Los Angeles Real Estate Blog

What To Do When You're Facing Foreclosure

Unfortunately, 30, 60, and 90 day late payment notices and the threat of foreclosure are all too real for thousands of people and the numbers are growing rapidly with the emerging "Alt A Crisis." Foreclosures aren't just happening to people who over-leveraged themselves and got into risky loans. They are happening to everyday homeowners and regardless of how one may have fallen behind on their mortgage payments, knowing what to do is critically important.

There is a lot of information out there about foreclosures, but as usual, one thing that the news media tends to tout as being the first action step is not the best and should be postponed.

Although many sources claim that one should "contact your lender," in reality if a home owner contacts thr lender first, the first person they interact with is the customer service agent who may threaten them and tell them 'We're going to foreclose on your home right away' and scare them into not taking action. If they get to a loan mitigation person and they are talking to them, they may agree to a workout that they cannot afford just to get the phone calls to stop. However, if they agree to a workout they cannot afford and they miss a payment, [the homeowners] have essentially lied to their loan agency and that's not something good."

Homeowners generally fall into a panic mode shortly after they realize the severity of their foreclosure circumstances. What do you recommend they do first?

"People need to back up, really stop panicking. … [They need to] look at their finances, look at their income, look at their expenses, and any liquid cash and then call their lender with that information so that they can workout something that's really going to help them and not break them."

What can homeowners say to their lenders to help influence them to work out a mutually beneficial arrangement?

"If you have gone through the steps of understanding what your deadlines are and then facing your finances and you still see that you're short, that's where you do need to communicate with your lender and say 'I need to work out some other agreement with you because right now I don't have it.'"

How receptive are lenders when homeowners say they can't pay their mortgage?

"What people are finding is that lenders are willing to work with them. It will take a whole lot of persistence on the part of homeowners. They really need to make sure that they're not intimidated by the conversation they need to have with their lender but they need to step up and say 'I am not going to be able to make this. What can we do to suspend the payment or lessen the payment or modify the payment until I get back on my feet?'"

Homeowners should also look for other sources of money. Where can they find this help?

"There are some employers who have a five-thousand-dollar loan that they are able to give their employees with low interest. They can pay it back through their pay over time; that's one. Two, there are grant programs through housing counselors like HUD; there are grant programs that are available to people who are going through foreclosure. [Homeowners] can reach out and be able to get some money that way."

You advise homeowners to also think outside of the box to help come up with money; what are those creative strategies?

"A lot of people are taking in boarders and renting out rooms. Some people are renting out their entire house and they are staying with family so that they can make the mortgage payment. These are all things that homeowners need to do—think a little bit outside of the box when it comes to a solution. Another thing is, with the gas prices being as high as they are and people having to commute back and forth to work, you may want to ask your employer if you can cut down to a telecommuting schedule and think about selling your car."

"There are plenty of other alternatives and people just need to look for them and apply them as quickly as possible."

Looking for solutions to an emotionally and financially draining situation such as a foreclosure is fatiguing and frustrating. However, if you realize there are options then you can begin to build momentum to rectify your situation. Ultimately, it's critical to consult with experts on this matter, to be open about your financial dilemma, and to seek help immediately. For instance, real estate agents can either help you sell your home in a short sale, if necessary, or rent it out to help you pay your mortgage. Trying to do it alone can be a painfully disastrous experience -- seek the help you need.

Published: August 1, 2008

The Harbor Gateway Real Estate Market Authority

From the desk of Greg M. Ingerson, Attorney At Law

During the Summer, Harbor Gateway home sellers should begin to see a gradual decrease in the number of showings and inquiries for their home over the next few weeks.

Last month, the MLS summary showed that there were 33 homes for sale in Harbor Gateway and 5 sold. Translation, under current market conditions, in any given month, you have about a 1 in 7 chance of selling your home.

In other words, when pricing your home, the practice of adding a "Pad" or "Cushion" to make room for negotiating is not advisable in this market.

As an informed Home Seller, you should understand that with an increase in inventory “supply” there is a corresponding decrease in demand.

Home Sellers should pay close attention to “Current Buyers.” Similar homes that have recently “Sold” tell us what people are willing to pay for this kind of home, in this area, at this time.

Information about similar homes “Currently for Sale” tells us what we are competing against. Buyers considering your home are also inspecting these homes.

Moreover, “Expired” listings tell us what people are not willing to pay for this kind of home, in this area, at this time.

Home Sellers in this market should realize that buyers in today's market will not overpay for a home and even if they would, the bank will not loan more than the home is worth when it doesn’t appraise.

So what can we expect? Demand should decrease a little over the coming weeks at least until the “sub-prime” mortgage meltdown crisis is figured out.

The Numbers Don’t Lie, Here Is What's Happening:
On August 1, 2008, there were 33 active listings for sale in the Harbor Gateway Market (Area 122): 21 Houses; 10 Townhouses; and 2 Condominiums.

In the past year, there were 30 homes sold in Harbor Gateway (between 8.01.07 and 7.31.08): 18 Houses; 11 Townhouses; and 1 Condominiums.

What this means is that on a yearly average, the inventory is currently turning over at a rate of approximately 0.9 times per year.

Broken down even further by specific property type, we find that given the current absorption rates, we can expect Houses to be on the market an average of 420 days, Townhouses will be on the market an average of 327 days, and Condominiums should be on the market an average of 720 days.

Market Recap for the Month of July, 2008
When one compares the July results with the yearly result, we find that there is an approximately 6.6 month inventory of homes for sale in Harbor Gateway.

Broken down by specific property type, we find that there is a 7 month inventory of Houses, a 5 month inventory of Townhouses, and a 0 month inventory of Condominiums on the market in Harbor Gateway. (Based on current absorption rates).

How should a Seller approach the market? The key in today's market is proper pricing. If you are thinking of selling, now may be the best time to put your Home on the market for the foreseeable future before any additional interest rate increases are implemented.

How should a Buyer approach the market? For buyers, this is a good time to be in the market while sellers are willing to negotiate price and while interest rates are still low. For those hoping that the market will cool, any advantage obtained by waiting for prices to decrease may be offset by higher interest rates.

For more information regarding the Harbor Gateway and/or greater Los Angeles Real Estate Markets, please visit our website at http://www.LAHomeSearch.com for FREE information or give our office a call at 310.908.2172 for Free Recorded Information 24 Hours a Day.

Sell Your Home In 120 Days or We’ll Sell It For Free
Buy a Home With NO Money Down
FREE Seller Reports Sell Your Home Fast And For Top Dollar
FREE Buyer Reports – Get The Most Home For Your Money
FREE Over The Net Home Evaluation
Find Out What The House Down The Street Sold For
Virtual Tours
And much more 

Harbor Gateway Home Sales by the Numbers
5 sold in July 2008
3 sold in July 2007

33 Current Active Listings
21 Houses
10 Townhouses
2 Condos

5 Sold in July 2008
3 Houses
2 Townhouses
0 Condos

6 Expired in July 2008
3 Houses
3 Townhouses
0 Condos

3 Contingent & Pending in July 2008
2 Houses
1 Townhouses
0 Condos

3 Sold in July 2007
3 Houses
0 Townhouses
0 Condos

5 Sold in July 2006
5 Houses
0 Townhouses
0 Condos

4 Sold in July 2005
3 Houses
0 Townhouses
1 Condos

8 Sold in July 2004
8 Houses
0 Townhouses
0 Condos

6 Sold in July 2003
2 Houses
2 Townhouses
2 Condos

6 Sold in July 2002
6 Houses
0 Townhouses
0 Condos

5 Sold in July 2001
5 Houses
0 Townhouses
0 Condos

4 Sold in July 2000
2 Houses
0 Townhouses
2 Condos

2 Expired in July 2007
1 Houses
1 Townhouses
0 Condos

3 Expired in July 2006
2 Houses
0 Townhouses
1 Condos

0 Expired in July 2005
0 Houses
0 Townhouses
0 Condos

0 Expired in July 2004
0 Houses
0 Townhouses
0 Condos

0 Expired in July 2003
0 Houses
0 Townhouses
0 Condos

1 Expired in July 2002
1 Houses
0 Townhouses
0 Condos

1 Expired in July 2001
1 Houses
0 Townhouses
0 Condos

2 Expired in July 2000
2 Houses
0 Townhouses
0 Condos

To search for bank owned properties on the market go to http://www.LAHomeSearch.com

To search for Southern California Real Estate including real estate in Beverly Hills, Brentwood, Santa Monica, and Malibu go to http://www.LAHomeSearch.com

For Los Angeles Real Estate go to http://www.LAHomeSearch.com

To search for "For Sale By Owner" properties in the Los Angeles Real Estate Market visit http://www.FSBO.LAHomeSearch.com

Thinking of Selling? To get the most Money, Fastest Sale, and the Fewest Problems, visit http://www.LAHomeSearch.com

About the Author
Greg M. Ingerson, Attorney At Law & Real Estate Broker, is a real estate Broker with LA Home Search in Los Angeles, California. To learn more about the Los Angeles Real Estate Market, please visit http://www.LAHomeSearch.com

The Torrance Real Estate Market Authority

From the desk of Greg M. Ingerson, Attorney At Law

During the Summer, Torrance home sellers should begin to see a gradual decrease in the number of showings and inquiries for their home over the next few weeks.

Last month, the MLS summary showed that there were 337 homes for sale in Torrance and 88 sold. Translation, under current market conditions, in any given month, you have about a 1 in 4 chance of selling your home.

In other words, when pricing your home, the practice of adding a "Pad" or "Cushion" to make room for negotiating is not advisable in this market.

As an informed Home Seller, you should understand that with an increase in inventory “supply” there is a corresponding decrease in demand.

Home Sellers should pay close attention to “Current Buyers.” Similar homes that have recently “Sold” tell us what people are willing to pay for this kind of home, in this area, at this time.

Information about similar homes “Currently for Sale” tells us what we are competing against. Buyers considering your home are also inspecting these homes.

Moreover, “Expired” listings tell us what people are not willing to pay for this kind of home, in this area, at this time.

Home Sellers in this market should realize that buyers in today's market will not overpay for a home and even if they would, the bank will not loan more than the home is worth when it doesn’t appraise.

So what can we expect? Demand should decrease a little over the coming weeks at least until the “sub-prime” mortgage meltdown crisis is figured out.

The Numbers Don’t Lie, Here Is What's Happening:
On August 1, 2008, there were 337 active listings for sale in the Torrance Market (Areas 125-135): 245 Houses; 41 Townhouses; and 51 Condominiums.

In the past year, there were 746 homes sold in Torrance (between 8.01.07 and 7.31.08): 483 Houses; 153 Townhouses; and 110 Condominiums.

What this means is that on a yearly average, the inventory is currently turning over at a rate of approximately 2.2 times per year.

Broken down even further by specific property type, we find that given the current absorption rates, we can expect Houses to be on the market an average of 183 days, Townhouses will be on the market an average of 41 days, and Condominiums should be on the market an average of 51 days.

Market Recap for the Month of July, 2008
When one compares the July results with the yearly result, we find that there is an approximately 3.8 month inventory of homes for sale in Torrance.

Broken down by specific property type, we find that there is a 4.2 month inventory of Houses, a 2.2 month inventory of Townhouses, and a 5.1 month inventory of Condominiums on the market in Torrance. (Based on current absorption rates).

How should a Seller approach the market? The key in today's market is proper pricing. If you are thinking of selling, now may be the best time to put your Home on the market for the foreseeable future before any additional interest rate increases are implemented.

How should a Buyer approach the market? For buyers, this is a good time to be in the market while sellers are willing to negotiate price and while interest rates are still low. For those hoping that the market will cool, any advantage obtained by waiting for prices to decrease may be offset by higher interest rates.

For more information regarding the Torrance and/or greater Los Angeles Real Estate Markets, please visit our website at http://www.LAHomeSearch.com for FREE information or give our office a call at 310.908.2172 for Free Recorded Information 24 Hours a Day.

Sell Your Home In 120 Days or We’ll Sell It For Free
Buy a Home With NO Money Down
FREE Seller Reports Sell Your Home Fast And For Top Dollar
FREE Buyer Reports – Get The Most Home For Your Money
FREE Over The Net Home Evaluation
Find Out What The House Down The Street Sold For
Virtual Tours
And much more 

Torrance Home Sales by the Numbers
88 sold in July 2008
86 sold in July 2007

337 Current Active Listings
245 Houses
41 Townhouses
51 Condos

88 Sold in July 2008
59 Houses
19 Townhouses
10 Condos

32 Expired in July 2008
20 Houses
7 Townhouses
5 Condos

93 Contingent & Pending in July 2008
57 Houses
17 Townhouses
19 Condos

86 Sold in July 2007
56 Houses
17 Townhouses
13 Condos

87 Sold in July 2006
60 Houses
18 Townhouses
9 Condos

77 Sold in July 2005
48 Houses
12 Townhouses
17 Condos

101 Sold in July 2004
67 Houses
22 Townhouses
12 Condos

119 Sold in July 2003
89 Houses
14 Townhouses
16 Condos

129 Sold in July 2002
88 Houses
20 Townhouses
21 Condos

117 Sold in July 2001
77 Houses
25 Townhouses
15 Condos

102 Sold in July 2000
77 Houses
15 Townhouses
10 Condos

20 Expired in July 2007
16 Houses
4 Townhouses
0 Condos

33 Expired in July 2006
17 Houses
12 Townhouses
4 Condos

18 Expired in July 2005
12 Houses
3 Townhouses
3 Condos

9 Expired in July 2004
8 Houses
1 Townhouses
0 Condos

13 Expired in July 2003
11 Houses
1 Townhouses
1 Condos

9 Expired in July 2002
7 Houses
1 Townhouses
1 Condos

13 Expired in July 2001
11 Houses
1 Townhouses
1 Condos

18 Expired in July 2000
16 Houses
1 Townhouses
1 Condos

To search for bank owned properties on the market go to http://www.LAHomeSearch.com

To search for Southern California Real Estate including real estate in Beverly Hills, Brentwood, Santa Monica, and Malibu go to http://www.LAHomeSearch.com

For Los Angeles Real Estate go to http://www.LAHomeSearch.com

To search for "For Sale By Owner" properties in the Los Angeles Real Estate Market visit http://www.FSBO.LAHomeSearch.com

Thinking of Selling? To get the most Money, Fastest Sale, and the Fewest Problems, visit http://www.LAHomeSearch.com

About the Author
Greg M. Ingerson, Attorney At Law & Real Estate Broker, is a real estate Broker with LA Home Search in Los Angeles, California. To learn more about the Los Angeles Real Estate Market, please visit http://www.LAHomeSearch.com

Californians who bought natural hazard disclosure reports when they listed their homes with Coldwell Banker, Prudential California Realty, RE/MAX, Century 21 or ERA Real Estate could soon be entitled to full refunds as part of a proposed $39.3 million settlement of a class-action lawsuit.

The settlement agreement, which must still be approved by a federal district judge, stems from a lawsuit alleging that real estate brokers took kickbacks from the company that produced the reports, Property I.D. Corp., in exchange for referring business to the company. The kickbacks were allegedly paid through "sham" affiliated businesses, with brokers receiving about $25 for each report.

Property I.D. and the real estate brokerages that partnered with the company in three jointly owned affiliated businesses deny wrongdoing. But Property I.D. and some of the brokers it partnered with have signed agreements with the Department of Housing and Urban Development stipulating that natural hazard disclosure reports are settlement services governed by the Real Estate Settlement Procedures Act, or RESPA.

RESPA prohibits companies from creating sham businesses for the sole purpose of splitting profits from the sale of settlement services such as title insurance. The three affiliated businesses HUD alleged were established to funnel kickback payments to real estate brokers all had the same Los Angeles address, phone number and bank accounts as Property I.D., and no employees of their own.

HUD launched its own investigation of Property I.D. and its partners in August 2005, several weeks after a class-action suit was filed in U.S. District Court in Los Angeles on behalf of Mark and Rachelle Berger and others who listed their homes for sale through the brokerages. HUD brought its own lawsuit against Property I.D. and its partners in May 2007, after Property I.D. sued HUD in an attempt to bring the nearly two-year investigation to a close (see story).

In its suit, HUD claimed that real estate brokerages steered clients using methods that included listing contracts naming Property I.D. as the default provider of natural hazard disclosure reports. The reports were priced at $99 to $114.

After deducting $50 per report to cover expenses, Property I.D. allegedly split the remaining $50 profit with referring brokers, making payments on a quarterly basis, HUD claimed. Brokers also instructed agents to advise buyers to purchase the reports, even though they were under no obligation to do so under California law.

California requires that sellers provide natural hazard disclosures for properties located in areas prone to flooding, fire, earthquake or landslides. The disclosures must be made on standardized forms and can be prepared by the seller, the seller's agent or a third-party consultant. Although some Property I.D. competitors charge less, the company claims its reports are more thorough.

Property I.D. and the real estate brokerages sued by HUD argued that because natural hazard disclosure statements are not specifically mentioned in RESPA, their marketing and sale was not subject to the law's requirements. Even if RESPA did apply to the disclosure reports, HUD did not have the legal authority to require the "disgorgement" or return of profits generated by the joint ventures, attorneys for the defendants claimed.

In a statement, Realogy spokesman Mark Panus said HUD's lawsuit "was the first public indication that these disclosures, unique to California, are considered settlement services."

While natural hazard disclosures didn't exist when RESPA was written and aren't specifically mentioned in the law, they are clearly settlement services if they are required by states, said Barry Himmelstein, the San Francisco-based attorney who filed the class-action lawsuit. HUD is not obliged to update RESPA to list changing requirements for real estate transactions that vary by state, he said.

"I share HUD's view that (natural hazard disclosure reports have) always been a settlement service subject to RESPA," Himmelstein said. "The argument that (they are not) has always seemed to me to be patently frivolous."

HUD spokesman Brian Sullivan said that with the pending settlement of the class-action lawsuit, HUD has reached an agreement with Property I.D. that does not involve payments, but which acknowledges that the reports are settlement services and bars the company from engaging in practices that violate RESPA. Similar agreements are pending with the brokers that partnered with Property I.D.

Sullivan said the lawsuits have not only put to rest the question of whether natural hazard disclosure reports are subject to RESPA, but establish HUD's authority to seek disgorgement of illegal profits.

In a press release, Property I.D. put a positive spin on its settlement with HUD, calling it "a dramatic example of how the government and the real estate industry are working together to establish new practices for California home buyers and sellers."

Property I.D. claimed the agreement "protects" companies that prepare natural hazard disclosure reports because payment for the reports will now be collected as part of escrow, "requiring a significant change in every escrow company's standard procedures."

Panus said Realogy "voluntarily terminated" its joint ventures with Property I.D. more than two years ago, "for business reasons unrelated to HUD's allegations."

Realogy sued Property I.D. in September 2006, claiming it had not received $600,000 it was owed from its joint ventures (see story). The lawsuit was dismissed in March 2007.

Realogy continues to maintain that the partnerships were legal but agreed to a settlement "to avoid the continuing legal expense and potential business disruption of these lawsuits," Panus said, adding that Realogy will treat natural hazard disclosure reports as settlement services governed by RESPA "on a going-forward basis."

Under the proposed settlement of the class-action lawsuit, Realogy -- parent company of Coldwell Banker, Century 21 and ERA Real Estate -- will pay up to $27 million to reimburse clients who purchased Property I.D. natural hazard disclosure reports between July 31, 1996 and June 30, 2006.

Pickford Real Estate Inc., the owner of Prudential California Realty offices in Southern California that participated in the affiliated business arrangements, will pay up to $4.34 million to reimburse home sellers who bought the reports from July 14, 2000 through Aug. 16, 2005.

Roche Enterprises Inc., the former owner of RE/MAX of California and Hawaii Inc., will pay $498,474 to compensate clients who bought Property I.D. reports from Aug. 23, 2000 through Feb. 28, 2003.

If final approval of the settlement agreement is approved by the judge overseeing the case -- a decision that's not expected until December at the earliest -- Property I.D. would pay up to $7.5 million.

The Aug. 4 settlement agreement, along with a proposed mailer to home owners who purchased Property I.D. reports and may be entitled to claim a refund, are included in an 80-page court document filed this week.

Judge George King is scheduled to weigh preliminary approval of the agreement on Aug. 25. If there are no objections from those eligible for claims, final approval of the agreement could be granted in December, Himmelstein said.

FirstFed Grapples With Payment-Option Mortgages

LOS ANGELES -- FirstFed Financial Corp. posted a loss of nearly $70 million in the first quarter -- reversing years of profit.

40% (Forty percent) of its borrowers became at least 30 days delinquent after the payments on their adjustable-rate mortgages were recast. The number of foreclosed homes held by the bank doubled in the second quarter from the first quarter.

Unfortunately, FirstFed is on the front lines of the next big mortgage debacle: payment option mortgages. Better known as the "Alt A Crisis," these loans went to people with good credit (above 700 FICO).

However, the Alt A Crisis is likely to experience defaults that are higher than those for subprime.

Barclays Capital estimates that as many as 45% of option ARMs originated in 2006 and 2007 will wind up in default while UBS AG suggests that defaults on option ARMs originated in 2006 could be as high as 48%.

Understanding Option ARMs

Option ARMs typically carry a low introductory rate and give borrowers multiple payment choices such as a minimum payment that is lower than the interest due which causes the loan balance to rise - known as negative amortization.

However, monthly payments can increase by 60% or more once borrowers begin making payments of principal and interest which typically happens after five years or earlier if the amount owed reaches a preset amount, typically 110%, 115% or 125% of the original loan balance.

FirstFed's is the first to experience this crisis because it's cap is set at 110% while many other lenders have higher caps.

FirstFed's chief executive, says that option ARMs were "a very good loan for the borrower and the bank" for more than 20 years, but that all changed when investment-banking firms entered the industry and set lower lending standards, which FirstFed and others followed.

For most of the product's history the introductory rate on an option ARM was 1-2 percentage points below the actual interest rate on the loan. This worked well when interest rates were flat or falling and the minimum payment was enough to cover the interest due, making the option ARM equivalent to an interest-only loan in the early years of the mortgage.

However in 2003 when home prices accelerated, lenders began pushing mortgages that made payments more affordable. As competition increased, lenders dropped the introductory rate on option ARMs to 1% or even lower and made more loans to borrowers who didn't fully document their income or assets.

Now, as loans are recasting, FirstFed is scrambling to modify the loans of borrowers who can't afford the higher payments. As of the end of June, nonperforming assets climbed to 8.2% of total assets, compared with 0.85% a year earlier.

Unexpected Hurdles
Many borrowers took out home-equity loans with other lenders after getting an option ARM. These borrowers account for 25% of FirstFed's mortgage loans but represented nearly 50% of its delinquencies in the third quarter of 2007. These loans are harder to modify because FirstFed often needs the approval of the holder of the home-equity loan which is unlikely to happen.

No Doc Stated Income Loans - "the Liars Loan"
"You expect a 20% fudge. You don't expect 500%." In addition, many borrowers submitted loan applications that overstated their financial condition, making it more likely that they wouldn't be able to afford the payments even if the loan is modified.

To search for bank owned properties on the market go to http://www.LAHomeSearch.com

To search for Southern California Real Estate including real estate in Beverly Hills, Brentwood, Santa Monica, and Malibu go to http://www.LAHomeSearch.com

For Los Angeles Real Estate go to http://www.LAHomeSearch.com

To search for "For Sale By Owner" properties in the Los Angeles Real Estate Market visit http://www.FSBO.LAHomeSearch.com

Thinking of Selling? To get the most Money, Fastest Sale, and the Fewest Problems, visit http://www.LAHomeSearch.com