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.

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New Short Sale Requirements from HUD

More Homeowner Support on the Way in Illinois

NeighborWorks America Grants to Aid Illinois Foreclosure Counseling

According to an article from local KSDK News, the Illinois Housing Development Authority recently received two federal grants to aid homeowners in the state who are facing foreclosure.  The grants came from NeighborWorks America, and they total $3 million.

What is NeighborWorks America?

NeighborWorks America seeks to help people across the U.S. to live in affordable homes, and to find ways to improve their lives and strengthen their communities.  The organization set a number of strategic goals that it hopes to meet between 2012-2016, which include:

·      Creating and preserving housing opportunities that are both sustainable and affordable

·      Advancing community development programs and resident involvement in order to achieve a positive community impact.

·      Supporting other NeighborWorks organizations that can help to provide housing and community development expertise, as well as effective business models

·      Strengthening knowledge and skills in our communities related to community development and affordable housing, allowing ground-up or grassroots efforts to thrive

The organization focuses specifically on foreclosure prevention and community development.  NeighborWorks America provides resources to struggling homeowners that include access to foreclosure help, news releases about mortgage scams, and important information about the National Foreclosure Mitigation Counseling (NFMC) Program.

At NeighborWorks America, members of the organization believe that foreclosure counseling can play a big role in preventing foreclosures and aiding struggling borrowers.  They provide foreclosure counseling training in cities across America.  The content covered in these trainings ranges from basic knowledge about foreclosure prevention to advanced certifications in mortgage relief strategies.  The organization’s focus on foreclosure prevention and foreclosure training will play a big role in the use of the $3 million grant money in Illinois.

What Will the Grants Fund?

While the market continues to show signs of recovery, many Illinois homeowners are still at risk of foreclosure.  The funding from NeighborWorks America will provide 10,000 families in our state with access to free foreclosure prevention counseling.  The counseling is through Governor Quinn’s Illinois Foreclosure Prevention Network (IFPN).

Quinn created the IFPN “as a service to Illinois residents to bring together the services and resources of various state agencies and qualified participating non-profit agencies” to guide homeowners through options for staying in their homes.  These services are free.

Specifically, counselors through the IFPN can help borrowers to better understand the foreclosure process and to help with communication with mortgage lenders and servicers.  They can also help with debt counseling so that you can maintain a reasonable budget and make your mortgage payments on time.

The recent grants from NeighborWorks America aren’t the only ones that the organization has provided to consumers in Illinois.  Just last month, NeighborWorks America also provided a grant of nearly $100,000 to HomeStart, a non-profit organization in Northern Illinois that assists consumers with foreclosure problems and other homeownership issues.  Like other programs sponsored by NeighborWorks America, this grant will aid housing and community development initiatives.

An experienced foreclosure defense attorney can answer any questions you might have about the foreclosure process, and can speak to your concerns about staying in your home after you’ve missed mortgage payments.  Contact us today.

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Huge Flaws in Independent Foreclosure Review Process?

Foreclosure defense attorneys are acutely aware of the myriad of problems with the way that many of the nation’s biggest lenders have handled foreclosures over the past decade.  All of that reached culmination in the housing crisis and subsequent “robo signing” scandal where many of those issues made national headlines.  Countless homeowners had their rights violated in one way or another as a result of the sloppy, confusing ,and downright fraudulent practices by some lenders.

In response to the disaster, an enormous “auditing” process was initiated known as the Independent Foreclosure Review.  It involved thousands of contractors combing through millions of pages of documents to get to the bottom of the many problems with the process--things like mixed up loan modifications, overcharges ,and paperwork errors.  However, according to a new story in the Huffington Post, that auditing process was doomed from the start.

Covering Up Foreclosure Mistakes
The story explains that those charged with spotting the errors were given only minimal training and confusing instructions.  Some of those workers even went so far as to say that they were told by one lender, Bank of America, to ignore some instances where there was obviously bank-caused mistakes. The article quotes one of the contract workers who shared information as saying: “We knew what we were looking at.  But we were told under threat of losing our jobs to not report what we saw."

A big concern was apparently the lack of uniformity and independence in the review.  The former chair of the Federal Deposit Insurance Corporation (FDIC) did not mince words when criticizing the auditing process.  She said, "It was doomed from the beginning.  It was designed to generate fees for consultants, not to help homeowners."

These serious problem with this auditing process is what led to its sudden halting last week.  Instead, a new $8.5 billion settlement was reached with ten large mortgage companies. Virtually all of the homeowners who received a foreclosure notice in the peak of the housing crisis--2009-2010--are expected to receive some compensation, though it may be only a small check in many cases.  In addition, some of the funds will be used to negotiate loan modifications to help keep families in their homes.

Help with Foreclosures
Sadly, these reports of cut corners and disregard for consumer rights is not exactly news to those of us who have worked on these legal issues for years.  It is yet another reminder of the need for all residents in Chicago, Oak Park, River Forest, and other nearby communities to seek out professional help when facing foreclosures.  These big lenders should not be able to get away with violating the law and stepping on the rights of homeowners.  You have options to fight back and defend yourself when facing foreclosure.  Please take a moment to contact our legal team today to see how we can help.

Mayor Emanuel Comes out Against Eminent Domain Plan for Underwater Mortgages

Each Oak Park foreclosure attorney at our firm understands intimately the complications of dealing with the mountain of underwater homes in the area.  Of course, the “Great Recession” had compounding effects--many lost their jobs (and ability to pay their mortgage) while house values plummeted.  Together that made many families unable to pay homes and many other owning homes worth far less than what they owed on them.  

We understand that solutions to the problem are different at the individual level and the government-level.  In other words, a solution to an underwater home issue for an individual homeowner is far different than a public official addressing the issue of thousands of underwater homes.   

Eminent Domain Idea
For example, one idea recently floating in the Chicago area was use of the government’s eminent domain power to take homes that are underwater and then refinance the mortgages.  The idea was pitched to local alderman by an out-of-state firm this week; though some are already calling the proposal a non-starter.

During the pitch meeting Mayor Emanuel told reporters that he was against the idea, noting that he “didn’t think it was the right way to address the problem.”  His concerns are shared by the Federal Housing Finance Agency which previously noted that it had “significant concerns” about using this government power in the aid of underwater homeowners.

Many aldermen have similarly voiced worry over the idea.  Yet, the informational meeting on the maneuver went ahead anyway, no doubt at a result of the need to at least consider any sort of new idea to help struggling homeowners.  Several years into the criss and many are still struggling.  The latest data suggests that nearly 1 in 4 homes in the city is underwater--totaling more than 100,000 borrowers.

The basic idea is somewhat straightforward.  The city would use its eminent domain power to seize the underwater property.  The mortgage would then be refinanced at a discount--written down to close to fair market value. The new loan would then be offered to the homeowner at a slightly higher amount than what it was purchased for.  The hope is that the monthly payment would then be lower than it is now with the homeowner retaining at least 5% equity.  The company which arranges the agreements would receive a set amount per mortgage and the city would only face administrative costs.

It remains to be seen if the Mayor’s comments are a sign that the proposal is dead-on-arrival.  At the very least, working through this sort of maneuver without approval from Emanuel is near-impossible.

No matter what action is or is not taken on a city or statewide level, please do not forget that options are available in your individual case. The Oak Park and River Forest foreclosure defense attorneys at our firm are here to help in any way necessary--from fighting the bank challenge to helping with a short sale.  If you are anywhere in our area and are fighting these issues please take a moment to call our office and see how we can help.   

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Attorney General Announces $3 Million for Foreclosure Mediation Programs, But Will They Be Effective?

Wells Fargo Settles with Illinois and U.S for $175 Million

Bank of America Announces Principal Reduction Plan for Underwater Homeowners

Earlier this year, federal and state officials announced a national-level agreement between the federal government and 49 state attorneys general and several large mortgage servicers to address mortgage loan and foreclosure abuses.  The servicers included Bank of America, JP Morgan Chase, Wells Fargo, Citigroup, and Ally Financial.  The final deal emerged out of a series of negotiations between the financial servicers and government officials, resulting in a total settlement of $25 billion.

Bank of America is now taking an additional step toward acknowledging its role in the foreclosure crisis, reports the Los Angeles Times.  The bank intends to reduce by about $100,000 the amount owed on as many as 200,000 underwater mortgages.  The promise is part of a $1-billion “side deal” to the earlier $25-billion foreclosure settlement.  (To read more about the original $25 billion settlement, see our prior post here.)  Our Oak Park foreclosure defense lawyers know this deal could provide important financial relief to struggling homeowners.  According to a Bank of America spokesman, the principal reductions could eliminate the entire underwater portion of some mortgages, with the average reduction projected to be approximately $100,000. 

A mortgage is deemed “underwater” when the amount owed on the mortgage exceeds the value of the home.  Typically, however, a homeowner’s concerns do not stop there.  Once a mortgage is underwater not only is the homeowner paying for a house that has lost significant value, but also he or she may fall behind on the mortgage, which generally results in hefty penalties and fees.

This “side deal,” while potentially helpful to a number of homeowners, is also self-serving.  By reducing the amount owed on its mortgages, Bank of America could cut significantly the amount of penalties it owes due to the settlement.  In fact, the $3.25 billion the organization faces in penalties could be reduced by approximately $850 million.

If you are a homeowner whose loan was serviced by Bank of America and you were at least 60 days delinquent on your mortgage as of January 31^st, you may be eligible for an underwater mortgage reduction.  However, only loans serviced by the bank or private investors are eligible for the program.  That does include loans serviced by Countrywide Financial Corporation (“Countrywide”), the sub-prime lender that Bank of America purchased in 2008 and which led to many of the company’s woes due to the number of “troubled” loans Countrywide brought with it.  Unfortunately, loans owned or backed Fannie Mae, Freddie Mac, the Federal Housing Administration, or the Veterans Administration are not eligible for the principal reduction program.

According to Bank of America, about 200,000 homeowners will be eligible for the principal reduction program.  If you are a Chicago homeowner and you think you may be eligible, you can call 877-488-7814 for more information.

Those of us working in Oak Park foreclosure law know that no one wants to lose their home.  We also know there is no shame in asking for help.  Our attorneys are here to listen to your questions and concerns and will do our best to explain all of the legal options available to you.

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Chicago Home Sales Experience Bump, but Prices Still Low

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Oak Park Foreclosure Defense Lawyers Discuss the State of Illinois Foreclosure

A recent Chicago Tribune article discusses the condition of Chicago mortgage foreclosure, noting that the state is the third worst in the nation in foreclosures despite overall improvement across the country.  Illinois and New Jersey still trail Florida, but both states are getting worse.  In fact, according to the chief economist of the Mortgage Bankers Association, the Illinois foreclosure rate is more than double that of California.

One of the reasons Chicago’s foreclosure rate is so poor is not because loans necessarily are entering foreclosure at a greater pace than in other states, but because they stay in foreclosure for longer periods of time.  For example, according to the Chicago Tribune, the percentage of loans in foreclosure in judicial states is at an all-time high of nearly 7% during the first quarter.  In contrast, in non-judicial states the rate is 2.8%, the lowest since early 2009. 

Illinois is a judicial foreclosure state, which means a lender must sue a homeowner in state court.  Those of us working in Illinois mortgage foreclosure know that while judicial foreclosure can take longer, it typically yields more protections for debtors.  In non-judicial foreclosure states, a homeowner receives a notice of default from the mortgagee.  Thus, the mortgagee does not need to file an actual lawsuit to begin the foreclosure process.  Oak Park foreclosure defense lawyers know this can be very problematic because some debtors may never receive a notice of foreclosure due to errors in the system, putting them in jeopardy of losing their homes outside of the protections of a court.  In judicial foreclosure states, for instance, homeowners have the constitutional protection of due process, which requires the state to protect all legal rights of an individual and to ensure the legal procedures are fair. 

Even though Illinois is a judicial foreclosure state, thus affording its citizens more protections than those living in non-judicial foreclosure states, creditors may try to play hardball or take advantage of debtors who are unrepresented by legal counsel.  If you are concerned you may be facing Oak Park mortgage foreclosure, consider consulting with a legal professional.  Homeowners should not give up.  There are many foreclosure defense options at your disposal.  Sometimes allowing your home to be foreclosed upon is the best option, but it is important to make an informed and careful decision because a house is likely one of the largest financial investments you will ever make.

More than a year ago, the Illinois Supreme Court formed a committee to study our state’s mortgage foreclosure process, as well as how other states are dealing with large volumes of foreclosure cases.  The backlog of foreclosures, some of which is due to the exposure of lenders’ fraudulent behavior including robo-signing, is clogging the system.  Some of the committee’s recommendations to ease the backlog include paperwork changes and providing homeowners with more notice about their rights.  However, the committee also suggested that foreclosure sales should be held within 45 days of the expiration of the redemption period, the date by which a homeowner can make the mortgage current and keep the property, in most cases.  Although this is only a recommendation, such a change could seriously harm homeowners’ rights, so it is important to speak with a professional if you are worried about losing your home since Illinois foreclosure law is constantly changing.

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Chicago Home Sales Experience Bump,but Prices Still Low

Bankruptcies Down, Foreclosures Upin Chicagoland

Chicago Home Sales Experience Bump, but Prices Still Low

According to a recent article in the Chicago Tribune, Chicago-area home sales experienced a boost this March, but actual home prices are still lagging.  In fact, prices hit new housing-bubble lows, and Chicago is one of several markets experiencing the most severe lows.  While it is positive news that homes sales are up in our area, the Oak Park foreclosure lawyers at the Emerson Firm know many Chicagoland residents still are concerned about the stability of the economy and are worried about the possibility of mortgage foreclosure or bankruptcy.

Though home sales are up consumers and investors likely jumped on bargain deals, purchasing properties at prices considerably lower than the value of those homes prior to the burst of the housing bubble.  Some real estate agents have expressed cautious optimism about the encouraging sign of increased home sales.  For example, Loretta Alonzo, president of the Illinois Association of Realtors, stated that the numbers may represent a “turning point” provided there is not an “influx of foreclosures” flooding the market or any other drastic events that potentially could cause buyers to hesitate.

In the city of Chicago alone, March home sales rose 12.1%, with the median price at $171,750, a 5.2 % increase from a year ago.  Condominium sales in Chicago also increased.  Just under 1,000 condos were sold in March, an increase of almost 20% from a year ago.  The median price was $213,250, 4% higher than in March 2011.  It is likely that investors are particularly interested in snapping up city properties that would typically be significantly more expensive and that could still be rented at fairly lucrative rates.

In the greater Chicago area, sales of single-family homes and condominiums rose 23.8% from a year ago.  The median price was $151,850, down almost 4% from March 2011.

So, some prices have declined while others have risen.  Although many real estate agents have expressed optimism, many also have suggested that more time is needed before an accurate assessment of the state of housing market can be made.  More data is needed before it is apparent whether home values have actually stabilized. 

RE/MAX, the international real estate company, reported that distressed property sales accounted for 46% of the transactions in Cook, DuPage, Kane, Kendall, Lake, McHenry, and Will counties, in contrast with 52% in February and 51% in January.

The attorneys at the Emerson Firm are skilled and knowledgeable in the area of Oak Park and River Forest mortgage foreclosure and bankruptcy.  However, we are also happy to advise you regarding any real estate concerns or questions you many have.  Consider speaking with an Illinois real estate lawyer before the purchase or sale of your home because it is probably the largest financial transaction you will ever undertake.  In the past decade, our office has successfully completed more than 800 real estate transactions, including short sales, condominium conversion projects, FSBOs (for sale by owner), and first time home purchases.  You can be sure you can trust our experienced real estate attorneys to assist you with your real estate needs.

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The Federal Housing Administration Offers a Streamlined Refinance Program to Relieve Homeowners of High Mortgage Payments

In today’s harsh economic landscape, refinancing a mortgage is an appealing cost-saving method for a homeowner.  Refinancing a mortgage restructures the debt payment, usually by way of lowering the interest rate and creating a different loan term than the current mortgage.  Our Oak Park real estate attorneys understand that although reducing the interest expense is the most common goal of a refinance, some homeowners also look to extending the loan out to 30 years, resulting in a lower monthly payment.  In appreciation of the current state of the economy and the benefits of a refinance, the Federal Housing Administration (FHA) has created a streamline refinance program for homeowners with existing FHA mortgages. 

The FHA is a government agency that insures loans made by banks and other private lenders for home building and home buying.  One of the agency’s goals is to provide an adequate home financing system through insurance of mortgage loans.  The FHA’s streamlined refinance program is one such method for achieving this objective.  According to The Washington Post, this refinancing program is reserved for FHA homeowners who have paid their mortgage payments on time but are struggling to meet the monthly obligation.  Therefore, homeowners with mortgages with other companies, such as Fannie Mae or Freddie Mac, cannot benefit from this refinance program.

There are several requirements for a FHA homeowner to satisfy in order to be eligible for this streamlined refinance program.  The basic requirements are:  (1) the mortgage to be refinanced must already be FHA-insured, (2) the mortgage to be refinanced should be current and not delinquent, (3) the refinance results in a lowering of the borrower’s monthly principal and interest payments, or the conversion of an adjustable rate mortgage (ARM) to a fixed-rate mortgage, and (4) no cash may be taken out on mortgages refinanced. 

Once these basic requirements are met, a FHA homeowner is eligible for the streamlined refinance program and can reap the benefits of the program.  One of the major perks of the program is that it does not require a home appraisal.  Essentially, this means that the FHA does not care if a FHA homeowner is underwater on his or her mortgage.  Therefore, even if a homeowner owes twice the current value of the home, the FHA will still refinance the home without any penalty. 

The FHA is in a posture to offer this program with minimal eligibility requirements because the agency’s main objective is to insure mortgages, not to make them.  Therefore, for purposes of reducing occurrences of loan defaults, our Oak Park foreclosure attorneys understand that it is in the FHA’s best interest to lower the mortgage rates of as many FHA homeowners as possible.  Hence, the streamlined refinance program is beneficial for both the FHA and FHA homeowners who qualify for the program.  All parties involved in a successful implementation of the streamline refinance program are on a more favorable platform than before the refinance was put into action. 

Of course, the streamlined refinance program entails more detail than these basic elements.  If you are considering a FHA streamline refinance or a traditional refinance with any other conventional lender, please contact an Oak Park or River Forest foreclosure attorney at Emerson Law Firm to discuss your options. 

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Illinois and Cook County Primary Judicial Election Results Announced

Illinois recently had a primary election where many vacant spots in the local judiciary filled by voters.   As our Oak Park foreclosure attorneys know, it is very important for fair and knowledgeable judges to sit on the bench.  In particular, in complex mortgage foreclosure or bankruptcy cases, a number of complicated legal issues may arise, requiring careful attention and expertise from the judges as well as from the lawyers involved. 

A helpful report from Chicago Appleseed summarized  results from the Illinois Judicial Primary for the Illinois Supreme Court, Illinois Appellate Court, Cook County, and Cook County Subcircuit races.  The Illinois Supreme Court is the highest court in our state, and the Illinois Appellate Court is the court of first appeal for both civil and criminal cases arising in our Illinois Circuit Courts.  Two judges listed as elected to the Appellate Court—Matthias Delort and Jesse Reyes—are Cook County foreclosure judges.  Those of us working in Cook County mortgage foreclosure know that judges in the Chicago area handle a heavy workload involving complex and important cases that affect many of our city’s residents.

Judge Delort won in the Democratic Primary, Cook County-wide, for an open seat on the Illinois Appellate Court, formerly held by the late Justice Robert Cahill.  Thus, Judge Delort is the endorsed candidate of the Cook County Democratic Party, and will run in the general election later this year.  He also received an endorsement from the Chicago Tribune, which stated that its editorial board makes recommendations based on the evaluations of major bar associations, interviews with judges and attorneys who know the work of the candidates, and information provided by the candidates to the board.  High experience, legal ability, impartiality, and integrity were listed as qualities that the paper looks for in a judicial candidate.  The Tribune’s article noted that Judge Delort is known as a “workhorse” in the Chancery Department.  Judge Delort was found “well qualified” by the Chicago Council of Lawyers and “highly qualified” by the Chicago Bar Association.

Judge Reyes also won a spot on the Appellate Court to fill the vacancy left by Judge Shelia O’Brien.  Judge Reyes was listed as “qualified” by the Chicago Council of Lawyers.  The attorneys at the Emerson Firm know that Judge Reyes is knowledgeable in the area of Chicago mortgage foreclosure and has expressed concern in the past about the problem of too many Illinois residents losing their homes because the court system can appear intimidating.  Those of us working Oak Park and River Forest foreclosure defense want to congratulate Judge Reyes on his primary win, even though we will be sad to see him leave the Circuit Court.

We agree with Judge Reyes in his assessment that too many Chicago residents may find the foreclosure process intimidating and overwhelming.  However, we also know that your home is an investment worth protecting.  It is worth finding out more about your legal rights.  Speaking with a qualified Oak Park foreclosure defense attorney could greatly ease your mind if you are facing mortgage foreclosure. 

 

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The Fed Makes Efforts to Convert Foreclosures into Rental Properties

The Federal Reserve (Fed) is making efforts to improve the housing market for the broader purpose of restoring economic stability in the United States.  According to The Chicago Tribune, the Fed has released new policies with the purpose of implementing a course of action that would move to turn banks’ foreclosure inventory into rental properties, and then ultimately selling those homes to investors.  Our Oak Park foreclosure attorneys understand that one of the goals of the Fed’s new policies of converting foreclosures to rentals is to allow banks to relinquish assets that carry minimal value. 

The banks are not the only parties to potentially reap the benefits of this new process.  People in need of housing could also gain significant advantages from the conversion of foreclosures to rentals.  Specifically, people facing foreclosure would have a better chance of renting property despite their poor credit, and more importantly, they would not be left homeless.  Each Oak Park foreclosure attorney at our firm recognizes that in the successful conversion of foreclosed homes to rentals, lenders could also receive Community Reinvestment Act credit for their service in providing housing to those in need, namely low-income and moderate-income people.  Therefore, this conversion process can positively affect the needs of banks and people in need of housing. 

In order for this system to be successful, the Fed has expressed the significance of the banks’ actions.  Specifically, banking organizations should make good faith efforts to dispose of foreclosed properties at the earliest possible date.  To counterbalance the required quick action of the banks, the Fed has stated that it will allow the banks to rent out foreclosed properties without being required to demonstrate continuous active marketing of the property for sale.  However, the banks must follow the relevant policies and procedures in order to be granted this leniency. 

This system of converting foreclosures into rentals has been the topic of discussion for some time.  Bloomberg Businessweek reports that as early as last year in September, Fed Governor Elizabeth Duke pushed for government efforts in promoting the rental of foreclosed homes.  Like most experts, Duke understood that the recovery of the housing market was a necessary component in the revitalization of the economy as a whole.  In order for this system to come into fruition, the Fed is taking strides to remove some of the barriers in the conversion of foreclosures into rental properties.

Bank of America (BofA) is the first entity to test the Fed’s new policies.  Last month, BofA implemented a foreclosure-to-rental pilot program for 1,000 homeowners who are facing foreclosure in Nevada, Arizona and upstate New York.  In this program, BofA has promised these homeowners that they would be relieved of their mortgages.  In exchange for the mortgage forgiveness, the homeowners facing foreclosure will enter into rental contracts with BofA.  The rental properties will then be sold to investors. 

If the Fed is successful in its efforts to put this conversion system into full effect, troubled homeowners facing foreclosure would have more legal options.  Until this system is officially adopted and injected into the slow-moving economy, those who are facing foreclosure must be knowledgeable of the other many legal options currently available.  If you are facing foreclosure, please contact an Oak Park or River Forest foreclosure attorney at Emerson Law Firm to discuss your options. 

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Foreclosure Pools

According to The Wall Street Journal there is a new trend of selling foreclosed properties in pools to major Wall Street investors.   Fannie Mae (Fannie) has recently begun selling pools of foreclosed properties to investors who are required to rent the homes for several years before selling them.  Many experts, including some Illinois foreclosure attorneys, believe that this type of arrangement could help speed up the recovery of the housing market.

In the past year rent prices have increased, while home prices have continued to decrease. Goldman Sachs economists predict that the annual yield on a rental property in the United States is 6.3%, but in cities hurt most by the mortgage crisis the yield can be 8% and above.  These yields are out-performing many traditional investments.  These financial trends have piqued the interest of Wall Street investors to enter the property management business on a large scale basis. 

In general, properties are one at a time, which can be inefficient and expensive with a large number of properties to sell.  Selling properties in pools can clear out inventory quickly, and can also result in a discount for investors.  While this may seem to benefit all parties, banks are currently receiving more than 90 cents on the dollar for their asking price on foreclosures, and therefore may be reluctant to sell properties in pools if doing so requires selling for much less. In fact, until now Fannie and Freddie Mac (Freddie) have largely resisted selling properties in pools because they could make more selling houses one at a time. 

The pool currently up for auction by Fannie consists of 2,500 houses with a total market value of $320 million.  The houses are divided into eight regional pools.  These regional pools range from 572 properties in Atlanta to 99 properties in Chicago.  This is just a fraction of the 180,000 foreclosed properties, worth an estimated $14.7 billion, that Fannie and Freddie hold.  Last year Fannie sold 240,000 properties primarily through real estate agents one by one.  Fannie is now testing selling properties in pools in order to be more efficient and possibly keep a stake in the pools.  It is unclear whether this type of sale will end up benefiting Fannie more than the traditional one at a time sales.

In order to invest in a pool of properties, Fannie requires the submission of an application where the investor’s capital backing and ability to manage the properties will be analyzed.  Bids for the pool are due in mid-April, with the transaction expected to be complete by late May.

Some experts believe that this type of sale will help fully stabilize markets that are already close to stabilizing.  However, not everyone is entirely on board.   Our Oak Park foreclosure defense lawyers understand that there may be some benefits for area residents if Fannie and Freddie would provide more loans for small local investors instead.  Giving the little guys a chance is often a fairer process.

In any event, if you are facing a foreclosure it is important to contact an experienced Oak Park and River Forest foreclosure attorney who can potentially help you avoid a foreclosure.  The attorneys of the Emerson Law Firm can go over your options with you in a confidential consultation.

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