By Joel Persinger
YourRealEstateDude.com
Over the past few days I have been approached by several clients who expressed concern that the U.S. Government is leading us into disaster by printing trillions of dollars in a vain hope that doing so will save the economy. On thing all of these folks had in common was their belief that the United States Government is spending money that it doesn’t have. Is that true and if so, is it a good plan?
There’s an old joke that goes, “What do you mean I don’t have any money in my account? I still have checks!” We all know that if I write checks without sufficient money in my bank account, the bank will refuse to cover my checks and vendors will eventually stop accepting them. My checks will become worthless. If I want to dig myself out of the hole and get the vendors to accept my checks again, I will have to borrow the money to cover the checks that I’ve already written, along with any I might intend to write in the future. Then, I will have to find a source of income, like a second job, in order to pay the debt on the money I had to borrow.
When the government prints money, it is essentially writing checks even though it has no money in its bank account. Just like my checks, people will eventually stop accepting the government’s money, because its money will have become worthless. The only way for the government to stave off such an eventuality is to borrow enough money from other countries to cover the checks it has already written, along with any it might intend to write in the future. Then the government will have to find a source of income to pay the debt on the money it had to borrow. Unfortunately, the government cannot get a second job. All it can do is raise taxes on generation after generation of Americans.
It may be disturbing to know, but should be point out that the government doesn’t make anything, grow anything, produce anything or sell anything. Basically, the government doesn’t make any money of its own. The Government is like a horribly fat old uncle who sits on your couch all day, eats your food, watches your TV, minds your business and bosses you around without ever pitching in to help pay the bills.
Many of us think that the government is our benefactor, but the reverse is actually the case. We are the government’s benefactors. We design and manufacture products, grow crops, provide services and run profitable business, while old, fat Uncle Sam sits on his behind and sponges off of us in the form of taxes and bosses us around.
But, what does all this have to do with the housing market? First of all, the economy functions as a unit. You cannot easily separate one section from another. Consequently, what affects one sector eventually affects them all. Therefore, when money is devalued, it takes more of it to buy goods, services and real estate. If you’re old enough to remember the late 1970’s, you remember the recession of the Carter years. We faced double-digit inflation back then. Prices of goods and services were sky high. People lost jobs all over the country. You could only buy gas for your car on odd or even days, depending upon whether your license plate ended in an odd or even number. And even when it was your day to buy gas, you had to wait for long periods because cars were lined up for blocks.
Like it or not, what happens with the economy affects everything. Many highly regarded economists and gurus, including those in the Congressional Budget Office, seem to be rightly concerned that printing all this money will send our economy into a tailspin, driving us headlong into a deep recession. If that happens, it may take more money to buy your house, but you may not be able to sell it. People will be too busy trying to scrape together the money to buy bread, eggs and gasoline. No matter how desperate you may be for a cure to present ills, it seems obvious to this real estate broker/investor that writing checks when you have no money and borrowing money that you cannot pay back will only make our current economic problems worse.
Monday, March 23, 2009
Monday, March 16, 2009
Dealing With Your Lender When You Can’t Make Your Payments
By Joel Persinger
YourRealEstateDude.com
Over the weekend, I received an email from a fellow asking me how to deal with a lender that was threatening foreclosure. In his case, he was not yet behind on payments and the lender had threatened to foreclose when the borrower called to ask for help. The borrower wanted to keep the house and expressed a desire to work with the lender by making partial payments. The question he asked me was, “Does a borrower have a right to keep the house, if he makes a partial payment.” With so many folks facing the same or similar issues, I thought you might like to know my answers to his question.
Not being an attorney, I can’t give you specifics regarding a borrower’s rights to keep the house by making a partial payment. However, it has been my experience that agreements allowing a borrower to remain in a home while making a partial payment are generally made outside the structure of the original lending agreement and are for short periods only. Your loan documents may contain a provision addressing the issue of partial payments. They may also address any rights you might have under such circumstances. Therefore, if you are wondering about your rights under the terms of your loan agreement, a good place to start would be examining those documents.
As for lender responses to telephone calls, you must first understand that banks employ different persons in different departments to do different things. As a result, the Customer Service Department may have a completely different response to a question than the Collections Department, which may have a different response than the Workout Department, and so on. That having been said, there are seven generally accepted “truths” you might wish to consider.
1) Letters generally work better than telephone calls. If you need to work out a payment strategy with your lender, you might try writing a letter. Draft your letter to the bank explaining your financial hardship, how long you feel the hardship will last and any proposed solutions you may have. Prior to sending the letter, you should contact your lender and ask for the “Workout Department” or for a supervisor. One or the other may be able to provide you with the appropriate address to which you should send the letter. You should also try to get an email address. That way you can send the letter by email, as well as by certified postal mail return receive requested. The email will provide you with a record of what you sent, to whom you sent it and when it was sent. Certified postal mail, by comparison, will only prove that you sent something, but will not prove what you sent.
2) Working these things out with banks is like trying to solve a problem with the DMV. It can try even the calmest person’s patience. Therefore, it is import to remember that perseverance and patience are the watchwords of the day.
3) Banks do not generally like partial payments. If you call your lender and say, “I’m having some financial troubles. Can I make a partial payment for a few months?” don’t be surprised if the first answer you receive is, “NO.” The bank is not going to just take your word for it. You will have to provide financial records and documents to prove that you cannot make the payment.
4) Banks don’t want to foreclose on your property. They just want their money back in the form of a payment. However, they will threaten to foreclose in order to motivate the borrower to pay. It should also be noted that they do have the power to foreclose, at some point, if the borrower does not pay. So, it is best to work on the problem sooner rather than later.
5) Collections people at banks tend to use threats as their first response to just about everything. So, don’t be terribly insulted if they threaten you the first, second or even the third time you talk to them.
6) Quite often, banks don’t see the situation as a problem when the borrower is making the payment. After all, the borrower is making the payment! So, what’s the problem? It’s when you completely run out of money and the bank doesn’t receive your payment that the light bulb will go on and the bank will realize that a problem exists. It’s sad, I agree. But, it’s the truth nonetheless. I should clearly point out that I am NOT advising you to stop making your loan payments. You should contact a quailed attorney for advice prior to making any such decision.
7) Dealing with problems like these is not easy. But, the sooner you start working on them the better. The worst thing you can do is to pretend that they will go away on their own.
YourRealEstateDude.com
Over the weekend, I received an email from a fellow asking me how to deal with a lender that was threatening foreclosure. In his case, he was not yet behind on payments and the lender had threatened to foreclose when the borrower called to ask for help. The borrower wanted to keep the house and expressed a desire to work with the lender by making partial payments. The question he asked me was, “Does a borrower have a right to keep the house, if he makes a partial payment.” With so many folks facing the same or similar issues, I thought you might like to know my answers to his question.
Not being an attorney, I can’t give you specifics regarding a borrower’s rights to keep the house by making a partial payment. However, it has been my experience that agreements allowing a borrower to remain in a home while making a partial payment are generally made outside the structure of the original lending agreement and are for short periods only. Your loan documents may contain a provision addressing the issue of partial payments. They may also address any rights you might have under such circumstances. Therefore, if you are wondering about your rights under the terms of your loan agreement, a good place to start would be examining those documents.
As for lender responses to telephone calls, you must first understand that banks employ different persons in different departments to do different things. As a result, the Customer Service Department may have a completely different response to a question than the Collections Department, which may have a different response than the Workout Department, and so on. That having been said, there are seven generally accepted “truths” you might wish to consider.
1) Letters generally work better than telephone calls. If you need to work out a payment strategy with your lender, you might try writing a letter. Draft your letter to the bank explaining your financial hardship, how long you feel the hardship will last and any proposed solutions you may have. Prior to sending the letter, you should contact your lender and ask for the “Workout Department” or for a supervisor. One or the other may be able to provide you with the appropriate address to which you should send the letter. You should also try to get an email address. That way you can send the letter by email, as well as by certified postal mail return receive requested. The email will provide you with a record of what you sent, to whom you sent it and when it was sent. Certified postal mail, by comparison, will only prove that you sent something, but will not prove what you sent.
2) Working these things out with banks is like trying to solve a problem with the DMV. It can try even the calmest person’s patience. Therefore, it is import to remember that perseverance and patience are the watchwords of the day.
3) Banks do not generally like partial payments. If you call your lender and say, “I’m having some financial troubles. Can I make a partial payment for a few months?” don’t be surprised if the first answer you receive is, “NO.” The bank is not going to just take your word for it. You will have to provide financial records and documents to prove that you cannot make the payment.
4) Banks don’t want to foreclose on your property. They just want their money back in the form of a payment. However, they will threaten to foreclose in order to motivate the borrower to pay. It should also be noted that they do have the power to foreclose, at some point, if the borrower does not pay. So, it is best to work on the problem sooner rather than later.
5) Collections people at banks tend to use threats as their first response to just about everything. So, don’t be terribly insulted if they threaten you the first, second or even the third time you talk to them.
6) Quite often, banks don’t see the situation as a problem when the borrower is making the payment. After all, the borrower is making the payment! So, what’s the problem? It’s when you completely run out of money and the bank doesn’t receive your payment that the light bulb will go on and the bank will realize that a problem exists. It’s sad, I agree. But, it’s the truth nonetheless. I should clearly point out that I am NOT advising you to stop making your loan payments. You should contact a quailed attorney for advice prior to making any such decision.
7) Dealing with problems like these is not easy. But, the sooner you start working on them the better. The worst thing you can do is to pretend that they will go away on their own.
Monday, March 09, 2009
The Truth about Loan Modifications
By Joel Persinger
YourRealEstateDude.com
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.
YourRealEstateDude.com
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.
Wednesday, March 04, 2009
Can Obama’s Stimulus Plan Help Homebuyers?
By Joel Persinger
YourRealEstateDude.com
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.
YourRealEstateDude.com
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
YourRealEstateDude.com
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.
YourRealEstateDude.com
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.
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