URGENT BREAKING NEWS: New ‘Secret’ Program, Homeowners Given New Mortgages Immediately After Foreclosure!
New Emerging story that will certainly rock the real estate world…
We have verified the facts of this new ‘secret program’ are would be happy to share this information with anyone. (CNBC…)
Over the last 90 days we have been hearing from Harris Real Estate Coaching students that banks are now extending opportunities to REINSTATE mortgages loans…after a foreclosure…to the former homeowners!
You read that right….homeowner ‘loses’ their home to foreclosure. Legally, its no longer their home. Home is legally in the hands of the bank. In the past…after the homeowner loses the home in a foreclosure sale….they move out…afterall, its no longer their home..home becomes a REO listing.
Now, homeowners are being offered the opportunity to stay in their home…reinstate their mortgage reflecting the value as established at the foreclosure sale. New mortgage terms, market interest rates.
It seems that this new ‘secret’ program is being tested in many major markets across the US. The former homeowner is now able to REINSTATE their mortgage…at the new value as established by the foreclosure sale. In other words, the negative equity is gone…the second mortgage is gone….back property taxes paid off…back HOA fees gone. Their new mortgage amount IS the amount the lender paid at the foreclosure sale!
I want you to think about that for a moment. This means that even AFTER a homeowner missed payments…loses the home to foreclosure…that they can now IMMEDIATELY secure another loan for the homes current market value. WOW!
Consider this, 25% of all homeowners with mortgages are upside down by at least 10%…..10% of all homeowners with mortgages are upside down by at least 25%. HREU Students know that this trend of underwater homeowners will increase before it levels off. There are 50,000,000 mortgages in the US….as of today…6,000,000 aren’t ‘performing’. In other words, homeowners aren’t paying their mortgages!
What happens when all of these millions of upside down homeowners discover that they can have their negative equity wiped out….secure a new mortgage…and keep their home…if they let it go into foreclosure?
Let me know what you think about this…
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This is insane !! I heard that happened to a buyer I know here in CA.he was pending on an REO and I met him recently and he told me that the bank kicked him out of the transaction as the original owner is coming back !! And I thought he was smoking something when he said that, but now I beleive it.This country is the ultimate- we are rewarding bad behaviour once again.My question is- why foreclose in the first place?? Do a principal reduction rather than foreclose. It is a weird world that I don’t get it….
So, now that this is happening…across the US…PLEASE tell me where is the incentive for ANYONE to stay current on their mortgage if they are upside down?
Where is the incentive for anyone to do a mod if the mod won’t wipe out the negative equity?
What effect will all of this have on property value, attitudes towards homeownership?
Like it or not, everything HAS changed. Homes are merely ‘investments’ to most folks. And if the investment sours…bye-bye. From a financial perspective, who can argue with that logic?
From our industry’s perspective…ALL THE RULES HAVE CHANGED.
The ‘easy’ days in real estate where you could do well working the traditional methods are over. Amazing times.
Tim
Wow, what does this do to the real estate market as we know it! I know we will be receiving many questions from clients regarding this information, way to keep us on our toes. Thanks for the heads up!
Wow! This is awesome. Actually makes sense in a lot of ways. Think about it. These people don’t want to lose their homes. They are frustrated by a process that seems to offer little helpful solutions other than losing their homes. When the values get down to true market values or what has been revealed by the BPOs… usually significantly less than what is owed… no matter how they got here… these may be in a range that homeowners can now afford… and the fact remains these values are not coming back at the same pace anytime soon. This can help prevent a blight on many neighborhoods of vacant, neglected properties. I can tell you from personal experience there is nothing more traumatic than losing one’s home. It’s a wound that many will not recover from. And given the way our banking industry has behaved, with total disregard for their role (attributable to insatiable greed and profit-taking… witness the multi-billion dollar bonuses AFTER the meltdown & bailouts)in this, an unnecessary wound for property owners. This presents a viable solution to an extremely difficult situation impacting many families. It’s an ingenious, bold idea… let’s see how many markets use it and make it work.
I understand your points…my concern is…what happens when EVERYONE wants to do this? As you know, the numbers of upside down homeowners is simply epic. AND only getting worse. I see no reason to believe that
homes will regain their lost value for years (like 10+). So, once the markets finally hit bottom…(when, who knows…maybe 2011?) that will mean that 50% of ALL homeowners with mortgages will be upside down. I just read that it would cost something like 900 BILLION to write down all the negative equity for everyone in the country who is upside down…900 BILLION! Now, how much $$ went to the bank bail outs…hmmm…close to 900 BILLION! So, wanna place bets that the Obama Administration proposes a bailout for homeowners?
I bet that he does exactly that. My prediction is that we will hear word that they are ‘exploring’ some sort of massive homeowner bail out later this year. OR they will put more fuel on letting homeowners reinstate their mortgages post foreclosure at the reduced foreclosure price.
Bottom line, we are no where near the end of this interesting unraveling of what once was…The American Dream.
Tim
I am making regular payments on a $250,000 mortgage for a home with a purchase price of $280,000 3 years ago. I am in a “nice” subdivision with a number of vacant homes around me – not yet a blight. The most recent market appraisal indicates my home is worth $140,000 today.
If I lost my job tomorrow I would go to Bankruptcy Court before I went to the Unemployment Office.
Where do I sign up??
Confused in Arizona
Paul,
You aren’t alone…I am sure you know that.
Here is an interesting fact…across the US homeowners who can’t (or choose not to) make their upside down mortgage payments are staying in their homes for month…if not years..for free.
So, lets be clear…I am not advocating anything..just passing along the facts. For example, there was a report today that folks in Florida are staying in their homes for a year+ and making NO payments.
If you don’t qualify for a mod…and you want to get rid of the house….you need to connect with one of our students in your area who has our ASD designation…someone who knows how to get the short sale closed…and
knows the benefits to you vs a foreclosure.
Hope this helps!
Tim
Dear Tim & Julie,
I am an HRC with Titanium, and I have been sent out to offer a new mortgage to a homeowner AFTER the bank had taken back the home in foreclosure. I thought I read the assignment instructions incorrectly, but found out that this was indeed the case when I contacted my contact at Titanium.
I wish the Obama administration had proposed a bailout for homeowners, since the bank bailout has only helped the banks and their executive bonuses, not the hardworking American homeowners who are losing their homes at record levels.
Mary Kay
Great Information.. This is why I try and read your blog daily
With the market shifting and rules changing daily it’s nice to know that a coaching company – like yours – is staying informed and working to keep students up to date and prepared to lead the market.
The impact of this “reinstatement” of a loan will in effect rewrite re write state and federal laws. File foreclosure / wipe out the 2nd and junior lien holders there by reducing the barrows debit to income ratio, file the lost income on the company books, by pass traditional loan application process and go directly to the now defaulted barrow and ask if they would like to “buy” the house at the new terms and avoid moving and start rebuilding their credit (post foreclosure today). Man this will change EVEYTHING, or is it just another way of slowing foreclosure inventor onto the market. I have to wait and see what HRUE reports next
This truly is a great and well kept secret…I would like to know the step by step details on how the homeowners were able to get the banks to allow them to get their homes back.
This would realy help the decline in the market and we could get back to REAL real estate marketing.
Amazing potential changing of the ‘rules’. Why bother with short sale if you can wait are keep the house with new mortgage at the forclosure price? The problem would be the government spending another $900 billion we don’t really have! The huge government deficit is already causing problems as it is now. China could really “own us” and we lose more than the American Dream. Stay tuned.
What’s the point of shorting a house if this comes to fruition? This is nuts! The whole idea behind the short was to at least avoid a foreclosure and give the lien holders the opportunity to recoup some of their investment. I understand there’s a lot of homeowners hurting right now and in many cases it’s simply not their fault. Those homeowners should be given the opportunity to short the home, release the deed ant not be held liable. If it’s purely devaluation and the bank wants to release the deed then great, but the majority of the time that homeowner is probably going to be held liable for the deficiency especially if there’s no hardship. This has gotten way out of control. In my part of the country we haven’t seen the hits like you guys on the Coasts and in Ohio and Michigan. However, there’s too many people that can afford to keep the house and make the payments that are strategically walking away because they simply were not responsible…ultimately the rest of us should not have to take the hit who were responsible. This is crazy!
I hate to sound so self-centered–but I’m wondering what kind of shock waves this will mean for Realtors. How are these lenders who are conducting the pilot programs currently compensating the Realtors involved? Surely this portends a massive change for the Realty profession. Tim, Julie and others–how do you see this affecting all of us?
Mary….we suspect that those assignments to reinstate are on BEHALF of the Obama administration. They may be testing a new program…reinstatements.
So, you may very well be part of what will happen next. And..yes…I agree…the big banks got 800B to be bailed out….and that is almost exactly the amount of
money needed to make every underwater home in the US above water..
Tim
Well….how about this.
Picking up on a building story that indeed the powers that be in Washington are going to make this reinstatement program part of HAFA (part 2)
if the markets continue to tube…as they will.
Tim
Join Titanium….become a HRC….they are issuing these reassignments!
As agents we need to do our best to forget the old rules…the simple fact is that everything is changing.
Easier to say than do…I know.
As far as judgments…remember, starting in April of this year most lenders will be following the new Treasury Department Guidelines for short sales…that means no judgments.
Also, in the course of negotiating a SS its considered part of the process (the HREU process anyway) to have the lenders. PMI company…everyone…agree to not pursue a judgment. AND judgments are NOT
automatic as THE BANKS would want you to believe. In some states they CAN’T pursue a judgment. In the states where they can pursue a judgment they have a limited time after the sale to do so…Nevada, 90 days for example.
I DO KNOW….100% for sure…. that the banks are scared as hell of the growing movement of strategic SS and Foreclosures. They only thing they can do is cause upside down owners to fear the unknown threat of a judgment (remember, most will never
have a tax issue)..and then pray these underwater owners stay put and suffer.
Watch for the banks trying to play that hand any day now. Next, watch the political beat down that will follow. Banks thought the lynch mobs that formed after the whole bank bonus stink was bad…just wait until they start playing the judgment hand.
Bottom line, we are not out of this mess….not even close. After markets hit bottom we will still have years of issues to resolve. Such is the way.
Tim
Andy…if I am being 100% honest not trying to be Agent PC (when I say thing that aren’t agent PC we often get a very negative reaction from the old gaurd)…I would suggest that we have lost control of the game. The NAR has done an incredible job of keeping the big banks out of our industry….of beating down the various proposed transactional taxes….of protecting us. I know that many agents (and others) tear down the NAR…I dont and never will. I know that w/o the NAR we would be toast. Lets be honest….we (Realtors) have virtually no allies. No one likes us. Thats just a fact. Our strength has been weakened dramatically from an influence perspective. The big banks and the government ARE now in housing. Matter of fact…the big banks and the government now CONTROL our industry.
Proof? OK, banks no tell you what your commission is. If it weren’t for the new Treasury Guidelines mandating our commission to be 6%…(thanks to the NAR) do you think the banks would of every agreed to pay a 6% fee. NOW WAY.
Look at all of these emerging ‘save the homeowner programs’ that Julie and I are discovering being beta tested across the US. The GOVERNMENT is now in complete control over what the future of housing will be….more proof? Hopw about Fannie and Freddie…GSE’s, right? No more GSE’s and there would be virtually NO home sales. 60%+ of all sales in 09 were using the GSE’s.
Another fun fact…reading the CAR monthly magazine the other day….get this…for the first time ever…the number of agents is decreasing…and the number of new agents getting into the biz is also DECREASING. Why is this important? Well, in virtually every other economic slow down the Realtor rosters INCREASED when the economy was bad. In other words, people couldnt find jobs…so, they became agents. NOT NOW. We have record unemployment and the number of new agents is DECREASING.
Ponder that for a moment. What will few agents, less $$ going to the NAR etc result in?
Tim
Wow, you guys have nailed it again…Tim you are on the $$$$. From my perspective being in the business for 9-years now in california (where I have lived all my life), there is no precedence to our current market. The rules have changed forever and homeownership attitudes are ever changing. Strategic defaults used to be for the rich-upper end of the market but now we see it on all levels. As realtors, we better stay educated on the pulse of what’s coming down the road, or we will get get run over by it…I still don’t know what to do about it but at least my eyes are open!
OK, I agree that “strategic default” is increasing and can be very tempting but I don’t see the explanation of how they avoid the consequences. Not all but many can afford to stay and can not prove hardship. Even without a deficiency judgement, the fact of ‘bad credit’ is a real issue to be faced. Only the truly “rich” can afford to always pay cash (plus the serious Dave Ramsey students!). What am I missing here?
Well if you understand how all the players make money it is easy to get. There are usually about 10 to 12 players involved in the ownership of the loan who have all raked money out of the transaction. The 2 main players are the Servicer bank(they collect your payments but don’t own your loan) and the bank where your loan sits in an investment pool. The servicer that controls the foreclosure makes about 46% mor profit when they foreclose on a loan than when it is performing. Yikes.. Foreclosures are a gold mine for them… Then they are willing to sell it back for what you owe plus all their fees after foreclose. They only get the windfall if they foreclose. It is a quick way for them to cash and then cash again… The owner of the note (the pool) has probably been paid off many times over on your loans with the credit default swaps. Those are bets that were made that you wouldn’t be able to pay the loan… Both the pool and the servicer cash when you default and they foreclose… Wall street is making a killing off our foreclosures. Why do you think the banks are doing so well right now…
This seems to be great option for all the upside downers,for all the homeowners with equity faceing foreclosure,has added stress and cause to hustle and sell prior to loseing their equity.
Seems like the foreclosing banks would benefit financially from reinstating the owners. The banks would not have to pay the expenses of the REO sale. The banks essentially “partner” with the owner to remove all other leins. The owner again has incentive to make the payments.
Mr. Harris – I saw this blog today. We have been foreclosed on just this week. We were also contacted by Titanium Inc beforehand. If this is actually really happening, how would one possibly go about suggesting it to the mortgage company.
Hi,
Did you keep the info from the agent from Titanium? They probably left a card….call that agent. That agent may have something for you…I don’t know. The lender via Titanium would be presenting the reinstatement to you…you wouldn’t be asking for it etc. This is not part of HAMP or HAFA.
I honestly have no clue how expansive the reinstatement program is….nor which lenders are participating.
Sorry about your situation. If it helps, you are not alone.
Tim
Tim–
I wonder if your information indicates these offers–to reinstate with a reduced principal amount–are still going on, and how widespread this is. As an Titanium HRC I have seen some Reinstatement offers, but only based on the same terms as the forecloseed mortgage, with certain qualifications (income, etc.). I have not heard about the reduced principal reinstatements anywhere but this blog, and I’m wondering why it hasn’t hit the news.
Andy,
They are offering to reinstatements at the foreclosed price….as in….no more second, no more back HOA, no more back property tax…etc. All wiped out during the foreclosure process.
Thus, the ultimate principal reduction.
These are Fannie/ Freddie owned loans, FYI.
Tim
I am guessing that this won’t be offered to you….I have no idea why/ how/ how they go about deciding who to offers these reinstatements to.
Not banks….Fannie and Freddie. In other words…you and me. We fund those entities with our tax money.
Tim
Does the homeowner have to qualify and submit a 1003 as a new loan or is the new mortgage amount offered as a loan modification program; meaning, their credit score or recent foreclosure is not taken into account when qualifying for the new mortgage amount?
Realtor and HRC for Titanium , Yes it’s real and will soon become wide spread. New programs are being developed that are in action now. Massive quanity of assignments to HRC’s to field inspect homes and give comment on vacancy and condition of homes are being set up. Most likly for the new Home retension bail out program.Once everything is in place and testing completed, the program will meet final approval. It wont be long. Fiels agents and HRC’s get ready!
Yes, it’s true. I’ve been given 2 assignments by Titanium to speak with homeowners of foreclosed homes to re-instate their loans. I was shocked in the beginning and did read the assignment twice. The lender in both cases was Freddie Mac. I’m in San Diego, CA.
So where does that leave the responsible payers?
I have several past clients in the Detroit Metropolitan area whose values have plummeted anywhere from 30-60%. Young couples, many who had a four-five year plan and bought a starter house during the markets peak. There payments are current. They have completed degrees, obtained good paying jobs, and now find themselves stuck in a home that is too small, not in the neighborhood that they would like to be in, and hugely underwater.
They have done what they feel is the right thing. They are proud of there credit scores and lack of debt. They are making payments on there $130,000 mortgage every month without question, knowing that the family across the street paid $40,000 for the same floor plan, received a buyer tax credit from the government, and are often paying a lower interest rate.
But they want more for themselves and there families. They don’t know how to get there and they are frustrated. How do we help them? Isn’t this just another kick in the face to them? If they choose to do a strategic short sale, staying current on there payments throughout the process, what are the odds they will be approved for the short sale? What are the odds they will be able to obtain a mortgage afterward? How do we help them?
Hi Rita,
The honest answer….non-real estate industry politically correct answer….is that real estate in most major markets is not to be seen anymore as a vehicle to build wealth:
http://timandjulieharris.com/2010/08/23/realtors-must-read-the-future-of-housing-in-flux-2011-real-estate-market-housing-predictions/
Hope this helps!
Tim