Saturday, February 27, 2010

Free housing, you thought it was a myth

we've all heard the stories about his person or that person living free in their home. A myth? Not so much. The LA times recently published an article about it.

It's been 16 months
since Eugene and Patricia Harrison last paid the mortgage on their Perris home. Eleven months since the notice got slapped on their front door, warning that it would be sold at auction.

A terse letter from a lawyer came eight months ago, telling them that their lender now owned the house. Three months later, the bank told them to pay up or get out by the end of the week.

Still, they remain in the yellow ranch-style home they bought seven years ago for $128,000, with its views of the San Jacinto Mountains. They're not planning on going anywhere.
Throughout the country, people continue to default on their home loans -- but lenders have backed off on forced evictions, allowing many to remain in their homes, essentially rent-free.

Several factors are driving the trend, industry experts say, including government pressure on banks to modify loans and keep people in their homes.

And with a glut of inventory in places like Southern California's Inland Empire, Nevada and Arizona, lenders are loath to depress housing prices further by dumping more properties into a weak market.

Finally, allowing borrowers to stay in their homes helps protect the bank's investment as it negotiates with the homeowners, said Gary Kirshner, a spokesman for Chase bank, a major lender.

"If the person's in the property, there's less chance for vandalism, and they're probably maintaining the house," he said. Economists say the situation won't last forever, but in the meantime the "amnesty" may allow at least some homeowners to regain their financial footing and avoid eviction.

In the Inland Empire, an estimated 100,000 homeowners are living rent-free, according to economist John Husing, who based that number on the difference between loan delinquencies and foreclosures. Industry experts say it's difficult to say how many families are in that situation nationally because only banks know for sure how many customers have stopped paying entirely.
More evidence is provided by another firm, ForeclosureRadar, which says it now takes an average of 229 days for a bank to foreclose on a home in California after sending a notice of default, up from 146 days in August 2008.

"For some reason, banks are being more lenient with homeowners who are behind on their loans," Sharga said. "Whether it's a strategy to try and slow down the volume of foreclosures or simply a matter of the banks being able to keep up with volume is something that banks only know for sure."

Lenders say the trend reflects their efforts to work with borrowers to modify loans to avoid foreclosure. Bank of America "continues to exhaust every possible option to qualify customers for modification or other solutions," spokeswoman Jumana Bauwens said.

Some lenders are making it a policy to partner with delinquent borrowers. Citibank said this month that it would let borrowers on the brink of foreclosure stay at their homes for six months, whether or not they make payments, if they turn over their property deed.
Such policies may partly reflect the fact that lenders can't keep up with all the foreclosures, some say.

"The mortgage lenders are so backlogged that some people are able to slip through the cracks," said Kathryn Davis, a real estate agent at America's Real Estate Advocates in Corona. That was apparently the case for the Harrisons, who were told at various times that their house had been sold, that it belonged to someone else and that it was empty.
"In many cases, particularly in California, people owe a boatload of payments, and no bank is going to forgive that," said Guy Cecala, editor of Inside Mortgage Finance, a trade publication.

In Diamond Bar, the Fraguere family is finally moving on after living rent-free for 18 months. Job loss and other setbacks prevented them from paying their mortgage, but they say they didn't hear anything from the bank, First Franklin, until a real estate agent showed up at their door last month saying she was going to sell their house.

Sandy Fraguere wasn't surprised that it had taken the bank so long to ask them to move. "I don't think they really knew what was going on or who was there," she said.


I actually know a family that have not made a payment since Feb 2008!


askanarab said...

saw that. crazy times.

off topic question on how to read and understand sales histories on houses. redfin says the following house in Norco was sold for 27,000 in 1995. how can that be? what do i do? where do i got to get info on that sale in 1995?

i see houses like that with a really low sale every once in a while and wonder what? how? huh? thanks.

theY said...

Damn, I wish I had the sad story of moving out of Diamond Bar and into dreaded Chino Hills. I think I know where they are going to in CH and I don't think anyone has to feel too bad for them. Maybe their 9 and 10 year old will be better for seeing what can happen in life.

I also don't see how you can feel bad for those "artists" who even if they made fast food wages should have paid their house off by now.

Also, in addition to this new CARD law for CC's there should be something about having a mortgage at 70 years old that lenders shouldn't be able to make.

golfer_X said...

Askanarab, sales are public record and you can get the information if you want it. However I can just about guarantee that was not a "regular" sale. You will run across crazy sales amounts from time to time. It's not unusual to see sale amounts of $1000. There's a million reasons for those. That house could have burned to the ground and that was the sale price of a heap of ashes. It could be a transfer to a family member, a tax sale, who knows but you can be sure it was not a trustee sale because there are always plenty of investors at trustee sales to bid the price up higher than that (not that a lender would offer it that low).

Neudi said...

That is not that shocking. I know the folks renting a few houses down lived there rent free for about a year and half after the bank foreclosed. It was like hitting the lottery. Then the same couple that purchased the home back in 2006 bought it back from the bank at a 50% discount. Fixed it back up since the 3 family's living in there tore it to shit and guess what, yup rented it out again. Big ole win win.

golfer_X said...

Anyone out there know who is handling Indymac's REO' for Riverside?

The Yen Guy said...

CitiMortgage, a unit of Citgroup Inc., did announce a pilot project that will let some delinquent borrowers remain in their homes without making mortgage payments for six months if they voluntarily transfer ownership back to the Mortgage Company. City Bank will give the occupants a generous relocation fee when they turn over the keys provided they leave the house in good order.

One of the many reasons, the banks are not foreclosing is that the SEC and the AICPA have ruled under FASB 167 and 168, the banks can value the homes at bank managers best estimate rather than at market; thus there is no rush to start foreclosing on a number of homes except if the area be "really distressed" like Orlando Florida or Tuscon Arizona.

doghouse said...

Bof A does not work with you!
a friend is losing his house, and has a BofA loan, all they offerd was to put the missed payments onto the principle, plus interest!
no reduction in interest, or loan balance.
He and his wife both lost their jobs, and unemployment has expired, what else is there to do?
they never took a second on the house, the loan is the original, and they did qualify when the bought it!

golfer_X said...

Well you can't blame a bank for not offering a mod to a couple of unemployed people. The cold hard reality is no bank is going to do that. That's pretty much par for the course though. Most lenders are doing mods the exact same way. They simply tack all the missed payments, late fees and interest to the end of the new loan. That's the reason this disaster will drag on for decades. Unless values really climb those people will just default when they need to sell or when a job loss, divorce or medical issue forces it.

Tyrone said...

And then there's this...

California is a greater risk than Greece, warns JP Morgan chief
Jamie Dimon, chairman of JP Morgan Chase, has warned American investors should be more worried about the risk of default of the state of California than of Greece's current debt woes.

Brace, Brace, Brace!!

golfer_X said...

What, Kalifornia isn't in traable is it. Ahnold would never let anything happen to us!