San Jose Short Sale Agent: Silicon Valley Foreclosure Prevention Specialists

Let us celebrate because I got another short sale approved today and another family can move forward with their lives.

As a San Jose Short Sale Agent, my days are frequently filled hearing many sad stories about the difficulties that distressed homeowners go through, or I am fighting with robot-like negotiators who just repeat company policies, rather than trying to exercise some discretion to help out and treat people as individuals rather than loan numbers.  You want to do the right thing to help folks in distress, but sometimes the situations and the institutions involved make it very difficult to do the right thing…..  It’s obviously not like this all the time, however, sometimes it can be very emotionally taxing.

So on those days when a successful approval letter comes flying through the fax or the email like today, it becomes a bright day worthy of celebration.  Yes, I know it is not polite to be crowing about my successes, but it is really more than that.  It is a celebration for the families who are enduring things most of us cannot imagine.

It is about another family being able to walk away without having to constantly worry about fear of a foreclosure sale date looming around the corner or the prospect of the Sheriff’s Department knocking on their doors to evict the family………

It is about another family fearing to answer the phone because the lenders or collection agencies are calling for the 5^th or 10^th time this day with more threats……….

It is about another family trying to explain to their children why the bank is trying to take away the only home they have ever known in their young lives and why they don’t know where they may be going next……..

It is about another family trying to explain to the world that they are not dead-beats, but victims of circumstance; that they are in this position because the mortgage had a hidden clause which stated if their balance rose above 115%, of their original principal borrowed, then their monthly mortgage payments would increase by 250% - but no one mentioned this when the mortgage documents were signed………

It is about another family finally having no other choice but to give up the home, but trying to preserve some sense of dignity to keep the family unit in tact during the difficult process in which they unfortunately found themselves………..

If I can help accomplish – especially the last point – then I have done a good job.   If I have helped another family move on to the next chapter of their lives, then I can feel like what I am doing really matters more than simply making another buck or completing another transaction.    If I feel like celebrating and crowing because another family can sleep better starting tonight, then please allow me to have this moment.  You see, because this celebration is about more than just me, it is more about another family.

Once again, with poor economic forecast and what I consider to be the twin pillars of  real estate distress (unemployment and negative equity) continuing to remain problematic in most of the country; and the Federal Government’s HAFA program being encouraged for those who cannot qualify for loan modifications or were victims of dual track foreclosures, we should hardly be surprised that Short Sales are increasing in popularity in California and the rest of the country.   It simply makes financial sense for a lot of homeowners, lenders and investors at the moment.

What we have learned from the article below is that short sale transactions have tripled since 2008 and California accounts for about 25% of all short sales in the nation. Until we eliminate these distressed properties from competing in the marketplace with normal, non-distressed properties, we cannot expect the housing sector to come out of its current funk.

We all wait with hopeful anticipation of positive long term housing news which seem to elude us in favor of uncertain or often times confusing short terms trends.   Depending on the day of the week, we can get information that we are heading in the right direction or in the wrong direction. No one can predict with any amount of certainty whether we are out of the housing slump or not.

As I have said over and over, like a broken record, until and unless we can address the unemployment issue, the housing sector will not come out its current mess. Those people who are out of a job are more willing to give up their homes and those who have jobs are afraid of being laid off and will not consider buying a new home or moving up to larger homes.  So we have a situation where the unemployed are unloading properties, but the employed who can afford to buy are too afraid to buy.   It’s a sticky mess we are in.   Unfortunately, add to that the issue of  what many call the shadow inventory, and we are looking at many years out into the future where distressed properties will continue to affect the real estate space in a negative manner.

Yes, Short Sales will continue to soar in California, but that is not necessarily good news.

http://www.latimes.com/business/la-fi-short-sales-20100811,0,7193924.story

But that appears to be good news as that number is an improvement over from the past quarter.    However, that is not the full story…..

“But don’t cheer about the slight gains in the past three months. Most of the improvement comes because so many people lost their homes to foreclosure “

The twin pillars of destruction in the real estate market still remain: high unemployment and negative equity.  As long as the homeowners do not see the light at the end of the tunnel, they will be more inclined to walk away from their homes.

http://money.cnn.com/2010/08/09/real_estate/fewer_underwater_borrowers/index.htm

This is the question that is put forth to me frequently.  Unfortunately, I don’t have a crystal ball, nor the mathematical mind-set to be able to compute the data available to reach a reasonable conclusion.  Fortunately, there are those who do have the mathematical wherewithal to be able to draw such conclusions and they are of the opinion that positive equity will return for most somewhere between 2015 or 2016.

Remember, this is just opinion from one organization, so they could be completely off; but it does give us some statistical analysis based data to ponder.

Here is a fantastic blog entry from Jeff Georghan, which goes into detail as to why the foreclosure mess will be WORSE before it get better.  I felt deserved to be re-posted.  Jeff is obviously correct, but remember, he is speaking primarily of Prime Loans and mentions in passing negative equity as a cause without explaining why;  his analysis does not delve into the coming option ARMs (negative equity loans) crisis which is the reason why many homeowners have negative equity.

From Jeff Geoghan MBA – Lancaster PA Real Estate Expert (The Jeff Geoghan Realty Group, Coldwell Banker Lancaster PA):

This is one of those posts where I wish I didn’t have to write it, but felt it was so important to my readers that I would be remiss not to at least talk about it.

Everyone out there probably knows somebody who is behind on their mortgage payments, looking for alternatives and likely also just finding out that their home’s value has dipped below what their loan amount is.  I know some within my own personal circles.  It’s a tough situation for me to advise them as a professional because it’s such a personal challenge to their pride and self-worth, not to mention their plans and dreams for the family. The question we’re asking is “when is this going to stop and where are we heading?”

I’m going to put up a few graphs that show the trends nationally with regards to mortgage delinquincies:

This chart is by quarter – Single-family mortgages set a new record delinquency rate in the second quarter of 2009, according to a quarterly survey by the Mortgage Bankers Association. Those of us in the real estate business see the foreclosure process (just visit the local Sheriff Sale docket to see the current numbers) but the looming delinqency-to-foreclosure issue is far, far larger.

The Wall Street Journal on 8/3/09 reported the following quote: “While subprime mortgages sparked the first round of housing problems two years ago, now “troubles are lurking further up the food chain,” says Joshua Shapiro, chief U.S. economist at MFR Inc. White-collar job losses have accelerated while more adjustable-rate loans to prime borrowers are resetting to higher payments. ‘You put all that together, it leads me to believe that the next leg down on home prices is going to come from the top,’ he says.”

The first objection someone may have would be to say “yes, but historically those who are delinqent usually get their act together and come current on the mortgage after a while”.  That WAS true, but not anymore!  We call that the “Cure Rate”, that is the rate of delinquencies that go back to current.  The Wall Street Journal reported on 8/24/09 about a Fitch analysis that found that the Cure Rate from 2000-2006 was 45% (which means about half of people fix their delinquency).  However, as of July 2009 the rate had dropped to just 6.6%!  That means that over 90% of delinquent customers are going to foreclosure.  Take a look again at the above chart…

The next thing someone will say is “well, that’s the ‘sand states’ and not my area”.  Here’s the chart for all 50 states showing the same breakdown of delinquencies and foreclosures.  Guess what – most states have a significant problem, especially compared to historical figures.

Now the next thing someone may say is “aren’t those loans going to get ‘fixed’ by a loan modification?” I know several people right now who are applying for a Lancaster County loan modification but are waiting and waiting.  I hope it works out for them…

In reality, loan modifications are hardly making a dent. To me, that’s a burning question.  Why arent banks being more aggressive in giving customers the option to extend their loan and/or reset to a lower rate?  Why are they being SO difficult? The people I know don’t want to be foreclosed.  They CAN make payments.  They just need the terms redrawn to allow them to catch & keep up.  Loan modifications are not helping us get this crisis under control.

What are the causes of all these delinquencies?  Here’s a chart that is enlightening:

We hear a lot about adjustable rate mortgages being the culprit, but the reality is that it’s the loss of jobs and the tanking real estate market that’s the perfect storm.  See my previous post on unemployment in the nation, the state and Lancaster County.

Keep in mind, this post is not intended to give us “good news”.  You may be experiencing good things in your market and that’s great.  My intent is to get us thinking about the challenges that aren’t going away and how we’re going to address them as homeowners, agents and professionals.  I’d love to hear your ideas!