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GL sent in this question:

I have a question, which maybe other people who read your blog might be curious about as well:

My parents, who live in Las Vegas, own a second property, a condo that they rent out. They owe about $70,000 on the mortgage. They are model borrowers who have never been late on a payment. Recently, they came into some cash, and are now in a position to pay off the mortgage outright.

Do you think the mortgage lender would be willing to give them a discount if they paid off the mortgage? And if so, how much? Would the fact that this is a second property, and not a primary residence, influence the negotiation, if there is one?

If this were a short sale of a primary residence, the bank would be happy to get $1,000 to $4,000 on a second mortgage in a market like Vegas.  So that is the best-case scenario.

What’s the best strategy?

You have to get their attention if you want a big discount.  Miss your next payment for starters.  I know, that sounds insane, but one 30-day late in this environment isn’t going to kill your credit score, and it’ll recover after a few years.

The minute you go 30 days late, the collectors start calling. Tell them you have no intention of ever making another payment.

Then the week before you go 60 days late, send them a copy of a cashier’s check for $x amount, made out to the bank or cash, and tell them they have a day to decide if they want it.  Mention that you’ll wire the funds today if it’ll make a difference.  Give yourself a couple of days before the 60-day late for them to make a decision.

What’s the right amount? I think they’d do $50,000 in a heartbeat.

I don’t think the primary residence or rental will matter, by the time you get to the collectors, it’s just a loan.

The preisdent will unleash his mortgage/credit crisis rescue plan tomorrow in Phoenix.

Here’s the L.A. Times idea of what it will include: 

In using Arizona as the backdrop to announce his housing plan, Obama is choosing a state hit hard by foreclosures. In January, more than 4,500 homes in Arizona were repossessed, the third highest number in the nation, according to RealtyTrac, a company that collects foreclosure data. Last month, California ranked first.

Obama has dropped hints about the broad outlines of his housing plan, estimated to cost $50 billion to $100 billion. Speaking in Elkhart last week, he said he would push for a new law that allows judges to rewrite the terms of a mortgage for homeowners who land in bankruptcy court.

Without such a law, people are being forced into “foreclosure who potentially would be better off, and the bank would be better off, and the community would be better off if they’re at least making some payments, but they’re not able to make all the payments necessary,” Obama said.

The following day, in Fort Myers, Obama outlined an arrangement in which banks would accept lower payments from homeowners in return for an equity stake once housing prices recover.

A Democratic congressional aide said Monday that Obama’s housing plan will have two pieces. One will involve changes in law that can only be made by Congress — such as empowering bankruptcy judges to restructure mortgages. The other will involve actions Obama can take by executive fiat.

I know two homeowners who have told me that they have received a loan modification from their lender.  Their tax rolls don’t show any new recording of loan documents, so if that’s the norm, the lenders aren’t leaving any public evidence of who is getting a break from loan modifications.

Those who are in bankruptcy are public record, though not on the tax rolls.  Will those who opt for the equity-share program get a new trust deed recorded?  They should, anyone who has a stake in the outcome of a sale would be crazy not to record their interest.

We’ll keep an eye out for how the equity-share program gets handled – they don’t have to record a new deed, the lenders could mention it when they get notified of the future sale.  If nothing new is recorded, we’ll never know who benefitted.

Wasn’t there going to be accountability this time around?

Listen carefully tomorrow to hear if there is going to be any public tracking of the equity-share program.  Without public scrutiny, how will we know how our tax dollars are being spent? 

At what point will the taxpayers revolt?

Chula Vista’s real estate problems are well known, but this street will make your head spin. Eighty percent (12 of 15) of the original owners had mortgages over $1.2 million, and 5 of 15 have already been foreclosed, or are in the process. 

An example of how you can lose 40% in three months….

Reader ‘no bubble here’ sent along the link to the U-T’s map on their estimates of how many homeowners owe more than their house is worth. Click on it for a bigger image:

Is the ‘spring selling season’ getting started?

It depends where you look. The areas that have been hard hit by foreclosures and have seen rapid depreciation have been selling like hot cakes (San Marcos, Oceanside and Vista), and the higher-end areas are loaded with sellers that “aren’t going to give them away”.

Here are the areas ranked by the lowest ratio of actives to pendings, plus their number of new active listings since February 1st/number of new pendings since February 1st:

Detached Actives/Pendings

In the 2000-2004 time frame, the ratio was around 2:1, with the hottest times as low as 1:1.

Score Guide

0-3 Hot market

3-4 Regular market

4-5 Market in trouble

5-7 Too many choices

7+ Freefall

The California DRE announced that they are doubling the cost of getting a real estate license.

A salesperson license went from $120 to $245, and a broker’s license will now cost you $300, instead of $165.

Are you renewing late?  Oh boy, the late fee went from $180 to $367 for a salesperson’s license, and from $248 to $450 for a broker.

The change is probably due to the state budget, but it appears the realtor population is dwindling. 

Here are the number of license tests taken in December:

An 89% drop in license tests between Decmeber 2005 and 2008!

The total licensee population has finally started to decline too, although when you’ve seen where we’ve been, you can’t help but think that we have a ways to go:

DOW JONES NEWSWIRES

WASHINGTON -(Dow Jones)- JPMorgan Chase & Co. (JPM), Citigroup Inc. (C), Bank of America Corp. (BAC) and Wells Fargo & Co. (WFC) have committed to temporary moratoriums on foreclosures as the government works on a financial stability plan slated to include billions of dollars aimed at keeping people in their homes.

“We will not add to the foreclosure process any new owner-occupied residential loans that are owned and serviced by JPMorgan Chase,” the company’s chief executive, Jamie Dimon, said in a letter Thursday to Rep. Barney Frank, D-Mass., chairman of the House Financial Services Committee.

The moratorium on new foreclosure actions will remain in effect through March 6 and is similar to a 90-day foreclosure freeze JPMorgan announced Oct. 31.

“We believe three weeks is adequate time for the Treasury to announce – and for us to implement – a new plan,” Dimon said.

Citigroup in a statement issued Friday said it will place a moratorium on foreclosures for all Citi-owned first mortgage loans that are on principal residences and on loans for which understandings with investors have been reached. The moratorium is scheduled to last until March 12 unless the government finalizes a loan-modification program before that date.

Bank of America on Friday said it will delay foreclosure sales on owner- occupied properties whose mortgage loans are owned and serviced by it or Countrywide Financial Corp. through March 6. Bank of America acquired Countrywide in July.

“If the program’s development is not complete in three weeks, we will consider a possible extension,” a Bank of America spokeswoman said.

Wells Fargo, which recently acquired Wachovia Corp., has imposed a moratorium on foreclosures for loans it holds, company spokesman Kevin Waetke said Friday. That moratorium is expected to remain in place until the government’s foreclosure prevention plan is announced.

The majority of Wells Fargo’s mortgage loans, however, are serviced by it and owned by other investors. The company is “working with these investors and related contractual commitments to determine how we will support the moratorium request,” it said in a statement issued Friday.

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Here are the current counts of bank-owned SFRs and condos in San Diego County – these ought to be enough to tide us over for a month, but get the train back on the tracks soon!

Citigroup – 168

Morgan Stanley – 205

JP Morgan Chase – 265

WFB/Wachovia – 417

Bank of America – 1,725

Total – 2,780

We know that there are over 10,000 bank-owned properties currently in the county, so I doubt that I picked up every one owned by these four lenders.  The BofA count includes Countrywide, Bank of New York, Deutsche, and US Bank, plus the private-label CWabs.

Dear Fellow REALTOR®,

Here’s our take on the Stimulis Bill and Treasury announcements made this week. We look at the Stimulis package AND the Treasury’s package holistically, in compliment with each other – mostly because that’s how the Obama team is looking at it. Your representatives, the NAR Board of Directors, asked us in November to do 4 things (with an unspoken but clearly understood mandate to PRESERVE what we already have). Here they are: 1) get loan limits raised for high cost areas, 2) make the $7,500 tax credit NOT a loan, 3) try to find ways to push interest rates down (which are higher than they should be due to systemic risk right now) by 200 basis points, and 4) help provide solutions to the foreclosure/short sale problem.

So here’s what we have achieved: 1) the loan limits will be raised to $727,000 in high cost areas, 2) the tax credit will be raised to $8,000 with NO payback [a true credit], 3) interest rates have come down 125-150 basis points, and 4) the bill has over $50 billion in it for foreclosure mitigation, with Geitners Treasury plan signaling that the second half of TARP and TALF will be used to mitigate foreclosures through a government guarantee, drive down interest rates by buying another $200-300 billion of mortgage paper from the GSES’s thereby freeing them up to do the same with new mortgages, and Fannie has just agreed to lift the cap of 4 investment properties eligible for loans and raise it to 10.

In addition, we preserved what we have – which some tend to forget is always on the table when these negotiations start up again – mortgage interest deductability, real estate tax deductability, and the $250,000/$500,000 cap gains exclusion (an overall package worth more than $100 billion and for some a very attractive funding source for their pet projects).

We did make a run at the $15,000 credit — and we would have loved to have gotten that or the Homebuilders $22,000 credit idea as well as their 5 year loss carryback deal, but they were considered too rich for this program. What it did do though is totally take the debate off of whether a tax credit should be reinstated at all (it expired last year) and whether it was a true credit or a repayable loan, and kept the conversation on how much it should be. It also kept the debate off of ‘what we are willing to give up to get a $15,000 tax credit’ and kept the debate again, on how much it should be. It’s pretty hard to complain when they give you what you ask for and you lose something you never had.

While we study the Treasury specifics on their major role in providing the rest of the housing solution — there is much more to come and we are working diligently with the Administration to help ‘unclog the pipeline’ and get capital flowing into housing again.

Sincerely,

Charles McMillan, CIPS, GRI
2009 NAR President

Hat tip to Kwaping for sending in this link:

http://news.yahoo.com/s/bw/20090213/bs_bw/0908b4120034085635

Some of the gems:

“The industry still has not stepped up to the volume of the problem,” Preston says. One program, Hope for Homeowners — which Bush officials and banks promised last fall would shield 400,000 families from foreclosure — has so far produced only 25 refinanced loans.

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Some from the industry denied a foreclosure problem existed, including Sandor E. Samuels, at the time chief legal officer of subprime giant Countrywide Financial. They vowed to continue selling loans with enticing introductory rates as well as those requiring minimal evidence of borrowers’ income. “We are going to keep making these loans until the last second they are legal,” Samuels later told a fellow participant.

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In a press release last Dec. 22, Hope Now said it had prevented 2.2 million foreclosures in 2008 by arranging for borrowers to catch up on delinquent payments and, in some cases, easing terms. But the data don’t reveal how many borrowers are falling back into default because many modifications don’t, in fact, reduce monthly payments. The alliance doesn’t receive this information from banks, says Schwartz.  “Hope Now is really just a vehicle for collecting and marketing information to the Treasury, people on the Hill, and the news media.”

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Federal banking regulators reported in December 2008 that fully 53% of consumers receiving loan modifications were again delinquent on their mortgages after six months. Alan M. White, a law professor at Valparaiso University, says the redefault rates are high because modifications often lead to higher rather than lower payments. An analysis White did of a sample of 21,219 largely subprime mortgages modified in November 2008 found that only 35% of the cases resulted in lower payments. In 18%, payments stayed the same; in the remaining 47%, they rose. The reason for this strange result: Lenders and loan servicers are tacking on missed payments, taxes, and big fees to borrowers’ monthly bills.

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In the first days of 2009 it appeared that progress might be possible on a different front. A slumping Citigroup came back to the Treasury Dept. for a second round of bailout money. Bowing to pressure from regulators, Citi broke ranks with its rivals and dropped its opposition to bankruptcy cramdown.

In the following weeks, banking lobbyists launched a renewed attack on the cramdown legislation, enlisting as an ally Republican Representative Lamar Smith of Texas, among others. Apart from Citi, “the industry remains united in that bankruptcy cramdown would destabilize the market” by creating widespread uncertainty about the value of numerous troubled mortgages, says Steve O’Connor, senior vice-president for government relations at the Mortgage Bankers Assn. His group is distributing talking points to key congressional aides laying out reasons why “Congress should defeat bankruptcy reform legislation.” These include the argument that if lenders can’t be confident that loan terms will survive, they will raise rates and reject riskier borrowers. Industry lobbyists are organizing home state bankers to pressure moderate Democrats they hope will be receptive to limiting the kinds of loans eligible for cramdown. One target: Senator Evan Bayh of Indiana.

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Stefanie and James Smith of Santa Clarita, Calif., fear they may need the help of a bankruptcy court if they are to keep the subdivision home they bought for $579,000 in November 2005. Stefanie, 37, a university human resources coordinator, and James, 40, a federal law enforcement agent, borrowed the entire amount in two subprime loans that required a total monthly payment of $3,000. A representative of their lender, Countrywide, told them not to worry, says Stefanie: They would be able to refinance in a year.

By mid-2007 they were running late on payments, and refinancing options had dried up. With their monthly bill scheduled to jump to more than $4,000 this January due to a rising mortgage rate, Stefanie contacted Countrywide last summer. She asked for a loan modification so they could avoid default. In December the lender said it would be willing to increase their payment by $600. That was better than the scheduled rise of $1,100, so the Smiths agreed.

But now they are struggling to pay the higher amount. Countrywide’s parent, BofA, declined to comment, citing the Smiths’ privacy. After BusinessWeek‘s questions, though, Countrywide called them to discuss cutting their payments.

“We knew when we bought that the payments would be a stretch,” says Stefanie. She regrets assuming they would be able to refinance at a lower rate. “We are not deadbeats,” she adds. “All we want is a mortgage we can afford.”

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