Let’s Resurrect Assumable Loans
September 29th, 2008 Categories: San Diego Foreclosures, San Diego Market Trends, San Diego Real Estate
The health of the San Diego real estate market hinges not only on home buyer demand, but also the ability of buyers to secure financing. At the same time, lenders are overwhelmed with short sales and foreclosures that hurt not only their balance sheets, but tear down neighborhood values as well.
It’s become an ugly cycle that needs serious correction–and I can’t help but wonder about reviving assumable loans in our real estate markets.
Years ago, as a Texas Realtor, a good percentage of our transactions involved the buyer’s assumption of the seller’s existing loan. Some of those loans were fully assumable, while others required lender approval.
How did this work?
Let’s use a simple example: Seller Jones has an outstanding mortgage balance of $150,000 and is willing to accept a $195,000 sales price. Buyer Smith pays $45,000 plus closing fees and assumes the existing financing. Seller leaves with that amount, less closing costs. Future mortgage payments are now made by Buyer Smith.
In some cases, lenders (and sometimes the Seller) would offer secondary financing to help with the difference between asking and sales price–as long as the buyers had a cash stake in the deal. And sometimes, to help facilitate a transaction, real estate agents took part or all of their commissions as a note.
I can’t help but wonder why mortgage lenders don’t revive the assumable loan, help kick start the real estate market, and save at least a portion of their own and investors’ portfolios in the process?
In many cases, sellers have no equity. Why not allow them to offer their mortgage debt (or renegotiated debt) as assumable financing for potential buyers? Lenders might be relieved to have mortgage payments brought current–and might even require the new buyer to deposit two or three month’s payments with them as insurance against future default.
By allowing assumable financing, lenders would fare much better vis-à-vis short sales and foreclosures–and more homeowners would be able to save their credit and exit their situations with dignity. Most lenders now force homeowners to be in default with their mortgage before they will even consider a short sale or modification of terms.
It just makes sense to get the mortgage debt seamlessly transferred before it ever goes default.
And with strangled liquidity in financial markets, it makes more sense than ever to transfer debt rather than forcing buyers to secure new financing–which may or may not be available.
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Weasels in the Chicken Coop?
September 13th, 2008 Categories: Mortgage News, Real Estate News, San Diego Foreclosures, San Diego Real Estate
As a San Diego Realtor, I am very frustrated at the number of non-responsive and phantom agents representing San Diego foreclosures, REO’s and bank-owned homes. I wonder why on earth lenders would choose such inept real estate representation to list their properties.
I also wonder about the wisdom of placing weasels as keepers of the chicken coop.
We have close friends who have moved in and out of real estate investments very profitably over the past few years—and it is/was not unusual for them to be holding several properties at once. Good friends they are, but they never took our advice about mortgage financing.
Instead, they always used some loan hack who never returned phone calls, was late on all commitments, but somehow managed to get the loan funded—several days late. According to our friends, he could “get any loan funded.”
And he did.
This hack, they tell us, has relocated from the Los Angeles area to San Diego and is now one of those non-responsive real estate phantoms who list foreclosures.
It’s deja vu all over again.
It absolutely baffles me that the very folk who helped create this real estate implosion are now being rewarded by the lenders they duped. I am amazed at the number of listing agents who are also former loan brokers–and wonder how this came to be.
And like Brian Brady and other concerned real estate professionals, I believe that separate licensing should be required of mortgage originators and real estate agents—and that banks and lenders should be vetting their foreclosure representatives more closely.
Far too often, in my opinion, these foreclosure listings are being placed with those who helped put the real estate industry into the tailspin it is today.
More and more, I believe our industry needs to tighten licensing requirements—and offer stiffer penalties for those who knowingly place clients in harm’s way. Consider the licensing requirements for selling stocks and bonds—and the SEC penalties given for misrepresentation.
Does real estate, the most significant investment in most people’s lives, deserve any less-qualified representation?
I think not.
A version of this article originally appeared in the HomeGain Real Estate Blog.
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Revisiting An Appeal for Credit Amnesty
September 8th, 2008 Categories: Real Estate News, San Diego Communities, San Diego Foreclosures, San Diego Real Estate
by Roberta Murphy
I wrote this article a year ago for Luxury Home Digest, and thought it might be time to revisit the idea (see below)–especially since this past weekend’s announcement that the Feds are rescuing Fannie Mae and Freddie Mac.
If those organizations get a reprieve (at the expense of common stockholders and the American taxpayer), why not San Diego’s battered homeowners?
Since publication of this original article, home values in the San Diego real estate market have plummeted (some neighborhoods more than others, of course). And just a couple of months ago, San Diego’s City Attorney Michael Aguirre grandstanded pushed to make San Diego a foreclosure sanctuary, and has sued Bank of America, trying to stop them from exercising that right.
Instead, some wonder, why not provide some protection to homeowners who have fallen victim to short sales and foreclosures in San Diego?
The original article:
There is a tsunami of wrecked credit that has only begun to hit the credit reporting bureaus.
Many of the victims are those whose FICO and credit scores have been demolished by short sales and foreclosures. With the short sales, or short pays as they are sometimes called, the mortgage lender has agreed to accept less than what is owed on the home–and where more is owed on the home than what it is worth. In the case of foreclosure, the home is auctioned off for non-payment. In both scenarios, credit scores of the former homeowners are generally ruined, which will likely prohibit them from purchasing another home anytime in the near future–or perhaps for years to come.
Many will argue against the idea, but perhaps it is time to consider credit amnesty for those who have lost their homes to foreclosure and short sales. Sure, there were those homeowners who were greedy, who used their homes as ATM machines, who foolishly thought the crazed real estate market would continue forever–or at least until they managed to sell at the top of the market.
We have even met a few of those people. They are among the legions who followed real estate flipping shows and late night television gurus. They followed the promises of big and easy money.
But most of the defaulted clients we counsel have a history of home ownership, pay their bills on time, and were lured into mortgage financing that was so easy to obtain and which offered irresistible terms. Most relied on the counsel of a loan broker or real estate agent (often one person who wore both hats), who assured them of the wisdom of such loans.
It was a diabolical match: Gullible and sometimes greedy homeowners paired with greedy and sometimes crooked mortgage and real estate professionals.
The finger pointing can go on for years, but very soon there will be tens of thousands of people who will no longer be able to purchase homes. Add these numbers to the huge pool of buyers who are already afraid to enter the burgeoning real estate market and we have an economic problem of near-Biblical proportions.
I’m not sure how the details of a credit amnesty plan might work (and the devil always lurks in the details), but something need to be done quickly to help bolster buyer capability in this market. To disenfranchise such a large group of home buyers will only magnify the expanding real estate market glut and lengthen its recovery.
And as with any amnesty plan, there will be a percentage of borderline criminals who are more deserving of jail than being forgiven.
But with tougher mortgage loan underwriting, better oversight and raising the bar on real estate and mortgage lending professional standards, the rotten borrowers would be weeded out. This would also encourage the discouraged to stay current with their other debt obligations instead of giving up entirely on their FICO scores and future home buying opportunities.
It might be a solution that could help our markets recover–and credit amnesty just might offer hope to the hopeless. Might not the rewards outweigh the costs?
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Bobcats Take Possession of Southern California Home
September 7th, 2008 Categories: San Diego Foreclosures, San Diego Market Trends, San Diego Real Estate
San Diego real estate hasn’t quite gone to the dogs–yet (though some inland neighborhoods may be coming close).
But Riverside County’s real estate market is another animal entirely.
It seems a family of bobcats has moved into a vacant and foreclosed Lake Elsinore home, according to blogger Peter Viles with L.A. Land Blog (Los Angeles Times). Viles quotes LA Times David Kelly:
(Lake Elsinore) Neighbors first noticed the feline squatters Aug. 27 hanging out on a side wall of the empty house in the Tuscany Hills development…. The foreclosed home is one of several on the block. Its lawn is brown but still being watered by the sprinklers. The house sits right up against barren, chaparral-covered hills.
At least two adult bobcats and perhaps a litter of young ones appear to be occupying the house. Residents have mixed emotions about their new neighbors.
Human locals don’t appear very upset over their new neighbors, and some even appear to delight in their presence. Some of the funny comments from readers, though, are a hoot:
They could have easily qualified for a loan last year….now they just squat.
There are still some fat cats benefiting from the real estate market.
They could have easily qualified for a loan last year. Now they just squat.
This will be one REO with a bonus for the lender.
Cats on a bank-owned roof: Bobcats claim foreclosed house | L.A. Land | Los Angeles Times
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A Most Unorthodox Market: Bob Dyson
September 1st, 2008 Categories: At Home in Del Mar, Real Estate News, San Diego Foreclosures, San Diego Market Trends, San Diego Real Estate
by Roberta Murphy
Last Thursday, I had the opportunity to sit across from Bob Dyson at his office in Del Mar and listen to this real estate legend discuss today’s real estate market. We were also fortunate to have Chris Dyson videotaping much of the discussion, which we have divided into four segments.
At the start of our interview, Bob Dyson said these are the worst conditions he has seen during his 40 years in the real estate business–citing symptoms such as lack of buyer confidence and the drastic deflation in certain real estate markets–including San Diego, of course, along with the rest of California, Nevada, Arizona and Florida.
The causes stem from irresponsible mortgage lending practices from 2003 to 2007 and the resultant and reactionary tightening of mortgage funds. Dyson simply calls it a “lending debacle.”
At the same time,he says, there is a large and growing backlog of buyers who want to buy–and are just waiting for reassurance that the real estate market has really bottomed, or is at least close to that point.
See below (and stay tuned for a radical solution):
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