Zombie Foreclosure–What is it?

Zombie foreclosures happen when the homeowner assumes they have lost their home and moves when the bank begins foreclosure, but the foreclosure process is never completed. So both the homeowner and their title are caught in between this world and the next, like a zombie.

The problem is that once the homeowner leaves, there’s an opportunity for real estate taxes to go unpaid and the property to go unmaintained, which often leads to code enforcement violations, vandals, and even squatters. You wind up with a whole slew of new problems—which the homeowner, not the bank, can still be liable for without even knowing it

Your first step when fighting back against a zombie foreclosure is to check the county or tax records. These are online in most areas now and will show you if you’re still on the title.

Anyone who has been foreclosed on might want to do this, if only to be sure. If you see that the bank has started but not finished a foreclosure, contact the bank and try to find out what their plans are.

The good news is that most banks are far more open nowadays to negotiate a short sale, deed in lieu of foreclosure, or agree to a loan modification than they were when most of these foreclosure cases were started.

The next step is to review current records for past due taxes, code violations, or other liens, and check out the property condition. You want to make sure you do what you can to avoid any more damage than what has already occurred and to also secure the home.

Depending on the circumstances, you may be able to rent the home or move back into it—a happier ending than most zombie movies get to see.



Mortgage Forgiveness Debt Relief Act Future?

NEW YORK (CNNMoney) — The clock is ticking on a taxbreak that saves struggling homeowners from paying thousands of dollars to the IRS.

If the Mortgage Forgiveness Debt Relief Act of 2007 does not get extended by Congress by the end of the year, homeowners will have to start paying income taxes on the portion of their mortgage that is forgiven in a foreclosure, short sale or principal reduction.

So if you owe $150,000 on your home and it sells for $100,000 in a foreclosure auction, the IRS could tax you on the remaining $50,000. For someone in the 25% tax bracket, that would mean paying $12,500 in taxes on the foreclosure.  Similar taxes would apply for forgiven amounts in short sales and principal reductions.

“People trying to do short sales are freaked out about it,” said Elizabeth Weintraub, a real estate agent in Sacramento, Calif. “They’re telling me they’ll do whatever it takes to close by the end of the year.”

Should the tax break expire, a large number of mortgage borrowers could be affected. More than 50,000 homeowners go through foreclosure each month.Meanwhile, the number of short saleshas tripled over the past three years to a rate of about half a million a year.And, under the terms of the $25 billion foreclosure abuse settlement, roughly one million borrowers may have their mortgage debt lowered through principal reductions over the next couple of years.

“If there ever was a no-brainer in housing policy, this would be it,” said Jaret Seiberg, a policy analyst for Guggenheim Securities.

Yet, Seiberg is skeptical the exemption will get extended. Now that the election is over, he thinks Congress will be heading into a “lame duck” session, with very little legislation moving forward through the end of the year.

In addition, the cost of the exemption could make it a point of contention, he said. The office of Sen. Max Baucus, who heads the finance committee, estimated the cost of a one-year extension at $1.3 billion.

Others disagree. Tom Kolpien, the press secretary forRep. Tom Reed of New York, said Congress will likely act before the end of the year. (Reed is currently pushing for the extension on the House Ways and Means Committee).

“Both parties, both houses of Congress agree it’s good policy and it needs to get done,” said Jamie Gregory, chief lobbyist for the National Association of Realtors, which supports an extension. “The hold up is the process. I’m confident it will get done. I just don’t know how.”

Even if Congress allowed the exemption to expire, not all borrowers withforgiven mortgage debt will take a tax hit. If the debt is discharged in a bankruptcy, no tax is due. And anyone who is insolvent — meaning they have more debt than assets — at the time the debt was forgiven — would not have to pay the tax.

Foreclosures Not Huge Savings Especially Places Like Destin or 30A Florida

While “foreclosure” remains a buzzword for bargain seekers, a study finds that
the actual discount off a “normal” price is far less than it used to
According to a study by Zillow, the national average discount of a
real estate owned (REO) property compared to a non-REO was only 7.7 percent in
September – a sizable change from the 23.7 percent average discount that peaked
nationally in August 2009 and less than the average 9.1 percent discount one
year earlier.
In some areas of Florida, REOs aren’t a bargain at all.
Zillow included three Florida metro areas in its analysis and claims an average
REO savings of only 2.9 percent in the Miami-Fort Lauderdale market – a
significant drop from the peak of 22.7 percent in August 2008 and a notable
decline year-to-year; in September 2011, a South Florida REO sold for 6.8
percent less.
In Tampa, a REO in September 2012 sold for 9 percent less
than a non-REO sale, down slightly from the 9.6 percent discount one year
earlier, but significantly lower than the peak 29.1 percent discount recorded in
November 2008.
In Orlando, the REO discount of 4.6 percent rose slightly
year-to-year; in September 2011, it was 2 percent. However, both numbers are
down from the peak 24.4 percent discount for a REO recorded in January
“The smallest foreclosure discount is found in places where  (DESTIN/30A corridor, Florida)“, says Zillow Chief Economist Dr. Stan Humphries. “People are willing to pay
the same amount for a foreclosure re-sale that they would for a non-distressed
home simply to take advantage of historic affordability.”

Year-over-year foreclosure discounts fell in roughly three-quarters (76.9 percent) of metro
areas analyzed, and all metros are down from their peak. Nationwide, foreclosure
discounts reached their height in 2008 and 2009, and in some areas peaked at
more than 30 percent.

© 2012 Florida Realtors®

Real Estate Investors Have Positive Effect!

The Washington Post

By Justin Pierce

Despite some shifts in the housing market that make it more difficult to earn money investing in residential real estate, a large majority of people in that field plan to buy as many or more properties in the next 12 months to rent out or sell for profit. That’s one of the findings of a study released last month that attempted to measure the impact people involved in income or speculative real estate are having on the housing market . The survey — sponsored by BiggerPockets.com, the nation’s leading social Web site for real estate investors, and Memphis Invest, one of the largest providers of single-family rentals — shows that 65 percent of investors plan to buy a lot more homes during the next 12 months. Still, from my experience in the Washington area, business conditions are changing with rising home prices, stiffening competition and shrinking margins. Anyone seeking to get into real estate investing should proceed with caution and not expect to earn the same money that has been made in the past few years. The report points out that investors played a fairly substantial role in the housing recovery. The housing crisis pushed nearly 4 million foreclosures onto the open market, devastating home values. This and the coinciding financial crisis squashed homebuyers’ confidence and their ability to buy. At that time, real estate investors began buying up the foreclosures when few other people could enter the market. They bought up so many properties that they established single-family rentals as a $100 billion business. In fact, the report says that single-family rentals now outnumber apartment units. They are also renovating the homes they buy and spending an average of $7,500 per home. That totals more than $9.2 billion every year in construction-related spending, according to the report. This is critical business for an industry that was hit hard by the recession

Mortgages for Foreclosure Purchase and Repairs

Purchasing foreclosures also means discounts, but with the markdown is the price of repairs. According to RealtyTrac, foreclosures or REOs sold at an average discount of 27 percent compared to non-distressed properties in the first quarter of 2012.  Through an FHA 203(k) loan, potential buyers who want to purchase a discounted foreclosure but don’t have cash for the repairs may find a way to receive financing.

According to HUD, the 203(k) program is the department’s main program for rehabilitating and repairing single family properties, and it’s viewed as an important tool to revitalize neighborhoods.

In order to be eligible, the property must be purchased as a primary residence or it can be for a HUD approved nonprofit. Also, the property must be a one-to four-family residence that has been completed for at least one year.

Dan Green, loan officer with Waterstone Mortgage and author of themortgagereports.com, explained that FHA 203(k) program can be used on any 1-4 unit residential property, and is not limited to just HUD properties or foreclosures.

The maximum amount that can be taken out for the property is based on the value or the purchase price of the property before rehabilitation (whichever is less), plus the estimated cost of rehabilitation or 110 percent of the property after improvements, according to HUD.

A down payment is required, and the minimal amount for a down payment is 3.5 percent of the accepted bid price plus the cost of financing additional repairs.

Since there is more “file” to underwrite for an FHA 203(k) loan, Green said the approval process takes longer than a standard FHA mortgage.

“FHA 203k approvals take more time, but are no more difficult than any other mortgage type,” said Green. “Borrowers should expect to provide the documentation required, and should respond to loan officer requests in a timely manner

There are a limited number of banks who offer these loans, so contact me at 850-305-6256 for more information on who offers these in the Destin/Niceville/Crestview/Fort Walton Beach/Navarre areas.

Homebuyer Interest in Foreclosures

The stigma associated with foreclosure purchases has apparently faded, with interest in foreclosures nearly tripling in the past two years, according to a survey released Wednesday by Realtor.com

The survey, conducted over 1,004 phone interviews at the beginning of May, suggested that homebuyer interest in foreclosures has jumped 159 percent since October 2009, when foreclosures made up 29 percent of all home sales. Nearly two-thirds (64.9 percent) of homebuyers surveyed said they’re likely to purchase a foreclosure, a huge increase from 25.3 percent two and a half years ago. The vast majority of buyers said they would want to live in their foreclosure purchase, with 92.1 percent looking for a home to live in and only 6.9 percent looking for foreclosure investments. “We see a combination of factors coming into play explaining the unexpected interest in foreclosures,” said Steve Berkowitz, CEO of Realtor.com operator Move, Inc. “Reductions in supply, expectations that home prices will rise, and changing attitudes towards foreclosures are contributing to the increased, especially among owner-occupants. As lenders begin processing their distressed inventories and releasing them for sale at the local level, we look to them to move carefully and monitor conditions so recently gained home values aren’t diminished

Foreclosures Affect On Children

Julia B. Isaacs of the Brookings Institution authored the report, which revealed five years into the housing crises, 2.3 million children have lost their homes to foreclosure, and 3 million more are at serious risk of losing their home in the future. In addition, approximately 3 million children were evicted, or may face eviction, from rental properties. Overall, one in 10 children were found to be affected by foreclosures. “Children are the often invisible victims of the foreclosure crisis,” said Issacs.

The report discussed four negative ways foreclosures impact children.

For one, foreclosed families tend to move, and children who move frequently tend to do worse in school.

Also, research shows financial stress and hardships affect the way parents interact with their children, and more specifically, parents under a lot of stress tend to be less supportive.

Thirdly, foreclosures adversely affect physical as well as mental health, with studies showing higher rates of visits to emergency rooms and hospitals in ZIP codes with the highest foreclosure rates.

Lastly, children living in or near foreclosed homes may be dealing with consequences of foreclosures such as more vacant houses, higher crime rates, lower social cohesion, and a lower tax base. “Housing disruptions due to foreclosure are just as traumatic for kids as losing their homes to a tornado or hurricane – except this disaster will hit one in ten children,” said First Focus president Bruce Lesley.

The report also stated that children who change schools tend to have lower levels of math and reading achievement compared to their more stable peers. Also, frequent changes in school are associated with higher dropout rates in high school.

The report analyzed the impact of foreclosures in different states and found that Alaska and North Dakota had the lowest rate, with 2 percent of children affected. Nevada led the country at 19 percent. Other states with high rates of affected children were Florida (15 percent), Arizona (14 percent), California (12 percent), and Michigan (10 percent). The report makes several suggestions to combat the issue and highlighted a program called McKinney-Vento Education for Homeless Children and Youth, which provides schools with tools to help homeless students stay in school. Loan modifications were also stressed, and the report called for bolder steps to improve the performance of modification programs, including national mortgage servicing standards, the resurrection of 2009 legislation that would amend bankruptcy laws to allow judges to modify residential mortgages, and principal reductions for homeowners under certain circumstances

Multiple Listing Services REO category

The requirement was reported on Inman News March 7, following another story published March 4 on Palm Beach Post that revealed some banks are not wanting agents to tell if a property is indeed bank-owned.

The Palm Beach Post article stated that Wells Fargo Bank’s Premier Asset Services division instructs agents who sell their REO properties to list the owner as “Owner of Record,” rather

than specifying that the owner is Wells Fargo Premier Asset Services.

Officials with the Palm Beach Gardens based MLS told Inman News that the mandatory REO data field was already in the works before the Post published its story on the matter.

While including an REO field is not required by MLSs, Realtor.com stated that certain MLSs have made it an option to indicate if a property is bank-owned, but some agents opt to not fill out that information.

REO properties, which are typically viewed as requiring more repairs than non-foreclosed homes, have an advantage of selling at greater discounts and can be an attractive option to investors.

According to a RealtyTrac report, REOs sold for an average of $149,686 in the fourth quarter of 2011, which is 36 percent below the average sales price of a non-foreclosure home; the average discount on bank-owned homes for all of 2011 was 40 percent.

An article from RealtyTrac also listed the top banks to buy bank-owned properties from based on its foreclosure sales data. The banks and their REO sale price averages are Ally Financial, $60,254; Wells Fargo, $83,530; Citigroup, $68,406; JPMorgan Chase, $98,864; and Bank of America, $120,801.

Independent Foreclosure Review Deadlines

Consumers who want their foreclosure cases checked by a third party as part of federal regulators’ independent foreclosure review directive now have until July 31, 2012, to submit their requests.

The Federal Reserve and the Office of the Comptroller of the Currency (OCC) announced Wednesday that the deadline has been pushed out by three months to give consumers more time to file for a case assessment if they believe they suffered financial injury as a result of errors in foreclosure actions in 2009 or 2010. The original deadline was April 30.

The independent foreclosure reviews, as mandated and enforced by the federal regulatory agencies, only apply to the mortgage servicers and their subsidiaries that were subject to the enforcement actions handed down by the OCC and Fed on April 13th of last year.

Participating servicers include:

  • America’s Servicing Company
  • Aurora Loan Services
  • BAC Home Loans Servicing
  • Bank of America
  • Beneficial
  • Chase
  • Citibank
  • CitiFinancial
  • CitiMortgage
  • Countrywide
  • EMC
  • Everbank/Everhome Mortgage Company
  • Financial Freedom
  • GMAC Mortgage
  • HFC
  • HSBC
  • IndyMac Mortgage Services
  • MetLife Bank
  • National City Mortgage
  • PNC Mortgage
  • Sovereign Bank
  • U.S. Bank
  • Wachovia Mortgage
  • Washington Mutual
  • Wells Fargo
  • Wilshire Credit Corporation

Borrowers are eligible for a foreclosure review if their loan is serviced by one of the participating companies above, the mortgage loan was subject to foreclosure between January 1, 2009 and December 31, 2010, and the property securing the mortgage was the borrower’s primary residence.

There are no costs associated with the foreclosure reviews. These case evaluations performed by independent third parties began in November. Eligible borrowers should have received a letter by the end of 2011 detailing the process.