There has been an upsurge recently in banks offering cold, hard cash to homeowners if they sell via shortsale.  As homeowners learn how to fight foreclosures, the banks are finding it saves money to just belly up to the bar and offer cash to sell.  From CNN Money,

And as the cases drag, expenses grow. Homeowners not only stop paying their mortgages but they stop paying property taxes and conducting normal maintenance as well. Roofs, siding, plumbing and other parts of the home deteriorate and the property loses value. By the time banks take possession, they’re out tens of thousands of dollars.

If my bank called today to make the offer, I’d first be suspicious but – if it was a real offer – I’d take the money and run!

While the majority of people who are upside-down on their homes, behind on their mortgage payments, or who’ve lost their homes will not benefit from the massive settlement, some will be helped.

Today 49 states and federal officials settled with some of the nation’s biggest banks to the tune of $25 billion.  However we are still in the dark about whether you, me, and our neighbors will be helped.  According to MSNBC,

The settlement largely affects borrowers whose loans are serviced by five big banks: Bank of America, Citi, JPMorgan Chase, Wells Fargo, and Ally/GMAC. Loans owned by government-owned mortgage giants Fannie Mae and Freddie Mac are not affected. Borrowers from Oklahoma also will not be eligible because officials from that state did not join the settlement.

There are a lot of people in this nation tonight crossing their fingers that relief is coming. Unfortunately it will take many nights of crossed fingers before they get their answer.

I have a confession to make here.  My husband’s job was outsourced to India two years ago and he has yet to find another job. Fortunately my own work life has improved so we have managed to stay in our home. We have, however, because of the displaced worker issue requested to modify our mortgage.  We have been trying to do this for a year and a half.  We fax our papers every two months (or more if they ask) showing paycheck receipts.  We  call Wells Fargo every week.  And still… nothing.

This is why as I read the article about the new task force investigating mortgage fraud, I feel a little sense of relief.

After a year of talks aimed at a settlement with five big banks — Bank of America, JPMorgan Chase, Wells Fargo, Citibank and Ally Financial (formerly GMAC) — attorneys general in all 50 states this week have been are poring over the 100-page draft of a the $25 billion deal requiring bankers to commit to modify problem loans that they have been slow to do until now. Under the proposed terms, the banks would also agree to follow strict foreclosure guidelines and procedures and contribute as much as $5 billion to foreclosure relief programs.

I don’t believe for a minute that it will help my husband and me – Mr. & Mrs. Joe Average – but it does give me a sense of satisfaction that perhaps SOMEONE will be helped.

It’s that time of year again.  Santa Claus is coming to town, Rudolph’s nose is blinking, and we want to let it snow let it snow let it snow!  It’s also time for what’s becoming an annual tradition – a foreclosure moratorium by Fannie, Freddie and banks … a holiday reprieve if you will. From CNN Money,

For homeowners with loans through Fannie Mae and Freddie Mac, the moratorium will run from Dec. 19 to Jan. 2. During this time, legal and administrative proceedings for evictions may continue, but families will be allowed to stay in their homes, Fannie said in a statement.

“No family should have to give up their home during this holiday season,” said Terry Edwards, an executive vice president for Fannie Mae.

In addition, Wells Fargo, Chase, and Bank of America are not kicking out homeowners for several weeks.

I have had only one experience with dealing with a bank to contact the unknown owner of a home.  The person had lost her job and was behind on both home loans.  Foreclosure was imminent.  The bank I worked with was the second lien holder and in the end they lost everything – except the ability to sue the homeowner for breach of contract.

I had nothing to offer the homeowner and the lien holder really could not offer anything either.  However, if a  bank holds the FIRST lien on a property, they have more room to negotiate.  And what they banks are negotiating is “cash for keys” where they pay homeowners to move out without destroying the house.  They turn in the keys of a home in good condition for cash.  From MSNBC,

[A real estate agent] She’s typically able to offer them between $500 and $2,500, depending on the lender, if they agree to move out within 30 days, leaving the place “broom-swept” clean.

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Foreclosure experts note that “cash for keys” may become more mainstream not just for foreclosures but also for short sales, where an owner is trying to sell their home for less than they owe. In those cases, the lender must agree to accept the sale price.

It makes good sense to take the money and run, especially if you’re going to be evicted for non-payment of mortgage anyway.

For the sixth week in a row, mortgage rates have dropped.  Now at 4.35 percent, this is the lowest rate Bankrate has recorded in the last 26 years.  According to the site,

One year ago, the mortgage index was 4.58 percent; four weeks ago, it was 4.46 percent.  The benchmark 15-year fixed-rate mortgage remained the same, after dropping 15 basis points last week.

While some predict that rates will not go lower, other observers believe the suffering job market may cause them to drop further.

In a conversation several days ago, one friend described how she was told to cheat in order to be approved for a mortgage loan when she bought her house.  She felt very uncomfortable following her lender’s instructions on the “declared income” loan she acquired.   Another friend said, “I can beat that!”  In detail she described how her real estate agent FILLED OUT a new FALSIFIED tax return and said, “These never get audited.”

As a Realtor, I was horrified and appalled to hear that this agent – who was very well known in my local area – actually FILLED OUT a fake tax return herself!  She went on to call the lender who was her best friend and asked for instructions on certain parts!

This is why it is now so hard to find a mortgage.  There were not enough checks and balances in place to stop this kind of fraud.  And there were lenders who blindly turned their eye from the criminal activity.

Now the party is over and it is time to pay the band.  The U.S. government through Fannie Mae and Freddie Mac is set to sue some of the big banks over their negligence in not performing due diligence in the home loans they packaged to the Feds.  According to MSNBC.com,

The suits will argue the banks, which assembled the mortgages and marketed them as securities to investors, failed to perform the due diligence required under securities law and missed evidence that borrowers’ incomes were inflated or falsified. When many borrowers were unable to pay their mortgages, the securities backed by the mortgages quickly lost value.

Fannie and Freddie lost more than $30 billion, in part as a result of the deals, losses that were borne mostly by taxpayers.

If *I* have heard so readily about cases of falsified mortgages, then there is no excuse for the banks to have allowed them to go through without question.  Sad how these crooks have helped bring the U.S. economy to its knees.

Want to buy the adorable doll house with the white picket fence along a shaded street with sidewalks?  You have a steady job, good credit, a down payment?  Well not so fast, love, because you still might not get the home loan.  According to CNN.com, people are being denied loans even when they easily qualify,

Banks are reluctant to make loans without the Fannie and Freddie guarantee, and loans backed by them account for just about every mortgage written these days.

In 2009, the agencies lifted the minimum credit score that borrowers must have from 580 to 620. That’s probably for the best.

But they’ve pushed through a host of other requirements as well, and that means real estate deals don’t get done, even for some relatively low-risk borrowers.

Missed payments on credit cards, too few condos sold in the neighborhood, and vulture investors may share the blame. And the only solution is to apply somewhere else… maybe someone else will take the big step and allow people to purchase mortgage loans again.

Bank of America blamed bad mortgages for its $1.6 billion loss in the 4th quarter of 2010.  Many of these bad loans became an entree on BoA’s table when it purchased Countrywide Home Loans in 2008.  Had the bad loans not been there, the firm would have earned four cents per share.

Meanwhile pressure is there for Bank of America to step up and buy back previously sold loans according to the Associated Press through Comcast Finance,

Investors say that the bank should take back the bad home loans because they were sold on improper documentation. Besides buying back bad loans, several banks were stung by accusations in the fourth quarter that they failed to properly review documents used in foreclosures. Attorneys general from all 50 states are conducting an investigation.

What does Bank of America’s report mean to the consumer?  Given that losses have slowed, it demonstrates that finances across the board – from corporate level to regular people like you and me – are improving.  More house payments are being made on time.  This is good.

You’d think this is a headline from four or five years ago, wouldn’t you?  Actually I came upon this today – an article written today by an Atlanta real estate agent.

Apparently Wells Fargo is accepting a credit scores as low as 500 with a specific down payment amounts and using FHA loans only.  From North Atlanta Real Estate,

Please note the following particulars as Wells begins to source up and process these transactions:

If 500-579 – MUST HAVE 10% DOWN
If 580-600- MUST HAVE 5% DOWN
NO GIFT FUND OR DPA (Down Payment Assistance) CAN BE USED FOR DOWN PAYMENT
DTI: (Debt to Income Ratio 31/43
Refer – 31/ 36 AND 2 MONTHS PITI RESERVES
ALL LOANS HAVE TO GO TO EXCEPTION DEPARTMENT! And reminder this is for ONLY PURCHASES, no refi’s!

I had heard that Wells Fargo still accepts 600 credit scores in certain situations, but 500 seems really low.  I wonder what the interest rate is on these loans – 8 percent? 8.5 percent?

Interesting…

Happy weekend and MLKing Day Monday!

Photo by Andrew Magill via flickr creative commons.