Sun Sentinel
11:04 a.m. EST, January 4, 2012
Now is the time to make the hard decision: Are you going to walk away from your underwater home?
Uncle Sam is still giving homeowners until Dec. 31 to go through a short sale or foreclosure without tax consequences -- as long as the lender officially releases the debt.
But on Jan. 1, 2013, the rules change: The amount a lender forgives, ether in a short sale or foreclosure, on a primary residence will be taxable on federal income taxes.
So if a house sold $50,000 short of what is owed on the mortgage, then the selling homeowners will owe federal income taxes on that $50,000. Homeowners would owe $12,500 in they're in the 25 percent bracket; $7,500 if in the 15 percent tax section.
Homeowners would be on the hook even if the house sold but the bank had not formally forgiven the loan in a letter: The banks must officially sign off in writing before Dec. 31.
"It's a huge issue -- it will be a shock to many taxpayers after 2012,'' said Mark Steber, the Florida-based chief tax officer for Jackson Hewitt Tax Service.
The law first came into affect five years ago as the housing market went bust nationwide.
The Mortgage Debt Relief Act of 2007 "generally allows taxpayers to exclude income from the discharge of debt on their principal residence,'' according to the Internal Revenue Service. "Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure, qualifies for the relief."
Up to $2 million of forgiven debt can be forgiven this year, $1 million if married and filing separately, according to the IRS.
Homeowners declaring bankruptcy could escape paying income taxes on any cancellation of debt income if the debt is forgiven in the bankruptcy even if the debtor is solvent, said Nick Jovanovich, a board-certified tax attorney in Fort Lauderdale.
"Bankruptcy trumps everything,'' he said.
Or homeowners might not have to pay income taxes on any cancellation of debt income to the extent that they are insolvent immediately before the cancellation -- that is, their debts exceed the value of their assets, Jovanovich added.
Steber and Jovanovich said homeowners should decide now what they are going to do -- to give themselves time.
Short sales can take a long time, said Timothy Singer of Coldwell Banker in Fort Lauderdale.
He said he knows of one that had been pending for three years.
But lenders "have been gearing up" and speeding up the process, Singer added.
But even if banks quickly approve a short sale, the would-be buyer may get cold feet and the deal fall through, Singer said.
Then the sellers have to begin again, he said.
2/3/2012
There was an excellent piece on public television tonight about Obama's failure to steady the housing market, and the challenges of trying to not lose your home when Bank of America, Chase, or Wells Fargo is your bank.
Their website has the video, and 3 good articles about the subject. http://www.pbs.org/wnet/need-to-know/
Posted: 11:21 a.m. Friday, Jan. 20, 2012
A third year of surging home sales in Palm Beach County has buoyed hopes of a market turnaround as 2011 ended with a 24 percent hike in purchases.
And while year-end median prices for existing single-family homes slipped 15 percent to $193,700, Realtors said Friday that low inventory has kicked up bidding wars that may boost prices.
"It's been a long down cycle, but it can't last forever," said Bill Richardson, president of the Realtors Association of the Palm Beaches. "I really do believe we are in a recovery. It won't be meteoric, but there will be a steady climb."
According to the Florida Realtors, which on Friday released total sales numbers for last year and December, 185,921 homes were purchased statewide in 2011, a 9 percent increase from the previous year.
Just two of the 19 regions the Florida Realtors measured saw dips in 2011 home sales, with Fort Myers dropping 7 percent and the Treasure Coast 6 percent.
The median sales price statewide ended the year at $131,700, 3 percent below 2010.
More recently, December prices were up from the previous month, rising 5 percent in Palm Beach County and 3 percent statewide.
"There's a pretty good amount of stabilization and a little increase in pricing," Richardson said.
Nationwide, total sales of existing homes last year were up 1.7 percent from 2010 with 4.26 million purchases, according to a National Association of Realtors report released Friday. December saw a bigger bump, with a 5 percent increase from the previous month.
The national median sales price was $164,500 in December, 2.5 percent below the previous year.
Lawrence Yun, chief economist with the National Association of Realtors, said a positive economic buzz has bolstered sales.
"Record low mortgage interest rates, job growth and bargain home prices are giving more consumers the confidence they need to enter the market," Yun said.
The average interest rate on a 30-year conventional fixed-rate mortgage fell to a record low of 3.96 percent in December from 3.99 percent the previous month, according to mortgage backer Freddie Mac. The rate was 4.71 percent in December 2010.
But tighter lending standards have reduced the pool of eligible borrowers. That, combined with a queasy stock market, has led to higher cash deals, said Jon Turla, president of the Florida Association of Mortgage Professionals.
"When you can pick up a property for 30 cents on the dollar, it's a good investment," Turla said.
All-cash sales accounted for 31 percent of home purchases nationally in December, up from 29 percent in 2010.
Investors played a substantial role in December sales nationwide, buying 21 percent of homes sold, about the same as December 2010.
Investor activity also is boosted by an increasingly strong rental market, Richardson said. That may account for the 30 percent jump in Palm Beach County condominium sales last year from 2010 as investors vie for easy rental units. Statewide, condo sales were up 15 percent.
At the same time, the median price for a condominium dropped 14 percent in Palm Beach County to $77,500 and 2 percent statewide to $88,300.
One looming cloud on the real estate horizon is the shadow inventory of foreclosures destined to hit the market after a long slog through the courts. In Palm Beach County, about 34,820 foreclosure cases are pending. Statewide, there's an estimated backlog of 260,815 cases.
With only 5.9 months' worth of single-family home inventory in Palm Beach County - the lowest since 2006 - Realtor Sherry Lee hopes to see some of that shadow inventory soon. Lee, whose Lee Property Sales is based in West Palm Beach, said clients are shocked at today's paltry selection.
"They try to bid on something only to realize that there are multiple offers," Lee said. "I'm looking six times a day for every little new listing."
Debt-relief window closing soon...
January 13, 2012
The window is closing rapidly on one of the most important tax-relief provisions enacted by Congress during the housing crisis to help financially strapped homeowners.Although the 2007 law that allows taxpayers to exclude from income the amount of debt that is forgiven or canceled by their lenders doesn't expire until Dec. 31, it's likely to take every bit of the next 11 months to persuade your bank to either foreclose or allow you to sell your house for less than it's worth.While owners who are struggling to hold onto their homes shouldn't throw in the towel solely because of the pending tax bite, it is certainly something to consider.Under the tax code, borrowed money need not be reported as income because you have an obligation to repay. But if the lender subsequently cancels what you owe, the IRS requires that you report that debt as income because the duty to repay it no longer exists.So, if you owe $250,000 and your lender forgives $50,000 of that debt in a $200,000 refinancing, that $50,000 is considered income. If your combined federal and state marginal tax rate is 36 percent, you would owe $18,000 in taxes.Under the Mortgage Forgiveness Debt Relief Act of 2007, though, taxpayers are allowed to exclude from income the discharge of debt on their principal residence — at least until 2013.So when your lender agrees to a short sale, there is no tax on the difference between the selling price and the amount you owe. When your lender forecloses, there is no tax on the canceled debt. Even when you refinance at a lower loan balance, there is no tax on the difference between what you owed on the old loan and what you now owe on the new one.But unless Congress extends the law — and there is no indication lawmakers are even thinking about that — all residential mortgage debt relief that takes place on or after Jan. 1, 2013, will once again be considered taxable income.Why worry about this now, nearly a year before the law changes? Because the timelines on debt forgiveness decisions by lenders are absolutely horrendous.As of October, it was taking lenders an average of 674 days to process a foreclosure, according to Lender Processing Services, a Jacksonville, Fla., mortgage technology firm. That's more than 22 months, or almost two years from the time the process starts to when the property is actually repossessed. And lenders don't even start the process until an average of 391 days after last receiving a payment.Lenders are moving even more slowly in the 24 so-called judicial states, where a judge has to sign off on each foreclosure. In those jurisdictions, the process is taking an average of 826 days, or more than 27 months.Lenders are acting more quickly in the District of Columbia and the 26 states where foreclosure is an administrative process. But at an average of 605 days, the process isn't exactly moving at warp speed in those jurisdictions, either.Of course, each state has a different timeline. But the shortest is 463 days in Minnesota, according to Lender Processing Services. So the tax absolution window may already be closed for foreclosures.There are no hard-and-fast numbers when it comes to short sales or refinancings. But they also can be long, drawn-out transactions.According to a nearly year-old survey by Equi-Trax Asset Solutions, a Santa Barbara, Calif., analytics company, it can take anywhere from four to nine months for underwater borrowers to persuade their lenders to sign off on a deal in which the lender will net less than what the borrower owes.Eighteen percent of the 600 agents polled said short sales can be closed in less than three months if the stars line up just right. But almost 10 percent said these transactions require more than 10 months to complete.A refinancing that involves principal amnesty is probably the quickest of the three debt-forgiveness scenarios. At Carrington Mortgage Services, a Santa Ana, Calif.-based lender licensed in 32 states, a "short-refi" takes anywhere from 45 to 60 days.There are many factors besides a tax break to consider when deciding whether to give up your house. What will a foreclosure or short sale do to your credit score? How long will you be precluded from buying another house? Will the extra income push you into a higher tax bracket?Consequently, as always when it comes to such matters, you should consult a tax professional before making any decisions.Figuring your taxesAs the debt-forgiveness tax break is set to expire, here are a few important rules that you and your tax preparer need to know:The debt-relief law applies only to debt incurred to buy, build or improve a personal residence.The law does not apply to vacation homes or investment properties.The maximum amount you can treat as indebtedness is $2 million, or $1 million if you are married but filing separately.For more detailed information, see IRS Publication 4681.
Inside the Fed in 2006: A Coming Crisis, and Banter
By BINYAMIN APPELBAUM | New York Times – Fri, Jan 13, 2012 7:42 AM EST
WASHINGTON — As the housing bubble entered its waning hours in 2006, top Federal Reserve officials marveled at the desperate antics of home builders seeking to lure buyers.
The officials laughed about the cars that builders were offering as signing bonuses, and about efforts to make empty homes look occupied. They joked about one builder who said that inventory was “rising through the roof.”
But the officials, meeting every six weeks to discuss the health of the nation’s economy, gave little credence to the possibility that the faltering housing market would weigh on the broader economy, according to transcripts that the Fed released Thursday. Instead they continued to tell one another throughout 2006 that the greatest danger was inflation — the possibility that the economy would grow too fast.
“We think the fundamentals of the expansion going forward still look good,” Timothy F. Geithner, then president of the Federal Reserve Bank of New York, told his colleagues when they gathered in Washington in December 2006.
Some officials, including Susan Bies, a Fed governor, suggested that a housing downturn actually could bolster the economy by redirecting money to other kinds of investments.
And there was general acclaim for Alan Greenspan, who stepped down as chairman at the beginning of the year, for presiding over one of the longest economic expansions in the nation’s history. Mr. Geithner suggested that Mr. Greenspan’s greatness still was not fully appreciated, an opinion now held by a much smaller number of people.
Meanwhile, by the end of 2006, the economy already was shrinking by at least one important measure, total income. And by the end of the next year, the Fed had started its desperate struggle to prevent the collapse of the financial system and to avert the onset of what could have been the nation’s first full-fledged depression in about 70 years.
The transcripts of the 2006 meetings, released after a standard five-year delay, clearly show some of the nation’s pre-eminent economic minds did not fully understand the basic mechanics of the economy that they were charged with shepherding. The problem was not a lack of information; it was a lack of comprehension, born in part of their deep confidence in economic forecasting models that turned out to be broken.
“It’s embarrassing for the Fed,” said Justin Wolfers, an economics professor at the University of Pennsylvania. “You see an awareness that the housing market is starting to crumble, and you see a lack of awareness of the connection between the housing market and financial markets.”
“It’s also embarrassing for economics,” he continued. “My strong guess is that if we had a transcript of any other economist, there would be at least as much fodder.”
Many of the officials who appear in the transcripts have since spoken publicly about the Fed’s failings in the years before the crisis. But the transcripts provide a raw and detailed account of those errors as they were made. Evidence of problems in the housing market accumulated at each meeting of the Federal Open Market Committee, which sets policy for the central bank.
“We are getting reports that builders are now making concessions and providing upgrades, such as marble countertops and other extras, and in one case even throwing in a free Mini Cooper to sweeten the deal,” George C. Guynn, then president of the Federal Reserve Bank of Atlanta, said at the June meeting.
The committee consists of the governors of the Federal Reserve and the presidents of the 12 regional banks.
“The speed of the falloff in housing activity and the deceleration in house prices continue to surprise us,” Janet Yellen, then president of the Federal Reserve Bank of San Francisco, said in September.
One builder she spoke with, she said, “toured some new subdivisions on the outskirts of Boise and discovered that the houses, most of which are unoccupied, are now being dressed up to look occupied — with curtains, things in the driveway, and so forth — so as not to discourage potential buyers.”
For a famously private institution known for its cryptic, formulaic statements, the meeting transcripts offer a rare glimpse of senior officials in relatively unguarded conversation, somewhat akin to the tapes that some presidents have made in the Oval Office. The Fed officials exchange jokes, gossip about people who are not present, and speak much more frankly about the economy and policy than they did in the public remarks that they made contemporaneously.
The results are unlikely to burnish any of their reputations, inasmuch as they could not see the widening cracks beneath their feet. But the Fed’s chairman, Ben S. Bernanke, appears as the most consistent voice of warning that problems in the housing market could have broader consequences.
The general consensus on the board, summarized by Mr. Geithner, was that problems in the housing market had few broader ramifications. “We just don’t see troubling signs yet of collateral damage, and we are not expecting much,” he said at the September meeting.
Mr. Bernanke initially agreed, telling colleagues at his first meeting as chairman, in March, “I think we are unlikely to see growth being derailed by the housing market.”
As the year rolled along, however, Mr. Bernanke increasingly took the view that his colleagues were too sanguine.
”I don’t have quite as much confidence as some people around the table that there will be no spillover effect,” he said.
As for Mr. Geithner, who became Treasury secretary in 2009, his spokesman, Anthony Coley, said, “Secretary Geithner was an early source of initiative at the Fed to reduce risk and make the financial system more resilient even before 2006.”
Some Fed officials argued that a housing slowdown would be good for the broader economy.
“I really believe that the drop in housing is actually on net going to make liquidity available for other sectors rather than being a drain going forward, and that will also get the growth rate more positive,” Ms. Bies told colleagues at the committee’s June meeting. Ms. Bies could not be reached for comment Thursday.
And even Ms. Yellen did not believe that the problems in the housing market would have broader consequences. “Of course, housing is a relatively small sector of the economy, and its decline should be self-correcting,” she said.
One fundamental reason for this blindness was that Fed officials did not understand how deeply intertwined the housing sector and financial markets had become. They also were convinced that financial innovations, by distributing the risk of losses more broadly, had increased the strength and resilience of the system as a whole.
“I would say that the capital markets are probably more profitable and more robust at this moment, or at least going into the six-week opportunity, than they have perhaps ever been,” Kevin Warsh, the Fed governor who watched Wall Street most closely, said at the meeting in September 2006. Three months later Mr. Warsh said almost exactly the same thing. He did not respond to an e-mail seeking comment Thursday.
For the Fed 2006 began with the departure of Mr. Greenspan, who presided in January over his final meeting as Fed chairman and was then widely regarded as the epitome of a central banker, a master who had guided the American economy through almost 20 years of remarkably consistent growth.
“I’d like the record to show that I think you’re pretty terrific, too,” Mr. Geithner said in adding his voice to the chorus of tributes at that final meeting. “And thinking in terms of probabilities, I think the risk that we decide in the future that you’re even better than we think is higher than the alternative.”
Ms. Yellen said: “It’s fitting for Chairman Greenspan to leave office with the economy in such solid shape. The situation you’re handing off to your successor is a lot like a tennis racquet with a gigantic sweet spot.”
Comment by Sherry Lee: Epic fail by the federal government.
Posted: 6:18 p.m. Sunday, Jan. 1, 2012
Bank of America's cash-back incentive, which tempted delinquent borrowers to do a short sale over a lengthy foreclosure, ended Dec. 12 with mixed reviews from Realtors and tepid homeowner response.
The Florida-only program offered between $5,000 and $20,000 in relocation expenses to qualified homeowners who agreed to vacate their homes through a short sale in lieu of the average two-year foreclosure process.
But as of early December, only about 3,000 homeowners of 20,000 solicited by the bank had expressed interest in the plan, which one real estate consultant said was unthinkable before the robo-signing scandal heightened the foreclosure chaos.
"A year ago, banks weren't making offers like this. Now, it's a complete reversal in that they are proactively soliciting short sales," said Jack McCabe, chief executive of McCabe Research & Consulting in Deerfield Beach. "They are offering unbelievable deals."
A short sale is when a lender agrees to accept less for a home than what is owed on the mortgage. Sometimes, the bank also will agree to waive the deficiency judgment - money still owed by the homeowner on the mortgage debt.
Realtors say banks, including Wells Fargo and JPMorgan Chase, began offering cash incentives about six months ago to homeowners who agree to do short sales. With foreclosures taking an average of 749 days in Florida, according to a November RealtyTrac report, it's cheaper to pay off an owner than take them to court, Realtors say.
"It's costing banks a fortune to do the foreclosure, and they want to cut their losses," said Sherry Lee, broker/owner of Lee Property Sales in West Palm Beach.
Lee said one of her clients got $45,000 from Chase to do a short sale, but most deals are between $10,000 and $20,000.
But she had little luck with Bank of America's test program, which she said used an unwieldy computer program and had unclear directions on who was eligible.
"People want straight answers from us brokers, and I couldn't get them," Lee said.
Bank of America spokeswoman Jumana Bauwens said she couldn't comment on concerns unless they dealt with a specific case, but that the company was "pleased" with the homeowner response.
Bauwens said Florida was chosen to test the program because of its high number of foreclosures. If it's ultimately deemed successful, it could be expanded to other states.
To qualify, homeowners had to submit their short sales for approval by Dec. 12 - an extended deadline from an original Nov. 30 date. The homes could not have offers on them already, and the closing needed to occur before Aug. 31.
Paul Baltrun, who works with real estate and mortgages at the Law Office of Paul A. Krasker in West Palm Beach, said he hasn't received any approvals yet on client short-sale submissions to the new program, but that the system is too new to judge. He said banks may be motivated to avoid foreclosure because they don't have the proper documentation to win in court.
"It's double trouble for the banks," he said. "They not only cannot foreclose, but may have to defend against a lawsuit from the homeowner."
At least one Realtor is a fan of Bank of America's program.
Liane Jamason, a Realtor with Smith and Associates Real Estate in Tampa, said she had one client get a $20,000 offer from Bank of America in writing.
"I think the problem was they didn't get the word out as much as they could have about the whole thing," Jamason said. "I hope they continue the program and that more banks follow suit."
By Liz Weston, Palm Beach Post
Dear Liz: Several years ago, we were talked into getting what I believe was a predatory loan - a negatively amortizing mortgage for 100 percent of the purchase price of our home. The loan broker assured us we could refinance the following year to a more traditional mortgage.
We paid the minimum monthly payment required, which didn't cover all the interest owed, so that amount was added to our mortgage balance. Like others, we have experienced the nightmare of the current housing market, and with the negative amortization adding on even more debt, we are severely underwater.
We've worked with two companies trying to get a workable loan modification but to no avail. The bank is not cooperating at all.
A lawyer I consulted is advising us not to pay at all going forward, saying that the upside-down home isn't worth saving or worth the grief. She told us to put our payment amounts into savings so that we have something to live on after we have to leave the home, which I so far have been able to do. But I'm worried about the potential fallout.
Would we be required to pay taxes on the remaining balance we owe after a foreclosure? If we can't afford to pay the taxes on $200,000 of untaxed income (that we really didn't earn), what do we do then? Does bankruptcy help with that?
Answer: When a lender cancels or "forgives" debt, it typically sends you a Form 1099 for the amount of forgiven debt. This amount usually must be included as income on your tax return. But there's a big exception when it comes to mortgage debt secured by your primary residence.
The Mortgage Forgiveness Debt Relief Act of 2007 generally allows you to exclude from your income the debt that's left over after a foreclosure. The law applies for the calendar years 2007 through 2012.
You can find more information about the act in IRS Publication 4681, Canceled Debts, Foreclosures, Repossessions, and Abandonments, as well as in IRS news release IR-2008-17.
In some cases, lenders aren't content to write off the excess debt and instead decide to pursue homeowners after foreclosure for the remaining balance owed. You may be protected by state law from such a lawsuit (as homeowners in California typically are), but you'll want to discuss this possibility with your attorney. If you are hit with such a lawsuit, you may need to consider filing for bankruptcy.
Government extends waiver of anti-flipping law, allowing homes to be bought and then sold in 90 days
By Kimberly Miller Palm Beach Post Staff Writer
Florida homebuyers will be able to purchase flipped properties with FHA loans through next year as federal officials try to speed the resale of foreclosed and abandoned homes.
The U.S. Department of Housing and Urban Development announced today that it was extending a 2010 waiver of its anti-flipping regulation, which was scheduled to end Saturday.
The rule forbids Federal Housing Administration-backed loans from being used to buy homes that have been owned by the seller for less than 90 days. It was put in place to thwart the kind of unscrupulous home flipping that drove up real estate prices during the boom and which is partly blamed for the market crash.
But with mounting foreclosures and a shadow inventory of 1.6 million not-yet-listed homes nationwide, federal officials said blocking the sale of flipped homes will hurt neighborhoods "struggling to overcome the possible effects of abandonment and blight."
Realtors said today that the extension was expected and that it is a boon to homebuyers as well as investors looking for quick turnarounds on refurbished homes.
"Right now, we really can't afford anything delaying or discouraging a qualified buyer willing to buy a home at fair market value," said Realtor Shannon Brink of RE/MAX Prestige Realty in West Palm Beach.
Brink said he's had past clients with FHA loans who had to delay a closing date to accommodate the 90-day waiting period. In some cases, he said, the buyer lost the home because of the delay.
The practice of flipping homes got a bad reputation during the build-up of the housing market as investors bought properties to resell quickly at marked up prices. Sometimes only minor cosmetic improvements were made to the homes before they were resold.
HUD, recognizing the potential problems caused by flipping in 2003, enacted the 90-day rule.
FHA loans, which require full credit and employment documentation, made up only a small portion of mortgages at the time so the rule had little impact, said Bill Richardson, president of the Realtors Association of the Palm Beaches. More popular during the market peak were stated-income loans or those with more lax requirements.
Today, FHA loans, while mostly for first-time homebuyers, are the preferred method of financing.
"When other financing dried up and banks stopped lending, everyone started doing FHA deals," Richardson said.
HUD's rule waiver does contain restrictions to prevent predatory flipping. If the sales price of a flipped property is 20 percent more than what the seller bought it for, the seller must justify the additional cost. That can include providing documentation on renovation expenses.
Also, sales must be arms-length, meaning there is no personal or business relationship between buyers and sellers.
Since the original waiver went into effect in February 2010, FHA has insured nearly 42,000 mortgages nationwide worth more than $7 billion on homes resold within 90 days of the last purchase.
Don Cameron, a real estate investor who owns a South Florida franchise of We Buy Ugly Houses, said extending the waiver through Dec. 31, 2012 only makes sense.
As much as 95 percent of the purchases of his refurbished homes are FHA financed, he said. It takes his company about 45 days to renovate homes, which usually sell within 30 days of being listed.
"It's certainly an inducement to move real estate and reduce inventories," he said about the waiver. "In a depressed market, everyone is looking for value and our homes are in pristine condition. Why wait 90 days before you can close on a home?"
Commentary by Sherry Lee:
A Sarasota lawmaker filed a bill Tuesday to reduce the amount of time banks have to pursue a homeowner for unpaid mortgage debt from five years to one.
Rep. Greg Steube, an attorney who handles foreclosure prosecution and defense cases, said homeowners should be able move on with their lives without the worry that five years down the road the bank will come after them.
Florida law gives a lender five years to file for a deficiency judgment and up to 20 years to collect.
“If the bank wants to go after a deficiency judgment, there’s no reason it should take them more than a year,” said Steube, a Republican. “Are we waiting on the second tier of the foreclosure crisis to come three or four years from now.”
While the proposed deadline change in HB 1149 may be popular with homeowners, a fast-track foreclosure provision for abandoned or vacant homes will likely irk anyone worried about losing a home in a quickie court hearing.
The bill would require a home to first be deemed abandoned and then allow for an expedited foreclosure process already in Florida law. The “order to show cause” statute is rarely used because many attorneys interpret it to apply only to non-residential property and believe it bars a deficiency judgment, according to a recent Senate staff report.
Under Steube’s proposal, homeowners with homesteaded properties would also be allowed to request foreclosure mediation or a conciliation conference before a final judgment is entered. The Florida Supreme Court just ditched its mandatory foreclosure mediation program after it netted few settled cases.
Steube said his program is different in that homeowners have to request the meeting, rather than it being automatically required, and all documents must be submitted and received by the bank prior to the meeting.
“That way the bank can’t say they don’t have the documents they need,” Steube said. “At least all the documents have been exchanged and they can say you either qualify for a modification or you don’t.”
Steube said he tried to draft a bill that would cut down on the foreclosure backlog in the courts, but also be fair to both homeowners and banks.
His proposal joins a handful of other bills submitted for the 2012 legislative session that aim to reduce the judicial case load of more than 300,000 foreclosures in Florida, or fast-track the process.
Below, commentary by Sherry Lee:
Having worked tirelessly to help home owners through this mess for the last 4 years, I had this comment to make on The PB Post blog:
Sherry Lee Says: December 29th, 2011 at 2:19 pm
This bill is a good idea and we need to support it. Banks have already done enough – with the help of the idiots in office – to crush the life out of people and the economy. The idea that these giant corporations can take taxpayer money and then use it to go after people for up to 20 years for a situation that they caused and then subsequently made billions of dollars from, in unconscionable. Pass this bill now!
Sherry Lee is a mother, business owner and real estate investor and has lived and worked in Palm Beach County since 1979.
The opinions expressed are those of the writer, and do not necessarily represent those of BIZPAC Review, its management, staff or advertisers.
The phrase “help for homeowners” has different meanings for different people. If you bought your home between 2003 and 2008, you likely need help with a loan modification or short sale. If you are a home buyer in this market, you need help getting a loan. And if you are a fully vested homesteader, you just want your value to stop going down.
Well, I know of some programs that just may provide the help we all need right now. One plan is called “Relocation Assistance” and is being offered by several large banks. It gives eligible Florida homeowners between $5,000 and $50,000 cash at closing and waives any deficiency. Although not perfect -- credit scores will still take a hit – it removes the major barriers of sellers dragging their feet, not being able to afford the cost of moving and the fear of a deficiency judgment following them for decades. The program seems to target loans acquired during the bank mergers following the 2008 market collapse. Bank of America is trying to purge Countrywide loans. Wells Fargo is purging World Savings and Wachovia loans, and Chase is closing out Washington Mutual loans. If you have been trying to decide what to do and want more information on this program, contact me or any Realtor who specializes in short sales to discuss your options.
Another very exciting program comes from the Palm Beach County Department of Housing and Community Development in the form of $14 million in grant money for home buyers who need help obtaining financing. Credit scores can be a little lower, 600 minimum, and there is second mortgage money of up to $50,000 for closing costs or down payment assistance, or if the property needs rehabilitation. Successful applicants cannot currently own a home, must have household income of up to 120 percent of area median income*, and reside in the home as their primary residence.
First mortgage interest rates are fixed for 30 years at 4 percent (4.9 percent APR), and second mortgage interest rates are at zero percent and run concurrently to the first mortgage loan for 30 years. The second mortgage loan does not have a monthly repayment requirement, but the home must remain the principal residence of the applicant for the life of the loan. Eligible dwellings must be foreclosed, abandoned or vacant residential properties located within one of the county’s Urban Redevelopment Areas or the Glades Regional Target Area.
The eastern URA boundaries are generally described as Community Drive to the north, the Lake Worth Drainage District L-14 Canal to the south, I-95 to the east, extending to various points west as far as Jog Road.
The western URA encompasses the municipalities of South Bay, Belle Glade and Pahokee and the unincorporated area of Canal Point. And the GRTA added nine census tracts: 80.01, 80.02, 81.01, 81.02, 82.01, 82.02, 82.03, 83.01 and 83.02.
Of course, as with any government program, certain conditions must be met. But this one is worth the effort because it goes to the root of the problem. Agents have buyers, and we have an abundance of well-priced homes, but in the absence of traditional financing, the market is left to investors and cash buyers. In order to stabilize neighborhoods and home values, we need homeowners who not only own the homes, but live in them and actually care about what happens there.
I am not an advocate for government interference in markets, and I am usually critical of government handouts, i.e. grants. However, since government helped Wall Street confiscate our homes and our wealth with its faulty legislation, and since government benefitted from the higher property taxes, and since it will be the recipient of billions in fines if/when the big banks settle, government appropriately must return “our” money back to the communities it helped destroy. As a homeowner, as a Realtor and as a small-government conservative, I say $14 million is a good start.
Realtors, home buyers and sellers are encouraged to contact Sherry Lee at slee0505@aol.com for more information about these two programs.
*FY 2011 Area Median Income (AMI) $63,300
By John R. Smith, September 21, 2011
The task before us in Palm Beach County is finding a permanent way to force County Administrator Weisman to be more concerned about the taxpayer than about broadening his fiefdom. And the best way to make that happen is to prod his bosses — the county commissioners — to sit him down every year and instruct him to show serious concern for taxpayer interests.
Here's why. Each year, county citizens must endure the Weisman ritual. It's always the same; the administrator spends the early part of each year concocting a county budget that ends up proposing a serious increase over the previous year. Then the folks who want to reduce taxes have to strap on the battle gear and go to combat. Most years, they can't count on a county commission that will help them.
It's the same merry-go-round this year. Weisman, in June, amidst a landscape of citizens enduring economic hardships, proposed a budget with about a 4 percent increase. This impelled responsible groups, like the Taxpayer Action Board, to spend months trying to lead county government toward accountable behavior. It prompted citizen groups to pay highly reputable tax watchdog Florida TaxWatch to come here, again, and point out the correct way to prepare budgets.
TaxWatch analyzed aspects of the 2011 county budget, and made 17 recommendations. They found that the county has hoarded excessive levels of reserves over the years, reserves that could be used to reduce the current tax burdens. Palm Beach County has set aside reserves that are 50 percent of total expenditures, while the standard for reserve funds is between 15 percent and 25 percent. The percentages are hard to determine because many fund balances are hidden and shifted within a myriad of individual funds.
Whenever anyone suggests tapping into reserves, Mr. Weisman lapses into his "sky-is-falling" routine, warning that the county might lose its AAA bond rating if it uses its reserves. That's bunk.
For example, Hillsborough County has maintained its AAA ratings even though its equivalent reserve funds as a percentage of total expenditures are only about 20 percent. The TaxWatch report concluded, "Palm Beach has the highest level of unreserved fund balances as a percent of combined balances compared to its peer counties."
The county's debt is staggering, with a substantially higher debt burden per citizen than counties of similar size. The only county with higher long-term debt is Miami-Dade. Here's how high the county debt is: next year, $87 million will go toward paying the interest on the debt, and that doesn't count the debt load that voters agreed to in referendums. The county owes so much money that each resident would need to pay $1,625 just to pay off the $2 billion debt.
Further, the county owns huge amounts of vacant land and buildings, much more than necessary. Selling just 25 percent of those properties could generate over $50 million in revenue.
The TaxWatch report goes on to list several recommendations they made to the county in 2006 that were ignored. The report concludes that "specified improvements are needed in Palm Beach County." The county needs to respond formally to TaxWatch's findings.
After vehement opposition to spending any reserves at all (his budget initially increased some fund balances), Mr. Weisman "found" $7 million during the commission meeting last week, and left with direction to spend it.
Local business leaders have long known that it is nearly impossible to understand the County Administrator's budget. The documents created by his office are not prepared in a way that is uniform with Florida's standard financial reporting, and TaxWatch has never been able to reconcile the county's budget documents with the uniform standard specified by the state. The Commission, at a minimum, needs to set policy and start holding Weisman accountable, to insist on an audit of the entire budget process (but not by the internal auditors) and an annual reconciliation between Florida's specifications, and the County's budget documents.
My personal belief is that there are only three or four people in the county who truly understand the county budget, most of them work for Bob Weisman, and that's the way he likes it.
John R. Smith is chairman of Palm Beach County's BizPac and owner of a financial services company.
Respond to this column at letters@sun-sentinel.com.
Reprinted from The Sun Sentinel.
Low appraisals continue to block people from selling homes or refinancing mortgages, leaving many sellers and real estate agents unhappy. "We really feel we're at the mercy of appraisers," said Randy Lane, a Broward County homeowner whose sale fell through recently when two value estimates came in well below the negotiated price. Yes. You are at the mercy of Appraisers. Not only are they using recent sales to establish a value for your property, but, in a market that is moving up or down rapidly, they also may use a multiplier to project future value. It's not a perfect science. But it is a reflection of the current market. Who knows better than appraisers what homes are selling for and what the over-all trend in the market is? And who knows better than banks that values will likely continue to fall given the amount of shadow inventory they are stockpiling and accumulating?
When a sale collapses because of a low appraisal, the buyer is angry for having agreed to pay more than the home is thought to be worth. Meanwhile, the seller puts the home back on the market and considers adjusting the price – all the while not knowing whether another potential sale will suffer the same fate. I don't know that buyers are angry. They usually see it as an opportunity to get a better deal on the home and are grateful that the appraisal protected them from over paying. Real estate agents have the difficult task of telling the seller that they can accept the lower price now, or accepting it later.
A May 2009 law required that appraisers work independently and without undue influence from mortgage brokers, lenders and real estate agents. Mortgage fraud prosecutors say the overhaul was necessary to curtail conflicts of interest and bloated estimates that contributed to the housing debacle. This law, like so many, is based on rare cases of fraud and will do little to help the broader market. In my nearly twenty years in the business, appraisers were always chosen by the lender. Real estate agents and mortgage brokers had no influence over them.
More than two years later, real estate professionals say the change has inadvertently led to inaccurate appraisals, which is delaying a housing recovery. "This requirement is costing everybody, including the consumer, because we're not getting quality appraisals," said Tim Singer of Coldwell Banker in Fort Lauderdale. Define 'inaccurate appraisals'. Define 'quality appraisals'. I can understand the frustration of agents and mortgage brokers if their deals are not going through. They want to blame someone. And if the appraiser is from out of the area, it's easy to say it's because they don't know the market. However, the appraiser can still examine recent comparable sales online, call the participating agents and ask questions about the properties and the terms of the sales to establish value - and without bias. Sometimes the real estate agents work and live in the neighborhoods they are selling in and become overly protective of the old higher valuations. Their bias is more common and potentially blinding than that of a detached appraiser.
Appraisers bristle at the criticism. While some concede that concerns about the law are valid, they also say real estate agents and sellers have vested interests that blind them to the reality of falling home values.
"Don't shoot the messenger," said Ken Chitester, spokesman for the Appraisal Institute, a Chicago-based association with 24,000 members nationwide. "It's very easy to point fingers, especially in a depressed market." The abundance of foreclosures in recent years has dramatically reduced values, and appraisers say they can't help but factor in those comparable homes when they're preparing estimates. But many of those homes are in disrepair, and real estate agents point out that appraisers often don't consider the condition of the properties, leading to unnecessarily low appraisals.
In home sales, buyers who need mortgages pay for the appraisals, which cost about $350 in South Florida. Banks require them to make sure they don't lend more money than the homes are worth. Cash buyers typically don't request appraisals, real estate agents say.
For years, an appraisal was considered a formality. A mortgage broker would commonly suggest a business acquaintance to do the work, virtually assuring the appraisal, an opinion of value, matched the sale price. The 2009 law put a stop to that by insisting on appraiser independence. It also discouraged prolonged communication between an appraiser and the real estate agent, who used to work more in tandem.
Many lenders now hire appraisal management companies, which randomly select appraisers. Real estate agents and others complain that the companies assign appraisers from out of the area who aren't familiar with specific neighborhoods. Another complaint is that the management companies don't pay a fair wage, which deters experienced appraisers from accepting assignments. The result: low valuations, real estate professionals say.
Charles Ware, president of Elite Appraisal Management Inc. in Michigan, said it's up to the appraisers to reject assignments if they aren't familiar with certain areas. His management company lets appraisers set their own fees. "We're not gouging," he said.
Nine percent of real estate agents reported delayed sales contracts in recent months because of low appraisals, according to the National Association of Realtors. In addition, 13 percent said a contract was renegotiated to a lower price because an appraisal came in below the agreed-upon price. The Realtors' trade group didn't say how many sales were canceled by low appraisals. Wow. Let's go nuts because 9% of agents had delays in their sales contracts due to low appraisals. And a whopping 13% actually had to renegotiate their contracts. Maybe, and I am going out on a limb here, agents should do a better job of establishing pricing for their listings. We are qualified to appraise property. And if we are going to complain about appraisers not giving proper valuations because they are from out of the area, then who better to assign value than agents from within the area?
Lane, the homeowner, said he interviewed five agents to help him establish a $1.15 million asking price for his four-bedroom waterfront home in Fort Lauderdale. I could be wrong, but when someone is shopping with that many real estate agents, they want to hear the highest price. This is again the fault of the agent who takes an over-priced listing in the first place. There are many reasons to take an over-priced listing, but it should never be for any other reason than to prolong a short sale for a seller's benefit. Too many agents do it for self-serving reasons.
After he signed a contract with a buyer, the appraisal came in $500,000 below the agreed-upon price. A second appraisal was more than $200,000 off. At that point, the buyer backed out, and the home remains on the market. Lane obtained copies of both appraisals, and he said the homes his was compared with weren't similar in location, lot size or square footage. In the second appraisal, two of the comparable homes weren't on the water, Lane said. He insists the two appraisers didn't work hard enough to find similar properties. "At least be fair," said Lane, 50, who wants to downsize into a condominium. "Take the time to do your job. Now we're praying for a cash buyer." Sorry, but their job is not to be fair or partial in any way toward you or your property. And remember, they are not only looking at what has just sold. In many cases they have to apply a multiplier to determine a value that will hold six months from now. The buyer's lender is protecting themselves with the appraisal. Not you. Not the buyer, directly. But themselves. Think about it this way; if a buyer is putting 10% down and the bank is loaning 90%, a market that is falling 12% per year will leave that buyer under water in less than 12 months. Not a good place for the buyer or their lender to be.
Appraisals are especially troublesome on short sales, when a lender agrees to let the homeowner unload the property for less than the mortgage amount, said Judy Trudel, an agent for Balistreri Realty inLighthouse Point. The seller's lender wants the home to appraise as high as possible to reduce the financial hit, but the buyer's lender hopes the appraisal comes in low, Trudel said. This is not always true. The seller's lender does not always want a higher appraisal. Every short sale is different. Some lenders are participating in TARP, or have Credit Default Swaps on the loan and actually need a lower appraisal and sale price in order to make the deal.
Scott Dooley, a Fort Lauderdale appraiser, shrugs off the criticism, saying appraisal complaints come with the job and tend to increase in a down market. "But once it stabilizes," he said, "things will improve and our jobs will be a little easier." From your lips to God's ears, Dooley. Now if we could only get our County Property Appraisers to tax us on our actual property values and not their favored 'five year moving average', we might see stabilization in the market in the next decade !!
Certified Distressed Property Expert (CDPE) on Call 24/7
561-685-8484
"We are here to help"
Free Home Valuation | Kay Ann Janisch | Sharon Lee | Gabriela Gosline | Stephen Lee | Cheryl Carpenter Klimeck | Our Homes | Search REALTOR.com® | Home | Applying for a Loan | Your Dream Home | 9 Steps to Ownership | How to Sell Your Home | Staging Your Home | Property Management | Buying Foreclosures/REO's | My Blog | Short Sale Buyer | Short Sale Seller
Copyright © 2012 Lee Property Sales, Inc.Portions Copyright © 2012 a la mode, inc.Another XSite by a la mode, inc. | Admin Login| Terms of Use| Site MapAll rate, payment, and area information are estimates and approximations only.
