessed homes are breaking records and are at their highest level since 1972, which is when the Mortgage Bankers Association started to keep records.
This is scary, at the beginning of the year 1 in 10 of American loans was past due or going through a foreclosure. Regardless of the efforts to stop this trend the rates just continue to increase. This surge in delinquencies indicates that a recovery in the housing market could be thwarted by the worsening employing rates and the drying up of the easy-money lending coffers.
On a more positive note, we had to find something; the median home prices do seem to be recuperating. Areas like California, which were hardest hit by the crisis, do seem to inching their way up. Some predict a rise of 9% in California by the end of next year. One reader quite rightly commented I must be crazy to report that. I don’t expect such a rise either but that is what some are forecasting based on current trends. Unfortunately it is likely this is just a local anomaly caused by the special circumstances of California that it many cases can be considered an country on its own, it would after all be the fourth economy in the world if it was separated from the U.S.
All other indicators remain very negative, in the third quarter of this year 14.4% of U.S home loans were foreclosing or 30 days past due, that is 1 in 7, a steep rise from the beginning of the year.
Jay Brinkmann, the mortgage group’s chief economist, is reported by the Los Angeles Times to predict delinquencies will continue to rise after unemployment tops, which according to him will occur in the first or second quarter of 2010. The rule book predicts that foreclosures will continue to rise for two quarters after unemployment peaks, but we don’t get drops in housing prices like those we have experienced in the last year every decade so the rule book will probably be useless. In other words expect foreclosures to continue into the fourth quarter of 2010 and beyond.
What is probably the scariest statistic and we have had plenty of them, is that prime loans, the best loans with the lowest interest rates, represent 33% of all foreclosures. Prime loans mean prime clients with good jobs (or former jobs) and good credit scores (i.e. reliable, conservative clients). When the best clients struggle where does that leave the rest?
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