Tsunami of Interest Rate Hikes Coming

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The NY Times reported yesterday in “Beware of Exploding Mortgages” that “anyone who believes that the worst is over in the subprime mortgage fiasco need merely wait awhile. A tsunami of interest rate increases on these loans is headed your way.”

100% Financing to Investors Harder To Find

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Mortgage brokers and direct lenders have tightened lending guidelines to those with excellent credit. So, what does this have to do with foreclosure? Everything. Often, a property owner may be bailed out by an investor/buyer on a straight sale or a leaseback with a repurchase option. These types of investors do not consider the transaction to be profitable if they have to put in much of their own money. It is the leverage that attracts them – that is, making money on other people’s money – although, in the end, they still assume a great deal of risk that they will have to “come out of their own pocket.” Usually investors want 100% financing to bail out a property owner in foreclosure. Recently, some lenders are pulling back and are only doing 95% financing which has dramatically restricted the options to stop foreclosure. There are still options but the smart property owner should avoid wasting time with buyers/investors who will let them down in the end. Property owners should make sure they are dealing with a buyer/investor who will be able to get financing on terms they can live with. The terms should all be disclosed up front and in writing. The seller in foreclosure should know what the buyer’s expectations are for financing and whether they are realistic. For now, 100% financing still appears to be available to buyers with 800 or near 800 credit scores and “seasoned funds.”

How To Find “Comps” To Assess Equity and LTV

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When a homeowner is trying to figure out a solution to foreclosure, it is almost always necessary to know if there is any equity in the home. The value of the home and the equity above any liens to be paid off is very important regardless of which solution is considered. Lenders cannot evaluate a refinance without knowing the LTV, or loan to value ratio. Bankruptcy Trustees need to know what the value of the primary asset is in order to assess whether unsecured creditors are entitled to receive 100% (in addition to considering other factors). Buyers and investors will want to know the value as well before they make an offer.

For those in New York City, there is a site that we have linked on the NY Foreclosure Law Blog called the Automated City Register Information System or ACRIS. The site is searchable by address or by block and lot number. Keep in mind that the City’s viewpoint on the value of your property may not reflect the reality of the current market. In addition, improvements and renovations (or, conversely, damage to the property) need to be considered as possible adjustments to reflect the true fair market value. Needless to say, any certified appraisal will be based on comps (comparable sales in your neighborhood in the last few months). But ACRIS is a very good starting point for most people.

For those living in Nassau County, there is also a site called My Nassau Property. And for almost anyone, there is another useful valuation site called Zillow, although in my experience, Zillow tends to overstate some values. Here are the links –

Zillow.com Property Valuation
New York City Property Information – ACRIS
Nassau Property Valuation

For future reference, all of these links can be found in the lower right sidebar of this blog.

Fighting Off Foreclosure

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The NY Times has just written about New Yorkers fighting off foreclosure. Here is the article.

Investors Are Slowing Down On Foreclosure Purchases – It’s Not An Easy Path To Riches

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Smartmoney is reporting that investors are slowing down on foreclosure purchases. There are a few reasons for this that I have seen in my practice, including the softening of the real estate market, tightening of lender guidelines, the renovations needed by many properties, and the limited equity that many homeowners have. These factors all reduce the profit that any investor might try to make by flipping the property. What does this mean for the homeowner? It means that if you decide to try to sell before the auction date (in order to prevent a sale), or sell and leaseback with an option to repurchase, it would be smart to begin the process as soon as possible. Finding a qualified and interested investor/buyer may be difficult.

Here’s the story –

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Free Annual Credit Reports

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If you are in default on a mortgage, it is always a good idea to check out your credit report – because everyone else will. Whether you are trying to refinance, file bankruptcy, obtain a forbearance agreement, or negotiate a sale-leaseback, others will need to see your overall credit picture. Annualcreditreport.com is a central site that allows you to request a free credit file disclosure, commonly called a credit report, once every 12 months from each of the nationwide consumer credit reporting companies: Equifax, Experian and TransUnion.