Facing Foreclosure? What To Do Right Now, by Jerry DeMuth, HouseLogic.com


If you’re facing foreclosure, don’t panic: Take steps right now to save your home or at least lessen the blow of its loss.

A record high 2.8 million properties were hit with foreclosure notices (http://www.realtytrac.com/contentmanagement/pressrelease.aspx?channelid=9&accnt=0&itemid=8333) in 2009. That’s the bad news. The good news: About two-thirds of notices don’t result in actual foreclosures, says Doug Robinson of NeighborWorks, a nonprofit group that offers foreclosure counseling.

Many homeowners find alternatives to foreclosure by negotiating with lenders, often with the help of foreclosure counselors. If you’re facing foreclosure, call your lender right now to determine your options, which can include loan modification, forbearance, or a short sale.

Foreclosure process takes time

The entire foreclosure process (http://portal.hud.gov/portal/page/portal/HUD/topics/avoiding_foreclosure/foreclosureprocess) can take anywhere from two to 12 months, depending on how fast your lender acts and where you live. Some states allow a nonjudicial process that’s speedier, while others require time-consuming judicial proceedings.

Once you miss at least one mortgage payment, the steps leading up to an actual foreclosure sale can include demand letters, notices of default, a recorded notice of foreclosure, publication of the debt, and the scheduling of a foreclosure auction. Even when an auction is scheduled, however, it may never occur, or it may occur but a qualified buyer doesn’t materialize.

Bottom line: Foreclosure can be a long slog, which gives you enough time to come up with an alternative. Meantime, if your goal is to salvage your home, think about keeping up with payments for homeowners insurance and property taxes. Otherwise, you could compound your problems by getting hit with an uncovered casualty loss or liability suit, or tax liens.

Read the fine print

Start by reviewing all correspondence you’ve received from your lender. The letters–and phone calls–probably began once you were 30 days past due. Also review your mortgage documents, which should outline what steps your lender can take. For instance, is there a “power of sale” clause that authorizes the sale of your home to pay off a mortgage after you miss payments?

Determine the specific foreclosure laws (http://www.foreclosurelaw.org) for your state. What’s the timeline? Do you have “right of redemption,” essentially a grace period in which you can reverse a foreclosure? Are deficiency judgments that hold you responsible for the difference between what your home sells for and your loan’s outstanding balance allowed? Get answers.

Pick up the phone

Don’t give up because you missed a mortgage payment or two and received a notice of default. Foreclosure isn’t a foregone conclusion, but it’s heading in that direction if you don’t call your lender. Dial the number on your mortgage statement, and ask for the Loss Mitigation Department. You might stay on hold for a while, but don’t hang up. Once you do get someone on the line, take notes and record names.

The next call should be to a foreclosure avoidance counselor (http://www.hud.gov/offices/hsg/sfh/hcc/fc/) approved by the U.S. Department of Housing and Urban Development. One of these counselors can, free of charge, explain your state’s foreclosure laws, discuss alternatives to foreclosure, help you organize financial documents, and even represent you in negotiations with your lender. Be wary of unsolicited offers of help, since foreclosure rescue scams (http://www.houselogic.com/articles/avoid-foreclosure-rescue-scams/) are common.

Be sure to let your lender know that you’re working with a counselor. Not only does it demonstrate your resolve, but according to NeighborWorks, homeowners who receive foreclosure counseling are 1.6 times more likely to avoid losing their homes than those who don’t. Homeowners who receive loan modifications with the help of a counselor also reduce monthly mortgage payments (http://www.nw.org/newsroom/pressReleases/2009/netNews111809.asp) by $454 more than homeowners who receive a modification without the aid of a counselor.

Lender alternatives to foreclosure

Hope Now (http://www.hopenow.com), an alliance of mortgage companies and housing counselors, can aid homeowners facing foreclosure. A self-assessment tool will give you an idea whether you might be eligible for help from your lender, and there are direct links to HUD-approved counseling agencies and lenders’ foreclosure-prevention programs.

There are alternatives to foreclosure that your lender might accept. The most attractive option that’ll allow you to keep your home is a loan modification that reduces your monthly payment. A modification can entail lowering the interest rate, changing a loan from an adjustable rate to a fixed rate, extending the term of a loan, or eliminating past-due balances. Another option, forbearance, can temporarily suspend payments, though the amount will likely be tacked on to the end of the loan.

If you’re unable to make even reduced payments, and assuming a conventional sale isn’t possible, then it may be best to turn your home over to your lender before a foreclosure is completed. A completed foreclosure can decimate a credit score, which will make it hard not only to purchase another home someday, but also to rent a home in the immediate future.

Your lender can approve a short sale, in which the proceeds are less than what’s still owed on your mortgage. A deed-in-lieu of foreclosure, which amounts to handing over your keys to your lender, is another possibility. The earlier you begin talks with your lender, the more likelihood of success.

Explore government programs

The federal government’s Making Home Affordable (http://www.makinghomeaffordable.gov/) program offers two options: loan modification (http://www.houselogic.com/articles/making-home-affordable-modification-option/) and refinancing (http://www.houselogic.com/articles/making-home-affordable-refinance-option/). A self-assessment will indicate which option might be right for you, but you need to apply for the program through your lender. A Making Home Affordable loan modification requires a three-month trial period before it can become permanent.

Fannie Mae and Freddie Mac have their own foreclosure-prevention programs as well. Check to determine if either Fannie (http://www.fanniemae.com/loanlookup) or Freddie (http://www.freddiemac.com/mymortgage) owns your mortgage. Present this information to your lender and your counselor. Fannie and Freddie also have rental programs under which former owners can remain in recently foreclosed homes on a month-to-month basis.

The federal Home Affordable Foreclosure Alternatives (https://www.hmpadmin.com/portal/programs/foreclosure_alternatives.html) program, which takes full effect in April 2010, offers lenders financial incentives to approve short sales and deeds-in-lieu of foreclosure. It also provides $3,000 in relocation assistance to borrowers. Again, talk to your lender and counselor.

Multnomahforeclosures.com: Bank Owned Property List Update for August 2010


August REO list for bank owned property has been added to Multnomahforeclosures.com . REO lists for Clackamas, Multnomah and Washington County has been addd to the site. The homes listed in these files were deeded back or returned to the investor or lender due to the finalizing of the foreclosure process. Many of these homes may already be on the market or will soon will be. It would not be a bad idea to contact the new owner of these properties and find out what their plans are when it comes to their future ownership of the property.

Multnomah County Foreclosures
http://multnomahforeclosures.com

Is this the Right Time for the Fed to go Negative?, by Willem Buiter, Wsj.com


Ben Bernanke, chairman of the Federal Reserve Bank, has a lot more tools for supporting U.S. economic activity through expansionary monetary policy than he discussed in his Jackson Hole speech, which alluded only to more quantitative easing and credit easing—increasing the size and changing the liquidity composition of the Fed’s balance sheet.

Perhaps out of fear of resurrecting the moniker “Helicopter Ben,” Mr. Bernanke did not refer to the combined fiscal-monetary stimulus that (almost) always works: a fiat money-financed increase in public spending or tax cut. Treasury Secretary Tim Geithner can always send a sufficiently large check to each U.S. resident to ensure that household spending rises. By borrowing the funds from the Fed, there is no addition to the interest-bearing, redeemable debt of the state. As long as households are confident that these transfers will not be reversed later, “helicopter money drops” will, if pushed far enough, always boost consumption.

However, stronger consumer expenditure, while appropriate from a cyclical perspective—any additional demand is welcome—is not what the U.S. needs for long-term sustainability and structural adjustment: to raise the national saving rate, boost fixed investment in plant, equipment and infrastructure, achieve a trade surplus and shift resources from the non-tradable to the tradable sectors.

By way of illustration, an eight percentage point reduction in public and private consumption as a share of GDP could be compensated for by an increase in the trade surplus of five per cent of GDP and in non-housing U.S. fixed capital formation of three per cent of GDP. To achieve this, a much weaker real exchange rate and lower real interest rates are necessary. To pursue these objectives speedily a Federal Funds target rate of around minus three or minus four per cent may well be required right now, in our view. This brings monetary policy up against the zero lower bound (zlb) on nominal interest rates.

The zlb results from the existence of currency (dollar bills and coins) with a zero nominal interest rate. Even allowing for “carry costs” of currency (storage, safekeeping, insurance etc.), this makes it impossible for competing assets like government bills, to offer interest rates much below zero. Stimulating demand in the U.S. economy, while rebalancing the composition of demand and production in the desired directions, requires a much lower Federal Funds target rate than is feasible with the zlb in place.

To restore monetary policy effectiveness in a low interest rate environment when confronted with deflationary or contractionary shocks, it is necessary to get rid of the zlb completely. This can be done in three ways: abolishing currency, taxing currency and ending the fixed exchange rate between currency and bank reserves with the Fed. All three are unorthodox. The third is unorthodox and innovative. All three are conceptually simple. The first and third are administratively easy to implement.

The first method does away with currency completely. This has the additional benefit of inconveniencing the main users of currency—operators in the grey, black and outright criminal economies. Adequate substitutes for the legitimate uses of currency, on which positive or negative interest could be paid, are available.

The second approach, proposed by Gesell, is to tax currency by making it subject to an expiration date. Currency would have to be “stamped” periodically by the Fed to keep it current. When done so, interest (positive or negative) is received or paid.

The third method ends the fixed exchange rate (set at one) between dollar deposits with the Fed (reserves) and dollar bills. There could be a currency reform first. All existing dollar bills and coin would be converted by a certain date and at a fixed exchange rate into a new currency called, say, the rallod. Reserves at the Fed would continue to be denominated in dollars. As long as the Federal Funds target rate is positive or zero, the Fed would maintain the fixed exchange rate between the dollar and the rallod.

When the Fed wants to set the Federal Funds target rate at minus five per cent, say, it would set the forward exchange rate between the dollar and the rallod, the number of dollars that have to be paid today to receive one rallod tomorrow, at five per cent below the spot exchange rate—the number of dollars paid today for one rallod delivered today. That way, the rate of return, expressed in a common unit, on dollar reserves is the same as on rallod currency.

For the dollar interest rate to remain the relevant one, the dollar has to remain the unit of account for setting prices and wages. This can be encouraged by the government continuing to denominate all of its contracts in dollars, including the invoicing and payment of taxes and benefits. Imposing the legal restriction that checkable deposits and other private means of payment cannot be denominated in rallod would help.

In the other major industrial countries too (the euro area, Japan and the U.K.), monetary policy is constrained by the zlb. Conventional fiscal expansion with government debt-financed deficit increases would be ineffective or infeasible because of fiscal unsustainability. Like the Fed, the ECB, the Bank of Japan and the Bank of England therefore should lobby for the legislation necessary to eliminate the zlb. The euro area and Japan, which don’t suffer from deficient saving rates or undesirable current account deficits, could in addition stimulate consumption through helicopter drops of money—base money-financed fiscal stimuli.

All three methods for eliminating the zlb, although administratively feasible and conceptually simple, are innovative and unorthodox. Central banks are conservative. The mere fact that something has not been done before often is sufficient grounds for not doing it now. The cost of rejecting institutional innovation to remove the zlb could, however, be high: a material risk of continued deficient aggregate demand, persistent deflation and, in the U.S. and the U.K., unnecessary conflict between short-term stabilization and long-term sustainability and rebalancing.

—Willem Buiter is chief economist for Citi.

Obama Administration Awards Additional $1 Billion to Stabilize Neighborhoods Hard-Hit by Foreclosure, RisMedia


RISMEDIA, September 13, 2010—U.S. Housing and Urban Development Secretary Shaun Donovan awarded an additional $1 billion in funding to all states along with a number of counties and local communities struggling to reverse the effects of the foreclosure crisis. The grants announced today represent a third round of funding through HUD’s Neighborhood Stabilization Program (NSP) and will provide targeted emergency assistance to state and local governments to acquire, redevelop or demolish foreclosed properties.

“These grants will support local efforts to reverse the effects these foreclosed properties have on their surrounding neighborhoods,” said Donovan. “We want to make certain that we target these funds to those places with especially high foreclosure activity so we can help turn the tide in our battle against abandonment and blight. As a direct result of the leadership provided by Senator Chris Dodd and Congressman Barney Frank, who played key roles in winning approval for these funds, we will be able to make investments that will reduce blight, bolster neighboring home values, create jobs and produce affordable housing.”

The funding announced today is provided under the Dodd-Frank Wall Street Reform and Consumer Protection Act. To date, there have been two other rounds of NSP funding: the Housing and Economic Recovery Act of 2008 (HERA) provided $3.92 billion and the American Recovery and Reinvestment Act of 2009 (Recovery Act) appropriated an additional $2 billion. Like those earlier rounds of NSP grants, these targeted funds will be used to purchase foreclosed homes at a discount and to rehabilitate or redevelop them in order to respond to rising foreclosures and falling home values. Today, 95 cents of every dollar from the first round of NSP funding is obligated—and is in use by communities, buying up and renovating homes, and creating jobs.

State and local governments can use their neighborhood stabilization grants to acquire land and property; to demolish or rehabilitate abandoned properties; and/or to offer downpayment and closing cost assistance to low- to moderate-income home buyers (household incomes do not exceed 120% of area median income). In addition, these grantees can create “land banks” to assemble, temporarily manage, and dispose of vacant land for the purpose of stabilizing neighborhoods and encouraging re-use or redevelopment of urban property. HUD will issue an NSP3 guidance notice in the next few weeks to assist grantees in designing their programs and applying for funds.

NSP 3 will take full advantage of the historic First Look partnership Secretary Donovan announced with the National Community Stabilization Trust last week. First Look gives NSP grantees an exclusive 12-14 day window to evaluate and bid on properties before others can do so. By giving every NSP grantee the first crack at buying foreclosed and abandoned properties in these targeted neighborhoods, First Look will maximize the impact of NSP dollars in the hardest-hit neighborhoods—making it more likely the properties that communities want to buy are strategically chosen and cutting in half the traditional 75-to-85 day process it takes to re-sell foreclosed properties .

NSP also seeks to prevent future foreclosures by requiring housing counseling for families receiving home buyer assistance. HUD seeks to protect future home buyers by requiring states and local grantees to ensure that new home buyers under NSP receive homeownership counseling and obtain a mortgage loan from a lender who agrees to comply with sound lending practices.

In determining the allocations announced today, HUD, as it did with NSP1, followed key indicators for the distribution formula outlined by Congress. HUD is using the latest data to implement the Congressional formula. The formula weighs several factors to match funding to need in the 20% most distressed neighborhoods as determined based on the number and percentage of home foreclosures, the number and percentage of homes financed by a subprime mortgage related loan, and the number and percentage of homes in delinquency. To estimate the level of need down to the neighborhood level, HUD uses a model that takes into account causes of foreclosures and delinquencies, which include housing price declines from peak levels, and increases in unemployment, and rate of high cost and highly leveraged loans. HUD also considers vacancy problems in neighborhoods with severe foreclosure related problems.

In addition to a third round of NSP funding, the Dodd-Frank Wall Street Reform and Consumer Protection Act creates a $1 billion Emergency Homeowners Loan Program to be administered by HUD. This loan program will provide up to 24 months in mortgage assistance to homeowners who are at risk of foreclosure and have experienced a substantial reduction in income due to involuntary unemployment, underemployment, or a medical condition. HUD will announce additional details, including the targeted areas and other program specifics when the program is officially launched in the coming weeks.

For more information, visit www.hud.gov.

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