Category: Foreclosures

Sometimes people just allow a foreclosure to happen when they have exhausted all resources. Huge loans and reset mortgages have often led to foreclosures nationwide. Prince William County was one of the hardest hit areas in Virginia. Now the Washington Post tells us more bad news:

After the bank foreclosed on Fernando Palacios’s Gainesville home in March, he thought he was done with what he described as the most stressful financial situation of his life.

The bank sold the home for far less than Palacios owed on it, as often happens with foreclosures. What Palacios did not see coming was the letter from his lender demanding that he pay the shortfall: $148,064.02. “I really thought I was through with this house,” said Palacios, who fell behind on payments when the economy soured and his cleaning business stumbled.

Over the past year, lenders have become much more aggressive in trying to recoup money lost in foreclosures and other distressed sales, creating more grief for people who thought their real estate headaches were far behind.

In many localities — including Virginia, Maryland and the District — lenders have the right to pursue borrowers whose homes have sold at a loss to collect the difference between what the property sold for and what the borrower owed on it, also called a deficiency.

Before the housing bust, when the volume of foreclosures was relatively low, lenders seldom bothered to chase after deficiencies because borrowers had few remaining assets to claim and doing so involved hassles and costs. But with foreclosures soaring, lenders are more determined to get their money back, especially if they suspect borrowers are skipping out on loan they could afford, an increasingly common practice in areas where home values have tanked.

Palacios said he was committed to staying in his house, which he bought in 2005. He sunk $20,000 into improving it and hoped to raise his children there. But his lender refused to modify his loan, he said. To avoid personal liability for the deficiency, Palacios is filing for bankruptcy protection, as many people do who are in similar situations, said Nancy Ryan, his bankruptcy attorney.

It makes sense that if people could afford to pay their mortgage, they just would. Isn’t this practice going to greatly increase the number of bankruptcies in the area? That hurts all the other creditors.

There are just no shortages of low, unprincipled dogs in the world. Crooks now have discovered a new scheme to take advantage of those in foreclosure. “Foreclosure rescue companies” are springing up everywhere there are an abundance of foreclosures and these swindlers move in on desperate people.

Today’s NYTimes exposes how ubiquitous, smarmy and sleazy these unscrupulous companies are.

Borrowers seeking loan modification are often frustrated that they cannot reach the right people at their lender or that the lender insists on a repayment plan they cannot keep, said Ira Rheingold, executive director of the National Association of Consumer Advocates.

“When you’re desperate, that’s when the crooks come out,” Mr. Rheingold said. “You’ve tried everything, and a guy calls you up on the phone or there’s an ad on TV, and you have no other options, what do you do? You go to those guys.

 

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Real estate agent Tracy Comstock shows a Prince William County property to Chris James of Clifton, who has been investing in foreclosed housing. Buying and renting foreclosed properties is good for the community, he said. (By Sarah L. Voisin — The Washington Post)

Today’s Washington Post, front page claims Prince William County is the ‘epicenter of the boom’ and a bargain-hunter’s paradise because of the extreme number of foreclosures.

The more foreclosures in a neighborhood, the more the value of the other homes is depressed. According to the Post:

The buying frenzy is the silver lining of a staggering decline in home values. With banks choking on a glut of empty, foreclosed properties, the median sale price for detached single-family houses in Prince William plunged 41 percent in the past year, from $405,000 to $239,900. In September, 118 homes in the county sold for less than $100,000, and many foreclosed townhouses sold for less than $70,000. One three-bedroom Manassas townhouse recently sold for $43,500, even though it was assessed at $273,100 in 2007.

“Prince William County is a fire sale,” said Joey Remondino, a “ridiculously busy” real estate agent with StoneHouse Realty in Manassas. “People are looking for amazing deals, and I’m writing offers as fast as I can,” he said.

Somehow being the cheapest is just not what I considered to be a good thing. Who wants to be described on the front page of a national newspaper as a ‘firesale’? I see our county becoming an oasis for investors and absentee landlordism, confirmed by the Post with:

Much of the dealmaking has been led by investors, according to real estate agents who specialize in foreclosed properties. Doctors, lawyers, engineers — anyone with good credit and disposable cash — are becoming part of a burgeoning class of landlords. Some are forming business partnerships to acquire properties; others are realizing that they can buy cheap homes and rent them out for more than the monthly mortgage payments.

I think this might be a cleaned up version of saying ‘slum-lords.’ Does anyone else feel this is something to celebrate? I know the dark screen was clicking its heels and thinking it was going to end up in Oz.

With credit as tight as it is now, I doubt that ordinary couples who have saved for a house will be able to obtain financing. I don’t think our new neighbors will be Mom, Dad, 2.3 kids and a dog.