Apr 8, 2009 12:16 PM — Scott Jagow
This is scary. The San Francisco Chronicle reports that lenders are sitting on hundreds of thousands of foreclosed homes that haven’t even been listed yet. If this “shadow inventory” hits the market, we’ll have a new definition of bottomless pit.
From the article:
“We believe there are in the neighborhood of 600,000 properties nationwide that banks have repossessed but not put on the market,” said Rick Sharga, vice president of RealtyTrac, which compiles nationwide statistics on foreclosures. “California probably represents 80,000 of those homes. It could be disastrous if the banks suddenly flooded the market with those distressed properties. You’d have further depreciation and carnage.”
The Chronicle suggests several reasons why banks might not be selling off their foreclosures:
— The “pig in the python”: Digesting all those foreclosures takes awhile. It’s time-consuming to get a home vacant, clean and ready for sale. “The system is overwhelmed by the volume,” Sharga said. “In a normal market, there are 160,000 (foreclosures for sale nationwide) over the course of a year. Right now, there are about 80,000 every month.”
— Accounting sleight-of-hand: Lenders could be deferring sales to put off having to acknowledge the actual extent of their loss. “With banks in the stress they’re in, I don’t think they’re anxious to show losses in assets on their balance sheets,” O’Toole said.
— Slowing the free-fall: Banks might be strategically holding back some foreclosures so prices don’t fall as fast. “They want to be careful about not releasing them too quickly so they don’t drive prices down and hurt the values,” O’Toole said.
And then, there are people scamming the system. Two dozen people have been indicted for “allegedly conducting a wide-ranging mortgage fraud based in San Diego and led by a street gang member.” From Reuters:
The defendants allegedly used straw buyers and inflated appraisals to purchase homes that had sat on the market for extended periods and had been reduced in price.
They submitted offers that exceeded the homes’ asking prices, and had the overage paid to a shell construction company that they claimed would make upgrades or handicap modifications to the properties, prosecutors said.
The defendants instead disbursed the “kickback amount” to members and associates of the enterprise as payments for their participation, the indictment said.
Lenders later foreclosed on the properties, taking “severe financial losses,” after the straw buyers failed to make payments, the indictment said.
By ALAN ZIBEL and CHRISTOPHER S. RUGABER, AP Business Writers
Top federal and state officials on Monday announced a broad crackdown on mortgage modification scams, accusing "criminal actors" of preying on desperate borrowers caught up in the nation's housing crisis.
Government officials say scammers are seeking to take advantage of borrowers in danger of default by charging them upfront fees of $1,000 to $3,000 for help with loan modifications that rarely, if ever, pay off.
The frauds often involve companies with official-sounding names designed to make borrowers think they are using the Obama administration's efforts to help modify or refinance 7 million to 9 million mortgages.
Officials say such operations almost always are fraudulent, and that help is available for free from government-approved housing counselors.
"These predatory scams callously rob Americans of their savings and potentially their homes," Treasury Secretary Timothy Geithner said. "We will shut down fraudulent companies more quickly than before. We will target companies that otherwise would have gone unnoticed under the radar."
The Federal Trade Commission has sent warning letters to 71 companies it says were running suspicious advertisements. The agency also said it filed three new complaints against Northridge, Calif.-based Federal Loan Modification Law Center LLP, Newport Beach, Calif.-based Bailout.hud-gov.us, and Clearwater, Fla.-based Home Assure LLC, and the operators of those companies.
The FTC last month filed cases against two other companies: Hope Now Modifications LLC and New Hope Modifications LLC.
Attorney General Eric Holder says the FBI is investigating about 2,100 mortgage fraud cases, a 400 percent increase from five years ago.
"If you discriminate against borrowers or prey on vulnerable homeowners with fraudulent mortgage schemes, we will find you, and we will punish you," Holder said.
Over the past year homeowners have been flooding state attorneys general with complaints about for-profit loan modification consultants. While some are legitimate, authorities say many are con artists.
"Stay away from anyone who says they will save your home in return for money up front," Illinois Attorney General Lisa Madigan told reporters in Washington. Such claims, she said, "are almost always scams."
Homeowners do not have to pay anything to participate in the administration's Making Home Affordable program, which seeks to prevent foreclosures by making mortgages affordable through refinancing or modified terms.
Other signs of a mortgage scam, according to the FTC are: promises to stop foreclosure or modify a loan; guarantees that your home will be saved and claims of a "97 percent success rate;" and use of official-sounding names.
Roadside billboards in places like Las Vegas scream, "Save my property!" and radio ads promise "expert help." Some companies comb property records and send mail designed to look like it is from the homeowner's lender.
Some of those making the offers to help are former brokers, agents and appraisers who've seen their previous business evaporate. But it's difficult to gauge if even the legitimate consultants are more effective than nonprofit credit counselors who also work with lenders at no charge.
Some states recently have toughened penalties for perpetrating foreclosure scams, and some prosecutors have used existing fraud statutes to bring criminal charges. But many state prosecutors have not filed criminal cases, instead proceeding with civil lawsuits.
Homeowners can locate free housing counselors at http://www.makinghomeaffordable.gov or by calling (888) 995-HOPE.
Jason Donn
As many of you know Credit Repair Companies are a dime a dozen. Most of the credit repair companies I have come in contact with charge around $500 or some sort of monthly fee. From the feedback I have received, most of them are not very good.
In an effort to find a VERY GOOD credit repair company I started researching them and met with several. 1 or 2 seemed to be very good but charged an arm and a leg. I finally found one that was not only superb but were also reasonable in their pricing. In addition, they have a money back GUARANTEE. I have already referred them to many Real Estate Brokers and Mortgage companies with phenomenal results.
One of the reasons this company is so good is that the President of the company was a former high level executive with Experian.
I would love to share more information on this company with you. If you are interested, please email me at jason.donn@yahoo.com or call me @ 954-892-6244.
Jason Donn
Posted by Scott Van Voorhis
Looks like the foreclosure epidemic is getting its second wind.
The first wave of foreclosures featured homeowners duped into buying homes they couldn’t afford with goofy, subprime loans. Not to mention a whole lot of small-time investors who bought units in hopes of flipping them for big profits, as well as a just outright fraudsters who used straw buyers to create artificial sales.
But much of that first wave of crazy subprime mortgages gone bad has already crashed into the housing market and economy. Now we are starting to see the second wave, regular homeowners who are losing their jobs and their homes due to the economic downturn, of course triggered in part by the subprime fiasco.
Anyway, that is the way some are reading the latest foreclosure stats, with the number of troubled mortgages rising to 7.8 percent of all home loans, the highest since 1972, Bloomberg reports. Loans actually in foreclosure now amount to 3.3 percent of all mortgages in the country, an all-time high.
The Mortgage Bankers Association is pointing to the deepening recession and job losses as a key factor behind the growing number of bad loans.
Let’s just hope President Obama’s $75 billion lifeline to homeowners in trouble works a bit better than the now long list of previous multibillion-dollar rescue plans rolled out by the federal government and several states, including Massachusetts.
Still, even the president’s ambitious effort won’t help you if you’ve lost your job and have no money at all to pay your mortgage.
NEW YORK (AP) — Citigroup Inc. said Tuesday that it will lower mortgage payments for some homeowners to an average of $500 a month for three months as part of a new program to help the unemployed.
The struggling bank makes the move as President Barack Obama looks to lenders to adjust the way loans are handled.
Citigroup's new mortgage efforts also come on the heels of the latest attempt to bail out the company, which includes the U.S. government's exchange of up to $25 billion in emergency bailout money given to Citigroup for as much as a 36 percent equity stake in the company. The deal between the Treasury Department and Citigroup represents the third rescue attempt for the bank in the past five months.
Unemployed homeowners who may qualify for assistance from Citigroup under the Homeowner Unemployment Assist program include those that are 60 days or more past due on their mortgages or in foreclosure and can pay the reduced amount. Customers must also have a first mortgage loan that is owned and serviced by CitiMortgage Inc. and conforms to government sponsored enterprise limits. The house must also be the customer's primary residence, with homeowners meeting all insurer and guaranty requirements.
"Our Homeowner Unemployment Assist program is intended to serve as a bridge toward a longer-term solution, helping homeowners stay in their homes and in their communities while they get their feet back on the ground," CitiMortgage Chief Executive Sanjiv Das said in a statement.
Citigroup predicts thousands of homeowners may be eligible for the program over the next two years.
Those that partake in the program and are still without jobs after three months will have their mortgages handled on a case-by-case basis to come up with the best payment option, Citigroup said. Others that find work within the three-month period can go back to paying their original mortgage amount or receive a long-term loan modification if qualified.
The program may also be expanded to include customers that are in early delinquency stages or are current on their mortgage at a later point in time once an initial evaluation of the program is complete.
Homeowner Unemployment Assist is part of the bank's existing Citi Homeowner Assistance, which tries to help customers avoid foreclosure.
One of the hardest hit banks by the ongoing credit crisis, Citigroup is in the process of shedding assets and cutting staff as it looks to reduce costs and streamline operations ahead of splitting its traditional banking businesses from its riskier operations. In January the company reached a deal to sell a majority stake in its Smith Barney brokerage unit to Morgan Stanley.
In premarket activity Tuesday, Citigroup shares climbed 11 cents, or 9.2 percent, to $1.31.
Specializing in Social Media for Real Estate.
Specializing in Social Media for Real Estate.
ActiveRain Corp. is not responsible for the accuracy of the site's content (which is written by members of the ActiveRain Real Estate Network) and does not endorse the views of the real estate agents, mortgage brokers, and others listed here.
Powered by the ActiveRain Real Estate Network
© 2009 ActiveRain Corp. All Rights Reserved
