Real Estate Investing

At the age of 71, Bernard Madoff will be 221 years old by the time he leaves prison.  We don’t expect he’ll be around that long, but the 150 year sentence is little consolation for the people who lost EVERYTHING because of Madoff’s criminal PONZI scheme in which he stole billions of dollars from people under the guise of investing.  Our own Miranda Marquit talks about the lesson that should be learned over at Loan Shak,

The bottom line is that there are plenty of other crooks out there in the financial world. While they may not be instigating Ponzi schemes, they are — quite likely — involved in other sneaky and underhanded practices. But most financial sector workers and companies have emerged largely unscathed. 

The Wall Street Journal reports on what Madoff said during the sentencing hearing,

“I cannot offer you an excuse for my behavior,” Mr. Madoff said. “How do you excuse betraying thousands of investors who entrusted me with their life savings? How do you excuse deceiving 200 employees who spent most of their working life with me? How do you excuse lying to a brother and two sons who spent their entire lives helping to build a successful business? How do you excuse lying to a wife who stood by you for 50 years?”

Mr. Madoff said he made “a terrible mistake” and an “error of judgment” and that he lives in a “tormented state” now. He also denied that he and his wife have been silent and not sympathetic to victims of the fraud.

The memory of Bernie Madoff will fade to most of the world, but not without years of regret by him, his family, and his victims.

Cartoon from Save our Bankers.

Out here in the streets, I’ve already talked about how people are facing major struggles to find mortgage relief from lenders even after the foreclosure rescue plan has been put into place by the administration of President Obama.  Apparently the problem is widespread as indicated in an article published by CNNMoney.com.  The news agency published the experiences that home owners have shared with them in seeking relief and in reading through them, it appear that most have been either told “No.” directly or are still waiting for an answer after being given the runaround.  For example Jose Rivera was seeking a lower interest rate,

Rivera hit roadblocks from the start. He never received a call back from the first customer service agent at Bank of America, which bought Countrywide, despite leaving three messages. In May, he requested a different agent and was told because he has private mortgage insurance, he couldn’t apply until the end of May. He called back in early June and was told to try again at the end of July. Now that interest rates are rising, he’s concerned it won’t be worth it to refinance.

According to the article, the plan allows people with little or no equity in their home to refinance so they can have lower mortgage interest rates. “The plan waives the requirement that homeowners have at least 20% equity in their home, allowing them to participate even if they have loans of up to 105% of the value of their property, as long as they meet other criteria. This aids those who are current in their payments but have seen their home values decline.”

However people making their payments - even though they struggle - are the low man on the totem pole so are not finding help.  This is why one of my friends skipped her December payment …. so she could move up on the priority list.  In January she was able to refinance at a much lower rate.

This is a sorry state of affairs when people do try to hold on, but get such negative responses such as those experienced by Jeffrey Huegel,

It’s been nothing but a runaround. They just don’t care. Rather than let me stay in my home at an affordable interest rate, the bank would rather foreclose and receive nothing. I guess it’s better just to let them foreclose because I am fighting a losing battle trying to stay.

Tsk tsk.  Read the full CNN article here.

Each week my company publishes a newspaper insert for our local paper featuring homes, open houses, and auctions.  Usually the editor also features a local charity (e.g., United Way, Elephant Sanctuary, etc.) that I don’t pay a lot of attention to.  I know, my bad.  I should be more sensitive to the needs of charity.  This week, however, the feature story was about avoiding foreclosure and my neck loudly cracked due to the speed of pouncing on the article.

The article is packed with good advice and since I’m all about sharing the good stuff, I’m passing it on to you.  First, credit where credit is due:  Janet Mills is broker of the Rutherford Office of Bob Parks Realty and wrote the article from information provided by Thom Scott of Fusion Real Estate Consulting.

If you are a home owner behind on your mortgage payment, you first need to be in touch with your lender.  Don’t put your head under a rock and hope the problem goes away - it will not.  By keeping an open line of communication with your lender, they should be more willing to help you through the problem times.  If there’s no way you can ever get caught up on your loan, however, a short sale is a better option than foreclosure.

The Short Sale results from a negotiation with your lender. This is often helpful to both lender/seller when the value of the property is equal or less than the money owed and the owner can no longer afford the monthly payment.  The negotiation involves setting  a reasonable market price; the owner and the lender agree to accept the price the market will bear. This can result in less than the amount owed on the property.  This will create a deficiency, i.e., a remainder on the loan that will not be paid off by the sale.  The lender can forgive this deficiency, or it can be recorded as an amount owed by the owner to the lender.

Forbearance is another option closely related to the short sale.  This is also negotiable with the lender to reduce the amount of your monthly payment for a defined amount of time - and you won’t be reported as being late or deficient to the credit bureaus, according to the article.

Forbearance will require all the same documentation and information as the short sale, plus a detailed budget showing all income and expenses for the household. However, it can work to the owner’s advantage. While the homeowner is making the newly negotiated payment and if you have negotiated correctly, the bank is reporting that you have made your payment on time. You are actually building positive credit while you work yourself out of a difficult situation.

When people are in a state of financial distress, they often don’t reach out for the help that’s available to them.  We urge you to make some phone calls for help… your lender is a great first step or find a financial advisor who can also help you find solutions.  A simple search on Google for “Financial Advice” brought over 15 million links.  Reach out.  Get help.