New Principal Reduction Modification Program for Underwater Borrowers

Are you seriously delinquent on your mortgage and at risk of foreclosure? According to a recent press release from the Federal Housing Finance Agency (FHFA), Fannie Mae and Freddie Mac will offer a new Principal Reduction Modification program for “certain seriously delinquent, underwater borrowers who are still struggling in the aftermath of the financial crisis.” It is the hope that this new program will allow these homeowners to stay in their houses and to avoid foreclosure.

Terms of the New Modification Program

What will the new Principal Reduction Modification program entail? First, it is important for borrowers to recognize that it is a one-time offer. And it is only good for current mortgage holders with a loan that is “owned or guaranteed by Fannie Mae or Freddie Mac.” But those are not the only eligibility criteria. To be eligible, homeowners will also need to fall within the following categories:

• Must be owner-occupant borrowers (in other words, the homeowners must actually be living in the house and using it as a residence, rather than renting it out, for instance, to a tenant);
• Must be delinquent on their mortgage by 90 days or more as of March 1, 2016;
• Must have a mortgage with an outstanding unpaid principal that is $250,000 or less; and
• Must have mark-to-market loan-to-value (MTMLTV) ratio that exceeds 115 percent.

Most of these terms should be relatively easier for borrowers to understand. But what is an MTMLTV ratio? According to an article in HousingWire, the MTMLTV ratio is “the gross unpaid principal balance of the mortgage, including any principal forbearance amount, if applicable, divided by the property value obtained.”

Other Key Items to Note About the New Offering

According to the FHFA’s fact sheet for the Principal Reduction Modification program, the following represent some key facts surrounding the decision to develop the program, as well as some more information about the borrowers it is most likely to help:

• The FHFA expects around 33,000 borrowers to be eligible for the new program.
• The program is designed to provide borrowers who are seriously delinquent on their mortgages a “last opportunity to avoid foreclosure while also addressing negative equity remaining from the financial crisis.”
• Over the last four years, the total number of underwater homeowners who currently have loans owned or guaranteed by Fannie or Freddie has declined by approximately 80 percent.
• Only around 2% of currently underwater loans would fall under the category of those that are “seriously delinquent” and are owned or guaranteed by Fannie or Freddie.
• Around half of all loan modifications currently include some form of principal reduction.

Borrowers who are eligible for the new program must receive a solicitation letter by October 15, 2016.

Contact an Oak Park Foreclosure Defense Lawyer

Despite the fact that much of the housing market has recovered from the financial crisis, there are still many families in Illinois who have not been able to get back on their feet over the last five years or more. Programs like the one recently announced by the FHFA are intended to help struggling homeowners, but it is also important to seek advice from an experienced Oak Park foreclosure defense lawyer. Contact the Emerson Law Firm today for more information.

See Related Blog Posts:

Chicago Suburbs and the Slow Recovery from Foreclosure

Federal Funding for Foreclosure Prevention in Illinois

Chicago Suburbs and the Slow Recovery from Foreclosure

As a recent article in the Chicago Tribune establishes, it has now been seven years since the “Great Recession,” which left individuals and families throughout Chicagoland with costly mortgages that many simply could not afford to pay. Given the financial difficulties of the first decades of the 2000s, many homes went into foreclosure, empty houses and properties in varying states of disrepair blighted neighborhoods throughout the state. According to recent news from RealtyTrac, for example, foreclosure filings reached all-time lows this year. Such numbers suggest that Illinois and the rest of the country truly are in a state of recovery after the housing crisis.

Are all neighborhoods in Chicago and its suburbs experiencing recovery from the foreclosure crisis, or have some places remained economically troubled? According to the Chicago Tribune article, there are still a number of Chicago suburbs that simply have not entered into a clear phase of housing recovery, and it is possible that such revival may never come—or at least in the near future.

Abandoned Homes Remain in Many of Chicago’s Suburbs

For certain neighborhoods, housing market recovery simply is not a phrase that has any meaning. Indeed, suburbs like Markham largely do not seem to be faring any better than they were at the lowest points of the housing crisis. For instance, the article cites one family’s home: a 900-square-foot modest house that has been “well-kept, with a neatly trimmed lawn and hedges, four bedrooms, and a two-car garage.” The family purchased the house in 2007—shortly before the housing crisis would sweep the country—for around $137,000. Now, their house is positioned just across the street from a home that has been abandoned for quite some time. And that property that once cost the family $137,000 was listed recently for only $29,500.

To put that number another way, the family may not even be able to sell their home for 20% of what they paid for it. As the article emphasizes, such poor resale values—even at a time in which much of the Chicago area as well as urban regions across the country have seen housing prices rise—do more than simply leave the homeowners underwater. As the article intimates, they “find themselves not so much underwater as buried in a cave beneath the ocean floor.” In other words, continuing to use the term “underwater” in suburbs like Markham is a drastic understatement.

Remaining Impact of the Recession and Resulting Economic Difficulties

For families like this, the economic difficulties associated with the recession remain palpable. For instance, in the example we gave above, the recession resulted in one of the primary earners of the family losing her job and that house—originally purchased for $137,000—going into the early stages of foreclosure. In order to avoid foreclosure, the family obtained a loan modification just a few years ago. However, including late fees and the new terms of the modification, they now owe around $180,000 for this house.

This story is one that is all-too-common among “predominantly African-American parts of the south suburbs and in pockets of mainly Latino and white ethnic suburbs just south of O’Hare International Airport,” where housing prices simply are not rising. These families, as the article suggests, have been “left behind by recovery,” and foreclosure remains a very real problem.

Do you have questions about avoiding foreclosure in the Chicago suburbs? An experienced Oak Park foreclosure defense lawyer can help. Contact the Emerson Law Firm to learn more about our services.

See Related Blog Posts:

Federal Funding for Foreclosure Prevention in Illinois

Update on Distressed Homes in Chicago

Federal Funding for Foreclosure Prevention in Illinois

Despite the fact that urban areas through the country continue—albeit slowly in some states—to get through their foreclosure inventories and to begin repairing neighborhoods blighted by empty and abandoned properties, foreclosure prevention remains a major issue in the Chicago area. Indeed, according to a recent article in Crain’s Chicago Business, the U.S. Treasury Department has decided to send $118 million to our state “through a program set up after the financial crisis to help struggling homeowners and [to] address neighborhood blight.”

What do you need to know about foreclosure prevention in Oak Park and other Chicago areas?

“Hardest Hit” Funds to Help States Still Struggling from the Housing Crisis

According to the article, that $118 million that will be going toward foreclosure prevention and housing recovery in Illinois is part of a larger $2 billion package being divided among 18 different states and the District of Columbia. The U.S. Treasury Department has described the money as “Hardest Hit” funds, which will aim to do exactly as the title suggests—provide more opportunities for rebuilding in areas of the country that were hit the hardest by the housing crisis.

Cook County Commissioner Bridget Gainer lobbied specifically for this funding, and she emphasized how it will create “a huge opportunity for Illinois to help neighborhoods devastated by the housing crisis.” Gainer is chairperson of Cook County’s Land Bank Authority. When she started lobbying for this money to come to the Chicago area, she highlighted the many ways in which it could help both neighborhoods in Chicago proper as well as the numerous suburbs. Here are some of the things she hopes to be able to do with the funds:

• Demolish currently vacant and dilapidated homes;
• Encourage developers to come in and build new properties; and
• Develop additional foreclosure prevention initiatives.

Role of the Cook County Land Bank

It makes senses that the chairperson of the Cook County Land Bank Authority was among the people to urge the Treasury Department to support Illinois in the current round of “Hardest Hit” funding. After all, the Cook County Land Bank, established in 2013, is tasked with “buying salvageable vacant buildings, clearing their titles, and transferring them to developers that can put them back to use.” While some foreclosures might be eligible, many of the buildings in the particularly hard-hit areas of Chicagoland “need to be razed,” according to Gainer. The “Hardest Hit” funding can help with that.

The “Hardest Hit” program grows out of money set aside for the federal Troubled Asset Relief Program. In previous rounds of funding, Illinois received a total of $446 million, which went largely toward foreclosure prevention. The $118 million in the most recent funding round will focus the most on blight reduction. Last year alone, the Illinois House Development Authority (IHDA) approved a total of $5.4 million for razing vacant homes that are beyond repair.

If you have questions about avoiding foreclosure, do not hesitate to reach out to an experienced Oak Park foreclosure defense attorney. A dedicated advocate at our firm can answer your questions today. Contact the Emerson Law Firm to learn more.

See Related Blog Posts:

Update on Distressed Homes in Chicago

Foreclosure Buyers and Common Expense Assessments

Update on Distressed Homes in Chicago

How are Chicago neighborhoods faring when it comes to housing recovery and distressed homes? It has been a number of years since the housing bubble burst, but distressed homes still line a number of streets. However, according to a recent article in Crain’s Chicago Business, the fact that distressed homes remain on the market is not necessarily a bad thing. The article suggests that these properties are an “improbable bright spot” in “Chicago’s lackluster residential real estate market.”

Finding Value in Distressed Properties

For individuals selling their homes, there is not a lot of opportunity in the Chicago market to make a profit right now. However, as the article notes, “banks and other firms selling foreclosed houses were far luckier.” The median sale price for distressed homes, including foreclosures and short sales, actually rose by 6.3% in 2015. To put that number in perspective, the median sale price increase for conventional home sales was only 0.4% last year. In other words, the price increase on distressed homes was 16 times better than the price increase on standard properties.

This gap between distressed and conventional property sales is not limited to lower socioeconomic brackets. The disparity in sale prices “shows up even in many more-affluent parts of Chicago and its suburbs where the real estate recovery came earlier and stronger than it has for the metropolitan market as a whole,” according to the article. On the Near North Side of Chicago, for instance, lender-mediated sales rose by about 6% by the end of 2015, compared with a 2.8% price increase for conventional properties. In Buffalo Grove, for example, lender-mediated sales climbed nearly 19%.

Need for an Improving Economy in Chicago

While it might seem as though high selling prices on distressed homes is a good thing, it may point to a sluggish Chicago economy. Chicago has seen relatively stagnant job growth and limited investment returns. The decline in conventional home sales may be evidence of the sluggish economy.

In terms of decreasing conventional home prices in Chicagoland, sales showed no growth at all in Evanston last year, and home prices dropped in Oak Park by 4.1%. In other words, the conventional real estate market does not look especially good outside out distressed home sales. But at the same time, the fact that more distressed homes are getting bought is a good thing, no matter what lens you view it through, according to the article.

According to Jonathan Smoke, the chief economist at Realtor.com, this trend is a common one toward the end of real estate recovery periods. While he remarks that Chicago remains behind in its recovery compared to many other urban areas in the U.S., the price gap that we are seeing between distressed and conventional properties simply makes clear that Illinois is “working through [its] foreclosure overhang.”

If you have questions about distressed properties or avoiding foreclosure, an experienced Oak Park foreclosure defense attorney can help. Contact the Emerson Law Firm today to learn more about how we can assist you.

See Related Blog Posts:

Foreclosure Buyers and Common Expense Assessments

Chicago Ranked Among Cities with Most Distressed Home Sales

Foreclosure Buyers and Common Expense Assessments

If you buy a foreclosure, can you be liable for costs incurred by the previous owner? According to a recent article in the Chicago Tribune, the Illinois Supreme Court ruled that “under certain circumstances a buyer of a foreclosed condominium unit may be responsible for unpaid common expenses not paid by the previous unit owner.” In other words, while Chicago neighborhoods continue along a path of recovery, the Illinois Supreme Court ruling could potentially limit recovery from the foreclosure crisis.

Condominium Act and Foreclosures

As the article notes, Section 9(g)(3) of the Condominium Act (765 ILCS 605/) states that someone who buys a foreclosed condo unit is “responsible for paying assessments beginning the first day of the month following the foreclosure sale.” Generally speaking, a condo association can collect fees for common expenses from a buyer on a foreclosed unit when the original owner has not made those payments. However, the ability for the condo association typically is limited to six months.

Yet that is not the conclusion that the Illinois Supreme Court recently came to when it decided the case of Lake Shore Association v. Deutsche Bank National Trust Co. back in December. To better understand how the court came to its decision and the impact the decision could have on foreclosure issues in Chicago, we should take a closer look at the facts of the case.

In this case, the defendant purchased a foreclosed condominium unit. Two years after the purchase, the defendant received a demand for payment from the plaintiff, the condo association. That demand for payment was for common expenses that had not been paid by the previous owner. The plaintiff filed a complaint seeking, among other things, more than $62,000 in unpaid assessments (in other words, the unpaid common expenses).

The defendant argued that, under Section 9(g)(3) of the Condominium Act, it “could not be held liable . . . for unpaid assessments that accrued before it purchased the unit at the judicial foreclosure sale.” Those assessments totaled more than $43,000 of the amount sought by the plaintiff.

Illinois Supreme Court Rules Against Foreclosure Buyers

After lower court rulings, the Illinois Supreme Court determined that the plain language of the Condominium Act “creates a lien in favor of a condominium association upon the failure or refusal of a unit owner to pay common expense assessments.” The Illinois Supreme Court made clear that if a buyer does not start paying assessments on the property at the beginning of the first month after the foreclosure sale (as required by the Condominium Act), that buyer can be “liable for all of the previous unit owners’ unpaid common expenses,” according to the Chicago Tribune article. To be sure, a buyer cannot rely on the Condominium Act to “extinguish the association’s lien on the foreclosed unit.”

The lesson, the article suggests, is that buyers and condominium associations need to have experienced attorneys to help contend with these complicated assessment issues.

If you have questions about buying a foreclosure or if you are having trouble making regular mortgage payments, an experienced Oak Park foreclosure defense attorney may be able to help. Contact the Emerson Law Firm today.

See Related Blog Posts:

Chicago Ranked Among Cities with Most Distressed Home Sales

Foreclosure Inventory Remains Above Normal Levels

Chicago Ranked Among Cities with Most Distressed Home Sales

Why is Chicago still identifiable as one of the cities in America with the largest share of distressed home sales, including foreclosures and short sales? That is a question recently posed in an article in Crain’s Chicago Business, which reported that “Chicago’s housing market is struggling to slim down its stock of distressed homes.” A business data report from CoreLogic made clear that more than 20% of houses sold in September 2015 were identified as foreclosures or short sales.

What do you need to know about foreclosures in Chicago? Do the recent statistics suggest that our city has not fully recovered from the financial crisis?

Rate of Distressed Home Sales in Chicago is Double the National Average

Based on the data gathered by CoreLogic, Chicago has the “fifth-highest percentage [of foreclosures and short sales] among major U.S. cities and more than double the national rate of 9.7%.” The rate of distressed home sales in Chicago is not too far off from the highest number in the country. The percentages look like this, in order of highest-rate of distressed property sales:

·      Orlando, Florida (22.7%);

·      Tampa, Florida (21.5%);

·      Baltimore, Maryland (21.2%);

·      Miami, Florida (21.2%);

·      Chicago, Illinois (20.8%);

·      Newark, New Jersey (15.7%);

·      Las Vegas, Nevada (15.5%);

·      St. Louis, Missouri (14.4%); and

·      Atlanta, Georgia (12.6%).

As you can see, there is a relatively large drop-off after Chicago’s statistics, and the rates among the top five cities are comparatively close in number. Statistics suggest that the rate of distressed home sales in Chicago is not declining with a quick enough pace. At this same time last year, the rate of distressed property sales was at 21.4%—a number that is less than one point higher than this year’s total.

Many Chicago-Area Homes Remain Underwater

According to a real estate agent in the Chicago area, the “region’s volume of distressed homes is coming down, but it’s not happening fast enough.” She predicts that we will continue to see high numbers of distressed home sales for at least two more years, and possibly more. Why have we not witnessed a quicker decline in the number of foreclosure sales and short sales in our city?

Generally speaking, the “local residential market has bounced back from the crash,” the article emphasizes. At the same time, however, home price growth has not been moving in a steadily upward direction. As a result, a number of houses in Chicago remain underwater, meaning that they are worth less than what the owner currently owes on the mortgage. When homeowners cannot make enough money by selling their homes to pay off their mortgages, they are more likely either to default (resulting in a foreclosure) or to agree to a short sale.

Another potential reason for the high number of distressed home sales in Chicago is the fact that Illinois is a “judicial state” when it comes to foreclosures. In other words, all foreclosures go through our courts, and this can take a long time. At the same time, many Chicagoans are not making the kind of money they were before the crash and thus are not able to afford monthly mortgage payments.

If you have questions about foreclosure in the area or if you need help avoiding foreclosure, you should discuss your options with an experienced Oak Park foreclosure defense attorney as soon as possible. Contact the Emerson Law Firm today to learn more about our services.

See Related Blog Posts:

Foreclosure Inventory Remains Above Normal Level

New Mortgage Disclosure Rule