Utah Short Sale & Foreclosure Resource

States Reach $26B Settlement with Banks

2012-02-16T17:44:00.005-07:00

Five of the nation's largest banks settled last Thursday with State and Federal officials in a landmark $26 billion settlement. The proposed settlement regarding fraudulent lending practices came to a close following lengthy negotiations aided by the attorneys general of California and New York who joined 40 other states.

The news came at the top of an already good week for home owners following news of extended low mortgage rates and a positive housing outlook for 2012.

Wall Street Journal (Developments): Fannie Mae: Outlook for Home Prices Rises Again

The consumer outlook for U.S. home prices improved again in January, extending a recent upward trend in housing market sentiment, according to mortgage market firm Fannie Mae. Views on the direction of the U.S. economy also continued to improve.

Bloomberg: Banks Paying Homeowners to Avoid Foreclosures
Banks, accelerating efforts to move troubled mortgages off their books, are offering as much as $35,000 or more in cash to delinquent home owners to sell their properties for less than they owe.

The New York Times: States Negotiate $26 Billion Agreement for Homeowners

After months of painstaking talks, government authorities and five of the nation’s biggest banks have agreed to a $26 billion settlement that could provide relief to nearly 2 million current and former American home owners. It’s part of a broad national settlement aimed at halting the housing market’s downward slide and holding the banks accountable for foreclosure abuses.
_____________________________________________________
***According to many analysts the US taxpayers will bailout the banks who will suffer minimal losses due to Hamp-assisted principal cuts occuring within the first year after foreclosure proceedings are finalized. Successful loan restructings then would turn a profit for the banks according to settlement terms based on incentive payments.

Your Goal: Avoid Foreclosure!

2012-02-02T04:45:00.000-07:00

You may know of someone who is struggling financially who may want to give up, or already has. I encourage you to check into a few options. My hope is to be able to provide any information for questions that you, or others you know, might have.

Very few understand what banks will provide as options to home owners facing financial difficulty and mortgage default on their home. Foreclosure occurs when a bank takes a property back from a borrower. After a borrower has defaulted on their loan for 90 days, a bank will post a Notice of Default (in judicial states) prior to another 90 days after which the bank will typically post a foreclosure date. A foreclosure may affect your credit by as much as 150-250 points and remain on your credit for up to 5 years. In Utah, lending institutions (banks) may exercise their right to pursue a deficiency judgement for the remaining loan amount. Banks tend to be easier on the borrower if you do what you can to minimize their losses through a short sale.

A short sale is when a bank is willing to take less than is owed on the mortgage. This involves a home sale cooperating with a realtor and does not require the seller to pay any losses or closing costs. This is a much better option for your credit than a foreclosure affecting your credit 50-150 points depending on your payment status. In fact, a bank would rather do a short-sale than foreclose in order to mitigate further losses.

Often in foreclosure, the second mortgagor may come after the borrower to recover losses. There can be recourse from a bank should a home go into foreclosure.

My start in the residential real estate market 10 years ago began in working pre-foreclosure, short-sales. The process of negotiating with the bank is somewhat fulfilling to me while I have the chance to help those with whom I am working. The process is not easy, but the outcome is rewarding with a win-win resolve for the bank and home owner.

Please call or e-mail me if you have questions.

All the best,

Dallin

Dallin B. Nelson

Real Estate Short Sale Specialist

(801) 830-3930 direct

(801) 995-4717 fax

(888) 447-6254 toll free

dallinn@prudentialutah.com

Utah Economic Outlook - Winter 2012

2012-01-22T08:26:00.001-07:00

UTAH ECONOMIC OUTLOOK

Winter 2012

NO ONE HORSE TOWN
Utah economic fortunes continue to improve, with solid performance in a variety of employment sectors. The Utah economy currently ranks third of the 50 states as measured by the growth rate of employment during the past year, trailing only North Dakota and Oklahoma, each significant energy players.
The Utah economy added 32,000 net new jobs during the most recent 12-month period, a 2.6% growth pace. Recent data now suggests the Utah economy has regained roughly half of the jobs lost in late 2008 through early 2010 resulting from the nation’s (and Utah’s) most serious recessions since the Great Depression.
A favorable development within the Utah economy is the increasing diversification of employment. Five major employment sectors have added at least 5,000 net new jobs during the past 12 months: manufacturing; trade, transportation & utilities; professional & business services; education & health services; and leisure & hospitality.
In addition, the Utah natural resources sector added 800 net new jobs, a growth pace of 7.3%. Such diversification bodes well for Utah in coming years to help absorb shocks to any one sector. The state will also benefit in 2012 and 2013 as additional employment activity is recorded in the residential home construction sector, an area where thousands of jobs were lost during the past four years.

JOBLESS DECLINE
The state’s unemployment rate declined to 7.0% in the latest month. Such a rate compares favorably to the 9.0% average U.S. unemployment rate of the past three years, as well as various months early in 2010 where Utah’s rate reached 8.0%. However, the current 7.0% rate pales versus the 2.8% average Utah rate during 2006 and 2007. We do anticipate measurable declines in the Utah unemployment rate during 2012 and 2013.

TOP RANKED BUSINESS
Utah continues to do very well when compared to the 49 other states as an attractive place to live, work, recreate, and raise a family. Forbes magazine ranked Utah #1 in the nation (for the second year in a row) as the best state in the U.S. for doing business and establishing a successful career. “No state can match the consistent performance of Utah,” noted the article.

The survey measured such components as business costs, labor supply, regulatory environment, current economic climate, growth prospects and quality of life. Utah’s moderate overall cost of doing business, including much lower energy costs, contributed to the top ranking. In addition, the state continues to rank at or near the top as being the best managed state in the nation.

TOP RANKED SKIING
Deer Valley Resort was recently named North America’s top ski resort (for the fifth straight year) by readers of Ski magazine. Three other Utah resorts: Park City Mountain Resort, the Canyons, and Snowbird, ranked among the top 20 resorts. When considering the quality of snow, Utah resorts claimed six of the top 10 spots. In addition, Park City Mountain Resort ranked first as a “family vacation” destination.
OTHER STRENGTHS
The state’s oil and natural gas sector has performed well in recent years. For the first time there are more than 10,000 producing oil and gas wells in the state, according to the Utah Division of Oil, Gas and Mining. Utah currently ranks 11th in the nation in crude oil production and ninth in natural gas production.

The Wall Street Journal recently ran a cover story entitled “Where the Action Is.” It reviewed seven communities across the nation where industry hubs are drawing entrepreneurs and investors. The only community mentioned in the Western U.S. was Ogden, Utah. The article reviewed the growth of the outdoor sports gear industry, where “manufacturers are pouring into this small city, lured by easy access to Olympic facilities and pristine terrain for testing products.”

A recent story in The Salt Lake Tribune noted the significant growth that could soon occur in the state’s aerospace and high-tech manufacturing industry. Three companies already doing business in Utah could soon expand their investment and employment substantially to take advantage of solid demand for their products and a business-friendly Utah economy.

UTAH IN 2012
The state’s economy is expected to continue the rebuilding process in place for the past two years. Increasing diversification of Utah employers, combined with high regard for Utah as a place to do business, bodes well for Utah and its residents for years to come.

The U.S. Economy
What we now call the Great Recession officially began in December 2007 and ended in June 2009. It was the longest, the deepest, and the most painful recession since the Great Depression.

By my count, that suggests that the current U.S. economic expansion has now reached the two-and-a-half year mark. The current expansion has been less than satisfying both statistically and emotionally, with major headwinds still in play involving weak residential and commercial real estate markets, uncomfortably high unemployment, major European financial risk, and elevated levels of anxiety about the direction of the federal government.

The current U.S. economic expansion has been especially lackluster when considering the massive and unprecedented levels of both fiscal and monetary stimulus. While modest economic growth has returned, a “recession of confidence” remains center stage.

Economic growth in 2012 is likely to remain substandard, with most forecasts congregating around a 1.5%-2.5% real (inflation adjusted) rate of growth. More bearish forecasters see particularly anemic growth in 2012’s first half.

The size and scope of a possible European financial implosion could lead the U.S. and much of the world back into recession, although that is not the consensus view. Nevertheless, investors around the globe have taken a “shoot first, ask questions later” approach to European sovereign (national) debt markets and the contagion that has now spread to more and more members of the euro community.

Government
Political theater of the absurd has been commonplace in the nation’s capital, with extreme partisan politics today’s reality. The government’s ability to live within its means remains highly elusive, even as European developments should be sending strong signals to Washington DC about damaging annual budget deficits and a more than $15,000,000,000,000 gross national debt.

Various economic studies have suggested that any nation’s ability to prosper and grow at a satisfactory pace is endangered when its gross national debt reaches 90% of that nation’s annual economic output. We are now at 100%...and rising quickly.

Trillion dollar plus budget deficits of the past three fiscal years will continue for as far as the eye can see. The biggest threat to this nation is the financial cancer of irresponsible government deficits. The need to slow the future growth pace of entitlement programs is mandatory.

U.S. Employment
Wary business leaders and worried consumers have contributed to the weak level of American job creation during the current economic recovery. The nation has regained less than one-third of the eight million jobs lost during the crisis of 2008 and 2009. Unless and until confidence levels improve, weak additions to employment will continue.

The nation’s unemployment rate has averaged 9.0% for the past three years. Most forecasters see an unemployment rate of not less than 8.5% by the end of 2012.

To be heard frequently during the Presidential campaign now well underway no sitting President in the past 75 years has been rewarded with a second term when the unemployment rate was above 7.2%. Whether the President can shift the blame for high unemployment to Republicans in the Congress will have a telling impact on election results.

U.S. Inflation
Consumer prices are expected to rise roughly 3.5% during 2011, with a slightly lesser rise being the consensus view for 2012. Weak global economic growth could lead oil prices lower, a key element in that forecast. Over a longer time horizon, the debate continues between those expecting higher U.S. inflation and those seeing a Japan-style deflation in the U.S.

The Federal Reserve
The Fed’s most critical interest rateâ€”the federal funds rateâ€”has been at an all-time low target level of 0.00%-0.25% since December 2008. Moreover, the Fed’s Open Market Committee has stated it expects this rate to remain unchanged until at least mid-2013.

In addition, the Fed has tripled the size of its balance sheet by buying massive amounts of U.S. Treasury securities and mortgage-backed securities. The intent? To drive long-term interest rates lower. While such actions have been largely successful, weak home prices across the nation, high unemployment, and a more paper-intensive lending industryâ€¦negatively impacted by the Dodd-Frank financial legislationâ€¦has not led to a strong surge in mortgage refinance activity.

Housing AND Rates
Most forecasting economists see national home prices stabilizing by mid-year 2012, with very modest price appreciation to follow. At the same time, conventional 30-year fixed-rate mortgages have been at a 60-year low near 4.0% in recent weeks.

One could make a case to delay a home purchase for 6-12 months, but mortgage rates could rise enough to offset any slightly lower home price. Now may be an outstanding time to purchase a new or foreclosed property and to refinance a mortgage.

Global Keys
Chinese and Indian economic growth are likely to slow somewhat, while Japan struggles with very substandard performance. High oil prices have boosted oil producing nations at the expense of user nations. The Canadian economy has slowed, while Mexico and Brazil are doing well.

However, these days it’s all about a fragile European economy. Greece, Ireland, and Portugal have already been bailed out, while major anxiety about Spain and Italy exists. Even the French have seen borrowing costs rise as questions about that economy have surfaced.

The Germans and the International Monetary Fund will face rising pressure to stem European debt contagion, even as impacted nations face the real need to get spending and debt issuance under control. No other issue is more critical to global economic performance in 2012 than a solid resolution of the European debt crisis.

Read more on Dis-incentives on Zions Bank Utah Outlook

Educating: The Crisis of Credit

2010-02-18T06:44:00.000-07:00

The Crisis of Credit by Jonathon Jarvis:

New Guidelines Affect Loan Modifications and Credit Scores

2009-10-23T05:15:00.000-06:00

New Guidelines Affect Loan Modifications and Credit Scores

By: Christine Hynes

New Guidelines Affect Loan Modifications and Credit Scores

Starting November 1, 2009, borrowers can have a little more assurance when it comes to loan modifications and how they impact credit scores negatively.

Previously, the effects of a loan modification on one’s credit score was something of a mystery. Some banks would not report late or partial payments to the credit bureaus during the trial modification process while others would. This led to confusion among borrowers, leaving many afraid of further damaging their credit with a loan modification.

Thanks to new guidelines set forth by the Consumer Data Industry Association, loan modifications under federal programs Making Homes Affordable and the Home Affordable Modification Program are to be listed on credit reports as, “loan modified under a federal plan”. This notification on the credit report will not have the same negative impact previous entries such as “partial payment” have had. In many instances, a report of a partial payment during the trial loan modification period could drop a borrower’s credit score as much as 100 points.

For the time being, FICO has agreed to take no action on these new entries… yet. Instead the credit reporting agency plans on studying the long term outcome of these loans and then making an appropriate score assessment based on the success rate of modified loans. As it stands now, banks are supposed to report the loan as current if the borrower is current on their normal mortgage payment and is current through their trial. However, if a homeowner is behind on their payments as they begin the trial process, their late entries on their credit report will not be expunged. When the permanent loan modification is approved and implemented that is when their loan will be brought current, but the late that are currently on the credit report will continue to report on the credit report.

It is important to note that these new guidelines only apply to loan modifications under the umbrellas of the federal loan modification programs MHA and HAMP. Individual bank loan modifications do not qualify and the banks will report to the credit agencies based on their specific policies. In addition, even if the borrower’s credit score is not affected by the “loan modified under a federal plan” entry will still be visible on a borrower’s credit report, which may affect a lender’s decision somewhere down the line.

Ultimately, the decision still rests with the homeowner on how to proceed with their specific situation. While a loan modification may or may not have an impact on credit reports, the impact of a foreclosure or short sale on credit scores will most likely be far more severe.

Finally, FICO will wait one year in order to gather data on this new ruling to see if they will retroactively decide to report negatively on the borrower’s credit report. This of course will be an across the board decision. And yes, they will retroactively ding your credit if they decide that is the appropriate course of action. However, any creditor that pulls your credit will still see some type of term listed on the credit referencing a loan modification. This means the new creditor will be aware of the modification, which may impact their decision.

* Provide help in most states.

(ArticlesBase SC #1495272)

Article Source: http://www.articlesbase.com/ - New Guidelines Affect Loan Modifications and Credit Scores

A Successful Bank Approval

2009-02-21T21:50:00.002-07:00

Many clients have asked me to post an approval for a short sale. This is an example of an approval from Wells Fargo. The desired outcome is to have the bank provide in writing that they will "agree to settlement short of full payment" and "waive any deficiency rights if applicable!"

(used with permission of seller of the property that received agreed settlement short of full payment).

Credit Meltdown - Some (very helpful) Educational Videos

2009-02-17T11:43:00.010-07:00

From PBS, this is the 6 part series on the meltdown of our economy.

Frontline: Inside the Meltdown part 1

Frontline: Inside the Meltdown part 2

Frontline: Inside the Meltdown part 3

Frontline: Inside the Meltdown part 4

Frontline: Inside the Meltdown part 5

Frontline: Inside the Meltdown part 6

KSL: Utah's worst recession in more than 50 years

2009-02-02T22:15:00.000-07:00

The only positive thing we heard today is the economy may hit bottom this year and stabilize. For now, we're feeling the strongest economic headwinds most of us can remember.

Consumer spending fell for the sixth straight month in December. For the year, consumer spending rose by just 3.6 percent.

Robert Crawford, an economist at the BYU Business School, says people are actually hurting the economy by not spending.

"That behavior, while prudent in the long-run perspective, is in fact making things worse," he said.

But he says saving is a good thing, especially for people who have unstable employment.

He also says an increase in spending by itself wouldn't be enough to reverse the recession. It's going to take businesses willing to invest. Consumer spending accounts for about 70 percent of total economic activity.

Americans worried about the possibility of more job cuts boosted their savings rate to 3.6 percent of their after-tax incomes in December. That was the highest level since tax rebate checks temporarily pushed the rate up to 4.8 percent in May.

A year ago, Utah led the nation in job growth. Now we're losing jobs. Construction is at its worst level since World War II, and sales tax revenue is dropping at a record pace, undermining government budgets.

To get money moving again, Wood says more rescue and stimulus bills are needed. He says, "You just have to hold your nose at this point. This is a crisis. This is a Pearl Harbor for the global and the U.S. economy. You know some of this is battlefield surgery, right now. We're just trying to stop the bleeding."

This article is found on KSL from February 2, 2009.

Successful closing of a short-sale that has been 11 months in the making; 9 months negotiating and 3 months under contract...!

2009-01-29T12:14:00.000-07:00

The closing of this property in west Lehi was an education I will have to benefit from in the future. The negotiations required contact with executive levels at two of the largest banks in the country (Wells Fargo and Chase).

We received offers in June, August and October but buyers were not taking on the offers due to confidence in their buying power, the lowering prices of neighboring properties (including better resale areas),and a custom/specific floor plan that they couldn't foresee as their own.

The second mortgage was a large one and they were unwilling to let go of so much money. However, after a great deal of effort and persuasion the first and second lowered the sale to a value comparable to about 70 cents on the dollar.

After final bank approval was given the buyer struggled to get financing due to competing refinances.

Needless to say, this was a nail-biter that we held our breath through to the end.

Thank you Adam and Kate for being great clients; I appreciate your conscientious and responsible attitude in helping me help you.

Successful Closing Today of Short Sale

2008-12-16T13:59:00.000-07:00

I listed Frank Volpe's home October 9, 2008. Today we closed his home in Highland. Here is a testimonial from Frank on his satisfaction of my work on selling his home.
Meeting with Frank initially, there was great concern over the time remaining to get his home sold to avoid foreclosure. In checking with the bank we found that they would postpone foreclosure if an offer was received. I knew I would need to work fast. An offer was received within 3 weeks and persistence with the bank merited an acceptance of a short sale or a payoff short of full amount.
Frank was great to work with - I appreciate the opportunity to help him.

60 Minutes: Where's The Bottom

2008-12-14T14:52:00.000-07:00

With the surge of sub-prime loans hitting the foreclosure market in 2008 there is another surge of loans that will affect our economy in a larger and more creative way in 2010.
This news story from 60 minutes provides staggering insight into the looming tidal wave that will hit soon.
Scott Pelley reports on the mortgage crisis that's far from over, with a second wave of expected defaults on the way that could deepen the bottom of the U.S. recession.

Successful Closing of Short Sale

2008-11-11T16:14:00.000-07:00

Twice in the last 3 months I have seen banks move fast enough to get an offer completed and closed from contract to recording within 45 days.

In late August I began marketing Shawn's home at a price that obtained about 35+ buyers to preview the home within a 3 month time frame. An offer was received in early October which culminated in a close today. Few snags were presented in negotiation with Citi Mortgage.

Many thanks to Shawn Carter for his recommendation and a great transaction.

Differences Between Foreclosure and Short Sale

2008-11-02T06:17:00.001-07:00

Having The Answers To Those Tough Questions
When a homeowner finds themselves upside down in their mortgage payments, they have no idea of which direction to turn, and It seems that it is almost impossible to get straight answers to their questions about what options they have, and how each option will affect their credit. Following is information to help you answers those questions. Remember, there are NO quick fixes when it comes to credit, so it is imperative that you don't wait until the last minute to get this information out to your clients. and your prospects, clients and referral partners.

FORECLOSURE
Foreclosure is the legal process in which a bank or other secured creditor either sells or repossesses a parcel of real property, home or land, after the owner has failed to comply with the mortgage or deed of trust agreement with the lender. Most frequently, the violation of the mortgage agreement is the default of payment. The completion of the foreclosure process allows the lender to sell the property, and keep the proceeds to pay off the mortgage as well as any legal costs. The length of the foreclosure process varies from state to state.

If the foreclosed property is sold for less than the remaining primary mortgage balance, and there is no insurance to cover the loss, the court overseeing the foreclosure process may enter a deficiency judgment against the borrower. Deficiency judgments can be used to place a lien on the borrower's other personal property, obligating the borrower to repay the difference or suffer the loss of their property. It gives the lender a legal right to collect the remainder of debt out of borrower's other existing assets.

However, there are exceptions to this rule. If the mortgage is classified as "non-recourse debt," then the borrower has no personal liability in the event of foreclosure. This is often the case with residential mortgages. If so, the lender may not go after borrower's personal assets to recoup additional loss.

The lender's ability to pursue a deficiency judgment can be restricted by state laws. In California and some other states, original mortgages (the ones taken out at the time of purchase) are typically non-recourse loans, however, refinanced loans and home equity lines of credit aren't.
If the lender chooses not to pursue deficiency judgment-or can't because the mortgage is non-recourse-and writes off the loss, the borrower may have to pay income taxes on the un-repaid amount if it can be considered "forgiven debt."

Any other loans taken out against the property being foreclosed (second mortgages, HELOCs) are "wiped out" by foreclosure (in the sense that they are no longer attached to the property), but the borrower is still obligated to pay them off if they are not paid out of the foreclosure auction's proceeds.

How Does a Foreclosure Affect Credit?
A foreclosure can be reported as a Foreclosure or Repossession and carries a derogatory payment status of 8 or 9 (M1, R1 and I1 being the best and R9, I9, etc. being the most negative) which is just under a Public Record. There is a misconception that foreclosures are considered Public Records to the scoring system, however, they are not. Although there is a Public Notice Record on file once a foreclosure is filed, but this record is completely different than a credit report public record.

A Foreclosure will remain on a credit report for 7 years from completion date. And the score will drop from 50-250 points. The difference in point loss depends on how many points your client has to lose in the payment history factor of their credit. So if someone has a 750 credit score, and they opt to foreclose, their score could drop up to 250 points. However, if someone has a 500 credit score, they may lose 50 points for the same derogatory.

If a Deficiency Judgment or Tax Lien is filed in connection with a Foreclosure, the credit score can drop an additional 100 points.

Fannie Mae Waiting Period
The current selling guideline from Fannie Mae has upped the previous 4 year period of how much time must elapse after a foreclosure to 5 years from the date the foreclosure proceeding is completed, not started.

The exception for extenuating circumstances has been increased from a 2 year to a 3 year waiting period.

WORD OF CAUTION: If you have a borrower going through a foreclosure due to circumstances of losing a job, a medical crisis, sub-prime mortgage crisis fall-out, I suggest that you advise them to fully document their experience now. Not to wait until later, because the details and emotional energy of what they are going through will be more difficult to document and prove down the road if they decide to apply for a loan in 2 years based on an extenuating circumstance claim.
In General: When it comes to foreclosure and how it affects the ability to obtain credit in the future, there are multiple points of extremely negative impact. Deficiency judgments for the amount not collected by the lender in the foreclosure sale can end up on the borrower's credit report as a derogatory mark. Additionally, there is a high risk that the borrower will be hit with a substantial tax penalty which can result in a tax lien, which also appears on the credit report. As a general rule, other than a bankruptcy, foreclosure is the least desirable of all of the options available when a borrower is upside down in a home mortgage.

Deed in Lieu Of Foreclosure
An alternative to foreclosure is a "deed in lieu of foreclosure." In this scenario, the borrower turns the house over to the lender and walks away without owing anything. A deed in lieu of foreclosure offers several advantages to both the borrower and the lender. The main advantage to the borrower is that it immediately releases him or her from most or all of the personal debt associated with the defaulted loan. The borrower also avoids a foreclosure proceeding and may receive more generous terms than he or she would in a formal foreclosure. Advantages to a lender include a reduction in the time and cost of repossessing the property.
However, the lender usually will not proceed with a deed in lieu of foreclosure if the outstanding debt on the property exceeds the current fair market value of the property. So in this market, this option probably won't be available to most homeowners who are upside down.

How Does a Deed in Lieu Of Foreclosure Affect the Borrower's Credit?
Most lenders report a deed in lieu of foreclosure as a foreclosure, so the credit scores will carry the same serious affect as if it were an actual foreclosure. However, what most borrowers don't know is that they can negotiate with the lender to report it differently in return for turning over the deed and avoiding foreclosure costs.

Many lenders will say that they cannot change the reporting status, but they can. Here are their options in preferred order:

• Paid As Agreed - Credit scores will have already dropped over 100 points due to default in payments, however, if reported as Paid As Agreed, the borrower will be able to purchase another home in a shorter time period.

• Paid Settlement - Credit scores could drop up to 150 points.
The item will remain on the credit report for 7 years from the completion date or the settlement date.

Fannie Mae Waiting Period
The selling guideline from Fannie Mae has not changed. It is a 4 year period of how much time must elapse after a deed in lieu of foreclosure proceeding is completed.
The exception for extenuating circumstances also remains the same at 2 years.

Short Sale (aka Pre-Foreclosure Sale)
In my opinion, the best option is a short sale, which occurs when a bank or mortgage lender agrees to discount a loan balance, due to an economic hardship on the part of the home owner. The home owner sells the mortgaged property for less than the outstanding balance of the loan, and turns over the proceeds of the sale to the lender in full satisfaction of the debt. In such instances, the lender would have the right to approve or disapprove a proposed sale.

A short sale is typically executed to prevent a home foreclosure. Lenders often choose to allow a short sale if they believe that it will result in a smaller financial loss than foreclosing. For the home owners, the advantages include avoidance of having foreclosures on their credit histories. Additionally, a short sale is typically faster and less expensive than a foreclosure.

Junior lien holders, such as holders of second mortgages, HELOC lenders, and homeowner associations (special assessment liens), may also need to approve the short sale. Frequent objectors to short sales include those who hold tax liens (income, estate or corporate franchise tax - as opposed to real property taxes, which have priority even unrecorded) and mechanic's lien holders. It is possible for junior lien holders to prevent the short sale.

While it is frequently common for a lender to forgive the balance of the loan in question, it is unlikely that a lien holder that is not a mortgagee will forgive any of their balance. Further, it is common for a lender to omit updating the zero balance and settlement option on the mortgagor's credit report, or even flat-out refuse to do so "due to their financial loss."

The Mortgage Forgiveness Debt Relief Act Of 2007
When the lender decides to forgive all or a portion of the debt and accept less, the forgiven amount is considered as income for the borrower, like with a foreclosure, leaving it open to be taxed. However, The Mortgage Forgiveness Debt Relief Act of 2007 contains amendments to remove such tax liability, allowing the borrower and lender to work together to find a solution beneficial to both parties.

How Does a Short Sale Affect the Borrower's Credit?
The few reported short sales that I have seen have appeared as "Paid Settlements" on a mortgage account. In the wake of the current mortgage crisis, short sales are becoming extremely common, but legislation has not caught up with the tidal wave and there is no law on the books relating to them to date. As a result, there is an opportunity for the borrower to negotiate credit reporting with the lender. I've seen several successful negotiations, so be sure to let your borrower know that it is possible.

My view - a short sale proves that the borrower is exhausting every effort to pay the loan. The borrower has willingly committed to taking on months of emotional and physical stress in a good-faith effort to sell the property to maintain a good relationship with that lender. Most likely, the reason they can't afford their current mortgage is because they were in an adjustable product and their mortgage payment has doubled. That doesn't mean that they can't afford a different loan program with a lower payment. Which leads me to wonder what the incentive is for lenders not to negotiate with the borrower on how the item is reported to the bureaus. All they would be doing is cutting off a pretty substantial future income stream if they put these types of borrowers out of the market for two years. In that light, negotiation for a non-report on short sales is well worth it. A short sale can ding a FICO score as little as 25 points to a maximum of 125. Depending upon how much (or how little) the FICO score was affected will determine how soon the borrower/seller can get back into the housing market.

Here are their options in preferred order:

• Paid As Agreed - Won't hurt the score at all as long as the borrower has kept payments current.
Unrated - May drop a few points.
• Paid Settlement - Credit score will drop 50-150 points.
• If reported, the item will remain on the credit report for 7 years from the completion date or the settlement date.

Fannie Mae Waiting Period
A few weeks ago, Fannie Mae was going to consider a short sale the same as a foreclosure, however, the current selling guideline from Fannie Mae has reduced the amount of time that must elapse after a short sale to 2 years from the date the short sale is completed, not started.
There is no exception for extenuating circumstances.

Bankruptcy Mortgage Relief
Currently, bankruptcy offers very limited protection to a homeowner who is upside down with their payments. The borrower can file a Chapter 7 which, depending on the state bankruptcy law, will most likely require him or her to surrender the property to the bankruptcy court, or file a Chapter 13 debt repayment plan to spread out prior delinquent payments over a number of months or years in the future. However, no bankruptcy proceeding can modify the terms of an existing home loan on a principal residence. Legislation is being proposed to Congress that would allow bankruptcy judges to modify the terms of an existing mortgage loan. I would not hold my breath. It could take years to make further substantial changes to the bankruptcy laws.

How Does a Bankruptcy Affect the Borrower's Credit?
My advice on this is to avoid Bankruptcy at all costs unless, your borrower is upside down on everything. Not only have the new bankruptcy filing requirements become more difficult and more costly, a public record will wreak havoc on credit scores and could stop someone from being hired or renting a place to live.
A Chapter 7 Bankruptcy will remain on the report for 10 years, and a Chapter 13 will remain for 7 years. The point loss could be from 100-350 points, depending on how many points the borrower has to lose in this factor.

Fannie Mae Waiting Period
The selling guideline from Fannie Mae has not changed. It is a 4 year period of how much time must elapse after a Chapter 7 Bankruptcy. The 4 year period can start on either the discharge or dismissal date.
The exception for extenuating circumstances is 2 years.
Again, the selling guideline from Fannie Mae has not changed. It is a 2 year period of how much time must elapse after a Chapter 13 Bankruptcy. The 2 year period can start on either the discharge or dismissal date.
In the case of multiple bankruptcies, the current selling guidelines that have just been added require a 5 year waiting period from the most recent discharge or dismissal date.
The exception for extenuating circumstances in the case of multiple bankruptcies is a 3 year waiting period from the most recent discharge or dismissal date.

What's the Good News?
Aging Out: In all instances above where I reference how many points will be lost in each scenario, it is important to make sure your clients understand that over time, all derogatory accounts age out. This means, the older the account becomes, the less it will hurt their credit scores.

7 Year Reporting Period: The law states that derogatory items "can be" reported for 7-10 years as outlined above. It doesn't state that they "MUST BE.' My experience proves over and over again that there is no need to wait out the 7 years. You don't have to. You can start seeking early removal of the item by disputing to the credit bureaus that are reporting it. In many instances, after 3-4 years, the item will be deleted.

Foreclosures climb 136 percent in Utah

2008-10-23T23:44:00.000-06:00

As reported on KSL October 23, a new report shows Utah has the 10th highest rate of foreclosure filings in the nation. The report released by RealtyTrac Inc. also shows that the number of Utahns facing foreclosures rose 136 percent compared to the same time last year.

By the end of the year, RealtyTrac Inc. expects that over a million bank-owned homes will be sitting in the market. That's a third of all properties for sale in the U.S. RealtyTrac Inc. says 4,867 Utahns received at least one foreclosure-related notice during the third quarter.

http://www.ksl.com/?nid=148&sid=4600308

2008-10-21T23:55:00.000-06:00

KSL reported this story October 21, 2008

"We've increased 13 percent, and I think that's a good sign that our sales are starting to improve," said Jillinda Bowers, president of the Salt Lake Board of Realtors.

Salt Lake County's average price has dropped 12 percent from the peak 16 months ago. The big stall right now is in expensive homes. Cheaper homes are selling.

http://www.ksl.com/?nid=148&sid=4587004

Foreclosure auction fails due to too low of bids

2008-10-14T19:19:00.000-06:00

"The bids that came in on those properties were between 20 and 30 percent on the dollar, which is the reason we declined the offers. They were just way too low," explained Alan Thompson, senior vice president of Centennial Bank.

Thompson says the bank appraised its lots 30 to 90 days before the auction, so the valuation was recent and, they believe, fair.

But EN Auctioneering, the group who put on the auction, says banks are being very cautious and pricing these homes way too high. "There are many issues involved; the bailout could be one," said Ryan Nelson, with EN Auctioneering.

Eric Nelson, founder of Eric Nelson Auctioneering, says buyers' bids totaling about $7.5 million were rejected because of indecision among nervous lenders, the pending bailout and last week's stock market plunge. He said apparently banks don't want 60 cents on the dollar when the government may give them 75 or 80 cents through the bailout.http://www.ksl.com/?nid=148&sid=4522597

Also reported in the Daily Herald and the Salt Lake Tribune.

Failure of a Speculator - Parody

2008-10-01T17:19:00.000-06:00

Utah County September 2008 Stats - From UCAR's CEO

2008-09-30T16:18:00.000-06:00

1- The market started to change dramatically at this time last year. Sales in August 2007 reached 575 units, but just one month later dropped to 374 in September--a 35% decline.This September, 433 units sold; this represents a 16% increase from last year. I'm pleased that the trend we have seen since December 2007 of either an increase in number of sales or percent improvement continued in September. While the total number of units sold dropped this year from 473 in August to 433 in September, the percentage compared to last year improved
dramatically.
2- September is the first month we have seen a measureable drop in home prices. September's median price of $207,500 is down 6.5% from 2007's price of $222,000. This is still significantly below the double-digit price reduction that many economists and pundits have been predicting and hoping for. This $14,500 price drop is another indication that price and location will continue to be major factors in real estate transactions this winter. Our relative price stability will continue to bring buyers into the market.
3- While home sales rose from 374 last year to 433 this year, condo sales continued to trail last year. September condo sales reached 73 units, down from last September's 92 sales…a 20.6% reduction. The September 2008 condo price of $157,000 also fell, but only 5% compared to
last year.
4- The number of active listings fell this month from 5,323 in September 2007 to 4,775 this year. Condo listings also fell from 798 last year to 641 in 2008.
5- Homes priced above $500,000 continued to perform as sales of 18 units in September 2008 outpaced last year's sales of 17 units.

Summary:
The Utah County market continues to defy many economists who predicted dramatic reductions in price and sales, but we continue to show relative strength in both categories. While obviously stating a 16% increase above last year's sales does not give a true reflection of our market, neither do statements of doom and gloom. We continue to enjoy a robust buyers market…and with the uncertainty on Wall Street we should continue to bring in wise buyers and investors looking for a deal and a stable place to invest. Keep in mind that we enjoy strong housing demand, job and wage growth, and competitive loan rates. All these factors indicate that our local market is doing well. You should continue to be the trusted professional your clients need and want, and together with UCAR, we will continue to make a difference one family at a time.

Utah Foreclosures on the Rise - KSL TV

2008-09-12T23:34:00.000-06:00

Presented on KSL Sept 25, 2008, This article identifies workshops to assist struggling homeowners. The stats are interesting and the necessity of getting help is well identified here.

http://www.ksl.com/?nid=148&sid=4361233

Slow Growth Ahead

2001-09-24T05:49:00.000-06:00

Data releases over the past month leave no doubt that economic growth has slowed to a snail’s pace. Second quarter GDP growth was revised down to a 1.6% annual rate. Orders for durable goods other than transportation equipment fell sharply, and included an abrupt decline in a critical component—orders for nondefense capital goods other than aircraft. Existing home sales plummeted, falling to the lowest level since the series began in 1999, and the ISM index for non-manufacturing registered an unexpected decline in August.

Fears that a double-dip recession might be in the immediate offing were allayed, however, by the August employment report. Jobs were created in the private sector for the 8th consecutive month, and employment levels for the previous two months were revised up significantly. But job creation was insufficient to prevent a rise in the unemployment rate, and unless economic growth picks up, further increases in unemployment are likely.

A rate of growth well below the economy’s long-term potential rate of expansion (probably around 2-1/2 %) is worrisome not just because it implies rising unemployment, but because an unexpected shock occurring in such an environment could send the economy reeling. While there is nothing of that kind on the horizon at the moment, the economy will remain in a precarious position until something comes along to stimulate more vigorous expansion.

Fed Chairman Ben Bernanke set forth the Fed’s expectations for the economic outlook in a recent speech at Jackson Hole. Acknowledging that near-term growth would probably be at “… a relatively modest pace,” Bernanke held out hope for a pickup in activity next year. He noted that financial conditions remain supportive; banks are a bit more willing to lend; consumer balance sheets are improving, as are budgets of state and local governments; and business investment in equipment and software should continue to provide support for economic growth. The case for the economy emerging from the current soft patch next year is quite plausible, and this month’s forecast anticipates a resumption of trend-like growth in 2011. Doubts are bound to remain, however, until that forecast becomes a reality.

The Obama Administration is scrambling to find something that will encourage stronger growth, particularly something that will improve the environment for job creation. Increasingly, it appears that all of the Bush tax cuts are likely to be extended, despite the Administration’s vocal opposition. A temporary payroll tax holiday is an option discussed in the press that would offer hope of stimulating hiring, but would increase the federal deficit in the near term and raise concerns about the long-run solvency of the Social Security system. Given the public’s concerns about the size of government and the growing burden of debt, fiscal policy appears to be hamstrung; if the economy needs help, it will have to come principally from the Federal Reserve.

Bernanke’s speech at Jackson Hole indicated that the Fed has been weighing the available options to invigorate the economy should additional stimulus be needed. He dismissed the notion of raising the Fed’s medium-term inflation target, and expressed doubts about the efficacy of lowering the interest rate paid on excess reserves. The live options are modifying the “extended period” language and expanding the Fed’s balance sheet by purchasing long-term securities.

The bar for the Fed to begin an aggressive use of quantitative easing will probably be set relatively high. Bernanke’s speech argues that the success the Fed achieved in reducing long-term interest rates in the first use of quantitative easing stemmed from the fact that the Fed’s purchases were large enough to reduce the outstanding stock of long-term issues available to private investors. Accordingly. lowering long-term rates further would likely require a willingness to resume purchases on a vast scale--buying $1 trillion or more in long-term securities and increasing the size of the Fed’s balance sheet to more than $3 trillion.

Such a policy action would be difficult for many Federal Open Market Committee (FOMC) members to swallow. As Bernanke acknowledged, the impact of another round of quantitative easing on long-term interest rates, and through that route on aggregate demand, is uncertain. Conditions in financial markets have improved markedly since the first round of quantitative easing was initiated in late 2008, hence the effects of a new round on long-term interest rates might be considerably less. The uncertain benefits have to be balanced against the possible costs of reducing the confidence of the public in the Fed’s ability to transition back to a normal posture of monetary policy without triggering a new round of inflation and rising inflation expectations.

Modifying its communications strategy—that is, changing the “extended period” language in ways that encourage investors to postpone the expected date of the first tightening of monetary policy—would be easier for most members of the FOMC to accept. Communicating its intentions to markets is, after all, an integral part of conventional monetary policy. It has been used by the Fed and by other central banks around the world for many years, and is widely accepted by FOMC members as an appropriate tool for the Fed to employ.

If the economy continues to show signs of growing during the second half of this year at the relatively modest pace that Chairman Bernanke expects, a change in the “extended period” language will probably be on the table. What form the change in language might take is hard to guess. One possibility would be to promise to keep the funds rate unchanged on the condition that the inflation rate stays below a specific numerical target.

Either of the two options the Fed might employ to help stimulate the economy would work by lowering long-term interest rates. But these interest rates are now as low as they have been since the early 1960s, and whether still lower rates would encourage businesses and individuals to step up their rate of borrowing and spending is an open question. But this is the only ammunition remaining to the Fed and will have to be used aggressively if the economy does not recover on its own.

© 2010 Mortgage Bankers Association

Mortgage Bankers Association Economic Commentary (July 2010)

2001-07-20T06:18:00.000-06:00

Slower Growth Ahead

Incoming data over the past month or two have made for sobering reading. Data from the housing industry have revealed huge declines in housing sales and starts, building permits, and applications for loans to purchase homes. While some post tax credit slump was to be expected, more was borrowed from the future than had been bargained for. The manufacturing industry, which earlier had been growing rapidly, is cooling off—the ISM index for that industry fell in June. Consumers have lost confidence, and car sales have tailed off. Reports from abroad indicate a slowdown in the rate of growth in industrial activity.

Signs of slowing growth at home were confirmed by the employment report for June. Growth in private payroll employment averaged 200 thousand a month in March and April, but then subsided to an average of 58 thousand in May and June. While the manufacturing sector added a small number of jobs in June, the average length of the work week fell by one-half an hour. Declines of that magnitude are quite unusual, typically seen only in recessions.

There seems little doubt that real GDP growth is decelerating significantly, probably to a second half pace of around 2-1/2%, following increases of 2.7% at an annual rate in the first quarter and an expected rise of close to 3% in the second. Slowdowns in the course of an economic recovery at not at all uncommon. To cite a few examples: economic growth during the recovery from the 1953-54 recession was unusually erratic—there were three quarters when real GDP showed an outright decline during the course of the expansion. During the recovery from the recession of 1973-75, there was one quarter of negative growth and five quarters in which real GDP rose by less than 2% at an annual rate. The recovery from the 2001 recession started slowly and finally gained momentum, but there were four quarters of growth below 2% before more robust growth kicked in.

There are reasons to suspect that growth might run into headwinds as the year goes on. Rising inventory investment, always a temporary source of stimulus, accounted for more than half of the growth in real GDP during the first three quarters of recovery. Support for growth from this sector is bound to wane at some point. Similarly, the impact of the fiscal stimulus package passed last year is widely expected to wane in the latter half of 2010. Credit availability to small businesses and consumers remains constrained, impeding full recovery. The European debt crisis is likely to take a toll on the U.S. economy—markets for exports have been affected negatively; stock prices have declined, and credit spreads have widened. Inflows of capital to the U.S. stemming from the European debt crisis have pushed down Treasury rates considerably, and that has led to lower mortgage rates. But the benefits of lower long-term Treasury rates are not flowing through as they usually do to other private credit costs.

The apparent slowing of real growth has raised anew concerns that the economy might be headed for a double-dip recession. While such a development cannot be ruled out, the probability of its occurrence still seems relatively low. The more likely outcome is that a period of subdued growth will be followed by resumption of somewhat stronger expansion next year. The U.S. economy has repeatedly demonstrated its resiliency to shocks. Reflecting large productivity gains, corporate profits have risen sharply since the end of 2008. That should help to bolster stock prices as the year goes on. Businesses have been investing aggressively in equipment and software, and data on new orders and order backlogs suggest continuation of that trend. The air pocket in housing caused by the tax credit will surely be behind us by year end, if not earlier, and housing activity will then resume a moderate pace of expansion. Inflation remains exceptionally low, a favorable factor for economic growth. Still, there are probably more downside than upside risks to a forecast of about 2-1/2% growth in the second half of this year, followed by slight improvement thereafter.

The drop in weekly earnings in the June report was another disconcerting reminder of just how weak this job market remains. Moreover, non-financial corporations have stockpiled nearly two trillion in cash, funds that could have been used to invest in new productive capacity, or to hire new workers. Business executives cite significant uncertainties. Increasing regulatory burdens, forceful but unpredictable government actions, and a slowing economy all make it difficult for businesses to plan and spend for the future.

What can be done if the worst happens? The first line of defense against economic weakness has typically been a monetary policy action in the form of a reduction in the federal funds rate. That rate, however, is for practical purposes already at the zero bound. The Fed could, of course, reactivate its asset purchase program, a step that Fed officials would be very reluctant to take absent clear signs of an economic downturn that threatened to get worse. Whether use of that policy instrument would be sufficient to stem a downward spiral is debatable. The yield on the 10-year Treasury has already fallen to levels not seen since the 1950s, and whether further declines generated by Fed purchases of long-term Treasuries would pass through to rates on corporate debt is uncertain. Purchases of agency debt or mortgage-backed securities might push mortgage rates somewhat lower, but the bang for the buck would certainly be a lot less than it was the first time around—since the spread between the 10-year Treasury rate and the conforming mortgage rate, around 250 basis points at the time, was far above the longer run average of about 170 basis points. Today, the spread is well below the long-term average.

Activist fiscal policy, i.e., yet another round of stimulus, could be used again if the Congress were willing to support an increase in the deficit, an unlikely outcome in the current political climate. A permanent, across the board, income tax cut of substantial magnitude would help to invigorate spending by consumers and businesses, but it would reduce the future tax base at a time when long-run projections of federal outlays and receipts point strongly to the need both to cut expenditures and raise additional revenues. A temporary tax cut, for example, extending the Bush tax cuts for another year or two, would be beneficial, but would have far less effect on aggregate demand than tax cuts perceived to be permanent, since the beneficiaries would expect their taxes to increase again and would therefore be reluctant to make major changes in their spending habits. Another round of expenditure increases by the federal government funded by additional borrowing could increase aggregate demand. Unless long-term interest rates rose in response to the larger outlays, an unlikely event in a weakly growing, low-inflation economy with short-term interest rates pegged at near zero levels, increased governmental outlays would lead to higher output and stronger job creation. But the mood of the public is so strongly opposed to any deficit-widening measures that Congress would be understandably reluctant to go in that direction.

PMI Appreciation Video

2001-05-02T09:32:00.004-06:00

To my PMI Family:

Those of you who have tried to make a video with coherent, sincere content & minimal ramblings can relate that it is hard and seems impersonable at times...

Please accept this video with the intent to tell you of my hopes to work with you and those you know in the near future. I enjoy serving others in Residential real estate (single family, multi-family, lots/land, etc) & Commercial real estate and have over 10 years of experience.

If you know anyone needing help in buying or selling real estate please email, text, or call me. I hope you will trust and rely on me to be of service in any way possible and I promise to give the best service and attention to their needs.

Thank you for making my days at PMI enjoyable.

Warm regards,

Dallin Nelson

(other testimonials can be found on my YouTube UtahSummitGroup channel)

A Little Humor - Timothy Geithner

2000-02-23T23:05:00.000-07:00

Home Crisis Investigation

The Daily Show With Jon Stewart

Mon - Thurs 11p / 10c

www.thedailyshow.com

Daily Show
Full Episodes

Political Humor

Health Care Crisis