Johnny Burke

The CA Attorney General's office has a new website which has info on how to avoid loan modification fraud. I know I have written about this before, but I still get the feeling many homeowners don't quite now where to go to get the information they need. You can find the site here. The latest on the AG's office crackdown on foreclosure "consultants" can be found here. Please help spread the word so more California homeowners can learn about this site.

The House Of Representatives this week passed a bill that would essentially authorize federally-insured depository institutions and banks to lease back houses to occupants of foreclosed properties. The proposed terms of the lease is up to five years. This is a bold move, which is aimed at limiting inventory, which would then hopefully stablilize home prices. The long term effects will vary depending on location, and just how long the defaulted homeowners will be allowed to stay as renters will be up to the bank. You can read more here.

The House Appropriations Committee has approved an extension of the $729,750 loan limits for Fannie Mae, Freddie Mac and the Federal Housing Administration through September 2010. The committee also increased the lending and guarantee authority of FHA and Ginnie Mae, as requested by the Obama Administration. The Department of Housing and Urban Development appropriations bill authorizes FHA to insure $400 billion in single-family loans during fiscal year 2010, up from $315 billion in the current 2009 fiscal year, which ends Sept. 30. The FY 2010 appropriations bill allows Ginnie Mae to guarantee up to $500 billion in securities backed by single-family and multifamily loans. Congress provided the secondary market agency with $400 billion in MBS guarantee authority in the FY 2009 appropriations bill. The massive stimulus bill that President Barack Obama signed in February raised the maximum loan limit for the GSEs and FHA to $729,750. But the higher limit is due to expire at year-end, if the full House as well as the Senate does not approve this bill.

Foreclosure filings hit 1.5 million homes in the first half of ‘09 according to the July 16, 2009 issue of the Wall Street Journal. The foreclosure train wreck continues, as a weak job market and falling home prices pushed foreclosures to a record high in the first half of the year. There are more properties in foreclosure available than ever before in California and while these deals may seem like bargains, many of these properties have more than the usual number of problems.

Jerry Malcome was able to purchase a foreclosure in Sherman Oaks California at a reduced price. However, as soon as he moved into the house the toilet backed up, flooding the bathroom floor with raw sewage, the gas company refused to turn on the gas to the heater because it was listed as a condemned furnace and he had to replace some wiring and lighting fixtures that mysteriously disappeared. The money Jerry saved on the purchase was now going being spent on handling a list of unexpected emergency repairs.

To avoid these kinds of problems a buyer should be aware of the kinds of issues commonly found with abandoned and foreclosed homes:

1. There is often none of the usual transaction disclosure information required when banks sell a foreclosed property and typically they will deny any liability for problems found with the property during the sale process and after the purchase.

2. Many times these homes are poorly maintained and deteriorated because the owner ran out of money and was forced to let their property fall into a state of disrepair.

3. There is often sabotage and vandalism caused by disgruntled owners or vandals. Deliberately damaged walls, windows, and doors, as well as clogged toilets, garbage disposers, sink drains and sewer-lines are quite common.

4. Systems and components get stolen or removed from the property such as light fixtures, appliances, heaters, toilets and cabinets.

5. Pools and spas are left un-maintained or drained and left to deteriorate.

6. Houses left vacant create special issues: Unused sink, tub and shower faucets and drains often become clogged with rust flakes and debris restricting the flow of water.

7. Water, gas and electric services discontinued making it impossible to inspect each of the components and fixtures of the property. A buyer should have all the services turned on so a proper inspection of every system can be done before the deal is closed.

8. Mold and mildew issues are commonly found when buildings are left sealed up for an extended period of time.

A buyer's best protection is to do extensive research and inspections. It should be standard to have professionally performed home inspections, sewer line inspections, chimney inspections, and mold inspections with a foreclosure purchase. Being diligent and thorough can help avoid the nightmare of serious unanticipated costs.

Courtesy of Larocca Inspections

The Federal Trade Commision and Attorney General Gerry Brown revealed lawsuits today filed against companies running loan modification scams in Southern California. You can read about it here. This is good news, but the question remains- How many more of these "operations" will continue to use their advance fee agreements with the CA Dept of Real Estate, and their "attorney affiliates" as a license to steal? It isn't a secret anymore that loan modifications are not granted to just anyone because of lender/investor criteria, so why justify up front fees when it is most likely not going to be approved anyway? What I still don't understand is why many homeowners will often lose part of the "retainer fee" when the modification is unsuccessful. This "fee" should be put into a trust fund until the modification works. If it doesn't, they get their money back. there are a few loss mitigation companies who do just that- this should be the standard for all of them.