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>Look Hard at PreForeclosures



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>Bank of America is Lending Our Bailout Money

Bank of America continues to
lend and invest

There are 10 key areas of lending and investing that are vital to the recovery of the economy. We will track and report on all of them. America deserves no less from us.
In the fourth quarter of 2008, Bank of America extended more than $115 billion in new credit to consumers, large and small businesses, governments and other entities. The company also recognizes the economic importance of extending credit to communities who traditionally have experienced difficulty gaining access to financial services. Beginning this year, Bank of America is undertaking a 10-year, $1.5 trillion community development lending and investing goal focused on delivering capital to low-to-moderate income and minority communities across the United States.
The Bank of America Lending & Investing Initiative to support our nation’s economy includes:
Consumer lending | Loss mitigation | Real Estate Owned Properties | Small business lending | Commercial lending | Green investing | Community Development Financial Institutions | Socially Responsible Private Equity | Nonprofit and Anchor Institution support | Mortgage-backed securities

Consumer lending:

Bank of America serves one out of every two households in the United States and is uniquely positioned to work with consumers to address their borrowing needs. By way of example, Bank of America lent $45 billion through its mortgage unit ($11.3 billion of that to low- and moderate-income borrowers), helping more than 200,000 Americans purchase a home or save money on the home they already own in the fourth quarter alone.
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Loss mitigation:

We’re offering loan modification programs to help up to 630,000 customers avoid foreclosure and stay in their homes, representing more than $100 billion in mortgage financing. In 2008, the company modified approximately 230,000 home loans — representing more than $44 billion in mortgage financing — to avoid foreclosures. Bank of America also modified nearly 700,000 credit card loans for borrowers experiencing financial hardship last year

>Be Careful Buying Foreclosures In Bulk


September 24, 2008

There’s a Wall Street Journal story out today warning the public away from buying foreclosures

I have personal friends who have bought several such homes and lost their shirts. It is risky business right now. I would be extra cautious also if someone offered me some shares in a company that specialized in buying and selling foreclosures.

Many investors have been tempted by the idea of buying foreclosed homes in bulk from banks, at a steep discount. But the experiences of a Washington, D.C.-based property investment firm, Redbrick Partners LLC, show it can be difficult to manage a large number of single-family rental homes scattered across a metropolitan area as opposed to all of them in one building as shown below.

[redbrick] Reuters

With the number of foreclosures skyrocketing, banks and other creditors have said they are getting lots of feelers from investors interested in buying large numbers of homes, but few if any large bulk sales have been completed so far. That is partly because of the difficulties of managing lots of homes–two in one city, ten in another, and twenty all over the place in another area.

Barclays Capital estimates that there are 811,000 bank-owned homes in the U.S., up from 129,000 two years ago, and predicts that the total will rise 60% more before peaking late next year. So far, banks typically are selling the homes one by one, through real-estate agents, and to a lesser extent at auctions.

The WSJ story today highlights the problems a company named Redbrick. They had never been in the business of buying up foreclosures in bulk, but due to the economic downturn they got into it and got stung.

They found a widely disbursed number of foreclosures is expensive to maintain until sale or during rental. Of course, the mom and pop rental business where the rental is next door is ideal, where they can fix their own toilets with far less expense than outsourcing the repairs. Owners of rental housing are more motivated than employees hired to do the dirty work,

Though Redbrick was never in the business of buying foreclosed homes, the firm in recent years bought hundreds of properties in working-class areas of East Coast cities including Baltimore, Philadelphia and Trenton, N.J. It hired local managers to handle rentals and maintenance.

Now Redbrick, formed in 2003, has concluded that it is too costly to manage those homes and is trying to sell most of them.The firm has raised a total of nearly $50 million in equity for four investment funds, selling limited partnership interests in them to individuals and institutions. Beware of such ploys. They could go sour in a hurry and if they ever do catch on and make some money it could take years. Why do you think Redbrick is getting rid of them? I have had some experience in real estate investment trusts (REITS). They may even sound interesting at first, but operating costs take up most of the profits, even when the consortium decides to dump a property or a location. Don’t go there.

In Baltimore and Trenton, Redbrick said in a recent letter to investors in one of its funds, “we have not been able to generate positive cash flow from these assets through our internal property management organization and have also been unable to identify satisfactory third-party property managers.” I’ll bet they haven’t.

>Do You Have The Nose Of A Sleuth?

by Don Whie
There is a right way and a wrong way to buy a foreclosed home. You can be successful if you have three things: acces to cash, good credit and good health, zest, vitality, and a taste for the hunt.

Distressed homes are all around just now. Yes, you can make some real money in this market, even a killing if you’re good and lucky. Those are two separate adjectives and you have to be both.

It isn’t as simple as you may think, and the road to success is full of minefields so be prepared to become frustrated. You can’t do it just by checking the newspaper notices from time to time. If you choose to pay for some website privilege it may cost you and you may not be any farther ahead because they offer only minimal information in most cases. And the information they have has been gleaned from lender notices, county registers, and private individuals crying for help.

It’s a crying shame, but lenders post only minimal information on the properties they’ve taken back. If you go to a real estate professional they may shy away from you, unless they haven’t made a sale in a long while, which could be true. For an agent it takes as much time to process one of these foreclosures at cut-rate prices as the real thing. Remember, their percentage is fixed, perhaps 6%, and if the price has dropped to 25 cents on the dollar so has the incentive for a real estate agent. Many agents have no expertise in this field and they don’t want to be bothered.

So where does that leave you? You must be willing to do the sleuthing on your own to find the best deals. The best place to start is where you want to buy, maybe in your own neighborhood. By narrowing the field this way, we also take some of your work away. Also, by living in the area it makes it easier for you to talk to neighbors and friends about the property and to build a real hefty file on the houses there.

Here are some tips:
• We’ve already told you to focus on one neighborhood, and what’s better than where you live? The best foreclosures for you are in good neighborhoods like yours, where there are plenty of good homes around this one bad one. It will bring up your selling price on the home later when you decide to market it.

The optimum time to buy a home like this is before it goes into foreclosure. Ring some neighbor doorbells, find out if this owner is in trouble and create a scenario in your portfolio and in your mind of how you can be of help to him while helping yourself.

• Go on the Net. Do your basic research. In Orange County Florida, for example, you can enter the county name in the computer, along with TAX SEARCH, and come to that very home if you have the owner’s name. The computer screen will tell you the square footage, bedrooms and baths, and what the house was appraised for. That gives you some idea of its potential. Some lenders list the properties they’ve taken back, though information on these properties is sparse. (Here’s a good link to these lender sites) Remember: REO means real estate owners

• The local assessor’s office may provide other information, such as what the owner paid for the house and additional tax information. What we’re finding is that most of the foreclosures are of recent acquisitions by their owners. In other words, they owned a house, then they bought this one as an investment, not realizing that the Adjustable Rate Mortgage they got sucked into was a boomerang waiting to hit them in the face with progressively higher and higher monthly payments until they couldn’t bear it any longer.

• Many of these foreclosure victims were “upside down,” meaning the value of the home dropped to a value lower than the amount they owed the bank on the mortgage. If the owners are still in the home, the key is to quickly determine what the owner wants. Usually its his wallet is not fat enough to keep up two houses’ mortgages. Try to settle with this owner quickly. Or if a lender is trying to minimize losses on a foreclosed property which no longer is worth the unpaid loan amount, you might be able to negotiate a very good deal on financing by agreeing to pay a close-to-market price. Don’t give them too close to market, because it’s a known fact many banks are willing to take 25 cents on the dollar–anything, to move these homes.

• You so far have found what you want to buy, but you may lack real estate technical experience. You will want to affiliate at some point with an experienced agent. You’ve done all the heavy lifting to this point so it won’t be hard to find a successful one to work with. Some lenders refuse to deal with buyers direct. Test the waters, see what you can do with the lender before giving away 6 to 8 percent to an agent who will do bery little for you except to protect your rights. This is good advice if you are new to this. If not, maybe you can carry the ball all the way to the closing. Make sure it is a closing at a quality closing company, with all the proper papers signed, the I’s dotted and the paperwork legal.

NEVER, and I can’t emphasize this enough: NEVER do a little private contract with the debtor where you buy it on contract from him. That can lead to all kinds of pitfalls.

Like our neighbor who thought he was buying an expensive house from the owner on contract. He and his family moved in and were there a couple of years, dutifully making payments to this former owner–who should have been paying the bank. But the former owner suddenly disappears and it is found out later he paid nothing to the bank for two years–that’s sometimes how long it takes on the road to foreclosure–and the bank finally foreclosed on the home, evicting the little guy who thought he bought it on contract. That’s misfortune you don’t need–something that can be avoided if you play your cards right.

There are plenty of pitfalls. If you need an agent, get a good one who has had this kind of experience. You may want to also get a real estate attorney who can draw up all the paperwork and do the closing as well. Get as many heavyweight experts in your corner before you proceed, and don’t be afraid to ask for advice all along the way.

You can sell your house yourself, but we don’t advise it. Read how people are turning to Don and Carolyn’s new book about selling houses fast even in this housing recession–yet making money on the sale. You, too, can profit by reading this boffo new book…but you must read it before you begin to sell the home–even before you list the home, to get the most mileage out of the five secrets the White’s outline in the book SELLING FAST:We Sold Our House In One Day And You Can Too.

Use the PayPal key below to purchase a great book that will save you thousands of dollars.

>30-Year Fixed-Rate Mortgages Going Up

>Foreclosed Homes Increases
June 4, 2008

The Wall Street Journal reports that the number of foreclosed homes owned by lenders continues to rise despite signs that they are increasingly willing to slash prices to sell those properties.

There were about 660,000 foreclosed homes in April, up from 493,000 in January and 231,000 in January 2007, according to First American CoreLogic, a research firm based in Santa Ana, California. They collect data from lenders and county clerks. The April total means one in seven previously occupied homes for sale are now in foreclosure! Wow!

There has been a surge in defaults that has increased the inventory of bank-owned homes, known in the trade as REO, for “real estate owned.”

Yes, if you’re on notice regarding a pending foreclosure the smart thing is to go to the bank and negotiate the amounts downward. There is evidence that banks are eager to work out the problems. It doesn’t help them to foreclose on someone, then turn around and get 50 cents on the dollar when they dump these properties.

By cutting prices, lenders have managed to increase sales of such homes sharply in recent months in some cities hit hard by foreclosures, including Las Vegas, Detroit and Sacramento, Calif., local real-estate brokers say.

With home prices falling, “holding the assets means further losses,” said Mark Fleming, chief economist for First American CoreLogic. Some lenders now are cutting prices as often as every 20 days on homes that aren’t selling, said David McCarthy, chief executive officer of Integrated Asset Services LLC, a Denver-based company that helps banks value and sell REO homes.

But lenders haven’t yet managed to catch up with the inflow of foreclosed homes. Mark Zandi, chief economist at Moody’s, forecasts that the inventory of REO homes won’t peak before the end of 2009.

In dollar terms, foreclosed one- to four-family homes owned by lenders whose deposits are insured by the Federal Deposit Insurance Corp. more than doubled to $8.56 billion at the end of the first quarter from $3.59 billion a year earlier.

The Wall Street Journal said the REO glut is weighing on house prices in many areas, as banks tend to cut prices faster than other sellers. A new set of local home-price indexes, to be introduced this week by Integrated Asset Services, shows that the median price of homes sold in Riverside County, Calif., in April was down about 29% from a year earlier. The median price fell about 13% in Clark County, Nev., and 12% in Arizona’s Maricopa and Pima counties. Median-price comparisons can be skewed by shifts in the proportions of high- and lower-priced homes sold from one year to the next but provide a broad indication of market trends.

To avoid or at least delay losses, many lenders are trying to avert foreclosures by easing loan terms or giving struggling borrowers more time to catch up. We hope they cut some “slack” for TV star Ed McMahon who is in jeopardy of losing his Berverly Hills mansion. Mortgage companies completed loan workouts for 183,000 households in April, up from 160,000 in March.

Meanwhile, long-term interest rates rose last week, marking another potential drag on the housing market. The average rate on 30-year fixed rate loans eligible for sale to government-sponsored investors Fannie Mae and Freddie Mac was 6.17%, up from 6.02% a week earlier, according to HSH Associates, a financial publisher in Pompton Plains, N.J.

>Ed McMann About To Lose His House


Foreclosure Looms In McMahon’s Future

The Wall Street Journal reported today that Ed McMahon, the longtime sidekick to television star Johnny Carson, faces the possible loss of his Beverly Hills home. Believe it or not, he faces what millions of other Americans face—a possible foreclosure action.

The action was initiated by a unit of Countrywide Financial Corp., but from Howard Bragman, spokesman for McMahon, it looks like something might be worked out. Many Americans at Mr. McMahon’s advanced age, 85, try to save the equity in the home by selling it, but it is also possible to take out a reverse mortgage. If that happens the McMahons will be allowed to live there until both he and Mrs Pamela McMahon die.

That isn’t the most satisfactory way to handle it, one most Americans dread because they have nothing left to give to their children when they die. The mortgage company takes everything, even if the value in the house far exceeds what they owe the mortgage company. Thus, a windfall in some instances to the mortgage companies.

We who remember the Johnny Carson TV show remember Ed McMahon as his jovial foil, a fixture of American television for decades. He is one of the most prominent people caught up in a wave of mortgage defaults that has devastated low-income areas, suburbia and even a few posh gated communities, such as the one where the McMahons live. U.S. Rep. Laura Richardson, a California Democrat, recently lost a home in Sacramento to a foreclosure. Rep.

The WS Journal said ReconTrust, a unit of mortgage lender Countrywide Financial, on Feb. 28 filed a notice of default on a $4.8 million Countrywide loan backed by Mr. McMahon’s home. The notice was filed with the Los Angeles County Recorder’s Office but hasn’t previously come to light. According to the filing, Mr. McMahon was then about $644,000 in arrears on the loan. It isn’t clear whether Countrywide still owns the loan or is acting on behalf of investors who acquired it. Public records also show that Mr. McMahon had a separate home-equity line of credit from Countrywide of up to $300,000 secured by the same house.

Mr. McMahon’s home has been on the market for about two years—what a shame. He should have read Don White’s new hit book, SELLING FAST, We Sold Our House In One Day And You Can Too. His real estate agent Alex Davis said the price had been reduced, but he couldn’t immediately provide details. The Christie’s Great Estates Web site, which includes homes listed by Mr. Davis, lists the asking price at $5.75 million and says it has a canyon view and a master-bedroom suite with his and her bathrooms.

Mr. McMahon broke his neck in a fall about 18 months ago and hasn’t been able to work, Mr. Bragman said. That health problem, along with the weak housing market and economy, has forced Mr. McMahon into foreclosure proceedings, Mr. Bragman said.

The McMahons “understand that they are in the same situation as hundreds of thousands of other hard-working Americans, and their hearts go out to them,” Mr. Bragman said.

It isn’t inevitable that the McMahons will lose their home to foreclosure. Lenders often ease terms on loans or provide more time for borrowers to catch up. Lenders also sometimes agree to accept less than the full amount due on the loan if the borrower can find a buyer for the home.

Don White’s new book is offered exclusively in ebook form. It can be purchased from this web site, HOUSE ABC’s through PayPal.
Or as a Kindle product (hand held device) from

>Homes Are More Available and Less Expensive

>The Orlando Sentinel is featuring a story about how great it is to buy a house NOW. It’s entitled:

“Now may be The Right Time To Take The Plunge”

Jerry Jackson says first-time homebuyers squeezed out of the market by the 2004-06 housing-price surge may want to consider taking the plunge now.

Everyone knows prices are lower than they’ve been for several years. But the important thing is that we really don’t know how low they will go. That isn’t stopping many people who are picking up a foreclosure or two. My friend Merrill Roberts has a world of experience in foreclosures. He owns several houses that he knows must be fixer-uppers before they can be sold.

If you’re in the market for a price about half of what that home previously went for, start investigating. You can go to the County Clerk’s office. They will send you a list of foreclosure candidates. In Florida, attorneys make a living on foreclosures because the law is definite on the amount of time a bank has to notify a delinquent “owner.” We might not want to use that word, owner, because in most cases these homes have gone down in value so much that the Bank now owns the home because the purchaser stopped making payments months ago.

Just drive by some of these homes. They will be vacant, with browned out lawn and shrubs. Once a person can’t make his mortgage payments it doesn’t make sense for him to continue to keep up the exterior.

Or does it? If that home is in a gated community that person will have received a notice to clean up his yard, turn on the water, and start making improvements. If he can’t, and if he knows he can’t possibly save the home, it will go back to the bank. Many speculators contact banks and mortgage companies and try to buy a package of homes for huge discounts. They fix them up and turn around and try to sell them, making a neat profit.

But home prices are still falling nationally and we have a huge inventory of houses and condominiums for sale — a mix that should spark more sales by year’s end, Realtors say.

Jackson says some buyers are still reluctant. “Stunned by the subprime-lending debacle, banks and thrifts want higher credit scores and bigger down payments.”

The newspaper offers some tips for newcomers:

Q: Is it true that no one is getting approved for home loans these days?

A: Home loans are being made every day, even to first-time buyers. Yes, lenders have raised the bar during the past year, but not that high. After all, they make money lending money, and a small army of private corporations and public agencies works full time at selling homes or promoting the benefits of homeownership.

Q: But my credit history is not so good. Do I have to keep renting forever?

A: Renting is a good option for many people. But for those who expect to stay in one location for at least a few years and want to try to build some financial equity, weak credit is not an insurmountable barrier.

Mitchell Harlee, 39, recently became a first-time homeowner in Orange County, fulfilling a lifelong dream despite some past bill-payment problems. “I had credit issues,” he said. A single father raising two daughters, Harlee improved his credit score by working closely with an east Orlando Century 21 real-estate agent, Michele Guzman, who specializes in first-time buyers. Harlee attended Guzman’s free seminars and followed her advice for about a year — and finally was able to buy a spacious, four-bedroom, two-bath home in Pine Hills for $150,000. He got a 30-year, fixed-rate mortgage with an interest rate of 5.9 percent from First National City Mortgage.

Better still, “I didn’t have to put a penny down,” he said, because he qualified for an Orange County down-payment-assistance program that Guzman told him about. “I couldn’t have done it without the help,” Harlee said.

Q: What kind of credit score do you need to qualify for a mortgage? Isn’t it really high now?

A: A couple of years ago, buyers with credit scores as low as 500 could still get a home loan, under some circumstances. Now the minimum is more like 560. But that’s still not a tough score to reach, credit experts say, if you make an effort to pay bills on time, clean up your credit record and control your debt load. To qualify for down-payment-assistance programs such as those run by various local counties and cities, credit scores typically have to be 630 or better — still in the moderate range.

Q: Housing prices still seem over the top to me. Aren’t homes unaffordable except for the wealthy?

A. The good news is affordability is starting to make a comeback. At the peak of the market frenzy in July 2006, the typical first-time buyer in Central Florida was earning only 59 percent of the annual income needed to qualify for the median-priced starter home, which sold at that time for $216,655, according to Orlando Regional Realtor Association records. Since then, the median price for a starter home has dropped to $179,350, as of April, and the typical first-time buyer now earns 77 percent of the annual income needed to buy such a home (assuming a 10 percent down payment). Also, mortgage rates in mid-2006 averaged about 6.4 percent for a fixed, 30-year loan. Now the average fixed rate is 5.77 percent.

Q: What if I don’t have a 10 percent down payment?

A: Loans insured by the Federal Housing Administration are making a comeback, and those loans typically require only 3 percent down. FHA-insured loans, made through regular lenders such as SunTrust Mortgage and others, have been around for years, but they were overshadowed during the housing frenzy, when buyers could get higher-interest subprime loans with little or no money down and little or no income documentation.

“If you could walk and chew gum, you could get a home loan,” recalled Re/Max Associates agent Mike Williams in Deltona. Now, he said, “You’ve got to be working and have decent credit. But decent credit is still attainable.”

Q: What about new homes?

A: There are so many out there, sitting empty, that builders are cutting deals and even paying Realtors to help move the inventory. Mary Gibson recently became a first-time owner in DeLand by buying a new house from a builder’s inventory in a deal she found with Williams’ help. Gibson applied to the Volusia County first-time homebuyer program, which uses state money to help qualifying buyers with their down payments.

“Plus, the builder actually brought $14,000 to the table,” said Williams, an agent in the Deltona area since 1987. “That doesn’t happen often, but the builder wanted to get this out of the inventory. There’s a lot of inventory out there,” he noted, which gives buyers added leverage when negotiating.

Q: Where can I go for free advice and information?

A: The U.S. Department of Housing and Urban Development has lots of advice on its Web site, much of it helpful for first-time buyers. HUD recommends people check out free or low-cost counseling outfits that can help lay the groundwork for getting that first home.

In the Orlando area, HUD-recommended groups include the Consumer Credit Counseling Service of Central Florida, the Metropolitan Orlando Urban League, and the Housing and Neighborhood Development Service of Central Florida (known as HANDS). Links to their Web sites and phone numbers are at the Web site. With a nonprofit group such as HANDS, which is supported financially by Wachovia Corp., Bank of America and the Dr. P. Phillips Foundation, among others, consumers can get one-on-one counseling, learn about homebuying seminars, and even see a list of homes for sale that qualify for various down-payment-assistance programs.

Realtors can help, and mortgage brokers can, too — though they both make money off their services one way or another when a sale is completed. That means consumers should learn as much as possible before turning to the paid professionals, who have a financial stake in the outcome.