Bank Foreclosures Information

The issue of bank foreclosed listings in California was among issues addressed by seven mortgage-related laws signed this week by Governor Arnold Schwarzenegger.

The seven bills all provided additional protections for consumers, particularly homeowners.

One of the bills signed was AB 260, which aimed to protect mortgage borrowers from brokers or lenders who entice prospective home buyers from taking out risky home loans and buying higher-priced homes. This is to prevent a repeat of bank foreclosures that arose over the past years and months.

The bill, proposed by Assemblyman Ted Lieu, will take effect on January 1 next year. It will ban lenders from offering pay option flexible-rate mortgage loans, which allow borrowers to make very low monthly payments in the initial years and then enable lenders to increase to higher interest rates and much higher monthly payments after 3 to 5 years of low payments.

AB 260 also limits prepayment fees to a maximum of 2 percent of the loan and enables state officials to implement federal lending laws.

Last year, a similar legislation was vetoed by the governor because of pressure from the California Mortgage Association, California Association of Realtors and the California Association of Mortgage Brokers. But Assemblyman Lieu was able to campaign effectively for his cause, arguing that his bill will cut down the rising number of homes going into bank foreclosed listings.

Lieu cited foreclosure statistics from a real estate research firm which indicated that more than 92,300 California mortgage borrowers were hit with default and foreclosure notices last August.

Another bill signed was the Buyer’s Choice Act, which was proposed by Assemblywoman Cathleen Galgiani. This bill aims to enable buyers of foreclosed properties in California to choose escrow firms operating in local areas to handle their closings. Galgiani claimed that lenders have been using their affiliated escrow firms to handle closings, eliminating escrow opportunities for local escrow firms. Galgiani also said that escrow entities based in Southern California are being used for closings in Northern California, making work more difficult for brokers and real estate agents in Northern California.

The other bills signed include SB 36, a bill proposed by Senator Ron Calderon to establish licensing requirements for home loan originators, and AB 1160, a bill proposed by Assemblyman Paul Fong to require lenders to provide borrowers with mortgage documents written in the language used during verbal negotiations concerning the mortgage. This bill aims to help non-native English speakers have a thorough understanding of their mortgages and help them save their properties from bank foreclosed listings.

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The commercial real estate market in California is currently taking a beating from the foreclosure crisis that has been pummeling the residential real estate market for several years now. Adding to the growing number of bank foreclosed properties in the state are Maguire Properties’ seven office buildings located in Los Angeles and Orange County.

Maguire Properties, one of the biggest real estate investment trusts (REIT) in the country, is compared to a heavily indebted homeowner who is trying to renegotiate troubled loans and deal with foreclosure.

Because of its inability to pay its mortgage, the Los Angeles-based REIT decided to turn over seven office buildings to lenders. This is the latest development in the company’s efforts to strengthen its balance sheet, which include renegotiating terms of another major loan.

Since the start of the housing market collapse in 2007, investors have been pondering when the foreclosure crisis would cross over from the residential real estate market to the commercial real estate market.

Market data showed that office buildings with combined worth of $127 billion are in danger of foreclosure because their owners are deep in debt in the current market that makes recovery an impossible task to achieve.

Industry analysts said that Maguire Properties has $4.4 billion assets and liabilities of $4.6 billion. They said that the REIT’s problems stem from its acquisition of office buildings worth $3 billion from Blackstone Group in 2007. During that time, these office buildings were occupied by mortgage brokers mostly from Orange County.

They explained that the acquisition deal was done during the peak of the housing market. And when the market collapsed and lending went kaput, vacancies in Maguire Properties buildings rose.

In the second quarter of this year, the company’s revenues were pegged at $135 million. It took charge-offs on its office properties thereby producing shareholder losses amounting to $384 million. For the same period last year, Maguire Properties reported only $110 million losses.

The company’s operational funds amounted to $339.7 million, a loss for $7.10 a share. A year earlier, the company took a $56.4 million loss or $1.18 a share.

Maguire Properties was established by Robert Maguire III, a major developer of downtown skyscrapers in Los Angeles. He tried but failed to raise funds for the company by taking it private. He resigned as the company’s chief executive office last May.

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Distressed homeowners who are facing the danger of seeing their properties on bank foreclosure listings may become desperate in their desire to save their homes. This desperation drove them to accept any offer of help that could save their properties from foreclosures. And before they even know what hit them, they have lost their money and sometimes their properties to fraudsters.

Fraud investigator Glenn Gulley, whose job requires him to go after con artists who defrauded distressed homes, said that there is nothing more satisfying than going after fraudsters and making them pay for their crimes.

Troubled homeowners in San Joaquin Valley, California are lucky to have people like Gulley who are committed on preventing unscrupulous people from taking advantage of homeowners facing bank foreclosure listings.

Now, the arm of the law gets longer in the valley as the Federal Bureau of Investigation (FBI), Internal Revenue Service and the Secret Service joined the local law enforcement in going after mortgage loan fraudsters.

Gulley and his team will benefit from the federal partnership by having access to sophisticated technology and extensive law enforcement contacts. Gulley and his fellow investigator Mark Smith were named U.S. marshals and given authority to process subpoenas and make arrest.

According to District Attorney Birgit Fladager of Stanislaus County, fraudulent companies offering to help homeowners avoid bank foreclosure listings are becoming rampant throughout the Central Valley. Fladager explained that unscrupulous people do not limit their illegal activities in just one place so it is better to deal with the problem on a global level.

As foreclosure filings continue to rise unabated, more fraudulent activities in the real estate market are expected. Nationwide, an estimated $6 billion annually is lost to foreclosure prevention fraud. According to the FBI, it registered 63,173 fraudulent activities in 2008. And last month, the FBI logged about 40,901 fraudulent activities.

The boom in the real estate market and its subsequent collapse attracted con artists who specialized in flipping properties and victimizing lenders and homeowners. Both Gulley and Smith are handling cases of bank foreclosure listings prevention fraud, in addition to bankruptcy fraud and Ponzi schemes.

On its part, the FBI is investigating bank foreclosure listings prevention fraud because mortgage lending and the real estate market have significant influence on the country’s economy.

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Toxic wastes may be present in some bank owned homes sale and this possibility has prompted the California Department of Toxic Substances Control to develop the cheat sheet, entitled “Managing Hazardous Waste at Foreclosed Properties.”

The guidelines will help potential buyers of distressed properties how to dispose certain toxic waste or potentially hazardous materials that they may discover.

Some of the hazardous items that may be left behind by owners of bank owned homes sale are common household chemicals, electronic devices, aerosol cans, batteries and fluorescent.

It is illegal in the United States to dispose of these hazardous wastes in landfills, private or public drains and household trash bins because they can pose danger to people and the environment. Under the California law, improper disposal of hazardous waste may result in fines for a maximum of $25,000 daily per incident or imprisonment.

The state Department of Toxic Substances Control advises buyers of bank owned homes sale to use these hazardous items such as common household chemicals, old appliances and electronics. According to the agency, most household chemicals left behind by previous owners can still be used. Or, they can donate the household chemicals to businesses or charities.

Furthermore, buyers can use the appliances and electronics if they are still in working condition. Using them may prove to be cost effective than self-managing these hazardous items as wastes.

The department pointed out that homebuyers may qualify for Conditionally Exempt Small Quantity Generator (CESG) if they generate less than 100 kilograms of potentially hazardous waste, about 27 gallons of liquid or a dry weight total of 220 pounds.

To qualify, homebuyers should get an Environmental Protection Identification number. Homebuyers have also the option to self-transport hazardous items to the nearest collection facility in their areas without registering as hazardous waste transporter.

Meanwhile, the department also recommended that homebuyers hire hazardous waste transporters. For homeowners who have a large of volume of hazardous waste and they think that they could not handle them, the department has a Registered Hazardous Waste Transporter Database.

The database is a list of for-hire hazardous waste transporter, registered and accredited by the department to haul dangerous items to a certified facility.

Homebuyers are required to submit an EPA ID number and a hazardous waste manifest to transporters.

Lastly, the department suggests that homeowners, especially those who invested in many bank owned homes sale that generate hazardous items, should consider becoming waste transporters themselves. They can register with the California Highway Patrol and follow requirements for packaging, shipping and marketing hazardous wastes.

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Lender Orson Benn left a lot of homes into waste after writing a $349 million loan, along with his partner Argent Mortgage, for 2,000 assets. Nationwide, around 600 of these apartments, suburban ranches and town houses are in foreclosure. Fifty percent of these homes are in West Kendall, ten percent in Miami and five percent in Hialeah and Miami. Hopefully the massive foreclosure cases do not occur escalate further.

It is not yet sure if Benn’s mortgages are untruthful and tricky but the Miami Herald saw several related questionable transactions.

According to records, many houses were dropped even without handing off money and instead used quitclaim deeds. Quitclaims are formal declarations that remove legal liability. That was already a bad sign for the industry for quitclaim deed is considered the best choice for frauds.

Then it was found that 6 percent of the loans went to the hands of industry people. There were some who took on multiple loans, but are now also in foreclosure.

Naïve renters do not know that Argent and Benn are now facing financial difficulties and are not capable of lending money for a home. Like Dayami Reyes who after signing a six-month loan found out that her home is actually in foreclosure.

These foreclosures do not only affect the homeowners, but also the neighborhood. Foreclosure generally brings home prices lower and crime rates higher.

Some renters left their homes trashed and inhabitable. The used to be $300,000 home may be left in a ruin. The eyesores of overgrowing loans and dilapidated houses bring down home values in the neighborhood, leaving others to another foreclosure.

Then, these forsaken properties also attract drug lords, prostitutes and homeless squatters. Poor neighbors troubled by the foreclosure of another.

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Last September, the California Senate Bill 137 was passed as response to the worsening problem in the state’s housing industry. The said bill included a provision that requires lenders to contact the distressed homeowner several times and wait for another 30 days after initial contact before filing for foreclosure.

After its implementation, ForeclosureRadar.com reported a 61.8 percent decline in default notices and a 47.3 percent drop in trustee sales notices.

Although this should be interpreted as good news, the website does not consider it as such. Instead, it believes that it has only made it even more difficult to understand and determine the real state of the local housing industry.

For them, the long term effect of the said bill is to only delay the foreclosure process and not really provide troubled borrowers with genuine assistance.

To make matters worse, the new legislation also encourages loan modification. The problem is that most of the troubled mortgages show negative equities which will make it close to impossible for lenders to change any terms of the mortgage.

The only way a loan modification can work is if the lender agrees to significantly reduce the principal balance or lower the interest rates – both of which pose considerable risks to the lenders. If the lender agrees, it could encourage the other non-defaulting borrowers to default just so they could enjoy lower mortgage rates or principal reduction.

For homeowners facing foreclosure in California, it is probably best for you to consider availing of the mortgage relief program sponsored by the government. There are certain requirements you mist meet before qualifying but if you do qualify, you will be able to shift your existing mortgage to a government-backed housing loan, which has a fixed interest rate.

Check with your local county office for more details about this program.

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Although Jonathan Stein specialized in cases involving consumer debt, he became quite an expert when national foreclosure rate soared to record levels. Because of his expertise in the field of foreclosure, Stein was named by Business Week as one of the top foreclosure experts in the nation.

Working with Awo.com, Business Week made it possible for consumers to rate foreclosure attorneys based on number of judgments won, awards received and experience.

For Stein, the foreclosure crisis has been a result of two things: homeowners who were lead to believe that they were getting a good mortgage deal and homeowners who lack financial savvy to realize that they could not afford their mortgage payments.

During the course of his helping distressed homeowners work out their mortgage problems, he noticed that lenders have become more and more open to negotiations. Because of this, it has become easier for him to find a long term solution to his clients’ mortgage problems.

Most of the homeowners who seek Stein’s assistance are those in the position to work through their mortgage problems and only require some guidance. For him, it certainly made his job easier when homeowners are eager to solve their problems and avoid foreclosure.

Stein usually advice troubled homeowners to face their foreclosure worries head on. If the problem is addressed early, the likelihood that it will be resolved is great. As soon as you miss a mortgage payment, you must contact your lender immediately and discuss alternative payment options. He also recommends that homeowners be realistic about the solution.

If selling the distressed property is the best solution, Stein believes that this is better than walking away. Clients who opted for this solution received legal advice for him so that the short sale transaction will push through without any problems.

Receiving the recognition is certainly a rewarding experience for this attorney. For certain, Stein will even be more inspired and motivated to help troubled homeowners.

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Charles Peabody, an experienced banking sector analyst, suggested that California Bank Foreclosures may be getting to their low point, in turn starting an upward trend with tenants becoming home owners.

Buying at auctions in much of California does seem to make more fiscal sense then continuing to pay rent, resulting in an increase in property sales across the state. This, to the California Bank Foreclosures, is a positive.

Peabody went on to say that the most important thing is to get the home rates stable, which is what appears to be happening in California. According to him, California recovering will mean the country recovering, California being the highest populated state. He does see that the fall of property is at its fag end in California and does presume stability in prices in other places too.

In a report published recently he said that since California contained of twenty five percent stock of the housing market, stability in California Bank Foreclosures will have a deep impact on averages of the entire country.

With prices of mortgages getting considerably lower, property prices falling, more people are getting to own homes, thanks to distress sales. This has, in part seen an upward trend in sales of home, predicting stability by the end of the year.

He also says that the low point that he sees could well be a temporary one, unsure if the stability will stay. If the coming together of financials is to be expected, prices of homes have to see some sort of stability. Supply for the month of June in California was the way below the average of the remainder of the nation.

Citing an example of Lompoc, he said that a buyer could find a house worth 500,000 when the housing market was at its peak not so long back in the decade for as much as 250,000 in an auction. With rents in Lompoc in the vicinity of 1500 to 2000 and the annual costs of carrying a mortgage and taxes around 20,000; it could well be affordable to families whose gross annual incomes are around 80,000.

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