Posted by DaveD (WI) on February 27, 2007 at 18:30:57:
… to your heavenly reward. As in passed away. Sheesh, John haven’t heard nuthin from you in a long time. Glad to see you’re still alive and kickin’
So you are saying the blood is running in the streets. As Terry would always say, time to loot and steal!
Best regards,
Dave
Cherry Picking Season on the Rise! - Posted by JohnBoy
Posted by JohnBoy on February 27, 2007 at 17:37:16:
Can’t sell, so owners give bank the homes
Desperate families walk away rather than lose them to foreclosure.
Ron French / The Detroit News
STERLING HEIGHTS – Alan and Alyson Wirgau live in a cute ranch on a quiet suburban street next to an award-winning school. There’s a new roof above their heads, a new deck in back and a For Sale By Owner sign in front.
Instead of weighing offers, the family is weighing an option that seemed unthinkable a year ago: If they don’t sell their home soon, they may turn down the heat, load their possessions in a U-Haul and drive away.
With a job in Indianapolis and dim prospects for selling their home, the Wirgaus are considering handing the keys back to the bank and walking away from their home.
They are among a growing number of Michigan families asking lenders to take their homes off their hands. That trend, paralleling a rapid rise in foreclosures, illustrates the desperation some families feel as home values fall below their mortgage debt.
That process, called a deed in lieu of foreclosure, is an agreement to give up all ownership rights in a home or piece of property to the lender.
It’s not a good option for anyone, but it’s often better than the alternative. Homeowners’ credit ratings are hurt, but not as much as in a foreclosure; the lenders lose money on homes now worth less than the outstanding loan, but lose less than the cost of a foreclosure proceeding.
There is no state or national data on deeds in lieu of foreclosure because it is an internal agreement between lenders and homeowners.
But at Michigan’s largest foreclosure law firm, Trott and Trott in Bingham Farms, deeds in lieu of foreclosure rose 35 percent in 2006. Looking at the firm’s data, attorney Dave Trott estimates there were more than 1,000 deeds in lieu of foreclosure in Michigan last year.
While that number is small compared to foreclosures (one in 80 homes in the Detroit area alone is in foreclosure), deeds in lieu are sometimes a less-bitter economic pill.
“Nobody knows you can even do it,” said Ann Howard, a bankruptcy attorney in Southfield. “I’m seeing people coming in and saying, ‘What do we do about our house?’ Their (mortgage) rate changed, they’re not getting the overtime they used to, they’ve taken a job out of state.”
In normal times, they’re the homeowners who would write “motivated seller” in their house ads and sell for a few thousand less. But with no buyers and property values declining, homeowners who have to sell fast find themselves in unchartered financial territory.
No offers at break-even price
Two years ago the Wirgau family’s 1,500-square-foot home was valued at $210,000. Today, it’s for sale at $180,000 – just enough to pay the mortgage and the closing costs.
No one has made an offer in the three months it’s been on the market. At the full asking price, “we’d just break even, and I’d bend down and kiss their (the buyers’) feet,” Alyson Wirgau said.
For five months, Alan Wirgau has been commuting to a new job in Indianapolis, where he lives in a $400-a-month studio apartment during the week. He drives back to Michigan on Friday night and leaves early Monday morning for Indiana.
“I just put a new set of tires on my car,” Alan Wirgau said. “At some point, you have to ask, ‘Where do we draw the line?’?”
It’s better for everyone if the Wirgaus can sell their home. But if they don’t, they’re good candidates for a deed in lieu of foreclosure. They aren’t behind on their mortgage payments, their home is worth close to the amount still owed, and the home is in good shape.
Lenders who frowned on such deals as well as short sales (accepting less than the loan amount for the sale of a home) now are routinely agreeing to both. For lenders, the choice often is between losing a little money now or a lot of money later.
A foreclosure can cost a lender thousands of dollars and can take a year. The homes often are not well-maintained during that period, costing the lender more money for repairs.
“The banks don’t know what they’re going to get back,” Howard said. “If people are willing to hand the house over, then it’s less likely the bank will get possession of a house that is completely trashed.”
By agreeing to a deed-in-lieu or a short sale, the lender “gets possession quicker,” said Michael Kus, spokesman for the Michigan Association of Community Banks. “Instead of waiting the redemption period (of a foreclosure proceeding, which can take six-12 months), you can get it marketed quicker.”
And with home prices continuing to fall, the sooner a lender can sell the distressed house, the less money the lender loses, Kus said.
“It’s the busiest department in the banks now, short sales and deeds in lieu,” Howard said. “They have people devoted to it.”
A deed in lieu of foreclosure is, at best, a mixed blessing. Homeowners may get rid of their home quickly, but their ability to purchase a new home is damaged.
At Rock Financial, a deed lieu carries the same stain as a foreclosure when a consumer applies for a new home loan, according to Bob Walters, chief economist at Rock Financial/Quicken Loans.
Livonia bankruptcy attorney Charles Schneider advises clients against deeds in lieu, but not for the expected reasons. He argues that it makes more financial sense for a distressed homeowner to go through foreclosure.
Honor bottom line or deal?
Most families who are on the verge of losing their homes have bad credit anyway, Schneider said. A family going through foreclosure proceedings can live in a home for almost a year without making mortgage payments.
“Making payments on a home that is under equity, you’re literally throwing money down the drain,” Schneider said. “Say you go 10 months without paying a $1,500 mortgage – that’s $15,000 to start over. Why would you pay that money when you can live there rent-free for that time?”
Alan Wirgau understands the economics of such a decision, but not the morality.
“You made a contract,” he said. “You should do your best to honor it.” Still, he can’t help but wonder whether he’ll feel differently if his home doesn’t sell in the coming months.
In July, the family’s adjustable rate mortgage will jump from 5.25 percent to 8.25 percent, costing another $250 a month. A property tax bill of $2,800 will be due.
“If we’re not out of here by then, something’s gotta give,” Wirgau said.
“People choose between trying to salvage some of their credit rating versus living in the house for free,” said Southfield bankruptcy lawyer Stuart Gold. “Some banks are even paying people to give their houses back, even on a short sale. They’ll pay them $500 to help on moving expenses to get them out of the house.”
The key for distressed homeowners, say attorneys, lenders and real estate agents, is to talk to lenders early. Homeowners who wait until they are behind on their mortgage payments will find their options severely limited.
The Wirgaus don’t know what they’re going to do. They’re considering lowering the price of their home and dipping into their savings to pay the bank the difference. Even then, there’s no guarantee that their house will sell.
They sit at their kitchen table weighing the pros and cons of a deed in lieu or a foreclosure, and wonder whether they could go through with it.
“I’ve covered all the angles,” Alan Wirgau said. "I hope it doesn’t come to that but it may be worth starting over.
“Some people have no choice,” he said. “It’s a sad state of affairs.”
Work At Home Jobs Idea - Posted by Work At Home Jobs Idea
Posted by Work At Home Jobs Idea on August 17, 2007 at 02:28:31:
there is information abt the Work At Home Jobs Idea Work At Home Jobs Idea
Cherries or sour grapes? - Posted by Wayne-NC
Posted by Wayne-NC on February 28, 2007 at 07:26:21:
In a tumultuous market such as this, it is hard for me to tell the difference. My area has never seen such a senario. It takes a good bottom feeder to invest in those situations. I am watching it carefully.
What is the strategy?? - Posted by Todd
Posted by Todd on February 27, 2007 at 23:41:50:
JohnBoy,
Great article, glad to see you posting here. Other than short sales, where else do you see the big money being made, now and the near future based on trends like this? Thanks!
Todd