Wednesday, November 12, 2008
Underwater in California and Across the US
Credit Card Debt Forgiveness Could Be On the Way
Is Credit Repair "Fixed"?
Borrowing Against Equity Is Getting Rare
High End Homes Move at a Snails Pace
What is a 'Good' Credit Score
The "Green" Curb Appeal
When is a Recession a 'Recession', Maybe Now!
Nearly One-Fifth of US Homeowners Upside Down on Their Houses
Appreciation is the Name of the Game
400,000 Countrywide Mortgage Holders to get Some Relief
Monday's deal settles claims brought by attorneys general in 11 states that accused Countrywide — acquired in July by BofA — of misrepresenting loan terms, loan payment increases and borrowers' ability to afford loans.
Bank of America says it will restructure loans for Countrywide customers holding subprime mortgages and option adjustable-rate loans that permit borrowers to pay only a small portion of interest and principal owed each month. Some might wind up in new fixed-rate loans; others might not.
But the Bank of America deal represents only a fraction of the future defaults and foreclosures facing homeowners. There were more than 2.2 million foreclosure filings in the USA in 2007.
"There could be a couple million more (foreclosures to come), so it begins to put a price tag on the problem and how expensive it is," says economist Joel Naroff at Naroff Economic Advisors.
Pat Lashinsky, CEO of ZipRealty, says as many as 6 million homes will have gone through a short-sale or foreclosure before this housing slump is finished.
Expect more states to file claims against predatory lenders, predicts Roger Cominsky of Buffalo, a lawyer at Hiscock & Barclay who specializes in financial institutions and lending issues.
Under the terms of the agreement with Bank of America, eligible homeowners must occupy the home as their primary residence. Their mortgages must be seriously delinquent — or likely to become so. Loans must have been serviced by Countrywide and originated prior to Dec. 31, 2007. Modifications will include lower interest rates and principal reductions.
How borrowers will be helped:
•First-year payments of principal, interest, taxes and insurance will be restructured to equal 34% of borrower's income.
•Effective immediately, no foreclosure sales can be initiated or proceed against borrowers who are likely to qualify for loan modification until a final decision is made on eligibility.
•No restructuring fees will be charged. Prepayment penalties will be waived.
"We will be proactive," says Bank of America's Daniel Frahm. "Effective Dec. 1, we'll start reaching out to homeowners."
Some $150 million has been set aside for borrowers in certain states who suffered foreclosure or are at serious risk of foreclosure, and another $70 million is earmarked for relocation assistance to borrowers unable to keep their homes.
The attorneys general in West Virginia, California, Connecticut and Illinois had sued Countrywide over its business practices.
"Countrywide's lending practices turned the American dream into a nightmare for tens of thousands of families by putting them into loans they couldn't understand and ultimately couldn't afford," California Attorney General Edmund Brown said Monday in a statement.
JP Morgan Agrees to Keep Customers out of Foreclosure
(Bloomberg) -- JPMorgan Chase & Co., the largest U.S. bank by market value, said it won't begin new foreclosure proceedings on some loans while it finds ways to make payments easier on $110 billion of problem mortgages.
Within the next 90 days, the bank, which two weeks ago accepted a $25 billion cash infusion from the government, will examine loans and may agree to reduce interest rates or principal amounts, New York-based JPMorgan said today in a statement. It will also open 24 centers to provide counseling in areas with high delinquency rates.
Congress has been urging financial-services companies to work with borrowers and avoid foreclosures, which rose to the highest on record in the third quarter. Bank of America Corp. said it will help more than 630,000 at-risk borrowers stay in their homes. States pivotal to the Nov. 4 U.S. election, including Florida, Ohio and Nevada, had some of the highest foreclosure rates, according to data compiled by RealtyTrac.
``Politics is playing such a huge role in this process, the banks have to be very cognizant of how they're perceived,'' said Charles Peabody, partner and research analyst at Portales Partners LLC in New York. ``What they want to do is show they deserve this good deal from the government by helping out the average man.''
Federal Deposit Insurance Corp. Chairman Sheila Bair has proposed a plan to guarantee mortgages to help stem foreclosures, according to two congressional aides briefed on the matter. Her idea is to use as much as $50 billion of the $700 billion financial-services industry bailout package approved by lawmakers this month.
`Welcome Development'
Bair called the JPMorgan plan a ``welcome development'' for the $10.6 trillion mortgage market.
``A clear consensus is emerging that broad-based and systematic loan modifications are the best way to maximize the value of mortgages while preserving homeownership,'' Bair said in an e-mailed statement. That process will help ``stabilize home prices and the broader economy,'' she said.
The JPMorgan program is expected to help 400,000 families with $70 billion in loans in the next two years, the bank said. An additional 250,000 families with $40 billion in mortgages have already been helped under existing loan-modification programs.
``We felt it is our responsibility to provide additional help to homeowners during these challenging times,'' said Charlie Scharf, chief executive officer of retail financial services at JPMorgan Chase. ``We will work with families who want to save their homes but are struggling to make their payments.''
Bank of America
Bank of America announced two plans this year to help reduce customers' payments by as much as $11 billion and keep them in their homes, including Countrywide Financial Corp borrowers. In total, they will cover more than $120 billion in unpaid balances.
Countrywide, the mortgage lender acquired by Bank of America, agreed earlier this month to help about 400,000 customers facing foreclosure or having problems paying their loans as part of settlement with 11 states over fraud complaints.
Citigroup Inc. has modified loans to keep approximately four distressed borrowers in their homes for each completed foreclosure, the New York-based lender said today in a statement.
JPMorgan said today it would hire 300 loan counselors to help delinquent homeowners and employ about 150 people to review each mortgage before it's sent to the foreclosure process. Other employees will be added to staff the regional counseling centers.
JPMorgan, which has lost 5.5 percent this year on the New York Stock Exchange, rose $3.63, or 10 percent, at 4:15 p.m. The KBW Bank Index of 24 companies advanced 4.4 percent.
WaMu, EMC
The bank's program extends to customers of Washington Mutual Inc., the savings and loan JPMorgan agreed to buy last month, and to clients of EMC, the loan-servicing company the bank acquired in its takeover of Bear Stearns Cos.
It is aimed only at homeowners who ``show a willingness to pay,'' the bank said. ``Customers should continue to make mortgage payments to reflect their intent to honor their commitments.''
JPMorgan said it will also donate or offer a ``substantial discount'' on 500 homes to community groups in order to stabilize local markets.
``We thought now was the right time to come out with what we hope is an industry-leading way to deal with this problem that's affecting all of us,'' Scharf said in an interview.
A total of 765,558 U.S. properties got a default notice, were warned of a pending auction or were foreclosed on in the third quarter, the most since records began in January 2005, according to Irvine, California-based RealtyTrac, which sells default data.
Home prices in 20 U.S. metropolitan areas fell in July at the fastest pace on record, and sales of previously owned homes in August were 32 percent below the peak reached in September 2005.
The state of the U.S. economy has become a key issue in the presidential race between Democratic Senator Barack Obama of Illinois and Arizona Senator John McCain, a Republican.
Obama supports an economic stimulus plan to boost the economy, while McCain wants the government to purchase troubled mortgages.
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About Me
- Bob Diamond
- Philadelphia, PA, United States
- Bob Diamond is a practicing real estate attorney, real estate developer, and published author of three books on foreclosure investing. You may be familiar with Bob from his appearances on FOX, NBC, or CNBC or on his real estate radio show. Inside the investor world, Bob is known as the ‘guru’s guru’ and teaches advanced real estate investing techniques including buying discounted liens, notes and judgments, buying out of bankruptcy, short sales, taking under and subject to, straight equity purchases, multi-units and even condo conversions.