Foreclosure restricts future home financing

Homeowners going through foreclosure today may have to wait five years before they are able to get financing for a home again.

That’s according to new federal guidelines from the Federal National Mortgage Association and the Federal Home Mortgage Corp., otherwise known as Fannie Mae and Freddie Mac.

And after those five years, a borrower would have to have a Fair Isaac Corp. (FICO) credit score of 680 and put 10 percent down, said Leslie Swart, managing partner and senior loan officer at Blue Skye Lending in Lakewood Ranch.

A FICO score ranges from 300 to 850 points and factors in things like length of credit history, how timely a person is in paying his or her bills and how much an individual has in debt versus available credit, according to Bankrate.com. About 27 percent of the nation falls into the 750-799 scoring range, according to FICO. The smallest category 2 percent — has scores of 499 or less.

“Fannie Mae and Freddie Mac, they’re actually tightening up those restrictions that much more,” Swart said. “The pendulum has swung to the other extreme.”

The move has come about as a result of soaring foreclosures in the nation, mostly linked to subprime mortgages that have left the financial sector in disarray.

Banks and lenders, many of which have written down billions of dollars in bad loans, are less willing to take risk in the subprime aftermath. Fannie Mae and Freddie Mac are the largest purchases of loans sold by banks and lenders on the secondary market.

Traditional mortgage companies also are looking at credit qualifications with more scrutiny, Swart said.

“What’s interesting is, it used to be we could say anything (credit score) over 700 or 720, you’re golden,” Swart said. “But some lenders are pricing their (annual percentage) rates differently at higher FICO levels. You can still get financing in the high 600s, but your rates are better if you’re 720 or plus.”

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North Side foreclosure upends lives

Black garbage bags stuffed with possessions covered the lawn of the north Minneapolis apartment building as its suddenly homeless residents milled around wondering where they would go next. Neighbors tired of the drug dealing were happy.

Beds, chairs, tables and black garbage bags stuffed with possessions covered the lawn of the north Minneapolis apartment building, as its suddenly homeless residents milled around, wondering where they would go next.

On Thursday, Minneapolis police evicted residents from their apartments, workers pounded plywood over the lower-level windows and barricaded the front door of 3101 6th St. N.

Another victim of the foreclosures plaguing the city’s North Side, the eight-unit complex had fallen into disrepair and its landlord’s rental license was revoked.

Thursday’s action was part of the city’s continuing crackdown on problem properties and pleased the neighbors, who were tired of the drug dealing and other trouble that had resulted in more than 1,100 police calls about the building since 1999.

But while the city had warned them on May 1 to move out, residents had held out hope that a last-minute takeover of the property by new management would allow them to stay. On Wednesday at 4:30 p.m., they learned that wouldn’t happen.

“We hoped they’d give us 48 hours,” resident Johnnie McLaughlin said Thursday afternoon. “We can’t get U-Hauls, we don’t have credit cards.

“I have a daughter coming home from school with no home.”

Built in 1962, the building was owned by Shirley Guevara until she lost it to foreclosure in August, according to Hennepin County property documents. The lender’s interest in the property was assigned to Bayview Loan Servicing LLC of Coral Gables, Fla.

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Any help from foreclosure bill too little, too late for Michigan

Given all the rhetoric about congressional attempts to help homeowners facing foreclosure, it’s hard to know whether the current plan is so pathetic it will help only a small fraction of people in trouble, or whether it’s so comprehensive it could drag down the federal budget to the tune of billions of dollars.

But the plan is voluntary on the part of lenders — they have to agree to write down home loans to as little as 85% of market value — and that puts suspicion heavily on the side of any help in this bill being too little for homeowners, and too late.

Way too late in the case of Michigan. The ongoing damage here involves waiting for bank-owned homes to get new owners, so home buyers and sellers can have some confidence that the market has bottomed out. (For a look at bank-owned homes in your neighborhood, go to www.realtytrac.com and enter your ZIP code.) Buyers tend to wait if they think they’ll get a better deal in six months or next year; many sellers won’t put their homes on the market at all if they know they have to compete with foreclosed homes being sold at auction.

Meantime, it’s not clear that the federal government has any solutions for people who got in trouble with their home equity lines or other types of adjustable-rate deals and can’t refinance simply because their home isn’t worth enough anymore to allow a lender to restructure their debt, even if they can afford it.

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Bus tour gives people look at foreclosed houses

The white shuttle bus came to a stop and Damon Borozny joked to the passengers, “All right, time to scare the neighbors.”

Borozny, a product manager for an office supply business, was helping lead a new kind of tour for Atlanta — the home foreclosure tour.

A dozen people paid $49, or $65 per couple, to spend five hours Sunday checking out other people’s broken dreams and possibly find a deal.

Real estate agents have held private foreclosure tours, but last weekend’s tour may have been the first in metro Atlanta open to the public. It drew home-seekers, investors and even tax-lien purchasers.

At stop No. 5 on the seven-house expedition, the group examined a 4-year-old, two-story home on Glenvalley Drive in Decatur that looked beautiful in the dappled sunshine of a color photograph.

In March 2006 the house sold for $275,000. It sold again in May 2007 as a foreclosure, bringing $206,550. Now the lender had it back and was asking $176,900.

Upon closer inspection, the dwelling revealed its wounds. The back door was boarded after vandals broke out the glass. Holes were bashed in the bedroom walls. Cabinet hardware, the air conditioning condenser and gutter sections had been stolen.

Still, the visitors saw potential. “I want this house — in Midtown,” said Evelyn Swanson, a consultant who lives in a Midtown bungalow that feels cramped.

After 20 minutes of opening cabinets and eyeballing the foundation, the group moved on to stop No. 6 — a small house in the Reynoldstown neighborhood of Atlanta where moisture curled the wood floors and stacked cinderblocks obstruct a doorway.

Foreclosures have risen because easy credit put many people in homes they could not afford. Equity Depot reported last week that more than 6,000 metro properties are scheduled to be sold on courthouse steps next month. Lenders will end up buying back many of the homes.

Borozny and Butch Whitfield, an agent with Harry Norman Realtors, started Foreclosure Tour and Learn after hearing about similar operations elsewhere.

Borozny bought his Grant Park home this year out of foreclosure. He had lived in it as a renter, then was evicted when his landlord lost the property.

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Report: Nevada Has Highest Foreclosure Rate in Nation

A research company says more U.S. homeowners have fallen behind on mortgage payments in the last month.

Figures from RealtyTrac show that more than 243,000 homes received at least one foreclosure-related filing in April.

That’s up 65% from almost 148,000 in the same month last year and up 4% since March.

In another foreclosure report released by RealtyStore.com, Nevada continues to hold the highest nationwide foreclosure rate, with defaults up 139% from last year.

With 1 out of every 52 households receiving a default notice last quarter, more than 7 times the national average, according to the RealtyStore.com report, who recorded 17,307 notices of default (NODs) statewide for 2008.

This was a 32% increase from those recorded in 2007 and a 139% jump over 2007.

An NOD is filed by the lending institution, when a homeowner falls behind on mortgage payments.

NODs provide important information about which homeowners have home loans they cannot afford.

Nevada has maintained the nation’s highest foreclosure rate for nearly two straight years.

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Three Things That Won’t Help End the Foreclosure Crisis

Falling home prices, rising foreclosures rates, and a slowing economy have created a perfect storm for U.S. homeowners.

Falling home prices, rising foreclosures rates, and a slowing economy have created a perfect storm for homeowners who bought in bubble-inflated markets, or used subprime, adjustable-rate mortgages to purchase their homes.

Members of Congress have responded to the crisis facing their constituents by proposing various measures, some strong, like amending the bankruptcy law to cover primary residences, and some misguided. The following are three major proposals that would actually do more harm than good. As Congress seeks to pass legislation to stem the foreclosure crisis, legislation containing elements of these proposals should not be on the table.

1. Subsidies for Home Buyers

Homeownership can be a useful way for families to accumulate wealth and to provide good secure housing. However, if families are buying homes with bubble-inflated prices, then they are not likely to accumulate any wealth in their home, since the price is likely to fall back to its trend level before they sell their home. (The median period of homeownership for moderate-income families is just four years.) Furthermore, they are likely to pay far more in housing costs each year, than they would to rent a comparable unit.

In the case of moderate-income families facing serious budget constraints, the additional housing costs associated with owning an over-priced home are likely to come at the expense of other necessary items, such as health care and child care. It is difficult to see how the government will have helped a family by encouraging them to buy into such a situation.

Additional tax credits for home buyers in a bubble-inflated market can put more people at risk by encouraging them to buy an over-priced home that will fall in value. In addition, tax credits for the purchase of homes that are in the foreclosure process, but have not yet been returned to the lender, provide a perverse incentive to lenders to foreclose on current homeowners, since they increase the resale value of the house following a foreclosure.

2. Artificial Price Floors

This has nothing to do with linoleum, and everything to do with how prices get set for homes that are refinanced and backed by FHA loans as proposed in legislation being considered by Congress.

If home prices continue to decline, and the government issues guarantees of mortgages at prices that are near current levels, then the government is likely to face a substantial cost associated with a high default rate. The most important factor determining both the default rate and the cost of each default is the movement in house prices.

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The face of foreclosure

Imagine having just 10 days to move out of a house you’ve lived in for nearly 40 years.

That’s what happened to 78-year-old Misa McKern. Wednesday was the final day for her to pack up everything after her house was sold at a foreclosure auction.

“I feel awful,” she said.

McKern was blindsided on May 5 when a notice arrived at her door. It said her house had been sold, and she had to be out in 10 days.

“They should at least give you a couple months or so to have time to do something,” she said.

McKern fell behind on her mortgage payments last year, and the house went into foreclosure at the beginning of 2008. She then requested — and received — an extension on the foreclosure. She and her son Ken looked into a reverse mortgage that would have allowed her to keep the house. They say they checked in with the mortgage company on a Friday and thought everything would be fine. But it turned out her house was sold over the weekend.

“Right now it’s go go go,” Ken McKern said. “I really haven’t had time to sit and go ‘wow,’ what just happened.”

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Editorial: Bush, Congress must act to quell foreclosure crisis

Home foreclosures are surging. Housing prices are sinking. And the broader economy is sputtering.

That should galvanize Congress and the president to deal aggressively with the mortgage crisis that’s hobbling the economy. But Democrats and President Bush are at odds over what to do.

Last week, the House passed responsible legislation to stave off foreclosure for hundreds of thousands of American homeowners. But Bush dismissed the bill as a bailout and threatened a veto. The president and Republicans should reach a compromise in the Senate – or bear the blame for further deterioration of the housing market.

Foreclosure proceedings were started on more than 1.5 million homes last year, up more than 50 percent from 2006. They’re likely to surpass 2 million this year.

Massive foreclosures don’t help anyone: Neighborhoods become blighted, the local tax base is eroded, consumer spending suffers, lenders lose money and home values fall.

The House legislation, authored by Rep. Barney Frank, D-Mass., lets the Federal Housing Administration guarantee up to $300 billion in new loans to help at-risk homeowners refinance into more affordable mortgages. In exchange for avoiding foreclosure, lenders must reduce the loan’s value to 85 percent. And homeowners get a loan limited to 90 percent of the home’s new market value.

The plan would help a wide swath of homeowners, but stops short of rewarding irresponsible borrowing. Only owner-occupied principal residences would qualify, cutting out investors and speculators. Borrowers would share at least half the profits with the government if they later refinance or sell their home.

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Mortgage in trouble? How Congress wants to help

Should Uncle Sam insure mortgages? That’s the big debate. But the devil is in the details and nobody is talking about them. Here’s how the plan would work.

Politicians in Washington are busy arguing about the financial and moral hazards of coming to the aid of troubled homeowners.

But overshadowed by the debate over a proposal to let the government back risky mortgages is one important issue – how the program would actually work.

Who would qualify? What do borrowers and lenders have to sacrifice? How does the government get paid for its trouble?

The House last week passed a bill by Rep. Barney Frank, D-Mass., that would allow the Federal Housing Administration to insure new mortgages for people at risk of foreclosure. A key Senate committee is likely to take up a similar proposal this week. Final legislation could differ, but the House bill offers a sense of how the program could work if enacted into law.

What follows is an initial explanation based on the legislation and interviews with government and private-sector players. It uses a fairly probable scenario in a time of falling home prices – a borrower who is “underwater” and owes $220,000 on a home that is now appraised at only $200,000.

First steps: Who qualifies

For homeowners to qualify under Frank’s proposal, they must be full-time occupants of their principal residence. They also must have a mortgage debt-to-income ratio on their existing loan of more than 35%. So if the borrower above who owes $220,000 makes $4,000 a month, his monthly mortgage debt must exceed $1,400 to be considered for the program.

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State Senator Pushes Foreclosure Legislation

One state lawmaker pushed legislation yesterday to make sure foreclosed homes do not end up ruining the neighborhood.

State Senator Jeff Klein says the lending institutions that foreclose on properties should be responsible for making sure those properties are maintained. Klein released a report that found more than 3.5 million homes in the state last year were devalued by foreclosures on nearby homes.

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