Flooding the news this week are announcements of new and existing foreclosures being suspended due to national attention regarding the legality of lender’s review of paperwork and transfer of title. Attorney Generals in all 50 states have launched investigations regarding lender’s foreclosure proceedings.
Every state processes foreclosures differently. Unlike California, many states require judicial review of foreclosure proceedings. Allegations have surfaced in 23 states stemming from the involvement of the court system and the associated documentation and transfer of title.
So what are the allegations?
Law firms in these 23 states review foreclosure documentation in the course of this judicial process. Investigations now contend that this documentation was outsourced to “robo-signers” who claim they signed 8,000-10,000 documents per month at a rate of about a minute per document. Lawsuits are being filed stating that missing signatures were forged and that proper review of documents was impossible under that timetable.
For more news regarding role of "robosigners," here is a recent New York Times article
California, on the other hand, does not involve the court system in foreclosure proceedings. There may be “robo-signers” employed on behalf of banks, but that is still to be determined. Bank of America, to date, is the only bank to halt foreclosures in California and claims there is no wrongdoing. Other mega-banks such as JP Morgan and Wells Fargo are reviewing the roles of robo-signers in their organizations but have not halted any foreclosures in California to date.
That hasn’t stopped California lawyers from getting involved however. Here’s a recent story on California foreclosure
In the midst of banks failing and crises occurring, it was common for loans to change between multiple lenders. The transfer of title was largely outsourced to a firm called Mortgage Electronic Registration System (MERS). When foreclosures began to build this company was used to initiate proceedings. Now, the question is whether MERS had a legal right to handle these foreclosures if they didn’t actually own the loans. Even more alarming, investigations are underway as to whether MERS complied with individual state and municipal requirements regarding registering change of title. Which means if a loan was sold from Bank “A” to Bank “B” but MERS did not complete all paperwork finalizing the transfer, then when Bank “B” forecloses on the home and an homebuyer buys it and moves in, did Bank “B” actually have the right to sell that home?
For more news regarding role of MERS, here is a recent USA Today article
All of these investigations and news are still too early to know where it will go. California has a clearer transfer of title due to courts not being involved. But, in our litigious state that does not necessarily mean safety for home buyers. Here is a recent story of a California attorney advising clients to break into their foreclosed home after it was purchased and rehabbed by an investor: HousingWatch.com
Now, I believe stories such as these are isolated circumstances. Logically, I would say that within California this foreclosure investigation will only be a blip in which reviews of foreclosures will extend escrow timelines and homes may be delayed in being foreclosed due to increased paperwork and scrutiny. But, with the volume of homes and money involved in these types of investigations, frivolous California lawsuits could change that scenario. It’s too early to say.
Sellers whose homes are unaffected by this foreclosure investigations have a competitive advantage. They can offer buyers delay-free, stress-free escrows that are quite attractive. Nearly half active homes currently for sale in the Fresno area are foreclosures or short sales. Bank of America is the largest provider of those properties, which makes “seller-owned” homes a hot commodity.
Fresno, California is currently ranked as one of the “Top Ten Cities” in the nation to buy a home for a good reason. Fresno is currently one of the cheapest places to buy in the United States in comparison to rental rates. Selling prices (except for a brief blip in June due to conclusion of first time home buyer credit) has averaged between $94-$97 per square foot in Fresno County in 2010. This means that if you bought a house a year ago or today, the average home price would only have varied $5000. In contrast, between 2007 and 2008, average home prices dropped from $160 to $108 per sq. ft. which equates to about $100,000 difference in price! So, prices are low and steady in the area and buyers shouldn’t hesitate to buy if the right home comes along.
To view homes for sale visit: HomesInFresno.com
Home Affordable Foreclosure Alternatives (HAFA)
You may have received a letter from your lender notifying you of a new government programs for homeowner mortgage assistance called "Home Affordable Foreclosure Alternatives (HAFA)." This program appears to hold some promise for streamlining the lengthy short sale process and also offers incentives for homeowners and lenders to participate. Here's some of the basics for those currently upside down on their home:
What is a Short Sale?
A homeowner works with a local realtor to sell their property for a current market rate and the mortgage lender agrees to accept the net proceeds of the sale even if the proceeds are less than the total amount due on the mortgage.
What is HAFA? - http://makinghomeaffordable.gov/hafa.html
First, the program promises a speedier, smoother process for processing a short sale. Through pre-approving HAFA participants, pre-determining listing prices with agents and setting a timeline for the active marketing of homes the program attempt to streamline some of the delays and frustrations for buyers and sellers.
Second, HAFA provides incentives for borrowers and banks to proceed with a short sale. Borrowers who participate will receive $3000 in relocation expenses at the close of escrow and assurance that they are not responsible for any remaining debt or obligations on their first mortgage. Lenders such as Freddie Mac also states that your home cannot be foreclosed upon if you are actively complying with the HAFA short sale program.
If the short sale does not succeed (no offers submitted for an acceptable amount with 120 days) then the homeowner can obtain a Deed-in-Lieu instead of foreclosure proceedings. A Deed-in-Lieu is where a homeowner voluntarily transfers ownership of the property to the lender instead of the lender legally seizing the property through foreclosure.
Is My Lender a Participant in HAFA?
View comprehensive list at: http://makinghomeaffordable.gov/contact_servicer.html
What about Freddie Mac and Fannie Mae Loans?
Yes, as of August 5, 2010, Freddie Mac and Fannie Mae federally backed mortgages. If you're not sure if you have a Freddie Mac or Fannie Mae loan, you can check at the links below. Either way, you would call the number on your loan statement to start the prequalification process:
Do you have a Freddie Mac Loan? - http://www.freddiemac.com/mymortgage/
Do you have a Fannie Mae Loan? - http://www.fanniemae.com/loanlookup/
Do I Qualify for HAFA?
The first step for qualifying is to first request a "loan modification" to determine if it is possible to adjust your current loan to make it more affordable. This program allows homeowners to continue to own their home at lower monthly payments. You would call your lender and ask if you qualify for the "Home Affordable Modification Program" (HAMP).
If you find that you do not qualify for HAMP, here are the HAFA requirements:
If you answered "Yes" to these questions then you passed the basic requirements and you should contact your lender to dive into more of the details on your loan.
If I Don't Qualify for HAFA does that mean a short sale is not an option?
A short sale is still an option for anyone that owes more on their home than it is currently worth. Not qualifying for HAFA simply means the additional government incentives such as the relocation reimbursement are not available.
Does HAFA work?
Now, that's the big question. There is certainly a need to streamline the short sale process. As of today (August 13, 2010) in the Fresno County local market, there are 1,354 active short sale properties for sale. Those homes have lingered on the market for an average of 137 days. This past month, a whopping 42% of all sold short sales sold in July (121 properties) had been on the market longer than 120 days before selling.
I've listed and closed nearly 50 short sales in the past two years and the review process by lenders, investors and mortgage insurance providers has stretched from 30 days to over a year. So, consequently I'm skeptical of improvement until I see this program in action.
So far, I have two HAFA qualified short sales actively on the market with Bank of America and Wells Fargo. Wells Fargo's HAFA program currently appears much more automated. We were able to obtain HAFA pre-qualification for our client by emailing documents on their behalf. Bank of America, on the other hand, required communication directly with our client through a separate HAFA phone number and could only send documents through US Mail. In that specific case, the documents never arrived and our client had difficulty understanding the requirement complexities by phone. So, the frustration of not being able to communicate directly with Bank of America on our client's behalf is complicating any pre-qualification. In the midst of those delays, the buyer found another home and we are back to the starting point.
So, no successful HAFA short sales to date, but the program is new. I would still encourage anyone who believes they qualify to consult their lender and start the process.
Interested in a Free Assessment of Your Home for a Short Sale?
HAROLD PENNER: Fresno Real Estate Market Analysis
Fresno Condos: A Good Buy?
One of the questions often asked by clients is, "Are condominiums a good investment in the Fresno County area?"
Current Price:
Certainly, the price is compelling. Investors, first time home buyers and retirees are currently picking up Fresno County condos for an average of $106,354 (approx. $74 per square foot). That means mortgage payments hover around $800 for a 1,200 square foot condo. For many buyers, condos provide an extremely affordable and attractive option.
So price isn't the question right now. But, should you buy is the question. The Central Valley is traditionally a single family home environment. Is there enough demand for condos in Fresno? With volatile real estate swings how does the value of condos compare with traditional homes?
Current Demand:
Well, if there was ever a time to judge the staying power of condos through tough real estate times, it is now! The statistics are interesting. Comparing single family home sales from the height of the real estate boom (typically viewed as 2005) to today, the number of homes sold has remained relatively constant. When viewing Fresno County condo sales under the same parameters, there were 62% less condos sold in the first half of 2010 than in the same months of 2005. One explanation for this reduction in sales is the relative halt of apartment conversions into condo developments.
Current Bank Owned Sales:
This would seem to suggest that condos are a much more questionable investment than traditional homes. Yet, when you dig deeper you find that of these 2010 sales, the percentage of single family homes and condos sold as foreclosures and short sales is nearly identical. 63% (2,445 of 3,851 sales) homes sold in 2010 to date were foreclosures and short sales compared to 62% of condominiums (85 of 137 sales).
Also, while the numbers are certainly jarring for those owning homes, the overall worth of these two different types of properties dropped at a similar pace in our area. The average single family home purchased today would be 54% less in value in Fresno and Madera County than in 2005. The average condo is close behind with a 58% reduction in value.
Overall Value:
So, yes, condos plummeted in value within our area. But, they are keeping pace with traditional home sales in percentage of value. Prices for both types are currently flattening out. If you compare sales in January 2010 vs. May 2010, the average price per square foot of both types of homes rose $4 each. In Fresno County, condos in January sold for an average of $70 per square foot and last month sold for $74. Single family homes selling for $97 per square foot increased to an average of $101 for May.
So, bottom line, for those who may desire the simplicity of a condo but worry that they aren't as secure an investment as a home, the numbers should speak for themselves. There may not be as many condos on the market today as in the past, but they are here to stay!
Contact my office for the latest Fresno real estate deals!
JUNE MARKET STATISTICS* - Fresno and Madera Counties
*Unless otherwise indicated, all stats are based on residential sales in Fresno and Madera counties.
HAROLD PENNER: Fresno Real Estate Market Analysis
Craigslist Real Estate Scams
As with any form of free online advertising, Craigslist.org provides a perfect vehicle for scammers to prey upon people searching for real estate. These scams are now taking on a disturbing level of sophistication. Scammers are now copying descriptions and pictures of active homes for sale from public real estate sites such as realtor.com, trulia.com, and others. Those homes are then re-posted as rental properties on Craigslist for low monthly rent. The actual name of the seller is used (most likely obtained by public tax assessor records) but with a false email address.
Recently, a client was shocked to learn that his home had been posted for rent on Craigslist when he discovered prospective renters exploring his backyard. The email explained the presence of the for sale sign by stating that the house had been pulled off the market and the sign would be taken down shortly. My office also received a frantic call from a renter who wired a large rental deposit for this home to the scammer.
Here are some ways to avoid being scammed:
Here are some helpful links:
http://www.craigslist.org/about/scams
http://en.wikipedia.org/wiki/Advance-fee_fraud
http://www.rentvine.com/tools/rentalscamquiz/
MAY MARKET STATISTICS* - Fresno and Madera Counties
Avg. Loan Percentage Rate in May 2010 - 4.71% (30 Year Fixed)
*Unless otherwise indicated, all stats are based on residential sales in Fresno and Madera counties.
Click here to visit HomesInFresno.com
HAROLD PENNER: Fresno Real Estate Market Analysis
California Short Sale Tax Awareness!
As many of you know, one of my specialties is short sales. For those who have explored all other options and are faced with the unfortunate reality of being unable to continue to own their home, a short sale is much more advantageous than a foreclosure.
Current Short Sale Statistics
The number of sold short sales (pre-foreclosed homes) in Fresno and Madera county has increased over 30% from last year. 302 homes were sold in 2010's first quarter in comparison to only 206 homes in the first 3 months of 2009.
The irony of referring to these transactions as "short" still remains however. Average days on market was 154 days (over 5 months!) in 2009 and a slight drop to 140 days in 2010. The main reasons short sales fail is due to the delays in banks to review and respond to offers and the subsequent inability of buyers to wait for an answer.
Currently, short sales represent only 15% of the homes sold in our local Fresno and Madera county market. For the patient buyer though, there are some excellent deals available.
To view more regarding the pros and cons of purchasing short sales, visit: Buying Short Sales
Short Sale Tax Information
For those of you who experienced a successful short sale of your principal residence this past year, there is good news regarding taxes. Prior to the housing crisis, if someone were to sell their principal residence (not an investment property) home as a short sale the amount of debt forgiven by the bank would be viewed as taxable income by the state and federal government. So, if your home sold for $50,000 less than what you owed on the home and the bank agreed to forgive that debt, the government would view that $50,000 as taxable income. With the recent state of the housing market, the federal government added provisions that if it is your principal residence this rule does not apply to homes sold before 2013. California had a similar law that expired and those whose homes were sold in 2009 have been in limbo.
On April 12, 2010, the state of California extended that protection to anyone who sells their home as a short sale between 2009 and January 1, 2013. For those who already submitted their 2009 taxes, the state is instructing you to file Form 540X to request an adjustment.
Click here for short sale tax info: Mortgage Debt Relief Law
Contact my office for the latest Fresno real estate deals!
MARCH MARKET STATISTICS* - Fresno and Madera Counties
*Unless otherwise indicated, all stats are based on residential sales in Fresno and Madera counties.
Click here to visit HomesInFresno.com
FEATURED LISTING 
943 Oak Ave., Clovis, CA 93619
Close to Old Town Clovis! A beautiful home in meticulous condition with 3 car garage, within the prestigious Clovis Unified School District. The wood floor entry opens up to a bright living room with vaulted ceiling. The kitchen has black appliances with working countertop that has a great view out to the eating area (with bay windows), back yard and family room. The cozy family room boasts a beautiful brick fireplace. You'll be impressed with the great lighting (cam lights) and the natural light coming through the shuttered windows. The master bedroom has sliding doors to the back yard, vaulted ceiling and 2 windows. Two sinks in the master bath, a shower, no tub. Ceiling fans in all rooms. White interior doors throughout. Wired for security system, but it has never been connected. Long-lasting cinderblock fencing in back yard! What a great place!
Harold Penner has been a leader in the Fresno and Clovis real estate market since 1989. Producing over $25 million in sales annually, Harold is an expert in resale, short sale and foreclosure homes.
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