Not Everything Is Bad News!

NOT EVERYTHING IS BAD NEWS

The business section in the New York Times, November 15 "Foreclosures hit a snag for Lenders" by Gretchen Morgenson states that two Federal Judges; one in Ohio and another in Cleveland, ruled against a long standing foreclosure practice that lenders use, of just reclaiming properties from troubled borrowers through the simple process of foreclosure. Both Judges ruled against the foreclosure action in more than 14 cases because the Lenders failed to show proof of ownership on the properties they were foreclosing. The report also states that consumers advocates estimate that this is true in more than 40% of the present foreclosures. The article mentions that because of the complex structure of mortgage securities. it has made harder for borrowers to work out troubled loans because they can not identify who holds the mortgage note, and also because many Lenders do not even know which pool of investors bought the mortgages that ended in foreclosure. As more Federal Judges adhere to stricter rules and ask Lenders to demonstrate proof of ownership, this could be a gift to many borrowers facing foreclosure. Federal Judges believe this situation will make Lenders more willing to work with distressed borrowers.
The same holds true with the proposal of Governor Schwarzenegger asking Lenders to keep borrowers that are not in default, and living in the homes, locked at their present low teaser rates holding off future rate increases; but for how long?- and do you believe that investors will accept to hold interest rates at sometimes 1%, 2%, 3%?. I think this proposal will only put pressure on Lenders and will make them more willing to work with borrowers facing foreclosure but I doubt that they will agree with this solution.
Anyway, I think the above scenarios are only small bandages for the huge problems of foreclosures and short sales that we are facing and will be facing for a while.
I tend to agree and disagree with some of the writings of Active Rain Bloggers. I agree that a massive amount of lenders decided to lend money to people that did not qualify for a loan and had bad credit, in many cases creating the problems that we are facing. The Lenders were at fault. PROFITS. CORPORATE GREED. FRAUD in some instances.
Also, borrowers were at fault. They took loans they could not afford. In California who could blame them? In San Diego, where I live, home prices went sky rocketing. We probably have the third most expensive housing prices in the USA, so if a lender gave you the opportunity to buy a home in an emerging market, with no downpayment and no qualifying, paying less than what you were paying for rent; Why not go for it?
Now, not all stories are bad and heart breaking. I had the opportunity to work with Buyers that were smart enough to take advantage of the market and bought and sold properties one after the other during the years 2000 and 2005. Without putting themselves at risk with adjustable mortgages they were able to accumulate wealth beyond their own expectations. They were smart enough to get out of the market at the right time. They always bought or sold "the last of the good deals".
I believe as Realtors we have the responsability to work with distress borrowers. We can offer them solutions to the huge problems they are facing. We can try to save their credit in "short sales" situations by trying to influence Lenders to give them a break when reporting to credit agencies. Also, by pushing the Senate or the House to speed up the signing of the pending law, allowing the IRS to forget the taxes on forgiven debt on people that will loose everything and are even facing problems paying up the rental security deposits.
Isaac Bensussen
www.besthomesinlajolla.com