Tuesday, October 29, 2013

“Vampire” Foreclosures in October

It’s almost Halloween, and RealtyTrac has released a new report in which it coined the phrase “vampire” foreclosures, according to a recent article in CBS MoneyWatch.  What are vampire foreclosures?  Basically, it’s a term that describes properties that have gone into foreclosure and have actually been seized by the bank, but are still occupied by the original owners.  Did you know this was happening in Illinois and across the country?  It may sound unlikely, but RealtyTrac estimates that about 47 percent of bank-owned homes actually fall into the category of “vampire” foreclosures.  And in some of America’s larger cities, that percentage is even higher.  Chicago is actually one of those places, where “vampire” foreclosures account for about 65 percent of bank-owned homes in the city.
Real estate information companies continue to report on foreclosures in Illinois and throughout the country.  Sometimes these companies can discuss the foreclosure process and its aftermath in terms that aren’t especially clear.  Do you have questions about foreclosure or about how the real estate market is likely to affect you?  It’s never too early to contact an experienced Illinois real estate attorney.
Vampires, Zombies, and the American Housing Market Recovery
Earlier this year, we told you about “zombie” foreclosures.  What are zombies when it comes to the housing market?  Basically, zombie foreclosures are those where the homeowner abandoned the property during foreclosure—no one’s living in them, but they’re still homes, in a sense.  What’s the deal with the proliferation of “undead” language when it comes to describing foreclosures?
For many commentators, the foreclosure process involves a lot of properties that seem to be metaphorically between stages of life and death.  Most of these properties had been homes to families, and they still bear traces of that life.  In addition, many of these foreclosures are going to have to “come back to life,” so to speak, when they’re revitalized on the market.  According to Daren Blomquist, the vice president of RealtyTrac, the “zombies will eventually have to come to market,” as will the “vampires.”
Why do so many of these properties exist?  In many ways, the high number of distressed properties is misleading.  According to Blomquist, “this distressed inventory is artificially being held back so that in the short-term, it’s helping boost the home prices and the housing recovery in general.”  However, Blomquist explained that when these properties do return to the market, we might need to anticipate a drop in house prices and a delay in housing recovering.  After all, as Blomquist said, “these homes are going to have to hit the market.  They’re not going to just disappear.”
How Many Vampires and Zombies are Out There?
According to RealtyTrac’s numbers, there are about 250,000 “vampire” properties nationwide, and about 150,000 “zombies.”  Together, that’s about 400,000 houses that are “poised to hit the market,” a number that represents close to 10 percent of current home sales.
The number isn’t strikingly overwhelming, as Blomquist noted, but they could pose particular problems in “markets where there’s a high concentration of these homes.”  Do you have questions about foreclosures in the Chicago area?  It’s essential to have an experienced foreclosure defense lawyer on your side.  At the Emerson Law Firm, we have significant experience handling foreclosure issues across the state of Illinois and can speak to you today about your case.
See Related Blog Posts:

Friday, October 25, 2013

Strategic Defaults Aren't Worth the Trouble?

Have you been thinking about a strategic default?  Do you currently have a mortgage that’s owned by Fannie Mae or Freddie Mac?  According to a recent article in the Chicago Tribune, Fannie and Freddie are starting to get serious about homeowners who have the money to make their monthly loans payments but decide to walk away from their mortgages.  Since the housing crash, homeowners have been electing to walk away from mortgages in which they owe more than the house’s current market value.  As a result, the homes go through the foreclosure process and are sold at auction.  However, foreclosure sales often don’t generate enough money to cover the homeowner’s loan balance, and they can be liable for the remaining amount in a deficiency judgment.
What Exactly is a Strategic Default?
You might have heard the term “strategic default” since the collapse of the housing market.  In short, it’s a situation where a borrower decides to stop making payments on his or her loan.  While strategic defaults can occur during any economic period, they’ve been numerous in the last five years.  The housing crash caused the market value of homes across the country to drop dramatically, leaving mortgage borrowers in situations where they owed a lot more money on their home loan than their house was even likely to garner on the market.  In other words, homeowners owed more on their loans than the market value of their property.  As a result, many of these borrowers began to simply walk away from the property, allowing it to go into foreclosure—a “strategic default.”
However, this is a big problem for Illinois homeowners.  Specifically, what happens to a borrower when his property sells for less than what he owes on his loan?  As you might imagine, the lender can be out thousands of dollars in these situations.  Depending on which state you’re in, lenders may be able to go after a borrower for additional funds that the lender can’t get back in a foreclosure sale.  In Illinois, lenders can legally go after homeowners for deficiency judgments when the foreclosure sale garners less money than what the borrower owes on the loan.
Fannie and Freddie Haven’t Held Defaulters Accountable
Recently, data has shown that Fannie and Freddie have been generating significant profits.  However, these “government-sponsored enterprises” historically haven’t taken substantial efforts to hold defaulters liable for the money they owe on their mortgages.  According to the article in the Chicago Tribune, Fannie and Freddie “haven’t done a particularly good job at pursuing deficiency judgments,” and the Office of the Inspector General at the Federal Housing Finance Agency (FHFA) isn’t happy about this.
According to the FHFA, they’re going to ensure that Fannie and Freddie “clean up their acts.”  What does this mean for consumers?  In short, if you’re considering a strategic default on a Fannie or Freddie loan, it means that those government-sponsored enterprises are going to go after you.  The Chicago Tribune explained that “going after strategic defaulters is big money.”  Indeed, Freddie Mac has lost out on nearly $4.6 billion from deficiency judgments since 2008.  While Freddie might not have been able to recover the entire amount (given that many homeowners actually had no money left to make their mortgage payments), the problem is that Freddie didn’t even consider trying to recover those funds.
If you think those numbers are staggering, Fannie Mae is even worse.  By the end of 2012, Fannie owned at least 105,000 foreclosed properties, which had then been valued at $9.5 billion.  The key for deficiency recoveries is acting quickly.  States that allow lenders to pursue deficiency recoveries—including Illinois—have specific time windows in which those lenders are allowed to go after the money.
Now, FHFA is new requirements for Fannie and Freddie that will “manage their deficiency collection process,” ensuring that strategic defaulters aren’t simply allowed to walk away from a loan.  If you have questions about how the FHFA’s rules and policies are likely to affect you, contact the licensed Illinois foreclosure defense lawyers at the Emerson Law Firm to discuss your case.
See Related Blog Posts:

Monday, October 21, 2013

Home Loan Modifications On the Rise

Has the Illinois foreclosure crisis ended yet?  While consumers across the country continue to wonder when home sales and neighborhood upkeep will return to normal, many homeowners continue to struggle to make their mortgage payments.  However, recent figures suggest that more of these homeowners are taking advantage of mortgage modifications before allowing their homes to fall into foreclosure.  According to a recent article in DSNews.com, mortgage modifications are on the rise.
Do you have questions about how to avoid foreclosure in the Chicago area?  Could a loan modification help your family with the monthly mortgage payment?  An experienced foreclosure defense attorney can answer your questions today.
Data Shows Increased Mortgage Modifications
As of the end of August, DSNews.com reports that mortgage servicers had completed 67,000 mortgage loan modifications.  That brings the total number of mortgage loan modifications for 2013 up to 580,000.  This figures includes significantly more mortgage loan modifications than in 2012.  In fact, according to data collected by HOPE NOW, which is a voluntary private-sector alliance, more families are entering into mortgage loan modifications than there are foreclosure sales.  Indeed, “year-to-date loan modifications outpace foreclosure sales by about 142,000.”
Of the mortgage modifications completed in August, about two-thirds were proprietary modifications, while about one-third were modifications that were completed through the Home Affordable Modification Program (HAMP), which is run through the federal government.  In addition to an increase in mortgage modifications, HOPE NOW’s data also showed a strikingly high number of short sales across the country.  According to Eric Selk, the executive director of HOPE NOW, that means that homeowners are beginning to realize that they have more options than they used to believe, and many can avoid foreclosure even if they’re having trouble making mortgage payments.  Selk said, “the bottom line is that there are more tools for consumers than ever before to handle mortgage challenges.”  According to Selk, these new market tools are making homeownership something that’s beginning to be sustainable again.
Foreclosure Sales Remain Static—How Long Will Recovery Take?
While the data reported by DSNews.com shows hope for homeownership with the increased number of mortgage modifications, there hasn’t been much of a change when it comes to foreclosure sales.  According to the article, the number of foreclosure sales has remained pretty static from month to month, at about 60,000.  However, this number might be a bit misleading—many homes have been in the foreclosure process for months, and thus the monthly number of foreclosure sales might simply reflect a backlog of properties.
Indeed, actual foreclosure starts appear to have decreased over the summer, “from 102,000 in July to 101,000 in August.”  In addition, according to DSNews.com, “60-plus-day delinquencies declined 2.5 percent to 2.18 million.”
Since the housing crash, a significant number of homeowners have been able to avoid foreclosure, with 5.4 million obtaining proprietary modifications and about 1.26 million obtaining modifications through HAMP since 2009.  It’s important to know that these solutions to avoiding foreclosure are available to Illinois families.  Are you concerned about making your monthly mortgage payment?  Do you have questions about avoiding foreclosure?  It’s never too soon to speak to an experienced foreclosure defense attorney.  Don’t hesitate to contact the dedicated advocates at the Emerson Law Firm.
See Related Blog Posts:

Friday, October 18, 2013

Buying a House After Foreclosure

As the housing market continues to recover and many Americans find themselves back in the position to consider buying a home, it’s important to know the details about buying a house after you’ve had the bank foreclose on your property.  Are you thinking about becoming an Illinois homeowner, either for the first time or after a foreclosure?  A recent article in the Chicago Tribune ran a story about what it takes to buy a home after foreclosure.  Is it only about credit scores and down payments?  Or is there more to the equation?  These questions are popping up across the country, and their answers will be important for Illinois families who are beginning to think about owning a home—again.
If you’re concerned about what it takes to buy a property after foreclosure, it’s important to speak to an experienced real estate attorney.  The lawyers at the Emerson Law Firm have been helping homeowners and potential homeowners for years, and they can speak to you today.
The Importance of Your Credit Score and Credit Report
In the Chicago Tribune article, a local couple wrote into the newspaper, telling “Real Estate Matters” about their homeownership history.  In short, the couple had lost a home to foreclosure, and now they’re hoping to be eligible to buy again one day in the future.  So what do Illinois homeowners like this couple mentioned in the Chicago Tribune need to know about buying a home after they’ve lost a property to foreclosure?
First, credit histories and credit scores are going to be important.  Since your credit score follows you into a marriage, if you’re currently thinking about buying a property with a spouse or significant other, it will be essential to know what each of your credit histories and credit scores will look like to your lender.  In terms of the key number, the Chicago Tribune’s “Real Estate Matters” says credit scores at 750 or above are ideal for homeownership: “we’d like to see your score in the mid- to upper 700s as you consider buying a home.”  Why?  According to the article, “you’ll have an easier time obtaining a mortgage loan and will obtain a better rate.”  In other words, “in the long run, you’ll save quite a bit of money if you are able to get the best rate possible having a higher credit score.”  The key takeaway when it comes to credit scores and credit reports is this: higher scores result in better rates, which save you money.
It’s a good idea to obtain a copy of your credit report, ensuring that you don’t have any “potentially negative information” that a lender will see.  If you do see negative information, you’ll want to make sure it’s accurate.  If it’s not, you can dispute the information with the credit reporting agency.  However, if the information is accurate, it can lead to high interest rates and, in some cases, the inability to obtain a home loan.
Why You’ll Need a Down Payment
More than your credit score, you’ll want to make sure you have a significant down payment if you want to buy a home.  In some cases, potential homeowners may qualify for special home loans through the U.S. Department of Housing and Urban Development (HUD).  If that’s the case, you might not need a lot of cash for your down payment.  However, if you’re trying to prove to a lender that you’re a serious homebuyer, you’ll want to be able to show that you really understand what it takes to buy a home and make monthly mortgage payments.
In most cases, if you’ve lost a property to foreclosure, you’ll need to work to improve your credit score, and you’ll also want to make sure you have a large cash down payment before you think about entering into another mortgage agreement.  The dedicated attorneys at the Emerson Law Firm have specialized knowledge about the foreclosure process and the real estate market in Illinois.  Contact us today.
See Related Blog Posts:

Wednesday, October 9, 2013

New Protections for Chicago Renters Take Effect

Over the summer, we told you about the Keep Chicago Renting ordinance that was designed to provide certain protections for Chicago renters living in foreclosed properties.  As of late last month, those protections have now taken effect, according to an article in the Chicago Tribune.  As you may remember, the ordinance will “offer additional protections, including funds to offset relocation costs, to tenants in foreclosed rental buildings in the city.”
Are you a renter who is concerned about losing your residence to foreclosure?  Or are you a property owner worrying that your real estate investment may be at risk of foreclosure?  The experienced foreclosure defense attorneys at the Emerson Law Firm have extensive knowledge about foreclosure practices in Illinois, and they can speak to you about your case today.
What Does the Ordinance Do, Again?
Given that the Keep Chicago Renting ordinance has just taken effect, we thought it might be a good idea to give you a refresher on its key points.  In short, there are two important features of the ordinance that are supposed to have a positive effect on renters across the city:
·            Rent-controlled leases: the ordinance will require most buyers (whether it’s a business entity or an individual investor) who take possession of foreclosed rental properties to offer rent-controlled leases to legitimate tenants who currently reside in the building.  And according to the ordinance, these rent-controlled leases will have to be valid for as long as they’re owners of the rental property.
·            Relocation assistance: if buyers of the foreclosed property aren’t willing to (or can’t, for whatever reason) offer a rent-controlled lease to current legitimate tenants, then the ordinance requires them to provide a relocation expense to current tenants.  And the relocation expense is no small matter: the ordinance entitles each unit containing legitimate residents to $10,600, and any portions of their unpaid rent can simply be deducted from this relocation payment.
Who will the ordinance apply to?  According to the Chicago Tribune, “the rules apply to any rental unit, including single-family homes.”  As such, the ordinance is likely to affect lenders who repossess these properties at the very end of the foreclosure process: “Lenders who allow tenants to remain in the buildings must offer them leases with annual rent increases of no more than 2 percent.  The requirements would continue until the building is sold to a third party.”
What Do Residents and Advocates Have to Say?
After the ordinance took effect, many local residents and consumer advocates praised the ordinance and the positive effects it’s likely to have across the city.  According to John McDermott, the Housing and Land Use Director for the Logan Square Neighborhood Association, the “ordinance is expected to protect 10,000 families per year.”  McDermott emphasized how “every month, 725 rental units in Chicago are taken over by banks at foreclosure auctions,” which usually spells trouble for families who have been renters in those buildings.
Others echoed McDermott’s praise of the ordinance.  For example, Diane Limas, leader of the Albany Park Neighborhood Council, spoke to a crowd of people after the ordinance took effect, saying, “[t]his is a great day” as she reminded others of the role the Albany Park Neighborhood Council had in bringing “awareness to what was happening to renters when the buildings they were living in went into foreclosure.”
Indeed, Patricia Fron of the Lawyers’ Committee for Better Housing made clear that the ordinance is likely to do exactly what it was intended to do—keep renters in their homes.  Speaking about the ordinance, she said, “this places serious burdens on rentals and doubled-up situations, as well as charity and municipal services.”
Now, consumer advocates want to make sure that the ordinance is enforced.  If you have questions about how the Keep Chicago Renting ordinance will affect you, don’t hesitate to contact the experienced real estate attorneys at the Emerson Law Firm today.
See Related Blog Posts:

Monday, October 7, 2013

New Short Sale Requirements from HUD

Last week, we discussed the Department of Housing and Urban Development’s (HUD) delay of the dual agency ban on short sales.  Now, there’s more to know about short sale requirements and how they’ll affect potential homebuyers.  Despite the government shutdown earlier this month, HUD announced new short sale requirements that are effective as of October 1, 2013.  These requirements represent changes to the current ones currently in use by the Federal Housing Administration (FHA).  A recent article from DSNews.com outlined key features of the new requirements and the ways in which they’re likely to affect sellers and homebuyers alike.
If you have questions about buying a short sale or a foreclosure, it’s important to speak to an experienced real estate attorney.  These transactions are more complicated than a typical home sale.  The dedicated lawyers at the Emerson Law Firm deal with short sales and foreclosures everyday, and they can answer your questions today.
Short Sale Sellers and the New Requirements
In order to sell a pre-foreclosure property, you’ll need to complete a short sale under the FHA short sale program.  As such, it’s important to know about the requirements of the program and what you’ll need to do to complete the sale:
·            First, if you’re the seller of the property, you cannot list the property with, or sell it to anyone with whom you’re related or with whom you have “a close personal or business relationship.”  In other words, the law would refer to this as an “arm’s-length” transaction.
·            Second, if you violate this “arm’s-length” requirement, you could end up being in violation of federal law.
·            Third, you must currently be in default on your mortgage, and your mortgage must specifically be in default on the date that the short sale closes.  In addition, you’ll have to make sure to have any additional liens on your property released before closing.  (If a lienholder demands a payment in order to release its lien, that lienholder will have to submit a written statement that says it will release the lien as soon as the amount is paid, according to DSNews.com).
In addition, one particular new condition for short sales is that sellers might have to make a final payment, or a “cash contribution” before the transaction closes.  According to DSNews.com, “this payment will reduce the deficiency balance.”
Mortgage Servicers and the New Requirements
What else do you need to know?  There are also requirements for servicers.  According to the new HUD requirements, servicers have to use a Deficit Income Test (DIT) in order to figure out a homeowner’s financial hardship.  This test is used to confirm all of a homeowner’s expenses.  What’s this for?  In brief, it’s used to ensure that the short-sale seller is also the party that’s currently occupying the property.  In other words, in order to be eligible for a standard pre-foreclosure sale, you must also be occupying the property—only owner-occupants are eligible.
Of course, there are some exceptions.  Homeowners who are eligible for streamlined short sales might not have to submit to financial hardship requirements, and in some of these cases, second homes and investment properties may be eligible for short sales.
Key Terms of the Arm’s-Length Transaction
While all the short-sale requirements are important, the key revision to the FHA’s short sale program is the arm’s-length transaction requirement.  We mentioned this above, but it’s important to know precisely what it is according to the law.
Under the FHA short sale program, an arm’s-length transaction is defined as “a short sale between two unrelated parties that is characterized by a selling price and other conditions that would prevail in an open market environment.”  In addition, “no hidden terms or special understandings can exist between any of the parties . . . involved in the transaction.”  This latter requirement refers to all parties involved in a short sale, including but not limited to: the buyer, the seller, the appraiser, the sales agent, the closing against, and the mortgagee.
These terms can seem confusing to many sellers and potential homebuyers.  If you have questions about buying a short sale or about the short sale requirements for current homeowners, contact the experienced real estate lawyers at the Emerson Law Firm today.
See Related Blog Posts: