Do experts agree that the housing crisis has reached Great Depression proportions? For economist Robert Shiller, it's old news. He said that would happen back in 2008, but others think the housing markets are too different to make an apples to apples comparison.
While Shiller thinks we're experiencing a downturn as bad as the Great Depression, Brian Coester, CEO of the Coester Appraisal Group, says it's not an easy comparison. "The government didn't start keeping track of home values until the 1950s, so it's hard to say whether or not depreciation is similar." His estimate is that home prices were in the average range of $8,000 to $11,000 (he can't be sure).
Coester also points out that home financing was much different in the 1920s and 1930s. People had mortgages for just four or five years. Only adjustable interest rates were available and most mortgages were interest only with a balloon payment. The 30-year fixed-rate mortgage was not available during the Great Depression. That was created by the Federal Housing Administration after the Depression.
One solution that was available to fill all the vacant homes after the Great Depression may not be used today. The vacant homes were given to troops returning from World War II in order to help stabilize the housing market. Instead banks are refusing to work with creative programs like AHP's to try to keep homes occupied even by civil servants who serve the public like Fred Stevens.
Jonathan Miller, an analyst for the MRIS/RBI thinks the numbers for the real estate market this year show "artificial highs" and "artificial lows," primarily because of the ups and downs of the market in 2009 and 2010 caused by the tax credits. People were pushed to purchase homes to meet the tax credit deadlines earlier than they might have done so. So prices started to jump up as the demand increased and then drop again as the demand slacked off. He thinks we'll see a more normal pattern in 2011 without the artificial stimulus of tax credits.
He insists "there is no national housing market" and thinks any attempt to correlate today's market with that of the Great Depression can't be done. Real estate is local. Some markets, like the metro DC market, are going up, while others are still falling.
Wednesday, January 19, 2011
2011 PREDICTIONS IN REAL ESTATE
How do you become an authority? By being an expert on a topic.
For me, that topic is real estate.
And to be an expert on real estate I need to understand many, many things.
Contract law. Buyer and seller motivations. The power of marketing. And so much more.
To truly understand the real estate market and be able to identify trends that impact your lives as agents, I also do an enormous amount of research into things that most agents don’t even think about when they hear the words “real estate”. I research dozens of sources – and I’m not talking about CNN or the nightly news.
Because I research the market, and the economy, on a daily basis I have the ability to look at where we’ve been, and have a pretty good sense of where we’re headed. Which brings me to my 2011 predictions.
Every year I do predictions for the coming year. And in the 11 years I’ve been doing this, my success rate is 98%. You see, numbers don’t lie. Economic indicators are just that – indicators of where we’re headed.
Here are three of my predictions for 2011:
- Home PricesWhile most national and local economists are forecasting continued declines in the price of homes, I completely disagree. I believe 2011 is the year prices will increase. There are two reasons for this:
1) the American Recovery and Reinvestment Act (ARRA) is pumping jobs into the economy. More jobs equate to more home buyers … and more home buyers equate to more demand for housing, leading to an increase in home prices in many areas. Those areas that are highly sensitive to the job market will be affected more—positively when there are more jobs; negatively when there are fewer jobs.
2) The affordability index is at an all-time high, which also lures buyers into the marketplace. Both the ARRA and the affordability index are contributing factors in 2010 that will peak in 2011. Home prices should increase slightly in 2011. Look for national increases of 2-3%, and increases of 4-5% in the State of Washington. - Interest RatesMortgage rates will likely rise slightly throughout 2011, exceeding the 5% level before year-end. However, rates should remain below 5% until May. The Federal Reserve will not raise rates until the unemployment rate decreases significantly, and will keep the short-term interest rate near zero through 2011.
- Consumer ConfidenceResearch from a variety of sources shows that consumer confidence was on the rise in the last quarter of 2010. This important index rose to 49.9% in October of 2010, and to 54.1% in November of 2010. Additional reports indicate a 5.5% increase in retail sales in the period from November 5 to December 24, as consumer spending continued to make a comeback. While there is always some increase in consumer confidence after an election, if the index continues to improve at this level it will most certainly help the economy and the real estate market in 2011.
This is the kind of market data that tells the real estate story for 2011.
As I said earlier, to be an expert on the topic of real estate you need to do the research. If you really want to become an authority, then take the time to understand what the numbers mean on a national, regional and local level—and how to articulate that information in your day-to-day business.
Denise Lone
Tuesday, January 18, 2011
BUY A FORECLOSURE/SHORT SALE IN MIAMI
This article is a little different for my blog. Here you will learn step by step what is needed to successfully buy a foreclosure or short sale. Keep in mind that to buy a short sale, you have to be willing to wait about 3-5 months before closing because we have to work with banks that take time in responding. The other thing to remember is that if you place an offer on a foreclosure, you will most likely be competing with many other offers, so you may win or you may lose. But that will be told within a few days of placing the offer, so if your offer is rejected, you can continue on pretty quickly.
First step in buying is to become pre-qualified by a mortgage broker/lender. This means that you will receive a letter that states how much house you can afford based on your credit and income, etc. We have a team of professional mortgage brokers who can pre-qualify you over the phone in minutes and it is very safe and secure.
The second step is to find a foreclosure or short sale that is perfect for you and your family within the price range given to you in your pre-qualification letter. We have a data base of litterally all the foreclosures and short sales on the market-AND WE CAN GIVE YOU ACCESS TO THAT DATA BASE. That means that you can find exactly what you're looking for (number of bedrooms, pool, lot size, price, amenities, association or not, etc.) in less than one minute on your own computer. Then, at your own leisure, you pick and choose which houses you want to visit. We also know the minute a house that fits your criteria comes out on the market just because we are on the data base all day long and because our colleges let us know when their new listings are going to be coming out. We will set up the appointment for you to see your favorites.
The third step is to go visit the houses. We will open the doors for you and show you the properties. We will also give you a full report of the history and current details of the house - VERY IMPORTANT INSIDE INFORMATION. For example, how long it has been on the market, what the owners paid for it and when, prior appraisals if any, what you should offer, known defects, all the listing information, and on and on. Our team focuses 100% on this part of the process because our inside information will give you the knowledge you need to make a fully educated decision on the best house for your buck. We loooove this part of the process.
The forth step is to discuss with us what your offer will look like. We write up the offer, send it, discuss the offer with the listing realtor, and stay on top of the offer until we receive a response. Our team's major work gets under way with the negotiation of the offer and counter-offers as well as appraisals and inspections. We pride ourselves in keeping you informed during every step of this process. We guide you through this process and keep you as hands-on as you want to be. We treat this part of the process as if it were our own house we were buying.
We will also walk you through the closing process, involving the attorneys, title agents, and mortgage brokers. We do this work every day, so we know how to get you into your house as smoothly and quickly as possible by working diligently through all the red tape. We always say that our client's needs are our own needs, and we want to use our experience and expertise to help our clients get to closing.
If you want more information about our team, just click on our website: http://www.realestatefloridamiami.com/ or we would love it if you would become our friend on facebook at www.facebook.com/miamiteam.
We would love to help you find the perfect home for you and your family. Don't hesitate to contact us today!
Ignacio Valenzuela
First step in buying is to become pre-qualified by a mortgage broker/lender. This means that you will receive a letter that states how much house you can afford based on your credit and income, etc. We have a team of professional mortgage brokers who can pre-qualify you over the phone in minutes and it is very safe and secure.
The second step is to find a foreclosure or short sale that is perfect for you and your family within the price range given to you in your pre-qualification letter. We have a data base of litterally all the foreclosures and short sales on the market-AND WE CAN GIVE YOU ACCESS TO THAT DATA BASE. That means that you can find exactly what you're looking for (number of bedrooms, pool, lot size, price, amenities, association or not, etc.) in less than one minute on your own computer. Then, at your own leisure, you pick and choose which houses you want to visit. We also know the minute a house that fits your criteria comes out on the market just because we are on the data base all day long and because our colleges let us know when their new listings are going to be coming out. We will set up the appointment for you to see your favorites.
The third step is to go visit the houses. We will open the doors for you and show you the properties. We will also give you a full report of the history and current details of the house - VERY IMPORTANT INSIDE INFORMATION. For example, how long it has been on the market, what the owners paid for it and when, prior appraisals if any, what you should offer, known defects, all the listing information, and on and on. Our team focuses 100% on this part of the process because our inside information will give you the knowledge you need to make a fully educated decision on the best house for your buck. We loooove this part of the process.
The forth step is to discuss with us what your offer will look like. We write up the offer, send it, discuss the offer with the listing realtor, and stay on top of the offer until we receive a response. Our team's major work gets under way with the negotiation of the offer and counter-offers as well as appraisals and inspections. We pride ourselves in keeping you informed during every step of this process. We guide you through this process and keep you as hands-on as you want to be. We treat this part of the process as if it were our own house we were buying.
We will also walk you through the closing process, involving the attorneys, title agents, and mortgage brokers. We do this work every day, so we know how to get you into your house as smoothly and quickly as possible by working diligently through all the red tape. We always say that our client's needs are our own needs, and we want to use our experience and expertise to help our clients get to closing.
If you want more information about our team, just click on our website: http://www.realestatefloridamiami.com/ or we would love it if you would become our friend on facebook at www.facebook.com/miamiteam.
We would love to help you find the perfect home for you and your family. Don't hesitate to contact us today!
Ignacio Valenzuela
MORTGAGE TERMS MADE EASY
Obtaining a mortgage loan means dealing with a lot of paperwork, from the documents you have to submit to documents you have to read and sign. More often than not, you're dealing with terms and conditions on various mortgage types that may be so difficult to understand that you just want to pull out your hair. But not understanding the terms of the loan could mean a very costly mistake on one of the most expensive purchases you'll ever make.
So before you sign on the dotted line, you should learn some basic mortgage terminology to keep your eyes from glazing over when you hear words like "amoritization" and "PITI." To help you tackle them, here's our guide to the top mortgage terms you need to know.
Adjustable rate mortgage: A mortgage loan with an interest rate that will change or "adjust" periodically, such as every three years or annually after the fifth year, changing the monthly payment due. ARMs are best if you plan to sell the home before the rate adjusts. (See "How to Pick the Right Mortgage Product for You.")
Amortization: The schedule for paying off a mortgage loan, showing the regular, required payments toward principal and interest over a set period of time. AOL Real Estate's mortgage calculator shows you an amortization table.
Credit score: A number between 300 and 850 used to show creditors and lenders the creditworthiness of a potential loan borrower. The score, determined by credit bureaus such as Equifax, Experian and TransUnion, is calculated through an analysis of a person's borrowing and repayment habits. How timely you are paying bills or how much revolving credit card debt you have can affect your score. The higher the score, the better. (See "Credit Scores and Home Buying.")
Equity: The value of a property minus the remaining mortgage balance. Equity is gained or lost by the appreciation or depreciation in the market value of the property. It is also typically gained as payments toward principal are made on the mortgage loan. You can rapidly increase your equity, and shave off tens of thousands in interest, by making one extra mortgage payment a year in a lump sum or paying a little more each month.
Fixed-rate mortgage: A conventional mortgage loan that has an interest rate and monthly payment that remain the same for the life of the loan (typically, 15 or 30 years, but 40-, 50- and 10-year loans are possible). A 15-year mortgage offers quicker repayment for faster equity buildup, usually at a lower interest rate than longer term mortgages. A fixed-rate mortgage is usually your safest financial choice. (See "How to Pick the Right Mortgage Product for You.")
Home equity loan: A loan or second mortgage that a borrower can take out against the equity in a home, essentially trading equity for cash. The interest paid on a home equity loan is tax deductible.
Home equity line of credit: Similar to the home equity loan, but instead of getting all the money at once, the borrower is essentially approved for a certain amount that can be withdrawn in increments, using a check book or debit card, up to a limit.
Interest-only mortgage: Allows buyers to pay just the interest on a mortgage at the beginning of the loan, then after a set period, typically a year or less, payment toward the principal is also made, at which time the minimum monthly payment typically increases. (See "How to Pick the Right Mortgage Product for You.")
Jumbo loan: A non-conforming loan, or "jumbo mortgage," that is larger than the home loan limits that Fannie Mae and Freddie Mac are willing to back, or guarantee, because they are considered risky. Jumbo loans have slightly higher rates than conforming loans. (See "How to Pick the Right Mortgage Product for You.")
Loan origination fees: Sometimes called "points," are loan application processing fees equal to 1 percent of the loan amount. Do not confuse these fees with mortgage points. (See "Closing Costs: How Much to Budget").
Lock or lock-in period: The timeframe in which a loan cannot be paid off earlier than stated without financial penalty, so that the lender is assured of obtaining a certain minimum return on the investment. This also refers to how long a lender has agreed to hold a quoted interest rate unchanged on the loan, regardless of whether the going market rate increases before the final paperwork is signed. The rates are usually held, or "locked in," for anywhere from 30 to 90 days.
Mortgage insurance: Protects the lender should the borrower default on the loan. The insurance is typically issued by the FHA or a private mortgage insurer. In the latter case the insurance is known as "PMI." Mortgage insurance is usually required if the homebuyer borrows more than 80 percent of the market value or purchase price of the home. If you need PMI, note that it can be canceled once you reach 20 percent equity in your home, either through price appreciation or by paying down the principal balance for your loan. You'll have to make your request in writing to the mortgage lender.
Mortgage points: Lender's fees or advance interest that a borrower pays up front in exchange for a lower interest rate for a certain part of the loan term, often over the life of the loan. Also known as "discount points," these points are based on a percentage of the loan, with each point being equal to 1 percent of the loan. So, one point costs $2,000 for a $200,000 mortgage loan. (See "Closing Costs: How Much to Budget.")
PITI: Pronounced "pity," it is an acronym for principal, interest, taxes and insurance, the four components of a mortgage payment.
Pre-payment penalty: A fee assessed by a lender as a charge to a loan borrower who makes an advanced payment or pays off a loan earlier than the due date or payment terms in the agreement. The penalty fee compensates the lender for the loss of some of the interest that would have been earned, had the loan continued for its full term.
Principal: The part of a monthly loan payment that reduces the outstanding balance of a mortgage, and becomes the equity for the borrower. By making extra payments toward your principal on a monthly or annual basis, you can greatly reduce how much interest you pay over the life of the loan.
Qualifying ratios: Calculations that the lenders use to determine the largest mortgage that a homebuyer can afford to obtain, or that the lender is willing to approve. (See "How Much Home Can I Afford?")
Refinancing: The process of obtaining a new loan to replace an existing loan. Typically this is done to reduce an interest rate or to extend the loan over a different period of time (for instance, starting again at 30 years or down to 15 years). It is done either to lower monthly payments, pay off a debt sooner, switch an adjustable rate mortgage to a fixed rate one, or obtain some cash back. (See "When to Refinance.")
So before you sign on the dotted line, you should learn some basic mortgage terminology to keep your eyes from glazing over when you hear words like "amoritization" and "PITI." To help you tackle them, here's our guide to the top mortgage terms you need to know.
Adjustable rate mortgage: A mortgage loan with an interest rate that will change or "adjust" periodically, such as every three years or annually after the fifth year, changing the monthly payment due. ARMs are best if you plan to sell the home before the rate adjusts. (See "How to Pick the Right Mortgage Product for You.")
Amortization: The schedule for paying off a mortgage loan, showing the regular, required payments toward principal and interest over a set period of time. AOL Real Estate's mortgage calculator shows you an amortization table.
Credit score: A number between 300 and 850 used to show creditors and lenders the creditworthiness of a potential loan borrower. The score, determined by credit bureaus such as Equifax, Experian and TransUnion, is calculated through an analysis of a person's borrowing and repayment habits. How timely you are paying bills or how much revolving credit card debt you have can affect your score. The higher the score, the better. (See "Credit Scores and Home Buying.")
Equity: The value of a property minus the remaining mortgage balance. Equity is gained or lost by the appreciation or depreciation in the market value of the property. It is also typically gained as payments toward principal are made on the mortgage loan. You can rapidly increase your equity, and shave off tens of thousands in interest, by making one extra mortgage payment a year in a lump sum or paying a little more each month.
Fixed-rate mortgage: A conventional mortgage loan that has an interest rate and monthly payment that remain the same for the life of the loan (typically, 15 or 30 years, but 40-, 50- and 10-year loans are possible). A 15-year mortgage offers quicker repayment for faster equity buildup, usually at a lower interest rate than longer term mortgages. A fixed-rate mortgage is usually your safest financial choice. (See "How to Pick the Right Mortgage Product for You.")
Home equity loan: A loan or second mortgage that a borrower can take out against the equity in a home, essentially trading equity for cash. The interest paid on a home equity loan is tax deductible.
Home equity line of credit: Similar to the home equity loan, but instead of getting all the money at once, the borrower is essentially approved for a certain amount that can be withdrawn in increments, using a check book or debit card, up to a limit.
Interest-only mortgage: Allows buyers to pay just the interest on a mortgage at the beginning of the loan, then after a set period, typically a year or less, payment toward the principal is also made, at which time the minimum monthly payment typically increases. (See "How to Pick the Right Mortgage Product for You.")
Jumbo loan: A non-conforming loan, or "jumbo mortgage," that is larger than the home loan limits that Fannie Mae and Freddie Mac are willing to back, or guarantee, because they are considered risky. Jumbo loans have slightly higher rates than conforming loans. (See "How to Pick the Right Mortgage Product for You.")
Loan origination fees: Sometimes called "points," are loan application processing fees equal to 1 percent of the loan amount. Do not confuse these fees with mortgage points. (See "Closing Costs: How Much to Budget").
Lock or lock-in period: The timeframe in which a loan cannot be paid off earlier than stated without financial penalty, so that the lender is assured of obtaining a certain minimum return on the investment. This also refers to how long a lender has agreed to hold a quoted interest rate unchanged on the loan, regardless of whether the going market rate increases before the final paperwork is signed. The rates are usually held, or "locked in," for anywhere from 30 to 90 days.
Mortgage insurance: Protects the lender should the borrower default on the loan. The insurance is typically issued by the FHA or a private mortgage insurer. In the latter case the insurance is known as "PMI." Mortgage insurance is usually required if the homebuyer borrows more than 80 percent of the market value or purchase price of the home. If you need PMI, note that it can be canceled once you reach 20 percent equity in your home, either through price appreciation or by paying down the principal balance for your loan. You'll have to make your request in writing to the mortgage lender.
Mortgage points: Lender's fees or advance interest that a borrower pays up front in exchange for a lower interest rate for a certain part of the loan term, often over the life of the loan. Also known as "discount points," these points are based on a percentage of the loan, with each point being equal to 1 percent of the loan. So, one point costs $2,000 for a $200,000 mortgage loan. (See "Closing Costs: How Much to Budget.")
PITI: Pronounced "pity," it is an acronym for principal, interest, taxes and insurance, the four components of a mortgage payment.
Pre-payment penalty: A fee assessed by a lender as a charge to a loan borrower who makes an advanced payment or pays off a loan earlier than the due date or payment terms in the agreement. The penalty fee compensates the lender for the loss of some of the interest that would have been earned, had the loan continued for its full term.
Principal: The part of a monthly loan payment that reduces the outstanding balance of a mortgage, and becomes the equity for the borrower. By making extra payments toward your principal on a monthly or annual basis, you can greatly reduce how much interest you pay over the life of the loan.
Qualifying ratios: Calculations that the lenders use to determine the largest mortgage that a homebuyer can afford to obtain, or that the lender is willing to approve. (See "How Much Home Can I Afford?")
Refinancing: The process of obtaining a new loan to replace an existing loan. Typically this is done to reduce an interest rate or to extend the loan over a different period of time (for instance, starting again at 30 years or down to 15 years). It is done either to lower monthly payments, pay off a debt sooner, switch an adjustable rate mortgage to a fixed rate one, or obtain some cash back. (See "When to Refinance.")
FACING FORECLOSURE?
With the number of foreclosures rising, homeowners are looking anywhere they can for help. But while there are a number of avenues promising relief, each has its own pitfalls.
The sheer scale of the problem has created a labyrinth of rules that no consumer should navigate alone, says Jim Sahnger, marketing director for Loan LifeSavers, a loan modification company in Palm Beach Gardens, Fla.
But as homeowners approach this new and harrowing experience, they wonder whom they can trust, what they can rightly expect and what their best course of action is.
These are difficult questions, but acting quickly and talking to a range of specialists are the way to start.
Can't the Obama Plan Help?
Even by President Barack Obama's own estimate, the government mortgage plan, known as Making Home Affordable, won't help every homeowner. In fact, the plan is designed for about 9 million homeowners. According to Moody's, a New York-based financial research and ratings company, there are an estimated 14 million homeowners in trouble, and that number is rising.
The plan works two ways -- loan modification and refinancing.
To refinance under the plan, homeowners must have a Fannie Mae- or Freddie Mac-secured loan, be current on the last 12 payments, have stable income and owe less than 105 percent of the value of their home.
To modify a mortgage under the plan, homeowners must demonstrate a significant hardship and a lack of liquid assets, and they must show that they can make the modified payments. Additionally, homeowners can only seek to modify loans made before Jan. 1, 2009.
A government-created eligibility checklist can be consulted at the Making Home Affordable Web site.
The First Question You Must Ask
So what are the options for homeowners who are looking to hang on? That depends on what their circumstances and long-term goals are, says Walter Walker Jr., co-author of "Foreclosure: The American Nightmare -- Strategies for Preventing, Surviving and Overcoming Foreclosure."
"Regardless of where they go, homeowners need to take a hard look at whether or not they can afford to stay in the house even if they do succeed in getting a modification," Walker says.
While Walker believes many homeowners are giving up too early, some people won't find a way to stay in their homes. He says many ads promising painless mortgage modifications deliver only minuscule reductions and false hope.
"If you still have a job, but your rate has adjusted and falling home prices have left you slightly upside down, you'll likely find a lender willing to work with you," Walker says. "If you've lost your job and there's really no hope of making future payments, it's just not going to work."
Yet, financial hardships can work for a homeowner. Sahnger says they are often the fodder for negotiation because lenders are recognizing that they must work with homeowners.
"If someone has experienced a hardship that has led to increasing expenses or decreasing income, which has led to an inability to make their mortgage payment, the door is open to exploring the options for modification," Sahnger says.
Read our articles on short sales to learn more about how to avoid foreclosure and ruinning your credit by doing a short sale.
The sheer scale of the problem has created a labyrinth of rules that no consumer should navigate alone, says Jim Sahnger, marketing director for Loan LifeSavers, a loan modification company in Palm Beach Gardens, Fla.
But as homeowners approach this new and harrowing experience, they wonder whom they can trust, what they can rightly expect and what their best course of action is.
These are difficult questions, but acting quickly and talking to a range of specialists are the way to start.
Can't the Obama Plan Help?
Even by President Barack Obama's own estimate, the government mortgage plan, known as Making Home Affordable, won't help every homeowner. In fact, the plan is designed for about 9 million homeowners. According to Moody's, a New York-based financial research and ratings company, there are an estimated 14 million homeowners in trouble, and that number is rising.
The plan works two ways -- loan modification and refinancing.
To refinance under the plan, homeowners must have a Fannie Mae- or Freddie Mac-secured loan, be current on the last 12 payments, have stable income and owe less than 105 percent of the value of their home.
To modify a mortgage under the plan, homeowners must demonstrate a significant hardship and a lack of liquid assets, and they must show that they can make the modified payments. Additionally, homeowners can only seek to modify loans made before Jan. 1, 2009.
A government-created eligibility checklist can be consulted at the Making Home Affordable Web site.
The First Question You Must Ask
So what are the options for homeowners who are looking to hang on? That depends on what their circumstances and long-term goals are, says Walter Walker Jr., co-author of "Foreclosure: The American Nightmare -- Strategies for Preventing, Surviving and Overcoming Foreclosure."
"Regardless of where they go, homeowners need to take a hard look at whether or not they can afford to stay in the house even if they do succeed in getting a modification," Walker says.
While Walker believes many homeowners are giving up too early, some people won't find a way to stay in their homes. He says many ads promising painless mortgage modifications deliver only minuscule reductions and false hope.
"If you still have a job, but your rate has adjusted and falling home prices have left you slightly upside down, you'll likely find a lender willing to work with you," Walker says. "If you've lost your job and there's really no hope of making future payments, it's just not going to work."
Yet, financial hardships can work for a homeowner. Sahnger says they are often the fodder for negotiation because lenders are recognizing that they must work with homeowners.
"If someone has experienced a hardship that has led to increasing expenses or decreasing income, which has led to an inability to make their mortgage payment, the door is open to exploring the options for modification," Sahnger says.
Read our articles on short sales to learn more about how to avoid foreclosure and ruinning your credit by doing a short sale.
Friday, January 14, 2011
Thursday, January 13, 2011
FORECLOSURE SCAMS
Renate Brevard was scammed twice. First by the bogus agency that promised to help repair her credit so that she could refinance her mortgage. Then by the lawyer she hired to help her stave off the foreclosure that eventually claimed her home.
The problems all started for Brevard, 47 when she refinanced the three-bedroom, 2.5-bath rambler in New Carrollton, Md., that she had owned since 2001. When her new adjustable rate mortgage reset from just under $1,100 per month to about $1,500, the accounting specialist fell behind on her mortgage payments. By 2007, she was struggling to hold onto the home, where she lived with her granddaughter, her teen-age son and a daughter.
"People in those situations are vulnerable, and the scammers are always a step ahead," says Ed Jacob, executive director at the Neighborhood Housing Services of Chicago, which provides housing counseling to homeowners struggling with mortgage payments. "The sad truth is that Ms. Brevard's story is not unique," says Marietta Rodriguez, director for homeownership and lending at NeighborWorks America. "With the national foreclosure rate persistently high, more and more homeowners are falling victim to scammers who are openly taking advantage of individuals in difficult circumstances."
Brevard learned the hard way how scammers can take advantage of desperate homeowners. Here's her advice to help others detect foreclosure rescue scams so that they don't become victims, too:
1. Avoid businesses that advertise with fliers or solicit door-to-door
After falling behind in her payments, Brevard received a flier in the mail from something called "the New Start Program."
"It said they'd help you improve your credit so you can qualify for a lower interest rate loan," she told AOL Real Estate. "They said they would act on my behalf so that I would not be in jeopardy of losing my home."
Brevard contacted the agency, which seemed legitimate to her because it did not charge any fees for its services. Now she regrets that decision. "Anything that comes in the mail, I would make sure it is a state-approved program or one through the actual bank itself," she says.
2. Know what you're signing
The agency asked Brevard to sign a statement authorizing it to talk to her lender about a new payment plan. What she didn't realize was that by signing the paperwork, she was also signing over the deed to her house.
Such "bait-and-switch" tactics are favorites of housing scam artists, who might say you're signing documents for a new loan to make your payments more affordable, when in reality they're documents that surrender the title of your house in exchange for a "rescue" loan.
Don't let a counselor pressure you to sign paperwork you haven't had a chance to read through carefully or that you don't understand. Also, don't sign any blank forms or let the counselor fill out forms for you. Be sure to talk with a state board licensed attorney before signing anything that transfers the title of your home to another party.
3. Be wary of the rent-to-buy scheme
Counselors she never met told Brevard they would lower her payments so she could clean up her credit history and later qualify for a refinance. Although her monthly payments were lowered to $1,100, she was sending payments to the scam artists, not to her lender. In effect, she was renting from them because they had refinanced her loan and held the deed.
Be wary of any program that asks you to surrender the title or deed as part of a deal to remain in your own home as a renter, even if it "guarantees" you can buy the home back in a few years. Scammers may tell you that surrendering the title will permit a borrower with a better credit rating to secure new financing to prevent the loss of the home, but buying back your home often becomes impossible. In a worst-case scenario, the new borrower walks off with your money, defaults on the loan, and you get evicted.
4. Work only with a HUD-approved counselor
After about two years of making the reduced payments to the New Start program, Brevard became suspicious and consulted a lawyer, who discovered that the counselors were not-HUD approved and that she'd fallen victim to a scam.
If you are approached by foreclosure counselors--by mail, phone, or in person--make sure the counseling agency you deal with is on the Department of Housing and Urban Development's list of approved agencies, or call 877-HUD-1515 for more information.
Most HUD-approved housing counselors provide no-cost counseling services and many more provide low-cost counseling, but they will not charge hefty upfront fees. Do not agree to work with a counselor who collects a fee before providing you with any services or who accepts payment only by cashier's check or wire transfer.
5. Hire licensed attorneys
Brevard hired an attorney to represent her to help her recover her funds and regain the deed to her home. She paid him a total of about $14,000 over a period of months to file documents and represent her in court. Court officials later told her that he never appeared in court on her behalf, never filed any documents, and in fact didn't even have a current license to practice law, as he had been disbarred before he took her on as a client.
"Here I am thinking he was taking care of the legal part of it, and one day I was here at work and my neighbor called me crying. All my stuff was in the front lawn. The bank had foreclosed and I had no idea that was happening," Brevard says.
When choosing a real estate attorney or other lawyer, check with your state bar association to see if the person is currently licensed to practice in your state or if there are any pending investigations. Be prepared to attend your court hearings, even if you have a lawyer representing you. Get a copy of your court file number so you can retrieve copies of documents at the courthouse or check on the status of a case online. Most states and counties maintain a public database that is accessible via the Internet.
"You think if you're getting a lawyer you're getting adequate representation, but you have to also check the lawyers out. You have to really do your homework," Brevard says.
6. If it sounds too good to be true, it probably is
Your foreclosure process is public information, and once the process is started, scam artists can pull information from databases that include the name of your lender, how much you owe and in some cases even the account number on your loan. All a savvy scammer needs to do is call you up quoting this information and claim to be acting on behalf of your bank. Make sure you keep track of the person's name, telephone number and an employee ID number, then call your lender from a number on your mortgage statement to verify if the person is legitimate.
"It's important for homeowners to know that what may look like a miracle may very well be a scam," says NeighborWorks' Rodriguez. "Knowledge is the best defense against this illegal activity, which is why it's critical that homeowners take advantage of the informational resources available to them from trusted sources."
7. If you're scammed
If you feel you may be the victim of foreclosure fraud, trust your instincts and seek help. For more tips on spotting scam artists, visit the Federal Trade Commission's webpage on foreclosure rescue scams. NeighborWorks' Loan Modification Scam Alert campaign also has a website, http://www.loanscamalert.org/, where homeowners can find tips and contact information for trusted resources in their area.
The bright spot for Brevard is she was able to recover the money she lost to the lawyer from a state program called the Client Protection Fund of the Bar of Maryland, and although she lost her home and all her equity, the foreclosure did not show up on her credit report because the deed had been transferred and the scammers had refinanced the mortgage out of her name. She now rents a home near her former one so that her son can finish high school with his friends.
The problems all started for Brevard, 47 when she refinanced the three-bedroom, 2.5-bath rambler in New Carrollton, Md., that she had owned since 2001. When her new adjustable rate mortgage reset from just under $1,100 per month to about $1,500, the accounting specialist fell behind on her mortgage payments. By 2007, she was struggling to hold onto the home, where she lived with her granddaughter, her teen-age son and a daughter.
"People in those situations are vulnerable, and the scammers are always a step ahead," says Ed Jacob, executive director at the Neighborhood Housing Services of Chicago, which provides housing counseling to homeowners struggling with mortgage payments. "The sad truth is that Ms. Brevard's story is not unique," says Marietta Rodriguez, director for homeownership and lending at NeighborWorks America. "With the national foreclosure rate persistently high, more and more homeowners are falling victim to scammers who are openly taking advantage of individuals in difficult circumstances."
Brevard learned the hard way how scammers can take advantage of desperate homeowners. Here's her advice to help others detect foreclosure rescue scams so that they don't become victims, too:
1. Avoid businesses that advertise with fliers or solicit door-to-door
After falling behind in her payments, Brevard received a flier in the mail from something called "the New Start Program."
"It said they'd help you improve your credit so you can qualify for a lower interest rate loan," she told AOL Real Estate. "They said they would act on my behalf so that I would not be in jeopardy of losing my home."
Brevard contacted the agency, which seemed legitimate to her because it did not charge any fees for its services. Now she regrets that decision. "Anything that comes in the mail, I would make sure it is a state-approved program or one through the actual bank itself," she says.
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The agency asked Brevard to sign a statement authorizing it to talk to her lender about a new payment plan. What she didn't realize was that by signing the paperwork, she was also signing over the deed to her house.
Such "bait-and-switch" tactics are favorites of housing scam artists, who might say you're signing documents for a new loan to make your payments more affordable, when in reality they're documents that surrender the title of your house in exchange for a "rescue" loan.
Don't let a counselor pressure you to sign paperwork you haven't had a chance to read through carefully or that you don't understand. Also, don't sign any blank forms or let the counselor fill out forms for you. Be sure to talk with a state board licensed attorney before signing anything that transfers the title of your home to another party.
3. Be wary of the rent-to-buy scheme
Counselors she never met told Brevard they would lower her payments so she could clean up her credit history and later qualify for a refinance. Although her monthly payments were lowered to $1,100, she was sending payments to the scam artists, not to her lender. In effect, she was renting from them because they had refinanced her loan and held the deed.
Be wary of any program that asks you to surrender the title or deed as part of a deal to remain in your own home as a renter, even if it "guarantees" you can buy the home back in a few years. Scammers may tell you that surrendering the title will permit a borrower with a better credit rating to secure new financing to prevent the loss of the home, but buying back your home often becomes impossible. In a worst-case scenario, the new borrower walks off with your money, defaults on the loan, and you get evicted.
4. Work only with a HUD-approved counselor
After about two years of making the reduced payments to the New Start program, Brevard became suspicious and consulted a lawyer, who discovered that the counselors were not-HUD approved and that she'd fallen victim to a scam.
If you are approached by foreclosure counselors--by mail, phone, or in person--make sure the counseling agency you deal with is on the Department of Housing and Urban Development's list of approved agencies, or call 877-HUD-1515 for more information.
Most HUD-approved housing counselors provide no-cost counseling services and many more provide low-cost counseling, but they will not charge hefty upfront fees. Do not agree to work with a counselor who collects a fee before providing you with any services or who accepts payment only by cashier's check or wire transfer.
5. Hire licensed attorneys
Brevard hired an attorney to represent her to help her recover her funds and regain the deed to her home. She paid him a total of about $14,000 over a period of months to file documents and represent her in court. Court officials later told her that he never appeared in court on her behalf, never filed any documents, and in fact didn't even have a current license to practice law, as he had been disbarred before he took her on as a client.
"Here I am thinking he was taking care of the legal part of it, and one day I was here at work and my neighbor called me crying. All my stuff was in the front lawn. The bank had foreclosed and I had no idea that was happening," Brevard says.
When choosing a real estate attorney or other lawyer, check with your state bar association to see if the person is currently licensed to practice in your state or if there are any pending investigations. Be prepared to attend your court hearings, even if you have a lawyer representing you. Get a copy of your court file number so you can retrieve copies of documents at the courthouse or check on the status of a case online. Most states and counties maintain a public database that is accessible via the Internet.
"You think if you're getting a lawyer you're getting adequate representation, but you have to also check the lawyers out. You have to really do your homework," Brevard says.
6. If it sounds too good to be true, it probably is
Your foreclosure process is public information, and once the process is started, scam artists can pull information from databases that include the name of your lender, how much you owe and in some cases even the account number on your loan. All a savvy scammer needs to do is call you up quoting this information and claim to be acting on behalf of your bank. Make sure you keep track of the person's name, telephone number and an employee ID number, then call your lender from a number on your mortgage statement to verify if the person is legitimate.
"It's important for homeowners to know that what may look like a miracle may very well be a scam," says NeighborWorks' Rodriguez. "Knowledge is the best defense against this illegal activity, which is why it's critical that homeowners take advantage of the informational resources available to them from trusted sources."
7. If you're scammed
If you feel you may be the victim of foreclosure fraud, trust your instincts and seek help. For more tips on spotting scam artists, visit the Federal Trade Commission's webpage on foreclosure rescue scams. NeighborWorks' Loan Modification Scam Alert campaign also has a website, http://www.loanscamalert.org/, where homeowners can find tips and contact information for trusted resources in their area.
The bright spot for Brevard is she was able to recover the money she lost to the lawyer from a state program called the Client Protection Fund of the Bar of Maryland, and although she lost her home and all her equity, the foreclosure did not show up on her credit report because the deed had been transferred and the scammers had refinanced the mortgage out of her name. She now rents a home near her former one so that her son can finish high school with his friends.
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