Nondelinquent Borrowers Soon to be Eligible for Short Sales

Daily Real Estate News | Wednesday, October 24, 2012

  

Mortgage giants Fannie Mae and Freddie Mac have issued new rules, which will take effect Nov. 1, that will allow short sales for underwater borrowers who have never missed a mortgage payment. Previously, Fannie and Freddie allowed only home owners who had missed payments to qualify for a short sale.

Eligible borrowers under the new rules will need to show a hardship to qualify for a short sale, however. Hardships may include unemployment or a death of a spouse.

Inman News points out one potential flaw to the new rule, however: The nondelinquent home owners who undergo a short sale will likely take just as big a hit to their credit score than if they had missed loan payments and gone into a foreclosure.

“Under current national credit reporting practices, those nondelinquent borrowers are likely to be treated the same for credit scoring purposes as severely delinquent owners who go to foreclosure after months of nonpayment, or who simply toss back the house keys and walk away in strategic defaults,” writes Ken Harney for Inman News.

Credit agencies use no special coding to indicate that a short sale was without delinquency. Therefore, home owners could see their credit scores drop 150 points or more after the short sale.

However, officials at the Federal Housing Finance Agency, which oversees Fannie and Freddie, told Inman News they are “in discussions with the credit industry” to explore ways to fix the credit score problem for those who haven’t missed a payment but undergo a short sale.

Source: “Damage to Credit Scores Could Trip Up New Fannie, Freddie Short Sale Program,” Inman News (Oct. 23, 2012)

Some Seller Seek Lowball Offers on Homes?

Daily Real Estate News | Tuesday, October 23, 2012

  

The latest mortgage fraud scam known as “flopping” has sellers who actually make their home look undesirable so that they can attract low offers from buyers.

Here’s how it works: The seller is underwater on their mortgage and wants to get the lender to agree to a short sale. The seller, working with an accomplice, seeks to get a super low price to sell their home in the short sale by making bogus damage claims. Once they get the bank to agree to a short sale, the home is sold to an accomplice who then quickly cleans up the home and resells it for a profit.

“Floppers,” as they’re known, average a $55,000 profit from the quick flips.

To get the low home price, some sellers will go to great lengths to make their homes look undesirable, even spreading possum urine around the house or turning up the heat and closing all the windows for several days, says Ann Fulmer, a mortgage fraud specialist with Interthinx. Floppers also have bene known to remove appliances and cupboard doors and even paint the ceilings so it looks like there’s been water damage in he home. When no sellers want the home due to the flaws, the sellers will point out to the bank the problems with the home and why the sales price needs to be lowered. Some scammers have even claimed their homes were contaminated as crystal meth labs in order to get a lower price.

Freddie Mac is cracking down on floppers, investigating suspicious cases, and has opened up a toll free number for others to report suspicious activity: 1-800-4fraud8 begin_of_the_skype_highlighting FREE end_of_the_skype_highlight.

Source: “Latest in Mortgage Fraud: Flopping,” CNNMoney (Oct. 23, 2012)

Strategic Defaulters May Be Pursued

Daily Real Estate News | Thursday, October 18, 2012

   

The Federal Housing Finance Agency’s inspector general is urging the government-sponsored enterprises to pursue strategic defaulters — those who walk away from their mortgage even though they have the means to pay it. The FHFA argues in a new report that going after strategic defaulters could be a way for Fannie Mae and Freddie Mac to recover some of their losses.

For example, the report highlights that out of 35,321 deficiencies that fall into this category, the GSEs could stand to collect $2.1 billion from those who walked away from their mortgage. In 2011, the recovery rate for the GSEs was about $4.7 million, or 0.22 percent.

Deficiency management for the GSEs is not overseen by FHFA.

"With 1.1 million seriously delinquent mortgages looming on the foreclosure horizon FHFA's timely guidance on deficiency management process may help the Enterprises recoup future losses and protect taxpayers' investment in their financial health," according to the FHFA report.

Source: “FHFA Should Help Pursue Fannie, Freddie Strategic Defaulters,” HousingWire (Oct. 17, 2012)

Wells Fargo Accused of "Reckless" Lending

Daily Real Estate News | Wednesday, October 10, 2012

  

The government has filed a lawsuit in federal court against Wells Fargo, alleging the nation’s largest mortgage lender has engaged in a decade of regular “reckless origination and underwriting” of government-backed loans.

The government’s lawsuit is the latest in its broad sweep against banks that cites the Federal False Claims Act, which targets lenders accused of misusing Federal Housing Administration loans. (The FHA does not make loans but insures loans that lenders make.)

Wells Fargo denies any wrongdoing and said it would “vigorously” defend itself against the government’s accusations. Company officials said they acted in “good faith and in compliance” with federal guidelines in their lending.

In February, Bank of America, which never admitted any wrongdoing, reached a $1 billion settlement involving False Claims Act fraud allegations with FHA-backed loans. Three other banks, in similar recent cases, also have agreed to pay $490 million.

Source: “U.S. Sues Wells Fargo for Faulty Mortgages,” The Wall Street Journal (Oct. 9, 2012)

530 Charged for Scamming Home Owners

Daily Real Estate News | Wednesday, October 10, 2012

  

After a yearlong probe, federal investigators say they’ve charged 530 people for allegedly defrauding more than 73,000 home owners who had fallen behind on their mortgage payments. The people charged are accused of allegedly duping the home owners into thinking that they could be rescued from foreclosure through the scammers’ fake rescue programs, investigators say.

The scams have resulted in 285 criminal cases of mortgage rescue scams and more than $1 billion in losses to home owners, U.S. Attorney General Eric Holder said Tuesday during a news conference.
“These comprehensive efforts represent a historic, governmentwide commitment to eradicating mortgage fraud and related offenses across the country,” Holder said.

Scammers would make bold promises to rescue struggling home owners from foreclosure, such as promising that if the home owners paid hefty fees they would have investors purchase the mortgage or negotiate the loan on their behalf with better terms.

The cases are part of a crackdown by federal investigators on mortgage-related fraud and scams that target home owners, a growing problem, according to the FBI.

“Distressed-homeowner schemes have displaced loan-origination fraud as the most common type of mortgage fraud in many areas in the country,” says FBI associate director Kevin Perkins. Two years ago, foreclosure scams accounted for about 4 percent of the mortgage fraud cases in the country, according to the FBI. Today, the percentage has jumped to nearly 20 percent.

Source: “Foreclosure Scam: 530 Charged for Allegedly Defrauding 73,000 Homeowners,” The Associated Press (Oct. 9, 2012) and “Feds Charged 530 in Crackdown on Mortgage Scams This Year, Holder Says,” The Washington Post (Oct. 9, 2012)

Scammers Post Fake REO Rentals on Craigslist

Daily Real Estate News | Tuesday, October 09, 2012  

Freddie Mac’s fraud unit is teaming up with real estate professionals who list HomeSteps homes to sniff out bogus rental ads of REO properties — a growing problem, according to Freddie Mac.

“We’re hearing more reports about fraudsters trying to cash in on the housing crisis’s remaining foreclosed homes by advertising them as rentals on the Internet,” writes Freddie Mac in a recent blog post warning about the Craigslist REO rental scams.

The scam works like this: After a house is sold at foreclosure, a scammer then posts an ad online trying to rent out the home before the new owner moves in. Interest renters then contact the scammer about leasing the property, and they are asked to submit their personal credit information for the lease application as well as two months of rent.

It’s often not until the would-be renters try to move in that they realize they’ve been duped: The key to the house doesn’t work or they find the house is for sale or even that the previous owners are still living there. There have been some cases where scammers change the locks in the house and give the renters a working key. It’s the real estate listing agent who then often discovers the renters living there and the scam.

Freddie Mac and real estate professionals are working together to find the fake Internet rental ads. When they do, they are having the ads removed immediately. They’re also warning renters on how not to be duped from the ads, such as always verifying the home’s status through a listing agent or through county records.

Source: “Caveat Renter: Fraudsters Falsely Advertising REO as Rentals,” Freddie Mac Blog (Oct. 8, 2012)

Home Prices Continue to Rise Over Last Year's Levels

DAILY REAL ESTATE NEWS | WEDNESDAY, SEPTEMBER 26, 2012

More housing reports released on Tuesday showed home prices on the rise. The Federal Housing Finance Agency reported that U.S. home prices increased 3.7 percent from a year ago in the 12-month period ending in July. 

FHFA’s home price index is now at about the same level it was in June 2004. However, it’s 16.4 percent below the peak reached in April 2007. To calculate its housing index, the FHFA uses purchase price data on mortgages owned or guaranteed by Freddie Mac and Fannie Mae. 

Also on Tuesday, S&P/Case-Shiller released a report also showing home prices on the rise for the fourth consecutive month and at their highest level in nearly two years. S&P/Case-Shiller report measures home prices in 10-city and 20-city composite indices. In its 20-city index, S&P/Case-Shiller reported home prices up 1.2 percent compared to a year earlier. 

"The news on home prices in this report confirm recent good news about housing,” David M. Blitzer, chairman of the index committee at S&P Dow Jones Indices, told The Wall Street Journal. “Single family housing starts are well ahead of last year's pace, existing home sales are up, the inventory of homes for sale is down and foreclosure activity is slowing. All in all, we are more optimistic about housing." 

Last week, NAR reported that the median price on existing-homes rose 9.5 percent over year ago levels. The median home price in August is $187,400. 

The increase to the sales price in August was the strongest since January 2006 when median home prices had risen 10.2 percent higher than what they were a year ago. 

The National Association of REALTORS® will release its pending home sales report on Thursday.

Source: “FHFA Home Price Index Now Equals 2004 Levels,” HousingWire (Sept. 25, 2012) and “Case-Shiller Shows Home Prices Rise Sharply Again,” The Wall Street Journal (Sept. 25, 2012)

Voting Obstacles for Foreclosed Home Owners

DAILY REAL ESTATE NEWS | WEDNESDAY, SEPTEMBER 26, 2012

A new report from the Fair Elections Legal Network details the challenges that foreclosed borrowers face when determining where to vote in the upcoming election. 

Foreclosed home owners often must update their addresses and the documentation needed to prove their voting residence, which can be difficult if they have not yet acquired a new residence.  They also must complete these tasks before varying state voter registration deadlines. 

State voting laws pose additional challenges, with only 18 states allowing foreclosure victims to vote based on the address of their foreclosed home until a new residence is established.  Some states have implemented rules requiring voters to show a photo ID with a current address, but foreclosure victims without a permanent residence cannot prove residency in the state and are unable to obtain IDs. 

The report, along with state voting guides, is available online.

Source: "Report: Foreclosure Shouldn't Mean Losing Your Right to Vote" RISMedia (09/24/12)

More Home Owners Lifted From Underwater

Daily Real Estate News | Thursday, September 13, 2012

As values rise, more home owners are finding equity in their houses again, surfacing after being underwater on their mortgage for the past few years, according to the latest data from CoreLogic.

In the second quarter, 10.8 million, or 22.3 percent, of home owners owed more on their mortgage than their house is currently worth, which is down from 11.4 million — or 23.7 percent — in the first quarter, CoreLogic reported Wednesday.

Often, the fear among the industry with underwater home owners is that they will be much more likely to stop making their mortgage payments and walk away from their properties. However, the majority of underwater home owners — 84.9 percent — are up to date on their mortgage payments despite the decrease in the value of their homes, according to CoreLogic.

“The level of negative equity continues to improve with more than 1.3 million households regaining a positive equity position since the beginning of the year,” says Mark Fleming, chief economist for CoreLogic. “Surging home prices this spring and summer, lower levels of inventory, and declining REO-sale shares are all contributing to the nascent housing recovery and declining negative equity.”

The highest number of underwater home owners are in Nevada (59 percent), Florida (43 percent), and Arizona (40 percent).

Source: CoreLogic

Home Prices Signal Recovery May Be Here

NEW YORK (CNNMoney) -- A sharp boost in home prices during the spring could signal a recovery in the long-suffering U.S. housing market, according to an industry report issued Tuesday.
  
The S&P/Case-Shiller national home price index, which covers more than 80% of the housing market in the United States, climbed 6.9% in the three months ended June 30 compared to the first three months of 2012.

"We seem to be witnessing exactly what we needed for a sustained recovery; monthly increases coupled with improving annual rates of change," said David Blitzer, a spokesman for S&P, in a statement. "The market may have finally turned around."

Two other key indexes covered in the S&P/Case-Shiller report also showed gains. The 20-city index was up 6% for the quarter and the 10-city index rose 5.8%.

National prices were up 1.2% compared with a year earlier, and the 20-city and 10-city indexes also gained year over year. It was the first time all three measures showed positive annual growth rates since the summer of 2010, when generous tax credits for homebuyers were in place.

There have been several positive industry reports over the past several weeks. In July, new home sales were 25% better than a year earlier; existing home sales gained 10% year over year; and developers applied for 30% more residential building permits.
  
The steep increase in home prices "feels really good after six years of straight down," said Mark Zandi, chief economist of Moody's Analytics.
  
He cautioned that the results may overstate the case for the housing recovery a bit. The mix of homes being sold has changed lately, with fewer repossessed homes on the market. Those sell at big discounts to conventionally sold homes and had been propelling prices downward.
  
The home price improvement is expected to have a positive impact on foreclosure rates, according to Michael Fratantoni, vice president for research and economics for the Mortgage Bankers Association.
Foreclosures have already been falling and could drop some more if the upswing in home prices continues.
  
As home values increase, home equity rises, and fewer mortgage borrowers will be underwater, owing more than their homes are worth. That will give them an asset to tap should they run into a tight financial patch.
  
An improving housing market will also give homeowners more confidence in the investments they've made in their homes.
  
"There has also been a lot of concern about strategic defaults," said Fratantoni. "That should ease now. When home prices go up, people have a financial incentive to hold onto their homes and they're less likely to walk away."
  
Rising prices are likely to push potential homebuyers off the fence, where many have been waiting out the price decline, according to Doug Duncan, chief economist for Fannie Mae.
  
"Their perception that we hit the bottom takes out the risk of buying into a falling market," he said. "That should increase demand, particularly if they also believe that mortgage rates have reached a bottom as well."
  
Each of the 20 cities covered in the report recorded a gain in June, compared with a month earlier. Detroit prices jumped 6% for the month, the most of any city. Minneapolis prices climbed 4.8% and Chicago prices rose 4.6%.
  
In Phoenix. home prices were 13.9% higher in June than 12 months earlier, the highest gain of any of the 20 cities covered.
  
Several cities were still in negative territory year over year, including Atlanta, where they were off 12.1%. New York prices were down 2.1% on an annual basis, and Las Vegas prices were 1.8% lower.
  
For Zandi, all the positive news on housing carries over to the rest of the economy.
  
"Housing is beginning to act as a tailwind for the recovery," he said.