Post-Foreclosure Stress Disorder: Barriers Keeping Buyers from Market

Editor’s Note:  In this article, the National Association of Realtors (NAR) admits that one of the challenges people who have faced foreclosure experience is a psychological disorder they refer to as ‘post-foreclosure stress disorder’.  We first wrote about this disorder last year when we discovered readers were suffering from long bouts of  post-traumatic stress disorder from their foreclosure experiences.  At least it’s a start that the NAR admits that foreclosure creates long-lasting psychological changes in future financial decision making.  Unfortunately the NAR doesn’t discuss the disorder in detail or provide reasons why record-numbers of Americans have lost their homes to pretend lenders.

Anyone who has had a bad experience with a loan servicer or lost their home to foreclosure will be very hesitant to purchase a home again- if ever.  The NAR has done very little as an advocate of homeowners, and continues to promote the fallacy that there is a single family housing supply  shortage (except in San Francisco or New York City) in an attempt to direct over-leveraged consumers into inflated mortgages they can’t afford.  The NAR uses tactics like, “interest rates are rising” and “supply is limited” to create artificial demand.  According to the author, the NAR also recommends that credit scores be relaxed so more homeowners can enter the market.  Unfortunately, the NAR propaganda recommendations serve to fuel real estate bubbles instead of market stability.

__________________________________________________________________

By Brianna Gilpin

http://www.dsnews.com/daily-dose/06-09-2017/post-foreclosure-stress-disorder-barriers-keeping-buyers-buying

U.S. homeownership rates have been at a 50-year low despite improving local job markets and historically low mortgage rates. Research commissioned by the National Association of Realtors (NAR) said there are five main barriers preventing a large number of individuals from purchasing a home including post-foreclosure stress disorder, mortgage availability, the growing burden of student loan debt, single-family housing affordability, and single-family housing supply shortages.

9 million homeowners experienced foreclosure and 8.7 million lost their jobs during the 2008 crisis. According to NAR, programs and workshops aimed at those with long-lasting psychological changes in financial decision-making could help those still gun shy about home buying. NAR also recommends restoring lending requirements in order to normalize credit standards for borrowers with good-to-excellent credit scores. Currently, those borrowers are not getting approved for the same rates they were in 2003, despite their credit score.

To households repaying student loan debt, it is extremely difficult to save for a down payment, qualify for a mortgage, and afford a mortgage payment – especially in areas with high rent and home prices. NAR found in a survey released last year that student loan debt is delaying purchases from millennials and over half expect to be delayed by at least five years. NAR believes policy changes need to be enacted that address soaring tuition costs and make repayment less burdensome. In regards to low affordability, NAR explained that policies need to be enacted to ensure creditworthy young households and minority groups have the opportunity to own a home.

“Single-family home construction plummeted after the recession and is still failing to keep up with demand as cities see increased migration and population as the result of faster job growth,” said Berkley Hass Real Estate Group Chair Ken Rosen. “The insufficient level of homebuilding has created a cumulative deficit of nearly 3.7 million new homes over the last eight years.”

Due to higher prices and lack of property lots, difficulty finding skilled labor, and higher construction costs, housing starts are not increasing to meet the growing demand.

“Low mortgage rates and a healthy job market for college-educated adults should have translated to more home sales and upward movement in the homeownership rate in recent years,” said NAR Chief Economist Lawrence Yun. “Sadly, this has not been the case. Obtaining a mortgage has been tough for those with good credit, savings for a down payment are instead going towards steeper rents and student loans, and first-time buyers are finding that listings in their price range are severely inadequate.”

About Author: Brianna Gilpin

To read about Post-Traumatic Stress Foreclosure in detail please go here.

Appraisers Reverse — Now Going Low

CLICK HERE FOR CONSULTATION WITH NEIL

“We can account for small to reasonable increases in values,” Mr. McKinnon said. “We cannot account for $20,000 jumps in a month.”

Editor’s Comment: An amazing quote from someone who obviously is NOW stressing the fundamental elements of an appraisal, especially where there is a loan involved. During the meltdown $20,000 price jumps were taken seriously by appraisers to justify the ever-increasing values they put on property. In some cases you can see jumps much higher than $20,000 within a few months or perhaps a year after the last financing on the same property.

No lender would lend more than the property is worth if they were doing a legitimate loan. In fact, in most cases they require 10%-20% down payment so that their loan to value ratio (LTV) builds in a buffer if the market goes down. So the big question for the sages of appraisal standards, is “where were you and what standards did you apply during the mortgage meltdown?”

And no lender would accept an appraisal report based upon price jumps that were out of character and recent in time. Like before the mortgage meltdown, the lender is responsible for the value used in the deal for a loan — not the borrower.

Any appraiser who had similar views when the securitization scam from Wall Street was in full swing was squashed. Everyone was just making too much money to confront the banks’ demands for higher appraisals — including jumps in prices that were as little as one month ago.

Now appraisers are showing us the way it would have been if the loan originator was actually at risk. Most originators are still not at risk but the threat of litigation from the managed funds that supply the cash for these deals is keeping most players within the normal rules of the game. By keeping appraisals within the realm of reason, they are protecting both the borrower and the investors putting up money for the deal.

When the market was going up, realtors were cheering the appraisers on so that the market would look like it was going up higher and higher and would continue forever. “Better buy now or you miss the boat and you’ll never be able to buy a home the way prices are going.” (Remember that?). Now the realtors are complaining that appraisals are too low and that those low appraisals are killing their deals.

When litigating Appraisal Fraud, it is not only the appraiser that is sued, it is everyone who participated in the securitization “chain” to nowhere. The very comments that appraisers are using to justify their behavior now can be used as the standard by which to judge them (and the banks that hired the appraisers) and their past behavior. I wouldn’t be too surprised if the same appraiser could be put on the stand to justify his current low appraisal reports using industry standards and to show how those standards were ignored in the mortgage meltdown period.

Meanwhile, banks in Spain are finally relenting and lowering the stated value of their real estate assets, which is causing an uptick in the market activity. That can’t happen here until the mega banks finally admit that the “assets” they are holding and reporting on their balance sheet are either fictitious or incredibly over-valued.

But the real jolt that will take us back to economic recovery is only going to be achieved when the millions of people who participated in tens of millions of real estate transactions are given relief in the form of restitution for appraisal fraud and other bad behavior on the part of the banks.

Scrutiny for Home Appraisers as the Market Struggles

By SHAILA DEWAN

When Justin Olson put his Southwestern-style ranch house outside Phoenix on the market, he got what he was expecting: an immediate batch of offers, virtually all above his asking price, which was set intentionally low, at $197,500, to attract interest. He chose an offer of $210,000.

But then came an unpleasant surprise. An appraiser for the buyer’s bank said the house was worth only $195,000. That limited the amount that the bank would lend, forcing the buyer to come up with more cash or negotiate a lower price.

“There was just no way I was selling that house for less than $200,000,” Mr. Olson said. His broker, Brett Barry of Homesmart, advised him that there was little chance of changing the appraiser’s mind. Mr. Olson said, “The part that blows me away — the appraisal can be such an arbitrary, personal decision and there is no appeals process.”

Adding to his indignation, a similar house two doors away was appraised at and sold for $225,000.

Appraisals are generally ordered by banks so they can verify the value of collateral before granting a mortgage. Before the housing crash, when home values seemed only to rise, appraisals were almost an afterthought. But now, with banks far more cautious about lending, a low appraisal can torpedo a deal.

The problem is so widespread that this week the National Association of Realtors blamed faulty appraisals for holding back the housing recovery, saying its members had reported that more than a third of all deals were canceled, delayed or renegotiated to a lower price because of a low appraisal. Several real estate agents said they were starting to include appraisal contingencies in their contracts, spelling out how much a buyer would be willing to pay in cash if the appraisal fell short.

Appraisers use previous sales of comparable houses to help value a home. If prices are just starting to climb, and sales take two or three months to close, there can be a lag before the change in prices is observed.

The Realtors report said appraisers were improperly using foreclosures and neglected properties as comparable homes, failing to account for market conditions like scarce inventory and bidding wars, and working in areas where they lack local expertise. The report faulted banks for using inexperienced appraisers, and for creating unrealistic requirements, like six comparable sales instead of three, at a time of few sales.

“It’s holding sellers off the market,” said Jed Smith, the managing director of quantitative research for the Realtors group. “Sales volume could probably be an additional 10 to 15 percent higher if we had normal lending practices and if we had normal appraisal practices.” That in turn, he said, would create more jobs.

Appraisers and real estate brokers agreed that a ban, imposed since the housing crash, on loan originators’ handpicking appraisers had led to the use of appraisal management companies that take a healthy cut of the consumer’s fee and hire inexperienced, low-cost appraisers.

But appraisers took issue with the complaints and pointed out that unlike real estate agents, they have no bias or incentive to help complete a deal.

“Appraisers don’t set the market, they reflect what’s happening in the market,” said Ken Chitester, a spokesman for the Appraisal Institute, a professional association. “So don’t shoot the messenger. Blaming the appraiser for a bad housing market is like blaming the weatherman because you don’t like the weather.”

Mr. Olson and his buyer compromised on a price of $205,000, less than initially offered and therefore, some might say, less than the house was worth.

But any transaction involving a mortgage is limited by the appraisal — an assessment that is part science and part art and is based on a variety of factors like location and square footage.

Though Mr. Olson’s house was in good condition, the house nearby that sold for more had at least $30,000 worth of upgrades, said Craig Young, the broker who represented the seller. But Mr. Young said appraisals could still be unpredictable, pointing out that a home across the street sold for even more, $239,000.

Some appraisers said agents misunderstand the way homes were valued. For example, although bank-owned homes generally sell at a discount, that is not true in every neighborhood, said Dan McKinnon, who runs an appraisal company with his wife in Phoenix. Appraisers, therefore, do not automatically make adjustments if they are using such sales for comparison. Some bank-owned homes are in good condition, and in some neighborhoods bank-owned sales dominate the market, and thus determine prices.

“If that property is in similar condition to your subject, it is direct competition,” Mr. McKinnon said.

R. James Girardot, an appraiser in Seattle, said appraisers could protect buyers — particularly those from out of town who might think a home sounds like a great deal because prices are much higher where they live.

He said he recently did an appraisal in a desirable subdivision where the contract price was head and shoulders above other recent sales.

“I was told by all the agents I talked to that there’s a real shortage out here, and this house is the sharpest house that has ever come on the market,” Mr. Girardot said. Then he found six other houses in the area for sale, and not one was close in price to the house in question.

Still, in some areas the light sales activity can cause legitimate worries. This week Shannon Moore, a real estate agent on Florida’s west coast, said she had written a contract for more than $1 million for a house on a barrier island. There had been no recent sales on the island, but one was set to close soon, meaning that a single price could affect her deal. “Everybody holds their breath until the appraisal comes in,” she said.

In some cases, agents use appraisals to convince sellers that their expectations are too high and that they should accept a lower offer. But in other cases, sellers know that traditional buyers are competing with cash investors who will pay more.

Afra Mendes Newell, a Florida agent, said one of her clients recently bid $150,000 on a home that was appraised for $135,000. The deal fell through, but another buyer stepped in with $150,000 cash. The good news, she said, was that the next appraisal in the neighborhood would take that price into account.

Agents can try to head off low valuations by arming the appraiser with relevant comparable sales and information about renovations or upgrades that are not readily visible, like insulation. Buyers who disagree with an appraisal can ask the bank to review it, ask for a second appraisal, pay for their own appraisal, or file a complaint with the state, though agents said the chances of salvaging a sale were slim.

Appraisers see some irony in the accusation that, so soon after a housing bubble, they are being accused of holding prices down. They said buyers should not be too eager to make a purchase that is far above recent sales in a neighborhood.

“We can account for small to reasonable increases in values,” Mr. McKinnon said. “We cannot account for $20,000 jumps in a month.”

Realtors Complaining About Lack of Financing on REO Resales

Featured Products and Services by The Garfield Firm

——–>SEE TABLE OF CONTENTS: WHOSE LIEN IS IT ANYWAY TOC

LivingLies Membership – If you are not already a member, this is the time to do it, when things are changing.

For Customer Service call 1-520-405-1688

Truth triumphs in the Marketplace:                                         Buyers and bankers have no confidence that prices are not going lower, and Title Corruption Taints the Deals

Editor’s Comment:

Realtors are on the wrong side of this issue. THEY should have led the way to correcting the problems and defects in the foundation of the housing market — pricing and title. Instead they put blinders on and pushed through whatever sales they could — REO sales, short sales, anything to make a buck. Now it is coming back and hitting them on the back of the head.

Sales are slowing because financing is getting harder and the message is out. The values of the homes are lower than the prices and the title chain is often corrupted leaving a prospective buyer or lender in a position of accepting a risk that didn’t exist before securitization. This isn’t the fault of realtors so don’t go blaming them for creating the securitization PONZI scheme. But they are at fault for not looking for a way to fix it. After all, it is THEIR industry.

Financing Needed to Boost REO Sales

by Carla Hill

Buyer, sellers, and real estate professionals alike are finding that today’s market is still experiencing a glut of distressed properties.

These properties hit the market each day in the form of REOs. This steady influx of properties is in addtion to the high number of short sales seen across the nation.

According to the National Association of Realtors (NAR) there are certain steps that lenders and the government need to take in order for this oversupply to reduce and for the market to return to a more normal balance.

The current market sees around one third of all sales coming from distressed properties. These housing units carry a smaller price tag than the competition, but a steeper price in terms of the value of the overall market. Distressed properties sell at steep discounts, sometimes at almost half of what a non-distressed property is listed. This causes the overall market value of a neighborhood or community to drop, ending up with more and more sellers finding themselves upside down in their loans.

NAR President Ron Phipps has said that a lack of mortgage financing is hurting REO sales and the entire housing market. They report that “the lack of private capital in the mortgage market, unduly tight underwriting standards, and increasing fees have discouraged many potential home buyers from applying for mortgages. NAR believes ensuring mortgage availability for qualified home buyers and investors will help absorb the excess REO inventory.”

“We believe the government has an opportunity to minimize the impact of distressed properties on local markets by expanding financing opportunities, bolstering loan modifications and short sales efforts, and enhancing the efficient disposition of REO properties. This will help stabilize home prices and neighborhoods and help support the broader economic recovery.”

NAR has also said in a letter to the U.S. Department of Housing and Urban Development, the Federal Housing Finance Agency, and the U.S. Department of the Treasury that steps must be taken in order to stop the steady stream of new REO properties that is currently hitting the market. Homeowners need help to either stay in their homes or to make short sales before their home is put into foreclosure, something that helps their credit scores and the market.

“Loan modifications keep families in their home and reduce defaults, while short sales keep homes occupied, helping stabilize neighborhoods and home values,” Phipps said. “Expanding resources and ensuring the use of already allocated funds for pre-foreclosure efforts is the best opportunity to reduce taxpayer costs and creates more positive outcomes for homeowners and their communities.”

As the election year heats up we expect to hear more about what candidates propose to do about the continued struggle the housing market faces as well as how to keep American homeowners in their homes

BUY THE BOOK! CLICK HERE!

BUY WORKSHOP COMPANION WORKBOOK AND 2D EDITION PRACTICE MANUAL

GET TWO HOURS OF CONSULTATION WITH NEIL DIRECTLY, USE AS NEEDED

COME TO THE 1/2 DAY PHOENIX WORKSHOP: CLICK HERE FOR PRE-REGISTRATION DISCOUNTS

Mortgage Meltdown: Credit Crisis Spreads

 

Credit Crisis Over? — Not by a Long Shot

 

As you can imagine I get emails and comments from hundreds of people seeking help and whose houses are going into sale or foreclosure, most of whom are completely unaware that they have rights superior to the lender, if they can find someone to help them like www.repairyourloan.com

 

Lawyers won’t help you until you get the mortgage audit completed. It is then that you will know the extent of your claims and what you do to stop the foreclosure, the eviction or even extinguish the mortgage and release yourself from liability on the mortgage note. 

 

Here is an article which illustrates why you need to beware of both the government and the lenders. They are trying to give the impression that the credit crisis is (a) not as bad as people thought and (b) over. What they are really trying to do is pivot your attention away from the fact that the massive mortgage meltdown has caused a meltdown in all the credit markets. It has caused a massive meltdown in asset values for individuals, corporations and government entities. 

 

This is not the beginning of the end. It is, as Winston Churchill said in World War II “the end of the beginning.” We have years to go before this shakes out just in terms of education of the public. And we have decades to go to recover from this utter failure of government to do its job — to referee between those who know things and those who don’t. 

 

In the process the government, the corporations and the individuals owning houses or doing their jobs have all been smacked in the face, really hard and have snapped out of their wishful confidence in their government and in the “good faith” of a good faith estimate before closing on a loan.

 

Credit Crisis

Congress And The Credit Crisis

Joshua Zumbrun 05.14.08, 6:00 AM ET

 

Washington, D.C. – 

A congressional panel meets Tuesday morning looking to answer two big questions about the economy: Is the credit crisis over? And can anything be done to prevent another crisis in the future? 

 

To both questions, the answer is “No. And proceed with great caution.”

 

For the credit crisis, reasons for optimism are emerging. Monday morning, Federal Reserve Chairman Ben Bernanke outlined positive signs: confidence between banks has risen, the market for repurchase agreements of Treasury securities has improved, secondary markets even for troubled mortgage-backed securities have more liquidity than they did in May.

 

“These are welcome signs, of course, but at this stage conditions in financial markets are still far from normal,” Bernanke cautioned. (See “Recovery: Are We There Yet?”)

 

Still, the battered housing market continues to drag. Data released Monday from the National Association of Realtors showed that home prices are still falling. In the first quarter of this year, the median home price dropped 7.7% from a year ago–the biggest decline in the 29 years NAR has compiled the prices.

 

The number of borrowers who owe more than their house is worth is still growing. Loan defaults and foreclosures are likely to continue, as will losses to the lenders. Foreclosures tend to drag down the prices of their entire neighborhoods. But even here, Lawrence Yun, chief economist of the National Association of Realtors, sees some signs of optimism: “Neighborhoods with little subprime exposure are holding on very well.” And at least banks are not originating new subprime loans.

 

Now for the second question: How to prevent risk in the future. That’s what makes Tuesday morning’s hearing significant. The early advice Congress receives could shape regulation of banks and the financial market for years or even decades. And, as Treasury Secretary Henry Paulson noted in proposing a series of regulatory reforms in March, “few, if any, will defend our current balkanized system as optimal.”

 

The March collapse of Bear Stearns exposed a weakness in the Gramm-Leach-Bliley Act, a 1999 law that removed the barriers between commercial banks, investment banks and insurance companies. The amount of systemic risk was not recognized until too late.

 

After Gramm-Leach-Bliley, banks and insurance companies were allowed to undertake the same activities, but they still answered to their old regulators. Five federal regulators oversee deposits, in addition to regulation from state governments. Futures and securities are regulated by separate agencies. Insurance regulation is spread across more than 50 regulators.

 

The result was a confused alphabet soup–SEC, CFTC, OCC, NCUA, FDIC–with muddled boundaries or, as SEC Chairman Christopher Cox described the result, “a statutory no-man’s land.”

 

But regulation presents pitfalls as well. It must be considered not in terms of more or less regulation but rather in terms of flexibility and efficiency. 

 

“In the wake of a bust, there is always a predictable series of political activities,” says Alex Pollock, former president of the Federal Home Loan Bank of Chicago, who will testify before the committee. “First, the search for the guilty; second, the fall of previously esteemed heroes; and third, legislation and increased regulation to ensure that ‘this will never happen again.’ But, with time, it always does happen again.”

 

The guilty have been identified as the twin bogeymen of the subprime underworld: “speculators” and “unscrupulous lenders,” enabled by banks unable to price risk and an irrational belief that home prices would always rise. The esteemed heroes have fallen: the collapse of Bear Stearns, disappointing results from Wall Street’s banks. Even Alan Greenspan has lost some of his luster.

 

The third act at the boom and bust theater is well under way. This week the Senate is ironing out its companion legislation to the House’s Foreclosure Prevention Act, which passed last week with a 266-154 margin. The president has indicated he would veto the bill’s current incarnation but could support a toned-down version. All that remains is the predictable regulatory overhaul and then a long wait for the inevitable cycle to begin in the future. 

 

 

%d bloggers like this: