The Short Sale Dilemma

Real estate short sales provide an unusual opportunity for a banking system flawed with incompetence and greed. It absolutely makes no sense for would be homeowners to even consider making an offer to purchase a short sale property. The process is supposed to help delinquent owners of short sale properties avoid foreclosure by allowing them to sell their homes before they go to auction, but does it really? Anyone familiar with the process will tell you that purchasing a short sale property is not only frustrating, but a very long, and sometimes, never ending process. Normally, if a person makes an offer to purchase a home, that buyer can assume that escrow will close within thirty days or less. This is not the case with a short sale. The length of time for a short sale to close escrow can be as long as six to eight months if home buyers wish to wait that long.

Its obvious that mortgage lenders who hold the liens on these short sale properties are not in a hurry to sell them or get their money back. And why should they? They are being fed intravenously with taxpayer money. Unfortunately for buyers and sellers, mortgage lenders have the final say on the terms of these sales. What’s ironic is that the same American taxpayers who are being disenfranchised by this entire process are bailing them out financially.

What makes matters even worse is that mortgage lenders are capable of selling their loans to the so-called secondary market made up of individual investors. Once a mortgage lender sells a homeowner’s loan to the secondary market, it becomes very difficult to track down who the individual investors are and get them to agree to the terms of these short sale transactions. Most investors expect to make a dollar out of fifteen cents, not the other way around. They have a hard time accepting the fact that property values are much less than the mortgage notes that they originally purchased when the market was booming. Quite often investors will reject the terms of a sale even when the appraised value of the property matches the sales price. Hence, the situation changes from need to greed and nobody wins.

Obama Versus The Banking Cartel – Round 1

Trying to tame a deregulated banking system that was allowed by the previous administration to make deals no one could refuse will require more than a war of wills. The first infusion of government funding resulted in little more than the banks responding like mafia bosses saying, “forget about it, we’ll continue to do it our way.” Nothing changed, except for them increasing the interest rates on credit cards and lowering credit card limits. Everyone assumed the big banking bosses would give a little back by opening up credit markets and helping the very same people who will be paying for their bailout. Instead, they rewarded themselves with lavish bonuses and expensive vacations.

President Obama’s new stimulus package addresses this problem and much more. The banking bosses must limit the compensation packages to its top officers and loosen its purse strings for consumers to borrow at affordable rates. If they don’t, they risk losing the lifeline that was extended to them and having to pay it all back. Only time will tell.

It will be interesting to see how the banks react to President Obama’s plan to help homeowners still struggling to make their house payments. Even thought they were allowed to “wet their lips” from the first infusion of government bailout funds, the banking bosses did nothing to assist homeowners. They don’t even bother to do anything about the homes they are about to foreclose upon. Many of these homes are advertised as short sales, but there is nothing short about the process. In most cases, short sales may take as long as six months to a year to close escrow. You would think the banks would want to recoup some its losses and replenish its coffers. Why should they? Especially when they are being fed intravenously with tax payer dollars.

Real Estate Short Sales Are Really NOT Short At All

Real estate short sales are anything but short. Believe me, it can take forever sometimes for the bank that owns the property to release its interest in it even though willing buyers are ready to close the deal. In today’s real estate market, property values are lowering to rock bottom prices and homebuyers are ready to scoop them up. But what was once a simple real estate transaction that took approximately30 days to complete has now turned into a very lengthy time process that can take as long as 90 days or longer.

Typically, a short sale is supposed to allow a homeowner, who is about to have their home foreclosed upon, the opportunity to sell their property in order to avoid ruining their credit history with a foreclosure showing on their credit report. This sounds simple, but the bureaucratic process banks implement to process short sales has several stages that they must go through before they will ever release their interest in the property.

Normally, a willing homeowner will sell their home to a bank-approved buyer who then is able to close escrow and move in to their newly acquired home. In a short sale, the homeowner, who is losing his/her home, must first get his/her bank to approve the terms of the sale before the transaction ever closes escrow. This can be difficult in today’s marker when home values are continuing to decline. Obviously, the bank that owns the home wants back all the money it is owed. But in most cases, the amount that is owed far exceeds what the house is worth in value. The bank will then assign its own appraiser to determine the current value on the house and proceed to turn the file over to a “negotiator” who will then respond to an offer made by the potential buyers. By the time the interested buyers receive any feedback on their offer their file has been bounced around at the bank several times. Sometimes short sales are really not what they appear to be and can turn into an endless nightmare with the buyers often withdrawing their offer to purchase. Makes you think why congress ever bailed out the banks, but that’s another story.

Winning The Lottery

Winning the lottery can be quite a challenge especially if you don’t play that often. I used to buy five one dollar tickets every other month until it was clear the chances of winning a big jackpot may not ever occur in my lifetime. Every once in a while I might win five dollars or at least break even. I read about people winning the lottery every once in a while and sometimes they win big, sometimes as high as ten million dollars. The only consolation I ever get is knowing these people live in nearby areas that I recognize, but never anyone I know.

Every once in a while I will read in the local newspaper about a group of employees purchasing lottery tickets together. Winning the lottery in this manner increases the odds for everyone if they purchase their tickets together. It’s a lot better to win a share of each winner’s ticket than to not win at all. Usually lottery pools are small in size, about 10 – 20 employees. When purchasing lottery tickets in a pool, chances are, several individuals are going to win. Even if only five members of the pool win five dollars each, at least everyone can share in the winnings. Can you imagine if a group of 100 persons formed a lottery pool together? Or how about 10,000 persons joining a lottery pool together. WOW! This sounds like fun. Their winnings may not be as high, but winning something is better than nothing. Who knows, maybe someone will win the big one.

Can you imagine a group of 100,000 persons, or more, playing one dollar tickets twice a week, every week, what the potential of winning it big will be? Surely, this is a lot better than playing alone. Well, this may seem impossible, but its not. By joining Zxotto, a legal lottery pool, everyone has one thing in common, winning the lottery.

Join My Lottery Pool and Win!

Xzotto is a way for everyone over the age of 18 to join a pool of lottery players all over the world and share in each others winnings. No kidding, when I first heard about it I couldn't believe it. You can purchase lottery tickets online and not have to go to the local drug store or minimart to buy them. Because Xzotto is just staring out, only the California Lottery is available. But soon it will include in each state of the union and other countries too.

But that's not all, players also have the unique opportunity to become representatives of Xzotto and can enroll others to join their lottery pool too. Whenever someone under an Xzotto representative wins the lotto, everyone above them wins too. Can you imagine having a group of 1000 or more players under you? Someone in that group is going to win and when they do, you win too. Who cares that this is a multi-level-nework! The bottom line is this is fun and joing a lotter pool increases you chances to win. Go ahead and see for yourself - CLICK HERE!

Homes and Loans

Do First Time Home Buyers Have A Chance In Today’s Market?

I’ve been originating home loans for first time homebuyers for over 10 years and I’ve seen the market go up and down several times during this period. However, never have I seen home prices drop this so dramatically as of lately. This is creating a tremendous opportunity for first time homebuyers to take advantage of homes with low prices and built-in equity. What other investment in today’s market can offer such a huge return on your dollar? Stocks, bonds, and even mutual funds are way too risky, but buying low in today’s real estate market offers one of the safest and best advantages for first time homebuyers wishing to buy a home.

Can you imagine, homes that were once valued at $400,000 are now selling for $200,000? In a few more years, these same homes will once again be valued at the higher amount or more. There is no other investment that I know of that can offer this high of a return. Most people must wait their entire their life time to earn enough money in their estate to equal what first time homeowners can gain in equity in one single transaction.

Everyone knows putting aside a little money each month is sometimes very difficult to do, especially in today’s economy. High gas prices, high food prices, practically everything has increased in price, even rent. I don’t know where you live, but to live in a decent house, apartment, or condo in the Fresno area your rent payment will be at least $1,200 – $1,400.00 per month, and Fresno’s housing costs are much lower then most other cities in California. So, the real question is, WHY PAY RENT WHEN YOU CAN BUY? Buying a house has so much more advantages than renting, especially if the amount you are spending on housing is about the same as what it will cost with a home loan. SO WHY RENT?

Ok, ok, I get it! The problem is saving enough money for a down payment, right? Well, there’s more than one way to peel an orange. Believe it or not, someone once got mad at me for saying that. Anyway, whether you go FHA or conventional for a home loan, you will need to have at 3% - 5% of your down payment in your bank account at least 60 days prior to the close of escrow. Let’s see now, 3% of $200,000 equals $6,000.00. Plus you will have to have closing costs, but you can request the seller of the house to pay them for you. Believe me, they would rather pay your closing costs than to have their house sit on the market another month. The bible says, “Ask and you shall receive”. All you need now is the faith of a mustard seed. Now go out and get qualified for a home loan!

The Mortgage Meltdown and How Credit Card Companies Played A Role

While the media and congress are busy pointing their fingers at the lackadaisical and allegedly unscrupulous business practices within the mortgage industry, they seem to be ignoring one of the more serious causes of the mortgage meltdown, credit card debt. Credit card debt has been a chronic problem over the past few decades and was incredibly out of control during the peak of the mortgage boom when property values rose skyward and homeowners gained thousands upon thousands of dollars in newly acquired home equity. The credit card companies were reaping tons of revenue, as they are now, and consumers were finding it more difficult to shoulder the burden of so much debt. Congress even sided with these multi-billion dollar companies in changing key bankruptcy legislation allowing them to pursue consumers who are filing for bankruptcy protection. Even Senator Joe Biden, the Vice Presidential choice of Democratic Presidential candidate Barack Obama, and others threw their support behind these corporate giants to the dismay of ordinary working folks just trying to make a living.

At the time, consumers used their credit cards to finance clothing, home improvements, emergencies, vacations, gas, and cash advances, among other things. Credit card companies even issued teaser interests rates for as low as 0% so consumers would not be the least hesitant to finance everything that suited their fancy as long as their payments were low and affordable. However after six months the teaser rates disappeared and cardholders were left with rates as high as 29% or more causing their payments to skyrocket way beyond their ability to pay them on time. The power of having credit is overwhelming for some. Unlike consumers who pay by cash, check, or with their debit cards, consumers who rely on credit cards will knowingly purchase items they can’t afford. This is because they do not have the discretionary funds in their savings accounts to accommodate such spending.

Small Businesses also Effected

Congress’s efforts, so far, have been focused around finance reforms and other restrictions pointed towards financial institutions. Although their intentions may seem honorable, this is putting a stranglehold on banks and other lending institutions that would, otherwise, approve qualified borrowers with good credit even though they may not be able to provide documented proof of their income because they are self-employed. Most self-employed small business owners will write off their business’s expenses during tax season to avoid paying the government whatever net income is left over from their net profits. After payroll taxes, worker’s compensation insurance, high fuel costs, inflation, a shrinking economy and other normal day-to-day business expenses, there’s seldom enough money left over to earn a living wage. The vast majority of small business owners are not a part of the 3% of the wealthiest Americans. Most of them are part of what was once considered middle class America, but not anymore.

What Congress fails to realize is that many small business owners rely on the equity of their homes to provide the much-needed capital necessary to make their businesses work. When business is good, these loans are paid off and the cycle starts all over again. Congress is not an expert regarding the many issues and problems within the mortgage industry. It must also welcome the input it receives from mortgage brokers in addition to the top paid banking executives who contribute to their political campaigns. When mortgage brokers took action to oppose some of the proposed financial reforms while still in committee, Senate Finance Committee members largely ignored what these brokers had to say and went forward with their own formula for changes within the industry.

Mortgage brokers, and the many loan officers who work for them, are in direct contact with homeowners and see firsthand the financial dilemma they are in. In a random survey taken at several prominent mortgage companies, loan officers reported that the number one reason homeowners requested refinancing was to pay off credit card debt. They reported that nine out of ten homeowners refinanced their properties when home values were at an all time high in order to consolidate their consumer debts, including credit card debt into their new loan. However, now that the market has changed for the worse, many are forced to abandon their homes and/or file for bankruptcy now that their properties worth less than the debt they now owe.

From 2002 to 2006 over 95% of homeowners refinanced their properties for the sole purpose of paying off their credit card debt with the equity from their homes. At that time interest rates for a home loan are much lower than what most credit card companies were charging. The benefit to homeowners was being able to pay out less per month compared to what they were paying with their mortgage payment and credit card payments combined. However, by combining these payments into a debt consolidation loan, the total combined debt that they once owed has increased because of loan related fees being added to their new home loan.

Consumers overburdened with excess debt have very few alternatives for getting out of debt unless they own a home or other liquid asset. But, for those who don’t own a home, or maybe do but have very little equity in their homes, there is no relief from rising debt unless they take extreme measures to modify their spending habits like trading in their SUV for a late model Toyota, or file for bankruptcy. The consequences for credit card abuse can dramatically change the living standards for many individuals.

Homeowners typically refinance their properties every 4-5 years on average. However, during the mortgage boom, homeowners were refinancing their properties more frequently, more like every 2 years due to the aggressive marketing tactics of the mortgage industry. Lenders offering low teaser rates during the first 2-3 years of the loan somehow believed borrowers would be able to refinance their properties again prior their rates being adjusted upward. For many homeowners, especially those who were seeking financial relief in the form of lower monthly payments, these variable interest rates seemed very attractive compared to what they were once paying. However, consolidating their credit card debt to their home loan was a recipe for disaster. This seemed to be the only answer to their financial suffering, but for some, it proved to be a financial nightmare. Little did they know that a new financial crisis was about to unfold that eventually would lead to the process of losing their home to foreclosure. As the mortgage lender implode list grew, so did the number of families left without a home.