Certified Forensic Loan Auditors, LLC

 
  Upcoming Classes

Search CFLA's Article Archive:

Boom-Era Property Speculators to Get Foreclosure Aid

bloomberg.comMar 5, 2012

The Obama administration will extend mortgage assistance for the first time to investors who bought multiple homes before the market imploded, helping some speculators who drove up prices and inflated the housing bubble.

Landlords can qualify for up to four federally-subsidized loan workouts starting around May, as long as they rent out each house or have plans to fill them, under the revamped Home Affordable Modification Program, also known as HAMP, according to Timothy Massad, the Treasury’s assistant secretary for financial stability. The program pays banks to reduce monthly payments by cutting interest rates, stretching terms, and forgiving principal.

 

Enlarge image Home Sales

Investors are central to the federal government’s strategy for reviving real estate with home prices down 34 percent since July 2006 and as foreclosures deplete the pool of buyers who can qualify for a mortgage. Photo: Tim Rue/Bloomberg

The government’s need to protect neighborhoods from blight and renters from eviction by keeping the current owners in place is outweighing concern that taxpayers will end up bailing out real-estate investors. The program is being enlarged after less than 1 million borrowers modified loans through HAMP, compared with the administration’s stated goal in 2009 of helping 3 million to 4 million homeowners.

“When we started the program we focused on owner-occupied houses because the need was so great and we wanted to target the efforts to that group,” said Massad. “Given where we are today, more and more people recognize that vacant properties are a problem no matter how they became vacant.”

 

Homeownership Rate

Investors are central to the federal government’s strategy for reviving real estate with home prices down 34 percent since July 2006 and as foreclosures deplete the pool of buyers who can qualify for a mortgage. Federal Reserve Chairman Ben S. Bernanke told homebuilders in Orlando, Florida last month that the U.S. economic recovery has been “frustratingly slow,” in part because weak housing markets are holding back consumer spending.

The homeownership rate, which peaked at 69.2 percent in June 2004, fell to 66 percent in the fourth quarter of 2011, according to the U.S. Census Bureau. A new Fannie Mae program designed to reduce the overhang of foreclosed homes is encouraging potential buyers, including private-equity firms, to purchase properties in bulk and convert them to rentals. Almost one in four home purchases in January was made by an investor, according to the National Association of Realtors. And investment and vacation properties made up 21 percent of houses in the foreclosure process in January, according to Irvine, California-based RealtyTrac Inc.

 

‘Huge Change’

The Obama administration announced last month that it would triple incentives to owners of mortgages that reduce home-loan debt and expand eligibility to borrowers struggling under the weight of other liabilities, such as medical bills. The extension will apply to all loans, including those held by Fannie Mae and Freddie Mac, the government-sponsored mortgage financiers. About 700,000 landlords will be eligible under the revisions to HAMP, which has been plagued by consumer complaints about lost paperwork, servicer delays and restrictive eligibility requirements.

“This is a huge change,” said Dan Immergluck, a housing policy professor at Georgia Institute of Technology. “The excessive concern to make sure nobody who played any role in creating the problem gets any benefit has paralyzed the response.”

The danger of blight to communities from foreclosed, vacant properties is still pervasive six years into the slump. Empty houses push down a neighborhood’s property values, according to a 2009 report by the Center for Responsible Lending, which said foreclosures will affect 91.5 million nearby homes through 2012. That will reduce property values by $20,300 for each household, according to the group, which seeks to protect homeownership and family wealth.
Buy-And-Flip Investors

By widening the program, the plan will inevitably offer aid to buy-and-flip investors who pushed prices higher during the boom by taking out mortgages with little or no down payment. Speculators accelerated the crash because they were quick to default when prices fell, according to a September report from Andrew Haughwout, Donghoon Lee, Joseph Tracy, and Wilbert van der Klaauw of the Federal Reserve Bank of New York.

At the peak of the boom in 2006, more than a third of home purchase loans were made to borrowers who already owned at least one house, according to the study. In California, Florida, Nevada, and Arizona, which had the most pronounced bubbles, investors accounted for 45 percent of the mortgages.

While survivors of the property bust are now long-term investors, some of them may have started out as flippers, Haughwout said.

 

Taxpayer Dollars

While speculators are “no one’s first priority for receiving taxpayer dollars,” providing assistance to a large class of multiple property owners and “blanket modifications offered regardless of occupancy” would be more efficient than restrictive programs, the Fed said in the September report.

Chandrajit Bhattacharya, an analyst at Credit Suisse Group AG in New York, said that the HAMP changes will result in about 200,000 modifications for investors. While it won’t keep bondholders “up at night,” it will probably slow the process of liquidating foreclosed homes.

Bhattacharya said he doesn’t understand why the government should be subsidizing workouts for property investors who are in the business of making money on their purchases. Vacancies are unlikely to increase if the houses go into foreclosure and are purchased by owner-occupants or new investors who fill them with tenants, he said.
‘Ridiculous’ Policy

John Burns, an Irvine, California-based real estate consultant, said it’s “ridiculous” for taxpayers to come to the aid of individuals who made bad bets.

“What kind of precedent are you going to set?,” Burns said. “Are you going to refund people who lost money on the stock market too?”

Government help to homeowners comes after President George W. Bush’s administration rescued banks with the Troubled Asset Relief Program in 2008, when the housing crash sparked the worst financial crisis since the Great Depression. Wall Street benefited from Federal Reserve emergency programs to keep credit flowing, while Bush and President Barack Obama directed federal money to save companies including General Motors Co. (GM) and Chrysler Group LLC. The Obama administration then pursued a series of programs meant to reduce foreclosures.

John Russell, 61, of Northville, Michigan, said he was never a speculator seeking to flip houses. He bought four rental properties in neighborhoods in the state more than 10 years ago and said he planned to keep them for decades more. Now the houses are worth far less than he owes, his rents have tumbled, and he has to spend about $20,000 a year to keep them operating.

 

Chrysler Bankruptcy

Russell, a retired Chrysler executive whose pension was cut during the automaker’s 2009 bankruptcy, said two houses are in foreclosure and he can’t afford to keep them without the federal government’s help.

Banks have repeatedly rejected him for a modification because they aren’t primary residences, he said. Russell said he simply wants his mortgage bills to be brought in line with the rents.

“I guess what you’re always asking yourself is the market going to come back?,” Russell said. “As an investor you want to think that some day the house will be worth more than it is today.”

Moose Scheib, chief executive officer of LoanMod.com, a Dearborn, Michigan-based (MBASMI) firm that advises homeowners facing foreclosure, said many of the investors who hung on through housing bust are “mom and pop” property owners who bought real estate as a source of retirement income. Russell is one of his clients.

“Our economy is in trouble, housing is in trouble,” Scheib said. “Whether you’re fixing it on behalf of investors or homeowners, it benefits everybody to do that.”


Back to March 2012 Archive

CFLA was founded by the Nation's Leading Foreclosure Defense Attorneys back in 2007 to serve the Foreclosure Defense Industry and fight pervasive Bank Fraud. Since opening our virtual doors, CFLA has rapidly expanded to become the premier online legal destination for small businesses and consumers. But as the company continues to grow, we're careful to hold true to our original vision. For us, putting the law within reach of millions of people is more than just a novel idea—it's the founding principle, just ask Andrew P. Lehman, J.D.. With convenient locations in Houston and Los Angeles, you can contact Our National Account Specialist and General Manager / Member Damion W. Emholtz at 888-758-2352 for a free Mortgage Fraud Analysis or to obtain samples of work product, including cutting edge Bloomberg Securitization Audits, Litigation Support, Quiet Title Packages, and for more information about our Nationally Accredited and U.S. Department of Education Approved "Mortgage Securitization Analyst Training Certification" Classes (3 days) 24 hours for approved CLE & MCLE Credit (Now Available Online).

SEE BELOW- http://www.certifiedforensicloanauditors.com

Call us toll free at 888-758-2352

Bookmark and Share
spacer
Facebook Like us on Facebook
Twitter Follow us on Twitter
YouTube View our YouTube Videos
LinkedIn Connect to us on Linkedin
 
BBB Logo

 

spacer
Contact us or view our Sample Documents & Audits by completing the form below.

  • Reload
  • Should be Empty:


 

DVD Sets Only $99

 

FREE Mortgage Fraud Analysis

 

Order Cutting-Edge Services Now

 

Quiet Title Packages from Licensed Attorneys

 

Affiliate Services

 

CFLA Sponsored Attorney Links

 

Take-Home Education Package

 

ALB Law Firm

 

Advocate Legal

 

The True News Network

 

Sutton Law Firm, P.L.L.C.

 

Rubenstein Business Law

 

Atighechi Law Group

 

Scunziano & Associates

 

Get Certified to Perform Mortgage Securitization Audits

 

CFLA Training Academy

 

Expert Witness Services

 

Cutting Edge Expert Securitization Reports

 

CFLA Credit Cards

 

Breaking News

 

Letters to the Editor

 

CFLA Weekly Newsletters

 

Code of Ethics

 

Testimonials

 

Instructional Videos

 

Job Opportunities

 

License Opportunities

 

MARS Rule

 

Product Samples

 

Resource Links

 

Servicer Information

 

Foreclosure Laws

 

REST Report

 

Quiet Title Packages from Licensed Attorneys

 

Advertise on CFLA

 

Advertising Space: Mortgage Securitization, Quiet Title

 

Certified Forensic Loan Auditors, LLC
13101 West Washington Blvd.
Suite 444
Los Angeles, CA 90066

Phone: 832-932-3951
Toll Free: 888-758-CFLA (2352)
Mobile Users: CLICK TO CALL
info@certifiedforensicloanauditors.com

   
 
CFLA IS NOT A LAW FIRM AND DOES NOT PROVIDE ANY LEGAL ADVICE. CFLA DOES NOT OFFER FORECLOSURE CONSULTING OR FORECLOSURE RELIEF
SERVICES. CFLA DOES NOT OFFER OR ASSIST WITH ANY LOAN MODIFICATION SERVICE. CFLA ALWAYS RECOMMENDS THAT CLIENTS RETAIN COMPETENT COUNSEL IN THEIR RESPECTIVE JURISDICTION. CFLA HAS A FREE PROGRAM TO REFER CFLA CLIENTS TO LAW FIRMS IN NEARLY EVERY STATE AND CFLA
DOES NOT CHARGE OR OBTAIN REFERRALS FEES FOR THESE SERVICES. SERVICES NOT OFFERED TO RESIDENTS OF THE STATE OF NEVADA.


     
 
Home About Us Privacy Policy Terms of Service Disclaimer SERVICES Careers Contact Us
 
COPYRIGHT © 2007-2016 Certified Forensic Loan Auditors ™ All rights reserved