Banks Are Not Driving Down Home Prices!

[Bill Call]

An article in today's Plain Dealer accuses banks of selling houses in Cleveland for "less than they are worth". see:

http://blog.cleveland.com/metro/2008/01 ... to_sl.html

Access to easy credit (no money down, no job, no problem!) allowed sellers in Cleveland to sell their homes at inflated values, allowed buyers to buy a house they otherwise couldn't afford and allowed local government to grow fat off overstated housing values. That economic environment couldn't last forever and it didn't.

The Lakewood connection? Your house is worth less than the County appraised value.

Any City or County budget based on increasing values or current real estate values needs to be reworked.

Is all of this the fault of the banks? No. Various levels of government have spent the last 20 years (or more) demanding that banks open up credit markets to the poor. The battle cry? Everyone should own a house!

The result is typical of modern American government. Demand banks loan money to people who normally wouldn't get a loan, have government institutions create a market for worthless loans and then blame the banks when it all goes sourer.

Banks who are selling foreclosed properties at "bargain" prices are simply cutting their losses. What does it all mean?

Now is the time to buy.

[Jim O'Bryan]

Bill

While banks alone are not causing this, they have a huge part in it along with the Federal Reserve.

There is a pattern of this, that is very well thought out.

.

[Bill Call]

Bill

While banks alone are not causing this, they have a huge part in it along with the Federal Reserve.

There is a pattern of this, that is very well thought out.

.

And I thought I had a conspiratorial mind.

Anyway, Lakewood home prices are holding up pretty well but there are some bargains out there.

If you intend to flip the house the secret is to install quality fixtures and add real value. Your competition is the guy down the street who hasn't done a thing to his house in thirty years and is wondering why it's not selling.

If you intend to live in the house use the money you "save" on the purchase and take down the aluminum siding, raise that lowered ceiling, unenclose the porch and update the kitchen. You will get your money back.

Now is the time to buy.

If your bank is foreclosing don't move. Make the bank an offer of sixty cents on the dollar. You can buy your house from the bank for less than you owe. I know every situation is different but letting the bank take your house, in Lakewood anyway, is foolish. Everywhere I look I see opportunity.

[dl meckes]

http://www.clevelandrestoration.org/Hom ... yahoga.htm

[Jim DeVito]

If your bank is foreclosing don't move. Make the bank an offer of sixty cents on the dollar. You can buy your house from the bank for less than you owe. I know every situation is different but letting the bank take your house, in Lakewood anyway, is foolish. Everywhere I look I see opportunity.

Wow. That is a very interesting idea. That I did not even know was an option. I wonder how often that does happen. I would bet it is a win win. The bank get just a little bit more than they would have got for a home that has been vacant for a year and sold at auction. The homeowner get to keep what they have worked so hard to get. The Neighborhood gets one less foreclosed home on the books.

[sharon kinsella]

60 cents on the dollar - beautiful idea. Reality, they won't take it.

I've known people who were a month late, offered to pay and had their checks returned. Doesn't make cents to me.

Bill -

I know from having gone into collections on medical bills a long time ago, that many times you can negotiate for a lot less. They would rather get some money than none at all.

The banks don't seem to have that much sense.

[Jeff Endress]

Bill, your suggestion could never work in reality;

If your bank is foreclosing don't move. Make the bank an offer of sixty cents on the dollar. You can buy your house from the bank for less than you owe. I know every situation is different but letting the bank take your house, in Lakewood anyway, is foolish. Everywhere I look I see opportunity.

Regardless of the discount you could negotiate (assuming the bank is willing to do so), you would still have to be able to finance that buyout....ie, get a new mortgage. If you're already in foreclosure, the chances of getting a conventional loan are pretty poor. The sub-prime market has dreid up. So unless you've got a secret bankroll, where are you fgoing to get the money to buy back the house (even a a greatly reduced number?). And if you have a secret bankroll, chances are you're not in foreclosure.


Jeff

[chris richards]

On the great deals in Lakewood: just watch your lender very closely.

The first lender I went to tried to tell me they could not assess a value on the house unless we made over $30,000 in repairs. They tried to switch us from a conventional loan to a rehab loan with a high percentage rate and instead of a $68,000 we'd be cleser to $100,000.

So we changed lenders right away and the house was appraised for above listed value and in sound condition. We also got everything that the first lender originally offered us as in interest rates and what nots and we were able to close in 6 days from application.

Anyone looking at these great deal, just be careful and watch what the banks do. If something looks peculiar, go to another bank.

[Dee Martinez]

Bill, your suggestion could never work in reality;

If your bank is foreclosing don't move. Make the bank an offer of sixty cents on the dollar. You can buy your house from the bank for less than you owe. I know every situation is different but letting the bank take your house, in Lakewood anyway, is foolish. Everywhere I look I see opportunity.

Regardless of the discount you could negotiate (assuming the bank is willing to do so), you would still have to be able to finance that buyout....ie, get a new mortgage. If you're already in foreclosure, the chances of getting a conventional loan are pretty poor. The sub-prime market has dreid up. So unless you've got a secret bankroll, where are you fgoing to get the money to buy back the house (even a a greatly reduced number?). And if you have a secret bankroll, chances are you're not in foreclosure.


Jeff

Correct.

Also remember that the bank (or more accurately, the mortgage lending company that the bank sold the mortgage to) in effect "bought" the money they lent you. And in a "subprime" loan, by definition, they "sold" you the money for less than they "paid" for it. Their only hope at making a profit is for you to adhere EXACTLY to the terms of your mortgage. Or to catch you in default and re-sell your home. But that opportunity is gone because the "wholesale" money is no longer available.

Medical bills are different, since the price they bill you is much higher, sometimes double or more, than what they bill Medicare, Medicaid, or private insurers. Look at a Medicare settlement for any given procedure. Thats what the provider will often settle for.

Credit card interest charges can be negotiated too sometimes, because the interest charges are pure profit. The issuer already gets a cut from the original transaction. You usually cant negotiate on the amount of the original purchase.

Oh if your wondering how I know all this, I helped a family member work through a credit nightmare. MY credit is golden.

[Bill Call]

Bill, your suggestion could never work in reality;

That was the old reality.

The new reality is that banks are selling homes with $100,000 mortages for $68,000.

The new new reality is that a bank like Wells Fargo might be willing to recast your $100,000 mortagage as a $75,00 mortgage. Why? Because a $25,000 loss is better than a $50,000 loss.

Will every bank be willing or able to make the deal? No. But it doesn't hurt to ask.

Also, you can buy a mortgage that is in default for less than the value of the mortgage. A year ago I back out of a deal to buy a $100,000 mortgage for $50,000. Why? It took the bank two years to finally get a foreclosure and I would have to begin the process all over again. I didn't have the stomach for it. The house was bought in foreclosure for $80,000, rehabed and appraised at $160,000.

Now is the time to buy.

If you are facing foreclosure the bank might be willing to make the deal. It doesn't hurt to ask. Banks don't determine the market value of a house, the market does.

[David Anderson]

To Bill’s point, Wells Fargo may be willing to recast a $100,000 loan for $75,000. The issue is that the borrower who failed to pay on a $100,000 note probably can’t afford a $75,000 note either (especially after making back payments). The level may be closer to $40-$50,000 which is less than $68,000 Bill reports banks are getting at auction.

And even if the loan is recast at $50,000 with the previous “unable to payâ€Â￾ borrowers, Wells Fargo still has a tentative mortgage on its books.

If I’m reading the news correctly, the surviving mortgage institutions want to both move the house and get rid of shaky borrowers.

Bill is spot on regarding another point. Few, if any, local elected officials voiced serious concern when their neighborhoods were being cased by these sub-prime mortgage and home improvement loan dealers. Properties were moving and the county was allowed to "grow fat on overstated housing values." Now that thousands of homes are failing to generate city/county income … Maybe they did try to stop it.

[Ryan Salo]

http://money.cnn.com/2007/11/19/real_es ... 2007112112

It is happening everyday.

Even with refinances some lenders are willing to negotiate the payoffs.

[Ryan Salo]

Ok this thought is just based on my experience in the mortgage industry.

Here is a link to some information about the predatory lending law that Cleveland put in place a few years ago.

http://findarticles.com/p/articles/mi_m ... _113905174

In my opinion, this action hurt Cleveland homeowners much more than it helped them.

If a homeowner got behind on their mortgage for any reason they could typically not refinance. Almost all of the "subprime lenders" pulled out of Cleveland. Only FHA conforming and a very few subprime lenders were left. If someone had 2 30 day lates and had a lot of equity but fell on bad times and needed help out most could get help except if they lived in Cleveland. The laws that were put in place to protect consumers were hurting those that needed the help the most.

Now that everything has hit the fan isn't it interesting that the city that has had laws to protect against predatory lending for years is the one most hurt by the collapse of the housing market?

We either need to accept the fact as a nation that people without 10%+ down and a score of 660+ should not own a home, or we need subprime lenders. We cannot promise someone a loan today and then take away the vehicle to refinance them in the future. We can get rid of predatory lenders (which everyone wants out) without getting rid of all subprime, but the new laws are not doing that.

Maybe this would not have happened if Cleveland didn't have a full time council. When people have to keep busy for 40+ hours a week they tend to make legislation for the sake of staying busy. (the same goes for the state level)

Just my opinion

[Bill Grulich]

I just finished helping my parents refinance their high Adjustable Rate Mortgage that they had with Amtrust. I looked at three banks First Federal of Lakewood, Huntington Bank, and Amtrust.

They went with Huntington Bank since they had the lowest rate and Huntington advertises in the Observer!

Bill Grulich

[ryan costa]

Actually, banks are "Trying" to sell houses for 2/3 their mortgage value or less. They frequently don't succeed. And they rake up a lot of administrative costs trying.

From a strictly "free market" standpoint it is true they are driving down real estate prices. If all housing markets "appreciated" 10 percent a year forever like Alan Greenspan said this wouldn't be happening.

Most High-"growth" regions attract "growth" by offering tax abatements, lower rates, and no income taxes. They can afford this because their homes are all new and the initial selling price is pretty high. A few years later their infrastructure and school systems are going broke.

They drove up the prices with the easy credit. it was irresponsible and unreasonable of them to expect all those mortgages to remain paid.

Does selling a default mortgage home for less decrease property values less than boarding it up? that is the only question that matters at this point.