In a complicated market like todays, it is hard to know whether you should keep your home or walk away from it. Many homeowners have watched their property values drop over 25 percent, sometimes more. Some say the market hasn't even hit the bottom yet.

Some homeowners are beginning to wonder if staying in their home is even worth it anymore. Some wonder, "If I owe more on the mortgage than the house is worth, why throw good money after bad?" When homeowners are thinking of walking away, they need to remind themselves of why they purchased the home, when they did, in the first place. It could be the fact that is was and still is a great neighborhood, apart from the declining value. It also could be that it is close to a great school that your children still attend. Maybe the drive to work is a breeze from your home. The reasons could go on and on. Homeowners should also consider the following reasons to stay in their current homes: 

•·       If you sell now, you're basically selling at a loss. The loss in equity is not an actual loss unless you sell; property values are likely to come back up over time. 

•·       If you're having trouble making payments, this would be a great opportunity to lower your house payment through refinancing or a loan modification.

•·       Walking away and vacating your home can tarnish your credit and make it much more difficult and costly to purchase a home when the market does recover, which it will.

•·       More and more lenders are seeking deficiency judgments against homeowners in states in which deficiency judgments are allowed. In other words, if homeowners abandon the property and the lender can't sell it for enough to cover the remaining balance on the loan, the lender may pursue legal action to collect the difference.

•·       Lenders are increasingly unwilling to accept a short sale or deed in lieu of foreclosure for borrowers who can afford to make the payments.

As a borrower, you must justify your reasoning of why you are unable to stay in the house and why you are no longer able to afford it. If you are financially able to make the payments and stay in the house, but you do not see the point of making payments on a house that is only worth a fraction of what you owe, the lender is highly unlikely to accept a short sale or deed in lieu of foreclosure.

However, it sometimes makes sense for homeowners to flee the property, assuming all of the following apply:

•·       They owe way more on the property than it is worth.

•·       They flat out cannot afford the payments no matter how much they trim their budget in other areas and even if the lender is willing to modify their mortgage.

•·       They're way behind on payments and will never be able to catch up.

•·       Trying to do the right thing is putting them further and further in debt.

•·       The lender rejects their request for an affordable loan modification.

•·       They can't refinance into an affordable monthly payment.

•·       They have come to terms with the fact that they may lose this house.

•·       They have exhausted or dismissed all other options, including bankruptcy.

If these conditions apply to your clients' situation, they may need to walk away, but there are right ways and wrong ways to abandon a property. In the case of abandoning a home, your clients may want to consider the following options from best to worst:

•·       Short sale: List the house for sale. If they can't sell it for at least what they owe on it, offer to negotiate short sales with the lenders who hold liens against the property. Real estate agents are often the best qualified to assist homeowners with the short sale option.

•·       Deed in lieu of foreclosure: If short sales are not an option, your clients can offer their lender a deed in lieu of foreclosure. They sign the deed over to the lender, hand them or ship them the keys, and walk away debt free. If your clients decide to pursue this option, advise them to hire an attorney to review any documents before they sign them. Also, let your clients know they may be able to negotiate with the lender to obtain some cash from the lender for turning in the keys and leaving the premises "broom clean." Or, the lender may allow them to live in the home rent-free until it sells - a vacant home is harder to sell.

•·       Walk out: Once homeowners have exhausted all other options and the lender is being totally uncooperative or uncommunicative, sometimes all they can do is walk away. This really is an option of last resort. A short sale or deed in lieu of foreclosure damages your credit less than a foreclosure. With your help, your clients should be able to avoid this unpleasant choice.

Homeowners should fight to keep their homes and real estate professionals should help them as much as possible. Keeping our clients in their homes is not only the right thing to do, but it is good for the industry- it helps stabilize our neighborhoods and the housing market and keeps the American Dream of Homeownership alive. When homeowners find themselves fighting a losing battle, however, they shouldn't throw good money after bad. Sometimes a graceful exit is the only choice.

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The prime borrowers are rapidly going into foreclosure, especially in those states of mass unemployment or decreasing property values, all which saw a huge run-up during the housing boom.

It's a marked shift from earlier this year, when foreclosures were driven by defaults on subprime loans. It has major implications - ravaging the credit scores of those borrowers who once had impeccable records and dragging down property values in the more wealthy neighborhoods.

It also threatens to weaken the housing recovery.

"It's definitely a concern," says Brian Bethune at IHS Global Insight. "(Unemployment) is a major driver of foreclosures, and it will frustrate the housing recovery process."

In the first quarter, almost half of the overall increase in the start of foreclosures was due to the increase in prime, fixed-rate loans, according to the Mortgage Bankers Association (MBA). At the end of the fourth quarter, 2.4% of prime mortgages were seriously delinquent, more than double the 1.1% at the end of March 2008, according to a report by the Office of the Comptroller of the Currency and the Office of Thrift Supervision.

"In the beginning, the higher-end (homes) were a bit isolated," says Kevin Marshall, president of Clear Capital, a provider of real estate asset valuation. "But in the last several months, we're seeing a significant erosion in the higher-end homes. It's reached into the prime loans."

California, Florida, Arizona and Nevada represent 56% of the escalation in foreclosure starts, including half of the increase in prime fixed-rate foreclosure starts, according to the MBA.

That conforms with states reporting some of the highest unemployment rates. In California, the unemployment rate in April was 11%, according to the Department of Labor. In Nevada, it was 10.6%.

Economists fear that further increases in unemployment could lead to more defaults on prime, fixed-rate loans.

That's what happened to Marvin Clayton, 47, of Waco, Texas. He lost income after his wife had a stroke and was unable to work. Then he lost his job a year ago. He's now behind on his 30-year, 5.78% prime loan and is facing foreclosure in July. He is currently trying to get another job in retailing.

"I was trying to make it off one income but was struggling to make payments," Clayton says. "I'm still hoping for a modification from my bank."

Sales are the uproar for the economic housing situation this week.   

Residential sales and pending sales are adequately increasing and a rebounding real estate market could soon start stimulating the economy.

Even Federal Reserve Chairman Ben Bernanke told Congress last week that essentially the worst is over, the housing market is stabilizing, and we're heading out of recession in the second half of the year.

Pending home sales heightened by 6.7 percent in April. April made the third consecutive month of significant increases. April was the highest pending sale total for any month in the last seven years.

In the Northeast region, pending sales rocketed upwards during April by an astounding 33 percent. In the Midwest, they increased by just under 10 percent, and the Western region by only two percent. The southern region is the only region that sales declined, although it was only by two tenths of one percent!

Closed sales also are moving up quickly. In Las Vegas, sales advanced by 36 percent during April, which was the highest in two years, according to MDA DataQuick researchers.

The disadvantage of this situation is that most of these sales were distressed properties-- foreclosured or bank-owned properties. 75 percent of all Las Vegas area sales fit into that category in April.

On the mortgage side, applications to purchase homes continued to ascend last week by up to 4.3 percent, according to the Mortgage Bankers Association.

Although the mortgage rates are at record lows, it's becoming increasingly clear that low mortgage rates are not going to be around forever. Average thirty year fixed rates took their biggest jump in half a year last week.

The average rate for 30 year fixed topped five and a quarter percent, up from 4.8 percent the week before. And 15 year rates went to 4.8 percent from 4.4 percent.

Therefore, if you are in a position to buy and have been thinking about making your move, you should seriously consider making that move sooner rather than later. Doing so can guarantee the lower mortgage rates.

Phoenix-area median priced homes sold increased slightly in May from the previous month despite an increase also in home foreclosures, according to the latest data from the Information Market and Cromford Report, local analysis firms.

In May, the number of homes sold increased to over 8,600. In April, the homes sold were just under 8,160. The median sales price for both new and resale homes was $130,000, which is an increase of about 3 percent. This information is based on data from the Maricopa County Recorder's Office.

In May, the median new-home sale prices rose to $216,000 from $205,000 in April. The amount of sales of new homes rose to 705 new-homes from 599 in April. The resale homes, however, remained the same at roughly $120,000. Cromford Report analyst Mike Orr said that the bulk of buyer activity is still happening at the market's low end but that home-sales volume in the higher-price range is starting to creep upward.

The percentage of Valley home sales involving bank-owned homes decreased to 57 percent in May, down from 68 percent the previous month, Orr said.

Although there was a lot of activity on purchases, the foreclosures were still very much active. There were 3,809 homes foreclosed on in May, which was an increase from April's 3,103. About 8,600 pending foreclosure notices were issued, which was a decrease from the previous month at 9,100.

Analyst Jim Belfiore of Belfiore Real Estate Consulting, who surveys home builders regularly about sales trends, stated that builders have recently been offering huge incentives to sell off the existing speculative inventory - as much as $200,000 worth per home in some high-end communities. That effort has paid off, he said, leaving only about 4,500 unsold "spec" homes now on the market Valley-wide.

I continued to work very hard to get the short sale approved without a the Promissory Note requirement.  A little reminder from Part 1 regarding the background situation, the home is in Gilbert, AZ and is protected under the Arizona anti-deficiency statues since it is the original purchase money mortgage.  The owners put down 10% and have a 90% mortgage with Wells Fargo.

After many attempts to get Radian to remove the Promissory Note removed, they would not budge.  I spoke with Vince the VP at Radian for Loss Mitigation.  A very rude individual that just yelled at me regarding the short sale.  He was quoting numbers off the top of his head regarding the loss payout they would have to make.  The actual loss on the sale is $71,000 and he kept saying they have to pay out $105,000.  They refused to review the seller's financial and ignored his job loss/ lay-off letter that was attached.  I have never been accosted on the phone that way before so that I could not review the actual numbers or get a work in edge wise.

Next we submitted the file to the Arizona Department of Financial Institutions, an agency that is set up to help homeowners and regulate Arizona banks.  They were very nice and told me that Wells Fargo is a national company but would try to assist.  After about two weeks, they sent back a letter indicating that they were also were unable to get the promissory note requirement removed.

Meantime the buyer was tired of waiting on the extended process and canceled the contract. However, we are still not giving up - we have put the home back on the market.  We are also starting to see signs that Wells Fargo or Radian is more willing to do a a short sale.  The original foreclosure auction date was 5/28/09 and they have moved it to June 30th without being asked.  They have also called the owners to see if they would consider a loan modification.  However, the owners are no longer interested in a modification since they are out of work and do not have any income to cover a mortgage payment.

We will see this to the end and we will be successful!  All my training as a Certified Distressed Property Expert will be used to help save the homeowners from foreclosure.  If you are facing a financial hardship and are not sure of what to do, please contact us regarding your options at 480-355-8645 or click here to view our web page.

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Call Gina McKinley, ABR, CRS, CDPE, Associate Broker at 480-355-8645 in order to schedule an appointment to view this home.

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President Obama signed a new legislation that entices the banks to help save homeowners facing foreclosure on Wednesday. President Obama states that it protects the homeowners and cracks down on lenders who try to take advantage of their situation.

The law expands on an existing program that entices the lenders to adjust the mortgage rate if the homeowner pays an insurance premium. The bill also extends a deposit insurance increase by the FDIC from $100,000 to $250,000 until 2013.

The House voted 367-54 to pass the Helping Families Save Their Homes Act on Tuesday, where it progresse to the Senate who had voted 91-5 in favor of the bill and approved the final version by unanimous consent.

This great news for homeowners who are in true financial hardship, offering them an oppertuniy to short slaw their home or have a Deed in Lieu of Forclosure.  If you have any questions about foreclosures or alternate oppertunitys, please contact me.  As a Certified Distressed Property Expert, I will be glad to assist you, providing you with specialized brochures that compare foreclosures and its alternates.