Friday, May 29, 2009

1113 Page St - A Short Sale in Charlottesville

In an attempt to prevent a foreclosure in Charlottesville, the Avery Group is helping a gentleman do a short sale.  This short sale is located in the City of Charlottesville on 1113 Page Street.  We have obtained an offer and currently negotiating with the bank!

1113 Page St - A Short Sale in Charlottesville

In an attempt to prevent a foreclosure in Charlottesville, the Avery Group is helping a gentleman do a short sale.  This short sale is located in the City of Charlottesville on 1113 Page Street.  We have obtained an offer and currently negotiating with the bank!

Wednesday, May 27, 2009

Wednesday's bond market opened fairly flat following a slightly stronger than expected housing report. The stock markets are mixed with the Dow down 18 points and the Nasdaq up 6 points. The bond market is currently down 2/32, but we will see an increase in this morning's mortgage rates of approximately .375 of a discount point due to weakness in bonds late yesterday.

The only relevant economic news of the day came from the National Association of Realtors, who reported that home resales rose 2.9% last month. This was slightly higher than expected but the data has not had much of an impact on today's trading or mortgage rates.

Today's 5-year Treasury Note auction may influence bond trading and possibly mortgage rates if they are met with an exceptional demand or if there is lackluster interest from investors. Results of the sale will be posted at 1:00 PM ET, so any reaction will come during afternoon hours.

Tomorrow morning brings us the release of two relevant monthly reports. The more important of the two is April's Durable Goods Orders data. This report gives us an indication of manufacturing sector strength by tracking orders at U.S. factories for big-ticket products. It is currently expected to show an increase in new orders of approximately 0.5%. If this report shows a stronger than expected reading, we should see mortgage rates rise because it indicates manufacturing growth. If it shows a smaller than expected rise, we could see rates improve tomorrow morning.

April's New Home Sales data will be released late tomorrow morning. This report gives us a measurement of housing sector strength and future mortgage credit demand. However, it is actually the least important release of the week and probably will not have much of an impact on mortgage pricing. It is expected to show a small increase in sales.

The Labor Department will also give us last week's unemployment figures tomo rrow morning. However, this data likely will not influence mortgage rates unless it varies greatly from the 630,000 new claims that are expected.

If I were considering financing/refinancing a home, I would.... Lock if my closing was taking place within 7 days... Lock if my closing was taking place between 8 and 20 days... Float if my closing was taking place between 21 and 60 days... Float if my closing was taking place over 60 days from now... This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.
Wednesday's bond market opened fairly flat following a slightly stronger than expected housing report. The stock markets are mixed with the Dow down 18 points and the Nasdaq up 6 points. The bond market is currently down 2/32, but we will see an increase in this morning's mortgage rates of approximately .375 of a discount point due to weakness in bonds late yesterday.

The only relevant economic news of the day came from the National Association of Realtors, who reported that home resales rose 2.9% last month. This was slightly higher than expected but the data has not had much of an impact on today's trading or mortgage rates.

Today's 5-year Treasury Note auction may influence bond trading and possibly mortgage rates if they are met with an exceptional demand or if there is lackluster interest from investors. Results of the sale will be posted at 1:00 PM ET, so any reaction will come during afternoon hours.

Tomorrow morning brings us the release of two relevant monthly reports. The more important of the two is April's Durable Goods Orders data. This report gives us an indication of manufacturing sector strength by tracking orders at U.S. factories for big-ticket products. It is currently expected to show an increase in new orders of approximately 0.5%. If this report shows a stronger than expected reading, we should see mortgage rates rise because it indicates manufacturing growth. If it shows a smaller than expected rise, we could see rates improve tomorrow morning.

April's New Home Sales data will be released late tomorrow morning. This report gives us a measurement of housing sector strength and future mortgage credit demand. However, it is actually the least important release of the week and probably will not have much of an impact on mortgage pricing. It is expected to show a small increase in sales.

The Labor Department will also give us last week's unemployment figures tomo rrow morning. However, this data likely will not influence mortgage rates unless it varies greatly from the 630,000 new claims that are expected.

If I were considering financing/refinancing a home, I would.... Lock if my closing was taking place within 7 days... Lock if my closing was taking place between 8 and 20 days... Float if my closing was taking place between 21 and 60 days... Float if my closing was taking place over 60 days from now... This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.

Tuesday, May 19, 2009

Extreme Makeover House not foreclosed yet

From the AJC

“A Clayton County couple living in an “Extreme Makeover” home delayed foreclosure Tuesday for a second time by filing for bankruptcy.

It appears Milton and Patricia Harper and their three sons will continue living for now in the 5,300-square-foot home constructed four years ago by the ABC television show that rebuilds or refurbishes homes for families in need.”

Bankruptcy, as we’ve often noted, rarely preserves homeownership, it simply delays the foreclosure

Rob Alley, Realtor of The Avery Group at Roy Wheeler
540-250-3275 (cell)
roballey@roywheeler.com
http://www.robsellscharlottesville.com
http://www.forestlakesliving.com
http://www.charlottesvillevarealestate.blogspot.com
http://www.charlottesvilleshortsale.com

Extreme Makeover House not foreclosed yet

From the AJC

“A Clayton County couple living in an “Extreme Makeover” home delayed foreclosure Tuesday for a second time by filing for bankruptcy.

It appears Milton and Patricia Harper and their three sons will continue living for now in the 5,300-square-foot home constructed four years ago by the ABC television show that rebuilds or refurbishes homes for families in need.”

Bankruptcy, as we’ve often noted, rarely preserves homeownership, it simply delays the foreclosure

Rob Alley, Realtor of The Avery Group at Roy Wheeler
540-250-3275 (cell)
roballey@roywheeler.com
http://www.robsellscharlottesville.com
http://www.forestlakesliving.com
http://www.charlottesvillevarealestate.blogspot.com
http://www.charlottesvilleshortsale.com

How the housing crisis will be resolved

Kind of a snarky article at the NY Times about Countrywide executives being involved with the purchase of distressed loans from the government. The “bad” loans, or toxic assets as some call them are a significant part of the problem with the financial industry in the United States. There really is only one way to clear up that problem, and that’s to get rid of the assets at a price that makes sense for the purchaser, not the value most banks seem to feel the assets are worth.

The “fire sale” prices are what’s necessary to attract private capital to the product, and that private capital is certainly going to be more efficient than a government bureaucracy at turning that product into either a producing loan or selling the underlying home at it’s true current market value.

So why does the Times seem to feel it’s problematic to have major lending executives in charge? The tone seems to be the executives made money through greed on the market’s way up, and now they’re trying to make more greedy money on the way down. Who else is going to have the experience to run that kind of an operation? Reality dictates the need for experienced executives who can quickly determine which loans are salvagable and which properties need to be taken back. There aren’t years available for on-the-job training on how to do this, it’s got to be done quickly and accurately.

I never thought I’d be defending lending executives, but I think the Times has it wrong in this case.

Rob Alley, Realtor of The Avery Group at Roy Wheeler
540-250-3275 (cell)
roballey@roywheeler.com
http://www.robsellscharlottesville.com
http://www.forestlakesliving.com
http://www.charlottesvillevarealestate.blogspot.com
http://www.charlottesvilleshortsale.com

How the housing crisis will be resolved

Kind of a snarky article at the NY Times about Countrywide executives being involved with the purchase of distressed loans from the government. The “bad” loans, or toxic assets as some call them are a significant part of the problem with the financial industry in the United States. There really is only one way to clear up that problem, and that’s to get rid of the assets at a price that makes sense for the purchaser, not the value most banks seem to feel the assets are worth.

The “fire sale” prices are what’s necessary to attract private capital to the product, and that private capital is certainly going to be more efficient than a government bureaucracy at turning that product into either a producing loan or selling the underlying home at it’s true current market value.

So why does the Times seem to feel it’s problematic to have major lending executives in charge? The tone seems to be the executives made money through greed on the market’s way up, and now they’re trying to make more greedy money on the way down. Who else is going to have the experience to run that kind of an operation? Reality dictates the need for experienced executives who can quickly determine which loans are salvagable and which properties need to be taken back. There aren’t years available for on-the-job training on how to do this, it’s got to be done quickly and accurately.

I never thought I’d be defending lending executives, but I think the Times has it wrong in this case.

Rob Alley, Realtor of The Avery Group at Roy Wheeler
540-250-3275 (cell)
roballey@roywheeler.com
http://www.robsellscharlottesville.com
http://www.forestlakesliving.com
http://www.charlottesvillevarealestate.blogspot.com
http://www.charlottesvilleshortsale.com

Bank Bulk REO Sales

I’ve seen quite a bit of email and postings about bulk bank REO sales and most of it, in my opinion, is wishful thinking and promotional rather than being based on actual portfolios available. An interesting article from the North County Times (hat tip Calculated Risk) talks about one property as part of a bulk sale:

For example, a unit of Citigroup, the troubled financial giant, sold a foreclosure in Temecula to an Arizona investment firm for $139,000 when comparable homes in the area were selling for $240,000 to $260,000.

The firm listed the home for $249,000, received multiple offers and the property has entered escrow, said Amber Schlieder, the real estate agent who handled the listing.
CR Capital was the firm that flipped the Temecula foreclosure property, an investment group based in Tucson, Ariz. Calls to CR Capital were not immediately returned.

The group typically purchases 200 to 350 foreclosures at a time from banks for $50 million to $100 million, said Schlieder, a Riverside real estate agent. Schlieder said her business has turned entirely to representing such foreclosure resales for bulk investors.

While the numbers seem rather amazing, and it doesn’t seem to make a lot of sense from the banks perspective, it doesn’t seem too out of line to me. A portfolio of 300+- foreclosed properties will have some properties with very good profit margins, some properties will be breakeven and some will be lucky to breakeven. That’s why a portfolio is sold in bulk, and at a discount to the face value of the notes/property. Cash now almost always gets a discount.
If my memory is correct, the last major downturn had distressed portfolio purchasers paying something around 65% of face value, so this really isn’t a new phenomenon.

Rob Alley, Realtor of The Avery Group at Roy Wheeler
540-250-3275 (cell)
roballey@roywheeler.com
http://www.robsellscharlottesville.com/
http://www.forestlakesliving.com/
http://www.charlottesvillevarealestate.blogspot.com/
http://www.charlottesvilleshortsale.com/

Bank Bulk REO Sales

I’ve seen quite a bit of email and postings about bulk bank REO sales and most of it, in my opinion, is wishful thinking and promotional rather than being based on actual portfolios available. An interesting article from the North County Times (hat tip Calculated Risk) talks about one property as part of a bulk sale:

For example, a unit of Citigroup, the troubled financial giant, sold a foreclosure in Temecula to an Arizona investment firm for $139,000 when comparable homes in the area were selling for $240,000 to $260,000.

The firm listed the home for $249,000, received multiple offers and the property has entered escrow, said Amber Schlieder, the real estate agent who handled the listing.
CR Capital was the firm that flipped the Temecula foreclosure property, an investment group based in Tucson, Ariz. Calls to CR Capital were not immediately returned.

The group typically purchases 200 to 350 foreclosures at a time from banks for $50 million to $100 million, said Schlieder, a Riverside real estate agent. Schlieder said her business has turned entirely to representing such foreclosure resales for bulk investors.

While the numbers seem rather amazing, and it doesn’t seem to make a lot of sense from the banks perspective, it doesn’t seem too out of line to me. A portfolio of 300+- foreclosed properties will have some properties with very good profit margins, some properties will be breakeven and some will be lucky to breakeven. That’s why a portfolio is sold in bulk, and at a discount to the face value of the notes/property. Cash now almost always gets a discount.
If my memory is correct, the last major downturn had distressed portfolio purchasers paying something around 65% of face value, so this really isn’t a new phenomenon.

Rob Alley, Realtor of The Avery Group at Roy Wheeler
540-250-3275 (cell)
roballey@roywheeler.com
http://www.robsellscharlottesville.com/
http://www.forestlakesliving.com/
http://www.charlottesvillevarealestate.blogspot.com/
http://www.charlottesvilleshortsale.com/

Housing Prices, Securitization and Foreclosure

Anyone who has been following the news about the Treasury and the various bank bailout problems probably has some idea that fairly large financial institutions are holding quite a bit of toxic legacy assets which are based on the home loans produced over the past few years. The Treasury and the financial institutions are saying those assets can’t be properly priced due to a lack of liquidity in the financial system. Thus we have the various forms of “bailout” providing taxpayer funds to improve liquidity in the financial sector.

Everything has a price and in a fairly balanced system buyers determine what the price will be. If a seller asks too much, the buyer won’t complete a purchase but will look for a better opportunity.

Memphis Commercial Appeal has an interesting article regarding foreclosure purchases in the Memphis, TN area and the prices at which those purchase were made. Their first example is a 5,000 square foot house that was purchased several years ago for $600,000. Last fall, a buyer purchased the property, which was in foreclosure and in need of repair, for $350,000. That’s a little over 50% of the previous sale price.

A second example is a home that had listed at $714,000 two years ago. The home was foreclosed upon and the bank sold it for $361,000. That’s also about 50% of what someone thought the value was several years ago.

Those stories, while not being conclusive evidence of a trend, will provide some basis for the belief markets will survive and thrive when values are at a level buyers find appropriate. Real estate is local in nature so there will be areas that did not see much upswing, and those areas really won’t see much downswing either. There are other places where the corrections aren’t anywhere near complete.

There is a level, though, where buyers will buy, it’s just a matter of finding the price. Which brings me back to the “legacy assets” and the Treasury/Financial company pricing concepts. Taxpayer funds aren’t going to make the securities based on home loans worth any more than the market buyers have already determined those securities are worth. Taxpayer funds can delay the sale of those securities by providing capital to the banks and taxpayer funds might take enough risk out of a transaction to allow a buyer to increase their potential offer on those securities, but taxpayer funds aren’t going to increase “legacy asset” values significantly.
Unless, of course, taxpayer funds are used to cover the losses on the values of those legacy

Rob Alley, Realtor of The Avery Group at Roy Wheeler
540-250-3275 (cell)
roballey@roywheeler.com
http://www.robsellscharlottesville.com
http://www.forestlakesliving.com
http://www.charlottesvillevarealestate.blogspot.com
http://www.charlottesvilleshortsale.com

Housing Prices, Securitization and Foreclosure

Anyone who has been following the news about the Treasury and the various bank bailout problems probably has some idea that fairly large financial institutions are holding quite a bit of toxic legacy assets which are based on the home loans produced over the past few years. The Treasury and the financial institutions are saying those assets can’t be properly priced due to a lack of liquidity in the financial system. Thus we have the various forms of “bailout” providing taxpayer funds to improve liquidity in the financial sector.

Everything has a price and in a fairly balanced system buyers determine what the price will be. If a seller asks too much, the buyer won’t complete a purchase but will look for a better opportunity.

Memphis Commercial Appeal has an interesting article regarding foreclosure purchases in the Memphis, TN area and the prices at which those purchase were made. Their first example is a 5,000 square foot house that was purchased several years ago for $600,000. Last fall, a buyer purchased the property, which was in foreclosure and in need of repair, for $350,000. That’s a little over 50% of the previous sale price.

A second example is a home that had listed at $714,000 two years ago. The home was foreclosed upon and the bank sold it for $361,000. That’s also about 50% of what someone thought the value was several years ago.

Those stories, while not being conclusive evidence of a trend, will provide some basis for the belief markets will survive and thrive when values are at a level buyers find appropriate. Real estate is local in nature so there will be areas that did not see much upswing, and those areas really won’t see much downswing either. There are other places where the corrections aren’t anywhere near complete.

There is a level, though, where buyers will buy, it’s just a matter of finding the price. Which brings me back to the “legacy assets” and the Treasury/Financial company pricing concepts. Taxpayer funds aren’t going to make the securities based on home loans worth any more than the market buyers have already determined those securities are worth. Taxpayer funds can delay the sale of those securities by providing capital to the banks and taxpayer funds might take enough risk out of a transaction to allow a buyer to increase their potential offer on those securities, but taxpayer funds aren’t going to increase “legacy asset” values significantly.
Unless, of course, taxpayer funds are used to cover the losses on the values of those legacy

Rob Alley, Realtor of The Avery Group at Roy Wheeler
540-250-3275 (cell)
roballey@roywheeler.com
http://www.robsellscharlottesville.com
http://www.forestlakesliving.com
http://www.charlottesvillevarealestate.blogspot.com
http://www.charlottesvilleshortsale.com

Wednesday, May 6, 2009

Your Mortgage is Stealing Your Future - What Banks Don't Want You to Know

Did you know that on your typical 30-year mortgage, it takes approximately 21 years just to pay down less than half of the principal of your loan?

The Mortgage industry's big secret has been kept away from the public since the Roosevelt administration. This little known secret has been taking you (and every other homeowner) for a very costly ride. Your 6% LOW INTEREST MORTGAGE IS REALLY costing you upwards of 60% or more!

You might be asking how you could possibly be paying THAT much without knowing it? It is because ALL mortgages are front end loaded, meaning you're paying off the interest first. So during all of those first years, you aren't paying down the principle. Instead, you're buying the banker a new Mercedes. Most of us realize how a mortgage works, and we are aware that we're paying off the interest first, but no one has come out and spelled out exactly what affect that has on the total interest you end up paying. This withholding of information is the biggest “little white lie” in the banking world today.

Does this scare you at all? Hopefully it makes you a bit angry as well. We have been led to believe, that this is simply the way mortgages work, and that we have no choice. After all, who has the cash to just go out and pay cash for their home? The banking industry is perfectly content with the way things are. Have you noticed that in virtually every town in the US, there seems to be a bank on every corner? Have you ever stopped to think that the banking industry is a business that earns money by using money? Your Money!

What's more of an eye opening statistic is that in just 5 years now, the bank has already made a great profit on the average mortgage. Let's look at a traditional 30 year fixed mortgage for $150,000 at 6%. Let's take a good look at what is happening here: (If you would like a visual, there are many online mortgage calculators that will allow you to print the amortization table and see these facts :) Each year, the consumer pays $10,792 but a different portion of that total gets credited to Principal and to Interest. In the first year, $8950 of the payments goes straight to the lender and the remaining $1842 gets credited back to the consumer.

Here are some other facts gleamed from this schedule: - It takes 19 years before just half the monthly payment goes to Principal, the consumer ($5482 to Principal, $5309 to Interest). - After 7 years, the consumer has paid $75,600 but only $15,541 goes to Principal. - After 10 years, over 84% of the starting balance is still owed. - After 21 years, half of the starting balance is still owed. At that point, the consumer will have paid $226,800 with only $75,000 of it going to Principal. The numbers are heavily skewed in favor of the lender because they are designed to be.

It's due to something many consumers are familiar with, front-end loaded interest. Even though the monthly payment is fixed, each payment has a different contribution to Principal than Interest, and the contribution to Interest in the first years is much greater than in the last years. The result of this system is that the lender collects their interest first, up front!

Most consumers know that the interest on mortgage loans is front-end loaded, purposely stacked against them. But we also found that those same consumers, no matter how educated, as well as mortgage industry experts, do not realize that the front-end loaded interest completely throws off the fixed interest rate schedule. Take a close look back at Year 1. The consumer pays $10,792 but only $1842 of it gets credited back to Principal. That's all?

What if he sold his house after that first year? Would it seem like he paid a 6.0% rate? Even after 10 years, the consumer pays the lender almost $108,000 but less than $25,000 of that is going back to pay off the Principal. That's not a 6.0% rate is it? The same holds true for even longer periods of time like 20 and 25 years. So if a 30-year fixed is kept for even 1 month less than 30 years, the rate consumers really wind up paying on it is higher. How much higher?

The Effective Rate Formula reveals what the actual, real interest rate would be if a front-end loaded loan was kept for less than the entire 30-year term. Holding on to that low 6.0% fixed-rate 30-year loan for 10 years results in paying an actual 43.48% interest rate. Keeping it for 7 years results in paying a staggering 68% interest rate to the lender. Keeping it for only 5 years results in the equivalent of a 102% rate. Holding it for 3 years yields an actual 182% rate and 1 year a 580% rate! The numbers prove that the 30-year fixed rate mortgage is equivalent to a giant credit card with an astronomical APR. Millions upon millions of American consumers have this credit card, this massive liability, which serves as nothing but a giant mountain standing in the way of their financial hopes and dreams. The mountain's bigger than Mount Everest yet remains invisible due to the deceptive nature of the game. And no matter how much more consumers earn at work and no matter how much their other investments return, it winds up being meaningless in the long run because that home loan, that 107% APR'd “credit card” is sucking all the wealth-building power out of them.”

Homeowners are being taken on a 30-year cab ride with the meter running. There must be a better way! It's a week night, and after a hard day's work you have plopped down on the couch to watch a little TV. You are making payments on your 30 Mortgage and the television commercials are telling you it's time again to refinance. “Consolidate that Credit Card Debt”, “Lower Your Monthly Payments…..“Refinance NOW & Save”, “It's Easy…No Closing Costs”. You've heard it all before, right?? Do you think it's possible that the banking industry wants you to refinance so that they can sell you yet another frontloaded mortgage and leaving you with a principal to pay off in another 20 – 30 (and now even 40 & 50) years?

Do you see how their game has them raking in that interest. They have the wonders of compound interest working FOR the bank, and against YOU the homeowner. So how do we beat the banks at their own game? Well I believe that United First Financial is certainly taking a step in the right direction with their Money Merge Account.

The Money Merge Account (MMA) System is a work-around solution designed to achieve an accelerated pay down of home loan mortgages in the United States, and is provided by United First Financial. It is based on the Current Account Mortgage concept based in the UK, Australia and Europe (see: http://en.wikipedia.org/wiki/The_One_account ) which results in homeowners paying less than half (on average) of the normal interest they would have paid on a normal amortization schedule. This concept has been around for over 10 years and 1/3 of all mortgages in these countries are current account mortgages. There is much misinformation about this concept among the American public... and especially by those who have not actually used the software themselves, and who do not understand the varying impacts of a closed end loan, versus an open-ended line of credit. Because this program achieves dramatic results, many are naturally skeptical.

However this concept is based on math, and once the math is understood, the concept is understood. In the US, banks make a huge amount of money off of "money float." Consumers pay 6% for a mortgage, but get 2-3% for a savings account, and usually 0-1% interest for a checking account. That money sitting in the bank results in profits for the bank (money float), but the money is not being put to work efficiently for the account holder.

A CAM - Current Account Mortgage - puts the money float to work for the customer. One of the most heavily praised (and awarded) CAM mortgages is the One Account - now owned by the Royal Bank of Scotland, but started by Richard Branson of Virgin Airline fame. The concept of the One Account / CAM is that the homeowner finances the home in an equity line of credit, deposits income into it and writes checks out of it. This puts every penny, not being spent, to work to keep the principle balance of the loan down, thus saving interest.

This is NOT exactly how the Money Merge Account works... but because the exact concept of the Current Account Mortgage cannot be achieved in the US easily, due to US banking laws, The Money Merge Account utilizes two accounts to achieve the beneficial effects of the CAM. An opened ended line of credit is used, in conjunction with the closed ended primary mortgage, and a software program makes specific calculations based on the homeowner's own financial variables.

The software that is part of the Money Merge Account is sophisticated... recalculating the variables with each new transaction recorded into the software (outgoing bills, dates and amounts paid, interest rates, income and dates received, etc.) The algorithm used for the software is designed to optimize the results of the Money Merge Account and, in effect, it learns from the client's history, thus becoming even more efficient at producing targeted results. The Money Merge account will pay off a 30 year mortgage (on average) in as little as 8 to 11 years, saving thousands in interest.

This pay down is accomplished without the homeowner changing their lifestyle, or the way they spend their money. It often has no effect on the current cash flow at all… and accomplishes the acceleration of the mortgage by simply putting the homeowner's money float to work FOR the homeowner, instead of for the bank. Results will vary from client to client based on debts rolled into equity line account, discretionary income and individual money float. All clients are given a detailed financial analysis prior to purchasing the software and the company (United First Financial) provides a MONEY BACK GUARANTEE based on the software performing as good, or better, than the Analysis.

When the Analysis shows the mortgage paid off... this also INCLUDES all debt included in the numbers. The Analysis also shows the total interest paid... which includes all interest on the Equity Line of Credit side as well. The program is about becoming debt free... not just mortgage free. For homeowners who do not keep their home or mortgage more than a few years, the Money Merge Account is simply an equity-building program. Since homes only appreciate through 2 methods... principal pay down or rising RE values. In slow market conditions, where homes are not appreciating, building equity through principle pay down is the only means of building equity at all.

This is important to know for people who financed their homes with Adjustable Rate Mortgages, or Negative Amortization mortgages. Right now, in the US there are two conditions coming together that are perilous for some homeowners... a slow real estate market in many areas (keeping real estate values flat, or even dropping in some cases), as well as a period when ARM's are about to have a rate adjustment. Experts are predicting that 1 in 4 ARM's will go into foreclosure. In any market conditions... building equity faster means homeowners have more financial stability. If the homeowners income has not risen to where they can easily handle the interest rate increases for the ARM... the equity in the home can be tapped through several means (including the MMA - Money Merge Account), OR simply having more equity means the homeowner can move into their next home even faster. Real estate investors are also finding the software tool invaluable in building a portfolio more quickly.

Faster equity building in property 1, means that the property can be leveraged to get property 2 even faster. Savvy investors and financial planners are combining the power of the MMA with their investment know-how to build wealth much faster for themselves, and their clients.

For more information about this program... ask someone who actually OWNS the software to show you their results. Have an Analysis run on YOUR numbers, attend a product education seminar or webinar. See if the MMA is right for you... and if you can qualify. This is not magic... it is math.

The truth lies in the bottom line. Knowledge is power.

Rob Alley, Realtor
The Avery Group at Roy Wheeler
540-250-3275
roballey@roywheeler.com
http://www.robsellscharlottesville.com
http://www.forestlakesliving.com
http://www.theaverygroup.com
http://www.charlottesvilleshortsale.com
http://www.charlottesvillevarealestate.blogspot.com

Your Mortgage is Stealing Your Future - What Banks Don't Want You to Know

Did you know that on your typical 30-year mortgage, it takes approximately 21 years just to pay down less than half of the principal of your loan?

The Mortgage industry's big secret has been kept away from the public since the Roosevelt administration. This little known secret has been taking you (and every other homeowner) for a very costly ride. Your 6% LOW INTEREST MORTGAGE IS REALLY costing you upwards of 60% or more!

You might be asking how you could possibly be paying THAT much without knowing it? It is because ALL mortgages are front end loaded, meaning you're paying off the interest first. So during all of those first years, you aren't paying down the principle. Instead, you're buying the banker a new Mercedes. Most of us realize how a mortgage works, and we are aware that we're paying off the interest first, but no one has come out and spelled out exactly what affect that has on the total interest you end up paying. This withholding of information is the biggest “little white lie” in the banking world today.

Does this scare you at all? Hopefully it makes you a bit angry as well. We have been led to believe, that this is simply the way mortgages work, and that we have no choice. After all, who has the cash to just go out and pay cash for their home? The banking industry is perfectly content with the way things are. Have you noticed that in virtually every town in the US, there seems to be a bank on every corner? Have you ever stopped to think that the banking industry is a business that earns money by using money? Your Money!

What's more of an eye opening statistic is that in just 5 years now, the bank has already made a great profit on the average mortgage. Let's look at a traditional 30 year fixed mortgage for $150,000 at 6%. Let's take a good look at what is happening here: (If you would like a visual, there are many online mortgage calculators that will allow you to print the amortization table and see these facts :) Each year, the consumer pays $10,792 but a different portion of that total gets credited to Principal and to Interest. In the first year, $8950 of the payments goes straight to the lender and the remaining $1842 gets credited back to the consumer.

Here are some other facts gleamed from this schedule: - It takes 19 years before just half the monthly payment goes to Principal, the consumer ($5482 to Principal, $5309 to Interest). - After 7 years, the consumer has paid $75,600 but only $15,541 goes to Principal. - After 10 years, over 84% of the starting balance is still owed. - After 21 years, half of the starting balance is still owed. At that point, the consumer will have paid $226,800 with only $75,000 of it going to Principal. The numbers are heavily skewed in favor of the lender because they are designed to be.

It's due to something many consumers are familiar with, front-end loaded interest. Even though the monthly payment is fixed, each payment has a different contribution to Principal than Interest, and the contribution to Interest in the first years is much greater than in the last years. The result of this system is that the lender collects their interest first, up front!

Most consumers know that the interest on mortgage loans is front-end loaded, purposely stacked against them. But we also found that those same consumers, no matter how educated, as well as mortgage industry experts, do not realize that the front-end loaded interest completely throws off the fixed interest rate schedule. Take a close look back at Year 1. The consumer pays $10,792 but only $1842 of it gets credited back to Principal. That's all?

What if he sold his house after that first year? Would it seem like he paid a 6.0% rate? Even after 10 years, the consumer pays the lender almost $108,000 but less than $25,000 of that is going back to pay off the Principal. That's not a 6.0% rate is it? The same holds true for even longer periods of time like 20 and 25 years. So if a 30-year fixed is kept for even 1 month less than 30 years, the rate consumers really wind up paying on it is higher. How much higher?

The Effective Rate Formula reveals what the actual, real interest rate would be if a front-end loaded loan was kept for less than the entire 30-year term. Holding on to that low 6.0% fixed-rate 30-year loan for 10 years results in paying an actual 43.48% interest rate. Keeping it for 7 years results in paying a staggering 68% interest rate to the lender. Keeping it for only 5 years results in the equivalent of a 102% rate. Holding it for 3 years yields an actual 182% rate and 1 year a 580% rate! The numbers prove that the 30-year fixed rate mortgage is equivalent to a giant credit card with an astronomical APR. Millions upon millions of American consumers have this credit card, this massive liability, which serves as nothing but a giant mountain standing in the way of their financial hopes and dreams. The mountain's bigger than Mount Everest yet remains invisible due to the deceptive nature of the game. And no matter how much more consumers earn at work and no matter how much their other investments return, it winds up being meaningless in the long run because that home loan, that 107% APR'd “credit card” is sucking all the wealth-building power out of them.”

Homeowners are being taken on a 30-year cab ride with the meter running. There must be a better way! It's a week night, and after a hard day's work you have plopped down on the couch to watch a little TV. You are making payments on your 30 Mortgage and the television commercials are telling you it's time again to refinance. “Consolidate that Credit Card Debt”, “Lower Your Monthly Payments…..“Refinance NOW & Save”, “It's Easy…No Closing Costs”. You've heard it all before, right?? Do you think it's possible that the banking industry wants you to refinance so that they can sell you yet another frontloaded mortgage and leaving you with a principal to pay off in another 20 – 30 (and now even 40 & 50) years?

Do you see how their game has them raking in that interest. They have the wonders of compound interest working FOR the bank, and against YOU the homeowner. So how do we beat the banks at their own game? Well I believe that United First Financial is certainly taking a step in the right direction with their Money Merge Account.

The Money Merge Account (MMA) System is a work-around solution designed to achieve an accelerated pay down of home loan mortgages in the United States, and is provided by United First Financial. It is based on the Current Account Mortgage concept based in the UK, Australia and Europe (see: http://en.wikipedia.org/wiki/The_One_account ) which results in homeowners paying less than half (on average) of the normal interest they would have paid on a normal amortization schedule. This concept has been around for over 10 years and 1/3 of all mortgages in these countries are current account mortgages. There is much misinformation about this concept among the American public... and especially by those who have not actually used the software themselves, and who do not understand the varying impacts of a closed end loan, versus an open-ended line of credit. Because this program achieves dramatic results, many are naturally skeptical.

However this concept is based on math, and once the math is understood, the concept is understood. In the US, banks make a huge amount of money off of "money float." Consumers pay 6% for a mortgage, but get 2-3% for a savings account, and usually 0-1% interest for a checking account. That money sitting in the bank results in profits for the bank (money float), but the money is not being put to work efficiently for the account holder.

A CAM - Current Account Mortgage - puts the money float to work for the customer. One of the most heavily praised (and awarded) CAM mortgages is the One Account - now owned by the Royal Bank of Scotland, but started by Richard Branson of Virgin Airline fame. The concept of the One Account / CAM is that the homeowner finances the home in an equity line of credit, deposits income into it and writes checks out of it. This puts every penny, not being spent, to work to keep the principle balance of the loan down, thus saving interest.

This is NOT exactly how the Money Merge Account works... but because the exact concept of the Current Account Mortgage cannot be achieved in the US easily, due to US banking laws, The Money Merge Account utilizes two accounts to achieve the beneficial effects of the CAM. An opened ended line of credit is used, in conjunction with the closed ended primary mortgage, and a software program makes specific calculations based on the homeowner's own financial variables.

The software that is part of the Money Merge Account is sophisticated... recalculating the variables with each new transaction recorded into the software (outgoing bills, dates and amounts paid, interest rates, income and dates received, etc.) The algorithm used for the software is designed to optimize the results of the Money Merge Account and, in effect, it learns from the client's history, thus becoming even more efficient at producing targeted results. The Money Merge account will pay off a 30 year mortgage (on average) in as little as 8 to 11 years, saving thousands in interest.

This pay down is accomplished without the homeowner changing their lifestyle, or the way they spend their money. It often has no effect on the current cash flow at all… and accomplishes the acceleration of the mortgage by simply putting the homeowner's money float to work FOR the homeowner, instead of for the bank. Results will vary from client to client based on debts rolled into equity line account, discretionary income and individual money float. All clients are given a detailed financial analysis prior to purchasing the software and the company (United First Financial) provides a MONEY BACK GUARANTEE based on the software performing as good, or better, than the Analysis.

When the Analysis shows the mortgage paid off... this also INCLUDES all debt included in the numbers. The Analysis also shows the total interest paid... which includes all interest on the Equity Line of Credit side as well. The program is about becoming debt free... not just mortgage free. For homeowners who do not keep their home or mortgage more than a few years, the Money Merge Account is simply an equity-building program. Since homes only appreciate through 2 methods... principal pay down or rising RE values. In slow market conditions, where homes are not appreciating, building equity through principle pay down is the only means of building equity at all.

This is important to know for people who financed their homes with Adjustable Rate Mortgages, or Negative Amortization mortgages. Right now, in the US there are two conditions coming together that are perilous for some homeowners... a slow real estate market in many areas (keeping real estate values flat, or even dropping in some cases), as well as a period when ARM's are about to have a rate adjustment. Experts are predicting that 1 in 4 ARM's will go into foreclosure. In any market conditions... building equity faster means homeowners have more financial stability. If the homeowners income has not risen to where they can easily handle the interest rate increases for the ARM... the equity in the home can be tapped through several means (including the MMA - Money Merge Account), OR simply having more equity means the homeowner can move into their next home even faster. Real estate investors are also finding the software tool invaluable in building a portfolio more quickly.

Faster equity building in property 1, means that the property can be leveraged to get property 2 even faster. Savvy investors and financial planners are combining the power of the MMA with their investment know-how to build wealth much faster for themselves, and their clients.

For more information about this program... ask someone who actually OWNS the software to show you their results. Have an Analysis run on YOUR numbers, attend a product education seminar or webinar. See if the MMA is right for you... and if you can qualify. This is not magic... it is math.

The truth lies in the bottom line. Knowledge is power.

Rob Alley, Realtor
The Avery Group at Roy Wheeler
540-250-3275
roballey@roywheeler.com
http://www.robsellscharlottesville.com
http://www.forestlakesliving.com
http://www.theaverygroup.com
http://www.charlottesvilleshortsale.com
http://www.charlottesvillevarealestate.blogspot.com

US Foreclosures Up 24 Percent In 1st Quarter 2009

The number of American households threatened with losing their homes grew 24 percent in the first three months of this year and is poised to rise further as major lenders restart foreclosures after a temporary break, according to data released Thursday, April 16th, 2009.

The big unknown for the coming months, however, is President Barack Obama's plan to help up to 9 million borrowers avoid foreclosure through refinanced mortgages or modified loans. The Obama administration expects its plans to make a big dent in the foreclosure crisis. But it remains to be seen whether the lending industry will fully embrace it, despite $75 billion in incentive payments.

The faltering economy is causing the housing crisis to spread. Nationwide, nearly 804,000 homes received at least one foreclosure-related notice from January through March, up from about 650,000 in the same time period a year earlier, according to RealtyTrac Inc., a foreclosure listing firm. During the quarter, Ohio was the state with the seventh highest number of homes seeing foreclosure activity with about 31,600 receiving at least one filing, up 1 percent from a year earlier.

In March, more than 340,000 properties were affected nationwide, up 17 percent from February and 46 percent from a year earlier. Ohio had 12,600 homes receiving foreclosure notices during the month, 12 percent more than during March 2008. Foreclosures "came back with a vengeance" last month and are likely to keep rising. Nearly 191,000 properties completed the foreclosure process and were repossessed by banks in the quarter. While the number was down 13 percent from the fourth quarter of last year, it is expected to rise through the summer and then possibly taper off.

Fannie Mae and Freddie Mac, the big mortgage finance companies, together with many banks had temporarily halted foreclosures in advance of Obama's plan. Now armed with the details about which borrowers can qualify, the mortgage industry has begun foreclosing on ineligible borrowers. The Treasury Department has signed contracts with six big loan servicing companies — including Citgroup, Wells Fargo and JPMorgan Chase. Many have already started processing loans as part of the government's "Making Home Affordable" plan.

In the coming months, there are still likely to be increased foreclosures, especially from vacant houses, second homes and those owned by speculators. None of those properties will qualify for a loan modification. However, overall foreclosures could start to decrease this summer. But even industry executives who emphatically support the plan emphasize that its success isn't guaranteed. Plus, the lending industry has been swamped by the unprecedented wave of calls from distressed borrowers.

In RealtyTrac's report, Nevada, Arizona, California and Florida had the nation's top foreclosure rates. In Nevada, one in every 27 homes received a foreclosure filing, while the number was one in every 54 in Arizona. Rounding out the top 10 were Illinois, Michigan, Georgia, Idaho, Utah and Oregon.

Rob Alley, Realtor
The Avery Group at Roy Wheeler
540-250-3275
roballey@roywheeler.com
http://www.robsellscharlottesville.com
http://www.forestlakesliving.com
http://www.theaverygroup.com

US Foreclosures Up 24 Percent In 1st Quarter 2009

The number of American households threatened with losing their homes grew 24 percent in the first three months of this year and is poised to rise further as major lenders restart foreclosures after a temporary break, according to data released Thursday, April 16th, 2009.

The big unknown for the coming months, however, is President Barack Obama's plan to help up to 9 million borrowers avoid foreclosure through refinanced mortgages or modified loans. The Obama administration expects its plans to make a big dent in the foreclosure crisis. But it remains to be seen whether the lending industry will fully embrace it, despite $75 billion in incentive payments.

The faltering economy is causing the housing crisis to spread. Nationwide, nearly 804,000 homes received at least one foreclosure-related notice from January through March, up from about 650,000 in the same time period a year earlier, according to RealtyTrac Inc., a foreclosure listing firm. During the quarter, Ohio was the state with the seventh highest number of homes seeing foreclosure activity with about 31,600 receiving at least one filing, up 1 percent from a year earlier.

In March, more than 340,000 properties were affected nationwide, up 17 percent from February and 46 percent from a year earlier. Ohio had 12,600 homes receiving foreclosure notices during the month, 12 percent more than during March 2008. Foreclosures "came back with a vengeance" last month and are likely to keep rising. Nearly 191,000 properties completed the foreclosure process and were repossessed by banks in the quarter. While the number was down 13 percent from the fourth quarter of last year, it is expected to rise through the summer and then possibly taper off.

Fannie Mae and Freddie Mac, the big mortgage finance companies, together with many banks had temporarily halted foreclosures in advance of Obama's plan. Now armed with the details about which borrowers can qualify, the mortgage industry has begun foreclosing on ineligible borrowers. The Treasury Department has signed contracts with six big loan servicing companies — including Citgroup, Wells Fargo and JPMorgan Chase. Many have already started processing loans as part of the government's "Making Home Affordable" plan.

In the coming months, there are still likely to be increased foreclosures, especially from vacant houses, second homes and those owned by speculators. None of those properties will qualify for a loan modification. However, overall foreclosures could start to decrease this summer. But even industry executives who emphatically support the plan emphasize that its success isn't guaranteed. Plus, the lending industry has been swamped by the unprecedented wave of calls from distressed borrowers.

In RealtyTrac's report, Nevada, Arizona, California and Florida had the nation's top foreclosure rates. In Nevada, one in every 27 homes received a foreclosure filing, while the number was one in every 54 in Arizona. Rounding out the top 10 were Illinois, Michigan, Georgia, Idaho, Utah and Oregon.

Rob Alley, Realtor
The Avery Group at Roy Wheeler
540-250-3275
roballey@roywheeler.com
http://www.robsellscharlottesville.com
http://www.forestlakesliving.com
http://www.theaverygroup.com

No Bankruptcy Help For Homeowners

The Obama administration lost a bid to add a powerful weapon in its fight against foreclosure on Thursday, April 30th, 2009 after the Senate voted down a proposal to allow bankruptcy judges to modify mortgages. The defeat left many housing advocates questioning the effectiveness of the president's loan modification plan. The so-called cramdown provision, which would allow judges to reduce mortgage principal, would have put pressure on servicers to modify loans before borrowers file for bankruptcy.

The financial industry lobbied hard against the bill, arguing that letting judges change mortgage contracts would add instability to the market and raise interest rates. Senate Republicans and some moderate Democrats were concerned about the bill's impact and about the growing resentment among homeowners in good standing.

The bill was defeated by a 51-45 vote. The House had passed similar legislation last month.

Rob Alley, Realtor
The Avery Group at Roy Wheeler
540-250-3275
roballey@roywheeler.com
http://www.robsellscharlottesville.com
http://www.forestlakesliving.com
http://www.theaverygroup.com
http://www.charlottesvilleshortsale.com

No Bankruptcy Help For Homeowners

The Obama administration lost a bid to add a powerful weapon in its fight against foreclosure on Thursday, April 30th, 2009 after the Senate voted down a proposal to allow bankruptcy judges to modify mortgages. The defeat left many housing advocates questioning the effectiveness of the president's loan modification plan. The so-called cramdown provision, which would allow judges to reduce mortgage principal, would have put pressure on servicers to modify loans before borrowers file for bankruptcy.

The financial industry lobbied hard against the bill, arguing that letting judges change mortgage contracts would add instability to the market and raise interest rates. Senate Republicans and some moderate Democrats were concerned about the bill's impact and about the growing resentment among homeowners in good standing.

The bill was defeated by a 51-45 vote. The House had passed similar legislation last month.

Rob Alley, Realtor
The Avery Group at Roy Wheeler
540-250-3275
roballey@roywheeler.com
http://www.robsellscharlottesville.com
http://www.forestlakesliving.com
http://www.theaverygroup.com
http://www.charlottesvilleshortsale.com

Foreclosure Filings In Record Jump

Lenders continued to rewrite troubled mortgages at a fast clip during March, 2009 but the weakening economy still sent foreclosure starts soaring to a record high.

Repayment plans merely postpone payments for delinquent borrowers without making them any more affordable. Mortgage modifications are changes in the terms of loans that reduce or freeze interest rates, extend the life of the loan, reduce loan balances or any combination of those three, to, ideally, lower the amount borrowers pay monthly. Modifications are considered more effective that repayment plans. The lending industry is steadily working out solutions for homeowners and keeping as many as possible in their homes. We expect that these numbers will continue to increase as servicers work with the Obama Administration to implement its Homeowner Affordability and Stability Plan.

Despite the efforts, however, more homeowners fell into default in March. Servicers initiated foreclosure proceedings against 290,000 mortgage borrowers, a jump of nearly 20% from February's 243,000, and the highest monthly total since the coalition began tracking data in mid-2007. Starts have risen by more than a third since January.

On the other hand, completed foreclosure sales, transactions in which lenders have actually taken back homes from defaulting borrowers, dropped by 39% in March. Banks repossessed only 53,000 homes compared with 87,000 taken over during February.

Since the mortgage meltdown hit in July 2007, 1,447,866 homes have been lost to foreclosure. It is too early to say this is a trend. But anecdotal reports from servicers do indicate that they are taking this extra step to help homeowners who qualify stay in their homes. Once the program is fully in place, servicers will have more tools to be able to make successful modifications to unaffordable mortgages. In the meantime, they're allowing a kind of grace period for homeowners until the government program can be applied to individual cases.

Rob Alley, Realtor
The Avery Group at Roy Wheeler
540-250-3275
roballey@roywheeler.com
http://www.robsellscharlottesville.com
http://www.forestlakesliving.com
http://www.theaverygroup.com
http://www.charlottesvilleshortsale.com

Foreclosure Filings In Record Jump

Lenders continued to rewrite troubled mortgages at a fast clip during March, 2009 but the weakening economy still sent foreclosure starts soaring to a record high.

Repayment plans merely postpone payments for delinquent borrowers without making them any more affordable. Mortgage modifications are changes in the terms of loans that reduce or freeze interest rates, extend the life of the loan, reduce loan balances or any combination of those three, to, ideally, lower the amount borrowers pay monthly. Modifications are considered more effective that repayment plans. The lending industry is steadily working out solutions for homeowners and keeping as many as possible in their homes. We expect that these numbers will continue to increase as servicers work with the Obama Administration to implement its Homeowner Affordability and Stability Plan.

Despite the efforts, however, more homeowners fell into default in March. Servicers initiated foreclosure proceedings against 290,000 mortgage borrowers, a jump of nearly 20% from February's 243,000, and the highest monthly total since the coalition began tracking data in mid-2007. Starts have risen by more than a third since January.

On the other hand, completed foreclosure sales, transactions in which lenders have actually taken back homes from defaulting borrowers, dropped by 39% in March. Banks repossessed only 53,000 homes compared with 87,000 taken over during February.

Since the mortgage meltdown hit in July 2007, 1,447,866 homes have been lost to foreclosure. It is too early to say this is a trend. But anecdotal reports from servicers do indicate that they are taking this extra step to help homeowners who qualify stay in their homes. Once the program is fully in place, servicers will have more tools to be able to make successful modifications to unaffordable mortgages. In the meantime, they're allowing a kind of grace period for homeowners until the government program can be applied to individual cases.

Rob Alley, Realtor
The Avery Group at Roy Wheeler
540-250-3275
roballey@roywheeler.com
http://www.robsellscharlottesville.com
http://www.forestlakesliving.com
http://www.theaverygroup.com
http://www.charlottesvilleshortsale.com

Tuesday, May 5, 2009

Spotsylvania County Has Highest Foreclosure Rate in Virginia

Data from RealtyTrac.com shows that Spotsylvania County had the highest foreclosure rate in Virginia in February.

According to the data, statewide, one in 679 housing units received a foreclosure filing in the last month. That includes notices of default or auction sale, and bank repossessions.

The national rate was one in 440, up from one in 466 in January. In Spotsylvania, the rate was one in 199 housing units.

The top of the list of Virginia's 134 localities also included Stafford County, Manassas, Prince William County, Orange, Caroline, Culpeper, Fauquier, Fredericksburg and Louisa.

Rob Alley, Realtor
The Avery Group at Roy Wheeler
540-250-3275
roballey@roywheeler.com
http://www.robsellscharlottesville.com
http://www.forestlakesliving.com
http://www.theaverygroup.com

Spotsylvania County Has Highest Foreclosure Rate in Virginia

Data from RealtyTrac.com shows that Spotsylvania County had the highest foreclosure rate in Virginia in February.

According to the data, statewide, one in 679 housing units received a foreclosure filing in the last month. That includes notices of default or auction sale, and bank repossessions.

The national rate was one in 440, up from one in 466 in January. In Spotsylvania, the rate was one in 199 housing units.

The top of the list of Virginia's 134 localities also included Stafford County, Manassas, Prince William County, Orange, Caroline, Culpeper, Fauquier, Fredericksburg and Louisa.

Rob Alley, Realtor
The Avery Group at Roy Wheeler
540-250-3275
roballey@roywheeler.com
http://www.robsellscharlottesville.com
http://www.forestlakesliving.com
http://www.theaverygroup.com

Monday, May 4, 2009

Real Estate Foreclosure Investing and How To Get Started

As many people succumb to the pressures of the recent economic downturn, the rate of homes in foreclosure is increasing dramatically. While this is terrible news for the person going through foreclosure proceedings, it can mean finding some excellent bargain investment properties for any wise investors watching the markets.

What Exactly are Foreclosures?

Banks begin foreclosure proceedings when a home owner falls behind on mortgage payments. When those payments are so far in arrears, the bank begins to take steps to recover the money is it owed by those home owners. If there is no possible way for the home owner to raise enough cash to cover the outstanding debts, then the bank has no other choice but to sell the house used as collateral security.

Why Buy Foreclosed Properties?

When a lender begins foreclosure proceedings, they aim at recovering the amount of money that is outstanding against the property. This can often mean the property is being sold for a much lower price than the real value of the property. Wise investors could find themselves purchasing properties at only a fraction of their true value with just a little research. Buying an investment property below true market price can mean an instant increase in the amount of available equity you have.

There are three options if you’re considering buying foreclosed property. Each opportunity comes with distinct advantages and disadvantages.

Pre-Foreclosure

The first option is to try and buy property during pre-foreclosure. Pre-foreclosed properties are homes that are still owned by the home owner. This means the bank hasn’t taken possession as yet. The current owners are very motivated to sell the house to get themselves out of trouble, so you could easily pick up a great bargain.

Purchase Through Court Auctions

The second option is buying during the court auctions after the property has been foreclosed upon. The disadvantage to an investor in this situation is that if there are several bidders at the auction, this could drive the price higher than you were willing to pay.

Purchase Directly From Lenders

The third option is buying after the lender has acquired the property and taken full ownership. Banks aren’t in business to buy property. They make their profits by charging interest on money they lend out to people, so its in their interests to sell any property they’ve acquired. In many cases, they’ll happily negotiate with you on the purchase price of the property. This can be one of the simplest ways to purchase real estate at a reasonable price.

Whichever option you choose, it’s always vital that you inspect the property thoroughly and investigate the true extent of any debts outstanding against the home.

Once you’re sure the numbers stack up the right way, you could easily be purchasing an investment property that is valued so much higher than the price you paid for it. Wise investors also understand that by keeping purchase costs low, they also have the opportunity to build an ongoing source of income as the rent can often exceed the costs associated with owning and maintaining the investment property.

Always be sure to spend some time researching into any potential foreclosed home you’re considering buying and you’ll soon find that there are opportunities to make great profits very quickly.

Rob Alley, Realtor
The Avery Group at Roy Wheeler
540-250-3275
roballey@roywheeler.com
http://www.robsellscharlottesville.com
http://www.forestlakesliving.com
http://www.theaverygroup.com

Real Estate Foreclosure Investing and How To Get Started

As many people succumb to the pressures of the recent economic downturn, the rate of homes in foreclosure is increasing dramatically. While this is terrible news for the person going through foreclosure proceedings, it can mean finding some excellent bargain investment properties for any wise investors watching the markets.

What Exactly are Foreclosures?

Banks begin foreclosure proceedings when a home owner falls behind on mortgage payments. When those payments are so far in arrears, the bank begins to take steps to recover the money is it owed by those home owners. If there is no possible way for the home owner to raise enough cash to cover the outstanding debts, then the bank has no other choice but to sell the house used as collateral security.

Why Buy Foreclosed Properties?

When a lender begins foreclosure proceedings, they aim at recovering the amount of money that is outstanding against the property. This can often mean the property is being sold for a much lower price than the real value of the property. Wise investors could find themselves purchasing properties at only a fraction of their true value with just a little research. Buying an investment property below true market price can mean an instant increase in the amount of available equity you have.

There are three options if you’re considering buying foreclosed property. Each opportunity comes with distinct advantages and disadvantages.

Pre-Foreclosure

The first option is to try and buy property during pre-foreclosure. Pre-foreclosed properties are homes that are still owned by the home owner. This means the bank hasn’t taken possession as yet. The current owners are very motivated to sell the house to get themselves out of trouble, so you could easily pick up a great bargain.

Purchase Through Court Auctions

The second option is buying during the court auctions after the property has been foreclosed upon. The disadvantage to an investor in this situation is that if there are several bidders at the auction, this could drive the price higher than you were willing to pay.

Purchase Directly From Lenders

The third option is buying after the lender has acquired the property and taken full ownership. Banks aren’t in business to buy property. They make their profits by charging interest on money they lend out to people, so its in their interests to sell any property they’ve acquired. In many cases, they’ll happily negotiate with you on the purchase price of the property. This can be one of the simplest ways to purchase real estate at a reasonable price.

Whichever option you choose, it’s always vital that you inspect the property thoroughly and investigate the true extent of any debts outstanding against the home.

Once you’re sure the numbers stack up the right way, you could easily be purchasing an investment property that is valued so much higher than the price you paid for it. Wise investors also understand that by keeping purchase costs low, they also have the opportunity to build an ongoing source of income as the rent can often exceed the costs associated with owning and maintaining the investment property.

Always be sure to spend some time researching into any potential foreclosed home you’re considering buying and you’ll soon find that there are opportunities to make great profits very quickly.

Rob Alley, Realtor
The Avery Group at Roy Wheeler
540-250-3275
roballey@roywheeler.com
http://www.robsellscharlottesville.com
http://www.forestlakesliving.com
http://www.theaverygroup.com

Buying Properties "Subject To"

Taking over a property "Subject To" an existing loan is not as hard as it may seem as long as you know what it is.
If you know what it is and how to explain it to the seller, and what steps to use to protect the loan from being called, you can buy many more properties faster than you can if you have to go get new loans on each purchase.
Here is how . . .
When financing a property, the note says I owe x amount of money and the Deed of Trust or Mortgage says, "here is how the lender proceeds to take over the collateral or sell it if I don't pay the note as agreed upon." Generally, the person borrowing the money is personally liable on the loan. This means that if the collateral that backs the note, once sold, is not enough to cover the debt, the borrower must make up the difference from their other resources.
Traditionally, if you don't get a new loan when you buy a property, you will take over ownership and "assume and agree to pay the loan as was agreed upon."
However, for many years now, lenders have had a "due on sale" clause in their collateral agreements. This means that anytime the original homeowner sells or transfers any interest in the property to someone else, the lien holder may (but does not have to) require full payment of the loan now rather than continue to accept payments.
In the early years of the "due on sale" clause, the current interest rates were much higher than the rates on old loans, so lenders had a good reason to call the loans due where the "due on sale" had been violated. Now that interest rates have reached historic lows and interest rates are still low, lenders in general have not been filing "due on sale" cases at all. And, as a rule, unless something out of the ordinary happens, the lender never notices that a transfer has occurred. If you don't make the payments, they will notice. If you cause them a lot of paper work, they will notice.
Taking a property "subject to" existing mortgage means that you get the deed but you do not assume the loan. The loan stays in the original homeowners name, but you now control the property and make the mortgage payments on it. If you don't make the payments, you could lose the property and any equity in it. However, if you don't make the payments and you lose the property, there will be no personal liability beyond the loss of the property.
Typically homeowners who are behind on payments, in foreclosure or have no equity in the home are the most common types of motivated sellers you will be dealing with and perfect for buying "subject to". Even though these types of motivated sellers will agree to almost anything, it's a good idea to explain what you are doing, how it works and how they can benefit from it. They will benefit because you will be making their payments on time so it will help their credit. If they are concerned about what you are doing, you can explain to them that the risk of losing the equity is enough to keep you from missing payments or you can use a clause where you agree to pay off the sellers loans within a certain amount of time.
If they still are unsure, you could have some sort of an intermediate collect and disburse the payments. An intermediate would be a loan servicing company or trust company that can do this for you. Another idea is to have the seller open a savings account at the Savings & Loan that is carrying the loan, and you make the payment into that account and set that account up for auto pay of the loan. This way, the seller can check the account and see that the payment was made and paid out.
The idea has the added advantage of the S & L still seeing a payment come from whoever they were accustomed to seeing it come from.
The biggest problem comes with insurance. You must have insurance. And the homeowner's policy is only good for 30 days after the transfer. So, for starters, call or write the insurance company that has the existing policy, and ask them to add you to the policy. If you do this, remember to follow up in two weeks and change the policy to a "renters" policy rather than a homeowner's policy. Or, get a new homeowners policy in both your and the seller's name. Or just leave the original policy and go get a second policy. But now you have two insurance payments.
Yet another approach when dealing with insurance on subject to deals is to use a land trust. A land trust holds title to real property and is commonly used by homeowners for tax purposes and estate planning. The homeowner would be the beneficiary and you would be the trustee who carries out orders and controls the property. Then you would write a letter to the lender explaining the change and all correspondence be directed to the trustee who then changes the policy. To protect your interest in the property, beneficial interest would also be assigned over to you.
There is a chance, as interest rates climb in future years, that lenders will be more interested in who is making the payments. But the sure way to catch their attention is to get behind on payments. So those of you who are using "subject to" as a tool, make sure you do everything else by the book and on time.

Rob Alley, Realtor
The Avery Group at Roy Wheeler
540-250-3275
roballey@roywheeler.com
http://www.robsellscharlottesville.com
http://www.forestlakesliving.com
http://www.theaverygroup.com

Buying Properties "Subject To"

Taking over a property "Subject To" an existing loan is not as hard as it may seem as long as you know what it is.
If you know what it is and how to explain it to the seller, and what steps to use to protect the loan from being called, you can buy many more properties faster than you can if you have to go get new loans on each purchase.
Here is how . . .
When financing a property, the note says I owe x amount of money and the Deed of Trust or Mortgage says, "here is how the lender proceeds to take over the collateral or sell it if I don't pay the note as agreed upon." Generally, the person borrowing the money is personally liable on the loan. This means that if the collateral that backs the note, once sold, is not enough to cover the debt, the borrower must make up the difference from their other resources.
Traditionally, if you don't get a new loan when you buy a property, you will take over ownership and "assume and agree to pay the loan as was agreed upon."
However, for many years now, lenders have had a "due on sale" clause in their collateral agreements. This means that anytime the original homeowner sells or transfers any interest in the property to someone else, the lien holder may (but does not have to) require full payment of the loan now rather than continue to accept payments.
In the early years of the "due on sale" clause, the current interest rates were much higher than the rates on old loans, so lenders had a good reason to call the loans due where the "due on sale" had been violated. Now that interest rates have reached historic lows and interest rates are still low, lenders in general have not been filing "due on sale" cases at all. And, as a rule, unless something out of the ordinary happens, the lender never notices that a transfer has occurred. If you don't make the payments, they will notice. If you cause them a lot of paper work, they will notice.
Taking a property "subject to" existing mortgage means that you get the deed but you do not assume the loan. The loan stays in the original homeowners name, but you now control the property and make the mortgage payments on it. If you don't make the payments, you could lose the property and any equity in it. However, if you don't make the payments and you lose the property, there will be no personal liability beyond the loss of the property.
Typically homeowners who are behind on payments, in foreclosure or have no equity in the home are the most common types of motivated sellers you will be dealing with and perfect for buying "subject to". Even though these types of motivated sellers will agree to almost anything, it's a good idea to explain what you are doing, how it works and how they can benefit from it. They will benefit because you will be making their payments on time so it will help their credit. If they are concerned about what you are doing, you can explain to them that the risk of losing the equity is enough to keep you from missing payments or you can use a clause where you agree to pay off the sellers loans within a certain amount of time.
If they still are unsure, you could have some sort of an intermediate collect and disburse the payments. An intermediate would be a loan servicing company or trust company that can do this for you. Another idea is to have the seller open a savings account at the Savings & Loan that is carrying the loan, and you make the payment into that account and set that account up for auto pay of the loan. This way, the seller can check the account and see that the payment was made and paid out.
The idea has the added advantage of the S & L still seeing a payment come from whoever they were accustomed to seeing it come from.
The biggest problem comes with insurance. You must have insurance. And the homeowner's policy is only good for 30 days after the transfer. So, for starters, call or write the insurance company that has the existing policy, and ask them to add you to the policy. If you do this, remember to follow up in two weeks and change the policy to a "renters" policy rather than a homeowner's policy. Or, get a new homeowners policy in both your and the seller's name. Or just leave the original policy and go get a second policy. But now you have two insurance payments.
Yet another approach when dealing with insurance on subject to deals is to use a land trust. A land trust holds title to real property and is commonly used by homeowners for tax purposes and estate planning. The homeowner would be the beneficiary and you would be the trustee who carries out orders and controls the property. Then you would write a letter to the lender explaining the change and all correspondence be directed to the trustee who then changes the policy. To protect your interest in the property, beneficial interest would also be assigned over to you.
There is a chance, as interest rates climb in future years, that lenders will be more interested in who is making the payments. But the sure way to catch their attention is to get behind on payments. So those of you who are using "subject to" as a tool, make sure you do everything else by the book and on time.

Rob Alley, Realtor
The Avery Group at Roy Wheeler
540-250-3275
roballey@roywheeler.com
http://www.robsellscharlottesville.com
http://www.forestlakesliving.com
http://www.theaverygroup.com

How to perform or structure a Simultaneous Closing - Double Closing - Back to Back Closing?

Each state has different laws or requirements when performing or structuring a simultaneous, double or back to back closing and they're always changing. What they could do 5 years ago, they may not be able to now. Some states don't allow simultaneous closings, others do. Some title companies allow this, other's don't. It's in your best interest to search diligently for a title company that will handle this unique way of closing on a property. They will be able to assist you in making sure it is performed properly according to your state's laws and regulationsDouble closings and simultaneous closings have been around for awhile so don't give up after you talk to 15 title companies and each tell you it can't be done. Talk to investors and real estate agents who invest, get referrals until you find a title company that is creative. The right title company is worth their weight in Gold. Once you exhausted all your options, just remember, there are more creative financing options when buying foreclosures.

There are several ways in which you can perform a simultaneous closing double closing, or back to back closing. I am going to discuss one way to do it with foreclosures that are in default. In a nutshell, this is how it works. First you take control of the homeowners property via a Land Trust. This prevents any other judgments going on title before you get it closed. It also prevents chain of title issues and due on sales clauses. Either you or (preferably) your company becomes the Trustee of that Land Trust. Beneficial interest is signed over from the homeowners to another company with the proper paperwork. You can't have the same company being trustee and beneficiary or you have a conflict of interest and may cause title insurance issues.

Once you have negotiated the debt with the lender, your company, purchases the home from the homeowners for the agreed negotiated price. Your title company will prepare a HUD for this transaction. Your end buyer will then provide funds in escrow at title company. When your end buyer runs a title report, it still shows the homeowners last name in the form of a trust on title. So there shouldn't be any title issues.

Then your company sells the property to the end buyer. This is done simultaneously through your title company. Your title company wires the negotiated debt amount to the foreclosing lender. This must be the same as the first HUD 1. You get to keep the difference from the negotiated payoff amount with the bank and your end buyers purchase price minus any closing costs. It is best to consult with a legal professional or title company to find out if your state allows simultaneous or double closings. Each state will vary on procedures and your title company will assist you in the process.

Disclaimer: Every state is different and laws continue to change. This information is presented with the understanding that neither the publisher, author and or staff are engaged in rendering accounting, legal, and financial or other professional services. If legal advice or other expert assistance is needed, the services of a competent professional person should be secured. Considerable efforts are made to provide the reader with timely and accurate information; however there are no guarantees.

Rob Alley, Realtor
The Avery Group at Roy Wheeler
540-250-3275
roballey@roywheeler.com
http://www.robsellscharlottesville.com
http://www.forestlakesliving.com
http://www.theaverygroup.com

How to perform or structure a Simultaneous Closing - Double Closing - Back to Back Closing?

Each state has different laws or requirements when performing or structuring a simultaneous, double or back to back closing and they're always changing. What they could do 5 years ago, they may not be able to now. Some states don't allow simultaneous closings, others do. Some title companies allow this, other's don't. It's in your best interest to search diligently for a title company that will handle this unique way of closing on a property. They will be able to assist you in making sure it is performed properly according to your state's laws and regulationsDouble closings and simultaneous closings have been around for awhile so don't give up after you talk to 15 title companies and each tell you it can't be done. Talk to investors and real estate agents who invest, get referrals until you find a title company that is creative. The right title company is worth their weight in Gold. Once you exhausted all your options, just remember, there are more creative financing options when buying foreclosures.

There are several ways in which you can perform a simultaneous closing double closing, or back to back closing. I am going to discuss one way to do it with foreclosures that are in default. In a nutshell, this is how it works. First you take control of the homeowners property via a Land Trust. This prevents any other judgments going on title before you get it closed. It also prevents chain of title issues and due on sales clauses. Either you or (preferably) your company becomes the Trustee of that Land Trust. Beneficial interest is signed over from the homeowners to another company with the proper paperwork. You can't have the same company being trustee and beneficiary or you have a conflict of interest and may cause title insurance issues.

Once you have negotiated the debt with the lender, your company, purchases the home from the homeowners for the agreed negotiated price. Your title company will prepare a HUD for this transaction. Your end buyer will then provide funds in escrow at title company. When your end buyer runs a title report, it still shows the homeowners last name in the form of a trust on title. So there shouldn't be any title issues.

Then your company sells the property to the end buyer. This is done simultaneously through your title company. Your title company wires the negotiated debt amount to the foreclosing lender. This must be the same as the first HUD 1. You get to keep the difference from the negotiated payoff amount with the bank and your end buyers purchase price minus any closing costs. It is best to consult with a legal professional or title company to find out if your state allows simultaneous or double closings. Each state will vary on procedures and your title company will assist you in the process.

Disclaimer: Every state is different and laws continue to change. This information is presented with the understanding that neither the publisher, author and or staff are engaged in rendering accounting, legal, and financial or other professional services. If legal advice or other expert assistance is needed, the services of a competent professional person should be secured. Considerable efforts are made to provide the reader with timely and accurate information; however there are no guarantees.

Rob Alley, Realtor
The Avery Group at Roy Wheeler
540-250-3275
roballey@roywheeler.com
http://www.robsellscharlottesville.com
http://www.forestlakesliving.com
http://www.theaverygroup.com

How does Lien Priority affect me?

To explain this as simple as possible, when you buy a home and get a loan for the home, the lender puts a lien on the property. By doing so, the property becomes collateral for the loan. So, in the event the homeowner is unable to make payments, the lender can force the sale of the home to get paid. There can be several liens at one time on a single property?

Lien priority is based on when things get recorded. So let me give you an extreme example to illustrate lien priority.

Here is an example situation with about everything that you could possibly come by. We have a 1st mortgage for $250,000 with $15,000 in arrears. This would include all back payments, late fees, attorney fees and all the other fees they tack on. This was recorded 6-20-1999. We have a 2nd for $60,000 with $5000 in arrears. Again this includes the back payments and fees. This was recorded 7-21-1999. We have two judgments. One for $2000 recorded 3-2-03, and one for $4000 recorded 4-2-03. We have $3000 in state income tax recorded 5-5-04. We have a $6000 IRS tax lien recorded 10-20-04. And finally we have $5000 in property taxes recorded 2-11-05. Believe it or not all of these are different which we will talk about.

If we take a look at this example, we have a 1st mortgage and we can clearly see it was recorded first in 1999. We also have a 2nd who is clearly in 2nd position. Then we have a couple of judgments. The judgment for $2000 is in 3rd position because it was recorded before the $4000 judgment. So the $4000 judgment is in 4th position. Then we have state income tax for $3000 which is in 5th position.

Here is a simple version.

1st Mortgage -$250,000 recorded 6-20-1999-arrears $15,000
2nd Mortgage - $60,000 recorded 7-21-1999-arrears $5000
Judgment 1 - $2000 recorded 3-2-2003
Judgment 2 - $4000 recorded 4-2-2003
State Income Tax $3000 recorded 5-5-2004
IRS Tax Lien - $6000 recorded 10-20-2004
Property Taxes - $5000 recorded 2-11-2005

Are you starting to see the pattern? It's all based upon when you record. Whoever records before another would be in "Senior" position and the other would be "Junior". Hence the terms senior or junior lien holders.

Now we get down to the last 2. These last two have rules which we need to discuss. If we look at when these were recorded, the good ole IRS tax lien would be in 6th position. Now even though the IRS is in 6th position, they have what's called redemption rights. So here is the rule for IRS. It doesn't matter what position they are in, they could be in last position. If there is still equity in the property, they have 120 days to redeem the property. Why would they want to redeem the property? If there is a great deal of equity in the property and they know it, they can use that money to satisfy any tax liens. It is very rare the IRS does this, but it can happen.

Then we finally get down to the state property taxes. All of you need to remember this. This is very important. Here is the rule for property taxes. State property taxes have priority over EVERYTHING. It does not matter when it was recorded. If you look at this example, there is $5000 of unpaid property taxes that was recorded after everything else. It was recorded 6 years after the first mortgage. Guess what? It does not matter. Property taxes always get paid first.

So if we take a look at this example from what we just discussed, and the first is foreclosing - what is the opening bid at the auction? $250,000 + $15,000 + $5000(property taxes) = $270,000. All the other junior lien holders are wiped out if they don't protect their position except for... the IRS tax lien. Remember, they have their redemption period. Now here is something else you need to understand. Even though everyone was wiped out, the junior lien holders can still go after the borrower. This is called a deficiency judgment. Again this does not happen very often but it does happen. A deficiency judgment is an unsecured debt and does not attach to any property. Then depending on your states laws they can collect this debt.

If the 2nd is foreclosing - what is the opening bid? $60,000 + $5,000(arrears) = $65,000 and you are responsible for anyone senior, in this case the 1st of $270,000 for a grand total of $335,000. And everyone junior to the 2nd lien holder is wiped out except for IRS. See why it's so important to know who is foreclosing?

Rob Alley, Realtor
The Avery Group at Roy Wheeler
540-250-3275
roballey@roywheeler.com
http://www.robsellscharlottesville.com/
http://www.forestlakesliving.com/
http://www.theaverygroup.com/

How does Lien Priority affect me?

To explain this as simple as possible, when you buy a home and get a loan for the home, the lender puts a lien on the property. By doing so, the property becomes collateral for the loan. So, in the event the homeowner is unable to make payments, the lender can force the sale of the home to get paid. There can be several liens at one time on a single property?

Lien priority is based on when things get recorded. So let me give you an extreme example to illustrate lien priority.

Here is an example situation with about everything that you could possibly come by. We have a 1st mortgage for $250,000 with $15,000 in arrears. This would include all back payments, late fees, attorney fees and all the other fees they tack on. This was recorded 6-20-1999. We have a 2nd for $60,000 with $5000 in arrears. Again this includes the back payments and fees. This was recorded 7-21-1999. We have two judgments. One for $2000 recorded 3-2-03, and one for $4000 recorded 4-2-03. We have $3000 in state income tax recorded 5-5-04. We have a $6000 IRS tax lien recorded 10-20-04. And finally we have $5000 in property taxes recorded 2-11-05. Believe it or not all of these are different which we will talk about.

If we take a look at this example, we have a 1st mortgage and we can clearly see it was recorded first in 1999. We also have a 2nd who is clearly in 2nd position. Then we have a couple of judgments. The judgment for $2000 is in 3rd position because it was recorded before the $4000 judgment. So the $4000 judgment is in 4th position. Then we have state income tax for $3000 which is in 5th position.

Here is a simple version.

1st Mortgage -$250,000 recorded 6-20-1999-arrears $15,000
2nd Mortgage - $60,000 recorded 7-21-1999-arrears $5000
Judgment 1 - $2000 recorded 3-2-2003
Judgment 2 - $4000 recorded 4-2-2003
State Income Tax $3000 recorded 5-5-2004
IRS Tax Lien - $6000 recorded 10-20-2004
Property Taxes - $5000 recorded 2-11-2005

Are you starting to see the pattern? It's all based upon when you record. Whoever records before another would be in "Senior" position and the other would be "Junior". Hence the terms senior or junior lien holders.

Now we get down to the last 2. These last two have rules which we need to discuss. If we look at when these were recorded, the good ole IRS tax lien would be in 6th position. Now even though the IRS is in 6th position, they have what's called redemption rights. So here is the rule for IRS. It doesn't matter what position they are in, they could be in last position. If there is still equity in the property, they have 120 days to redeem the property. Why would they want to redeem the property? If there is a great deal of equity in the property and they know it, they can use that money to satisfy any tax liens. It is very rare the IRS does this, but it can happen.

Then we finally get down to the state property taxes. All of you need to remember this. This is very important. Here is the rule for property taxes. State property taxes have priority over EVERYTHING. It does not matter when it was recorded. If you look at this example, there is $5000 of unpaid property taxes that was recorded after everything else. It was recorded 6 years after the first mortgage. Guess what? It does not matter. Property taxes always get paid first.

So if we take a look at this example from what we just discussed, and the first is foreclosing - what is the opening bid at the auction? $250,000 + $15,000 + $5000(property taxes) = $270,000. All the other junior lien holders are wiped out if they don't protect their position except for... the IRS tax lien. Remember, they have their redemption period. Now here is something else you need to understand. Even though everyone was wiped out, the junior lien holders can still go after the borrower. This is called a deficiency judgment. Again this does not happen very often but it does happen. A deficiency judgment is an unsecured debt and does not attach to any property. Then depending on your states laws they can collect this debt.

If the 2nd is foreclosing - what is the opening bid? $60,000 + $5,000(arrears) = $65,000 and you are responsible for anyone senior, in this case the 1st of $270,000 for a grand total of $335,000. And everyone junior to the 2nd lien holder is wiped out except for IRS. See why it's so important to know who is foreclosing?

Rob Alley, Realtor
The Avery Group at Roy Wheeler
540-250-3275
roballey@roywheeler.com
http://www.robsellscharlottesville.com/
http://www.forestlakesliving.com/
http://www.theaverygroup.com/

Pages

About me

Blog Archive