May 22, 2013

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Finally! The Extension to the Mortgage Forgiveness Debt Relief Act

January 2, 2013 By Leave a Comment

mortgage debt relief act extensionMany of the members of the Financial Revival Group have been waiting for this extension to happen and know what it is about.  As we have been discussing in our Member Emails and in our Monthly Members Only Meetings, we fully expected this extension to take place.  We even expressed to you that we thought it would simply be an add-on to the fiscal cliff bill, which indeed it was.

It is official.  The Mortgage Forgiveness Debt Relief Act has been extended through the end of 2013. 

We still have more to do because we think this bill should have been extended for three years, not just one.  However, with all of the lobbying that went on from many different groups, we don’t believe that further extensions of this bill will be an issue. 

Now, for the benefit of our readers who are not members of the Financial Revival Group and don’t know what this act is about, here is a quick explanation.

If you owe a debt and that debt is forgiven, you have received a financial benefit from that transaction.  When the creditor finally gives up or settles the debt for less than is owed and stops further action to collect the debt, they have officially taken a loss.  The IRS says that since you actually received the money and didn’t fully pay it back, you received a “gift” from that creditor and that “gift” amount is taxable as normal income. 

In the past, we saw this mostly with credit card companies and other uncollectable debts.  If you settled a $20,000 credit card debt for $8,000 you and the IRS would receive a form 1099 for $12,000.  (The IRS gets a copy to make sure you include with your next tax return)  You would have to pay income tax on that $12,000.  If you were in a 15% tax bracket, your tax bill the following year would increase by $1,800.  Not a bad trade by most standards. 

With the continuing housing collapse, we are seeing this same event in real estate but with much larger numbers.  So to help out underwater homeowners, the Bush Administration passed the Mortgage Forgiveness Debt Relief Act in 2007 that says that if your bank suffers a loss on your house, in certain cases, you would be exempt from the tax.  This law expired at the end of 2010 but was extended through the end of 2012 by the Obama Administration.  Now the bill has been extended again through the end of 2013.

This law applies to you if:

  1. Your bank takes a loss on your house as a result of a foreclosure, deed in lieu of foreclosure, short sale, loan modification or principle reduction.
  2. The event is completed by the end of 2013.  That means your foreclosure, short sale etc. has to be finalized by the end of the year. 
  3. The property is your primary residence.
  4. The money forgiven was used to buy, build or substantially improve the property.
  5. The forgiven amount is less than $2 Million.  Hey, movie stars and basketball players need a break too.

 So, if you have been waiting for the extension of this bill to make a move on your underwater house, now is the time.  Nothing is quick in this process, no matter which way you decide to go.  The first thing you need to do is to find out what all of your options look like and how they will affect you moving forward. 

If you or someone you know wants to find out about every option you have available, you can start with a free 15 minute consultation with the Financial Revival Group.  This free, no obligation phone call will help you get your immediate questions answered and put you on the right track based on your particular situation.  Call us at 425-259-2600 to schedule your consultation or CLICK HERE to email us. 

Filed Under: Featured, Housing, Life After Foreclosure Tagged With: , , , , , , , , , , , , , , , , , , , , , ,

While Much of America Suffers with Stagnation, Washington’s Political Class Is Having a Very Merry Christmas

December 27, 2012 By 1 Comment

This post is reprinted in full.  It is written by Dan Mitchell and published on his site.  It speaks to the Politbureau class that our politicians have created for themselves and the people that work for and support them.  We cannot afford these people anymore.  We have to change the rules and rid ourselves of these parasites.  That is my commentary on the situation.  We would like to hear your comments. 

 

While Much of America Suffers with Stagnation, Washington’s Political Class Is Having a Very Merry Christmas

In large part because of an excessive burden of government, the American economy is suffering European-style stagnation, with even the Washington Post now confessing that growth far below the long-run trend.

This helps explain why job creation has been so dismal in recent years, with more than twenty million Americans out of work, underemployed, or dropped out of the workforce.

But there is one pocket of enormous prosperity in America. It will warm your heart to know that our overlords in Washington are living the life of Riley.

Here are some of the highlights of a remarkable Reuters expose about the fat cats of big government, starting with the huge gap between the insider elite and the poor.

In the town that launched the War on Poverty 48 years ago, the poor are getting poorer despite the government’s help. And the rich are getting richer because of it. The top 5 percent of households in Washington, D.C., made more than $500,000 on average last year, while the bottom 20 percent earned less than $9,500 – a ratio of 54 to 1. That gap is up from 39 to 1 two decades ago. It’s wider than in any of the 50 states and all but two major cities.

One small but important correction in the previous excerpt. As I have noted many times, the “poor are getting poorer” because of “the government’s help.”

The article then explains that a lot of the redistribution in Washington is from taxpayers to a pampered elite.

…in the years since President Lyndon Johnson took aim at poverty in his first State of the Union address, there has been an increasingly strong crosscurrent: The government is redistributing wealth up, too – especially in the nation’s capital. …Two decades of record federal spending and expanding regulation have fostered a growing upper class of federal contractors, lobbyists and lawyers in the District of Columbia area. …Direct spending by the federal government accounts for 40 percent of the area’s $425 billion-a-year economy. …Roughly 15 cents of every dollar from the entire federal procurement budget stays in or around the government’s hometown, said Stephen S. Fuller, director of the Center for Regional Analysis at George Mason University. Last year, that was about $80 billion out of $536 billion in procurement spending, he said. The 15 percent share is far greater than the region’s 2 percent portion of the U.S. population. “We’re seeing an enormous transfer of wealth from taxpayers to the Washington economy,” said Fuller.

And all this spending leads to an elitist class of cronyists, politicians, contractors, bureaucrats, and lobbyists. No wonder the DC area is home to some of the richest counties in America.

But unlike other well-to-do areas, the wealth in DC is rarely accumulated by honest means.

Instead, it’s the result of perverse form of redistribution to big-government insiders. Check out these horrifying details.

Washington-area workers with incomes above $100,000 rose to 22 percent of the workforce, up from 14 percent in 1990, adjusted for inflation, a Reuters analysis of Census data found. …there are 320,000 federal jobs in the Washington area. Within the District of Columbia, 55 percent pay $100,000 or more. …Nearly 13,000 lobbyists registered with the government last year and reported $3.3 billion in fees, or about $260,000 per lobbyist. That’s 22 percent more lobbyists and 37 percent more inflation-adjusted revenue per lobbyist than in 1998… Times are flush for Washington lawyers as well. The number of attorneys in the area has risen 44 percent, twice the national rate, to 41,000 since 1999. Their average income, adjusted for inflation, rose 35 percent to $156,000.

I guess we know who’s having a merry Christmas.

All these rich bureaucrats, lobbyists, politicians, cronyists, and contractors certainly are living the good life, as revealed in a Washington Post story on the “Region’s Rising Wealth.” Here are some sordid excerpts.

…the D.C. region already has a reputation as one of the most affluent in the country. But the area is fast emerging as a home to the truly rich as well. High-end luxury retailers are responding. Brands such as Aston Martin are expanding their operations into the area — betting, for instance, that there will be plenty of customers who can afford the $280,000 sports car James Bond drives in the movies. …Already there are 500 Aston Martin owners in the area with the potential for more.

I’ve already shared an interview with Andrew Ferguson by Reason TV that should make all taxpayers upset. Why should ordinary taxpayers be coerced to subsidize Washington’s high-flying parasite economy?

Redistribution is a bad thing in most circumstances. But when you redistribute from poor to rich, that’s utterly perverse.

Well, thanks to profligacy by Bush and Obama, that’s exactly what’s happened.

The region’s top one percent of households make more than a half million dollars yearly — far more than the national average for the one percent, according to a study of Census data by Sentier Research, an Annapolis-based data analysis firm. And these top earners — many of whom are from dual-income households and benefit from federal contracting — weathered the recession better than their counterparts in some other metropolitan areas and the nation. More are moving beyond comfortable affluence to a much higher standard of living. “What is unique to D.C. is that there has been a change in the complexion of wealth here. There didn’t used to be much of this ultra-high-net-worth business here and now there is,” said Susan Traver, the regional president of BNY Mellon Wealth Management.

But everyone in the rest of America at least can go to sleep tonight with a warm and fuzzy feeling of joy, knowing that our money has created such comfortable lives for the political elite.

Milton Pedraza, the CEO of the Luxury Institute, a research and consulting firm, said that purveyors of luxury goods are drawn to the area because it has…a stable economy bolstered by the federal government. Government contracting, where some local entrepreneurs and business owners amassed their fortunes, has been a key driver of the region’s economy for three decades. A third of the region’s gross regional product still comes from federal spending… “Let’s face it . . . the only place with money during the recession was Washington, D.C.,” Pedraza said.

Perhaps we should make a slight correction in the previous excerpt. After all, shouldn’t it read “America suffered a recession because the only place with money was Washington, DC.”

Let’s wrap this up. A few years ago, I issued this video about overpaid bureaucrats.

But I now realize my mini-documentary only scratches the  surface. Yes, there are too many paper-pushers on the government payroll, and of course they get far too much compensation.

But what about unofficial government workforce of over-paid contractors? And all the lobbyists, consultants, and cronyists that exist only because we have a bloated federal government?

Our nation is being seriously damaged by this corrupt system, and I fear that the outcome will be Argentinian-style decline.

Filed Under: Economy, Featured Tagged With: , , ,

THEY are talking up the housing market. Do you really believe them? Don’t!

December 1, 2012 By Leave a Comment

I am so frustrated by all of the talking up of the housing market.  More people are going to be hurt financially by this intentional deceit by the infamous "They" we have talked about in previous posts.  We got here because we have been lied to throughout this whole housing collape.  There is a lot more pain to come in housing.  Just because you have held out this long does not mean you are going to make it through what it still awaits us no matter what "They" say. 

The piece below is a full reprint of a post by Martin Andelman of Mandelman Matters.  Martin and I have had many discussions about this topic and he puts it very well so I wanted you to see this. 

 

Talking Up the Housing Market? Yada, Yada, Yada… Talk is Cheap

By Martin Andelman

Now I get it… our plan is to try to TALK the housing market up.

Apparently, and I just realized this today, some people think they have figured out that if we just keep talking about how the housing market is recovering… it will respond by recovering.  It’s positively brilliant.  Someone should really let the EU countries know about this strategy because they could really use it, since absolutely nothing else is working in the least.

Hey, you guys in Spain… instead of all that rioting, try saying this over and over again in the newspapers and on television: “El mercado de la vivienda se está recuperando… El mercado de la vivienda se está recuperando!”  That should pretty much handle it.  See, problem solved… glad I could help.

And you guys in Greece, try saying whatever this sounds like: “Η αγορά κατοικίας είναι ανάκτηση.”  And your welcome, by the way.

Okay, look… talk is cheap.  And the strategy of talking about how the housing market is recovering in order to actually make anything recover, although hysterical, is just plain stupid.

On the other hand, since it’s obvious that essentially no one, present company excluded, has the foggiest idea of what to do differently, or is willing to even try doing anything differently, then I suppose talk is all we’ve got.  So, go ahead chatty Cathys… blather on.  Besides, I’ve gotten much better at ignoring you.

 

 

The Scale of the Crisis at the End of 2012

As of the end of this year, we will have lost FIVE MILLION homes to foreclosure… and 10 MILLION MORE American households have faced the prospect of foreclosure since the crisis began during the third quarter of 2006.  Add to those the numbers the 5.3 MILLION NOW in the foreclosure pipeline, meaning they have already received a foreclosure notice or are over 30 days delinquent… and 3.3 MILLION of them are over 90 days delinquent or already in pre-sale inventory.

Then stop to consider that there are only 50 million homes carrying a mortgage in this country… and then do the math.  You shouldn’t need a calculator to know that the answer to any equation comes out CRISIS of historical proportion no matter what the talkers are talking about today.

In addition, it’s interesting that no one wants to talk about the COMPLETED BANK REPOSSESSIONS continuing at the rate of about 50,000 A MONTH, with foreclosure starts at 100,000 A MONTH.

But, the housing market is recovering, the housing market is recovering… well yada, yada, yada and a blah, blah, blah.

 

 

First Time Buyer Demand Falling

One of the only legitimate sources of demand for homes in this country would be that provided by first time buyers.  Think about it… they can’t be underwater because they don’t already own a home.  So, with at least a third of the country’s homeowners underwater and unable to move, our first time buyers are about the only growing demographic we’ve got, since we’re certainly not growing investors in any sort of hurry.

The latest edition of Fannie Mae’s Housing Insights, however, in which Fannie economists examined the data shows that the decline in the homeownership rate over the last four years has been particularly pronounced for young households.

According to Mortgage News Daily on November 15, 2012, “five years after the start of the housing bust American households continue to shift from homeownership to being renters.”  And why this would be any sort of surprise to anyone is beyond me.

The particularly bad news is that homeownership among the younger demographic groups dropped the most in each of the last five years.  In fact, overall homeownership among those between age 25-44 has declined at double the rate of the overall decline.

The only age group that did not seen a decline in homeownership in 2010 and 2011 is the age 75+ group.

But don’t worry, I’m certainly confident that this country’s OCTOGENARIANS (people in their 80s, just to make sure everyone’s with me) are going to save our housing market… so attention all talkers, better get ready to start talking about that.

Why are young people not buying homes like they used to?  Well, gee… let’s see if we can’t figure that out without having to look anything up, shall we?

Well, there’s the issue of student loan debt, which has become such a scam that I may have to devote an entire blog to it in the near future.  And then there’s the need for 20 percent down payments and 760 credit scores… unless we’re talking FHA loans, in which case we’re talking about 20 percent defaults and increasing insurance premiums and tightening underwriting requirements.

Oh, something else… there’s the relatively higher unemployment numbers among the younger demographics, twice as high as the average in many areas.  And then there’s the fact that young people AREN’T STUPID, so one might imagine that since AT LEAST 20 MILLION of them have watched their elders either lose homes or be at risk of losing homes, it might just be that many are in no hurry to repeat the apparent mistakes of the past.

Ya’ think?  Or do the MORONS reading this think we need to conduct a study to figure that out too?

 

 

Being Underwater

Consider the chart from Zillow below to get an idea of how the underwater problem can do nothing but significantly reduce future demand.  Zoom in on it to read it closely, but if you don’t have your glasses, the blue bars are underwater homes by city, and the red bars are delinquent underwater homes by city.

And that’s what Zillow thinks.  Just imagine what the truth of the situation is, because you know it’s not better than Zillow’s.  Just by factoring in the percentage underwater when including real estate sales commissions would take all of those numbers up by 6 percent, right?  Yes, right.

 

Foreclosures to Come

Another factor that makes talkers mute and much of their data moot is how state laws have created markets where foreclosures are delayed and hanging like the Sword of Damocles over their respective markets.

In case you’re a little rusty on your legends from classical Greek culture, Roman philosopher Cicero uses this story to reach the conclusion that virtue is all you need to live a happy life, when he asks the question, “Does not Dionysius seem to have made it sufficiently clear that there can be nothing happy for the person over whom some fear always looms?”

Look at the chart below to see how Nevada’s new law, AB 284, which took effect in October of 2011, has impacted servicers filing Notices of Default.  It’s not a chart showing problems being solved, it’s just a study in kicking the proverbial can down the road.

 

 

As Phillip Gusterson, writing for Seeking Alpha on November 27th, said in his article titled, “Dark Forces Manipulate the Housing Market, “AB284 has dramatically reduced foreclosures in Las Vegas. The result is a lesson in basic economics, with a drop in supply leading to an increase in prices. But what is clear to everyone is that the supply is artificially constrained, and a second lesson in economics could be around the corner: an increase in supply will lead to lower prices.”

He goes on to point out what should be obvious, “AB284 did not remove the need to foreclose on these properties, it just removed the ability to do it, so now one year later we have at least 24,000 units that should have been filed on, but were not because lawmakers in a run up to a general election decided to manipulate the market.”

I don’t agree with everything Mr. Gusterson has to say, but on that point there’s absolutely no chance that he’s even a little bit wrong.  When supply goes down, prices always go up… and the reverse is also true… welcome to Econ 101.

And if that fundamental truth wasn’t enough to cause those thinking that Las Vegas is already at the bottom of the market to pause, Gusterson also points out that, “Las Vegas also has a disproportionate share of ARM mortgages. When interest rates inevitably rise that this will cause a further wave of defaults just as the market shows signs of genuine recovery stimulated by economic growth.”

Notices of Default are increasing steadily over the last few months, however,  which just shows that the banks will ultimately figure out how to foreclose within the current legislative requirements.  As Gusterson’s article opines, “… it does seem logical that the significant market force of 75,000 delinquents will eventually overcome the barriers that politicians throw up to stem the tide.”

He figures that banks will use some combination of “improved administration, short sales, bulk note sales, bulk REO sales, and judicial foreclosures to operate within the post-AB284 environment to work through the foreclosures, and that the post-MERS environment will encourage them to increase the rate of foreclosure.”  

Once again, he is most assuredly correct, but he may be missing one additional factor, which is that the legislature, all too aware of AB 284’s draconian and utterly paralyzing effect on the market, may very well act to weaken the law in order to make it somewhat easier to foreclose in the future.

Lastly, consider that in 2102, according to the Greater Las Vegas Association of Realtors, almost 55 percent of all homes sold in Southern Nevada were bought as ALL CASH deals.  And you don’t have to be any sort of economic expert to realize that we just don’t have anywhere near enough people able to pay cash for homes to create any sort of actual recovery.  (I’m not going to bother sourcing that statement, if you don’t instinctively know it to be the case, you’re an idiot and reading the wrong blog, so scat. I have no time for you.)

 

 

What Is Going Up?

The only segment of any housing market going up is at the bottom of the market, where investors are prone to bid against each other, afraid that they’ll lose out.  It’s the same sort of greedy mentality that takes hold at auctions, where I’ve seen people pay more for things than they would have to if buy them at their retail price.

The simple fact is that the markets aren’t acting rationally, and I’m sure part of it is that some of the talking causes irrational things to happen.  For example, Dr. Housing Bubble, who follows Southern California’s housing market better than anyone, points out that while “home sales are up by 8 percent year-over-year, during the same period, the median home price fell by 3.7 percent.”

That’s just great… as demand goes up, price falls?  Try answering questions on an economics exam that way and you’ll fail the test sure as shootin’.  Again, according to Dr. Housing Bubble…

“If you want to see delusion in action take a look at Zillow’s “make me move” option and you will see it in full force.  Even with mortgage rates at record low prices and very generous products like FHA loans that only require 3.5 percent down, the market seems to be moving lower in mid-tier to upper-tier areas.”

Well, obviously that part of the market needs a stern talking to, wouldn’t you say?  Get to work talkers… I expect to see some yabbering and in a hurry.

 

 

Talk is Cheap

The fact that there are properties at the very bottom that appear to have increased in price by a few points is no indication that housing is recovering.

Remember, the underwater problem is just as it was, so demand can’t increase because half the market can’t move.  And remember that, for the most part, no one is selling their home unless they have to, so the supply is reduced because no one wants to compete with foreclosures and short sales when selling their home into what is already the worst housing market in 70 years.

If people were selling, without demand increasing, then prices would fall even further as the impact of increased supply and competition could produce no other outcome. And there’s just nowhere that demand can come from as long as we’re pretending that our economy and housing market are recovering, and therefore doing NOTHING about ANYTHING.

Our situation related to unemployment in this country is nothing short of horrific… we’ve got at least 5.5 MILLION people out of work for over six months.  In California, the published rate is over 11 percent, and that’s not even a fully loaded number.  And we haven’t created anything but part-time and minimum wage jobs over the last four years, so even if working, EVERYONE is making less.

What’s amazing to me is that we’re not even pressuring our elected officials to do anything.  Other than a few Occupy people camping on lawns until they get arrested, the only thing we’re doing is kvetching on Facebook and pacing through sleepless nights.

Here’s an excerpt from a Rolling Stone article from last June, written by Jeff Tietz…

To aid Santa Barbara’s large homeless population, local activists launched the Safe Parking program and since the Great Recession began, the number of lots and participants in the program has doubled. By 2009, formerly middle-class people like Janis Adkins had begun turning up – teachers and computer repairmen and yoga instructors seeking refuge in the city’s parking­ lots. 

Safe-parking programs in other cities have experienced a similar influx of middle-class exiles, and their numbers are not expected to decrease anytime soon. 

It can take years for unemployed workers from the middle class to burn through their resources – savings, credit, salable belongings, home equity, loans from family and friends. 

Some 5.4 million Americans have been without work for at least six months, and an estimated 750,000 of them are completely broke or heading inexorably toward destitution. In California, where unemployment remains at 11 percent, middle-class refugees like Janis Adkins are only the earliest arrivals. “She’s the tip of the iceberg,” says Nancy Kapp, the coordinator of the Safe Parking program. 

“There are many people out there who haven’t hit bottom yet, but they’re on their way – they’re on their way.”

 

Afraid?  Terrified?  Yeah, well me too. 

It’s happening all around us, most of us see the signs of the cracks widening every day.  But too many of us are still in denial, they don’t want to talk about it, they’d rather just listen to the happy talk crowd who are constantly trying to talk our economy back to health.

My wife noticed that I didn’t bother to vote this year and asked me why.  I replied that for all our president is doing, I would have been okay with leaving the position open for the next four years… you know, just not fill it until someone worth voting for comes along.  But it now occurs to me that President Obama fits in  perfectly with what’s going on.  If talking the economy up will somehow work, then I’ve changed my mind and he’s the perfect guy for that job.  (Hahaha… get it?)

Here’s the real deal, however… while you might be able to get ME up by talking to me, housing isn’t going anywhere but sideways and down no matter what anyone says.  Bet on it.

Mandelman out. 

Filed Under: Banks, Economy, Featured, Housing Tagged With: , , , , , , , , , , , , , , , ,

Attorneys general request extended tax relief for distressed homeowners

November 23, 2012 By Leave a Comment

Did you know that if you do a short sale, foreclosure or settle a 2nd mortgage you can get out of the debt on your underwater home that you could still owe the IRS a lot of money?

While many states allow homeowners to get out of their houses without the threat of the bank coming after them for the money the bank lost, the IRS can still haunt you for lots of money in taxes.  Whatever money the bank loses on your underwater house is looked upon by the IRS as a gift from the bank and requires you to pay income tax on it. 

Currently there is a law in place that exempts most homeowners from this tax.  However, this law exprires on December 31, 2012.  The Mortgage Foregiveness Debt Relief Act began with the Bush administration and extended in the Obama administration via the Dodd-Frank bill.  This makes it bi-partisan but needs to be extended.  We have brought this to your attention in previous posts and to support the extension of this important bill. We are gettting some additional help.

Below is an article published by Housing Wire.  Written by Megan Hopkins. 

Four attorneys general are leading the fight to extend tax relief to homeowners who faced financial hardship such as a foreclosure and were granted mortgage debt forgiveness.

Attorneys General Catherine Cortez Masto of Nevada, Lisa Madigan of Illinois, Pam Bondi of Florida, George Jepsen of Connecticut and Martha Coakley of Massachusetts lead the national effort of 41 state attorneys general calling on Congress to extend the exclusion, in place since 2007. Various government agencies and industry trade groups began fighting for an extension as early as April.

If Congress does not answer, the tax relief efforts put in place by the Mortgage Debt Relief Act will expire on Dec. 31. This federal act essentially dismisses a distressed homeowner’s mortgage debt in the case of a foreclosure, short sale or loan modification.

With the recent push toward more principal reductions via the national settlement between state AGs and the nation's biggest mortgage servicers, hundreds of thousands could be impacted. The $20 bilion-plus settlement outlines consumer-relief mandates and servicing requirements for the nation's largest mortgage servicers.

“Failure to extend this tax relief would hurt the very families we set out to help in the national foreclosure settlement,” Illinois' Madigan said. “We need to do everything we can to encourage — not deter — struggling homeowners to seek help to stay in their homes.”

The AGs wrote a letter to the leaders of the U.S. House and Senate requesting an extension. The letter noted that if the $25 billion national settlement does expire, homeowners would face up to $1.3 billion in tax increases over two years, according to the Congressional Budget Office.

"Unless Congress acts, any debt relief to be provided in 2013 under the national mortgage settlement, as well as other mortgage debt relief programs, will likely be considered taxable income," said Masto.

Added Coakley, “This tax relief is critical for helping struggling homeowners stay in their homes as we work to repair the damage from the foreclosure crisis. We urge Congress to ensure families are not hit with an unexpected tax bill when seeking a loan modification.”

More than 4,000 homeowners had received mortgage debt relief for an average savings of $67,457 per homeowner in Coakley's state of Massachusetts since the settlement was signed earlier this year.

An extension is included in the Family and Business Tax Cut Certainty Act of 2012 (S. 3521), which recently passed out of the Senate Finance Committee with bipartisan support.

Filed Under: Featured, Housing Tagged With: , , , , , , , , , , , , , , , , , ,

The financial benefit of giving your house back

October 8, 2012 By Leave a Comment

If you have stopped paying on your house or have just considered it, there are several things you need to be aware of before you do anything.  This video is one we put together to help sort through some of the many issues that you need to be aware of. 

If you want to discuss the options available and how they will impact you specifically, we will do a free, no obligaton 15 minute phone consultation.  This call is designed to help you get some of your immediate questions answered. 

Filed Under: Featured, FRGI Videos (ours) Tagged With: , , , , , , , , , , , , , , , , ,

If banks have agreed to forgive debt. Shouldn’t they do it for people who are still alive?

September 21, 2012 By Leave a Comment

We have been working with Underwater Homeowners for the past three years.  In that time we have chronicled the tactics of the big banks in the way they do what they can to get money from every source possible.  We don't necessarily fault the banks when they do this.  They are businesses and their job is to make money.  We would just like to see them show some modicum of following the same rules that they expect from us.

The Attorney's General from 49 states recently settled with the big five banks regarding the methods they used in the way they have gone about foreclosing and bullying America's underwater homeowners.  The total settlement was $25 billion.  That is a big number but it will do very little in the actual help it will provide to people that actually need it.  This is especially true in that the banks out negotiated the states top lawyers, Again!

Of the $25 billion settlement, $20 billion is designated to go to lowering principle amounts of loans.  The theory is that if the principle is reduced, then people will choose to keep their homes instead of walking away.  In order to get the big five to actually get something done, they get a 25% bonus on any principle they reduce in the first year after the settlement. 

There is no reduction of principle on loans owned by Fannie Mae and Freddie Mac.  The FHFA, which is the agency that regulates them said they will not allow it.  With that rule from FHFA, the principle reductions are left to privately owned mortgages that are incorporated into MBS (Mortgage Backed Securities) that are owned primarily by investors (Wall Street) and loans held in the portfolios in each bank. 

The FED recently announced QE3 and says it will buy mortgages to the tune of $40 billion per month for as long as it takes.  This takes care of Wall Street, Again!  So the big five can use their share of the AG Settlement to deal with their own portfolio.  Mostly what they are doing is forgiving 2nd mortgages. 

SIDE NOTE:  If you are current on the payments of your 2nd mortgage, you are not going to get any of this money.  They are forgiving the loans of the people that are already behind.  Another example that if you keep paying you are not going to get any help.

Don't you think they should be helping people who will get some actual benefit from this? 

Meaning people who are still alive.

One of our clients recently sent us a copy of a letter from Chase saying that they are going to forgive the $111,000 2nd mortgage of her husband that died in early 2011.  She was not on the loan or the title to the house, so there is no benefit to her from this.  The loan is included in her husbands probate so we believe that Chase was dutifully notified that they were not going to get paid on this loan. 

So Chase gets credit with the AG's for forgiving $138,750 on a loan they were never going to collect on anyway.  The IRS will not get to collect income taxes on that money either.  If you didn't know, the IRS says that any money forgiven by the banks is taxable as a gift.  Chase also kept for the themselves the opportunity to actually help someone that might be able to keep their house because their 2nd mortgage was forgiven. 

This is not surprising to those of us who understand how the banks work in this arena.  They take every advantage possible for themselves and their shareholders.  If they are too big to fail, does that mean that they should have to do everything in their power to repair the mess they helped to create?  We think they should. 

Note to Chase:  Take this money and use it to forgive the 2nd mortgages of someone, or two some ones that really need it.  Clean up your tactics and help us to fix this mess. 

Filed Under: Banks, Featured Tagged With: , , , , , , , , , , , , , , ,

Should A Borrower With An Underwater Mortgage Strategically Default?

September 20, 2012 By Leave a Comment

In a recent article in the Mortgage Servicing News, a publication that benefits those that collect mortgage payments.  We see changes in their attitudes and the statistics they publish about Strategic Defaulters, underwater homeowners that choose to give their houses back.

Companies that collect mortgage payments understand that the housing collapse and lack of any quantifiable rebound is destroying families and the financial futures of millions of Americans.  The employees of these companies are not immune from this either and are looking at their own personal circumstances to determine their course of action.  

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Does a borrower whose mortgage is underwater have an obligation to continue paying their monthly loans if they have the ability to do so?

In a survey of 114 economists, real estate experts and investment and market strategists, 71% said they would not strategically default on their mortgage that is at least 40% more than the current value of their home.

My guess is that these people have stable salaries and have not experienced a drop in their incomes since the collapse.

In a separate national survey, 2,009 adults where asked if they would pursue a strategic default, 59% of homeowners said they would not utilize this strategy if they were underwater on their home by 40%.

Probably more of these people have experienced lower incomes since the collapse.

Currently, 15.3 million U.S. homeowners (31%) who have a mortgage are underwater.  Nearly three-quarters have properties that are 40% below their buying cost.  On average, homeowners across the country owe $75,235, approximately 44%, more than what their house is worth.

When homeowners were asked in the survey why they would not choose to strategically default, 37% cited moral reasons, while 35% indicated it didn’t make sense since they intend to live in that house for an extended period of time.

Does the moral issue play a smaller role if you can still pay your mortgage easily?  We believe that is the primary issue when the moral implications are discussed.  If you can’t pay or if your income has dropped, making your payment is destroying your life, the moral issue becomes less important or disappears all together.  

The percentage of people citing the moral issue continues to drop as the collapse continues:

  1. People have exhausted their savings and retirement to try to keep up.
  2. More details and new plans to protect the banks are released with no help for homeowners.
  3. They don’t get any help from their bank.

 The moral issue is the biggest tool the banks have to keep people paying.  The number of strategic defaults is increasing and will grow rapidly as we get deeper into the collapse with no sign of recovery. 

When the Economists were asked for their opinion on the adoption of government-sponsored mortgage principal forgiveness initiatives for underwater borrowers. The survey found that 72% of respondents opposed any adoption of such programs, while 28% were in favor.

Pretty much the same percentage that said they would default in the earlier question.  “I’ve got mine. I’m OK so no one else should get any help.”

Meanwhile, homeowners in one of the states hardest hit by the housing crisis have a different opinion regarding strategic defaults.

In Nevada, where over 60% of homeowners are underwater, a “Face of Foreclosure” report released by the Nevada Association of Realtors polled 1,000 state residents and revealed that 45% believe “there is nothing wrong” with strategically defaulting on their mortgages. However, the other 45% of the survey respondents believe that homeowners still have a legal and ethical obligation to pay for their mortgage if they can.

Does this mean that if they interviewed 1,000 people that 600 were underwater and 450 of those said it is OK to strategically default?  That’s 75% of the underwater homeowners.  Of the people we work with, that number is what we see. 

Last year, one out of every 16 Nevada properties had a foreclosure notice, the report said. According to 500 individuals surveyed who personally experienced a foreclosure in the state, just over one quarter (27%) indicated they strategically defaulted this year, 4% more than the 2011 report.

Furthermore, 40% of those going through the default foreclosure process were told by their financial institutions to strategically default on their mortgage.  Only 9% of those who were foreclosed upon and 10% of all survey respondents said foreclosure prevention programs have helped. Also, 55% of all Nevadans believe the government has failed to address the foreclosure crisis.

The Mortgage Servicing News article was not intended to show the weakness in the market or convince people to strategically default on their mortgages.  However when you look at into the heart of the article, they know the landslide of strategic defaults is coming.  If you are one of the over 15 million underwater homeowners in the country, this will be a decision you will have to deal with.  Don’t wait until you have no choice.  The earlier you act, the more options and benefits you can use to make the transition easier on you.

CLICK HERE to read the full text of the article. 

Filed Under: Featured Tagged With: , , , , , , , , , , , , , , , ,

Guest Post – Shadow & Ghost Inventory Quantified

August 14, 2012 By Leave a Comment

This is a direct reprint of a post by Mark Hanson.  I don't know him but I get his posts from time to time.  His writing in this post is a bit cryptic but he is right on the money. 

"As far as the housing market goes, if you are waiting for a recovery, you probably won't see it in your lifetime."

8/14 Mark Hanson…

”Shadow” & “Ghost” Inventory Quantified

by Mark on August 14, 2012

Those estimating “shadow” inventory at levels inconsistent with a multi-year drag on housing are “definitionally” challenged.  Moreover, they have bad data.

How I see is — based on the data and simple math — we have at least 10 -years of distressed supply to work through based on the past two years average of monthly distressed sales demand.

 

Demand

1)  Annualized Existing Home Sales 4.4mm units

a)  3.1mm units are non-distresssed

b) 1.3mm units are from the foreclosure stock or short sales

Bottom line: Demand for distressed supply is 110k per month on average.

 

 Supply (Visible, Shadow, Ghost)

Visible Supply

1)  Listed Supply – 2.4 million Nation Assoc of Realtor listings

2)  REO – 300k to 400k Foreclosures

**this is where most “analysts” stop looking for supply.

 

“Shadow Supply”

1)  60-days late or in Foreclosure – 5 to 6 million units

2)  short sales – 600k annually

3)  modified legacy loans – 6 million (I call mods “new-vintage, higher-leverage, worse-than-Subprime loans).  Note, mods redefault at a faster pace than legacy Subprime loans defaulted in 2006 to 2008.

Bottom line, there are 11.6mm high risk loans. If half liquidate over the next 3 years it means ~2mm per year in distressed supply in a market only proven to absorb 1.3mm units.

**Some better analysts go as far as here but they don’t grasp the “denominator effect” and try to divide total sales of 4.4 million into the “distressed” supply. That’s not accurate because only 25% of the demand is for distressed supply.

 

“Ghost” Supply 20 million to 30 million borrowers/houses (not mutually exclusive meaning one borrower can belong to multiple cohorts)

1)  “Effective” Negative Equity – 25 million borrowers / houses.  These borrowers are dead to the housing market, as they don’t have the equity to pay a Realtor 6% to sell and put 20% down on a new house.  They were once the most active participants, the repeat buyers. Now they are “zombie homeowners”.

2)  Impaired Credit – 28 million borrowers.  These are borrowers with “c” grade or lower credit that can’t easily qualify for a purchase money loan outside of FHA

3)  Legacy Second Liens – 18 million borrowers.  Legacy seconds that banks refuse to extinguish also trap millions of homeowners making them useless in the macro housing market equation.

 

Bottom Line:

First timers and investors are volatile and thin cohorts that cannot sustain a “durable” recovery or push macro housing to “escape velocity”.   In fact, “distressed resales” have only averaged 110k per month over the past two years.  That is nowhere near enough demand to absorb all the likely supply detailed in the chart below.

The investor and first timer by and large bowed out of the market in June, as the distressed supply was all but chocked off for the election cycle. Now, the Realtors are screaming for more Foreclosures…how ironic.

This housing market will never achieve a “durable recovery” or “escape velocity” with 20 to 30 million homeowners — the prime repeat buyer cohort — trapped in their houses due to effective negative equity, poor credit, or legacy second liens.  All that will continue to happen is stimulus-induced short squeezes like we saw this year and in 2010 followed by hangovers like in 2011 and will again in the back half of 2012 and 2013.

Filed Under: Housing Tagged With: , , , , , , , , , , , , , , , ,

Confidence in Housing Values Falls to Lows for the Year

July 20, 2012 By Leave a Comment

I am a big fan of Rasmussen Reports.  While I have had enough of political polls, I believe Rasmusen does a great job of gaging the trends amongst "Working America".  This is a recent poll about the housing market.  Regardless of what the media, the government, NAR and the MBA want us to believe, the housing market is still a long way from the bottom. 

Here is the full Rasmussen article followed by the wording of the questions:  

Confidence in the short- and long-term housing market among homeowners has fallen to the lowest level of 2012.

A new Rasmussen Reports national telephone survey of Homeowners shows that just 18% expect their home’s value to go up over the next year, down four points from June. Twenty-five percent (25%) expect home values to go down over the next year, while 51% say they will remain about the same. 

Looking further ahead, just 38% of homeowners now believe the value of their home will go up over the next five years, representing a 13-point drop from last month and among the lowest findings in three years of surveying. Fifteen percent (15%) expect values to go down during the next five years. Thirty-six percent (36%) predict that they will remain about the same.

Confidence in home values over the short- and long-term is at the lowest point since late 2011. Still, belief that home values will go up over the next year remains slightly above findings for most of last year. The number of homeowners who expect home values to go up over five years first fell below 40% in April of last year.

Half of Americans (50%) report that the value of their home is worth more than the amount they owe on their mortgage, up slightly from 47% last month. This finding slipped below 50% for the first time in June of last year and has ranged from 44% to 57% ever since. Thirty-nine percent (39%) say their home is not worth more than what they owe, down slightly from last month’s high of 42%.

Want a free daily e-mail update? If it's in the news, it's in our polls

The national survey of 732 Adult Homeowners was conducted on July 18-19, 2012 by Rasmussen Reports. The margin of sampling error is +/- 4 percentage points with a 95% level of confidence. Field work for all Rasmussen

Just six percent (6%) of homeowners report missing or being late on a mortgage payment in the last six months. Thirteen percent (13%) say it’s at least somewhat likely that will happen over the next six months, but only four percent (4%) think it's Very Likely. Both findings have changed little over the past two years.

Men and women share similar views about home values over the next year, but men express more confidence about values five years from now.

Investors are slightly more optimistic about the housing market compared to non-investors. 

Married homeowners are twice as confident as non-married homeowners when it comes to home values in the short- and long-term.

Republican homeowners show more pessimism than Democrats and those not affiliated with either political party about home values over the next year. There is less partisan disagreement when it comes to the housing market in five years.

Separate polling shows that nearly half (44%) of young Americans now say they owe more money than they did last year. Overall, 30% of all Americans say they owe more than they did a year ago.

 

 

National Survey of 732 Adult Homeowners
Conducted July 18-19, 2012

By Rasmussen Reports

 

1* Looking ahead over the next year, is the value of your home likely to go up, go down, or remain about the same?

2* What about over the next five years? Is the value of your home likely to go up, go down, or remain about the same? 

3* Is the value of your home worth more than the amount you owe on your mortgage? 

 

4* Over the last six months, have you missed or been late on a mortgage payment? 

5* Looking ahead, how likely are you to miss or be late with a mortgage payment in the next six months? 

 

You have options for your underwater house, you won't find them through traditional sources.  Find all of your options at www.myownbailout.com

Filed Under: Economy, Housing Tagged With: , , , , , , , , , , , , , , , , , ,

A brilliant reply to a politician begging for money!

June 12, 2012 By Leave a Comment

Another post from Martin Andelman of Mandelman Matters…

Nancy Pelosi sent my reader Amy an email. And Amy replied brilliantly.

 
 

On Jun 9, 2012, at 10:40 AM, Nancy Pelosi wrote:

Amy –

Today is my 25th anniversary in Congress.

I want to take a moment to thank you for your support over the years.

We have made tremendous progress because you have stood with me to ensure that we continue moving America forward.

And now, it’s because of friends and supporters like you that the House Majority is within reach with five months left until Election Day.



On this special anniversary, House Democrats are focused on the 25 seats we need to win the Majority.

Please contribute $3 or more right now to ensure House Democrats have important resources to support strong Democratic candidates and Members facing tough challenges for re-election and hold Republicans accountable for their misguided agenda.

President Obama needs a strong Democratic Majority in Congress and your support will bring us closer to returning the gavel to Democrats who will focus on the people’s interests instead of the special interests.

You are the backbone of our party and we will win in November because of your tireless support and determination.

  Can you chip in today?

Onward to victory,

Nancy

 

###

 

 

So, on Jun 9, 2012, at 12:01 PM, Amy Sheaffer wrote back:

Dear Ms. Pelosi,

Today is my 13th anniversary in my home.  

I have seen no progress in “America moving forward”.  I have lived with the stress of pending foreclosure, postponed home auction dates, underemployment and bankruptcy for the past several years.  

Please take the time to contribute a small portion of your huge salary to:  The Fund to Save Amy’s Home!!

Your donation is greatly appreciated and will contribute to continued shelter for myself and my cat, Mr. Miles!  

Remember that a portion of your donation (or all of it) is tax deductible!

Sincerely,

Amy Sheaffer, MA, LMFT

Filed Under: Economy, Housing Tagged With: , , , , , , , , , , , , , ,
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