Zombie Foreclosures Present an Opportunity for Investors

Unoccupied house
Unoccupied house

Who can blame a home owner for thinking his or her house has been foreclosed upon after receiving more than 200 letters from the bank stating it is taking over the property for nonpayment? But here’s the surprise: many of those homes were never actually foreclosed upon. The bank, after reviewing the value and equity, decided it was not worth their time or effort to complete the foreclosure. In the meantime, the home owner moved out and into a rental.

These zombie foreclosures — vacant homes — are a “growing problem,” according to Consumer Financial Protection Bureau (CFPB). The government committee is now (finally) planning to have a little chat about this issue.

Some investors have already taken action. They’ve contacted the homeowners and have paid them cash to be added to the title. Armed with this status, they’ve done the clean-up work on the property and have turned the houses into rentals. So while the bank has been snoozing, the investors have been collecting rental income.

Of course, none of this would have happened if the home owners would have executed a smart strategy on their own: stay in the house and live free until they were officially evicted. Before you cry, “That’s not fair!” let me remind you that it is better for everyone in the neighborhood to have people living in a house and keeping up the property, including the yard. No one wins when zombie foreclosures turn into ugly, unsightly, broken-down blights on the street.

Are More Zombie Foreclosures Set to Flood the Market?

Two million home owners who received a loan modification (a temporary reduction in interest rate in order to prevent a foreclosure) are set to have their mortgages recast. This means their temporary low interest rate period is coming to an end, and they are about to get an increase in their payments.

40% of these home owners are still underwater and will not be able to refinance or sell. That is 800,000 properties that could come flooding onto the market at bargain prices (as in a short sale) or turn into abandoned houses (if the home owners flee).

But the numbers don’t stop there. Another 18% of these modified home owners have only 9% or less equity in their homes. Since it costs approximately 8% to 9% to sell a home, they would walk away with nothing in their pockets for the effort of selling. What will they do in this situation?

What Happens Next?

Will the CFPB force lenders to extend the loan modifications, thus kicking the can down into the future?

Will another wave of foreclosures hit the market?

Will a solution to found for the problematic zombies already setting in neighborhoods like haunted houses?

What do you think?

Statistical sources: Housing Wire, OriginationPro





Widow’s House Foreclosed Over $6.30 Due

Eileen Battista home
Eileen Battista home. Photo: Keith Srakocic/AP

The Beaver County Tax assessor snatched away Eileen Battisti’s house in foreclosure because she owed a mere $6.30.

They claimed they had the right to take away the Pennsylvania widow’s house, because they had sent the proper legal notices of the money due.

Really, tax people? How is that fair and honest treatment of a home owner who has paid their taxes faithfully over the years?

Eileen Batisti thought she had paid all past due bills after her husband’s death in 2004. She was unaware there was an outstanding balance due. Adding late fees and penalties to the $6.30, her bill shot up to $235.

Her house was then sold under value for about $116,000 to “some lucky buyer” getting a bargain.

But wait, there’s more!

Eileen wasn’t going to be defeated that easily. She filed an appeal of the sale in county court. And legally, the new owner could not take possession of the house while an appeal was going on. So Eileen has continued to live in her home.

Judge Mary Hannah Leavitt said the county’s action “was particularly inappropriate because the outstanding liability was small and the value of the home was far greater than the amount paid by purchaser.”

The Take-Away: If you don’t pay your property taxes, the county can foreclose on your home, even if the mortgage is paid on time. And, if there is a gross inequity, such as what happened to Eileen Battisti, you do have the right to appeal.

Source: CNBC

Forclosure Stopped for 91-Year Old Widow

interior Mid-February, I posted about a 91-year old widow who was losing her home to foreclosure simply because her husband died. What happened is that the loan officer who did their reverse mortgage (a program that enables seniors to take cash out of their home equity) wrote the loan in the husband’s name only. Mr. and Mrs. Ogle didn’t understand what was happening, because there was paperwork for each of them to sign. They didn’t understand the consequences. When a reverse mortgage is written in only one spouse’s name, if that spouse dies, the survivor no longer owns the home.

Why would anyone do that? Some loan officers set up the loan for the oldest person so they can get more cash out. In the case of the Ogles, Jeanette didn’t understand that she was signing away the home she had and her husband had paid for and lived in together for over 30 years. And now the lender, Reverse Mortgage Solutions of Spring, Texas, was taking the property and throwing the 91-year old out on the street.

I posted and asked folks to write in a complaint to HUD (U.S. Dept. of Housing and Urban Development.) In addition, the AARP and others protested.

March 1st, Kenneth R. Harney, syndicated columnist, Nation’s Housing, reported that Reverse Mortgage Solutions has had a change of heart about taking away Mrs. Ogle’s home. They said they are now “committed to allow you to remain in your home” and will “take no action to displace you as long as the mortgage agreement… is not in default.” Meaning that as long as she pays the property taxes, all is good.

With a reverse mortgage, there is no payment — the company pays you — so the only way it can go into default is if the property taxes are not paid.

Jeanette Ogle said it was the best birthday present she could receive. She got the good news just as she was turning 92.

Mrs. Ogle said, “I’m on cloud nine. I’m staying put in my house. I don’t have to move. And even though I’m 92, I’ve got all my marbles–so everybody should know I plan to be around for a while.”

You go, Jeanette Ogle! We’re all cheering with and for you!

Innocent 91-yr Widow Muscled Out of Her Home

Evicted  A sweet little lady who’s managed to live to the age of 91 deserves respect. I don’t think there’s any argument there. So why is our government agency, HUD (U.S. Dept. of Housing and Urban Development) muscling Jeanette Ogle out of her home — when she owns it free-and-clear?

Great question, especially since on their “About” page, HUD claims one of their goals is to protect consumers. Just who do they think they’re protecting by tossing a nonagenarian out into the streets? This is one story that really makes my blood boil, and I’m glad Kenneth R. Harney exposed it in his syndicated column “Nation’s Housing.”

In 2007, Mr. and Mrs. Ogle refinanced their home into a reverse mortgage. A reverse mortgage is a program for senior citizens wherein they can collect cash from the equity of their home. The intent is to help old people who need extra income to live comfortably. Rather than die equity rich and live in poverty, they can receive a monthly check taken from their home equity. And why not? They put the money into the home, so why shouldn’t they be able to take some out? For seniors who need supplemental income, the program makes sense.

However, when the Ogles took their reverse mortgage, the Weasel who called himself a loan officer had only Mr. Ogle sign for the mortgage. At the time, Mrs. Ogle did not understand what was happening. She sat along with her husband and signed all the paperwork she was given to sign. She didn’t understand she was signing an acknowledgement that only her husband was on the loan. No doubt, her husband didn’t understand that either. Only the deceptive loan officer, underwriter, and possibly the signer and funder–all the people inside the business–understood.

In 2010, Mr. Ogle passed away, leaving his wife a widow. Now that the only person on the mortgage has deceased, the loan servicer, Reverse Mortgage Solutions of Spring, Texas, has initiated a foreclosure action. Once the 91-year old is booted out, the house ownership goes to the big government agency, HUD.  Like HUD needs another property, right?

HUD has “no comment.”  Cowards!

Handily, HUD has on their website an online form where people can send in a complaint about someone who violates housing discrimination laws. I’d love to see HUD flooded with protests on behalf of Mrs. Ogle. If enough people come to her defense, maybe the public can muscle HUD into backing off of their intention to strong-arm a little lady out of the home she and her husband paid for long ago.

Please feel free to pass this on to others in behalf of Mrs. Ogle via Twitter, Facebook, email, or any other way.