April 17th, 2011
There is an interesting practice developing at our nation’s big banks. Borrowers who are in or nearing foreclosure are being offered thousands of dollars to short sale their homes. Some are even being offered $35,000 to get rid of their homes, and quickly. This situation presents an intriguing insight into the way banks are thinking at the moment. Banks would rather pay you and take a loss rather than foreclose on homes.
Do such offers signify that banks have learned their lesson and are trying to get out of sub-prime loans, or are they looking to just prevent further losses? Perhaps the answer is that the banks are concerned about existing home prices. Bank of America’s chief economist, Mickey Levy, while speaking privately, spoke of the concern that the 1.8 million bad loans in the nation will drive down the market if they go into foreclosure. Such fears help explain why the banks are desperate to avoid foreclosing on homes. They don’t want the rest of their loans to become vulnerable: the more foreclosures, the more house prices fall, therefore, the value of the banks’ loans go down and more people want to walk away from their homes, causing the banks even more losses.
In the end, this situation is a win-win. Not only do banks protect home prices, but they stand to get back more money quicker from a short sale than a foreclosure and the good publicity would be a nice change of pace for their PR departments. Homeowners in trouble are also helped because they can get out of their houses with some cash in their pockets and get on with the rest of their lives.
April 15th, 2011
Who would ever have thought that the most respected names on Wall Street would cheat the house by playing with a marked deck?
Dear Wall Street: We’re not in Vegas anymore! The Sin City “players” of Wall Street might be trading in the fancy hotel rooms for prison cells.
The SEC is now following the Federal Reserve and the Senate is chastising Wall Street for effectively causing the economic crisis. The Securities and Exchange Commission today announced that they too will be joining the bandwagon and fining the major banks on Wall Street for fraudulently causing the worst economic meltdown since the Great Depression. They follow on the heels of the Federal Reserve and the United States Senate in lambasting the “banksters”.
April 14th, 2011
Like the never ending horror franchise, deficiency judgments are back. A Florida deficiency judgment occurs when a bank pursues the remaining balance on a mortgage either after a foreclosure or, in theory, after a Florida short sale. Most banks are currently too busy to process deficiency judgments because they are dealing with foreclosures and short sales. Due to the large costs associated with pursuing deficiency judgments, few homeowners who were foreclosed upon will be pursued. Those people whose mortgages were owned by trusts will probably not face a deficiency judgment because of the large costs. Unfortunately, if a community bank owns the mortgage the story might be a little different. Most community banks still have the loans on their books so they will pursue the deficiencies. Also, some community banks have started to buy deficiency judgments for pennies on the dollar for the express purpose of acting like a collection agency. This is good news to keep in mind because, in these situations, the banks will be eager to settle.
While we have addressed the deficiency judgment issue for years now, the Sun-Sentinel has now also reported on the danger of what will soon happen. In two or three years, when big banks catch up with their foreclosures, we will see a flood of such deficiency judgments. The main targets of the big banks will be strategic defaulters. Strategic defaulters are the folks who could afford their mortgages but defaulted because they are so underwater that it didn’t make any sense to pay. Not every strategic defaulter has to worry though. A deficiency judgment can only be entered in foreclosure cases. Short sales cannot lead to a judgment being entered against you unless the bank decides to file an action and litigate in court. An action would require the bank to pay attorneys and other fees with no guarantee of success and scrutiny of their documents, which might lead to sanction if fraud is uncovered.
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April 13th, 2011
Weston is Number One! Zip codes with good schools, high paying jobs are topping list.
Some areas of South Florida are finally seeing the first steps of a tentative recovery. As reported by the Sun-Sentinel, ten zip codes in Broward and six in Palm Beach County are seeing higher home prices.
33327, in Weston, saw the largest price increase from February 2010 with a 9.3% increase. The areas that have had a price recovery have generally been close to good schools or high paying jobs. While only a few zip codes are showing signs of recovery, the news is nevertheless good for all of South Florida. As an area that was one of the worst hit by the real estate crisis, we are now seeing a recovery before the rest of the country. Prices are still low in other areas because foreclosures and short sales make up the majority of sales.
Every recovery has to start somewhere and it seems to be starting in our own back yard here in Weston.
There is a large backlog of these “distressed” loans and the only way property values are going to go up in the rest of South Florida is if they are cleared out. This is what is happening right now and is the first step on a long road to recovery.
This news comes on the heels of reports that traffic to real estate websites increased 27 percent during the month of February – the largest jump since the first half of 2009. This combined with news that single family home sales across South Florida also went up in February and an encouraging job market leads Oppenheim Law and Weston Title to believe that the economy here in South Florida is showing signs of life after all.
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