Lake County May Buy Foreclosed Homes

New source of affordable housing

August 7, 2008 | By Jim Newton | News Sun 

A new federal housing law signed by President Bush last week may increase affordable housing opportunities in Lake County.

The law, aimed at stabilizing ongoing problems in the housing market, includes almost $4 billion in block grants that will allow states and local governments to purchase foreclosed homes and sell at least 25 percent of those homes to lower-income families and individuals.

Lake County, Waukegan and North Chicago are expected to receive an unspecified amount of that new funding through the state.

Lobbying consultant Trent Lehman told members of the County Board’s Revenue Records and Legislative Committee Wednesday that the law “offers a lot of opportunity for the county.”

Although there have been some reports that Illinois would receive about $135 million under the new legislation, Lehman said such details haven’t been finalized.

Officials said the funding would come through the state, and that the county, as well Waukegan and North Chicago, would receive a portion.

“We are entitled to funding in the formula,” said county administrator Barry Burton.

Under the block grant section of the law, all governmental recipients of the new funding must use the money for the purchase and rehabilitation of foreclosed homes and other residential property within 18 months of receiving it.

At least 25 percent of the funds must be used to purchase properties that would house individuals or families whose income is below 50 percent of the area’s median income.

The sale price must be equal or less than the cost to purchase and rehabilitate the homes.

County officials said the funding may be funneled through the Lake County Affordable Housing Corporation, which already oversees affordable housing, low-interest loans and other housing assistance programs.

The law also attempts to temper the housing crisis by providing the Treasury Department with the emergency authority to purchase stock in Fannie Mae and Freddie Mac if it would “provide stability to the financial markets, prevent disruptions in the availability of mortgage finances and protect taxpayers,” according to an overview provided by Lehman.

It also provides billions in new loan guarantees to establish a voluntary HOPE for Homeowners program to help at-risk borrowers refinance mortgages to increase their viability and affordability.

REO inventory increased in July

In my market area, active REO listings increased 4.7% over June
Pending listings (under contract, no contingencies) decreased 9.4%
Closed listings decreased 2.0%

Previous month trends hinted at a foreclosure slowdown; but that hope was shortlived.

Property Management Seminar

I will have a class on Rental Property Management, Tuesday, August 19 from 6-9 pm in Mundelein, Illinois. This seminar is sponsored by the Lake County Property Investors Association. Hope you can make it!

Click for Details

Our July 29 class covering the Legal Aspects of Landlording was well-attended. Participants received a 181-page workbook plus companion CD-ROM of forms and worksheets.

Classes will be held periodically; if you’d like to be notified of upcoming seminars, let me know (melmetts at gmail dot com).

Senate approves housing relief bill

Dodd to families: ‘Help is on the way’

By Richard Simon | Los Angeles Times | July 27, 2008

WASHINGTON - Congress completed work Saturday on the government’s most sweeping response yet to the nation’s housing crisis, sending to President George W. Bush a bill designed to help homeowners avoid foreclosure, spur home buying and prop up struggling mortgage giants Fannie Mae and Freddie Mac.

The Senate, in a rare weekend session, overwhelmingly approved the measure, 72-13.

Bush has said he will sign the bill, which the House approved, 272-152.

“Today, Congress did more than send a bill to the president - we sent a message to American families that help is on the way,” said Senate Banking Committee Chairman Christopher Dodd (D-Conn.), who helped write the legislation.

The measure’s critics attacked it as a bailout of speculators and irresponsible borrowers at potentially huge cost to taxpayers.

“This bill is fraught with too much risk and too little protection to the taxpayer,” said Sen. Christopher Bond (R-Mo.), contending it would allow lenders to “dump their worst subprime mortgages” on the Federal Housing Administration.

All the votes opposing the legislation were cast by Republicans.

The bill passed Saturday contains a key provision that would allow the Federal Housing Administration to guarantee as much as $300 billion in lower-cost mortgages - provided that lenders accept significant losses.

The provision is expected to help at least 400,000 homeowners.

The bill also would give the U.S. Treasury Department authority temporarily to increase its lending to Fannie Mae and Freddie Mac and buy their stock, a provision that Treasury Secretary Henry Paulson has called crucial to bolstering confidence in the companies and stabilizing housing finance markets.

Presidential candidates Sens. John McCain and Barack Obama each expressed support for the measure but missed the vote.

Highlights of the legislation

• Includes about $15 billion in tax breaks, including what amounts to an interest-free loan of as much as $7,500 for first-time home buyers.
• Funnels $4 billion to communities to buy and renovate vacant foreclosed properties.
• Gives states authority to issue an additional $11 billion in tax-exempt bonds to refinance troubled loans and finance low-income rental housing.
• Raises the cap on mortgages that Fannie Mae and Freddie Mac can buy.
• Sets up Federal Housing Finance Agency to oversee the mortgage giants.

Have banks bottomed out?

Despite stock price jump for many this week, analysts see problems continuing

By Becky Yerak | Chicago Tribune reporter | July 19, 2008

Don’t break out the bubbly just yet.That’s the thinking of several bank watchers who, despite seeing financial services stocks end the week on a high note, say the worst probably isn’t over as the credit crisis approaches its one-year anniversary.

As the week started, many braced for the worst. IndyMac Bancorp Inc. had just been seized by U.S. banking regulators. And the federal government felt compelled to offer assurances that it would help out mortgage financiers Freddie Mac and Fannie Mae. The news drove down the KBW Bank Index by 8.5 percent on Monday.

But as the week wore on, megabanks Wells Fargo, JPMorgan Chase and, on Friday, Citigroup delivered better-than-expected results. Citigroup posted a $2.5 billion second-quarter loss, or 54 cents per share; analysts were expecting a 66-cent-per-share loss.

Meanwhile, of the four Chicago-area banks that have released second-quarter earnings, two got a bump in their stock price after numbers were released.

Could the worst be over?

Hardly, said BMO Financial Markets analyst Peter Winter.

“Analysts are falling over themselves to lower earnings estimates,” Winter said. Wells, Chase and Citigroup “beat very low expectations, and the quality of the earnings is not good.”

Also, the economy shows signs of weakening, he said.

“The feeling is that credit problems are contained now in residential mortgage areas, but there are signs that the problem is spreading to auto loans, credit cards and commercial lending,” Winter said.

By the end of the first quarter, many investors and analysts assumed banks had written off their bad loans and that profits would improve, said William Blair & Co. analyst David Long.

“That thesis proved wrong,” Long said. “While second-quarter earnings have been better than expected in some cases, the bar was set pretty low.”

And earnings could get worse.

“The peak for adjustable-rate-mortgage resets is the third quarter,” he said. “So many consumers current on their mortgages today will experience an increase in their monthly mortgage payments of several hundred dollars, which may lead to additional mortgage delinquencies in the second half of the year and into 2009.”

Another bank watcher also believes the uncertainty will continue into next year.

“The credit crunch will continue to be the significant wild card into 2009 and perhaps the most significant capital markets shock of the last two generations,” said Stephen Wood, Russell Investments senior portfolio strategist.

Keep your eye on closing fees

By Renae Merle | The Washington Post | July 20, 2008

You looked hard to find the right house. You negotiated the right price and shopped around for the best mortgage rate.

But you’re not done shopping yet.

Home buyers can squeeze out extra savings at the closing table if they negotiate on fees charged by lenders, closing companies and title insurers. Some buyers can push sellers to cover a portion of their closing costs, and the slow housing market also is giving them leverage to negotiate discounts from some of the professionals involved in settlement, experts say.

Closing costs vary by locality and loan size, with taxes the main difference, but they usually amount to 2 to 5 percent of the home’s price. Nationally, that translates to an average $3,681 on a $200,000 home loan, according to Bankrate.com.

But there are other variations in how much home buyers pay in closing costs, according to a report released this spring by the Department of Housing and Urban Development.

The report found that minorities and those without college degrees pay more in closing costs.

The study also found that borrowers who used mortgage brokers paid more in closing costs than those who didn’t, a finding the industry disputes.

To ensure that they are not being overcharged at closing, home buyers should eliminate junk fees and ask for discounts, housing experts said. Ask the lender for a written good-faith estimate, which is required after you apply for the loan, and then compare the closing costs with competitors’ charges. Some things are non-negotiable—county transfer taxes, for example.

But that shouldn’t stop buyers from challenging other costs, said Brian Sullivan, a HUD spokesman. “Shop until you drop. I know it’s easier said than done, but do it anyway,” he said.

The complexity of closing may inhibit some buyers. Nearly a quarter of homeowners interviewed in a Federal Trade Commission survey last year could not identify the total amount of their settlement costs.

“One of the main ways to save money is to be that person who is really, obviously on the ball. Otherwise, ask a lot of questions about the closing costs, and maybe every week or so, ask about the status of the loan,” said Holden Lewis, a reporter for Bankrate. “Ask: ‘Why am I paying a documentation fee and a processing fee? Why am I paying an application fee and a commitment fee?’ I have heard some places are charging e-mailing and PDF fees; what’s that?”

Making comparisons more difficult, some lenders bundle the cost of the settlement process, offering a flat-rate for the title insurance as well as other services. Buyers who do not opt for a bundled offering must wade through lenders’ disparate definitions of services to find savings.

“One lender may include a document preparation fee that the other doesn’t, but the second lender has a processing fee,” said Keith Gumbinger, vice president of HSH Associates, a New Jersey-based mortgage information company. “It all makes direct comparisons difficult.”

Making another attempt to simplify the closing process for consumers, HUD is developing a new standard form for lenders to use when giving consumers good-faith estimates.

The forms would specify which charges could change at settlement and by how much, giving customers a better opportunity to compare rates, Sullivan said. The agency is also pushing for lenders to lift requirements that buyers pay application fees before receiving good-faith estimates.

The agency anticipates completing the form by the end of the year. In the meantime, home buyers can look for excessive or unexplained fees under the current process.

A week or more before closing, a buyer should notify the lender that he or she wants the settlement statement that outlines final closing costs, also known as a HUD-1 form, at least a day before heading to the settlement table. Comparing that document to the good-faith estimate can help the borrower find discrepancies. “There are some common things you can look for, like a $50 courier fee when it only costs $16 to send something through UPS,” Gumbinger said.

“We want to limit the so-called fee creep,” Sullivan said, and protect consumers from “being offered one thing and paying another—those last-minute settlement surprises.”

Copyright © 2008, Chicago Tribune

Legal Landlording Seminar

I will be presenting on the Legal Aspects of Landlording, Tuesday, July 29 from 6-9 pm in Mundelein, Illinois. This seminar is sponsored by the Lake County Property Investors Association. Hope you can make it!

Click for Details

New wave of mortgage resets coming

Today’s Chicago Tribune had an article by Renae Merle entitled “Hot time for ARM resets this summer.”

According to the article, the summers of 2005 and 2006 were a hotbed of subprime lending, with rates scheduled to reset after two or three years. This indicates a new wave of resets are due about now, with another (smaller) wave coming next summer.

Mortgage rate resets will spawn more foreclosures.

Nationally, more than 300,000 ARMS will reset this summer, and with declining home values, owners have few options.

I am convinced that the real estate market won’t turn around until foreclosures decline. June data showed a slight increase over May, but this trend may not last.

Meanwhile, foreclosed homes can be excellent investment opportunities for buyers with sufficient cash and/or credit. The rental market continues to improve, with vacancies dropping to pre-2001 rates. Call me! 847-949-6045

REO inventory increased in June

In my market area, active REO listings increased 1.7% over May

Pending listings (under contract, no contingencies) increased 26.2%

Closed listings increased 69.0%

Month over month inventory growth slowed in June. Are brighter days ahead?

AG Madigan sues Countrywide for fraud

By: Lorene Yue June 24, 2008

(Crain’s) — Illinois Attorney General Lisa Madigan is suing Countrywide Financial Corp., claiming that the company knowingly put borrowers in mortgages they couldn’t afford leading to thousands of residents losing their homes.

The suit, filed Wednesday morning in Cook County Circuit Court, charges Countrywide with one count of fraud and deceptive business practices and one count of violating the Illinois Fairness in Lending Act.

Also named in the suit were co-founder and Chief Executive Officer Angelo Mozilo, Countrywide Home Loans Inc., Full Spectrum Lending and Countrywide Home Loan Servicing L.P.

Countrywide said in a statement that it is cooperating with Ms. Madigan’s office.

“Our mission remains to assist our customers,” Countrywide said. “We are particularly focused on working with our customers who are having difficulty making their mortgage payments, or who foresee difficulty with future rate resets.”

Countrywide Financial Corp., based in Calabasas, Calif., is the nation’s largest mortgage lender. It was also the largest mortgage lender in Illinois in 2004, 2005 and 2006, according to the suit.

Ms. Madigan’s accusations stem from an investigation she began in September. At that time, her office subpoenaed Countrywide’s home loan unit for documents and records related to loan originations and funding.

The suit alleges that Countrywide Financial “engaged in unfair and deceptive practices including the loosening of underwriting standards, structuring unfair loan products with risky features, engaging in misleading marketing and sale techniques and incentivizing employees and brokers to sell more and more loans with risky features.”

Those practices, the suit said, led to higher loan delinquencies and foreclosure rates for Illinois homeowners.

“From 2006 to 2007, all foreclosure complaint filings in Cook County increased by 46%,” the suit said. “For this same period, however, Countrywide Home Loans Inc.’s foreclosure complaint filings increased by 117%.”

The suit claims that Countrywide foreclosed on at least 2,534 Cook County homes between January 2004 and June 2008.

Ms. Madigan is seeking a judgment that will order Countrywide to rescind, reform or modify all of its mortgages that were obtained by the company’s alleged deceptive practices. She also wants restitution for borrowers who lost their homes due to Countrywide’s practices.

The suit also seeks civil penalties up to $50,000 as well as a penalty of up to $10,000 for each violation of the state’s Consumer Fraud and Deceptive Practices Act.