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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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Relief at the end of the tunnel of debt.

Those of us that have been or are in serious debt understand how horrible it is, the terrible feeling of being trapped by debt with no relief in sight. Debt leads to bad credit which leads to bad loans which further immerse you in debt.

It is like a dark tunnel that slowly chokes you, what is especially sad is that only too often we ourselves are doing the choking.

In fact allow me to illustrate what debt is like with the killing technique of a boa constrictor. This snake is amazing it can kill anything up to the size of an antelope (or a man)  and swallow it whole. Many believe that boas kill their prey by crushing them to death with their powerful muscles. That is untrue, as strong as boas are they cannot crush the ribcage of a large animal. What they do is constrict the ribcage from expanding. They wait for the prey to breath out, lowering the ribcage and then tighten their grip again. This causes the victim to in a way kill itself by breathing out and out, leaving less and less room for the ribcage to rise, eventually dying of lack of oxygen.
Often, with debt something similar occurs, we dig our own grave and jump straight into it. How does this happen? Debt is such a depressing and “choking” situation to be in that we often get into a panic trying to find a way out. We struggle to pay our rent, our mortgage, insurance, failing to pay any of these important bills can lead us to being homeless, lose our home or get in even more debt due to medical bills. On top of this people who are in debt often got there because of an out of control spending habit that doesn’t fix itself just because they are in debt, it continues, causing the person to carry on spending and getting further into debt.

I remember a workmate who was in serious debt, with a wife and a newly born baby, they had lost their home and were living with their parents. Well, he was depressed about his situation but would still use his credit card to buy computer games and on other hobbies. I have nothing against spending money on your hobbies but you might want to start trying to get to the end of the month with food in your fridge before buying the last sequel of worldcraft.
So how can you find relief from the dark tunnel of debt?

Here at Blownmortgage.com we have decided to dedicate a whole section with various blogs to debt relief, we hope it is helpful. This blog will set the tone with a broad overview of some of the steps that can help you stop digging a hole for yourself and start climbing out of it.

1.)    Take control of your spending
2.)    Prepare a budget where you spend less than you make, or as close as possible, and stick to it.
3.)    Look for ways to “improve” your situation by smart debt  management.
4.)    Break the debt cycle

The following articles will elaborate on this rough sketch and hopefully create some light at the end of your personal debt tunnel.

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What poses the greater threat to homeowners during the current mortgage crisis, predatory mortgage modification companies or the costs of hiring an attorney to represent them during the modification or foreclosure process?

According to California Governor Arnold Schwarzenegger, lawyers’ retainers and fees represent the greatest threat to homeowners. Over the weekend he demanded  state legislature include a clause prohibiting attorneys from accepting retainers for performing legal services to prevent foreclosures in SB 64 if they wanted him to sign the bill into California law.

SB 64 is intended to protect homeowners from mortgage modification companies. It seems that preventing homeowners from retaining legal representation to work on their behalf would not constitute protecting the homeowner. Of course, to give the Governor the benefit of the doubt, his intent in demanding the clause may be to assure all homeowners are able to retain counsel whether they can afford it or not.

At issue is whether eliminating retainers or allowing lawyers representing homeowners during the mortgage modification process to receive payment or security deposits upfront will effectively limit their ability to represent their clients. According to Martin Andleman of ML-Implode this is exactly the effect this will have.

“SB 04 will essentially deny homeowners their right to counsel guaranteed by the 5th and 14th Amendments, by making it so that no lawyer would be able to take on such a client,” Andleman explained.

The National Association of consumer Bankruptcy Attorneys (NACBA) agrees, saying “While there have been a very few law firms implicated in loan modification abuses, adequate legal recourse against bad actors in our profession already exists, including disbandment and criminal prosecution for fraud. Because other fly-by-night scammers can pack up and move on to greener pastures on very short notice and don’t have a bar license to lose, it is understandable why consumer advocates would seek protections for consumers against those predators. However, placing blanket retainer restrictions on attorneys whom consumers may need to represent them is an unconscionable effort to interfere with their legal rights.”

The simple fact is, retainers are a standard business practice for attorneys. Retainers assure  lawyers that they will be paid for their services at the time they are rendered, something that is particularly important in situations like mortgage modifications which can take months to resolve or may be over in a matter of weeks.

In addition, the possibility exists that lawyers may not get paid for the work they do on mortgage modifications if they have to wait until the process is complete. Loan modifications are not the solution to every financial problem homeowners encounter. In fact, some homeowners may still end up losing their home to foreclosure or filing for bankruptcy after their mortgage is modified raising serious questions regarding how attorneys would be paid in these circumstances. Also, consumer filing bankruptcy commonly consult attorneys during that process and it makes no sense for consumers not to have the same protections while trying to prevent bankruptcy.

“Homeowners are scared, emotional, unknowledgeable and panicked when at risk of losing their homes,” said Andleman. “For the government to support a position that they should go to their lender alone is criminal. It is the worst abuse of power I’ve seen in my lifetime.”

If consumers do not benefit from the elimination of retainers, the question must be asked: who does? The obvious answer is lenders and mortgage servicers who will be more likely to be dealing directly with homeowners rather than attorneys. This gives lenders a distinct advantage in negotiations. Beyond the favorable terms lenders are likely to insist on before agreeing to modify a mortgage there are also the fees banks will collect. Data collected by the federal government indicates banks will earn $38 billion in fees this year and that’s just from overdraft fees. Imagine what else might be hidden in the fine print.

When you dig a little deeper it becomes obvious that the clause eliminating retainers in SB 94 is just not in the best interest of homeowners. It may even prove to be instrumental in prolonging the current crisis rather than shortening it. As with so much in this crisis it is “buyer beware”.

“The modifications that the loan servicers are offering homeowners, if they will even talk to them, are short term fixes that will leave the homeowners facing foreclosure at a later date,” said Alan Jablonski, a Long Beach, CA based consumer tights attorney and author of “Successfully Navigating the Mortgage Maze”.

Related posts:

1. California trys to deter loan modification and foreclosure rescue scams
2. Bucking the mortgage modification trends
3. More Modification Efforts On The Way

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A study by the Boston Fed has found that the administration’s mortgage rescue plan has failed to provide that all important profit incentive. According to today’s Boston Globe:

Mortgage lenders don’t try to rework most home loans held by borrowers facing foreclosure because it would probably mean losing money.

The Boston Fed’s findings suggest the Obama administration’s major effort to solve the foreclosure crisis by giving the lending industry $75 billion to rewrite delinquent loans to more affordable levels is not likely to work.

One of the study’s coauthors, Boston Fed senior economist Paul S. Willen, said the government would be better off giving the money directly to struggling borrowers to help them with their payments, rather than to lenders that are averse to working out the troubled loans.

“Loan modification is not profitable for lenders,” Willen said. “If it were profitable, they would go out and hire staff.”

Hard to argue with that logic.

Writing at the WSJ, Stan Liebowitz makes a strong case for the idea that now is exactly not the time for the government to be stepping in and fiddling with the markets.

What is really behind the mushrooming rate of mortgage foreclosures since 2007? The evidence from a huge national database containing millions of individual loans strongly suggests that the single most important factor is whether the homeowner has negative equity in a house — that is, the balance of the mortgage is greater than the value of the house. This means that most government policies being discussed to remedy woes in the housing market are misdirected.

The difference in policy implications is enormous: A significant reduction in foreclosures will happen when and only when housing prices stop falling and unemployment stops rising.

(Hat tip to the HousingDoom blog)

Leibowitz is hardly a laissez faire type. He just thinks that the economy would be best served by having government do what it should have been doing all along: Requiring, monitoring and enforcing strong underwriter standards.

We are at a crossroads where we can undo the damage to the housing market by strengthening underwriting standards in a reasonable way. But to do so political leaders must face up to the actual causes of the mortgage crisis, not fictitious causes that fit political agendas and election strategies.

Yeah, I’m not holding my breath on that one.

Constantine von Hoffman is a veteran business journalist and social media consultant. He write the blog CollateralDamage, a satirical look at marketing and business.

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It looks like it going to be a busy year for do-it-yourselfers. A new poll from Consumer Reports reveals that 54 percent of homeowners participating in the poll plan some type of remodeling project during the next 12 months. Sixty-five percent of them plan to do the work themselves.

Now, remodeling is not unknown among homeowners, even during boom times. The recent economic downturn, however, has forced 67 percent of homeowners to rethink their plans. The biggest changes to remodeling plans include:

• Doing the work themselves – 42 percent
• Fixing or sprucing up what they already have – 39 percent
• Remodeling in phases – 36 percent

According to the Consumer Reports poll, the most popular types of work include painting (56 percent), designing (39 percent) and flooring (34 percent). The most popular remodeling projects are kitchens (19 percent) and bathrooms (17 percent).

“Whether homeowners are venturing into a project themselves or plan to hire a professional, you need to lay out a budget, decide what you want most at the end of the project — and decide what you can live without,” advises Bob Markovich, senior home editor at Consumer Reports. “The more homeowners know what they’re getting into, the more money they’ll save.”

Remodeling funds come from a variety of places. Most homeowners, 66 percent, support their projects with their savings. Others, 29 percent, plan to cut back on travel and entertainment while another 21 percent are using a home equity or other loan.

The biggest reason consumers are cutting back on remodeling is that they simply do not have the money, according to 42 percent of respondents. Many homeowners, right now, are focused on paying, modifying or refinancing their mortgage rather than remodeling. There are homebuyers out there, like Chad and Brittany Johnson in Ohio, who purchase a foreclosure home for far less than market price and immediately remodel it.

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On July 1, 2009, U.S. Housing and Urban Development (HUD) Secretary Shaun Donovan announced an expansion of the Making Home Affordable Refinance Program to include borrowers who are current but up to 125 percent underwater on their mortgage. The announcement was made while the Secretary toured a Las Vegas neighborhood with Senate Majority Leader Harry Reid (D-NV) and Congresswoman Dina Titus.

“This decision is part of our ongoing efforts to maximize the effectiveness of the Making Home Affordable program and adapt to an ever-changing housing market,” said Treasury Secretary Tim Geither. “By expanding refinance eligibility, we can bring relief to more struggling homeowners more quickly. It’s a crucial step in our broader efforts to get America’s housing market and economy on the path to recovery.”

Las Vegas is the ground zero of the foreclosure crisis. Not only does the area lead the nation in foreclosures, more than two-thirds of current mortgage holders in the market have mortgages higher than their property is currently worth. Prior to the announced expansion, only those borrowers whose first mortgage did not exceed 105 percent of the current market value of their property were eligible for the program.

Donovan also announced plans to deploy HUD Foreclosure Rapid Response Teams to assess the area hardest hit by foreclosure, starting in Las Vegas. The Las Vegas team will consist of two-senior-level HUD Field staff having experience in Single Family Housing and community outreach. Over they next two weeks these team members will be determining the need in Nevada and surrounding areas. HUD will commit two full-time employees to implement the Foreclosure Rapid Response Team’s recommendations.

Additionally, HUD plans to deploy two Fair Housing equal opportunity specialists to the Las Vegas HUD office. HUD receive about 100 housing discrimination complaints annually from Nevada residents, more than double what was received in 2005.  The Fair Housing specialists will conduct local outreach and education as well as receiving discrimination complaints and conducting investigations. With a local presence, HUD’s Fair Housing & Equal Opportunity office should make it easier for Nevada Residents to obtain justice and relief , to educate housing consumers about predatory lending and to conduct program compliance and monitoring in more than 3,000 public housing units and over 8,500 Section 8 Vouchers.

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“The economy is based on trust,” said Dean Johnson, associate professor of finance at Michigan Technological University in Houghton, Michigan.

In situations like the recent housing bubble, or even the stock market collapse of 1929, where markets were driven by debt and fueled by the false expectation that values can only increase, trust can be a very fragile thing.

“One little blip and everything started to unwind,” Johnson said. “The particulars are different, but the basics are familiar.”

Trust, however, seems to be coming back, according to Johnson. If people are cautious and not spending money, the government and financial industry must take action to encourage capital liquidity. During the first half of 2009, this is exactly what they have been doing. And if the effects have not been as immediate as some would like and others needed, at least their efforts are beginning to take effect.

Why does Johnson believe trust is returning? He points to the Volatility Index, or VIX, which measures investors’ expectations of how volatile the stock markets will be. The VIX reached all-time highs in 2008.

“People think of it as the fear gauge,” Johson explained. “it’s encouraging that the VIX, though still high be historical standards, is down about 60 percent from what it was at its peak in November.”

Other, more recent, signs that trust is being rebuilt in the American housing/real estate markets and the financial industry include:

• USA Today reports that while the construction market remains weak the housing market may be improving slightly. Residential construction reportedly dropped to the lowest level since December 1995. Pending homes sales increased slightly in May, according to the National Association of Realtors (NAR).
• Proposed legislation to create a Consumer Financial Protection Agency is making progress at the federal level, according to the Washington Post. The Post reports that the Treasury Department’s proposal for a new federal agency to consolidate the plethora of state and federal regulators responsible for overseeing the lending industry arrived on Capitol Hill on Tuesday.
• At the end of June, Fannie Mae, which is still under the conservatorship of the federal government, reported its mortgage portfolio grew at a compound annual rate of more than 35 percent in May. A report from Dow Jones appearing in the Wall Street Journal indicates a large jump in the issuing of mortgage-backed securities offset continued rises in single-family and multi-family mortgage delinquencies.

Notes of caution, however, are also being heard. Yale University economist and co-founder of the S&P/Case-Schiller home-price index, Robert Schiller told Bloomberg: “At this point, people are thinking the fall is over. The market is predicting the declines are over.” At the same time he is “not optimistic that we’re going to see any sharp rebound.”

Johnson agrees with Schiller.

“It’s still a risky market,” Johnson stresses. “This is the first time in history that you’ve been better off if you’d put your money under a mattress 10 years ago. But hopefully, this indicates that the financial markets are returning to normal.”

Of course this doesn’t mean the housing market or the financial industry will be returning to the halcyon days of pre-mortgage crisis days anytime soon. It doesn’t matter how badly investors, bankers, consumers, lenders, the government or the world at large want it.

“There’s no easy fix,” Johnson concluded. “We have to take our medicine. It took 20 years to create the over-leverage and it will take time to undo that.”

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“Local reports indicate that homelessness is on the rise and this report [Foreclosure to Homelessness] gives us insight into the role that foreclosures may be having on that increase,” said Nan Roman, president of the National Alliance to End Homelessness.

The Foreclosure to Homelessness: The Forgotten Victims of the Foreclosure Crisis report released last week provides insight into how foreclosures have affected homeless populations around the country. Based on surveys completed by 178 organizations across the U.S. that provide services to individuals and families experiencing  homelessness it was determined that the nation’s homeless population has been directly impacted by foreclosure and that the is likely to increase along with the number of foreclosures.  Nearly 80 percent of the respondents reported that at least some of their clients became homeless due to foreclosure. The leading self-reported reasons for homelessness, however, remain financial obstacles like job loss, addiction and evictions, according to additional information gathered by the Alliance to End Homelessness.

“The results of this survey make clear that foreclosures are a major factor in the increase of homelessness in the United States,” National Low Income Housing Coalition (NLIHC) President Shelia Crowley said.

Conducted earlier this year between January 15 and February 21, the data collected by the survey reflects the previous 12-month period. Other key findings include:

• Housing providers (including emergency, transitional and permanent housing) estimated that 5 percent of their clients experienced homelessness as a result of foreclosure compared to 10 percent of all respondents.

• 34 percent of responding organizations indicated none of their clients were homeless as a result of foreclosure however 14 percent of those surveyed estimated that most of their clients were homeless due to foreclosure.

• Those experiencing homelessness due to foreclosure tended to be renters – not owners.

• Most of those facing homelessness because of foreclosure, whether renters or owners, did not seek legal advice in foreclosure proceedings.

• The most common living situations among those made homeless by foreclosure included staying with family or friends and emergency shelters.

“We’re grateful that since the time this data was collected, federal actions have provided communities with resources to prevent and end homelessness, in the form of stimulus dollars and renter protections.”

The 40-page report was released by the Alliance along with the National Coalition for Homelessness, the National Health Care for the Homeless Council (NHCHC), the National Association for the Education of Homeless Children and Youth (NAEHC), the National Law Center on Homelessness and Poverty (NLCHP), the National Low Income Housing Coalition (NLIHC) and the National Policy and Advocacy Council on Homelessness (NPACH).

Another study, Renters in Crisis by Shelia Crowley and Danilo Pelletiere of the National Low Income Housing Coalition and Maria Foscarinis of the National Law Center on Homelessness & Poverty, that is also cited in the Foreclosure to Homelessness report, revealed the following facts regarding renters and foreclosures:

• In 2008, one of every five properties in foreclosure were rental properties. Many had multiple units.

• An estimated 40 percent of families facing eviction due to foreclosure are renters.

• Seven million households living on very low incomes (31 to 50 percent of the Area Median Income) are at risk of foreclosure.

Renters received important new federal protections when President Obama signed the Helping Families Keep Their Homes Act in May 2009. The Act states that tenants must be given at least 90 days notice to vacate once a property has been foreclosed on and have the right to occupy the premises until the end of any term entered into under a bona fide lease agreement made prior to the notice of foreclosure is given unless the property will become the owner’s primary residence. Further, the Act protects renters receiving Section 8 assistance by preventing eviction during the term of their lease just so the new owner can sell the property. These and other provisions, while helpful, will not completely solve the problems renters and tenants face during foreclosure.

To assist tenants facing foreclosure, NLIHC has teamed up with the National Housing Law Project (NHLP) to create a toolkit for renters facing eviction due to foreclosure. The toolkit, which is available on the NLIHC website, includes a copy of the law, a one page explanation of its provisions, a question and answer document for tenants, sample letters to send to landlords, judges and public housing agencies and a webinar explaining the new law.

“Under the law, these blameless victims of the foreclosure crisis are now protected,” said Crowley. “The toolkit provides tenants and their advocates with the information necessary to protect families from being evicted unlawfully.”

Some activists and advocates for the homeless have promoted the idea of moving homeless families and individuals into empty properties that are in foreclosure. In April 2009, Real Estate Pro Articles detailed some of the efforts to allow homeless persons to occupy vacant homes occurring around the country.  The New York Times also explored this issue back in February 2009. Since April, however, stories about this alternative have largely vanished from media and the blogoshpere although the release of this new report may revitalize interest.

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