The Fed has struck again!  This time the government has introduced a program to purchase $750 billion in mortgage backed securities.  The idea behind this is to lower mortgage interest rates. The program was announced last week and the immediate action has been favorable. 

Wall Street responded favorably and 30 year conventional fixed rate mortgages also dropped to a level below 5%.  This rate is the lowest level in over 30 years.  For homebuyers this is even more favorable news. For those of you who read my e-mails, you know that I have been stating that this current market may be the best home purchase opportuity in most of our lifetimes.  I am now taking that statement to a new and higher level. 

With the combination of extraordinary home pricing and historically low interest rates the situation for homebuyers may never be better.

Are you facing foreclosure, or have you already lost your home? Share a story of how the housing crisis has affected you by emailing me @ Patti@PattiLyles.com

Here is my first entry from Jackie Crockett, a short sale realtor:

There's another side to the foreclosure crisis: Realtors trying to save families from losing their homes. Jackie Crockett is a short sale realtor in Fairfield, CA who has seen the hard times faced by numerous families. Despite her own health problems, she considers herself lucky:

I was one of the first in our area to start listing and negotiating short sales over 3 years ago and helping various clients with loan modifications and 2nd lien write-offs. Unfortunately, the horror stories are never-ending. Plus, we work 4 or 5 times as hard, for about 1/6^th of the income. Those of us handling short sales (versus REO - bank owned properties) are really not in it in for the money, but for our community.

For every short sale listing I've had, I've submitted an average of 7 offers, with only a 50% closing ratio. That is higher than most. The average is 3 out of 10 short sale listings will foreclose before a negotiator finalizes an acceptance. I've had homes ready to close, clients ready to sign, and had the homes foreclosed out from under us. The worst part is, the home usually sells for well below the lowest offer we had submitted.

None of this makes sense. It is frustrating for us as Realtors, and heartbreaking for our clients, their families and our community. These are good people, hardworking, caught in a vicious cycle, with really no fundamental understanding of where to turn, who to talk to. When even the lenders and bankers don't know what to do, or how to proceed, what chance do "regular" homeowners stand?

The lenders and bankers treat us Realtors as if we are the enemy when all we are trying to do is stabilize our communities by keeping folks in their homes, or getting people into these homes as quickly as possible. It's worn me out mentally and physically. I am preparing for a kidney transplant - my husband is my donor - and I've put if off for almost a year now because I felt so many of my clients needed help more desperately. For all that my husband and I are facing, all the uncertainties, I know we are luckier than most and for that I feel so blessed.

Due to the nature of my business, I was in a unique position to take care of our own personal finances when my health started to deteriorate. We very easily could have been one of the statistics, losing our home due to skyrocketing hospital bills, dialysis costs, and lost income. I recently negotiated a settlement with my own 2nd lien holder who will take a very small payoff to "release" the loan. It took months of negotiating, reams of doctor's bills, hospital bills, tax statements, pay stubs, hardship letters, etc., but it was well worth it. Of course, using money from our rapidly dwindling 401 K seems to negate some of the euphoria. I've also called every credit card and set up various payment plans, and auto debit payments that earned us huge interest rate reductions for as long as we need while we're recuperating, and both back on our feet.

I could go on and on about all the pets we found locked in homes when families would leave. Neighbors would gasp and ask "how could people do that?" But some had no choice. Those losing their homes are mostly families with children, some were elderly folks on fixed incomes with no where to go. Pets ended up being the least of their problems. Needless to say, we have 5 rescued cats - we love them and hope their owners somehow know they are well and loved.

Are you facing foreclosure, or have you already lost your home? Share a story of how the housing crisis has affected you by emailing me ...Patti@PattiLyles.com

The Federal Reserve recently announced it will seek to renegotiate mortgages it owns that might otherwise enter foreclosure, according to Federal Reserve Chairman Ben S. Bernanke.  Under the program, the Fed could reduce what a homeowner owes on a mortgage; lower the interest rate; lengthen the term of a loan; or take other steps to prevent a loan from defaulting.

The Federal Reserve’s program will focus on reducing the amount of principal owed by those at risk of foreclosure, especially those with loan balances exceeding 125 percent of the estimated value of their property.

It is unclear how many homeowners could benefit from the program, and most individual borrowers will likely not know if their mortgages are owned by the Federal Reserve.  If eligible for a loan modification, the homeowner would work with mortgage servicer and not the government directly.

To read the full story, please click here:

http://www.washingtonpost.com/wp-dyn/content/article/2009/01/27/AR2009012703501.ht

Renters in Fannie Mae-Owned Foreclosed Properties Eligible to Stay in Their Homes

Fannie Mae established of a new National Real Estate Owned (REO) Rental Policy that will allow qualified renters in Fannie Mae-owned foreclosed properties to stay in their homes. The company currently has an eviction suspension in place through the end of January which will allow for the new policy to be fully operationalized prior to the suspension concluding.

"Renters in foreclosed properties have often been a casualty of the foreclosure crisis the country is facing," said Michael Williams, chief operating officer of Fannie Mae. "This policy will allow qualified renters to remain in Fannie Mae-owned properties should they choose to do so, mitigate the disruption of personal lives that foreclosures can cause, and help bring a measure of stability to communities impacted by high foreclosure rates."

The new policy applies to renters occupying foreclosed properties at the time Fannie Mae acquires the property. Renters occupying any type of single-family property will be eligible including residents of two- to four-unit properties, condos, co-ops, single-family detached homes and manufactured housing. Eligible renters will be offered a new month-to-month lease with Fannie Mae or financial assistance for their transition to new housing should they choose to vacate the property. The properties must meet state laws and local code requirements for a rental property.

While the company markets the properties for sale, Fannie Mae will manage the properties through a real estate broker or a property management company. The company will not require security deposits to be posted in connection with this program.

Renters in the foreclosed properties will be asked to pay market rate rent under the new leases. Rates may be determined by reviewing local comparable rents, conducting a neighborhood survey, or through other relevant indicators. Rates will also be subject to any legal rent control restrictions. The company will review each instance where the market rate may require a tenant to pay additional rent and will work to reach an equitable resolution.

On behalf of the company, property managers are contacting renters in Fannie Mae-owned foreclosed properties to notify them of their options.

 Law Alert! New California law amends loan foreclosure procedures

On July 8, 2008, California signed into law SB 1137 as urgency legislation, effective immediately. The new law

1. (1) establishes detailed procedures as part of the foreclosure process requiring lenders to contact homeowners in default on their mortgages to assess the homeowner's financial situation and explore options for avoiding foreclosure;
2. (2) requires a purchaser to maintain under the building codes vacant residential property purchased at a foreclosure sale and authorizes local governmental entities to impose civil fines and penalties for violations of up to $1000 per day; and
3. (3) gives a tenant or subtenant, in possession of a rental housing unit at the time the property is sold in foreclosure, 60 days instead of 30 days to vacate the unit.

Note, the legislature declared that this act was necessary for "the immediate preservation of the public peace, health, or safety" of California communities, citing the underlying policy of the law to "stabilize and protect the state and local economies and housing market." Although most provisions are effective immediately, some provisions become operative 60 days after the effective date of the law (i.e., 60 days after July 8, 2008). Nearly all provisions sunset by January 1, 2013.

By Patti Lyles

A California law that requires mortgage lenders to give customers 30 days notice before filing a default, appears to have only postponed the problems of financially troubled homeowners rather than resolved them.

 Between November and December, California saw a 122 percent surge in default notices that begin the foreclosure process, following a three-month decline, RealtyTrac reported Wednesday.

It was hoped that the law, which took effect in September, would provide time for the lender and homeowner to find an alternative to foreclosure.

Riverside County saw notices of default plunge by more than half in September, stay low for three months and then jump 126 percent to 4,729 in December. San Bernardino County saw the number of default notices increase 92 percent between November and December to 4,247, after falling as low as 1,500 in September.

"Clearly, the foreclosure prevention programs implemented to date have not had any real success in slowing down this foreclosure tsunami. And the recent California law, much like its predecessors in Massachusetts and Maryland, appears to have done little more than delay the inevitable foreclosure proceedings for thousands of homeowners," said RealtyTrac Chief Executive James J. Saccacio in a prepared statement.

Life in the Balance

The only way foreclosure modifications will work, several economists said, is if lenders agree to lower mortgage balances. They said that is the only way to help those who used creative financing to buy houses they actually could not afford over the life of the mortgage.

Lisa Jarman, a counselor with the Fair Housing Council of Riverside County, said there are modification programs that can lower mortgage balances and interest rates and extend a loan to 40 years, which combined can lower monthly mortgage payments. But she said most of her clients have too much debt or too little income to qualify.

Dependency

An Inland Empire economist, John Husing, said he favors proposed federal legislation to allow U.S. bankruptcy judges to lower the balances on mortgages of homeowners who seek to reorganize their debts in bankruptcy.

Because the region is so dependent on housing, the flood of foreclosures must stop before the Inland economy can start to recover, Husing said. "If you don't get a solution to this problem the recession will continue for multiple years," he said.

RealtyTrac's year-end report for 2008 illustrates homeowners' difficulty coping with falling home values and adjustable-rate mortgages that have reset to monthly payments they can no longer afford. Unable to refinance or sell their homes, homeowners are increasingly losing them.

Foreclosure activity more than doubled in Riverside and San Bernardino counties in 2008 compared to a year earlier. Several economists and analysts predict the pain will continue through 2009 because of a worsening economy.

"Rising unemployment is going to be the major catalyst for continued foreclosures in 2009," said Greg McBride, senior financial analyst with Bankrate.com.

What are your thoughts on Home Sale Contingencies in this marketplace?

Definition: A Home Sale Contingency is where a purchaser has a home that they need to sell first before they can buy a home. Oftentimes these offers are written as "Under Contract with Kickout." I will explain the Kickout part later.

Buyer needed to sell his place first. My initial reaction was "heck no." If you approach a seller that hasn't been able to sell their place in 100 days, you are effectively telling them, "I know you haven't been able to sell your place, but I want you to accept this contract and wait for me to sell MY place." I would think they would laugh out loud.

But then I decided to look closer into the facts and perhaps it isn't so crazy. What if these buyers haven’t had their home on the market? They would only put their house on the market “If they found just the right one” Mmmmmm

So as I pondered it, though a contingency like this is very rare these days. Crazy? Maybe, maybe not. If done creatively, I think one might be able to push one through in this Wild West marketplace. Everything else is unprecedented-Who Knows it could happen!

Pros for Home Sale Contingency BUYERS:

1. Less risk for the buyer. Their alternative has been to: a) Own two homes at once or  b) sell your place first and run out and buy a place while you are selling your place. (people usually do the "b" option, but there is a major problem if you don't like much that is out there for sale)

Cons for Home Sale Contingency BUYERS:

1. You don't get as good of a price. Sellers care about price AND terms. Similar to the carfax commercial where they illustrate with a balloon how dealers either inflate the trade in, or the new purchase. If you have bad terms, they will hold out for more money. I prefer to write CLEAN offers and be more aggressive on the price.
2. Most contingencies are written with a KICK OUT. This means that if another offer comes in, you will have 3 days to remove your contingency, or they KICK you out to the curb. So, if you listed your house for sale and are halfway through that process and a KICK OUT situation comes up, you bare some significant risk. Do you lose your contract to buy or drop the contingency and risk not selling your house? (there are some creative solutions to fill the gaps in time including Options to extend etc)
3. Your contract can help light a fire under another buyer to finally bid on the house you have under contract, therefore you get Curbed.

Pros for Home Sale Contingency SELLERs:

1. If you are getting no offers, and your house is unique and hard to sell (near a highway or odd style), and meanwhile an offer comes in with a Home Sale Contingency but the agent can prove it will sell fast... heck what is another 30 days?

Cons for sellers:

1. The obvious. You pull your house off the market, nobody sees it and the buyer never gets around to selling their place. Or worse yet, the buyer changes their mind and they have a HUGE way to back out.

How best to do one for buyers:

1. Prove to the listing agent and seller that your house will sell FAST (as in 1-2 weeks). Show them comps, show them the track record of the agent. Even consider LOSING $20,000-$30,000 by “Under-Pricing” your house to sell fast (something I don't recommend, but something to think about if you can make up that savings on the purchase, also think of it as an insurance fee and cost of making your $100,000 lower offer on your purchase look better). (I hope that wasn't confusing)
2. See if you can do one without any Kickout. A smart listing agent will say no, but you never know.
3. Try to make the provisions as long as possible. But the more you ask them to wait, the higher a price they are going to expect.

Tips for sellers considering taking a Home Sale Contingency:

1. Pretty much the same as above but in reverse. Also KEEP MARKETING the house. The MLS makes you put it under contract and few agents will touch it, but don't forget Craigslist and Open Houses. It is easier to get an offer when you have a standing offer. People love to offer on homes with others that are interested.
2. Make sure you have the ability to Kick Out the contract and take another contract. Keep the # of days to as short a number as possible. Maybe charge a daily fee for an extension.

And whatever you do, don't have the agent that is listing the place you like, become the listing agent for YOUR house. Wow, that would be a nightmare. No matter what "deal" he offers you. You would never know who he is working for and you could lose far more money and sanity than saved in lower commissions.

Pros & Cons: Deferred maintenance, lender approval among key issues

By Patti Lyles 

Create partnership agreement to protect finances, credit

By Patti Lyles, Tuesday, January 20, 2009.