Real Estate Investing

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.

I’ll admit it… I looked up “Kerfuffle” when Tennessee blogger used it in his headline “Real Estate Kerfuffle in Key West.”  Disorder. Commotion. Disruption.  He links to another site called Rock Trueblood’s Watchworld and a post about DEBT becoming the next four letter word.

In the case of my current landlord (soon to be ex-landlord) this Realtor took my $1600 I paid for rent since December 2008 and never made another mortgage payment. In May 2009 (last month) I got the obligatory knock on the door from a Monroe County sheriff telling me the place I was renting was being foreclosed upon. Last words from the sheriff, so help me, were like the words of last year’s sheriff: “Don’t worry about moving out immediately. We have so many foreclosures clogging up the courthouse that we won’t be getting around to formally taking this place away from your landlord for another six months.”

The writer goes on to explain about three other squatters who haven’t made mortgage payments in months (to get the lender to negotiate) and years (they can’t produce the note to prove the new mortgage company actually owns it).

A friend of mine went 8 months without making a house payment. They got some phone calls but never a foreclosure notice.  They’re caught up - thanks to some family help - but it’s astonishing to me that they were able to live in their house that long without making a payment.

The same company that didn’t foreclose on them is the final decision-maker in a short-sale I’m working with - I’m on the buyer’s side.  They don’t want to accept the short-sale offer which would cost them about $10,000.   They have said they’d prefer to foreclose …. which would cost them about $62,000 minimum.

I have no sympathy for these mortgage companies, but feel a certain degree of anger and frustration that as a taxpayer I’m helping them out of the mess they’re in when this is how they make decisions.

Cartoon from Mordant Orange.

My home isn’t worth what I owe on it.  But I’m not ready to refinance at this point so I’ll keep making my monthly mortgage payments - shuffling around this mortal coil until a door hits me in the backside.

CNN Money is reporting that home prices have dropped 18.2 percent the last quarter, news that could be devastating to a real estate recovery.  Why?  Because when the amount you owe on the home is far far away from the amount it’s worth, people sometimes think they’re better to just walk away.  That will lead to foreclosure, which will lead to a low-ball sale by the mortgage lender, which will drop values in the neighborhood - neighborhoods that are all around us.

It’s important to note that - according to the article - the prices plunging the steepest are also the ones that increased most rapidly during the years before the bubble popped.

“Those markets were driven by subprime lending expansion from the summer of 2003 on,” he [Wellesley Economist Karl Case] said. “After the [Federal Reserve’s lowered interest rates] to fight against the recession of 2001, subprime took off like gangbusters.”

But all is not lost for many homeowners.  While these low rates last, it could be a good time to refinance.  There *are* loans available contrary to what many would have you believe.  One of my readers asked about refinancing when the value of her home had droped about $10,000 from when she purchased it in 2006.  Fortunately, she had an FHA loan and is able to refinance through a “streamlined” loan which doesn’t require a new appraisal.  Her interest rate is dropping from 6.8 percent to 5 percent - saving her mega bucks each month!

If you want to know more information about whether refinancing is in your future, find a lender and/or a Realtor who have some experience and know what questions and loan products to look for. The money is out there, the interest rates are available, all it takes is a phone call from you to see where you stand.

Photo by Woodley Wonder Works through Flickr Creative Commons.