Fannie, Freddie Extend Foreclosure Eviction Freeze & Launch Rental Program

Fannie Mae and Freddie Mac put a freeze on foreclosure evictions through January 9, but have decided to extend the date to March.

In addition, Fannie and Freddie are launching a program that will allow qualified owner-ocupants and renters the chance to rent the property back from them on a month-to-month basis at market rental rates.

Fannie and Freddie are allowing renters in homes owned by Fannie Mae and Freddie Mac that have been foreclosed to remain in the property and enter into a month-to-month lease. The program also allows troubled owner-occupants who have been unable to modify their mortgage a chance to lease the property after foreclosure takes place.

Though I applaud Fannie and Freddie for launching the program that allows renters to stay in the property because their landlords (the owners/borrowers) have been foreclosed on (and I hope private lenders follow suit), I don't necessarily agree with allowing owner-occupants/borrowers to rent the property back after they've been foreclosed on.

That may sound harsh, but hear me out…

Many people are just walking away from the mortgages and homes because they don't feel like paying their mortgage and/or are upside down and don't want to wait for the market to rebound to get their money back - even though they're fully capable of paying their mortgage in full and on time. These people are abusing the system (imho).

Once these people hear that they can walk away from their $3000 per month mortgage and rent the property for $1500 per month without ever having to pack a box or move a thing, what do you think they'll do?

Unless Fannie and Freddie are strict and only give the very "qualified" borrowers/owner-occupants that chance, the program will get abused.

I would like hear what Fannie and Freddie mean by "qualified owner-occupants", something they haven't released details on yet. 

Source: MarketWatch.com and The Wall Street Journal (WJ.com)

Bloggers for Good Meet-Up & Charity Event

There's a new grass-roots group called "Bloggers for Good" that is having their first ever meet-up and charity event at O'Faolain's Irish Restaurant in Sterling, VA on February 19.

The meet-up will be a chill, fun way to grab some food and drinks and hang out with fellow local bloggers while raising money for charity. If you're a blogger in the area, I hope to see you there.

Here's the official press release including more details about the group and the event next month:

Bloggers for Good is a new, grass-roots group that leverages local blog communities to help people meet, greet, and give to a good cause. BFG events provide a chance to gather in a fun, social setting with a common interest and a bigger purpose.

BFG “meetups” are designed to be low-key, interesting, and enjoyable. There is no cover charge or advance signup required; bloggers, their readers, and the general public are encouraged to attend.

Some of the attendees include Erica Garman of the Washington Post’s Loudoun Extra website, author/blogger Tammi Marcoullier of the blog InsideOut, and Dan Sousa of LoudounPrepSports.

The first BFG meetup will take place on February 19, 2009 from 6-8 p.m. at O’Faolain’s Irish Restaurant in Sterling, VA. Proceeds will benefit Loudoun Interfaith Relief; including a percentage of restaurant sales, raffle sales, canned food collection and direct donations.

BFG events are primarily publicized through "word of blog." Supportive bloggers and their fans support the event by posting the BFG logo graphic/badge on their blogs, writing about the event, and attending the meetup.

With your help, another BFG event will be coming soon to a place near you!

For more information, visit www.BloggersforGood.org.

How to Apply for Loudoun Neighborhood Stabilization Program, List of Designated Areas

Loudoun County just released the name of the neighborhoods that qualify for the Neighborhood Stabilization Program (NSP). This is part of the NSP application process to, which Loudoun will submit to Virginia at the end of this month in hopes of securing at least $2 million to buy foreclosed properties for rehab.

The designated neighborhoods are (Adobe Reader required):

• Crestwood Hamlet
• Heritage Square 
• Hunington Ridge
• Sterling Park South (A)
• Sterling Park South (B)
• Sugarland Run

The application for the Neighborhood Stabilization Program requires Loudoun County to provide a list of qualified buyers that would be interested in purchasing a property in these designated neighborhoods.

If you are interested in purchasing a property in one of these designated neighborhoods through the Neighborhood Stabilization Program, contact me and have the following information ready:

1. Name
2. Address
3. Phone number
4. Pre-qualification letter from a lender (aka "approval letter" or "lender letter")

Important…

• The deadline for these applications is January 27, 2009 (the application from the county is due to Virginia at the end of the month and these applications need to be a part of that)
• Without the above information, the County will not process your application
• The information listed above is required by Loudoun County as well as Virginia - this is not a gimmick to get your information for my own records (I was asked by Loudoun County to be part of the group providing input into the program and application process)

My contact info: danilo.bogdanovic (at) gmail (dot) com - 703.582.6900 (cell)

Why Subprime Lenders Aren’t So Willing To Help

You've all probably heard the term "loan modifications" being thrown around a lot lately. It's being referred to by many as a way to help troubled borrowers and help soften the blow of the foreclosure and mortgage crisis. Many believe that if we lower the rate and/or change the terms on the subprime loans that are causing the very mess we're in, we'll be able to help borrowers while getting through this mess faster and with less destruction.

But not everyone feels the same way, especially the subprime lenders who gave out those sub-prime loans in the first place. After crunching the numbers, many subprime lenders feel that modifying subprime loans will cost them more than just letting those in trouble default and go into foreclosure.

Sound crazy?

Perhaps to you and I… But remember that these subprime lenders are businesses - they're concerned with their bottom line and shareholders, not the well-being of borrowers. If they have to sacrifice a few borrowers for the greater good of their bottom line, they will do so.

There's an excellent post by Rob Blake over at BiggerPockets.com on this topic. It reveals some recent Fed research and statistics that go along with the notion that subprime lenders would rather just let the inevitable (foreclosures) happen than help troubled borrowers.

Here's an excerpt:

So the researchers factored in the cost of the “accidental helping” of those who didn’t need it…which does occur when you do en mass loan modification ala Sheila Blair’s method. With this factored in, the subprime borrower now shows a negative “Net Gain” of -12.7%. The bank loses money even after reducing the principal amount…a no-win situation.

Combine this fact with the fact that 67% of subprime home-owner borrowers were going to pay in full without any help whatsoever, we get a reluctant banking industry when it comes to principal reduction loan mods.

Another argument Rob makes in his post is that "loan modifications" and other such help are actually delaying the inevitable and interfering with the natural course of the market. I believe that there is truth to that. But I share in his sentiment…

I say this with equal parts relief that the debate is over…and overwhelming sadness the only logical conclusion means, in this case, “help” turns into hindrance.

I really wanted it to go the other way…

Bottom lines…share holders…delaying the inevitable… All sad realities, but realities nevertheless.

Loudoun Foreclosure Article in Washington Post Features Danilo Bogdanovic

Yes, this is shameless self-promotion so cover your ears or click "back" if you'd like…

The Washington Post ran an article entitled "2008 Foreclosures Mostly in Sterling, Leesburg" both, online and in last Sunday's Loudoun Extra print edition. The article talks about how most of the foreclosures and bank-owned properties in Loudoun County are in Sterling and Leesburg.

The piece features myself as well as data and a foreclosure map discussed at the Dulles Area Association of Realtors Economic and Housing Forecast Summit, which took place last month. 

If you haven't seen it, here's the online version of the article over at Living in LoCo/LoudounExtra.com.

Do You Get a Home Inspection With a Foreclosure/Bank-Owned or Short-Sale Property?

You may be wondering if you're able to do a home inspection on a foreclosure/bank-owned or short-sale property prior to writing an offer or afterwards. Well, the answer is "no" and "maybe". The "no" is the easy part - the "maybe" is where it gets tricky.

The easy part…You definitely do not get to do a home inspection prior to submitting an offer. That's the case with most all residential real estate sales - foreclosures/bank-owned properties, short-sales, traditional resales and new construction.

The tricky part…you may or may not be allowed to do an inspection of the property after verbal or written ratification. Let me explain…

Some banks will let you do an inspection of the property within a certain time frame from the date of ratification, either written or verbal ratification. If that's the case, you can have the property inspected and if there are "material deficiencies" (e.g. cracked foundation, water damage, holes in the roof), you can give notice to the bank and walk-away from the contract. You must provide the inspection report noting the "material deficiences" along with the notice that you're walking away within the specified time frame.

But…

Some banks will not allow you to conduct an inspection nor have a clause that lets you pull out of the deal if you find something "wrong with the property" after the contract has been ratified. And no…you can't just ask your agent to "open the door for you" and let you waltz around the house doing an inspection anyway.

The contract will most likely state that the bank will give you "reasonable access to the property" and accessing the property for an inspection that is not agreed upon in the contract is not "reasonable". I'm not a lawyer, but I wouldn't be shocked to find out that the bank may view something like that as trespassing and possibly a breach of contract. (Thank goodness that I've never had to find that out for real)

How do you know if an inspection is allowed and whether there's a clause that protects you and leaves you a way out?

Have your agent find out for you or, if you're in Dual Agency, ask the listing agent (I do NOT recommend Dual Agency, but that's for another post). There are other ways to protect yourself such as putting certain language in your offer, but I won't get into details about that here on this post.

And make sure you find stuff like this out before you write an offer so you're not wasting your time nor getting stuck buying a property that ends up being a lot more hassle and work than you originally thought.

Happy New Year and Best Wishes for 2009!

Hope you have a Happy New Year and best wishes for 2009!

Is there Another Wave of Foreclosures Coming to Loudoun in 2009?

An unprecedented wave of foreclosures has hit Loudoun County as well as the rest of the nation over the past few years. The primary source? "Subprime" loans and their high rate of default.

But there may be a second wave of foreclosures coming to Loudoun County thanks to "Alt-A" and "Option ARM" loans. Though previously thought of as less risky than "subprime" loans, many are saying that they will have the same, if not higher, rate of default as "subprime" loans. Most of these "Alt-A" and "Option ARM" loans have not yet "reset", but will begin doing so early next year.

Note: "Alt-A" and "Option ARM" loans don't fall into the category of "subprime" loans and have been virtually unaccounted for nor talked about until recently.

Consider this…

If you put a "heat" map of the US showing the number of "subprime" loans next to a "heat" map of the US showing the number of foreclosures and/or bank-owned properties, they look almost identical. The higher the number of "subprime" loans, the higher the foreclosure rate and number of bank-owned properties.

Assuming that "Alt-A" and "Option ARM" loans have the same, if not higher, rate of default, I can't imagine we'd get anything but the same result when comparing "heat" maps of these types of loans with future Loudoun foreclosure rates.

That being said, let's look at a "heat" map of "Alt-A" and "Option ARM" loans in Virginia (click to enlarge):

 

As you can see, there is a high concentration of "Alt-A" and "Option ARM" loans in the Northern Virginia area, including Loudoun County.

According to a recent 60 Minute special about "Alt-A" and "Option ARM" loans (check out the video), they are just now starting to reset with the worse to come in the next year to three years. If this hypothesis holds true and no real help becomes available for troubled borrowers, according to the map above, Loudoun will see another wave of foreclosures coming on the market over the next few years.

At this point, the data is limited though it's on economist's radar screens and there should be more coming out soon. As more becomes available, I'll keep you posted.

Where Are All the Foreclosures in Loudoun County?

If you're curious as to where all the foreclosures in Loudoun County are located or which areas of Loudoun are most affected by foreclosures, check out the map below (click on map to enlarge)…

     

As you can see by the where most of the red dots are, the areas of Sterling and SE Leesburg are where most of the foreclosures are located. Incidentally, that's where some of the biggest drops in home values in Loudoun County have occurred.

Another thing the map shows is the total number of foreclosures in Loudoun County for the first, second and third quarters of 2008. Notice the increase in foreclosures as the year has progressed though the rate of increase has decreased.

Source: Presentation by Jack Brown, Economist for Loudoun County - DAAR Economic and Housing Forecast Summit

10 Things You Should Know Before Writing an Offer on a Foreclosure/Bank-Owned Property

Back in October, I wrote a post entitled, "Read This Before Writing an Offer on a Bank-Owned Property", which cited several things from a post over at Agent Genius. I'm writing a similar post today because some things have changed while others need to be reinforced. So here goes…

Foreclosures/bank-owned properties are quite different from traditional resales. There are many things to consider and understand before writing an offer on a foreclosure/bank-owned property. For starters, here are the top 10 things you should know before writing an offer on a foreclosure/bank-owned property (click on links for greater explanation):

1. Properties are sold "AS IS" - All properties are sold "AS IS" in their present condition. If you are using FHA financing, this may present a problem.
2. Multiple offers - If the bank receives multiple offers, buyers may be requested to submit their "highest, best and final offer" by a specific date and time. All offers received by that date will be presented at the same time.
3. Proof of Financing/Funds - All offers must have a lender letter with loan and approval amount indicated in the letter or proof of funds otherwise the bank will not respond.
4. Countrywide/GMAC-owned properties - If the property is being sold by Countrywide, you must also provide a lender letter from Countrywide prior to or along with your offer otherwise Countrywide will not review your offer. (The same goes for some properties being sold by GMAC - ask your agent to check the MRIS/MLS remarks section of the listing)
5. Delay of settlement - If the closing is delayed due to the buyer's inability to obtain financing after the financing contingency has been removed or if the buyer's lender delays settlement by not having the loan docs or funds ready by the settlement date, the bank will typically charge the buyer $100.00 per day.
6. Bank addendums - All bank-owned properties have their own set of addendums. They supercede the Regional Sales Contract or other such contracts. Sometimes, these addendums must be signed and submitted at the same time as the offer. Other times, the addendums will be provided to the buyer after their offer is accepted. Until all the addendums have been signed and delivered, the contract is typically not considered "ratified" and the bank may sometimes continue to market the property for sale.
7. Response time - Response time on foreclosures/bank-owned properties can vary from 24 hours to several days or a week. In the case of Freddie Mac or Fannie Mae owned properties, a verbal response may take several days while a written response may take several weeks.
8. "Sale of Home" contingency - Banks will not accept "Sale of Home" contingent contracts - no exceptions.
9. Title company - Banks will want to close at a title company of their choice and do not like to do "split settlements". The bank addendums that you must sign to purchase the property will state that you agree to using the title company the seller has chosen.
10. Inspection/utilities - If the property has been winterized and if the buyer is allowed to do an inspection, the buyer must ask for permission from the seller to dewinterize the property just prior to the inspection and rewinterized immediately after inspection. Not every bank allows an inspection so check on that before submitting an offer.

There are other nuances and things to be aware of, but these ten are some of the most important. If you have any questions, feel free to drop me a line - danilo.bogdanovic (at) gmail (dot) com or 703.582.6900 (cell).

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