Update on Foreclosures from the CAR President

Brought to you by the CALIFORNIA ASSOCIATION OF REALTORS®


October 12, 2010

Dear C.A.R. member,

No doubt you’ve heard the news recently that a number of major banks have volunteered to temporarily suspend foreclosures in 23 states and Bank of America is temporarily suspending foreclosures nationwide.

While this situation is changing daily, I want to tell you what we currently know to answer any questions you may have.

In late September and early October some lenders and servicers began voluntarily halting foreclosures in select states while they reviewed their foreclosure processes.

So far, only Bank of America has extended its foreclosure moratorium to California, where the vast majority of foreclosures are conducted without a court order. Foreclosures in the other 23 states are processed through the court system.

Non-judicial foreclosures in California, however, do have legal requirements that lenders must follow. For example, California law requires that lenders for certain mortgage loans made between Jan. 1, 2003, and Dec. 31, 2007, attempt to make contact with borrowers to discuss options for avoiding foreclosure at least 30 days before filing a notice of default. Lenders also must sign a declaration in the notice of default stating that they tried to contact the borrower, made contact with the borrower, or fall within an exception (such as a bankruptcy filing).

The lenders and servicers that have placed their foreclosure moratorium on properties in the 23 states where courts are involved in the foreclosure process include: Goldman Sachs Group Inc’s Litton Loan Servicing, Ally Financial Inc.’s GMAC Mortgage unit, JPMorgan Chase, and PNC Financial.

These lenders/servicers have only temporarily halted their foreclosures while they review their foreclosure process. This is in response to findings that questioned whether some lenders/servicers were following the correct procedures to foreclose on a property.

This halting of foreclosures is a voluntary action taken on the part of these lenders/servicers and has not been mandated by either the states or the federal government.

Some members have begun to report the immediate impact of this moratorium on transactions that involve foreclosed properties. Delays in escrow and the removal of listed foreclosures are temporary results of this moratorium.

The immediate impact on the market will be the slowing of home sales, which could put upward pressure on home prices in the short term. The long-term effect on the market is uncertain at this point as it depends how long the moratorium remains in place.

Assuming the moratorium is lifted in the next month, the flow of REOs to the market should resume, but the uncertainty created by the moratorium may cause hesitation on the part of buyers.

Federal agencies, including the Office of the Comptroller of the Currency, the Federal Housing Administration, and the conservator of Fannie Mae and Freddie Mac, have asked lenders and servicers to review their foreclosure processes. This review would apply to all states including those like California where the vast majority of foreclosures are non-judicial.

The participating lenders and servicers believe their internal review processes should take anywhere from a few weeks to 30 days to complete.
NAR has sent a letter to regulators expressing their concerns over the foreclosure issue. Please visit www.realtor.org/foreclosure for the latest developments and additional information.

C.A.R. is supportive of lenders taking action to ensure homeowners are not improperly foreclosed on and that they are following state law. We hope they are able to conduct their review expeditiously so as to minimize the impact on California’s housing market.


Sincerely,

Steve Goddard
2010 President
CALIFORNIA ASSOCIATION OF REALTORS®

Fannie, Freddie Suspend Forclosures

Fannie, Freddie Suspend Foreclosures
Carrie Bay | 11.20.08

Fannie Mae and Freddie Mac announced this afternoon that they are suspending all foreclosures on mortgages that the two companies own.

Both companies have ordered their national networks of mortgage servicers and foreclosure attorneys to halt all foreclosure sales and evictions involving occupied single-family properties. Freddie Mac is also including 2-4 unit occupancies as part of the suspension. The foreclosure moratoriums will take effect November 26 and go through January 9, 2009.

The suspensions will give servicers time to implement the Streamlined Modification Program announced by Fannie Mae, Freddie Mac, and their conservator, the Federal Housing Finance Agency (FHFA). The agencies' fast-track plan for getting seriously delinquent borrowers into more affordable mortgages was announced on November 11 in conjunction with the HOPE NOW Alliance and is scheduled to launch on December 15.

The temporary suspensions are also expected to give servicers more time to help troubled borrowers avoid foreclosure. Fannie Mae's attorneys and servicers plan to reach out to more than 10,000 borrowers the company estimates will be affected during the suspension period. Freddie Mac said its representatives will contact an estimated 6,000 borrowers.

“By working closely with FHFA and our servicers, Freddie Mac is on track to help three out of every five troubled borrowers with Freddie Mac-owned loans avoid foreclosure this year,” said Freddie Mac CEO David M. Moffett. “Today’s announcement builds on this momentum and provides a new measure of certainty to many of these families during the holidays.”

The chiefs of both organizations emphasized that lenders servicing mortgages they own will continue to work with distressed borrowers to consider all workout options available, such as permanent rate reductions and mortgage term extension modifications, “even if previous workout efforts have been unsuccessful,” Fannie Mae said in a written statement. This year, Freddie Mac said it expects to approve 84,000 workouts for the estimated 140,000 who are delinquent on its wholly-owned mortgages. Sister financier, Fannie Mae, did not release its workout estimates.

“Fannie Mae is committed to working with FHFA to implement the streamlined modification program as quickly as possible to help prevent unnecessary foreclosures,” said Herb Allison, Fannie Mae's CEO. “We must and will do more.”

Thanks to Gwen and Rhoda from Holmgren and Associates for this information:

REAL ESTATE FINANCE
Gwen Hoople and Rhoda Paul
Mortgage Lending Specialists
HOLMGREN + ASSOCIATES
1900 Mountain Boulevard
Oakland, CA 94611
office: 510-339-2121
fax: 510-339-1004
loans@gwenandrhoda.com

Bargain Hunting For Homes Can Be Misleading

Many buyers looking for foreclosure deals are finding Internet research tools misleading.

From an Inman News article posted on July 7, titled When Prices are Too Good to be True, by Matt Carter:

"A constant stream of headlines about rising foreclosures and falling home prices in many U.S. markets might lead bargain hunters to believe that there are some incredible deals to be had out there....

Is the housing downturn so bad that you can now swoop in and buy a house in Hermosa Beach, Calif., for less than $100,000? A search for foreclosure properties on Trulia -- which puts the average sale price of a home in the coastal city at $1.67 million -- might lead you to believe that the answer is yes.

The problem is that most, if not all, of these properties aren't officially on the market. They are "pre-foreclosures," meaning that their owners have defaulted on a loan, prompting a lender to begin the foreclosure process."

"Pre-forclosure" lilstings do not only artificially inflate the numbers of available listings for a particular area...

"The reality is that the majority of homes that start the foreclosure process never complete it. The borrowers refinance, catch up on their payments, or do something else to avoid foreclosure." - Brad Geisen, the founder and chief executive officer of Foreclosure.com

...they also grossly misrepresent the prices.

"They may represent the amount outstanding on the loan that's in default -- sometimes a relatively small second loan -- or the amount that the borrower is in arrears. Real estate agents, investors and sophisticated buyers will know that it's impossible to buy a house in Hermosa Beach for $4,712. But first-time home buyers may miss the fine print on sites like Yahoo and Trulia that explains that this is not the home's listing price -- and that the property may not even be for sale." - Matt Carter, Inman News

"If you are looking for the best deal... contact a Realtor!"

Doug Birnbaum, a Realtor with Veranda Homes in Costa Mesa, Calif., said he recently fielded a call from a client who saw what she believed was a listing for a four-bedroom house for $100,000.

"In Costa Mesa, there's not going to be a four-bedroom for less than $350,000," he said. The $100,000 figure "could have been the second mortgage in default, "Birnbaum said, but "the Web site was so misleading I never actually figured out where the property was -- there was no address, just an intersection."

That experience led Birnbaum to post a warning on Trulia Voices, titled: "RealtyTrac, are the prices too good to be true?"

"It appears that ReatlyTrac is posting homes on Trulia for shockingly low prices, "Birnbaum wrote. "Now what these prices actually reflect is the dollar amount of one of the liens on the home. This in no way reflects ... the true value of the home. If you are looking for the best deals in this red hot market, contact a Realtor!"