Why you can’t afford NOT to buy the book today…coffee and beer

There are only a few hundred remaining copies of the first edition of Mangled Mortgage.  After this, you’ll have to buy them at a bookstore and track me down to get a signature.  While I’m happy to sign them if you ask, it will cost you coffee or a beer to get a signature if you buy the book somewhere other than here.  And, I make it hard to find me these days.

Email info@mangledmortgage.com to learn how to buy one of the remaining copies from the first run.  There are several payment options and they’re all easy.

Where else are you going to go for information on what happens next in the housing market?

I can’t think of any other place either.

Jon

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Where can I buy a copy of Mangled Mortgage?

Right now, the only place to buy it is right here. Email info@mangledmortgage.com and you’ll get a reply with easy payment options.  Books start shipping the week of March 9th.

Someday, you may be able to find it on the big online shops.  Until then, this is the Mangled Mortgage shop.

Mangled Mortgage is a book about foreclosures, short sales, and loan modifications written by someone who lives and breathes mortgage challenges every day.  Jon Sterling works in real estate sales Southern California, where he moved specifically because of the housing crisis.  Working in some of the most challenging markets in the United States, Jon’s team provides a wealth of experience and perspective for today’s real estate market.

Foreclosures are gone for good

Hardly.

Fannie Mae and Freddie Mac have both extended their eviction moratorium to April 1st.  If history is any guide, this will not be the last extension as the government works with the banks to straighten-out the housing mess.

The “freeze” on foreclosures began last fall when Bank of America, Chase, Citigroup, and Wells Fargo all put a halt to their new foreclosure filings.  The plan was two-fold:  The banks were waiting to see if they would be able to recover some of their losses with bailout funds, and they were buying some time to contact their mortgage customers who were in default to see if loan modifications would be a better solution.

From the first round of loan modifications, over half are in default six months later.  It’s safe to assume history will repeat itself here.  Many of the loan modification customers I have encountered are using the loan modification as nothing more than an excuse to stay in their house for free for a few more months.  They had no intention of paying before the modification, and they have no intention of paying now.  Let’s hope that attitude belongs to the minority of loan modification customers.

The big variable this week is the bankruptcy judges’ ability to “write down” the loan amount to make the loan affordable for a homeowner so he/she can avoid bankruptcy.  This is power the judges did not have before this week.  While it may seem like a good idea on the surface, the impact will be far-reaching.  Basically, this gives judges the power to decide the investor for the loans are having their equity in their investments reduced without any input from the investor.

Mangled Mortgage tells you everything you need to know about foreclosures, short sales, and loan modifications.  Order a copy today!

Foreclosure solution – affordable and sustainable

From the US Department of the Treasury on March 4, 2009:

“The Home Affordable Modification program will help up to 3 to 4 million at-risk homeowners avoid foreclosure by reducing monthly mortgage payments.  Working with the banking and credit union regulators, the FHA, the VA, the USDA and the Federal Housing Finance Agency, the Treasury Department today announced program guidelines that are expected to become standard industry practice in pursuing affordable and sustainable mortgage modifications.  This program will work in tandem with an expanded and improved Hope for Homeowners program.”  (links are mine)

This is a good start.  The important pieces to note are the ideas of affordable and sustainable. The affordable piece of the puzzle is already in place, even if it wasn’t by design.  The sustainable part of the program is going to be the tough one.  Nothing exists in a vacuum and markets are efficient.  As one solution looks like it’s working, it will have to be closely monitored so it doesn’t create bigger issues, like inflation.

Mortgage interest rates look good right now and they don’t seem to be going anywhere anytime soon.  Real estate prices are at an affordable level in most markets around the country.  The unemployment rate is definitely a concern right now because it impacts everything else.

The trickle-down effect of the Obama Administration’s actions will take some time.  It’s good to see that they’re taking action, even if nobody has seen anything like this before now.

For more information on the housing market disaster and what happens next, check out Mangled Mortgage by Jon Sterling.

Order a copy of Mangled Mortgage today!

For a copy of Mangled Mortgage:  Everything you need to know about foreclosures, short sales, and loan modifications, the only place to buy it is right here.

Send a message to info@mangledmortgage.com with BOOK in the subject line and I’ll send you a choice of payment options.

This site is designed as an informational place and those order forms are so cheesy looking.  Don’t get me wrong…I still want you to buy the book.  I just want to flirt with you before we get married, so to speak.

-Jon

Home sale statistics

The US Commerce Department reported today that new home sales fell 10.2% in January, which is a record low.

The National Association of Realtors reported that sales of existing homes fell 5.3%.

What does this mean?  The American Recovery and Reinvestment Act has its work cut-out for it.

Everyone agrees that things are likely going to get worse before they improve.  Eight hundred billion dollars and change might not be enough to make an impact worth noting.

Progress should be celebrated, although it makes me wonder how much more money we’ll have to print to make the government program work.  Printing more money is easy, but creating a bailout mentality for America is the part where I take exception.

If we eliminate the efficiency of capitalism, the smart money will eventually go elsewhere. Until that happens, we are living in one of the best times to buy real estate in the history of the United States.  The smartest people I know are buying as much real estate as they can.  The first-time home buyer tax credit makes it easier for many people.  Our record low mortgage interest rates help too.

www.mangledmortgage.com

Tips for the hardship letter

The hardship letter needs to have a few basic elements.   The obvious ones are the loan number, names of the borrowers, and a description of the hardship.  You don’t have to be a literary genius to create your own hardship letter, but there are ways to improve the effectiveness of the letter.

Tip #1

Instead of simply stating the facts of the financial hardship situation, you want to evoke emotion in the reader.  Remember, the reader is the loss mitigator and that person’s job is to make sure the lenders and the investors backing the lenders limit their losses.  If they can feel some sympathy for your situation, you have a much better chance of getting the short sale or loan modification approved.

Tip #2

If the financial situation of the borrower is looking grim and they might be headed toward bankruptcy, mention that.  Any mention of the word “bankruptcy” will create a sense of urgency with the loss mitigator.  If bankruptcy is not a possibility, don’t waste your time trying to bluff.  It isn’t honest and you get into a gray area that includes a crime called  fraud.

Tip #3

Give specific examples of things that have been done to help remedy the hardship situation.  The lender needs to understand that you are experiencing a real hardship, and not just trying to game the system.  The short sale and loan modification processes are complex and thorough to be sure each situation is legitimate.

For more tips and information on the housing mess, check out my book Mangled Mortgage. Email info@mangledmortgage.com.

The hardship letter

In the case of short sales or loan modifications, a letter must be written to the lender describing the circumstances (hardship) causing the borrower’s inability to continue paying the mortgage loan according to the original terms.  A hardship letter should illustrate long-term or permanent circumstances that make the borrower unable to pay in order to be considered a legitimate hardship.

A legitimate hardship is when the borrower’s personal situation has experienced a change which prevents the borrower from making payments as originally agreed.  Some examples of common hardships:

  • Death of an income earner in the family
  • Divorce
  • Large loss of income (long-term or permanent)
  • Job relocation or job loss
  • Mortgage payment adjustment that makes the payments unmanageable
  • Health issues

The hardship must be a long-term situation.  If the owner simply had a bad month or still has money in savings and retirement accounts, the bank is less likely to approve a short sale.

As the housing crisis continues, lenders are becoming more flexible with some of their hardship requirements.  With the current stimulus bill, there may be a way for the lenders to minimize their losses in a short sale.  Hypothetically, that would encourage more homeowners to get out of their houses with relatively little damage to their credit.

For a copy of a sample hardship letter, email info@mangledmortgage.com.

Loan Modifications

Some experts, including the smartest people I know, believe the loan modification efforts are delaying the inevitable flood of foreclosures.  Without a major change in strategy on the part of the lenders, it is just a matter of time before the newly modified borrowers become delinquent with their payments.  Recent reports of the first major round of loan modifications are supporting this theory, since over half are delinquent.

Even if the loan terms are modified to be reasonable given the borrower’s current income, it still does not solve the negative equity problem.

The current relief structure provides free money for those who cannot or will not stay current with their mortgage payments.  The unintended consequence of the handouts is an incentive for borrowers to stop making payments.  This is a dangerous road to travel, and my fear is it will not be recognized as a big problem until it is too late.

Given the current loan modification policies, is there really an incentive to stay current with one’s mortgage?

It can be argued that the benefits of being a few payments delinquent far outweigh the benefits of staying current.  Yes, you read that correctly.

People who honor their commitments might feel a little bit of indigestion from that last statement, and I understand.  Look at the long term benefit of intentionally missing a few mortgage payments.  It could allow you to have your mortgage interest rate reduced or your loan balance reduced, or both.  The short term consequence of dings on your credit report might be worth it to some people.  The penalty for your misbehavior is simply not significant.

If I was considering walking away from my house or defaulting on my payments, I would certainly say I should do it as soon as I can.  That way, I can start the clock ticking on my “repaired credit” status so I can buy another house at today’s prices and today’s interest rates.

It may sound a little goofy, but you can see how this would make sense to the less-than-honorable borrowers in the world.  I meet people like this in my market every week.

I am not advocating this as a strategy.

I do not think this is even close to a good idea, but it is not difficult to see the logic.  As long as there are incentives to become delinquent with mortgage payments, this scenario has the potential to fester and grow.

To purchase a copy of Mangled Mortgage, send a message to info@mangledmortgage.com.

Short Sales

I recently saw a short sale listing being advertised and there was an exterior photo of the house.  Parked in the driveway was a BIG speedboat.  The seller had refinanced the mortgage several times, had no equity (spent on a boat, perhaps?), and needed to sell.

Many people are not even being subtle about abandoning their obligations these days because it is commonplace to do so.  As long as borrowers are allowed to shrug and walk away, there will continue to be major challenges in the housing industry.

There are also people with legitimate hardships.  Those people did not necessarily do anything wrong; they are victims of the situation.  Because of the irresponsible actions of others, these borrowers are feeling the financial pain.  It is a basic economic law:  As supply increases, demand decreases.

As the number of homes on the market increases, the demand for all the homes on the market decreases.  As the demand decreases, prices adjust downward.  With the glut of foreclosures on the market from the over-leveraged homeowners and the “shrug and walk away” people, those who made responsible financing decisions are at risk of suffering the consequences of too much inventory and decreasing home values.

For more information on foreclosures, short sales, and loan modifications, or to order a copy of Mangled Mortgage, send a message to info@mangledmortgage.com.