Archive for May, 2009

Banks Need A Clean Load of Laundry

clean-laundry When I thought about writing an article that would try to describe how we got ourselves into this financial mess I  thought about the analogy of going off to college with a clean load of laundry.

Imagine the real estate market 30 years ago.

Back then, if you wanted to buy a home you would go to the community bank or savings and loan and ask them to give you a loan. You would give them all of your personal financial information. They would qualify you for a loan based on the value of the home, the purchase price, how much you have in savings, how much you earn on your job.

Giving you a loan was pretty clean and neat. The bank would hold on the mortgage and receive monthly payments from you until the loan was paid off.

dirty-laundry1 Our banks grow up and go off to college and look what happens. The once neat pile of laundry turns into room full of dirty laundry.

Banks started to realize that they could not do more loans if they did not hold onto your mortgage for the full 30 years. So based on your credit, the value of the asset, they bundled the loan with other loans like your to investors.

This is called repackaging cash flow producing financial assets into Securities.

The banks soon found out there were many people interested in buying mortgage backed securities than there were loans. So here is what they did. They started to mix the loans together AAA rated loans with Subprime loans. The pile of mortgages kind of looks like our dirty laundry pile above and here is the problem we have today.

We need to sort out all of the laundry. We need to put whites with whites, color with colors, those that need to be washed as seperates and so forth. The rest we take to the dry cleaner.

Written by Jack Lewitz | Discussion: No Comments »

Buyers Market Vs Sellers Market Needs To Be Re-Defined..

small_sick_house_2Since we are in full swing of the Spring Housing Market I thought I would write about the Health of the Market as it relates to one community where I work.

As of today’s date, there are 300 active single family homes for sale in the city of Evanston, IL.  During the past month 64 homes went under contract.

If you divide the number of homes under contract by the number of active listings you will be calculating for what is normally called the absorption rate. The absorption rate tells you how many months it will take to sell a home in today’s market.

In this example, (64 homes under contract  /divided by 300 active listings) you get an absorption rate of 4.69 months. As Realtors we look at the absorption rate to define the difference between a buyers market and sellers market.

If it takes 1-4 months (30-120 days) then this is considered a buyers market. If it takes 5-7 months (150-210 days) to sell a home this is considered a sellers market.

On the surface the real estate market in Evanston, IL appears to be a buyers market. Now here is the kicker… Out of the 64 homes under contract 17 of those are Short Sales or Bank Owned Foreclosures. This represents 27% of the total future sales in Evanston, IL.

And we know it takes a longer time to get a Short Sale accepted by the bank and closed than a normal real estate transaction.

In conclusion, I think we need to adjust our concept of a buyers market vs a sellers market when the number of  pending sales are  really foreclosures.

Written by Jack Lewitz | Discussion: No Comments »

Investing in Foreclosures

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Written by Jack Lewitz | Discussion: No Comments »

How Your Credit is Affected …

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Written by Jack Lewitz | Discussion: No Comments »

Buyers Are Looking For Foreclosures

istock_000005686837xsmallMore and more people are on the internet each day looking for information.

So what kind of information are they seeking about real estate? According to Google, 6,000,000 people have searched for foreclosures in the past month.

There were 201,000  people looking for foreclosure in Illinois. Out of this group 18,000 were looking to buy foreclosures and another 8,000 were trying to find information how to buy foreclosures.

While searching for foreclosures 12,000 people only want to search on sites where the information is FREE.

More people were searching for Short sales (200,000)  than Bank foreclosures (135,000).

IL RealEstate Specialists is listening to what people want from an internet site. Buyers can search for Active listings for FREE.

These Active listings are arranged as either  Pre-foreclosure  “Short Sales” or “Bank Owned” Foreclosures.

All  listings are all  listed for Sale by Real Estate Brokers. We are not searching the public records like other sites giving you information on people who have no intention of selling their home.

IL RealEstate Specialists is also one of the very few sites that also provides Sales data on Foreclosures. Our records go back to 2007  through 2009. This information is useful to  buyers who want to know what homes are selling for before they make an offer on a home.

Written by Jack Lewitz | Discussion: No Comments »

IL Senate Bill 2513

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Senate Bill 2513 which was signed into law on April 5, 2009 as the Homeowners Protection Act is a temporary solution to the foreclosure crisis facing our state.

This new law essential is a 90-day moratorium on all  home foreclosures.

  • A lender must send a homeowner an additional notice of default by Certified Mail and cannot foreclose on the home for an additional 30 days after sending  the warning.
  • During this 30-day window the homeowner has the right to seek approved mortgage counseling.
  • If the homeowner seeks counseling then another 30 days grace period will be given to work out a mortgage refinancing plan
  • This stays another 30 additional days on top of the already 60 days given.

Who is eligible under the plan? All homeowners whose loans have not begun the foreclosure process.

Who provides the counseling? The Department o Housing and Urban Development (HUD) approved counseing offices that are recognized by the Illinois Department of Financial and Professional Regulation.

What is a Workout Plan? A  workout plan will allow the homeowner to keep the home, stay current on the mortgage by suspending payments, lowering interest rates, extending mortgage terms, or reducing prinical balances.

The success of IL Senate Bill will be how many foreclosures are prevented and the results of the bill will not occur until after the 90 day moratorium.

Written by Jack Lewitz | Discussion: No Comments »

Top 10 Problems to Loan Modification…

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The biggest problem to the loan modification process is finding a live person who cares about you, your problem and wants to help you.

There are countless stories of people being put on hold for 30 minutes or more. Finally someone picks up the phone, you tell them the same information, and they transfer you again to some one else.

Following is a list of the  top 10 problems you will have when trying to modify your loan:

1. They do not return calls.

2. They take 30-60 days to give a written answer

3. They require their own authorization to release information forms

4. They take too long to assign the cases

5. They keep changing officers after they assign cases

6. They give wrong information regarding your loan

7. You always have to refax your documents and explain what  you just sent.

8. Customer service sends your call to the wrong department.

9. They hang up on you or you get disconnected.

10. They cannot make a decision.

Written by Jack Lewitz | Discussion: No Comments »

Loan Modification VS Pre-Payment Plan

A loan modification is a written change to the agreement between the mortgage holder (or its Servicer) and the homeowner on the original terms of the note.

The goal of the loan modification is to prevent  foreclosure by altering the original payments terms so that it becomes more affordable for the homeowner.

Loan modification programs may be short term or long term but the intention is to allow homeowners to keep up with payments which they can afford and prevent them from going into default.

There are many ways to modify the original loan.

  • Reduce the interest rate
  • Extend the  loan term
  • Reduce the principal balance
  • Or a combination of the above

Using these various combination’s the Loan Modification will reduce the payment amount for the homeowner so it is more affordable.

A Loan Modification must not be confused with Pre-Payment Plan.

A pre-payment plan requires homeowners to make increased monthly payments to cure payments that are in Broke business manarrears.

Most pre-payment plans fail because they increase the monthly payment rather than decrease the monthly payment.

Remember if your bank offers you a plan and it will take more money out of your pocket then this is a pre-payment plan that benefits the bank not the homeowner.

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If the bank reduces your payment and puts more money in your pocket then this is a good loan modification plan.

Written by Jack Lewitz | Discussion: No Comments »

Illinois Foreclosure Law Needs Improvement..

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The February 2009 Report “Foreclosing a Dream” by National Consumer Law Center examines the current foreclosure laws in all 50 states and evaluates how well the laws in each state protect homeowners facing foreclosure.

This study recommended the following actions in order to restore fairness to homeowners in the foreclosure process before a foreclosure sale and after the sale:

1. A Judicial Foreclosure Process should be the norm where homeowners are given due process in the courts.

2 Homeowners must be served a Notice of Default

3. States should require a lender to make attempts to modify the loan before foreclosure can be initiated through a formal court proceeding.

4. Homeowners should be given the right to cure the default , catch up on missing payment , without penalty , before any formal foreclosure proceedings.

5. Guarantee the right to reinstate the  mortgage by paying the all payments in arrears and any costs up to the time of a foreclosure sale.

6. Each State should create an Emergency Financial Assistance Fund for homeowners facing foreclosure.

7. All homeowners with the Right to Redeem the property after a foreclosure sale.

8. Prohibit Lenders from giving homeowners Deficiency Judgements after foreclosure

9. Accounting of all sales to be supervised by the courts

10. Require court supervision to surplus of any sale proceeds to homeowner

Illinois Foreclosure Law

Pre-Foreclosure Protection
Homeowner must be served Notice of Default Yes
Homeowners right to Judicial Review Yes
Homeowners Right to Loss Mitigation before Foreclosure No
Homeowners Right to Cure before Sale No
Homeowners Right to Reinstate before Sale No
Housing Emergency Assistance Fund No
Post Foreclosure Sale Protection
Homeowner Right to Redeem Home After Foreclosure No
Protection from Deficiency Judgement No
Court Supervision of Sale Proceeds Yes
Court Supervision of Surplus Yes

Written by Jack Lewitz | Discussion: 3 Comments »

The American Dream or the American Dilemma

Understanding Mortgages

The American Dream has always been to own a home. As  homeowners try to find a way to keep their home out of foreclosure the American Dream has turned into the American Dilemma.

Homeowner who wish to keep their homes out of Foreclosure  must decide which Loss Mitigation plan will work for them.

  • Repayment Plan– allows the homeowner to get current by making regular mortgage payments plus the amount in arrears usually spread out over a period of less than six months.
  • Forebearance Plan – is also a payment plan that may reduce or suspend the owner’s paymennts for a period generally no more than 12 months.
  • Loan Modification- involves modifying the mortgage, such as by changing the interest rate or terms of the mortgage, capitalizing arrears by adding them to the mortgage, and reducing the principal balance of the mortgage.

Written by Jack Lewitz | Discussion: No Comments »

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