Foreclosures Rely on Lenders Having Clear Title

We've been hearing about this for well over a year now as many homeowners across the country threatened with foreclosure are challenging lenders to produce proof of clear title to their properties.

Here in Massachusetts, the question is being raised again as the Massachusetts Supreme Judicial Court rules invalidating foreclosures on two properties in Western Mass. Here is the article that appeared Boston.com:

SJC ruling may void thousands of foreclosures
January 7, 2011
By Jenifer B. McKim, Globe Staff

The Massachusetts Supreme Judicial Court today upheld a contentious land court ruling that puts in question the ownership of hundreds, possibly thousands, of foreclosed properties in the state.

The ruling challenges the way lenders have traditionally foreclosed on properties -- without having all the paperwork in place at the time a home is seized. It affirms a 2009 lower court decision that invalidated foreclosures on two Springfield homes because the lenders did not hold clear titles to the properties.

Cambridge attorney Paul Collier, who represented one of the homeowners in the case, said the supreme court ruling invalidates thousands of foreclosures, reverting ownership back to the homeowners who lost the homes, at least temporarily. In most cases, those property takings will have to be redone, further clogging an already bogged down foreclosure process that many real estate specialists say has contributed to the stagnant housing market.

"The banks and the investors are going to have to deal with those homeowners as to what happens to those properties," Collier said.

During the housing boom, millions of mortgages were packaged into bonds and sold to investors, a process that resulted in lengthy and tangled paper trails that can obscure ownership. Many lenders believed they could complete foreclosure transactions and later produce formal proof they held a mortgage. Today's ruling makes it clear that the practice will not be allowed in Massachusetts.

"We agree with the [land court] judge that the plaintiffs who were not the original mortgagees, failed to make the required showing that they were the holders of the mortgages at the time of foreclosure,'' the justices said in their opinion.

The decision will also have national implications at a time when lenders' foreclosure practices are being scrutinized by federal regulators and state attorneys general.

"The World's Gonna Find a Way" but we want it Now -- Today!

Do you remember Ray Steven’s 1970’s hit song, “Everything is Beautiful”?
I wonder how that song would play today.

“There is none so blind as he who will not see
We must not close our minds
We must let our thoughts be free
For every hour that passes by
You know the world gets a little bit older
It's time to realize that beauty lies
In the eyes of the beholder.”

For so many people, everything is not beautiful these days and life sucks. But we keep believing and trying to see the beauty in our lives. We must remain positive and hopeful.

The sing-song lyrics go on beseeching us –
“And we gonna get it all together now
Everything gonna work out fine
Just take a little time to look on the good side my friend
And straighten it out in your mind.”

We thought we were getting it all together but now all you hear is double dip recession, disrespect for our elected President and rancor among the political parties.

Working in real estate, I desperately want everything to be beautiful, but the truth is it is going to take longer than any of us thought before everything is beautiful again.

In a survey conducted by the Cape & Plymouth Business group, they concluded that the majority of respondents who were private business owners felt:
The economy will improve slightly in 2011
Small business owners will not hire additional staff
Businesses will not raise capital and if they do it will be through bank loans and private investors
Businesses will not expand or invest in property or equipment
Housing prices will remain flat
The strongest contributors to the Cape and Island economy will be Tourism/Retail and Health Care
Revenue increases of 1% - 10% are projected through local and regional sources

I guess that means there is hope, but not much confidence. Perhaps, because Cape Cod and the Islands are resort destinations, merchants are hoping people will still need mental health R&R vacations in 2011. I could use one right now, but I live here in paradise so I will simply go for a walk and appreciate what I have around me all the time.

What is not beautiful is the looming Shadow Inventory of foreclosures, and in 2011 it is predicted that nationally there will be a record high volume of foreclosures. According to Inman News, Core Logic reported that the "shadow" inventory of homes likely to be repossessed or already in REO inventory but not yet on the market reached 2.1 million units in August, up from 1.9 million units a year ago. Because home sales have also slowed, that represents 8 months supply, up from 5 months one year ago. Adding the 2.1 million shadow inventory to the 4.2 million homes on the market, causes the total supply to reach 23 months of inventory, almost double NAR's estimate in September. In the markets yet to be affected by foreclosures, prices will go down more but in markets where the majority of foreclosures have already occurred, they may have already bottomed out.

Experts predict that when tallied, 2010 will show fewer home sales than 2009 and the dollar volume will be lower than 2009. Keep in mind that 2009 was a lack luster year for sales. The beginning of 2010 was stimulated by the home buyer tax credits so we might consider that as being a false start. The fact of the matter is that there are better opportunities available right now even without the home buyer tax credit, but people are not jumping to take advantage of those once in a lifetime opportunities. Interest rates will most likely go up in 2011, as they already are right now. I doubt that will affect sales because despite the current record low rates it did not have much impact on sales this year. Without a job, job security or a steady income low interest rates become moot.

2011 will prove to be just more of the same and the housing market will not recover until people have jobs and the confidence to act upon their pent-up desire to BUY a home.

However, since Martha’s Vineyard is primarily a second home market I believe everything could be beautiful for those buyers who keep their finger on the pulse, have financial security and recognize that this is probably the best opportunity in their lifetime to own a piece of The Rock. They recognize to wait would be penny wise and dollar foolish. With 712 properties currently on the market and many properties ‘off market’ but still for sale there is a lot to choose from for a very limited pool of qualified buyers. There is no reason why a savvy buyer cannot find a good deal here. Currently, there are 70 properties either under contract or being negotiated, so some people are still singing ‘Everything is Beautiful’.

Over the years, many Buyers who have contacted me, read through the copious amount of FOR BUYERS ONLY information on my website and subscribed to my Buyer's Basic e-Newsletter have remarked that they perceive my function as one of a consultant and information provider, rather than as a 'realtor'. As an exclusive advocate for buyers I believe educating buyers is a vital part of my job. However, as a real estate professional, my business is consummating the purchase and sale of real estate. If you appreciate the consistent effort I make to bring you 'No Bull' educational information, please contact me when you are ready to buy. I want your business, so please come to me first. I can assure you that I will put your interests before my own and do my utmost to negotiate the best price and terms for you. I will work very hard to discover all the details and hidden secrets of the property you are purchasing so that you will not have any unpleasant surprises.

Keep the faith, “The world's gonna find a way.”

The Elephant in the Room

These days I am sure we are all paying attention to the nation’s recovery report card, the stock market’s daily mood swings, the price of gas, the staggering unemployment numbers, and oh yes, the foreclosure market that has been like a wild fire in the Southern California hills; it just keeps growing and spreading. The GDP appears strong at a fourth quarter annual growth rate of 5.7%, but home sales in December were down 7.6%. Does that make sense? Oh sure it does, because December is always a slow month for sales and there was that hiccup in the home buyer tax credit program. I’m not forgetting about unemployment, but why talk about it even though it is the biggest elephant in the room. Well, I guess we have to talk about it because our local flagship newspaper needs a sensational story to fill column inches.

Much to the displeasure of the real estate community, the Gazette once again decided to paint a most negative depressing picture about the real estate market, and the overall state of our union all in the name of truth penned by its resident editorial curmudgeon. The front page headline reads, “Foreclosures and Joblessness Up”. Sure we have about 24 bank owned properties in Dukes County that we are working to absorb, and there will surely be more on the way during this year. However, the writer insists on going on and on about the column inches all the foreclosures are taking up in print, and now we can put a number on unemployment predicting 50% over the next couple months, compared to about half that in normal times. With no new home starts, everyone counting pennies, only buying essentials and eating at home instead of going out to dinner, is this really breaking news?

The good news in this editorial according to Chris Wells, president of MV Savings Bank is petitions to foreclose are not nearly what they are in the rest of Southern New England and the median sale prices in some towns actually increased from 2008 to 2009. West Tisbury shows a 2% increase and Edgartown a 14% increase in median sales prices. According to Mr. Wells, in the other three Island towns, Oak Bluffs was down 27%, Tisbury was down 19% and Chilmark saw the greatest reduction at 43% median sales price.

Martha’s Vineyard continues to bravely soldier on, its citizens doing all they can to make ends meet and keep a stiff upper lip. We have always been a hot and cold running Island with jobs for everyone during the tourist season and one of the highest, if not the highest unemployment rates in the Commonwealth for what amounts to 8 months during the off season. The Island greeting has become variations of “we’re hanging in there” and assurances that “we are all in this together”. Whew, I feel better already. What we all look for every day is some good news, news that will inspire us to keep on because we know summer is coming and with the sun we look forward to greeting all those visitors who love what Martha’s Vineyard has to offer, a simpler way of life.  Oh by the way, bring your checkbook and support the Island economy.

Where To Now Martha's Vineyard?

Are you upside down? Did you know one in four home owners in America with a mortgage are under water? By that I mean their home is worth less than what they owe. The beginning of 2010 will see more Option ARM’s coming to term. In many cases where home prices have fallen drastically borrowers are so deeply under water that they can't refinance their mortgage in order to take advantage of take advantage of the current lower rates. "We're declining hundreds of loans each month," said Steve Walsh, a mortgage broker in Scottsdale, Ariz. "The only way we will make headway is if we allow for a streamlined refinance where the appraisal is irrelevant."

5.3 million homeowners have mortgages that are at least 120% of their homes’ value. According to Mark Fleming, chief economist of First American Core Logic, homeowners whose loan to value ratio is greater than 120% are more likely to default and 520,000 of these borrowers have received default notices. Even if they want to sell (Short Sale), they can’t afford to --- they’re stuck. Sanjiv Das, head of Citigroup's mortgage unit said "Beyond 120%, the most effective modification is a complete loan restructuring, including a principal reduction. Mr. Das goes on to say “Borrowers who are less than 20% under water are likely to maintain their mortgage if their loan is modified and the payments reduced”.

As financial institutions continue to struggle with how they are going to solve the mess they have created, about 588,000 borrowers defaulted on mortgages last year even though they had employment and could afford to pay. That is more than double the number in 2007, according to a study by Experian and consulting firm Oliver Wyman. "The American consumer has had a long-held taboo against walking away from the home, and this crisis seems to be eroding that," the study said. Previously the advice to borrowers has been, only by defaulting on their loans will lenders pay attention and consider adjusting rates and principals in line with today’s market. However, lenders have been reluctant to reduce mortgage principal over worries about "moral contagion, with people not paying their mortgage or re-defaulting because they believed the bank would reduce their principal," Mr. Das said.

I expect that we will see more loan defaults on Martha’s Vineyard and more foreclosure auctions at the beginning of 2010 despite the fact that we have leveled out in our market. In the early 90’s we called this moment in the market a “trough”. I also think the Martha’s Vineyard recovery will slow down because; with the optimistic forecast more less-motivated homeowners have placed their properties back on the market at overly optimistic prices. I believe the result will be a stall in the market because everyone is confused. However, I still maintain that this is a great time to buy. Look at what you have going for you. Interest rates hit an all time record low this week averaging 4.78% on a 30-year fixed-rate mortgage --- this has never happened before in all the time Freddie Mac has been keeping records. For comparison sake, the interest rate last year was 5.97%. "Interest rates for 30-year fixed-rate loans are currently 0.8 percentage points below this year's peak set in mid-June, which shaves roughly $100 off the monthly payments on a $200,000 mortgage," said Frank Nothaft, Freddie Mac chief economist. Interest rates will only go in one direction from here, and don’t forget the extended and broadened home buyer tax credit; it no longer applies only to first time home buyers.

I want to urge you, if you see something you like take a run at it. You will never know what you can negotiate until you engage, but be patient, realistic and resolute in your objective. $20,000 one way or the other today is not going to make a difference ten years from now.

President Obama’s NEW Housing-Aid Plan – who WINS and who LOSES?

The new Housing-Aid Plan, according to the administration, is estimated to cover as many as nine million mortgage holders nationwide. It has two main components.

PART 1: Loan Modification
The first part supports borrowers who have kept up with their mortgage payments, but have lost so much value in their homes that they don’t have the equity necessary to refinance. Therefore, they are unable to take advantage of the present record low interest rates, which are hovering around 4%.

You WIN if you have payments of more than 31% of your pretax monthly income and you can prove hardship.

You WIN if you occupy a single-family home and can prove the home is your primary residence.

You WIN if you have an unpaid principal balance of $729,750 or less.

You WIN if you have a mortgage originated on or before January 1, 2009 and make all the modified payments over a trial period of three months or more.

You LOSE if you are not about to default.

You LOSE if you are an investor with a home that is not owner-occupied.

You LOSE if you have a home that is vacant of condemned.

You LOSE if you have an unpaid principal of more than $729,750.

You LOSE if your mortgage is packaged into securities whose rules explicitly forbid modification.

You LOSE if you have loan servicers who can’t be reached or are unwilling to consider modification.

PART 2: Loan Refinancing
The second part of the plan is geared toward borrowers who are already delinquent in their loan payments or are in eminent danger of default and aren’t able to refinance, perhaps due to a decrease in the value of their home.

You WIN if you have loans owned or guaranteed by Fannie Mae or Freddie Mac.

You WIN if you are current on your mortgage payments.

You WIN if you can prove the ability to afford the new mortgage debt.

You WIN if your mortgage balance is no more than 105% of your current estimated home value.

You LOSE if you have loans owned or guaranteed by a company other than Fannie Mae or Freddie Mac.

You LOSE if you have been more than 30 days late on a payment in the past 12 months.

You LOSE if you can’t afford the new mortgage debt.

You LOSE if your home price has fallen so that the loan is more than 105% of the market price.

Good Property Opportunities on Martha's Vineyard

SHORT SALE: Located close to the hospital and 5 minutes from either Vineyard Haven or Oak Bluffs Harbor, this 2100 sf colonial style 3 bedroom 2.5 bath home on a quarter acre lot is being offered at the distress price of $450,000. The assessed value for 2009 is $576, 700 and it was purchased in 2006 for $612,000. Please note that this property may very well sell for more than the asking price and offer acceptance is subject to approval by the lender.

Click here to view property > Oak Bluffs - 3 Linton Avenue

Another Huge Opportunity for Home Buyers

As part of the new Economic Stimulus Bill being thrashed around in the senate, and on top of the Tax Credit proposed for all home buyers allowing them a tax credit at the rate of 10% of the sales price up to a limit of $15,000, there now is Amendment 353.

Amendment 353, proposed by Senator John Ensign, Republican Senator from Nevada, would provide 30 year fixed rate financing at about 4%, for anyone purchasing a primary residence. If this passes the House and if there is more sensitivity by lenders in handling those threatened by foreclosure, we could really be on our way to recovery in the housing market.

Is the Martha’s Vineyard Housing Market really that Bad? I Don’t Think So

Looking at the overall picture of the housing crisis, perspective and understanding has been lost as a result of what is essentially a localized crisis in 4 states: California, Nevada, Florida, and Arizona. According to statistics from City-Data.com, 54 of the 101 cities with the largest population increase from 2000 - 2006 are located inside California, Nevada, Florida, and Arizona - the four states most affected by sharply decreasing home values. These four states saw the largest population influx between 2000 and 2006 triggering the need for more housing supply and with that demand, prices started to go up at 15% or more annually.

Anyone who has been in the real estate investment business knows that what goes up must come down. Many mortgage lenders bolstered by the above average appreciation rate year after year irresponsibly let their guard down, lowering lending standards and granting all sorts of exotic loans they should have known could not be repaid. Opportunity and greed propelled builders, real estate licensees, lenders and investors to push the envelope until the bubble burst. Today there are 15 states struggling to correct themselves; that is 30% of the country with 37% of the population and approximately 4 million problem mortgages. That breaks down to 7 percent of all mortgages owned in the U.S. Sure, you hear numbers reported by RealtyTrac, a foreclosure reporting service, stating one in every 464 U.S. households were served with a foreclosure filing in July --- 272,171 households, but the deepest concentration of those foreclosures are in California, Nevada, Florida, and Arizona. In Cape Coral-Fort Meyers, Florida alone, one in every 64 households received a foreclosure notice in July. On Martha’s Vineyard, RealtyTrac is reporting only 34 properties in Pre-foreclosure, Foreclosure or REO status. There are approximately 14,000 households on Martha’s Vineyard. The current inventory of properties for sale is less than 800 properties. Does anyone remember the early nineties? This is nothing compared to back then, but business is so much more difficult today because everyone is afraid of doing the wrong thing. Most of the public continues to believe the media, and the media continues to fuel the fear factor because, “misery sells newspapers”.

Not having a clear picture of the market has resulted in a lack of movement stalling the market, except for those buyers who ignore the media negativity and know how to read the numbers. I believe we are about to see a significant paradigm shift being expressed in two ways. Frustrated sellers are finally taking a hard look at their pricing realizing that their past strategy has not worked and has done them more harm than good. They are listening to their seller agents and cutting prices to the bone, well below assessed value in many cases. Sellers who have refused to price their properties realistically for today’s market and were never really sincere about selling, are taking their properties off the market. They think the market is about to turn around and prices will start to inch back up within the next 4 to 9 months. They can wait. I think this will paint a clear uncluttered picture for consumers who have been anxiously waiting with pent-up desire to get into this market but have been unsure and confused. They will finally realize now is the time to buy. They want to buy!

This fall, mortgage rates are forecasted to go up as much as a quarter percentage point according to Jim Vogel, an analyst at FTN Financial Capital Markets. This prediction is a result of Fannie Mae reporting a second-quarter loss of $2.3 billion and their prediction of more heavy losses resulting from the home-mortgage defaults and price declines centered primarily in California
(-28%), Florida (-17%), Nevada and Arizona. Fannie Mae has already said they will stop buying alt-A loans by the end of 2008. Fannie Mae and Freddie Mac are going to be limited in their ability to buy and guarantee home loans, and they will increase fees to borrowers seeking LTVs of 75-80 percent. Increases in the cost of borrowing will reduce the pool of homebuyers with the expected result that buyers with strong liquidity and solid credit will be in the catbird seat. As of today, mortgage rates are still very attractive. Martha’s Vineyard local Island banks understand our market and are excellent at helping qualified buyers to create a loan package that suits their needs. Now is the best time to buy, waiting will only create memories of what could have been your dream come true.