Hope Now: Support & Guidance for Homeowners in Trouble

What is Hope Now?

As I was browsing the WSJ this morning I found an article about a new group called Hope Now. Apparently Hope Now is a cooperative effort between counselors, investors, and lenders to maximize outreach efforts to homeowners in distress. The alliance members include many of the leaders in their respective industry and includes the likes of Homeownership Preservation Foundation, NeighborWorks America, Bank of America, Citigroup, Inc., JPMorgan Chase & Co., Fannie Mae, Freddie Mac, American Bankers Association, Mortgage Bankers Association, and many others. The main goal is to provide assistance and resources to homeowners who are either in trouble or are facing future problems with their sub-prime mortgages when they reset.

Hope Now is Working with the US Treasury to Freeze Sub-Prime Rates

According to the Wall Street Journal they are also in negotiations with the US Treasury Department to temporarily freeze sub-prime mortgage rates to keep them from resetting. The goal is to help people stay in their homes and provide confidence to investors anxious about the spiraling mortgage problem and possible recession. Obviously the banks have their own interests to protect along with the interests of the sub-prime mortgage holders but if they can work out a deal it could go a long way in helping those who may be facing foreclosure when the loans reset.

The Sub-Prime Crisis will affect everyone. Will Hope Now Ease the Burden?

The sub-prime mortgage crisis and subsequent foreclosure crisis could continue to cause huge problems for the entire US economy if something is not done. While the mortgage banks and lenders are not the only reason for the recent meltdown they do share part of the blame. They were willing to give mortgages to people who had no business getting them. Now everyone is paying the price and everyone involved needs to be a part of the solution. I am not sure if Hope Now will be the ultimate solution but it is a step in the right direction. The myClosingSPACE.com blog will continue to keep an eye on this and follow up with any news.

Great Discussion on the Current Housing Crisis at the Title-Opoly Blog

Ed Rybczynski from the Title-Opoly blog has a great breakdown of his posts about the current housing crisis at Active Rain. Ed is one of the leading voices for reform in the mortgage and title industry and graciously shares his thoughts and ideas regularly at his blog. If you are interested in getting some in depth knowledge from the front lines you should read what he has to say.

The current problems in the real estate market have been brewing for a long time and Ed offers a good analysis as tho how it happened as well as what can be done to start turning it around.

Real Estate Crossword Puzzle Challenge

I wanted to add a little fun and interactivity to the myClosingSPACE.com blog while continuing to educate consumers about the real estate and title process. The Real Estate Terms crossword puzzle is a collection of real estate related terms. Some are fairly simple and some are pretty difficult. I tried to make something that would be interesting for those who are new to real estate terminology as well as the seasoned professional. In any case please give it a try and see how you do.

Another Round of Title Insurance Company Violations

First American has reached a $5 million settlement in Florida for paying kickbacks for business referrals. The U.S. Department of Housing and Urban Development and Florida insurance and banking regulators alleged that First American created title companies and set up sham affiliated business arrangements with real estate professionals to secure more business for First American. You can read more about this settlement here.

I would say it is amazing that this type of thing is still happening but sadly it does not surprise me. It seems like we read about sham ABA's and kickbacks every couple of weeks. This is bad for everyone in the title industry and all real estate professionals. From the consumers' point of view it reinforces the belief that everyone in the real estate industry is shady. That is not really true but until the upstanding title and real estate professionals take a stand the reputation will stand.

It seems obvious that the fines that the offending companies are being forced to pay do not impact their business. If that were the case they would cease using these methods. It would appear that the fines are considered another cost of doing business and that the additional revenue that comes from these arrangements more than makes up for the fines levied against the offenders.

Short of federal and state governments making the fines more punitive it is up to us in the industry to stand up and make changes from within. If we actually take away the ability of these companies to pay for referrals (with costs passed on to the consumer) they would stop. After all, if there nobody was willing to enter these illegal partnerships the perpetrators would be forced to change their methods.

By all means fight for change in the way RESPA violations are treated. Work to make the fines punitive enough that they can no longer be ignored. In the mean time make sure you only do business with companies that offer better service to your clients instead of the one that is paying you the most. The consumer is the most important person in a real estate transaction and we should all work together to provide them with the best service at the lowest price possible.

5 Ways to Avoid Foreclosure

In November of 2005, Greg and Mary Edwards purchased their first new home in New Jersey. Greg, a big rig mechanic, and Mary a receptionist, thought their dream of owning a home would never come true. With below average credit scores their financing options were thin, but through a three-year adjustable rate mortgage loan (ARM) they were able to purchase the home with no money down and an extremely good introductory interest rate.

That was a common story back then, but now the couple faces a sadly more common story as they come up on the end of their introductory term. Their interest rate has jumped almost two points. They’re barely able to pay for this month’s mortgage and next three month’s payment are looking grim. They have the opportunity to refinance, but sadly programs for sub-prime borrowers no longer exist. With no help in sight and their rate starting to climb they face a credit damaging and emotional scenario – foreclosure. They have now joined almost a half million homeowners who as of last quarter are facing foreclosures. Even more so, the numbers are growing.

Greg and Mary are only examples, but their story is a reality for thousands of Americans. The growing numbers of foreclosures has caused a ripple effect in the housing market which has led to the closing of more than 170 mortgage lenders, according to Mortgageimplode.com, as well as a glut in the American housing market and a drop in home prices. What happened? Did anyone see this coming? How can consumers be saved from financial ruin? In order to look ahead, let’s take a look back at the late 90s.

In late 1999, Wall Street rating services like S&P and Moody’s told investors that securities backed by sub-prime mortgages carried minimal risk. These investors poured billions of dollars into mortgage companies who then aggressively push mortgages on this new class of homebuyers. The mortgage company would then sell bundles of mortgages (called Mortgage Back Securities - MBS) to the secondary market to raise more capital to continue their business. The original mortgage companies made great profits while investors experienced great returns. This cycle continued for about six years.

Fast forward to 2006. Heavier than expected defaults caused rating companies to change their tune and they lowered the ratings on sub-prime Mortgage Back Securities. Home values started to drop, weakening investor confidence. Thus, Wall Street stopped investing in mortgages, leaving mortgage companies with no market for the mortgages that they lent to homebuyers. Then as introductory rates began to expire, thousands of homeowners seeking to refinance began defaulting on their loans found that mortgage programs that were so plenteous a few short years ago had vanished.

Why didn’t anyone see this coming? For those whose introductory rates are about to expire here are five simple tips to avoid defaulting on your mortgages or, even worse, enduring foreclosure.

1. Speak to your lender: Usually your best opportunity to avoid foreclosure is to contact your current mortgage lender. Your lender doesn’t want to own your home. Foreclosure administration and subsequent marketing costs to unload your property will cost them thousands. Your lender would rather work with you than have your house on the foreclosure market. Ask them about forbearance, reinstatement, payment plans or loan modifications. It is estimated that over 70% of homeowners in default don’t talk to their lender. Many lenders are now creating new programs targeted to assisting homeowners in financial distress. Call them to determine your options.
2. Consult state and Federal foreclosure relief programs: While state governments scramble to catch up with the rising foreclosure rates, the Department of Housing and Urban Development’s (HUD) Federal Housing Administration has set up a website offering helpful advice to consumers trying to avoid foreclosures. You can also call HUD’s foreclosure hotline at (800) 569-4287. State organizations also have hotlines to help alleviate foreclosures.
3. Utilize credit counseling services: Credit counseling services have the power to negotiate with your mortgage holder to help alleviate your debt. In most major cities, HUD-sanctioned housing credit counselors are also available to talk to homeowners about their options during foreclosure, http://www.hud.gov/offices/hsg/sfh/hcc/hcs.cfm. I only advise credit counselors as a last resort, but in today’s market this might be an option for many people. But be warned, some counseling services may be fraudulent. Don’t sign anything without consulting your attorney. Many scams literally have homeowners sign their houses away without paying off their original mortgage. In all cases, check with our local BBB representative to see if a company is fraudulent or not.
4. Don’t be too proud: Can you honestly afford to keep this house? You may just have to sell and start over. Each person’s situation is different, so talk to a financial adviser about your personal situation. Most importantly, be as truthful as possible when talking to your mortgage company, lender, bank, program or service. They can only help you as far as the information you give them.
   
5. Lower your closing costs: When refinancing after or during foreclosure don’t forget to shop around for savings on title and settlement services. You can “Google” title insurance and choose from companies that can help you find the lowest cost. You can save hundreds of dollars in closing costs that you can use to alleviate some of your financial burden.
   

In conclusion, never be afraid to be proactive in foreclosure process. You may have just missed a payment or your interest rate recently adjusted. Don’t lose heart. If you follow some of these suggestions you very well may avoid foreclosure.

Does What Happens in Vegas Stay in Vegas?

I am sure you have heard the slogan What Happens in Vegas stays in Vegas. While it is a great marketing slogan it is not necessarily the case. The St. Charles Journal (Missouri) had an interesting story about a title insurance related issue that came about due to some Vegas fun. Apparently a St. Charles resident went to Vegas for a little excitement and found it with a cocktail waitress there. So much fun in fact, that he decided to get married while he was there.

All was great with the world until the man passed away. See, his heirs were unaware that he got married in Vegas. They sold his house and a but later the buyers were delivered a letter that they were being sued by the Vegas wife who claimed she was part owner of the house. Luckily they had title insurance and the issue was straightened out without any additional cost to the new owners.

This article highlights the importance of title insurance and discusses some changes to the title insurance law in Missouri that should benefit consumers. These situations are not as rare as many believe and an unknown lien of judgment could pop up at any time. You may think it will never happen to you but it very well could and it could be very painful if you are not protected. Make sure you shop around for title insurance and learn as much as possible, Educating and protecting yourself could save you a lot of money and headaches in the future. And remember if you go to Vegas and get married make sure everyone knows.

Ask the Title Expert: Part 1

This is the first post in our Ask the Title Expert Series at the myClosingSPACE.com blog. The goal of this series to explore the questions that consumers or even real estate professionals have about title insurance and closing services. If you have any questions please take the time to ask it here or email me.

Without further ado I will move on to the first few questions, which come from our Director of Customer Service Annette Leoncini. These are questions she is asked regularly by customers who are shopping for title insurance.

Question 1: Why do I need title insurance if I buy a brand new home?
Answer: Let me give you an example. What if the builder of your new home never paid off a mechanic’s lien against the property and the lien wasn’t filed until 2 pm the day of your closing and your closing was scheduled for 3 pm? It is now of record, but may not have been included in the original property search. The lien goes with the property, not the builder or previous owner. If the builder refused to pay the lien after the closing took place, you would have to then either sue the builder, which could be very costly, or pay the lien. Title insurance will protect you from this scenario.

Question 2: Why should I use my own title company and not the title company my attorney recommended?
Answer: Because while your attorney (or mortgage broker, realtor, etc) may have your best interests at heart in many cases they have a financial incentive in recommending a title company. Even though it violates RESPA guidelines many title companies pay other real estate professionals for their business. This kickback is factored into the cost of the service the title company provides and is passed on to you, the consumer. By shopping for title insurance on your own you will be able to compare quotes and feel out the different companies. Armed with this information you can choose the title company that offers the best price and most friendly service instead of the company that is paying your lawyer to send them business. Think about it, you don't have your car dealer recommend auto insurance. Why would you let your lawyer choose your title insurance provider.

Question 3: How Do I Pay for Title Insurance?
Answer: All costs associated with your title insurance will be paid at your loan closing. There should be no deposit or any up-front fees. Title companies do not get paid until your transaction closes and if a company asks for a deposit you may want to look more deeply into their practices.

That is for the first part of this series. If you want further clarification please feel free to ask me here. If you have some questions you would like to see answered please leave them here or send me an email here.