Bank of America Will Pay $8.5 Billion to Repurchase Mortgage Securities

A large fix for the banking industry was settled today.

Bank of America announced today that it will pay $8.5 billion to settle claims related to sales of poor quality mortgage securities through its Countrywide division.  Bank of America CEO Brian Moynihan said that the settlement would minimize “future economic uncertainty” in the banking business and “clean up the mortgage issues largely stemming from our purchase of Countrywide.”

“We have said consistently if people are reasonable and can get to a reasonable assessment of their claims and it’s in the best interest of shareholders, we will settle,” Moynihan told Wall Street analysts in a conference call.

The settlement is subject to court approval and covers 530 trusts with original principal balance of $424 billion.

Citi analyst Keith Horowitz said the settlement, which amounts to only 2 percent of the original principal balance, removes one of the largest investor risks for Bank of America.

Shares of Bank of America Corp. jumped more than 4 percent, or 48 cents to $11.30 before the market opened, with investors happy that the bank can put very big uncertainty behind it.

Investors may now be more confident that they can get similar concessions from other major U.S. banks that created markets for mortgage-backed securities with questionable pedigrees.

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While I am glad to see the financial world begin to stabilize itself, the settlement still begs the question about how much the banks are doing to help people during the foreclosure crisis.  While Bank of America is willing to settle with large banking clients, what about all the mortgage customers who have lost their livelihood while the banks were foreclosing on their homes.  Consumer confidence will continue to be shaky until the foreclosure rate goes down, and people start buying new homes, and building new homes.  Until then, Ohio and the rest of the U.S. will be buying and selling foreclosed homes, foreclosed properties, and foreclosed condos.

Until then, you can get a real bargain on a short sale in Ohio, or a foreclosed home or office building.  Hopefully, with the banks improving their financial status, the rest of us can do the same.

Foreclosures for Sale Causing Dropping Home Equity Values

If you are looking for a bargain on a new home, then buying a foreclosed home for sale will get you a house that is 20% less than normal value on average across the United States.  Recently, studies showed that in Ohio, that discount is even higher, up to 41%  in some cases.  And you may think that at least you can get a bargain on a new house.

You would be absolutely right, except that the falling home equity values, coupled with the continued foreclosing of more homes, is a downward spiral that actually hurts everyone, including you, the home bargain hunter.

A study based on data from the first quarter of this year, shows that more than one in five Ohioans with a mortgage owe more than their home is worth.  The study was conducted by a mortgage data firm, CoreLogic, to find out how many home owners were “under water” nationwide.  Cleveland has an even higher percentage, 27.3%, of homeowners that owe more than their home is currently worth.

This is a problem that is occurring due to the discounted sales of foreclosed properties which is driving home values down.  Until the majority of the foreclosed homes in Ohio are sold, Ohioans will continue to suffer from this loss of income.  Falling real estate rates means that Americans own a smaller percentage of their homes than they have since World War II, according to the Federal Reserve. The average homeowner now has 38 percent equity, down from 61 percent a decade ago.

In a normal situation, home equity goes up as you pay off your mortgage, but right now while homeowners continue to pay off mortgages, their home value goes down, so that they own less and less of their homes.  Many homeowners are battling foreclosure on a home that they are losing equity in.

It just doesn’t seem right that you can pay and pay on your home, and still not own it.  Who owns it then?  Is the bank the true owner of your property, or the lender?

Foreclosure sales have been delayed while federal regulators, state attorneys general and banks review how those foreclosures were carried out over the past two years. We all know that in addition to the problems of foreclosure, bankruptcy, and defaulted loans, there are numerous instances of mortgage fraud, and other instances where lenders have not really helped people who are trying to pay off their mortgage loans.

Home prices are expected to keep falling until the number of foreclosures for sale is reduced, companies start hiring in greater force, banks ease lending rules and more people think it makes financial sense again to buy a house.  That is a lot of conditions that need to be met here in Ohio, where jobs are still hard to find, and companies are just trying to hold on to the status quo.  Many Ohioans are still looking for jobs to replace the ones they lost when the economy fell.

So what does that mean for Ohioans?  It feels like we are bailing out a sinking ship.  Even when we pay our mortgages, we are still not the true owner of our property.  No wonder so many people are in despair.

Derelict Property For Sale

There’s something to be said for looking at derelict property for sale. Often, neglected properties need a complete overhaul, and that includes demolition and a full rebuild. The interesting aspect is the fact that (generally) when you knock a building down, you can raise another one in its place.

There can be high value and a great ROI with this method of house buying. For a start you’re looking at a piece of land that effectively possesses the right to rebuild (always check first, never assume), and land being what it is it’s rarely sold at less than premium prices.

Derelict Property

In effect, a plot of land that plays host to a derelict property already has permission for that building; therefore it’s likely that you’ll be granted permission to rebuild over the same footprint. Securing planning permission is often a subjective experience and for that reason alone, your chances of securing it are far higher when you’re reclaiming land that’s already been built upon.

Of course the old chestnut caveat emptor must be taken into consideration; converting from commercial to residential property can become an issue. A house that was formerly a home will be easier to reestablish, whereas going from an old mill to apartment block may be more far more difficult.

Finding Derelict Property For Sale

If you were looking for overseas derelict property for sale you’d find something within a matter of minutes. However in the UK we seem to do things a little different. You will need to check through different estate agents and property auction web sites as to how they list their for sale portfolios.

As an example you may well find renovation properties for sale that are less about being renovated and more about being demolished. Similarly check out land for sale, as plots of land can also throw up derelict places and dilapidated buildings. Give the lower end of the housing market a close inspection.

Sometimes, houses for sale at the bare bones level show up as derelict, and it’s certainly worth trawling through the lists using a low-price filter to sift out the hidden gems.

Derelict Barns For Sale

Usually derelict barns for sale will come under farming and agricultural listings, and these are a highly popular and effective method of middle ground investment for high return. Barns are often huge in terms of size and a full rebuild/conversion often creates a stunningly beautiful home.

Again there are always caveats so don’t rush in having found one and dream of sitting under stunning exposed beams and toasting yourself on a gorgeous open fire. Local authorities differ from area to area and what may work in one may well receive a refusal in another. Do your homework first.

Derelict Property – Things To Consider

There are things to consider before you go ahead and start looking for a derelict property. Top of your list should be the research. Make some general enquiries in relation to what may or may not be likely in relation to planning applications. Can you extend the original footprint? If it’s single story can you build above height?

What about access? This is a common downfall with rural plots; derelict farms often possess rights of way (to the public), make sure you’re aware of what they are and where they are. Beyond the above you’ll need to factor in an architect, engineering, demolition works and builders.

Who’s going to be the project manager? How will you set your budget and stick to it? In real terms most of the aforementioned can, in some way, be attributed to buying a house through the normal route. Many people extend their property post-sale, so architects and builders are required. However, done right, a well-thought out plan can come to fruition.

A derelict property can become your dream home and there’s nothing more satisfying than knowing that the place that you now call home is something that you’ve built from the ground up. Having experienced such a venture a few years ago, I can speak from experience. The highs and lows really are worth it once it all comes together.

What is foreclosure?

A foreclosure is not an overnight process. There are always a number of months, sometimes years, before the first inkling of what’s to come rears its head. Does this make any difference to those that lose their homes? Probably not, as the inevitable result is pretty much the same time and again. The span of time between knowing what’s going to happen and the day that it actually does happen is neither here nor there; the fact remains that very few manage to avoid losing their home to their mortgage lender. Oddly, I know you can’t win in the more positive sense either. I have a member of family that came into a considerable sum of money recently.

As a means of ensuring that their home remains their home, they decided to use the windfall to pay off their mortgage. They approached their bank (that’s who they borrowed their mortgage from) and asked about the early redemption process. The bank was fine with their proposal, with the exception that they had to pay an early redemption penalty! It turned out that they had to find another $7800 in order to pay their mortgage off in full. Fancy that … you want to rid your debt, you want to do the right thing and the banks way of dealing with it is to extract a ‘fine’ out of your pocket.
It’s almost as if you’re punished for wanting to do the right thing. I was pretty shocked, as they were. Of course they decided to go ahead and pay it off regardless, but both were left with a nasty taste in their mouths. It’s almost as if the banks have the right to print money, to extract as much as possible out of your pocket, whether or not you can actually afford it! Anyway, at least there’s no chance of them being hit by a foreclosure any time in the future.

Most of us know what a foreclosure is, and what it entails. The end result is that you lose your home, end of story. It’s a sad fact that over the last couple of years, the rate at which homes are being repossessed by the banks remains on the rise. As the financial crisis tightens, so many families are feeling the ill effects. This is not a good thing, probably not a good thing for the banks either. Let’s face it, the banks don’t want to own a string of houses, they’re not into the realty business. They don’t want to become landlords, owners of vast numbers of properties that require maintenance and upkeep, as well as property management.
However they are repossessing houses on a daily basis across the nation. You only have to take a drive around your local area to realize just how many people are being affected by this horrible trend. There are foreclosed boards up on every street, or so it seems when you’re driving around. In fact this is one of the ways in which people hunt for such properties, as they find them at the source – the side of the road. You drive around, looking for such properties. You find one that you like the look of; you take the details down and find out when the house is up for resale and where.

You then attend the auction (which is where most of these properties are sold) and bid for the house you’re interested in. If you’re successful, fine, you’ve got yourself a new home at what will probably be a rather low price. If not you just enter back into the fray, eventually you will manage to secure one. As time passes, more and more homes are repossessed through foreclosure, and more and more people end up without a family home. If you’re one of these people you’ll know the process, how it works and where it ends up. None of it seems fair, not least if you’ve lost your job. It’s a sad state of affairs that doesn’t look as though it’s going to improve any time soon.

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Move Out of London – Spotlight on Bishops Stortford, Hertfordshire

It was heart warming to see an article in the London Standard a few weeks ago that pretty much covered what I wrote in my move out of London post several months ago. Obviously old pub in bishops stortfordgreat minds do think alike! Apparently Savills, one of the largest auction houses in the UK, has done some research and identified three “Cinderalla” towns where property is cheap, where there are plenty of facilities for townies to appreciate and which are in commuting distance to London. The Standard article does not talk explicitly about buying property in these towns from house auctions, but there are auction bargains to be had in these areas.

One of these Cinderalla towns just happens to be on the very edge of Essex/Hertfordshire border – Bishops Stortford. In fact Bishops Stortford is just a stone’s throw from where I live, so I’d say I know Stortford pretty well. I have to agree that Bishops Stortford does have some things going for it as a commuter town, but the image painted of the town in the Standard is not wholly reflective in my view. Before I get onto why I wouldn’t live in Bishops Stortford, I’ll tell you what is good about Stortford first.

The train journey into Liverpool St takes around 45 minutes and there are some stunning old properties, cottages and the like on the outskirts of the town and in the surrounding villages. New apartment and house building has been going on relentlessly for the last 20 years, so there are plenty of newer properties to choose from if you are after something shiny and new.

It goes without saying that house prices are substantially less in Bishops Stortford than in London, and you will, in general get more square footage for your money. Here is what you can expect to pay in Stortford itself (rather than in one of the surrounding villages) if you buy through a traditional estate agent rather than at a house auction:

  • 2 Bed Flat – 145,000 Min
  • 2 Bed Terraced House – 175,000 Min
  • 3 Bed Terraced House – 190,000 Min
  • 3 Bed Detached House – 260,000 Min
  • 5 Bed Detached House – 450,000 Min

bishops storford house for auctionThe prices are tempting aren’t they? Stortford has a cinema, plenty of shops including a big Waitrose, some great oldy worldy pubs, a few good schools, a swimming pool and a few gyms for the health conscious. One benefit of Stortford that should be made clear is its location. It’s very close to Stansted airport, so for those who need to travel for business or like lots of holidays, it is convenient to be so close to an airport. Bishops Stortford is also within a half hour drive or train journey to Cambridge (23 miles) and is a short drive to Chelmsford (15 miles).

In my view, that’s about it. It’s the surrouthatched cottage stortfordnding villages such as Great Hallingbury, Thaxted and Hatfield Heath that offer the most appeal for me and the best properties, not Stortford itself. These villages are jam packed with character – village greens and beautiful cottages – and none are far from mainline rail.

One thing that those not au fait with Bishops Stortford will not be aware of is its strange culture. Bishops Stortfordonians tend to look down their noses at those around them and believe they are better, richer and cleverer than the wider population (though there is absolutely no evidence for that). There is a lot of drug use in the town with cocaine being the drug of choice, which means plenty of fighting in the town on weekends fuelled by huge amounts of alcohol alongside illicit drugs. There are also some big pockets of deprivation in Stortford and estates that you definitely would not want to go into at night.

So like most towns Stortford has it’s positives and it has it’s downsides. Given the choice I would not live in or bring up my children in Bishops Stortford, but I would happily live in one of the villages. If you’re lucky enough to find a renovation job or a repossessed house to buy in one of those, then I’d say go for it and leave the stink of London behind you.

bishops stortford prximity to london cambridge & chelmsford

Condos Foreclosure?

Are there a lot of condos in foreclosure? Bet your bottom dollar there are. The banks are even more likely to foreclose on a condo than they are on a “normal,” stand alone home, because there are likely to be less issues with maintenance as long as there are other tenants/owners in the building. Some sales portals are claiming to have foreclosed condominiums by the hundreds of thousands on their listing books, but the actual number available is pretty opaque.

The problem with back dues then becomes something the other owners may eventually have to deal with and the law is not clear as to who becomes responsible for any homeowners association fees, but usually the rest of the owners are forced to take up teh slack. In fact – almost as many homeowners associations are foreclosing as banks are.

Some owners are attempting to avoid the foreclosure process by filing chapter 7 bankruptcy, but this merely serves to delay the process as inevitably, more debts are incurred after the filing, and these will become a new debt that is not discharged with ethe chapter 7.

Chapter 11 offers little respite either – as long as there is equity, the court trustee will seize the property to free up any equity and use that to pay the debts (after fees), so most people who are well behind in payments, either to the bank or a homeowners association, are walking away becaus ethey are often in a “upside down,” situation of owing more than the property is worth.

Exactly how many condominiums have been foreclosed on, or are in the process of being repossessed is hard to determine. Many condo associations are now in financial difficulty because of the amount of condos in foreclosure, which naturally brings down the value of all the others in the block.

Recent news about this issue suggests that things are not getting any better:

A former president of a condominium association was arrested on fraud charges Friday after police said she swindled nearly $300,000 by trying to sell condos that were in foreclosure or off the market. Source.

Canadians shopping for bargain condos for sale in Florida are wary of the “Chinese drywall,” issue with many properties built between 2004 and 2007:

It’s a reminder never to make a decision based on low price alone. Instead, for the one in five Canadians who, according to a recent Leger Marketing poll, are considering buying U.S. real estate, veteran realtors like Moore advise a detailed, step-by-step approach to evaluating deals in Tampa, Vegas or Scottsdale.

“Air conditioning, electrical and plumbing systems will be toast. You can have trouble breathing, and MLS may not tell you about any of that,” Read more: http://www.calgaryherald.com/business/place/4855618/story.html#ixzz1OTPpKxd1

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NJ Foreclosure

If there was any doubt that foreclosures in New Jersey were substantial, a quick google search for “NJ foreclosure,” will dispel that notion immediately. The front page of search results is dominated by google map ads for a huge list of foreclosure agents. as you can see from this screen capture.

As you can see, the map is literally peppered with results for foreclosures in nj, and the consequences of the vast amounts of repossessions continues to have an effect on the real estate market. Some anomalies are starting to crop up as well. In fact – a private individual recently foreclosed on Bank of America in Florida, which – while entertaining – demonstrates just how broken the system is and rather adds to the distrust many are feeling towards the banks in general and the way the system is working.

Even though there has been a reduction in the amount of filings in New Jersey (largely thanks to an intervention by the courts to delay proceedings) the amount of pending foreclosures and property that will eventually be seized by the banks is quite substantial. Numbers of properties actually foreclosed upon in 2010 rose to more than 10,000 – a five fold increase over the 2006 numbers.

The situation will not improve any time soon either, and the staggering number of properties being sat on by the banks continues to rise.

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Bank of America Gets Foreclosed on

How funny is this?

Rent Or Buy

There are pros and cons on both side of the property fence. If you buy, you tend to feel as though you have a measure of security. Rent and you know that you’re at the mercy of your landlord. Delve a little deeper and one prospect starts to look better than the other. And that prospect would be rental property.

We live (somehow) under the presumption that owning our home provides us with a ‘bricks and mortar’ level of security. Our home is our castle, we own it, right?

Myth One: you don’t own your home, your mortgage lender does. You’re also not buying your home from the vendor. Your lender buys it, you buy it from them. A long-winded and conveniently overlooked aspect of buying a property, and something that the majority of buyers never think about.

Sound familiar? It should, because chances are you’ve done exactly that.

Myth Two: buying your home offers a higher level of security. It does? Says who? Tell that to those losing their homes hand over fist. Buying your home provides a false sense of security; there is no tangible refuge in the so-called ownership of house buying.

See Myth One – you own your home the minute you make your last mortgage repayment. Up until you hand over that final sum of money, your home is owned by your mortgage lender. Yes, the deeds say otherwise however the minute you start to default on your agreed payments you are in danger of losing your home to … that’s right, your lender.

The ‘myths’ aren’t exhaustive and yet I don’t think that there’s a need to continue listing each and every one. The above two speak for themselves, and when you also add in the overall costs of buying your home (from your lender!), then things really start to make sense.

On a standard rate of 5%, over a period of 25 years on a £100,000 market, you will pay an extra £75,000. And even in today’s housing market £100,000 won’t buy you a great deal.

That doesn’t sound much in one sense but, doubled up that’s £150,000 on a £200,000 mortgage. And so on. Who receives the better deal? Your lender. Yup – the guys that you’re buying your house from in the first place!

So, why rent? What’s in it for you? Well for a start off you’re not tied to the house. On a standard short-hold tenancy you’re tied in for six-month periods. This is in the private rental market. Rent from your local authority and, once you’ve reached the secure tenant stage (generally after the first 12 months), you’re set for life.

That’s security. Okay, a short-hold tenancy isn’t exactly secure but it does work both ways. Maybe your landlord decides to oust you for some reason and you’ve got to move out. By law you have to receive an agreed level of notice, which allows you plenty of time to find something else.

Fall lucky and you’ll stumble across a landlord that prefers secure, long-term tenancies, which suits both you and the owner. On top of that the repairs and general maintenance are the landlords domain. Need a plumber? Call your landlord. Lost a few roof tiles? Call your landlord.

Again this becomes far easier when you rent from your local authority. And whilst many people may think that renting from their local council is a step down, these days council tenants have very fixed rules to live by.

The average tenant, living in a manner that matches that of modern society (i.e. being a ‘good neighbour’) has nothing to worry about. However if you’re the type to play raucous music at 3 every morning or let your dog bark away to his heart’s content then you’re out on your ear.

So saying that both local authority housing and housing association groups have tightened their belts in recent years, and self-centred tenants are now a thing of the past. In short renting has far more benefits going for it than house ownership.

If you’re not in the position to buy, and renting is your only viable option, think yourself lucky. Owning your own home isn’t all that it’s cracked up to be.

OBAMA ADMINISTRATION RELEASES MARCH HOUSING SCORECARD

The U.S. Department of Housing and Urban Development (HUD) and the U.S. Department of the Treasury today released the March edition of the Obama Administration’s Housing Scorecard. Officials caution that the latest housing figures underscore fragility in the housing market and the need to continue efforts to help American families stay in their homes. The housing scorecard is a comprehensive report on the nation’s housing market.

“There’s no question that this month’s figures show a troubling dip in home sales and housing prices,” said HUD Assistant Secretary Raphael Bostic. “While we should not ignore the real impact that the Obama Administration’s programs are having for millions of homeowners and borrowers, these statistics clearly show that housing markets across the country continue to struggle to regain stable footing. We must remain steadfast in our efforts to support homeowners and communities in ways to help advance market stabilization and a transition towards health.”

“The latest data underscore the importance of continuing our efforts to help families stay in their homes,” said acting Assistant Secretary for Financial Stability Tim Massad. “Each month, the Administration’s Home Affordable Modification Program helps over 25,000 additional families avoid foreclosure, and it has set important standards that have led to more than 2 million mortgage modifications outside of the program. We are also working hard to implement additional programs to assist families in the hardest-hit states. We will continue these efforts so that we help more Americans remain in their homes and help our nation recover from this crisis.”

Available online at www.hud.gov/scorecard, the March Housing Scorecard features key data on the health of the housing market including:

  • Housing market remains fragile as data through February paint a mixed picture of recovery. Home prices remain weak under continued strain from foreclosures and distressed home sales, according to CoreLogic data now available in the Housing Scorecard. Mortgage delinquencies continued a downward trend compared to early 2010 and foreclosure starts and completions remain below peak. However, as lenders review internal procedures related to foreclosure processing, many foreclosure actions have been delayed. The decline is likely to be temporary as lenders eventually revise and resubmit foreclosure paperwork in the coming months.
  • Administration efforts have helped millions of families deal with the effects of the deepest economic crisis since the Great Depression. Since April of 2009, record low mortgage rates have helped nearly 10 million homeowners to refinance, resulting in $18.1 billion in total borrower savings. More than 4.4 million modification arrangements were started between April 2009 and the end of February 2011 – including more than 1.5 million HAMP trial modification starts, more than 776,000 FHA loss mitigation and early delinquency interventions, and nearly 2.2 million proprietary modifications under HOPE Now. While some homeowners may have received help from more than one program, the number of agreements offered was more than double the number of foreclosure completions for the same period (1.9 million). View the February HAMP Servicer Performance Report.

Given the current fragility and recognizing that recovery will take place over time, the Administration remains committed to its efforts to prevent avoidable foreclosures and stabilize the housing market.

Each month, the Housing Scorecard incorporates key housing market indicators and highlights the impact of the Administration’s unprecedented housing recovery efforts, including assistance to homeowners through the FHA and HAMP. The Obama Administration’s complete Housing Scorecard is available at: www.hud.gov/scorecard.