Average Foreclosure Discount 34%

In the third quarter of 2011, homes that were in foreclosure accounted for 20 percent of all residential sales in the country, according to RealtyTrac in its latest Foreclosure Sales Report. 

While a high number of foreclosures still persist, the bulk of foreclosed home sales is shrinking. In the second quarter of 2011, foreclosures accounted for 22 percent of all sales and 30 percent of all sales in the third quarter of 2010. For comparison, in 2005 and 2006, foreclosure sales accounted for less than 5 percent of all sales.

Foreclosures continue to sell at big discounts compared to non-foreclosures. Foreclosures in the third quarter sold for about a 34 percent discount compared to the average home not in foreclosure, according to RealtyTrac. The average sales price of a home in foreclosure was $165,322, which is up 1 percent from the second quarter, yet down by 3 percent from the third quarter of 2010. 

Mortgage Modification Scams

The foreclosure crisis that has spread across the country is producing another epidemic: mortgage modification scams that have cost desperate borrowers thousands of dollars — even their homes.

There are devastating consequences to this fraud. However keep in mind that aplying for HAMP is free, as is the loan modification advice of housing counselors approved by the U.S. Department of Housing and Urban Development.

Don't become a victim

You can apply for the government's Home Affordable Modification Program (HAMP) on your own or with free help from a housing counselor approved by the U.S. Department of Housing and Urban Development. Applying for HAMP is always free.

To find a housing counselor, or for more information, contact the Homeowner's HOPE Hotline at 888-995-4673 (888-995-HOPE) or go to www.MakingHomeAffordable.gov.
Other tips:
• Only your mortgage servicer has the discretion to grant a loan modification. No third party can guarantee or pre-approve a HAMP application.
• Beware of anyone seeking to charge you in advance for mortgage modification services. In most cases, charging fees in advance is illegal.
• Paying a third party to assist with a HAMP application does not improve the likelihood of receiving a mortgage modification. Beware of individuals or companies that ask for payments, tout success rates or claim to be HAMP experts.

• Beware of individuals or companies that offer money-back guarantees.
• Beware of individuals or companies that instruct borrowers to stop making mortgage payments or to stop dealing with their mortgage servicer. Avoid working with someone who promises to stop the foreclosure process.
• If an individual or company claims to be affiliated with HAMP or displays a seal or logo representing the U.S. government, either in correspondence or on the Web, check the connection by calling the Homeowner's HOPE Hotline.
• Beware of anyone who wants the deed to your property. Do not transfer title to your home to a foreclosure rescuer.
If you suspect you have been a victim of a mortgage modification scam related to HAMP, contact the SIGTARP hot line at 877-744-2009.

Yet scam artists have convinced struggling homeowners to pay an ILLEGAL upfront fee in return for false promises of lowering their debt or their mortgage payments.

Other scammers have had homeowners turn over the deeds to their homes, told borrowers to stop making their payments, or insisted they stop dealing with their mortgage servicer.

These scam artists may advertise on Web search engines, television and radio; illustrate their materials with government logos; give their companies official-sounding names, or use scare tactics.

Unfortunately tens of thousands of borrowers across the country are at risk of losing their homes.

The stories of the people who are victims of these scams are really heartbreaking and unfortunately, the HAMP mortgage modification scams have become a nationwide epidemic.

In November, SIGTARP announced it had shut down 125 alleged schemes advertised on Yahoo, Bing and Google.

SIGTARP's investigation has led to criminal charges against 17 people, including three sentenced to prison; the other cases are pending.

Homeowners should educate themselves about the hallmarks of the scams.

"HAMP is a free program, so homeowners need to be wary of anyone who charges them for their work on a HAMP application," she said. "Homeowners also need to be wary of anyone who guarantees them they will get a successful modification through HAMP."

You should never have to pay for foreclosure counseling or foreclosure assistance. Save your money to make your mortgage payments. Do not listen to people who tell you to stop paying your mortgage. Why would a lender want you to stop paying your mortgage? That is not how you can solve your financial issue with someone you owe money to.

Every time a scam artist victimizes a family, there's a huge ripple effect. When scam artists run away, they leave a worse situation than when they found the family, the family is more likely to lose their home. When a home is lost, the property is at risk for property crimes, theft of copper and piping and other materials from the house, and there is a destabilizing impact on the neighborhood. . . . The ripple effect of this unethical act is enormous all around the country.

Where Can You Find the Cheapest Homes?

Buyers can snag plenty of deals in housing today. Falling home values and record-low interest rates continue to push affordability to record highs. 

Nationally, the median list price for a home is $189,900, up 4.05 percent year-over-year. 

The following cities offer the lowest median list prices in the nation as of November: 

• Detroit: $84,900
• South Bend, Ind.: $102,000
• Dayton-Springfield, Ohio: $109,900
• Fort Wayne, Ind.: $109,900
• Toledo, Ohio: $109,900
• Las Vegas, Nev.-Ariz.: $122,000
• Cleveland-Lorain-Elyria, Ohio: $129,900
• Lakeland-Winter Haven, Fla.: $129,900
• Akron, Ohio: $129,900
• Ocala, Fla.: $129,500
• Springfield, Ill.: $129,250
• Wichita, Kan.: $130,828

38% of Homes Purchased in 2011 Bought with Cash

Despite record low mortgage rates, 2011 has seen an amazingly high-level of cash home purchases, according to the real estate research firm Hanley Wood Market Intelligence. No doubt that investors love that real estate environment and know that in the future they will be making big profits when real estate goes back up.

Jonathan Dienhart and Ken Lee, two analysts with the company, say between tight lending standards and a desperate search for yield by investors, cash purchases of homes – particularly for distressed properties – became even more common in 2011 than last year.
Dienhart and Lee analyzed data collected through Hanley Wood’s Housing IntelligencePro, and shared their findings in a blog post.

The two discovered that 38 percent of homes purchased in 2011 were bought with all cash. That’s up from 34 percent in 2010, and double the 19 percent rate in 2006.
According to Dienhart and Lee, this trend is likely to continue in the near term. They note that cash-paying investors are responsible for an increasing share of home purchases nowadays as prior homeowners abandon the ownership market and head back to rentals.

5 States With the Most Mortgage Fraud

Mortgage fraud continues to climb in the country as $1.3 billion in questionable loans surfaced in the third quarter, according to a mortgage fraud index by Mortgage Daily.

Florida continues to have the most cases of mortgage fraud, according to the index. In Florida alone, mortgage fraud activity included more than $144 million in loans that were questioned in court, and Florida’s mortgage fraud index soared 45 percent in the third quarter compared to the previous quarter.
The five states that had the worst index ranking with mortgage fraud cases, according to Mortgage Daily, are:

1. Florida
2. California
3. Minnesota
4. New York
5. Texas

10 States Hit Hardest by Foreclosures

The following are the top 10 states with the highest foreclosure rates in the country in November, according to RealtyTrac data.

1. Nevada: 1 in every 175 home received a foreclosure filing in November
2. California: 1 in every 211 homes
3. Arizona: 1 in every 256 homes
4. Utah: 1 in every 290 (This state saw a 74 percent increase in November from October in foreclosure activity.)
5. Georgia: 1 in every 330 homes
6. Michigan: 1 in every 330 homes
7. Florida: 1 in every 358 homes
8. Illinois: 1 in every 427 homes
9. Ohio: 1 in every 500 homes
10. South Carolina: 1 in every 517 (This is the first time South Carolina has made it into the top

BofA Considers Renting REOs Back to Previous Homeowners

In facing large inventories of foreclosures, Bank of America is considering a program that would allow investors to buy a foreclosed home and then rent it back to the former home owner, HousingWire reports.
Bank of America is looking for ideas on how to handle the large inventories of foreclosures in some areas where demand hasn’t picked up.

"We are looking at programs where you can capture somebody before the REO process and offer a deed-for-lease," Ron Sturzenegger, who leads the bank's legacy asset servicing division, explained to HousingWire. "We would go to the customer and say, 'We'll do a short sale. Will you be interested in leasing your property back? We're still going to sell the property. You will no longer be the owner. But you can be a tenant now in that same property and save you from moving on.'"

The program is still in very early stages and more details need to be worked out, Sturzenegger noted.

Monthly Mortgage Down About 40%

Improving housing affordability along with low mortgage interest rates means that home owners are paying a lot less these days for their monthly mortgage payment than they did just a few years back. Homeowners are paying nearly 40 percent less on their monthly mortgage payment than home owners paid in 2006.

According to Fiserv, the monthly mortgage payment for a median-priced single-family home today is $700, a drop of close 40 % from the high of the real estate market in 2006, when it was $1,140.

Housing affordability has improved dramatically because of declines in both prices and mortgage interest rates. Nationally, purchase mortgage payments now account for only 13 percent of monthly median family income, the lowest percentage on record (since 1971), and compared to 23 percent in the first quarter of 2006."

Credit Scores: 5 Things That Matter

Since your credit score is obviously super-important, and is derived from your personal credit history, you may feel justifiably confused by why you should have to pay 20 bucks to see it. The explanation for that I can summarize with one word: lobbying. The financial services lobby in this country is one of our democracy’s most powerful. To get a fair shake for consumers in virtually anything has always been an up-hill battle. In the case of getting a free look at your credit report, for example, it took years. In the case of being able to see your credit score, it hasn’t happened yet.

Payment history (35%) – This is your track record of paying back what you borrowed. Accounts in collection, late payments, and bankruptcy are bad; paying on time for a long period is good.

Amounts owed (30%) – This is based on the total amounts you owe, and the ratio of what you’re allowed to borrow to what you currently owe, called your “utilization ratio.” Maxing out your credit hurts it; keeping a lot of unused credit available helps it. Ideally, you want to keep your utilization ratio below 30 percent. So if you have a credit card with a $1,000 limit, you’d want to keep your balance below $300.

Length of credit history (15%) – This considers the length of time each credit account has been open, and when each account was last updated with payment or usage info. As you might imagine, the longer your history, the better. This is why if you’re going to cancel a credit card, all things being equal, ditch the newest and keep the oldest.

New credit (10%) – This includes recent inquiries and requests for credit. Regularly applying for new credit cards or other loans will cost you.

Types of credit used (10%) – There’s all kinds of credit out there, from revolving (credit cards) to installment (car and home loans.) Fair Isaac likes you to be well-rounded and sample them all. In short, diversity helps.

Benefits of Prelisting Home Inspections

Can I really obtain the home inspection in advance? The process seems to be useless since the prospective buyer gets the mortgage and then pays for his or her own inspection. It would seem like a good selling point if the property already had a clean inspection or the indicated repair were already taken care of. Michelle A.

You absolutely can and should obtain an inspection on your home before you put it on the market. Given the way mortgage lending guidelines have tightened up and the fact that appraisal and condition issues are killling a larger number of transactions, obtaining a prelisting inspection differentiate your home from the competition and boost your home's chances of selling by helping satisfy prospective buyers that the property will:

• Pass the lender's and appraiser's condition guidelines;
• Not have surprise condition issues arise during the sale process and escrow; and
• Be in a condition that reflects to the price they've agreed to pay for it.

Here are some things you should think about as you decide whether to move forward with obtaining prelisting inspections and figure out a plan around how to leverage the reports.

1. Prelisting inspections won't make the deal, but they can help optimize your chances of closing the deal. Buyers are not going to buy a house they wouldn't consider otherwise because it has reports, but if they are debating between your home and another property, a house with no issue, documentation that needed repairs have been completed, or even reports showing what needs doing and a corresponding discount can persusade buyers off the fence.

Many homes fall out of escrow because of condition issues not discovered until the transaction is underway. Sometimes, advance inspection reports can surface issues, allow you to get repairs completed and thus avoid that fatal  issue. However, at other times, prelisting inspections show issues too big for you to have repaired that will be deal-killers for almost any mortgage lender. In this case, you do yourself the favor of forgoing even bothering trying to get it past a mortgage lender and empower yourself to list it as a cash-only sale for a fixer-upper price.

2. Your prelisting inspection won't replace the buyer's inspections. To be clear, whatever inspection(s) you obtain won't be the inspection, it will just be an inspection. You don't want the buyer to rely totally on it and forgo his own due diligence for liability reasons; your aim is to either verify the place is in good shape, clear the place of major repairs or brief them on why the property is being priced in that way and what they'll need to do (or won't need to do) later, assuming you can negotiate an as-is offer.

But you also want the buyer to still obtain his own inspections, so he can attend, ask questions, select the inspector and not fault you for anything that is missed. And you should work with your listing agent to require that the buyer sign your written advice to get his own inspections, as well as to make the property available to the buyer for just that purpose.

10 Cities Where List Prices Have Fallen the Most

The following are the 10 cities where median list prices have dropped the most, based on year-over-year Realtor.com data from September 2011.
1. Chicago
Year-over-year change in median list price: -11.56 percent
Median list price: $199,000
2. Las Vegas 
Year-over-year change in median list price: -11.05 percent
Median list price: $120,000
3. Detroit 
Year-over-year change in median list price: -10.01 percent
Median list price: $89,900
4. Ventura, Calif. 
Year-over-year change in median list price: -9.09 percent
Median list price: $409,000
5. Atlanta 
Year-over-year change in median list price: -8.63 percent
Median list price: $159,900
6. San Francisco 
Year-over-year change in median list price: -8.63 percent
Median list price: $635,000
7. Santa Barbara-Santa Maria-Lompoc, Calif. 
Year-over-year change in median list price: -8.35 percent
Median list price: $549,000
8. Sacramento, Calif. 
Year-over-year change in median list price: -8.30 percent
Median list price: $210,000
9. Los Angeles-Long Beach, Calif. 
Year-over-year change in median list price: -6.94 percent
Median list price: $335,000
10. Tampa-St. Petersburg-Clearwater, Fla.
Year-over-year change in median list price: -6.67 percent
Median list price: $140,000

Mortgage Giant Faces Big Trouble Over Bad Lending Practices

The U.S. Justice Department is suing Allied Home Mortgage, one of the country’s largest mortgage brokers, and accusing the company of fraud, according to a civil lawsuit.

The lawsuit alleges that the mortgage broker’s lending practices led to thousands of Americans losing their homes and “tens of thousands” of defaulted loans and cost the U.S government hundreds of millions of dollars in losses. The lawsuit accuses Allied of violating FHA mortgage insurance requirements, claiming it “profited for years as one of the nation's largest FHA lenders by engaging in reckless mortgage lending." 

According to the lawsuit, prosecutors say about a third of the loans originated by Allied defaulted from 2001 through 2010, amounting to $834 million in insurance claims HUD paid. A staggering default rate of “a 55%” occurred in 2006 and 2007 alone, the lawsuit charges. About 2,509 more loans are currently in default, which could have HUD facing $363 million more in claims, according to the lawsuit.

“The losers here were American taxpayers and the thousands of families who faced foreclosure because they could not ultimately fulfill their obligations on mortgages that were doomed to fail,” attorney Preet Bharara said at a news conference Tuesday announcing the lawsuit.

Foreign Buyers Could Be Soon Buying a Home & Stay

A bill recently introduced in the Senate proposes that foreigners who spend $500,000 or more on a residential property should be eligible to obtain a visa that will allow them to stay in the country.
Several stipulations would be attached to the offer, however. Foreign investors would need to purchase a primary residence of at least $250,000 but spend at least $500,000 on residential real estate (another property could be a rental) — and through cash purchases only. The property would also need to be purchased for more than its appraised value, and the buyer would need to agree to live in the home for at least 180 days each year, which means any foreign buyer would be required to pay U.S. income taxes on any foreign earnings too. 

The visa could be renewed every three years, but it would not serve as a way toward citizenship.
"Many people want to come and live in the United States," says Sen. Charles Schumer, D-N.Y., who introduced the legislation this week with Sen. Mike Lee, R-Utah. "They will be here spending money and paying taxes, and the most important thing is they'll sop up the extra supply of homes we have right now compared to demand, and that's what's dragging our economy down."

Some brokers say that a visa incentive to foreign buyers could potentially even triple sales in their markets.
"California, Florida, New York, Colorado, Hawaii, and Texas — those states will see a huge increase in demand," Sandra Miller, a broker at Engel & Volkers in Santa Monica, told the Los Angeles Times.

Top 6 Reasons Mortgage Applications Are Denied

About 50% of home refinance and  30 percent of purchase mortgage applications are denied.

 It's tough especially since mortgage lenders have become increasingly restrictive in terms of their lending guidelines since the housing market crash.

Here are the top 6 reasons mortgage lenders reject applications.
1. Income issues. Most failed mortgage applications falling into this category have income too low for the mortgage amount they are seeking. But increasingly, the recent turmoil of the job market are also causing this issue, as people who have changed their line of work or have changed from salaried employee to freelancer over the last couple of years can also have their home loan applications rejected based on income.When you are self employed you must show proof of at least 2 years income.If you have not been in business for at least two years you will not be approved for a mortgage.

2. Debt To Income Ratio. If the mortgage for which you're applying plus your monthly payments on credit card, car and student loan debts are more than 45% of your total gross income, you could have problems qualifying for a home loan. You might also run into problems if you rely too heavily on bonuses, overtime, cash wages or rental income, all of these can be difficult or impossible to get a mortgage.

3. Credit issues. Today, the mortgage-qualifying FICO score cutoff falls somewhere between 620 and 660, depending on which lender and which loan type you need. More than one-third of Americans, by some numbers, have credit scores too low to qualify for a home loan. Even if your credit score is high enough to qualify, if you have any late mortgage payments, a short sale, a foreclosure or a bankruptcy in the last 2 years, loan qualifying could be difficult.

4. Property didn't appraise. Since the whole industry had its hand smacked for allowing home values to skyrocket in a very short time, (2002 to 2006) appraisal guidelines have tightened up. So, it is increasingly common to have the property appraise for a price lower than the sale price negotiated between the buyer and seller.Keep in mind that as you negotiate back and forth with the seller, there might be some foreclosed properties in your neighborhood that just sold at lower than expected which brings down the value of the property you may be tring to sell. This change the whole game and unavoidably brings the value down of the properties in the neighborhood.

5. Condition problems. With all the distressed properties on the market, and with most non-distressed sellers barely breaking even, more home-sale transactions than ever are falling apart due to condition problems with the property. Many lenders will not extend financing on homes where the appraiser points out problems like cracked or broken windows, missing kitchen appliances, electrical problems, or wood rot.
And in the world of condos and other units that belong to a homeowners association, if more than 25 percent of units are rented (rather than owner-occupied) or more than 15 percent are delinquent on their HOA dues, new applications for refinance or purchase mortgages on units in the development are likely to be rejected.

6. Technical difficulties with application. The days when lenders just took your word for it are long gone. Applications with incomplete or unverifiable information will fail. If any of these mortgage loan application glitches arise in your homebuying or refinancing process, it's critical that you connect with your mortgage professional to determine what course of action to take to get your loan approved.

Don't upgrade your house beyond the level of neighboring homes

Don't upgrade your house beyond the level of neighboring homes.
Real estate experts have long observed that home buyers are hesitant to pay a premium to buy the best house on an otherwise modest neighborhood.

Customizing a home with extravagant features, beyond all reason, does make your house harder to sell later. But adding features and upgrades that make your life in your home mirror your dream life, or create the comfort and lifestyle your family craves? If you can afford it without draining your home of equity or going into consumer debt, go for it, especially if you plan to be in the property over the long term.
It's your home, not just another financial asset, and one of the major advantages of ownership is your ability to create a comfortable, personalized habitat for your life.

Don't necessarily expect to get back your investment in upgrades dollar for dollar, and do avoid making bizarre customizations unless you're OK with reversing them when you do list the place for sale, but don't hold back on creating a custom home experience for your family and your lifestyle because you heard it's a bad investment.

Paying off your mortgage is bad.

 Paying off your mortgage is not such a good idea today.

During the real estate boom, many an mortgage companies espoused borrowing against your home to buy more homes, creating wealth or consolidating debts or even buying cars, boats, vacations etc.. Basically they were saying to Americans to use their home equity as cash cow.

While that worked for very few, for awhile, you can see how that turned out. A real disaster and terrible advice. But even now, traditional and conservative financial advisers still say that paying off your mortgage is not the best use of cash, as your mortgage interest is tax deductible, and the better use of the funds is to invest them for growth.

For people who can and are inclined to pay their homes off, though, this rule is off-target. Paying off your home is less about making the most assertive financial move possible, and more about creating security, fixing a low set of living expenses, and hedging against economic and job market uncertainty.

The best practice in today's economy is to make money moves that create maximum sustainability and minimum stress; if that means paying your mortgage off, then do it.

30-Year Mortgage Rates Drop Below 4%

For the first time ever, 30-year fixed-rate mortgages fell below 4 percent, Freddie Mac reported in its weekly mortgage market survey.

Fixed-Rate Mortgages Lowest on Record

Freddie Mac (OTC: FMCC) released the results of its Primary Mortgage Market Survey (PMMS), coming on the heels of the Federal Reserve's recent announcements. The conventional 30-year fixed averaged an all-time record low at 4.01 percent; likewise the 15-year fixed averaged an all-time record low at 3.28 percent for the week. Of the five regions surveyed in Freddie Mac's survey, the West region recorded the lowest average rate for the 30-year fixed dipping below 4.00 percent to 3.95 percent.

New Scam Dupes Homeowners into Fake Loan Audits

More home owners are being tricked into a fake forensic loan audit, a new scam that targets struggling home owners looking for a loan modification to save their home from foreclosure.

Several scam organizations, usually linking themselves to attorney and loan auditors, have popped up in the last 2 years offering forensic loan audits.

In the scam, the organizations claim to review a homeowner’s mortgage loan documents to determine whether their lender had complied with state and federal lending laws. They then promise to get the home owner a quick loan modification and possibly a principal reduction on their mortgage too. Home owners pay an upfront fee usually around $3,000 or even more.

However, home owners say that they aren’t getting a loan modification and usually nothing happens after they pay the upfront money.

They lure homeowners to believe that by hiring them for a review of a loan modification package, they can expedite the process and get better results, or they make false promises that they can get a loan modification and/or principal reduction. Homeowners are not typically getting any results at all.  The scammers are just taking the money and disappear.

As always it is always better to deal with your own lender or call a lawyer as opposed to you replying to an unsollicited offer.

Joke of The Week

Nighttime Prayers  

A father put his 3-year old daughter to bed,

told her a story and listened to her prayers which ended by her saying:


"God bless Mommy, God bless Daddy, God bless Grandma and goodbye Grandpa."

The father asked, "Why did you say goodbye Grandpa?"

The little girl said,

"I don't know, Daddy, it just seemed like the thing to do."

The next day grandpa died.

The father thought it was a strange coincidence.

A few months later the father put the girl to bed and

listened to her prayers which went like this:



"God bless Mommy, God Bless Daddy and goodbye Grandma."

The next day the grandmother died.
"Holy Moley, thought the father,

"this kid is in contact with the other-side."

Several weeks later when the girl was going

to bed the dad heard her say:

"God bless Mommy and goodbye Daddy."

He practically went into shock.

He couldn't sleep all night and got up

at the crack of dawn to go to his office.

He was nervous as a cat all day,

had lunch and watched the clock.



He figured if he could get by until midnight he would be okay.

He felt safe in the office,

so instead of going home at the

end of the day he stayed there,

drinking coffee,

looking at his watch

and jumping at every sound.


Finally, midnight arrived,

he breathed a sigh of relief and went home.

When he got home his wife said,

"I've never seen you work so late, what's the matter?"

He said, "I don't want to talk about it,

I've just spent the worst day of my life."

She said, "You think you had a bad day,

you'll never believe what happened to me this morning.

My golf pro dropped dead in the middle of my lesson."