Don't Call it a Foreclosure!

As I wrote last week, we are moving away from the term foreclosure for the loss of a house.  Our current Administration wants fewer foreclosures.  Sounds good.  So here’s how they’ll accomplish that:  they’ll call them something else—now they will be short sales or deeds in lieu of foreclosure—thankfully this much more “correct” way of explaining how a house was lost is likely to be available through HAFA.

I can’t guarantee that HAFA (the Home Affordable Foreclosure Alternatives program) will work for you or even someone you know, but it is designed to help folks who have been trying in good faith to work out a mortgage issue with their bank.  It’s a program intended to make short sales easier and more streamlined for homeowners (who did not qualify for a loan modification).

Unfortunately when the government gets involved, things tend to get complicated.  But recently thanks to HAFA, some larger banks have begun to “work” with their clients and this may now pave the way for more short sales (or deeds in lieu of foreclosure) to get more homes sold in 2011

There is a bonus for all players.  The banks can absorb up to $20,000 in deficiencies, meaning you can sell your $120,000 home for $100,000 and not have a penalty.  Really, that’s about what it costs a bank to handle a foreclosure, but if it results in a successful short sale, it’s a win/win situation.  And, the bank will offer up to $3,000 as a relocation fee if you find a buyer and make the sale, this is really a bribe to close the home without involving the bank—and eliminating the potential for a long list of repairs that the bank might normally have to make.

To be considered for HAFA, the property currently must be (or have recently been) the borrower's principal residence. A property qualifies that has been vacant or rented to a non-borrower for less than 12 months prior to the date of the Short Sale Agreement (SSA).  The borrower must prove that the property was their principal residence prior to relocation and such borrower has not purchased a one to four-unit property during the 12-month period prior to the date of the SSA.

The borrower's reason for relocation does not need to be connected to re-employment or transfer of employment. Also, there is no longer a minimum distance requirement.

The program is designed help homeowners who couldn't or didn't get a Loan Modification and are now unable to keep their home.  A borrower may be able to avoid a foreclosure by completing a short sale or a deed-in-lieu of foreclosure under HAFA.

Who is eligible?

The borrower must meet the basic eligibility criteria for HAMP:

Principal residence.  (You now or recently lived in the house)

You got your mortgage before 2009.

A delinquency or default is reasonably foreseeable.  (You have a hardship)

Unpaid principal balance no more than $729,750 (higher limits for 2 to 4 unit dwellings).

Benefits of a HAFA Short Sale:

You are allowed to sell your home for less than you owe on the mortgage!

You avoid foreclosure and its effect on your credit!

Requires borrowers to be fully released from future liability for the first mortgage debt (no cash contribution, promissory note, or deficiency judgment is allowed

No obligation to repay the deficiency!

Qualify for a new loan in as little as 2 years!

Receive up to $3,000 for relocation expenses!

Allows borrowers to receive pre-approved short sales terms before listing the property (including the minimum acceptable net proceeds).

If you think HAFA might work for you or a friend, check out the government website that will give all the information and nuances as they will apply to a specific transaction.  http://homeownership.org/foreclosure-help/mortgage-relief-programs/hafa-program.aspx

Dane Hahn is a real estate professional, reach him at dane.hahn@gmail.com or check his web site at http://www.danesellsflorida.com/.

Q: How Can You Tell A Statistitian is Lying? A: The Numbers Look So Much Better!

The latest housing numbers aren’t pretty. But they’re about to seem a lot better. Here’s why that’s happening. The whole key to correcting our crappy housing market is to eliminate the excess and surplus inventory of homes. (And getting rid of the foreclosures).

The issue we are seemingly unable to address is what to do when a homeowner either can't make his payments, or simply wants out of his contract because as far as he can see, the house isn't worth the money he agreed to pay, back when he bought it. In either case the homeowner is what we call, underwater.

Banks are increasingly offering underwater homeowners a way out that’s less familiar than the well-known process of foreclosure. Instead, they’re employing a strategy called a deed-in-lieu of foreclosure. Here's how that works, a homeowner (currently paid up on their mortgage or not) can voluntarily sign the deed of their home over to their lender. In exchange, the loan is canceled.

It’s different — but not that different — than a foreclosure. It lets an underwater homeowner out, and saves everyone the legal hassle of a foreclosure. It extinguishes a debt that might have been a bad idea for the purchaser in the first place. But getting a borrower off the bank's hook may not cover all the bases; banks may report the deed-in-lieu to the IRS and to credit bureaus, although a lender’s credit might not be as harmed as it would under a foreclosure.

The bad news is it still means that housing supply is ratcheting up. But it's good news for banks, who can avoid legal expenses and it creates the illusion that foreclosure rate are dropping. In the mean time former owners are being driven to renting.

Undoubtedly, the illusion of declining foreclosure rates will play a role in pretending that the economy isn’t so bad, especially during next year’s presidential election. But make no mistake. Housing prices continue to reflect the underlying reality of the economy.

And house prices are probably lower than they have been at any time in the last 50 years (adjusted for inflation). Now is the time to buy in and hold—if you can. I know my opinion until now has been that the market has been awful, but when you think of real estate as an investment, now is the time to buy.

Now is when you can get the lowest financing rates. Now is when the selling prices are scraping the bottom, and now is a time when more Americans need to rent. So buying one or more homes right now with the idea of holding them (as an investment) as rentals is an excellent idea.

For investors with the financial resources to obtain a loan, the willingness to put in some hard work, and the patience for a long-term investment, real estate is now a great buy.

Today's good news/bad news: The supply of homes will dry up over the next year. So expect fewer foreclosures and more “bank owned” properties (think “deals”). If you get in now, plan to buy and hold for the long term investment--don’t expect to flip a property for huge profits anytime soon. Real Estate is not that liquid, but it's also not likely to be going down (like gold) anytime soon.

Dane Hahn is a real estate professional with Tarpon Coast Realty, call him at 941-681-0312, or at dane.hahn@gmail.com. See him on the web at http://www.danesellsflorida.com/

The Price of Excess

The first day of fall came this week, that was about the only good thing.  The stock markets are in pandemonium, the real estate market is on its butt and the jobs market is by most measures, hovering around 15% unemployed, and still about 2 years from recovery. A friend just told me that liquidity is when you look at your retirement funds and wet your pants

The Wall Street Journal had a compelling headline on Thursday—one of those “standing heads” that they can bring out and dust off to reuse as needed.  The headline, “Home Resales Up, But Remain Weak”.  The story goes on to say that the sales of previously occupied homes has risen to the highest point in five months (of course five months ago we all thought home sales sucked, but apparently the ensuing five months of Summer were worse).

“Despite the monthly increase in sales,” the Journal continued, “the US continues to struggle with the aftermath of the worst housing bust in decades.  Last year was the worst year since 1997. This year’s sales are on track to be slightly better.”

Home prices are expected to drop 2.5% this year, and then begin a slow rise of 1.1% annually through 2015.  (This should be real growth, not adjusted for inflation) The International Monetary Fund concurs with these predictions and has cut its 2012 growth forecast for the U.S. to 1.8% from 2.7% based on the weakness of the housing market.

Lots of the reporting of home sales is confusing because we tend to think of houses for sale as a single grouping, but for reporting purposes, there are subsets, and the largest of these is the so-called “Previously-Occupied” homes, so this is the best measure of how the real estate marketplace is doing--as opposed to car sales, where “previously driven” would not be a good measure of sales.  New car sales ring the biggest bell in that reporting category.

But it’s not all gloom and doom because the numbers the Wall Street Journal reports are national numbers and we live locally.  Home sales by region vary tremendously; sales in the West were up 18.3%, in the South 5.4%.

And inventories of homes for sale have dropped over the last few months as well.  Two weeks ago there were 3.58 million homes for sale across the United States, which at the present rate of sales is an 8.5 month supply.  To give you a benchmark, in a healthy marketplace, there would be about a 6 month supply, and during the “go-go days of the 2003,4 and 5” we had about a 3 month supply, meaning a house that was listed today—on average—would be sold and a new family would have moved in within 90 days. In the “bubble days” it went even faster.

I just drove between Florida and New England, and I can share first hand knowledge that there were very few moving vans on the road, I saw perhaps only a handful in 1700 miles, there were a few more U-Hauls and pick-ups with tons of stuff in them, but real family relocation moves seem to be few and far between.

There were also lots of for sale and for lease signs on what appear to be large factory type commercial buildings all along Interstate Route 95.  And probably 35% of the outdoor billboard signs are unrented, painted out white, or offering “This Space Available”

And so it is that in September 2011 we are paying the price of the excesses of the last decade.  As we lick our wounds and console one another by saying, “we’re all in the same boat”, look ahead the 14 months to the next election and demand of our politicians more and better candidates.  Demand a business-friendly administration.  Demand new jobs even at the risk of loosening environmental regulations.  Demand that we renew our quest for energy independence.  (Even the shrill voice of Sarah Palin squawking, “drill baby drill”, has merit.)  And finally, if you are interested in your future, demand a simple and fair tax code at the same time.

Dane Hahn is a real estate professional with Tarpon Coast Realty in Englewood, Florida.  He can be reached at 941-681-0312 or at dane.hahn@gmail.com.  See him on the web at http://www.danesellsflorida.com/

Six Changes to the President's Jobs Bill

The talking heads on my TV are yelling at each other as I write this.  The beautiful women who are in favor of the President’s jobs bill are being laughed at by the handsome men who are against it.  The more average looking economists are generally appearing to be thoughtful, and seem to take a middle of the road view, but the President and his jobs bill seems to misunderstand what a small business is.

I’m from a family of small businesspeople.  And notwithstanding my forays into the world of big business most of my career has been made in smallish retail locations with less than 2000 square feet of space.  There’s something very comforting about having your own business.  (For starters, you rarely get fired…)

My wife and I have owned a number of small businesses, most recently a real estate brokerage of medium size.  We had variously 5 to 15 agents, depending on the market, and we were faced with all the regulations that are assessed on small business.  A quick list of all that would include the quarterly taxes that were required, the employee documentation, the forms and posters we had to display, the fees and dues that were collected by the Feds, the State, the Real Estate Commission, the National Association of Realtors, the State Association of Realtors, the local Board of Realtors, and the franchise company whose name we used (EXIT Real Estate) the real estate insurance companies (errors and omissions), the marketing companies, and the rest.

I suppose about half our day (my wife and mine) was spent dealing with non-business related work.  By that I mean government compliance, mandatory reporting, and banking and documentation, license updates, and then promotion of future business by buying ads, signs, internet and web sites, phone lists, and the like.  The other half of our day was meeting with agents and clients, and maybe doing a little something toward earning a living.  And this was a little company.

The President’s jobs bill was apparently designed by people who have never owned or worked in a small business, and had no idea how or why a small business runs. So I have a few suggestions for their new bill.

First of all, the new bill should not extend unemployment payments.  If it works at all, the 10% unemployment problem will take care of itself.  Unemployment compensation is really a disincentive to find a job.  It takes the hurry out of the concept.  I was at the dump this week and a guy was telling me he was having a hard time making his mortgage payments.  He’s been on unemployment for almost 2 years and he said, “I may have to go find a job if I want to stay in my house…”

A jobs bill should provide an incentive for employers to create jobs.  And should offer an incentive for qualified employees to take the job.  Meaning the job should pay more than unemployment, and should provide an ongoing meaningful financial incentive for the employer to increase the number of employees.  I would propose a 10% tax cut on profits if a company could achieve a 10% increase in employees.  This would be on-going and measured on a quarterly basis, when the company reports sales and quarterly taxes anyway.  This method would require the employer to keep their employees for the long term, and for the employees to be “employable” and qualified

The bill should have a penalty for companies that have excess “idle cash”.  I would identify idle cash as funds that are held for no apparent reason.  To hear that Apple has 90 Billion dollars in cash makes me smile, but I recognize this as a problem for our economy which depends on the ebb and flow of funds. And of course to opportunity to tax the flow each time it is spent.  So I would require these large pools of idle funds should be spent on growth, building infrastructure, hiring new people and developing new ideas, donated to a charity or invested in Government bonds. (I think most businessmen would take the hint here and spend down the money in ways that would add assets to their balance sheet, and create more jobs)

Thirdly, here is the perfect place to insert and pass a balanced budget amendment. As a part of the bill, and to give businesses a level of confidence that the government is no longer going to tax and spend until we have to declare bankruptcy, we should insert the Amendment, and ask the American public to approve it ASAP.

Finally I would address the compliance regulations, If a small businessman has to spend ½ his time on paperwork to comply with government regulations, that’s just too much bureaucracy.  It would be time for the Department of Redundancy Department to step up and cut some of the regulations and paperwork.

To kick this economy into the 21^st Century, the best thing this Congress and President could do is pass a flat tax, with few if any deductions. 

Dane Hahn is a real estate professional in NH and Florida.  The Gove Group in NH and Tarpon Coast Realty in Boca Grande, Englewood and Sarasota.  He can be reached at dane.hahn@gmail.com or through his web site at http://www.danesellsflorida.com/

Stop the World--I Want to Get Off!

This week I have been swamped with too much news.  My head is swimming with stock market ups and downs, Republican debates, Presidential speeches, Red Sox/Rays games, the return of NFL Football and the 48 hours of 9/11 on TV.  OMG, Stop the world--I’m in information overload--I want to get off, please, forgive me if I’m a little off track.

Real estate investor Gary Shilling wrote this week that he believes U.S. housing prices are likely to lose another 20 percent over the next couple of years because the oversupply of available housing is still huge.  I don’t see that drastic loss in either Florida or New England—we’ve had enough already.  But I have been harping on bulldozing or burning (somehow ridding ourselves of) the over supply of broken-down homes, but that’s an idea that hasn’t grown legs so far.

Shilling also expects that official quarterly U.S. growth figures will be soon be revised downward. “The odds are that next time they revise the data it will be to make it even weaker,” Shilling says. “We could be looking at numbers that are positive today but may not be six months from now.”  As I see it, restating financial results is something exclusively reserved for the government.  If I had tried that when I was with Fidelity, I’d have been unemployed within the month.

“The Fed and the government are pretty much out of ammunition,” says Shilling. “The Fed has tried the printing press — $1.6 trillion in excess reserves and what’s happened? It’s just sitting there.  It’s up to the banks and credit worthy borrowers to turn those reserves into money and they haven’t been. It’s the classic pushing on a string.”

As I write this, borrowing activity is so low that banks have a record $1.5 trillion sitting idol at the Federal Reserve Bank — funds eligible for loans if creditworthy borrowers show up and apply.

Here’s some “better news”: more than 2 million homeowners who were foreclosed on or were in the process of a foreclosure during 2009 or 2010 can now ask for a review of their case. Banking regulators say ex-homeowners who might be eligible will receive a letter from their lender explaining their rights.

The move is to help identify homeowners who may have been improperly foreclosed upon, homeowners who ask for the review will receive a letter explaining their rights.

Mortgage servicers will be required to hire independent auditors to conduct reviews of the cases and determine if homeowners should receive financial compensation if the foreclosures were not done properly. They will also look for borrowers who were denied loan modifications when they may have been eligible for one.

The reviews are part of the mortgage servicer requirements called for by regulators after an investigation last fall revealed improper foreclosure practices by banks.

My opinion:  I am glad it’s been 10 years since the attack on America, and that it’s been 10 years without another attack, I was impressed with how presidential George Bush was in his speech this week, and how easily Bill Clinton interacted with the audience.  These are two world leaders who by comparison, dramatically demonstrate the difference between our “old style” Presidents and our “new style” president.  (I like the old style better…)

So much in our lives has changed in the years since 9/11/2001.  I am sorry that we lost nearly 3,000 people that day, and in the wars we’ve waged since then to revenge that attack, another 6,000.  Frankly, I think losing 9,000+/- Americans is enough.  I’m sorry that we still have young people in harm’s way, and I want to see them home safely. 

I’m sorry that our leaders have been so thumb handed in their management of our economy, (our housing market, our employment situation, our taxes and spending and health care) and our military. 

I think we’ve got work to do between now and the next election.  If we work hard now, maybe we’ll have something to show for it in 2012.

Dane Hahn is a real estate professional in New Hampshire and Florida.  He can be reached at 941-681-0312 or at dane.hahn@gmail.com.  See him on the web at www.danesellsflorida.com  or http://www.danesellsnh.com/

How's That Hope and Change Thing Working Out For You?

Over the last ten years or so the government forced banks to make loans in neighborhoods which they knew were likely to produce buyers with bad credit, (but the banks made the loans under threats of “redlining” which carried huge fines for area/regional discrimination.)  The government, spearheaded by the likes of Barney Frank (d) Massachusetts), allowed—but really required banks--to develop loans that all parties knew would be risky and likely to result in a foreclosure.  Their logic: every American deserves to own a home (read: get a loan) and while some loans would fail, at least in the America of the early 2000’s, everyone would have the homeownership opportunity.

Well it didn’t work, we are saddled with tens of millions of upside down homes and millions of foreclosures.  And to make matters worse, now the government has sued 17 financial firms, including the largest U.S. banks, for selling Fannie Mae and Freddie Mac billions of dollars worth of mortgage-backed securities that turned toxic when the housing market collapsed.

The total price tag for the securities bought by Fannie and Freddie affected by the lawsuits: $196 billion.  There is no stated amount that the government seeks in damages. It said that it wants to have the purchases of the securities canceled, be compensated for lost principal and interest payments as well as attorney fees and costs.

This government tactic will not result in any homeowners getting their property back, but it will serve to hogtie the major banks and at worst drive even the large banks out of business.  The topic under discussion here is not a taxpayer’sforeclosed home but rather the sale of bundles of loans by the banks to the government.  Home mortgage-backed securities were risky investments that collapsed after the real-estate bust and helped fuel the financial crisis in late 2008.

All of a sudden nobody is afraid of the Obama Administration, so what if the American Banking Association took the bull by the horns and counter sued the government for actually requiring them to make the bad loans?  What if they could show that the loans were in fact made because they were required to make loans to unqualified people, and in return the government promised that they would buy the bundles of loans, no questions asked (wink wink…)

I have had literally dozens of people in my office who wanted to buy a house in the worst way.  I would contact a mortgage agent and find out how much they could afford—then show them every property in their price range, only to have them say they wanted me to show them homes priced $10,000 to $25,000 more.  Once we would find a home above their price range, they would sweet talk the mortgage agent and get the loan.

I recall asking one of the mortgage agents (whose bank is being sued right now) how he could raise the amount of a loan to somebody who seemed unable to make the payments?
His answer, “If I don’t make the loan, somebody else will.  We all make a buck, and the government buys up all the loans anyway, no matter who makes the loan.”

Well there’s plenty of blame to go around, but if we don’t allow this marketplace to settle out, and get the foreclosed homes somehow out of the mix, we’ll be stuck in the morass of cheap homes for another bunch of years. 

So far the weakness in the real estate business has created a bunch of clerks and retail salespeople out of the Realtors whose names and signs you probably know; it’s driven builders and artisans to move to new areas--different states even--or find new work; and now if the government sues all the banks that have made it their business to loan money to home buyers, it’ll be one more nail in the real estate coffin. 

And this in a cycle where there have been no new jobs created.  How’s that hope and change thing working out for your business?

Dane Hahn is a real estate professional with Tarpon Coast Realty in Englewood, Sarasota and Boca Grande.  You can reach him at 941-681-0312 at dane.hahn@gmail.com or at www.danesellsflorida.com

This Week I Got Scammed

This week I spent most of my time focused on leases. I don't want to sound like a snob, but leases pay somewhere between $50 and $100 each and so writing a couple of leases can be a thin paycheck week, and it’s a far cry from even a small sale. But here's what happened, I had two great lease clients who both really wanted to rent a unit that I had showed them--and nothing I tried to sell anyone else “stuck”--so a couple of leases to clients I enjoyed spending time with is better than a sharp stick in the eye.

I must say that for the moment (at least) I like both of my new lease clients, and am trying to provide each of them a comfortable lease with no downsides to them or the landowners. These are upwardly mobile people, and anxious to move into a home that is nicer than where they have been. Well to be fair, one of them is year 'round and moving up, the other is taking a condo in Sarasota for the winter. But that couple has been wintering on the east coast, so I am thinking they are moving up too.

And then I found myself in a scam.

Let me back-up my story about a week or two to the point when I listed a large condex, this was probably 10 days ago. I had known the owners for some time, and in fact years back my wife had been their agent and I had been the broker on the sale of this condex to these folks. Anyway, we met with them at the house and filled out the paperwork (Realtors are always filling out paperwork) so that I had their legal permission to rent the property.

A day or so later I entered the listing and almost immediately started getting calls. But here's where this one became different from any rental listing I ever have handled before. I started getting calls from people asking me why the home was cheaper on Craig's List than it was in the Multiple Listing.

I had meant to enter the home into Craig's List, but had not taken a full series of photographs when I was there to sign the listing agreements, principally because it was raining and I didn't want a rainy day to be memorialized in the listing photos, so I had come back a day or two later and taken the rest fo the photos. But the house had found it's way into Craig's list.

Two clients called me and asked why the home was on ly $900 a month in Craig's List and $1,500 in my listing. I had no answer—and really still don't—but here's what I know:

One of the clients had responded to the email in Craig's List, and asked about the home. They replied that they owned the house (not true) and that they planned to spend more time in Africa (probably true) and so they wanted to rent it cheaply to get a good tenant.

My client sent along her question and what follows is the answer:

From: Home Tagged <home.tagged@yahoo.com>
Sent: Wednesday, August 24, 2011 6:31 AM
Subject: Re: Rental

Thanks for your email. The house is still available. I decided to rent the house because we are going to spend more time here in West Africa, about 4 years... Let me start by introducing myself  I must confess that I am very very new in this landlord business.. However, My name is Sam Gerald. I own the house located at (here I removed the address). Due to my job as a missionary with the General Board of Global Ministries of the United Methodist Church International, I am presently serving as Area Financial Executive (AFE) with the United Methodist Church in Lagos, West Africa.I am responsible for receiving distribution of funds for various UMC projects in West Africa  , and all related works with other mission personnel. my current home is in the vineyard of the Lord in BENIN West Africa.I spent less time in the States so I could not get a hold on any Realtor to handle this rent issue, although it was when I knew how long we are going to stay in Africa  that I decided to rent out the house. However, the initial plan was to sale out the House. which I tried, but sometimes the agents inflates the prize and it takes longer to sell. because of this reason and more we need a responsible person (With good credit) that can take very good care of it as we are not after the money , but want it to be clean and for you to take it as if it were yours.you can call me at +23480-6060-5897. The rent is $900 and 600 for Security Deposit For this 3Bedroom,2Bath Features: Air Conditioning, Dishwasher, Fireplace, Garage, Washer & Dryer, Yard LEASE APPLICATION FORM FULL CONTACT NAME? OCCUPATION? RESIDENTIAL HOME ADDRESS? YOUR CELLPHONE NUMBER? YOUR HOME PHONE NUMBER?  YOUR WORKPLACE NUMBER? WHAT TIME IS THE` BEST TIME TO REACH YOU? AGE & MARITAL STATUS? OWN A PET? OWN A CAR? HOW MANY PEOPLE SHALL RESIDE IN THE PREMISES? ANTICIPATED MOVE IN DATE? REFERENCE? ============================== ======= Application Comment ============================== ======= Please make sure this questions are fill correctly because the best way you answer with your comment will impress me the more to accept your applications. Regards Sam Gerald.

My client followed up with a request for more photos—remember I had not taken a full set when the property was first listed.  In the ensuing days I had filled in the photos in the multiple listing.  Somehow the scam artist had access to the photos in the multiple listing and managed to forward them on to her.  Here is his last email:

From: Home Tagged <home.tagged@yahoo.com>
Sent: Wednesday, August 24, 2011 7:09 PM
Subject: Re: Rental

Thanks for your mail.  Yes it has oversized deck  and i will coming for visit in the state and also great spaces at the back yard....below are more pictures of the inside!!do get back to me with rental application filled out so we can proceed These were the newest photos I had just taken!  So this week I will be trying to deal with this kind of a scammer.

Dane Hahn is a real estate professional with Tarpon Coast Realty in Boca Grande, Englewood and Sarasota.  He can be reached at dane.hahn@gmail.com or see his litings at http://www.danesellsflorida.com/