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Why Home Prices Are and Are Not Stabilizing

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Call Bob Cumming of Keystone Group Properties at 310-496-8122 for information about Southern California luxury homes in Los Angeles County, exclusive Orange County CA homes and beach/coastal homes in San Diego County.  Serving buyers and sellers of Southern California coastal real estate , Keystone Group Properties offers excellent services and professional expertise to discriminating clients in Southern California.

Why Home Prices Are and Are Not Stabilizing

Home prices are falling again, but some analysts see a silver lining because the prices of homes that aren’t selling out of foreclosure have been holding steady.

CoreLogic reported that home prices in October declined by 1.3% from September and by 3.9% from one year ago. A separate index released Monday by LPS Applied Analytics showed that home prices in September had dropped by 1.2% from August.

“Many housing statistics are basically moving sideways,” said Mark Fleming, chief economist at CoreLogic.

Still, the CoreLogic index shows an important emerging trend where home prices are stabilizing after excluding distressed sales.

What’s the difference between distressed sales and non-distressed sales?

Unlike traditional owners, banks are often faster to cut prices in order to unload properties quickly—or what are called “distressed” sales. The upshot is that, the more homes being sold by lenders in any given month the faster prices tend to fall.

This was clear throughout the initial years of the housing bust. Prices declined most sharply in 2008 as banks dumped foreclosed properties at fire-sale prices. Owner-occupants are less likely to list their homes for sale in the winter months, too, which means that each winter there are also drops in prices because distressed sales account for a growing share of sales.

Are prices of distressed homes falling at the same rate as non-distressed homes?

That’s been the case up until recently. While total home prices were down by 3.9% from one year ago, prices were down by just 0.5% from one year ago when excluding distressed sales. In September, total prices were down by 3.8% from one year ago, but non-distressed prices were down by 2.1%.

This shows that while price declines are resuming, they are not yet falling from one-year ago for non-distressed homes. In fact, during the first nine months of 2011, prices of non-distressed homes remained relatively stable, with year-over-year declines between 2% and 3%.

Analysts at Barclays Capital called this “the most important trend in the housing industry right now,” in a report published on Monday.

Why would any stabilization of non-distressed prices matter?

If it’s true that prices of non-distressed homes are stabilizing, even as distressed homes continue to fall in price, it would mean that a distressed home is “increasingly being seen as a poor substitute for a non-distressed home,” writes Stephen Kim, the Barclays housing analyst. He says it’s possible that the “bifurcation between distressed and non-distressed homes will only widen with the passage of time.”

Won’t the overhang of foreclosures put pressure on non-distressed prices anyway?

That’s all too possible. There are more than two million loans in some stage of foreclosure, and it may be too early to argue that those won’t in some way impact the sales prices of non-distressed homes. For one, homes that sell out of foreclosure at significantly lower prices could be used by appraisers as “comparable” sales that may make banks less willing to lend at an agreed sales price for a non-distressed home.

In certain markets where many homes are selling out of foreclosure, it’s hard to simply set aside distressed homes. “You can’t deny the fact that if half of homes that sold in San Diego in a given year were distressed, that is the trend,” said Kyle Lundstedt, managing director at LPS.

What could happen if this trend holds up, with distressed prices falling and non-distressed prices staying flat?

It could stabilize something else: home-buyer confidence. “There is nothing that strikes fear in a homeowner’s heart than to hear that his home value has declined,” writes Mr. Kim of Barclays. “But if it was home price trends that got us into this funk, it stands to reason that a recovery in sentiment will be similarly ushered in once price declines have abated—which is precisely what the CoreLogic price data shows us.”

What Went Wrong With Foreclosure Aid Programs

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What Went Wrong With Foreclosure Aid Programs

At the time, they thought they were being reviewed for a loan modification through the U.S. government’s foreclosure-prevention program.A Realtor knocking on their door to tell them to vacate told them otherwise.

“I’m bitter,” says Harry Johnson.  “We did everything they told us to do.”

The Johnson’s are angry not only at their mortgage company, but also at the government, and they’re two voices among a discontented chorus.

The Obama administration’s initial foreclosure-prevention programs, launched in early 2009, were intended to help 7 million to 9 million people. So far, they’ve aided about 2 million, and not all of those are out of foreclosure danger.

Programs begun later have also faltered. One intended to help at least 500,000 has helped just a few hundred a year after its launch. Another initiative to extend $1 billion to help the jobless or underemployed avoid foreclosure ended in September, obligating less than half of its funds. The unused money went back to the U.S. Treasury.

As of Nov. 30, the government had spent just $2.8 billion of the $46 billion war chest it had in 2009 to devote to the housing crisis, the Treasury Department says. More has been committed, but only $13 billion will ultimately be spent, the non-partisan Congressional Budget Office estimated in March.

Meanwhile, 2.5 million homes have been lost to foreclosure since 2009, an additional 4 million are in the foreclosure process or seriously delinquent, and home prices are still falling in much of the U.S., shrinking household wealth for millions of Americans.
“Every program has fallen far short of goals. I can’t think of one that’s been largely successful,” says the  director of an Unemployment Project, a non-profit that’s been involved in foreclosure prevention for decades.

The administration’s programs were hampered by design flaws, their reliance on a mortgage industry overwhelmed by the fallout from a historic collapse in home prices, and a brutal extended housing downturn. Nor could they always overcome the conflicting interests of borrowers with too much debt, mortgage investors unwilling to surrender profits and mortgage servicers with sometimes greater financial incentives to foreclose on loans than to permanently modify them, say housing and government policy analysts, consumer advocates and former administration officials.

Critics also say the administration failed to entice banks and mortgage-finance giants Freddie Mac and Fannie Mae to take bolder steps to address the crisis even though the institutions received billions in government bailout funds.

“There was nowhere near the effort to help Main Street as there was to help the banks,” says former senator Ted Kaufman, D-Del., who chaired a congressional oversight panel that oversaw $475 billion in Troubled Asset Relief Program (TARP) funds. Most of that went to banks and the auto industry, but $46 billion in TARP money also funded foreclosure-prevention efforts.

Administration officials defend their response. They say the scope of the problem was unprecedented — and so were their actions. Federal programs prevented many foreclosures even if they didn’t help as many people as expected, officials say. They say the administration’s efforts will save homeowners billions in mortgage costs.

They also say the initiatives helped millions of other homeowners by driving service improvements in the mortgage industry and preventing an even worse collapse in home prices. Since the peak of the housing market in 2006, $3 trillion in home equity has been lost, researcher LPS Applied Analytics estimates.

“It’s too easy to underestimate the scale and complexity of these issues,” Shaun Donovan, secretary of Housing and Urban Development, said in a recent interview, while acknowledging that some administration programs “haven’t reached as many people as we originally targeted.”

Those shortfalls are most evident in the:

•Home Affordable Modification Program (HAMP). Through October, the biggest foreclosure-prevention effort has resulted in 883,076 homeowners getting permanent loan modifications that made their loans more affordable and improved their ability to avoid foreclosure.

But HAMP was targeted to help 3 million to 4 million homeowners,President Obama said when he announced it in 2009. When it expires next December, it will have prevented fewer than 800,000 foreclosures, Kaufman’s congressional oversight panel estimated in December 2010.

HAMP “has been a failure,” Neil Barofsky, the former special inspector general for TARP, told a congressional committee in October.

•Home Affordable Refinance Program (HARP). Through September, it’s helped 928,570 homeowners get lower-interest loans even though they lacked the amount of equity usually needed for a new loan.

HARP was intended to help 4 million to 5 million homeowners. While it was recently overhauled to encourage more refinancing, federal officials now say it will help fewer than 2 million borrowers by the end of 2013, when it expires.

So far, those getting HARP refis also tend to be people who aren’t deeply underwater — those who owe more on their homes than they’re worth. HARP refis have gone largely to homeowners with some equity or who were only slightly underwater, government data show. It’s unclear whether the recent revamping will significantly change that, says Alan White, law professor and mortgage lending expert at the Valparaiso University School of Law.

More than 11 million homeowners — more than a fifth of homeowners with mortgages — are underwater, says market researcher CoreLogic. Many are unable to take advantage of today’s historically low interest rates and wring some relief from the ravages of the recession and weak economic recovery.

Rep. Dennis Cardoza, D-Calif., whose district encompasses Stockton, one of the nation’s worst foreclosure hot spots, says more needs to be done and that the changes to HARP are “too little, too late.”

•Federal Housing Administration Short Refinance program. Intended to help 500,000 to 1.5 million homeowners refinance into loans with a lower interest rate, the FHA program did fewer than 400 deals through September, a year after the effort’s launch, government data show.

The program requires mortgage owners to forgive at least 10% of a borrower’s unpaid principal before that loan can be refinanced into an FHA loan at a lower interest rate.

But mortgage owners have been reluctant to forgive principal, fearing that doing so for some would create a “moral hazard,” leading other borrowers to default to get help, says James Parrott, a senior adviser to the White House’s National Economic Council.

“The moral hazard concern was stronger than we realized,” Parrott says.

One big bank says it warned of the program’s limitations.

Bank of America, which services 12 million mortgages, gave federal officials data showing the program would benefit only 10,000 to 15,000 customers because of its design and the degree of support from investors who owned loans, says spokesman Dan Frahm.

Almost 1 million modifications

Administration officials say the programs’ statistics alone don’t fully reflect what’s been accomplished. “You have to look at the ripple effect,” Donovan says.

HAMP, which most often lowers mortgage payments through interest rate reductions, is approaching 1 million permanent loan modifications.That is “not a negligible sum,” Parrott says.

HAMP also “significantly changed the market,” says Michael Barr, former assistant secretary at Treasury who worked on mortgage issues while in the Obama administration.

Before HAMP, mortgage servicers had no standard approach to modify loans. HAMP created one and streamlined the process, says Barr, who now teaches at the University of Michigan Law School.

Since HAMP’s launch, lenders have independently offered more than 2.5 million loan modifications outside of HAMP, staving off foreclosures for many.

“The overall impact of the (HAMP) program has gone unnoticed,” says Teri Schrettenbrunner, senior vice president of communications for Wells Fargo Home Mortgage.

HAMP was announced just weeks after Obama took office and at a time when home prices had fallen for 30 months in a row.

Given the short time the administration took to launch HAMP and HARP, “We knew they wouldn’t be perfect. We knew they’d be as good as they could be given the time we had,” Barr says.

He says a prime reason that government programs haven’t reached more people is that mortgage servicers “were really bad at doing their jobs.”

Servicers collect home loan payments for investor-owners. Big banks, such as Bank of America, Wells Fargo and JPMorgan Chase, are among the largest ones.

The servicers lacked adequate processes and enough employees to meet the crush of distressed borrowers, Barr says. They took too long to beef up staff. They couldn’t do “basic blocking and tackling” in communicating with borrowers, he says.

The Government Accountability Office documented problems when it surveyed housing counselors who work with borrowers seeking HAMP modifications. Almost 60% complained that servicers lost documents, 54% said trial modifications took too long, and 42% said borrowers felt that they were wrongly denied modifications, according to the GAO’s report in March.

The Johnson’s weren’t the only ones who lost a house to foreclosure while thinking help was on the way. Others did, too, said Treasury official Darius Kingsley in congressional testimony in October. He called such situations egregious.

The administration casts much of the blame on the industry, but others blame the government.

Barofsky says Treasury had to have known that servicers were “totally unequipped” to handle HAMP when it launched. Still, it rushed out a “poorly designed program,” he says.

Servicers say changing program guidelines made it tough to implement the government programs.In a three-month period, Treasury made 100 changes to HAMP, making it “physically impossible” for servicers to keep up, said Barbara Desoer, president of Bank of America Home Loans, in a recent speech to community leaders in San Francisco.

HAMP provides financial incentives — generally about $4,000 a loan — to servicers to modify loans.The goal is to make it more economical for servicers to modify a loan than to foreclose.But the incentives weren’t big enough to draw broader servicer participation, says Jared Bernstein, former economic policy adviser to Vice President Biden.What’s more, the government made HAMP a voluntary program for servicers, then failed to make sure that participating servicers followed HAMP’s rules, consumer advocates say.

HAMP ran for two years before financial incentives were withheld from any uncompliant servicer, even though abuses were “widespread,” Barofsky says.

“There’s been no enforcement or accountability,” says Diane Thompson of the National Consumer Law Center.

The $1 billion Emergency Homeowner Loan Program was open to homeowners in 32 states who were ineligible for aid from a $7.6 billion fund for homeowners in 18 states hardest hit by the recession and falling home prices.

HUD took too long to launch the program, which didn’t leave enough time to get applicants through an onerous application process, consumer advocates say.

Instead of helping 30,000 homeowners as first intended, the program is on track to help fewer than 12,000, HUD’s preliminary data show.That “is an absolute disgrace,” says Ira Rheingold, executive director of the National Association of Consumer Advocates.HUD officials say it took time to identify contractors to run the program, set up fiscal controls and ensure the program was run fairly.”We, too, are disappointed,” Carol Galante, a senior HUD housing official, testified at a congressional hearing in October.

More but smaller plans to come

New efforts are underway, but none appear to have the scope of previous plans.
State attorneys general and federal officials are negotiating a multibillion-dollar settlement with major mortgage servicers to help more homeowners.

If a deal is struck, it will include principal forgiveness on more home loans, Donovan says. That may show loan owners that forgiving principal really does lead to fewer defaults, Rheingold says, and encourage more of it.

Most of the $7.6 billion in Hardest Hit Funds, too, have yet to reach the market. States have through 2017 to use those funds.The Treasury Department also says there are still 1 million homeowners who could be eligible for HAMP.”We’re going to keep fighting to fix this housing market,” Donovan says

5 Reasons to get a New Mortgage in 2012

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5 Reasons to get a New Mortgage in 2012

Mortgage interest rates, near all-time lows, are likely to remain attractive throughout 2012. That means opportunities for new homebuyers and for homeowners who want to refinance.

Here are five reasons why you might want to get a new mortgage, and what you should know.

While depressed housing prices and low mortgage rates have made homes more affordable, economic uncertainty and volatile housing markets have discouraged so many homebuyers that mortgage purchase applications dropped to a 15-year low in August, the Mortgage Bankers Association reported.

In qualifying for loans, buyers face hurdles including a down payment and the ability to document at least two years of income, says Justin Lopatin, vice president of Baytree National Bank & Trust in Chicago. Income documentation can be hard for people who’ve suffered temporary unemployment and those who are self-employed or have irregular wages.

Many investors pay cash to purchase residential rental properties. But some take out a mortgage to increase their leverage, says Julie Miller, sales manager at Prospect Mortgage in Irvine, Calif.

Lopatin says low interest rates are an inducement for investment property buyers.

“If you can take out an investment loan at 4.5 percent and rent out (the property) and make a few dollars a month, annually, the return will be worth the loan,” he says. “Not to mention the tax write-offs and other advantages of owning real estate.”

Mortgage insurance isn’t an option for investment property, so a fat down payment, typically 20 percent or more, is a must.

Investment buyers also need to show that they have enough income and reserves to afford the payments even if the tenant fails to pay the rent or moves out. Lenders typically will count 75 percent of the rent toward the borrower’s income-qualifying ratios, Lopatin says. For example, a monthly rent of $1,000 would count as $750 of income.

Low rates can make rate-and-term refinancing a smart financial move. This type of new loan is exactly what the name implies: a refinance in which the interest rate or term is changed, but the loan amount stays the same.

Another benefit might be locking in a fixed interest rate instead of an adjustable rate.

Homeowners who want to refinance must provide income documentation and have a “decent” credit score, to use Miller’s characterization.

Equity is also required for most loan refinance programs. This hurdle can be troublesome because homeowners don’t control a property’s market value, Lopatin says.

If your loan amount exceeds your home’s value, consider the Home Affordable Refinance Program, or HARP, part of the federal government’s Making Home Affordable initiative. If your loan is insured by the Federal Housing Administration, the FHA Short Refi program might enable you to refinance in a negative equity position.

A home equity loan or line of credit can be a good way to get cash for financial needs such as remodeling, major home repairs or financing a college education. The benefits, Lopatin says, include immediate cash, low-cost debt and potentially an income tax write-off.

There’s a catch: You can’t borrow against your equity if your mortgage debt exceeds your home’s value.

Taking out cash isn’t free money. In fact, a cash-out refinance increases your debt, which is “just not wise today,” says Alfred McIntosh, principal of McIntosh Capital Advisors, a financial planning firm in Los Angeles.

Co-signing a home loan for someone might sound like a feel-good proposition. But those warm fuzzies are the only benefit to co-signing.

“I see no reason why anyone should co-sign on anything for anyone, unless it’s a relative, because you’re putting yourself in a position to jeopardize your credit,” Lopatin says.

Miller sees “more negatives than positives” because the co-signer is equally responsible for the loan. If the borrower fails to make payments, the co-signer is on the hook.

Mortgage rates fell this week, reaching new record lows as investors seemed to ignore the latest signs of economic recovery.

The 30-year fixed-rate mortgage fell 3 basis points to 4.18 percent. A basis point is one-hundredth of 1 percentage point.

The 15-year fixed-rate fell 4 basis points to 3.4 percent. The average rate for 30-year jumbo mortgages, or generally for those of more than $417,000, fell 2 basis points to 4.62 percent.

The 5/1 ARM fell 1 basis point to 3.19 percent. With a 5/1 ARM, the rate is fixed for five years and adjusted annually thereafter.

Freddie Mac Permits Up To 12 Mos Forbearance to Unemployed Borrowers

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Freddie Mac Permits Up To 12 Mos Forbearance to Unemployed Borrowers

Freddie Mac (OTC: FMCC) today announced it is giving mortgage servicers expanded authority to provide six months of forbearance to unemployed borrowers without Freddie Mac’s prior approval and up to an additional six months with prior approval. This means unemployed borrowers may be eligible for up to 12 months of forbearance. Freddie Mac’s forbearance options are being expanded at the direction of the Federal Housing Finance Agency and will take effect on February 1, 2012.

News Facts:

  • Mortgage servicers can now approve unemployed borrowers with Freddie Mac owned- or guaranteed-loans for six months of forbearance without prior approval from Freddie Mac.
  • Servicers can extend the forbearance period up to an additional six months with prior Freddie Mac approval, giving eligible unemployed borrowers with Freddie Mac owned- or guaranteed-mortgages up to one year of forbearance.
  • The expanded forbearance options will take effect on February 1, 2012.
  • Delinquent borrowers in an existing short term forbearance plan can be evaluated for an extended forbearance under the new policy.
  • Previously Freddie Mac allowed servicers to grant up to three months of forbearance with no payment and without prior approval, or six months at a reduced payment with prior approval. Longer forbearance required prior approval and was generally restricted to events such as natural disasters, permanent disability or long-term medical emergencies.
  • According to the latest statistics, nearly 10 percent of delinquencies on Freddie Mac mortgages were tied to unemployment.

Quote:

Attribute to Tracy Mooney, Senior Vice President, Single-Family Servicing and REO, Freddie Mac:

“These expanded forbearance periods will provide families facing prolonged periods of unemployment with a greater measure of security by giving them more time to find new employment and resolve their delinquencies. We believe this will put more families back on track to successful long-term homeownership.”

Freddie Mac was established by Congress in 1970 to provide liquidity, stability and affordability to the nation’s residential mortgage markets.

Freddie Mac supports communities across the nation by providing mortgage capital to lenders. Over the years, Freddie Mac has made home possible for one in six homebuyers and more than five million renters. For more information, visit FreddieMac.com.

California Ranks #1 for Mortgage Fraud

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California Ranks #1 for Mortgage Fraud

Mortgage fraud activity slowed overall in the third quarter, but California ranks first in home loan fraud, with the state seeing as much as $204.2 million in losses on deceptive mortgage activity.

That’s according to a new report from MortgageDaily, which found that lenders victimized by fraud faced inflated appraisals and fraudulent documentation.

California was followed by New York, which experienced $199.6 million in losses from nefarious activities in mortgage finance.

New York was followed by Florida, South Carolina and Minnesota in terms of fraudulent activity.

The total loss value of all mortgage activity in the third quarter hit $1.3 billion.

In the third quarter, the Mortgage Fraud Index maintained by MortgageDaily noted that the index score hit 1,173 in the third quarter.

General Bankruptcy Information for So Cal Homeowners

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For information on properties in Southern California— San Diego County coastal real estate  and Marina Del Rey beach homes , call Bob Cumming of Keystone Group Properties at 310-496-8122.

If you are thinking about filing bankruptcy, this page will provide general information about a Chapter 7, Chapter 11, and Chapter 13 Bankruptcy. It will help you understand what the law allows. We would be happy to refer a bankruptcy attorney to you for further consultation.

WHAT IS CHAPTER 7 BANKRUPTCY?

One of the main purposes of Chapter 7 Bankruptcy is to give a person who is hopelessly burdened with debt a fresh start by wiping out most debts. A Chapter 7 Bankruptcy is a liquidation proceeding. The debtor receives a discharge (elimination) of all dischargeable debts usually within four months. Note that some debts, listed below, are not dischargeable. The debtor turns over all non-exempt property to the bankruptcy trustee who then converts it to cash for distribution to creditors. In the vast majority of cases the debtor’s assets fall within the exemption provisions,  and he has no assets that he would lose, so Chapter 7 will give that person a fairly quick “fresh start.”  To qualify for Chapter 7 Bankruptcy a person must meet the Means Test. He or she must gather information about his/her assets and liabilities, and apply the Means Test formula to them. Please Google “Chapter 7 Bankruptcy Means Test” for more information.

WHAT IS CHAPTER 11 BANKRUPTCY?

Chapter 11 Bankruptcy is known as a reorganization bankruptcy. Through a court approved Plan, a debtor may restructure obligations to creditors and pay them over time, or may liquidate assets to pay creditors. The debtor remains in control and does not turn over assets to the trustee.

WHAT IS CHAPTER 13 BANKRUPTCY?

Chapter 13 Bankruptcy is also known as a reorganization bankruptcy. Chapter 13 Bankruptcy is filed by individuals who want to pay off their debts over a period of 3 to 5 years. This type of bankruptcy appeals to individuals who have non-exempt property that they want to keep. It is also an option for individuals who have predictable income that  is sufficient to pay reasonable expenses with some amount left over to pay off debts.  To qualify for Chapter 13 Bankruptcy a person must: Reside, have a domicile, a place of business, or property in the United States, or a
municipality;  Have a source of regular income; and on the date the petition is filed owe less than $360,475 in unsecured debts and less than $1,081,400 in secured debts. Note: The amounts are regularly adjusted to keep up with the cost of living. Google “Chapter 13 Bankruptcy Means Test” for current information.  Corporations and partnerships may not file a Chapter 13 Bankruptcy. If you filed a prior Chapter 13 Bankruptcy and the prior proceeding was dismissed within the last 180 days, you may not be able to file a second petition and should check 11 U.S.C. sec. 109(g).

WHAT CHAPTER BANKRUPTCY — 7 or 11 or 13 — IS BEST FOR ME?

Chapter 7, Chapter 11 and Chapter 13 Bankruptcy Qualifications Compared:
Chapter 7 Bankruptcy: For individual debtors. There is an upper limit as to income (see Chapter 7 Bankruptcy Means Test), but no limit as to amount of debt. Chapter 11 Bankruptcy: For individual, corporate and partnership debtors. There is no limit as to income, and no limit as to debt. A debtor may “stretch out” payments to creditors with their consent beyond the 3 to 5 year time limit of a Chapter 13 Bankruptcy. Chapter 13 Bankruptcy: For individual debtors. There is an upper limit as to amount of unsecured and secured debt.  Debtor is required to have a source of regular income, but there is no limit as to income. Debtor must pay creditors under the court approved Plan in 3 to 5 years. Debtors who qualify for both Chapter 11 and 13 may prefer to file under Chapter 13 because a debtor in a Chapter 13 is entitled to various procedural and substantive advantages, including a broader scope of discharge, than in a Chapter 11. Please consult a bankruptcy attorney about your particular situation to determine what is best for you. Keystone Group Properties dba Southern California Home Source would be happy to refer a bankruptcy attorney to you.

BEFORE FILING BANKRUPTCY, A CREDIT COUNSELING COURSE IS REQUIRED.   HOW DO I FIND ONE?

At least five days before filing a Bankruptcy Petition (with exception for emergencies), you are required to take an approved Credit Counseling Course. It can be taken in person or over the phone.  A list of approved credit counseling agencies may be found at the California Bankruptcy Court Central District’s (includes Los Angeles and Orange Counties) website:  www.cacb.uscourts.gov click information, click Self Service Center, click Credit Counseling Courses.  A list of approved credit counseling agencies also may be found at the United States Bankruptcy Court’s website: ww.uscourts.gov/federalcourts/bankruptcy click Bankruptcy Resources, click Approved Credit Counseling Agencies and Debtor Education Providers.

WILL FILING BANKRUPTCY HELP ME KEEP MY HOME?

Filing Chapter 7,11 or 13 Bankruptcy will delay foreclosure but will not stop it.

Chapter 7 Bankruptcy:

Filing a Chapter 7 Bankruptcy Petition will freeze foreclosure proceedings for a short time. The lender usually files for Relief from Automatic Stay and asks the Bankruptcy Judge to be able to proceed with the foreclosure. The Judge usually grants this request. Chapter 11 and Chapter 13 Bankruptcy and Loans on Debtor’s Principal Residence:

In a Chapter 11 and Chapter 13 Bankruptcy, a person obtains court approval of a Plan to pay creditors. The home loan or mortgage creditors on debtor’s principal residence would be a part of that Plan. If a debtor is not able to make payments, then there may be foreclosure, short sale, or deed-in-lieu.

“Lien stripping” in a Chapter 11 or Chapter 13 Bankruptcy:

“Lien stripping” may reduce the over-encumbered value of real property to current market value. It is only available for an individual debtor, not a corporate or partnership debtor. It is not available on a 1st trust deed on debtor’s principal residence. It possibly may be used on a 2nd trust deed, or on real property that is not debtor’s principal residence (2nd homes, investment properties, commercial property). “Lien stripping” described generally: the real property’s over-encumbered value is reduced to current market value; the amount that exceeds current market value is treated in the Plan like unsecured debt and may be reduced; debtor pays the current market value, the secured debt.   In a Chapter 13, a debtor must pay creditors, including the secured debt, in 3 to 5 years. In a Chapter 11 Bankruptcy, a debtor has a longer time to pay creditors. Please consult a bankruptcy attorney for further information.

WHAT ARE THE MOST COMMON REASONS FOR A CHAPTER 7 BANKRUPTCY?

The most common reasons for a Chapter 7 Bankruptcy are: unemployment; large medical expenses; seriously overextended credit; marital
problems, and other large unexpected expenses.  A Harvard Study reported that half of US bankruptcies were caused by medical bills
(MSNBC). The study was published online in February of 2005 by Health Affairs. The Harvard study concluded that illness and medical bills caused half (50.4 percent) of the 1,458,000 personal bankruptcies in 2001. The study estimates that medical bankruptcies affect about 2 million Americans annually – counting debtors and their dependents, including about 700,000 children.

WHAT DEBTS ARE ERASED BY A BANKRUPTCY?

Most unsecured debt is erased in a Chapter 7 Bankruptcy, or reduced in Chapter 11 and 13 Bankruptcies, except for: Child support and alimony; Debts for personal injury or death caused by debtor’s drunk driving; Government guaranteed student loans; Tax debt and money owed to government agencies.

Note on Private Student Loans: On June 7 2007, a US Senate Bill was introduced to make private student loans dischargeable in bankruptcy, as they were before 2005, so that again they would be fully dischargeable in bankruptcy. Please consult a bankruptcy attorney for the most recent state of the law.

More information about debt that may not be dischargeable and may survive bankruptcy:

The following debts are not erased in both Chapter 7 and Chapter 13. If you file Chapter 7, these will remain when your case is over. If you file Chapter 13, these debts must be paid in full during your Plan. If they are not, the balance will remain at the end of your case.  Debts you forget to list in your bankruptcy papers, unless the creditor learns of your bankruptcy case.

Child support and alimony; debts for personal injury or death caused by your intoxicated driving; student loans from government organizations, unless it would be an undue hardship for you to repay; fines and penalties imposed for violating the law, such as traffic tickets and criminal restitution.Whether recent income tax debts and all other tax debts are dischargeable is a complicated area. Usually they are not dischargeable.

Please consult a bankruptcy attorney for more information. In addition, the following debts may be declared non-dischargeable by a
bankruptcy judge in Chapter 7 if the creditor challenges your request to discharge them. These debts may be discharged in Chapter 13. You can include them in your Plan, and at the end of your case, the balance may be wiped out.

Debts you incurred on the basis of fraud, such as lying on a credit application; credit purchases of $500 or more for luxury goods or services made within 90 days of filing; loans or cash advances of $750 or more taken within 70 days of filing; debts from willful or malicious injury to another person or another person’s property; debts from embezzlement, larceny or breach of trust, and debts owed under a divorce decree or settlement unless after bankruptcy you would still not be able to afford to pay them, or the benefit you’d receive by the discharge outweighs any detriment to your ex-spouse (who would have to pay them if you discharge them in bankruptcy).

WILL MY CREDITORS STOP HARASSING ME?

Yes, they will!  By law, all actions against a debtor must cease once the Petition is filed. Creditors cannot initiate or continue any lawsuits, wage garnishes, or even telephone calls demanding payments. Secured creditors such as banks holding, for example, a lien on a car or a home loan, will get the stay lifted if you cannot make payments, and act to repossess or foreclose.

WILL MY SPOUSE BE AFFECTED?

Your wife or husband will not be affected by your bankruptcy if they are not responsible (did not sign an agreement or contract) for any of your debt. If they have a supplemental credit card, they are probably responsible for that debt. However, in community property states like California, either spouse can contract for a debt without the other spouse’s signature on anything, and still obligate the marital community. There are a few exceptions to that rule, such as the purchase or sale of real estate; those few exceptions do require both spouse’s signatures on contracts. But the day to day debts, such as credit cards, do NOT require both spouses to have signed. Please consult a bankruptcy attorney for more information. The following are community property states: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin.

WHO WILL KNOW?

Bankruptcy filings are public records. However, under normal circumstances, no one will know you went bankrupt. The Credit Bureaus will record your bankruptcy and it will remain on your credit record for 10 years.

WILL I LOSE MY JOB BECAUSE I FILED BANKRUPTCY?

No. U.S.C. Sec. 525, prohibits any employer from discriminating against you because you filed bankruptcy.

WHAT DON’T I KEEP?  HOW MUCH AM I ALLOWED TO KEEP?

In a Chapter 7 Bankruptcy, assets in excess of the allowed exemptions, or non exempt assets such as real estate and boats, will be liquidated by the trustee. Please Google “Chapter 7 Bankruptcy Exemptions” for more information. In a Chapter 7 Bankruptcy, you are allowed to keep certain assets, depending on the state in which you reside. Please Google “Chapter 7 Bankruptcy Exemptions” for more information.

MAY I KEEP ANY CREDIT CARDS?

Whether a debtor keeps credit cards after filing bankruptcy is up to the credit card company. If you are discharging a credit card, they will cancel the card unless you reaffirm the debt. Even if you have a zero balance, the credit card company might cancel the card.

WILL I EVER GET CREDIT AGAIN?

Yes! A number of banks now offer “secured” credit cards where a debtor puts up a certain amount of money (as little as $200) in an account at the bank to guarantee payment. Usually the credit limit is equal to the security given and is increased as the debtor proves his or her ability to pay the debt. Two years after a bankruptcy discharge, debtors are eligible for mortgage loans on terms as good as those of others, with the same financial profile, who have not filed bankruptcy. The size of your down payment and the stability of your income will be much more important than the fact you filed bankruptcy in the past. The fact you filed bankruptcy stays on your credit report for 10 years. It becomes less significant the further in the past the bankruptcy is. The truth is, that you are probably a better credit risk after bankruptcy than before. Please Google “build credit after bankruptcy” for more information.

WHEN WILL I BE DISCHARGED FROM BANKRUPTCY?

One of the major purposes of a Chapter 7 Bankruptcy is to erase debt and to give a person a fresh financial start. The debt is erased when he or she is discharged. This happens 3 – 5 months after the Chapter 7 Bankruptcy is filed. At that time all debts (with some exceptions) are written off.

I FILED CHAPTER 7 BANKRUPTCY BEFORE.  WHEN MAY I FILE AGAIN?

A person may file Chapter 7 Bankruptcy again if it has been more than 8 years since he or she filed the previous Chapter 7 Bankruptcy.

IF I USE A CREDIT COUNSELOR, WON’T I GET A BETTER CREDIT RATING THAN IF I FILE BANKRUPTCY?

No, you will not. It will cost you less money and you will rebuild your credit rating faster if you file Chapter 7 or Chapter 13. Be cautious if you are considering using a credit counselor. Also read about the problems of unscrupulous companies in the credit counseling industry, and the action the IRS has taken against “non-profit” credit counseling groups following widespread abuse.

WHAT DOES IT COST?

It costs about $300 to file a Chapter 7 Bankruptcy. A bankruptcy attorney’s fees vary but should be in the range of $1,000 to $3,000. Many bankruptcy attorneys will give you a free initial consultation. You can keep the fees down by being well organized and well prepared. You may also be able to keep the fees down by not requiring your attorney to attend the Section 341 (a) Meeting of Creditors with you. The fees for a Chapter 11 or 13 Bankruptcy are higher.  Please consult with a bankruptcy attorney about fees.

Financial Assistance for Southern California Homebuyers through Conveyance by Trust

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HOME  BUYERS – BUYER FINANCING ASSISTANCE

Homebuyers in Southern California may benefit by Buying through Seller Assisted Financing.  Through Conveyance by Trust, homebuyers of real estate in Los Angeles County and Orange County as well as of La Jolla CA real estate are able to take over the Seller’s home loan payments.  Click here for more information about buying So CA real estate with Conveyance by Trust Financial Assistance.

For information on coastal and luxury properties from Santa Monica to Beverly Hills homes to San Juan Capistrano and La Jolla real estate, call Bob Cumming of Keystone Group Properties at 310-496-8122.

Conveyance by Trust – Seller Assisted Financing for Southern California Real Estate

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There are many benefits of selling Southern California real estate in Los Angeles and homes in Orange and San Diego counties through Seller Assisted Financing.  Conveyance by Trust offers homebuyers the opportunity to take over the Seller’s loan payments.  Buyers are easier to find and the closing is quick.  Click here for a comprehensive list of the reasons why this method of Seller Assisted Financing may offer the best solution to selling California coastal properties.

Please contact Bob Cumming of Keystone Group Properties at 310-496-8122.  Our area of expertise includes Southern California Properties for sale in the coastal areas and luxury Beverly Hills homes.

Keystone team Los Angeles real estate and Orange County CA home testimonials

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Cindy and Brad T., Pacific Palisades, CA

We wish to thank you and the Keystone team for everything you have done for our family. Our house had been listed for more than eighteen months with three different realtors. Your firm was able to provide a qualified buyer that made a fair offer and enabled us to close on the transaction in approximately sixty days.

Harry and Betty J., New York, New York

We feel you saved us from the potential of financial ruin! As you recall, my husband’s company transferred him from Southern California to the East Coast. We moved to the East Coast and purchased a house with my husband’s company paying the monthly mortgage and costs for our Laguna Beach home while we were trying to sell it.

My husband’s company was sold shortly after we were back each and the acquiring company refused to continue to pay the monthly mortgage and upkeep costs for our house in Southern California. We were desperate. Nothing we tried worked as our  bank account balances diminished during this trying time. We were introduced to you by a friend and your organization was able to complete a transaction in a relatively short time and help get us back on our feet.

Thank you, Thank you, Thank you.

John and Mary T., Calabasas, CA

Our family wants to thank you for being able to consummate a short sale of our property. It minimized the effect on our credit and gave all of us a piece of mind. My husband and I lost both of our good paying jobs due to the economy and were unable to find other jobs immediately. The downturn in real estate at the same time made our home worth a lot less than the mortgage.

We were both successful at finding new jobs but at salary levels that were much less than what we had been making. We could no longer afford the mortgage. Our efforts and those of other professional service firms went nowhere with the financial institutions. We fell behind many months on our loan payments.  Your firm’s professional, no nonsense approach working with the finance institutions allowed us to sell the property as a short sale in a few short months.

Our credit is being repaired and we look forward to having your organization help us buy another property in a few years.

What is Short Sale for Southern California Real Estate?

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For information on short sale real estate in Southern California—in the coastal areas of Orange County (Newport Beach real estate to Laguna Beach), Los Angeles County real estate from Malibu and Marina Del Ray beach homes to Bel Air homes,  and La Jolla real estate in San Diego County, call Bob Cumming of Keystone Group Properties at 310-496-8122.

In a short sale, the bank or mortgage lender agrees to discuss a loan balance because of the an economic or financial hardship on the part of the borrower. The home owner/debtor sells the mortgaged property for less than the outstanding balance of the loan, and turns over the proceeds of the sale to the lender. Neither side is doing the other a favor, a short sale is simply the most economical solution to a problem. Banks will incur a smaller financial loss than foreclosure or continued non-payment would entail. Barrowers are able to mitigate damage to their credit history, and partially control the debt. A short sale is typically faster and less expensive than a foreclosure.  It does not extinguish the remaining balance unless settlement is clearly indicated on the acceptance offer.

Lenders often have loss mitigation departments that evaluate potential short sale transactions. The majority have pre-determined criteria for such transactions, but they may be open to offers, and their willingness varies. A bank will typically determine the amount of equity (or lack thereof), by  deterring the probable selling price from an appraisal or Broker Price Opinion (abbreviated BPO or BOV).

Lenders may accept short sale offers or requests for short sales if a Notice of Default has not been issued or recorded with the locality where the property is located. Given the unprecedented and overwhelming number of losses that the mortgage lender have suffered from the foreclosure crisis, they are now more willing to accept short sales than before. This presents an opportunity for the under-water borrowers who owe more on their mortgage than their property is worth and are having trouble selling to avoid foreclosure.