Why the New Trustee?

When the Lender files the Notice of Default to start the foreclosure process often times they will also assign a New Trustee. 

When that happens you'll receive all sorts of important registered letters announcing the New Trustee.  By law they have make sure you are properly notified.

(you might call it being Spammed)

This is normal. 

So why do they do this do you ask?

 

Maybe the New Trustee is better, faster and / or cheaper than the old one when it comes to the Foreclosure Process.  That's all.

The Good News is that the New Trustee cannot change the terms of the Note.  They only act as instructed.

The Bad News is that you still have a Notice of Default and it's been transferred to a company that might better process that.

 

No Options With Ocwen

Yesterday I wrote about mortgage loan servicer Ocwen stopping all short sale negotiations.

I proposed that Ocwen might be taking a self centered approach by forcing the homeowner into default in order to maximize the fees it can collect.  I lost sleep last night thinking about the far reaching implications involved.

BUSINESS IS WAR!

Or so some say.  This theory most aptly applies to your competitors.   Beating your competition is business 101.  Read Ocwen's Code of Ethics, specifically page 13 if you are in doubt.  I don't agree, but I can understand that.

What about your clients?  Do you treat them like you do your competitors?  Of course not.  Not to debate the concept  in depth here but that's how Ocwen is treating it's clients.

Who are Ocwen's clients?  They have two.  The homeowners that Ocwen services and the Note Holders that Ocwen collects mortgage payments for.  Ocwen has a page for it's Clients: LINK

SCREWING THE HOMEOWNER

You are a homeowner.  You didn't go to Ocwen to get your loan but the payment servicing was sold to them.  You find yourself in trouble and can't make your payments. 

You have options.  We explain 7 of these other options available to everyone of our short sale clients.  Typically one of them would be to sell the property for what you can, which might be less than what you owe.  This is a short sale.  Unfortunately for you, Ocwen has closed that door! 

While a short sale wasn't your only option, it might have been the best.  Chances are ,of the remaining 7 options, the last one might be the only one that works.  That's letting the home go to foreclosure.  That's what Ocwen is forcing you into.

SCREWING THE NOTE HOLDER

The Note Holder has employed the servicing to Ocwen.  It's part of what a servicer does.  They collect payments.   I would think Ocwen would have a fiduciary responsibility to best preserve the value of the portfolio the Note Holder has entrusted them with.

By refusing to entertain any short sale offers,  they are forcing more homeowners into foreclosure.  That process is costly.  To recoup any money the Note Holder will have to sell the property as an REO (bank owned).  Everyone knows that the net loss resulting from an REO is much higher.  That's why you hear that banks don't want your property.  That's also why they'll happily negotiate a short sale.  It's better to take a smaller loss in a short sale now than to take a larger loss later.

OCWEN HAS MOTIVE

I suggested yesterday that Ocwen is taking this course of action because their plans to sell the company fell through.  I proposed that they can collect more in fee income by forcing the home into foreclosure.  The greater loss by the resulting REO will not be Ocwen's.  It all transfers to the Note Holder.

Last night I realized there was more.  When a loan starts to get behind, Ocwen's servicing people will call the homeowner to remind them that they missed their payment.  When it gets severely behind, the loan file is sold to a collection company.  Did you know that Ocwen also runs a collection company?  That's right. The  Ocwen Recovery Group 

From their front page...

To make your loans worth more, it is critical to collect as much of your assets as possible - to recover more! Since 1988, Ocwen has focused on making loans worth more. We started by working on improving the liquidation rate of non-performing assets. We studied high performing collectors and utilized psychologists to determine best practices and then embedded this knowledge into our technology, recruiting and training programs. In 2007, Nationwide Credit, Inc. joined Ocwen, establishing Ocwen as the 5th largest collection agency in the nation. By implementing these best practices into our wholly owned global delivery centers, Ocwen and Nationwide Credit, Inc. have created the only proven "Global Collections Platform".

Is Ocwen's new plan to drive more collection contracts to their other company?  It certainly is a growth industry right now.

Just thinking...

 

You can't fix UGLY

I have a client who is dire need of a Short Sale to get out from under her mortgages. She's upside down primarily due to the reasons I explained in my post, "You Can't Fix LTV". In simplest terms, her homes value has dropped dramatically because the homes around her have drastically dropped in value. Yes, she has no income.  Yes, she has no chance to loan modify.  Yes, she bought at the market high with the wrong loans and little to nothing  down.  But as I started looking at the "other" reasons why the neighborhood is in such decline and found a horrid tale that can only be described as Ugly, Ugly, Ugly!  How Ugly is UGLY? There are currently 82 REOs in the neighborhood. There are 139 NODs (soon to be REOs) How about the record high HOMICIDES last year? What about the other crimes?  How does 631 separate incidents in the last 90 days sound? My package includes over 300 recent news stories about this neighborhood. I don't know about you, but if I was a Loss Mitigation Specialist and had an offer presented that would keep my company from owning this potential soon to be REO, I'd take pretty much anything that came my way. We shall see.  The Listing Agent has a couple of real offers and I'm putting the Short Sale Package together today.

California Notice of Default Law

I was just asked this question and had to look it up.
I figured it was worthy of a post.

In California, if the property is in Notice of Default (NOD), and the purchaser does not occupy the property (Investor), the transaction becomes what is called an Equity Purchase.


That's important because there are specific rules that need to be applied and adhered to.

Here's the actual question:

"I plan on buying a home that is in foreclosure and flip it, But I just heard the seller (homeowner) has a 2 year right of rescission. What does that mean? Do I have to hold the property for two years before I can sell?"

As I mentioned, I had to look this up to make sure I had the correct information.
Here's what I found.

Once the sale has closed, the investors title is subject to the seller in foreclosure's Two Year Right of Rescission due to any unconscionable advantage the Investor might have imposed on the transaction.

So does that mean the homeowner can get their property back?

Not quite. Assuming the investor has already sold the property to an unknowing buyer, the remedy would be a recovery of the money the original homeowner was out.

That figure would be determined by the value of the property at the time of resale, less the old loan amounts, less any funds received (good faith money) in the original transaction from the investor.

Interestingly, if it was a sale rent back, where the homeowner never left but instead started to pay the new owner rent, they will not be able to recover any of the rent paid - NONE.

They will however get paid 10% interest on the equity they lost from the start of the violation.

Where did I find this information?
California Civil Code 1695.10 and 1695.14

Buying a foreclosure and planning on living in it?
These rules don't apply to you.

Remember, always work with a professional. Always!

Has Stockton Run Out?

Poor Stockton, CA.

We saw 60 Minutes, we read all the news, everyone knows or has heard that Stockton IS the

Foreclosure Capital of the U.S.

Is that because the good people of Stockton all got together and decided to call themselves that? No.

Maybe there was a contest, poll or election? Nope.

It was the media that planted the moniker on the city. I always assumed it was based on raw numbers. Maybe it was. I can't tell.

Yesterday I was working on a project and pulled the entire current list of Notice of Default filings for the entire State of California. It was dated Feb 5th.

As I was compiling numbers I noticed something strange.

Stockton, and it's county (San Joaquin) seemed lower than what I expected to see.

By City: Antioch: 85 Bakersfield: 143 Elk Grove: 63 Fontana: 107 Hayward: 99 Modesto: 149 Oakland: 171 Sacramento: 326 Stockton: 110 Tracy: 50 Vallejo: 63

By County:Alameda: 460 Contra Costa: 339 Orange: 334 Sacramento: 512 San Joaquin: 212 Santa Clara: 174 Sonoma: 273 Stanislaus: 276

If the title wasn't bestowed upon them based on sheer numbers, maybe it was something else.

Was it Per Capita?
Per Capita would make perfect sense. The number of foreclosures per person? Maybe it was per household?

Stockton has an estimated 290,141 people (2006) according to CityData,
while Sacramento sits at 453,781 according to the same site.

Sacramento is slightly less than twice the size of Stockton, yet our state capital had 3 times the number of filings!

I realize this is only a one week sampling. I can pull a new list later today.

Is it just because the media thinks they are the proverbial Red Headed Step Child of the central valley? There is a finite number of homes that can be foreclosed on. That leads me to wonder...

Is Stockton actually running out of homes to foreclose on?

Just thinking.

Will Agents Replace Mortgage Brokers?

Will the Lenders soon change their business model, dumping Mortgage Brokers for Real Estate Agents in the name of profitability? I posted the question over at Lenderama earlier this week.

In simple terms, a company's bottom line (profitability) is determined by how much they brought in minus what they spent to do it. Along the way to that number we can also throw in what they lose. That loss is called shrinkage.

SHRINKAGE

The Chef has shrinkage. They will try best to minimize this. The pretty vegetables on your entree plate had parts they trimmed from them. Instead of tossing those away they toss them in the stock pot. Like Ravioli or a good meat sauce? As they trim the large pieces of meat down to perfect New York's for grilling, the small (but very good scraps) are certainly not thrown away. Now you know where they go.

The retail store has shrinkage. It's called shoplifting. Some have more than others. Sandy's Teen Emporium has more than Tiffany's. No surprise there. But retail also has shrinkage outside of theft. The grocery store will have vegetables, dairy and other items that have past their shelf life. What about BOB? The checkers are notorious in forgetting to check the Bottom of the Basket. How many cases of beer roll out the store unpaid for on that lower rack of the shopping cart?

Lenders have shrinkage too. We've all heard they don't really want to take back your home. They really don't. Current estimates say that it will cost the lender over $60,000 just to take back your home. Once they have it back they will need to sell it. They'll have to pay to get the house back into proper shape to sell. They'll have to pay commission to the real estate agents. There are also large financial ramifications dealing with trust accounting when a lender carries a property on it's books as an REO. All this represents shrinkage and has a heavy effect on their bottom line.

BOTTOM LINE TIME

In the past the Lenders have tapped the Mortgage Brokers to generate more loans. They were working on the premise that more loans created more revenue. The Brokers could be serviced with a minimal staff. They didn't need to pay for fancy retail space. Let the Brokers do that. Let the Brokers pay for advertising. Using Brokers was a leverage play. Today, many are trying to distance themselves from the Brokers. No surprise there.

Looking at the other side of the equation, the shrinkage side. If a Lender can minimize it's shrinkage, it can have a profound effect on it's bottom line. How can they do that? The Short Sale. By a successfully negotiating a short sale transaction they can minimize the negative impact of foreclosing on that home.

THE LOSS MITIGATION DEPARTMENT

The lender already has a staff in place to address this shrinkage. I know many of you are laughing right now. For those that are not, here's the joke. Negotiating a short sale with a loss mitigation department is typically an exercise in patience. These departments are horribly understaffed and overworked. Want to wait on hold for hours, only to be told that you are not talking to the right person? Don't call the IRS, call any Loss Mitigation Department! If you really do, here's a Big List of them. Have fun! The utter ineffectiveness of the Loss Mitigation Department is legendary amongst those that know. They are the red headed step child of the Lenders organization.

My point is this: How long until the lenders get wise? How long until they start staffing this department with their very best people and plenty of them? How long until they start courting the Real Estate Agents to get out there and negotiate short sales? Do this and it will have a dramatic effect on their shrinkage. Minimize that shrinkage and you add to the bottom line. How long until they see this as a reality?

Real Estate "GURU" Caught Skimming

Here's a trail of stories to read dealing with Equity Skimming.

I started at this article in BusinessWeek by Dean Foust about Foreclosure Rescue Scams.

It's a good article and worth the read.

"... in which unscrupulous individuals or groups approach homeowners facing foreclosure and promise to help them save their homes. In many instances, they convince the troubled homeowner--who is desperate to save their homes--to transfer the deed over to them with the promise that the investor will make the mortgage payments going forward, and the previous owner can rent while they try to rebuild their savings and repair their credit."

In the comment section I saw a link that led me to this page:

"The Home Equity Theft Reporter"

"a blog dedicated to informing the consumer public and the legal profession about Home Equity Theft issues. This blog will consist of information describing the various forms of Home Equity Theft and links to news reports & other informational sources from throughout the country about the victims of Home Equity Theft and what government authorities and others are doing about it"

Which then led to to an article in The Kansas City Star entitled

"Real estate's market crash ensnares guru"

Of course that grabbed my interest. Just to help decipher the quote below, Smolec was the homeowner, Ledman was the Real Estate Guru, and Sargent the Buyer.

"Smolec was about $35,000 in arrears on her mortgage, and the bank was bearing down. Smolec said she thought she was signing a lease with Ledman that would allow her to stay in the house for two years while she made arrangements to pay off what she owed using a pension that was due her.

Asked whether she understood she was signing away all her rights to her house, Smolec testified, "No, I did not... I didn't understand because I was told differently."

Smolec said Ledman never explained the complex papers she signed.

"He said I was too old and he would take care of me like a grandma," she said.

Instead, Ledman sold the house to real estate agent Susan Sargent for $500,000, said Tom Gottschalk, a former investigator who testified at the court hearing. Gottschalk said that in signing away all her rights, Smolec lost the equity she still held in her house. He said that after expenses, Ledman would make a $130,000 profit.

Sargent said at the hearing that when she told Smolec she was the home's new owner, "She broke down." Sargent said Smolec was never aware until then that her house was sold.

Sargent said because of problems with the deal, she got Ledman to buy the house back. The house was remodeled and sold last year, this time for $600,000."

Please, please - read all three sites and if you are in trouble - DO NOT sign your Deed over to Anyone - Don't allow yourself to be "Smolec'd"

Also Posted at THE FORECLOSURE REPORT

Share this post :

7/10/07 NODs (CA)

Notice of Defaults

This week, for the State of California, there were 3,692 Notice of Defaults (NOD) filed with the County Recorder office.

Here are just some of the notable counties:

County	# of Defaults This Week
Alameda	280
Contra Costa	178
Fresno	192
Los Angeles	761
Orange	260
Riverside	366
Sacramento	234
San Bernardino	474
Solano	48

If you, or someone you know

• May be soon Late on their Mortgage Payment
• Is 3o Days Late,
• More than 30 Days Late,
• Has a Notice of Default Filed,
• In Foreclosure,
• Trustee Sale Date set,

The time to act is now!

The Foreclosure Report

Share this post :

Sometimes Holidays are for Worrying

With the Fourth of July holiday tomorrow I am looking forward to the Parade, the BBQ, and the Fireworks.

Holidays are times for us to slow down, to catch up with the Family, to reconnect with Friends. 

Holidays are also times when our busy day to day schedules take a break, allowing times for reflection and clear thoughts. 

Unfortunately for so many that break also means "those thoughts and worries" bubble up again to the surface.

You might recognize some of them:

• The "How am I going to make that next payment" worry.
• The "When my loan adjusts, where will it adjust to?" thought.
• The "How am I ever going to catch up?" worry.

Sometimes these thoughts and worries are so powerful they consume us. 

They make what should have been a relaxing day turn into an anxious, worry filled day. 

Catching a Frisbee while contemplating index and margin isn't what it's all about.

My recommendation to you, should you be one of those worrying types is this.

Go out and have a great time.  But make a promise to yourself and your family that first thing Thursday Morning you'll start being proactive.

Start by looking into The Foreclosure Report. 

Even if you are not in Foreclosure, it has some very valuable information for you!

• What to do before you are 30 Days Late
• "How To" Articles
• Scam and Fraud Alerts
• How to Conduct a Short Sale
• 7 Ways to Resolve Today
• Foreclosure Articles
• How to Stop Foreclosure
• Deed in Lieu
• Loss Mitigation

And so much more!

Make that promise to yourself right now - Then get out there and teach Uncle Bob that you are never too old to slip and slide!

Share this post :

TV is my Economic Indicator

Is it just me?

• Maybe it's just the power of the free markets,
  
• Maybe the skyrocketing price of rare metals,
  

Perhaps... Perhaps not.

Personally, I think it is just a gleaming example of our glorious system of capitalism in action.

Find a need and fill it - That's the American Way.

Have you noticed the various commercials letting you know that "Now is the time to cash in all that old gold!"?

Did you realize that your structured settlement has an actual cash value?

Remember when Aunt Gertie gave you that family heirloom on your wedding eve? That necklace that has been handed down from generation to generation?

Isn't it time you traded that useless gaudy piece in for good, hard usable cash?

Or maybe you were a high flying mortgage selling machine, but that was last year, times change.

That's right! Now that your mortgage payment is going through the roof it's time you traded in those useless family heirlooms!

If you are lucky, and Mom always liked you best, just maybe you'll be able to make that next mortgage payment.

Hurry, supplies are limited!

Capitalism at it's best!

Real Estate Investor?

This is Part One in a Three Part series

The System

Have you ever seen one of those signs and wondered?

"We Pay CASH for Homes!"

or the latest incarnation...


"Real Estate Investor Apprentice Wanted"

Wonder how all these people could pay cash for all those homes?

Wonder why the same looking signs have popped up everywhere?

Wonder why if they have so much money, they can't afford better signs or advertising?

Wonder why if they are seeking an Apprentice - why are they driving a beat up Pinto?

I have too.

So a little over a year ago I paid good money to go to this big Real Estate shin dig in Moscone Center. It was put together by the Learning Annex. It had keynote speakers like Anthony Robbins, Robert Kiyosaki, and even The Donald.
I certainly wanted to "Learn" and why not learn from guys like that?

For three days, for twelve hours a day, I attended "class" after "class". If I remember right there were over 80 different "classes" offered. Not by the Keynote guys above, but by True Professional Real Estate Investors. These people were some of the most successful people on the planet. They had spent the early years of their life learning how to strike it rich with real estate and now wanted to give something back.

I know they were truly successful because of the expensive silk suits they wore. And then I couldn't help but notice their flashy watches. Oh and the way they talked about their last vacation. And then to verify what I already knew, they also told me they were (extremely wealthy). Each and every one of them did.

Amazingly, they were all willing to share vital information, the very same information it took them years of hard work to learn, with anyone!
Almost.

Just as long as you were one of the first 500 people to make their way to the back table and give their wonderful helpers a credit card.

Don't think of the $1,800 charge as a high price to pay for 12 CDs and a booklet. It's an investment in your future!

Time and time again, in each and every "class", with the very same speech pattern, the rush to the back was on. People of all walks of life were suddenly running for their financial lives.
Not for the door (as I might have hoped) but for the back table!
These good people would literally inundate the 20 or so wonderful helpers.


"NO... Take my Platinum Card first, I was here first!"

At times it reminded me of glorious holiday times past.
Cabbage Patch Kids, Tickle Me Elmo, and Beanie Babies have nothing on this spectacle.





Continued soon...

How far will their Foreclosure drag you?

As I watch my list of Notice of Defaults / Foreclosures rise and rise each month, I have to wonder just how devastating the effect of this will be on surrounding homes.

Here is a quick overall picture on what usually happens.

As a homeowner starts to struggle the first thing that happens is sometimes what is called "deferred maintainence". We can call it neglect for lack of a better word.

As they continue down the spiral path towards foreclosure the yard goes unkept, the lawn unmowed, the weeds grow high, the garbage piles up, the windows go uncleaned.

They say the first thing that happens when you fall behind is you lose that "Pride of Ownership".

No matter what, one of three things are going to happen with with this house:

1. They might be able to refinance and catch up - maybe.
2. They might put the property up for sale - maybe a short sale?
3. They might let the property go to Foreclosure at which it will either be bought by a bidder or retained by the bank (REO).
   

OPTION 1, REFINANCE:

If they can refinance, perhaps they can also catch up on the Pride of Ownership items they've been neglecting.

OPTION 2, LISTED:

If the property is listed for sale, it's under duress, it's not because the owners feel the time is right and they want to move up to a larger home with better schools. It's a fire sale. They are looking at getting out as quick and cleanly as they can without spending another dime.

• It isn't going to have new paint and carpets is it?
• It isn't going to be neat and clean is it?
• And it certainly isn't going to be staged!
  

We all know, a staged home will generally sell faster and for more than a similar home - Right?

"Mr. and Mrs. Homeowner... I know you can't afford to pay your mortgage but I believe your home will sell faster if you pay $x,xxx and have it professionally staged". Yeah, that's a likely conversation that'll never happen!

OPTION 3, FORECLOSED:

Now what? Either the bank owns the property and lists it with a local broker or an investor type now owns it. While the Broker may pay to have the lawn mowed they are not going to spend the big bucks to bring the property up to snuff with the regular homes around it.

In Options 2 & 3 above - the home will be sold to someone eventually, but it will also be sold at something below it's true market value potential.

The home next door, the home down the street and the home a 1/4 mile away all will be unintentional and innocent bystanders.

The Sales Comparison Approach of Appraisal has to take into account the recent transactions in the surrounding areas. While a certain amount of explanation on the appraisers part may help shift the blame of declining values in the neighborhood to foreclosure activity, it's temporary at best!

The Truth is - your home's value is determined by and and can be positively or negatively effected by, the homes and homeowners around you. And unfortunately that is something you have absolutely no control over!

For related reading see: The Foreclosure Crunch