Chicago Neighborhood are Working to Survive

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Although this video is from 2009, the problems are still the same in neighborhoods across the country.  This is a neighborhood in Chicago, IL, but you can see the same problems and struggles in similar neighborhoods in the Midwest.  Some areas of the country are slowly recovering, but many were so devastated by the foreclosures and the fact that houses are left empty, that it will be a long time before they are close to healthy again.

House Repossession Hotspots

Surprising as it may seem, home-owners in the South are far more likely to lose their homes than their Northern counterparts. National charitable organisation Shelter have analysed research, presumably drawn from reliable testing, and claim that the boroughs of Dagenham and Barking are at higher risk of suffering from house repossessions.

Interestingly, most of the rest of the top ten so-called hotspots are made of the more usual candidates, those being locations in the North, in particular areas of the North West. Still, three of the ten are given over to areas in and around London and that does but a different spin on things.

Generally those living in the South are viewed as being more affluent that those living in more Northern climes, and whilst many a politician and spin doctor would try to convince you otherwise, the North/South divide does exist. Southerners have always been thought of as better off, as being financially solvent, with access to a higher standard of living than residents anywhere else in the country.

However, Shelter’s current thinking sheds a slightly different perspective on the whole repossession debacle.

In a nutshell, what Shelter are trying to point out is this: no matter where you’re from, or where you live, your mortgage is still your single biggest outgoing. Unfortunately, despite lower interest rates and various attempts by the big lenders/ Bank of England to help out home owners, the cost of living continues to rise. This has a knock-on effect with regard to how far the average wage packet now has to stretch.

Once the tax man’s had his cut, he continues to dip in and out by way of stealth taxes, fuel duty, VAT and interest on loans. Then there are the utility companies, all upping their pricing bands despite warnings to the contrary. And let’s not get started on the rising cost of the weekly shop.

The beleaguered home-owner is left with an ever-dwindling pile of cash, and this then leaves him more open to repossession. Shelter’s advice? Don’t put off the need to discuss your mortgage if you’re starting to struggle. Our advice? What Shelter say.

HUD ACCEPTING APPLICATIONS FOR ENTITIES TO PURCHASE TROUBLED MORTGAGES, OFFER CHANCE TO AVOID COSTLY FORECLOSURES AND STABILIZE NEIGHBORHOODS

September loan sale to include neighborhood stabilization pools in Chicago, Newark, Phoenix and Tampa as part of broader Obama Administration effort to address shadow inventory, target relief to hardest hit communities

WASHINGTON – Qualified entities interested in purchasing pools of severely distressed loans formerly insured by the Federal Housing Administration (FHA) can now submit applications for the Distressed Asset Stabilization Program, an expansion of an FHA disposition program that sells pools of defaulted mortgages headed for foreclosure and provides the opportunity for the purchaser and borrower to avoid a costly foreclosure. According to loan pool information released today, approximately 3,500 loans will be sold in four metropolitan areas that are among those hardest hit by the foreclosure crisis – Chicago, IL; Newark, NJ; Phoenix, AZ; and Tampa, FL – aligning with other neighborhood stabilization efforts to help those communities recover as quickly as possible. The program is part of the Obama Administration’s broader strategy to encourage public/private partnerships to stabilize neighborhoods and home values in critical markets. Details on the Distressed Asset Stabilization Program can be found at www.hud.gov/fhaloansales.

“The housing market has momentum not seen since before the crisis,” said HUD Secretary Shaun Donovan. “But some metro areas are still under pressure and some FHA borrowers remain seriously behind on their loans and stand to lose their homes in a matter of months. As one step towards avoiding unnecessary foreclosures and further stabilizing communities, we are increasing the number of loans beyond our original goals of 5,000 per quarter to approximately 9,000 this quarter. Providing the opportunity for borrowers to potentially stay in their home under a new sustainable mortgage or other meaningful help not only benefits that homeowner but reduces the costs to FHA and ultimately benefits the entire community.”

Under the program, loans are sold competitively at a market-determined price generally below the outstanding principal balance. FHA then processes an insurance claim, removes the FHA insurance and transfers the loan to the investor. Once the note is purchased, foreclosure is delayed for a minimum of six additional months, giving the new servicer time to work through alternatives with the borrower, possibly finding an affordable solution to allow the borrower to remain in their home. Because the loans are generally sold for less than what the borrower currently owes, the purchaser has the ability to reduce or modify the loan terms while still making a return on the initial investment. If no viable alternatives exist, the purchaser may be able to help the borrower sell the property through a short sale and avoid the costs of foreclosure.

“This program creates the opportunity for everyone – the homeowner, the new mortgage holder, FHA, and the community – to walk away a winner,” said Acting FHA Commissioner Carol Galante. “FHA not only avoids the costs associated with a long foreclosure process, but also the high costs of maintaining and selling vacant properties in already distressed markets.”

FHA began selling distressed single family loans through what is now the Distressed Asset Stabilization Program in 2010 and has successfully sold more than 2,100 single family loans to date. An FHA-approved mortgagee can file a claim for FHA insurance benefits and assign the loan to FHA if the borrower is at least six months delinquent on their mortgage; the servicer has exhausted all steps in the FHA loss mitigation process; the servicer has initiated foreclosure proceedings; and the borrower is not in bankruptcy. These assigned loans are then pooled by FHA for resale through the Distressed Asset Stabilization Program.

Neighborhood Stabilization Loan Sales

In addition to the standard note sales, the enhanced program features new neighborhood stabilization requirements to encourage investment in communities hit hardest by the foreclosure crisis. Approximately 40 percent of the 9,000 loans in the sale scheduled for September 2012 will be located in Chicago, IL; Newark, NJ; Phoenix, AZ; and Tampa, FL – four metropolitan areas where high numbers of seriously delinquent loans could expand an already large inventory of REO properties over the coming months. Designed to help stem the flow of distressed properties hitting these markets, these neighborhood stabilization requirements provide that no more than 50 percent of the loans within a purchased neighborhood stabilization pool may be sold as real-estate owned (REO) properties.

“These markets were chosen because of the high concentration of FHA loans in the pipeline for foreclosure and because each allows us to test this strategy under a variety of market conditions,” added Galante. “Further, in some of these communities, state and local leaders are already acquiring these loans and using tools like the Neighborhood Stabilization Program and the Hardest Hit Fund to offer workable solutions for homeowners and communities. And in each city, nonprofit and for-profit investors have shown great interest in using this program to help borrowers in their community find affordable solutions as quickly as possible. FHA is working with local leaders to create additional smaller pools to fit their targeted neighborhood strategies.”

All parties seeking to bid on the sale pools must first be qualified by HUD. Parties seeking to bid in the neighborhood stabilization pools are required to meet several additional criteria to ensure they will comply with the program’s goal that fewer homes end up as vacant REO properties in metro areas already struggling with high numbers of foreclosures. Eligible investors must have experience in asset management and property management, as well as a proven track record in helping borrowers seriously delinquent on their loans to re-perform or to achieve an affordable alternative to foreclosure. An emphasis will be placed on experience within the metro area in which the bidder is interested.

Bidder qualification materials and guidelines for the Distressed Asset Stabilization Program bidding process can be found at www.hud.gov/fhaloansales.

Problems in Foreclosure Outreach Program

The Government Accountability Office or GAO is of the view that current foreclosure outreach program which has been designed to help troubled property owners is not doing enough to reduce foreclosures in United States.

High rate of Foreclosure

Since the rate of foreclosure is still a major hurdle in the economic and housing recovery, a study was conducted by GAO to find ways of enhancing foreclosure mitigation effort. They came out with a report that suggested that government agencies that are a part of foreclosure mitigation program must make changes in their strategies to help existing borrowers.

Significant Negative Equity

The report released by GAO specifically addressed the United States Department of Agriculture, Federal Housing Administration and Government Sponsored Enterprises. Even though these agencies have modified more than 2 million loans, the number of loans that are in foreclosure are still very high which is weakening the American real estate market. An analysis of the mortgage data showed that about 2 to 3 million loans have characteristics that are associated with high probability of foreclosure like significant negative equity and serious delinquency. Significant negative equity means the ratio of loan-to-value of the property mortgaged is 125 percent or more.

These loans that have significant negative equity are concentrated in states like Florida and Nevada. Also, the recent signals like strong home equity and home prices does not mean that real estate market in US has recovered because the prices of some of the properties is still close to their post-bubble lows. Another worrying factor is that total household mortgage debt is $3.7 trillion more than the household’s equity. This means that household wealth is declining and the value of most properties are not rising.

Problems in Loan Modification

Also, thousands of borrowers who had requested assistance did not receive modification. The applications of about 2.75 million borrowers who had requested HAMP loan modification was denied which has decreased the volume of federal loan modifications. Even though efforts have been made to improve the reach of the refinance programs, low participation of the borrowers in these programs has raised questions on the need for the Treasury to offer financial support for these programs. GAO is of the view that funding given to underused programs must be re-evaluated.

Even though several agencies have stepped up their efforts to monitor the outreach of the services to struggling borrowers, most agencies are not conducting analysis to evaluate the benefits and effectiveness of the foreclosure mitigation programs. GAO is of the view that better analysis of the data collected is needed to improve the effectiveness of mortgage mitigation effort. These efforts will not only reduce cost but also improve the effectiveness of the outreach program.

Suggestions of GAO

The report has also suggested that principal taken by a few homeowners must be forgiven especially loans that have significant negative equity. However, this must be used as one time measure as some borrowers may misuse this benefit.

GAO has also come out with suggestions to help agencies and enterprises that are a part of the outreach program. The report has also called for detailed analysis of the borrower profile and loan data which can help them find effective solutions.

Foreclosures Scenario in the United States

Right now, in the U.S. thousands of people are losing their homes and other properties due to foreclosures. Sadly, the Midwest part of the country has the highest number of foreclosures happening every year and such a high numbers of mortgages and auctions are affecting the real estate scenario of the country. The percentage of foreclosures has gone up to 47% since the last year and is increasing with time. It is being predicted by economists that these mortgages are going to rise in the coming months. According to Economist David Shulman of the UCLA Anderson Forecast, foreclosures will continue to rise for the remainder of the year as more adjustable-rate mortgages reset. California has the highest foreclosure rate and is set to rise.

Foreclosure is a complicated process and raises a number of questions in people’s mind. After the property is mortgaged and auctioned, where does the property go and what happens of it? How do bankruptcies come into picture? How is the real estate situation of the country? These questions are on everybody’s mind and here is some information that will help you understand these questions and their answers. To understand what the effect of foreclosures is, you first need to understand what a foreclosure is.

When a group fails to make payments or dues usually up to 3 months, the authorities take an action against the mortgage borrowers and the lender has the right to take over the property after the process of the foreclosure is complete and the borrower still hasn’t been able to pay the complete dues. Approximate time taken by the process to be complete is 5 to 6 months and after the process the borrower has to leave the place as he or she loses all right to that property.

What happens to mortgaged property?

Auctions

As the rights of the property now rest with the lender, in many cases the bank, there are many options available to them to make use of the property. First option is mortgaging the property right away. The lender puts the property on auction at the time when the foreclosure deal is finalized and the lender takes in whatever the highest bidder has to pay to collect their dues. Most of the time, the new owner get the rights the property in a lower-than-retail price and in this case sometimes the lenders get partial payment for the dues and again the mortgage borrower is entitled to pay the rest of them.

Bank-Owned property

When the bank or the mortgaged lender comes in terms with the fact that the property owner many not be able to give back the dues that had to be given as repayment, the bank or the group decides that they will wait for a better opportunity to sell the property so that they get better returns out of it. This means there will be a delay in selling the property and such property is often called as bank owned property. One problem that arises in bank owned property is that the bank has to maintain it and it takes a lot of resources which is expensive. Thus when not done properly it reduces the value of the place and the banks are not able to sell it.

How do bankruptcies feature in foreclosures?

When a person’s property is going to be mortgaged, one option to avoid losing is to file the form of bankruptcy. Most people think after filing the bankruptcy, nothing can go wrong and they will never lose their house but that is not the case. When filing for a bankruptcy, there are two forms; chapter 7 bankruptcy and chapter 13 bankruptcies. The chapter 7 can you help you delaying the foreclosures with the help of the order known as automatic stay and chapter 13 can sometimes save your home as you can sit with the lender and work out a repayment plan, though not everybody can file chapter 13.

Thus, while borrowing money from bank or other mortgage lenders, a proper risk assessment should be done and extra resources counted so that the situation doesn’t arise. A good bankruptcy and foreclosure attorney can also be of help to prevent foreclosures. No matter how easily or simply somebody puts it, foreclosure is a stressful process and takes a lot of resources and time and poses a threat to the safety of your family and loved ones if such a situation arises.