Foreclosure chaos - who benefits?

Bankrate.com’s Marcie Geffner writes about the pros and cons of the recently announced pause in mortgage foreclosures in many states.

“Recently, several major lenders suspended foreclosures as they review irregularities in legal paperwork. These suspensions could have a significant impact on today's homebuyers and sellers.

“The extent of disruption will depend largely on how long banks hold up foreclosures in the 23 states that require a judicial foreclosure process. During these suspensions, banks will review affidavits that have been challenged.

“If the problems are resolved quickly, the impact may be minor, according to Rick Sharga, senior vice president at RealtyTrac, a national foreclosure-tracking service in Irvine, Calif.”

The slowdown will, in our opinion, be temporary. The result of the banks’ review of foreclosure files will find them to be in order. We’ll then see a surge in foreclosures going to auction in the beginning of 2011.

How does it affect sellers?

“Homeowners in foreclosure who hope to sell may get a "temporary break" before the process moves forward, according to Nick Libert, broker/owner of Exit Strategy Realty in Chicago. That would allow them to live in their home a while longer and potentially close a short sale. Or, they could negotiate a loan modification to avoid foreclosure.”

“Homesellers who aren't in foreclosure also may benefit since banks have taken foreclosed homes off the market and the diminished supply could put upward pressure on prices.”

For buyers,

“Potential homebuyers who previously considered shopping for foreclosures may be scared off by the recent negative news reports. But Libert says there's no reason for buyers to delay their plans as long as they can get clear title to the property and title insurance.”

For everyone, “The bottom line is that affected housing markets are now in a state of heightened uncertainty that presents both risks and opportunities.”

Read the full report.

For your next title order or

if you have questions about what you see here, contact

Stephen M. Flatow, Esq.

Vested Title Inc.

165 Passaic Avenue, Suite 101

Fairfield, NJ 07004

Tel 973-808-6130 - Fax 201-656-4506

E-mail vti@vested.com - www.vested.com

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FDIC floats rules on when they’ll close financial firms

A story by Deborah Solomon in the Wall Street Journal covers an FDIC proposal that will let financial creditors take the hit when a financial firm must be closed “but left wiggle room for the U.S. to make payments to certain types of creditors.”

“The proposal is the first step in the government's effort to clarify how it will seize and dismantle large financial firms that run into trouble. The Federal Deposit Insurance Corp. was given authority to liquidate firms as part of the U.S. effort to prevent another collapse like that of Lehman Brothers, whose demise rippled through the financial sector.”

The FDIC is taking the action at the same time that regulators in other countries are addressing the so-called “too big to fail” firms and banks.

What’s the FDIC considering? As a first step

"it planned to prohibit additional payments to shareholders and long-term debtholders in the event of a firm's demise. The FDIC said it could make additional payments to certain short-term creditors in situations where it maintains "essential operations" or to "minimize losses and maximize recoveries."

The proposed rule has been put out for comment. We’ll keep you posted.

By the way, three more banks recently failed.

Here’s the WSJ story.

For your next title order or

if you have questions about what you see here, contact

Stephen M. Flatow, Esq.

Vested Title Inc.

165 Passaic Avenue, Suite 101

Fairfield, NJ 07004

Tel 973-808-6130 - Fax 201-656-4506

E-mail vti@vested.com - www.vested.com

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Foreclosure properties are not always a bargain

We get a lot of phone calls from potential buyers. They usually go like this, “What can you tell me about buying a property at a foreclosure sale?”  My answer, “Don’t unless you have done it before and you were successful.”

The New York Times ran a story, “Avoid Foreclosure Market Until the Dust Settles” by Ron Lieber. He writes,

“Are you out of your mind to even consider buying a foreclosed property right now?”

He tells the tale of Todd Phelps and Paul Whitehead “thought they had won the lottery” when they bought a property at a foreclosure sale.

“Several days later, however, they realized that what they had really bought was a second mortgage from Wachovia on a house that still had an enormous, unpaid primary loan. In other words, they did not own the home free and clear, and the auction company wouldn’t give back their $137,000 check.”

Admittedly, these homes are “tempting for scores of first-time homebuyers, second-home seekers and people looking to get an early jump on buying a retirement home while prices and interest rates are low.”

Bidding on a foreclosed home does have its pitfalls but it’s a way to get a start in the real estate market. And we have many clients who make a living buying at foreclosure sales, fixing up the property and selling it. Yet, the Phelps and Whitehead story is a cautionary one and you are invited to read the full report here.

For your next title order or

if you have questions about what you see here, contact

Stephen M. Flatow, Esq.

Vested Title Inc.

165 Passaic Avenue, Suite 101

Fairfield, NJ 07004

Tel 973-808-6130 - Fax 201-656-4506

E-mail vti@vested.com - www.vested.com

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FHA has a “Little-Known Loan Program for Fixer-Uppers”

Lynnley Browning writes in the Sunday New York Times about a program through the Federal Housing Administration, FHA, for rehabilitation of “distressed homes or any other fixer-upper not only face the daunting task of turning a run-down property into a livable one, but often worry about paying for it all.”

“There’s a way to make essential repairs and add other accouterments without dipping into savings or taking out a home-equity loan. The Federal Housing Administration’s 203(k) rehabilitation program provides for loans covering renovation costs as well as the purchase price of a primary residence — investors excluded — and it allows for just a 3.5 percent down payment.”

“Although the program has been around since 1978, it is not well publicized, and many borrowers mistakenly think they have to buy a wreck in order to qualify. They don’t.”

“Covered repairs include a new roof or heating system (geothermal ones too). Decorative changes, like replacing vinyl with ceramic tile on the kitchen floor replacement, or painting the interior, are covered.”

The rates are usually a percentage point higher than conventional mortgages and certain aspects of the program can result in “closing costs $1,000 or more higher than average.”
Read the entire report.

For your next title order or

if you have questions about what you see here, contact

Stephen M. Flatow, Esq.

Vested Title Inc.

165 Passaic Avenue, Suite 101

Fairfield, NJ 07004

Tel 973-808-6130 - Fax 201-656-4506

E-mail vti@vested.com - www.vested.com

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Foreclosure freeze may have grim future

The slow-down in foreclosures by several of the big lenders is not all good news. As reported in the Star-Ledger:

“A halt in home foreclosures at the largest mortgage firms may sideline buyers worried about legal issues, further depressing sales at a time when distressed properties account for almost a quarter of all transactions.”

Why? Because doubt on the legal sufficiency of the foreclosures will result in those houses not reaching the real estate market.

“Bank of America Corp., the largest U.S. lender, extended a freeze on foreclosures to all 50 states on Friday as concern spread among federal and state officials that homes are being seized based on faulty data. JPMorgan Chase and Ally Financial Inc.’s GMAC Mortgage unit stopped repossession cases in 23 states where courts supervise home seizures — including New Jersey — amid allegations that employees submitted documents with unverified or false information to speed the process.”

Statistics from around the country demonstrate that foreclosure sales play a major role in the rebound of the real estate market.

"’Our preliminary review of September foreclosure activity doesn’t show any obvious or notable impact," said Rick Sharga, senior vice president of RealtyTrac. The effects may show up in the October data, he said.’”

 On the other hand,

“A reduction in foreclosure sales may result in a short-term boost to the nation’s median home price as buyers shy away from distressed properties, said Thomas Lawler, founder and president of Lawler Housing and Economic Consulting in Leesburg, Va.”

 The halt to pending actions by several lenders means that many property owners are living rent free. That would include those who have made so-called “strategic defaults.” Let’s hope the system straightens out sooner rather than later.

Read the full story.

For your next title order or

if you have questions about what you see here, contact

Stephen M. Flatow, Esq.

Vested Title Inc.

165 Passaic Avenue, Suite 101

Fairfield, NJ 07004

Tel 973-808-6130 - Fax 201-656-4506

E-mail vti@vested.com - www.vested.com

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