With home prices in decline over the past 4 years, and still falling in most markets, many people have fallen victim to foreclosure.  For some, the decision to let a home go to foreclosure can feel like a relief after a long struggle and failed negotiations with lenders.  Unfortunately, that sigh of relief may be a little too soon.

Most homes that are lost to foreclosure are underwater on their loans, meaning that the home value has dropped far below the existing mortgage loan amount.   When homes are sold in foreclosure, they often sell for substantially less than the loan, leaving the banks holding upwards of $100,000 on the loan.

More and more, banks are suing homeowners for the deficiency, or balance due on the loan after the foreclosure sale.

Rather than helping struggling homeowners with a fresh start, lenders are trying to squeeze even more money out of distressed borrowers.  These days, foreclosure may mean losing your home and still finding yourself burdened with a large debt, with interest building each month, and nothing to show for it.

A recent article in the Wall Street Journal highlights several homeowners in Florida who have found themselves in similar situations after losing their homes to foreclosure.

“Ray Falero, a truck driver whose Orlando home was foreclosed on and sold in August 2010, says he thought he was hallucinating when, months later, he opened the door and saw a sheriff’s deputy. The visitor handed him a notice saying he was being sued for $78,500 by the lender on the home purchase, EverBank Financial Corp., of Jacksonville, Fla.

“’I thought I was done with this whole mess,’ he says.”

This has also spurred increased business for debt collectors.  Increasingly, banks are selling debt to collection agencies, who then file suit against borrowers for the deficiency.  Lenders have up to 5 years to file for a deficiency judgment, leaving distressed former homeowners time to recover and therefore able to make payments.  In the meantime, debts grow at an average of 8% interest rate.

There are better options for homeowners out there facing the possibility of foreclosure.  One option may be to consider a “short sale” on your property.  An experienced attorney can help to navigate these troubled waters, and to protect you from unexpected lawsuits and deficiency judgments in the future.  I specialize in short sales, foreclosures and distressed real estate situations such as these.  Please, contact me before you lose your home, I am here to help.

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Many homeowners in the US find themselves tied to properties with negative equity.  As a matter of fact, nearly 11 million properties, or 22.5% of homes in the US, are worth less than the underlying mortgages.

Further complicating problems is that many homeowners in this situation also find themselves paying above market interest rates on their homes.  As a matter of fact, 3 out of 4 homeowners with negative equity in their homes are paying well above current market interest rates, putting them in a very precarious financial situation.

Negative equity is preventing many homeowners from refinancing or selling their homes, leaving them strapped to a high interest mortgage and paying more each month than they should be, for a home that is no longer worth the remaining balance of the mortgage.

According to CoreLogic, nearly 28 million mortgages are at above market interest rates.  Unless the Obama administration relaxes or eliminates negative equity restrictions on Fanny Mae and Freddie Mac loans, homeowners with negative equity will continue to pay well above current interest rates.

Some analysts claim that the housing market is still falling, expecting prices to drop another 5% at the beginning of 2012.  This will further impact the number of homes with negative equity, pushing the number of homes with mortgages that are higher than the equity owned to above 15 million homes.

Economists consider high mortgage payments on homes that are “underwater,” or worth less than the debt owed on them, to be more likely to lead to foreclosure, according to an article in the Seattle Times.  These homeowners can end up feeling hopelessly trapped by the bad decisions made during the boom years.

There are, of course, better options to consider before allowing your home to go into foreclosure.  It’s always a good idea to consult an experienced real estate attorney for advice before making any decisions.

A short sale can be a good option for both borrowers and lenders, if transactions are handled properly; ultimately saving all involved the headaches and costs of foreclosure, and lessening the blow to your credit score as well.

Our office specializes in short sales, working with both buyers and sellers, to avoid the frustrations often encountered during the short sale process and provide positive results for all parties.

If you find yourself strapped to a high interest mortgage on a property with negative equity, or are considering a short sale for any reason, please give us a call.  We have the experience to answer any questions you might have.

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As I was out and about the other day, looking at properties on the market, it suddenly occurred to me that many of the properties I was seeing could be purchased at prices I would have expected to see in the late 1990s. These “flashback deals” may not be prevalent everywhere, but a smart investor who knows what to look for can find rental properties that would have listed for $150k in 2006 for almost half that price today! I realized that in spite of the trepidation investors may be feeling because of the “burst of the housing bubble,” if you know what you’re doing, now is the perfect time to buy.

Any quick search of real estate news will tell you just how low housing prices are. This article in the New York Daily News states that “home values [in the New York metro area] fell 1.6% between January and March to $346,600, hitting their lowest level in more than seven years,” and that  “across the country, home values posted their biggest quarterly drop since 2008, falling 3% in the first three months of this year.” According to ABC News “Home value declines are currently equal to those we experienced during the darkest days of the housing recession.”

This is good news for investors, who may wait decades for a buyer’s market as steadfast as the one we’re currently experiencing; but further research reveals that investors looking to take advantage of the low property prices should be prepared to make it a long-term investment.  Although there are a few opportunities for house flipping for a quick profit, most experts agree that it may be a few years more until the housing market fully rebounds and home values see a consistent upward trend.

So when can investors expect to see home values increase?  Most sources say not until 2012 at the earliest.  According to CNBC “Home value declines are currently equal to those we experienced during the darkest days of the housing recession. With accelerating declines during the first quarter, it is unreasonable to expect home values to return to stability by the end of 2011.” The Wall Street Journal puts it another way, saying “if we consider that the housing bubble inflated from roughly 1999 to 2006, that made seven fat years. An ancient authority would suggest that seven lean years should follow. That would mean two more lean years to go.”

But when economists predict two more years of declining real estate prices, they don’t necessarily mean that prices will suddenly return to “normal” in one or two years, only that this is when we might expect a break in the downward momentum.  The Wall Street Journal explains it this way “As the debt hangover works its way through the system, the outlook is for housing to continue along an extended rocky and bumpy bottom, generally moving sideways in nominal terms. Since we will have an overall inflationary regime, real house prices will be falling. After working through the concluding lean years, housing prices can reasonably be expected to regain their long-term trend of increasing a little over 3% per year in nominal terms. . . This would take them back to their highs in 10 years or so.”

What this means for investors is that there may never be a better time to buy than right now… but only if you have the wherewithal to hold on to your investment as long as it takes to see the kind of return you hope for. If you have questions about the current real estate market, or whether now is the right time for YOU to buy, contact my office today.

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While the current housing crisis has some homeowners and sellers worried that the sky is falling, savvy investors recognize that if you are in the market to purchase or resell a property there are some great opportunities out there.

Buying a home in foreclosure can often mean amazing deals, sometimes as much as 25% below market prices or more.  However, as a real estate investor myself, I know the ins and outs of dealing with foreclosure sales, and there are some pitfalls to watch out for.

Unlike a regular sale, where you are dealing with an individual homeowner, when buying a distressed property you may end up dealing with several different lenders and investors, each with their own agenda and procedures to follow.  This can often drag the process on for many months.  The bank that services the loan may not even own the loan, in which case they will need to confirm what investors who do own the loan are willing to accept.

A great example of an eventually successful but drawn out short-sale property in Long Island was described in a recent article in CNN Money.  Shopping for a new home on Long Island after the birth of their daughter, Chris and Diane Moore fell in love with a 1920s Mediterranean-style home with a storied history.  According to the article, the home was sold as a short sale, in which a lender must agree to accept less than what’s owed on a property.  And as often happens with such deals, the buying process soon turned into a horror show.  The property was one of a kind, and the couple eventually secured the property at a 26% discount, but it took 10 months of negotiating.

Some short sales may qualify for the Federal HAFA program (Home Affordable Foreclosure Alternatives); and if it is a bank approved short sale or HAFA qualified short sale, this can speed up the process considerably.

Investors may wonder if it is safe to purchase a foreclosed property.  With recent news of the ‘robo-signing’ scandal, many illegally or improperly filed foreclosures and properties being returned to the original home owners, I understand your concerns.   Rest assured, as long as the new lender and buyer have title insurance, the former owner cannot seize the property.  Lenders always require a lenders title policy.  Owner’s policies are optional, but highly recommended for foreclosure properties.

If you are in the market for a home, it is especially important in this volatile and sometimes confusing real estate market to work with a real estate team that you can trust.  As a real estate investor myself as well as a real estate attorney, I can help you navigate these troubled waters to secure the amazing properties you are looking for.  Please feel free to call me with any questions or concerns.

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Conflicting reports in the media may have some homeowners at a loss as to what is really happening in these troubling financial times.  Reports of a steep decline in foreclosure filings had many hopeful that the housing crisis may be heading towards recovery, but experts warn that the underlying conditions in the housing market have not yet improved.

With a 15% decline in February for New York foreclosures, and 27% nationwide, the country experienced a 3-year low compared to 2010.  In February, default notices, auctions and seizures all fell, according to a report by RealtyTrac.

Some experts are attributing the decline in February to the backlog of filings due to the ‘robosigning’ controversy in the industry.  Investigations into the foreclosure process resulted in a big drop in activity as banks and servicers work through the mess they got themselves into due to poor procedures.  Lenders are now working to re-file paperwork that was initially improperly done.

Dr. Barbara van Kerkhove, Research and Policy Analyst at the Empire Justice Center recently published an exhaustive report on New York’s foreclosure crisis. The report indicates that the state is nowhere near the end of the foreclosure crisis, which now includes those homeowners with good credit and prime loans.

A recent article in The Daily Record quoted Van Kerkhove as saying the number of loans 90-plus days past due exceeds the number of pending foreclosures in every county of New York state, meaning a flood of new filings is forthcoming.

According to an article in the Business Review, Nearly 69,000 home loans in New York are at imminent risk of foreclosure, a situation that an advocacy group said today could lead to a “tsunami” of foreclosures over the next year or two.

Rueters recently reported on the decline as well, quoting Rick Sharga, senior vice president at RealtyTrac; “The drop-off was too severe to be organic.  There’s nothing in the underlying conditions that are causing foreclosures to suggest they should be going down yet.”

And so it seems we aren’t out of the woods just yet, despite the recent decline in filings.

I will continue to follow and report on the current housing crisis, foreclosure trends and legislation.  If you or somebody you know is at risk of foreclosure, I can help—please contact me.

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