By Joel Persinger
Loan modifications are a relatively new bread of animal. They popped up as a cottage industry in response to the troubled housing market. Real estate companies, having suffered as a result of the slowdown, and attorneys, looking for a quick way to make a buck, began positioning themselves as “Loan Modification Experts.” Not being loan modification experts ourselves, my staff and I embarked on a search for a reputable loan modification provider, to which we could refer our clients. What we found was less than encouraging.
After having interviewed dozens of self-proclaimed “Loan Modification Experts”, we came to discover that no such thing really existed. When asked how many loan modifications they had done, most “experts” were deliberately vague in their responses. Some gave us numbers that meant nothing and some refused to give us numbers at all. Most gave us answers that went sort of like this, “Oh… ah… we’ve signed up 300 clients so far!” To which I would ask, “But, how many loan modifications have you actually completed?” The answers I received ranged from, “Well, that’s hard to say…ah… you know… ah… we’re just getting started” to “Ah… I don’t really track those numbers… but, I can check around and get back to you.” They never got back to me.
The truth is that loan modifications are in their infancy and the landscape is constantly changing. As a result, no-one is an expert and no-one really knows how to get them done consistently. The proof of this statement can be found in an email exchange I had with a young “Loan Modification Expert” who was referred to me about two weeks ago. Following a lengthy discussion on the phone and some emails back and forth, I was finally able to clarify my desires by asking, “What I need to know is, what percentage of the time are you successful in negotiating a loan modification with the banks that is acceptable to the homeowners and is successful in keeping the homeowners in their homes?” It took two days to get the response. But it was quite an eye opener when it arrived. The young man came strait to the point in telling me that their success rate was somewhere around 40%. That means that far less than half of all the loan modifications they attempt are successful.
Many companies will tell you that they are successful in negotiating a loan modification 90 percent of the time or more. What they aren’t telling you is the fine detail associated with that percentage. For example; one company we spoke to was successful in getting lenders to make a loan modification offer 90 percent of the time. However, the overwhelming majority of those offers were so bad that the homeowners did not accept the offers, because the modifications that the lenders offered would not have helped them at all. Actually, you can probably call your bank and get them to offer you the same bad offers 90 percent of the time all by yourself and you won’t have to shell out $3,500 to a “Loan Modification Expert” to accomplish it.
All that having been said, for those who actually have succeeded in getting their loans modified through such service providers, the money spent may have been well worth it. The important thing is to understand the genuine odds of success. From this real estate broker’s experience, the chances of success in a loan modification are a crap-shoot at best. Still, there is a chance and if you’re willing to take the gamble, perhaps a loan modification is for you.
Monday, March 9, 2009
Wednesday, March 4, 2009
Can Obama’s Stimulus Plan Help Homebuyers?
By Joel Persinger
February 23, 2009
There’s quite a buzz among real estate folks and the media regarding the new Obama stimulus plan and how it might help home buyers. One of the items most talked about around the water cooler in my office, is the $8,000 tax credit. But, before I get into the specifics of how this tax credit is suppose to work, let me remind you that the actual stimulus plan probably weighs ten pounds when printed and won’t be fully understood for many months, if ever! Consequently, anything I tell you now will only paint a small part of the picture.
In basic, the new law says that first time homebuyers who purchase homes anytime from the start of this year until the end of November 2009, may be eligible for a tax credit. The credit could be as much as $8,000, but not more. This is a tax credit, rather than down payment assistance. So you have to come up with your own down payment. Then once you have completed the purchase, you can apply for the credit when you file your tax return at the end of the year.
The benefit of a tax credit is that it is a dollar-for-dollar reduction in the actual taxes you owe, rather than a reduction in your taxable income. Reducing your taxable income by $8,000 might only save you $1,000 to $1,500 in your actual taxes. On the other hand, a credit is real money that goes toward your actual tax bill. So, if you were to owe $8,000 in income taxes and qualified for the $8,000 tax credit, you would owe nothing. Better yet, the tax credit is real money. That means that you can receive a check for all or part of the credit, depending upon your tax liability. For example, if you end up owing $4,000 in taxes, you can offset that $4,000 with half of the tax credit and still receive a check for the other $4,000!
This may sound great, but it doesn’t apply to just anybody. You must either be a first time homebuyer or someone who has NOT owned a home during the past three years. Additionally, the program phases out as your income increases. According to the reports I’ve read so far, the phase out begins when couples make more than $150,000 per year or when single borrowers make more than $75,000 annually. Once you hit either of those income limits, figuring out what credit you are eligible for, if any, may require a degree in either accounting or rocket science. My advice is, speak to your accountant… even if you’re a rocket scientist.
How much this program will actually help home buyers remains to be seen. But, if you’re a first time buyer, it certainly is worth checking out. Just make sure you get good advice from qualified professionals along the way.
February 23, 2009
There’s quite a buzz among real estate folks and the media regarding the new Obama stimulus plan and how it might help home buyers. One of the items most talked about around the water cooler in my office, is the $8,000 tax credit. But, before I get into the specifics of how this tax credit is suppose to work, let me remind you that the actual stimulus plan probably weighs ten pounds when printed and won’t be fully understood for many months, if ever! Consequently, anything I tell you now will only paint a small part of the picture.
In basic, the new law says that first time homebuyers who purchase homes anytime from the start of this year until the end of November 2009, may be eligible for a tax credit. The credit could be as much as $8,000, but not more. This is a tax credit, rather than down payment assistance. So you have to come up with your own down payment. Then once you have completed the purchase, you can apply for the credit when you file your tax return at the end of the year.
The benefit of a tax credit is that it is a dollar-for-dollar reduction in the actual taxes you owe, rather than a reduction in your taxable income. Reducing your taxable income by $8,000 might only save you $1,000 to $1,500 in your actual taxes. On the other hand, a credit is real money that goes toward your actual tax bill. So, if you were to owe $8,000 in income taxes and qualified for the $8,000 tax credit, you would owe nothing. Better yet, the tax credit is real money. That means that you can receive a check for all or part of the credit, depending upon your tax liability. For example, if you end up owing $4,000 in taxes, you can offset that $4,000 with half of the tax credit and still receive a check for the other $4,000!
This may sound great, but it doesn’t apply to just anybody. You must either be a first time homebuyer or someone who has NOT owned a home during the past three years. Additionally, the program phases out as your income increases. According to the reports I’ve read so far, the phase out begins when couples make more than $150,000 per year or when single borrowers make more than $75,000 annually. Once you hit either of those income limits, figuring out what credit you are eligible for, if any, may require a degree in either accounting or rocket science. My advice is, speak to your accountant… even if you’re a rocket scientist.
How much this program will actually help home buyers remains to be seen. But, if you’re a first time buyer, it certainly is worth checking out. Just make sure you get good advice from qualified professionals along the way.
What’s Happening with Foreclosures?
By Joel Persinger
February 17,2009
Not long ago, the question I was most often asked was, “How are the interest rates today.” But now, the burning question on most people’s lips appears to be some version of, “What’s happening with foreclosures?” Unfortunately, a good answer is difficult to come by.
Over the past year or two, healthy banks have been gobbling up sick ones and have been trying to deal with the financial illnesses that the sick banks brought into the deals. A prime example of this is the purchase of Countrywide Home Loans by Bank of America. Since the day the deal was announced, trying to work with Countrywide to resolve the problems of distressed homeowners in “pre-foreclosure” has been a nightmare. In every way, Countrywide has lived out the old saying that, “The right hand doesn’t know what the left hand is doing.” This is not to single out Countrywide. Just about every recent purchase of a distressed bank has yielded a similar result. Nevertheless, this kind of thing can make figuring out the real estate and lending markets quite challenging for both real estate professionals and homeowner.
This past week, ForeclosureRadar.com released its California Foreclosure Report for January 2009. The report states, in part, “January brought an unexpected, across the board drop, in the total Notices of Default, Notices of Trustee Sale, and sales at auction, not only from the prior month, but year over year as well. Even after accounting for the fact that January had two fewer days than December, only properties sold at auction saw a slight increase of 3.4 percent. Analyzing the data at the lender level, it appears these drops can be primarily attributed to the significant changes taking place among the Country’s major lending institutions. Wells Fargo, with its recent acquisition of Wachovia, saw a drop in Notice of Default filings of 46 percent, while JP Morgan, which acquired Washington Mutual, saw a drop of 49 percent. Bank of America, which earlier acquired Countrywide, saw a significant 281 percent increase in filings, though still below the levels Countrywide experienced in the second quarter of 2008”
At first glance this appears to be good news. Hey… foreclosures are down! But, just when you thought it was safe to go back in the water, the report continues by stating, “Given the significant integration issues faced by most major lenders today, it would be irresponsible to draw any conclusions about market direction from current foreclosure numbers.” In plain English this means that since the lending institutions have no idea what their doing and since their proverbial right hands have no idea what their left hands are doing, nobody really knows what direction the market will take and ForeclosureRadar.com’s California Foreclosure Report, while interesting reading, means absolutely nothing.
So where does that leave you and me? Currently, foreclosures are down, but tomorrow they may be up. Who knows? What we do know is this: prices are down and still decreasing. Interest rates are low and loans are available to those who can actually repay them. Sellers are having a tough time and buyers are finding deals. Basically, it continues to be a buyer’s market. If you are a qualified buyer, you should be buying.
February 17,2009
Not long ago, the question I was most often asked was, “How are the interest rates today.” But now, the burning question on most people’s lips appears to be some version of, “What’s happening with foreclosures?” Unfortunately, a good answer is difficult to come by.
Over the past year or two, healthy banks have been gobbling up sick ones and have been trying to deal with the financial illnesses that the sick banks brought into the deals. A prime example of this is the purchase of Countrywide Home Loans by Bank of America. Since the day the deal was announced, trying to work with Countrywide to resolve the problems of distressed homeowners in “pre-foreclosure” has been a nightmare. In every way, Countrywide has lived out the old saying that, “The right hand doesn’t know what the left hand is doing.” This is not to single out Countrywide. Just about every recent purchase of a distressed bank has yielded a similar result. Nevertheless, this kind of thing can make figuring out the real estate and lending markets quite challenging for both real estate professionals and homeowner.
This past week, ForeclosureRadar.com released its California Foreclosure Report for January 2009. The report states, in part, “January brought an unexpected, across the board drop, in the total Notices of Default, Notices of Trustee Sale, and sales at auction, not only from the prior month, but year over year as well. Even after accounting for the fact that January had two fewer days than December, only properties sold at auction saw a slight increase of 3.4 percent. Analyzing the data at the lender level, it appears these drops can be primarily attributed to the significant changes taking place among the Country’s major lending institutions. Wells Fargo, with its recent acquisition of Wachovia, saw a drop in Notice of Default filings of 46 percent, while JP Morgan, which acquired Washington Mutual, saw a drop of 49 percent. Bank of America, which earlier acquired Countrywide, saw a significant 281 percent increase in filings, though still below the levels Countrywide experienced in the second quarter of 2008”
At first glance this appears to be good news. Hey… foreclosures are down! But, just when you thought it was safe to go back in the water, the report continues by stating, “Given the significant integration issues faced by most major lenders today, it would be irresponsible to draw any conclusions about market direction from current foreclosure numbers.” In plain English this means that since the lending institutions have no idea what their doing and since their proverbial right hands have no idea what their left hands are doing, nobody really knows what direction the market will take and ForeclosureRadar.com’s California Foreclosure Report, while interesting reading, means absolutely nothing.
So where does that leave you and me? Currently, foreclosures are down, but tomorrow they may be up. Who knows? What we do know is this: prices are down and still decreasing. Interest rates are low and loans are available to those who can actually repay them. Sellers are having a tough time and buyers are finding deals. Basically, it continues to be a buyer’s market. If you are a qualified buyer, you should be buying.
Tuesday, February 3, 2009
Real Estate Prices Have Tumbled… Bad News or Good?
By Joel Persinger
In every economic shift there are winners and losers. By nature, and with the help of the news media, most of us focus so strongly on the losers that we miss the winners almost entirely. This column is dedicated to those who are winning.
A couple of months ago, an old client of mine called me and said, “Joel, I want you to help my son to find a house he can buy.” Just over a week ago that same young man closed escrow on his first house. The property was a pre-foreclosure and had been left in terrible shape. But, this young fellow and his father work in the construction industry. They have lots of friends and contacts to help whip that house into shape. I’d be willing to bet that inside of a month, that place will look great.
Just yesterday, I had the privilege of having lunch with a fine couple who are looking for their first house. They both have great jobs and good credit and are so excited about the possibilities and their dreams that they can’t stop talking about them. She wants to have a home that she can call her own. He wants to have a garage with a work bench, so he can fix his own car and tinker with his own projects. After doing a little homework on their behalf, one of my loan officers felt very strongly that these folks are more than qualified to buy their own home. You never know, I just might be telling you about their new place in these pages soon.
A good friend of mine has wanted a house with a view and some elbow room for years. He grew up in Montana and likes to have a bit more than ten feet between his house and his neighbors. For some time now he’s been looking up at the house on the hill across from his place. You know the house. It’s the one with the 300 degree view and two acres of land. You probably have one just like it in your neighborhood. My buddy has been wondering what it would be like to live up there for years. Well, it looks like he’s going to find out. With any luck, my friend will own that house in less than a month.
These are just three stories of the millions that are out there. We never hear about them because good news doesn’t sell papers or increase viewership. Sure, people are losing jobs and homes. But, let’s not forget that when unemployment reaches 9 percent, it means that 91 percent of the people are working. Likewise, even if the number of foreclosures reaches 10 percent, it would mean that 90 percent of homeowners are paying their mortgages on time. News organizations and politicians make their livings by focusing on the negative. Here’s my advice: look for the positive. It’s easy to see, there is generally more of it and making it your focus will let you sleep better at night.
In every economic shift there are winners and losers. By nature, and with the help of the news media, most of us focus so strongly on the losers that we miss the winners almost entirely. This column is dedicated to those who are winning.
A couple of months ago, an old client of mine called me and said, “Joel, I want you to help my son to find a house he can buy.” Just over a week ago that same young man closed escrow on his first house. The property was a pre-foreclosure and had been left in terrible shape. But, this young fellow and his father work in the construction industry. They have lots of friends and contacts to help whip that house into shape. I’d be willing to bet that inside of a month, that place will look great.
Just yesterday, I had the privilege of having lunch with a fine couple who are looking for their first house. They both have great jobs and good credit and are so excited about the possibilities and their dreams that they can’t stop talking about them. She wants to have a home that she can call her own. He wants to have a garage with a work bench, so he can fix his own car and tinker with his own projects. After doing a little homework on their behalf, one of my loan officers felt very strongly that these folks are more than qualified to buy their own home. You never know, I just might be telling you about their new place in these pages soon.
A good friend of mine has wanted a house with a view and some elbow room for years. He grew up in Montana and likes to have a bit more than ten feet between his house and his neighbors. For some time now he’s been looking up at the house on the hill across from his place. You know the house. It’s the one with the 300 degree view and two acres of land. You probably have one just like it in your neighborhood. My buddy has been wondering what it would be like to live up there for years. Well, it looks like he’s going to find out. With any luck, my friend will own that house in less than a month.
These are just three stories of the millions that are out there. We never hear about them because good news doesn’t sell papers or increase viewership. Sure, people are losing jobs and homes. But, let’s not forget that when unemployment reaches 9 percent, it means that 91 percent of the people are working. Likewise, even if the number of foreclosures reaches 10 percent, it would mean that 90 percent of homeowners are paying their mortgages on time. News organizations and politicians make their livings by focusing on the negative. Here’s my advice: look for the positive. It’s easy to see, there is generally more of it and making it your focus will let you sleep better at night.
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