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Mortgage Delinquencies - The Coming Storm

This is one of those posts where I wish I didn't have to write it, but felt it was so important to my readers that I would be remiss not to at least talk about it.

Everyone out there probably knows somebody who is behind on their mortgage payments, looking for alternatives and likely also just finding out that their home's value has dipped below what their loan amount is.  I know some within my own personal circles.  It's a tough situation for me to advise them as a professional because it's such a personal challenge to their pride and self-worth, not to mention their plans and dreams for the family. The question we're asking is "when is this going to stop and where are we heading?"

I'm going to put up a few graphs that show the trends nationally with regards to mortgage delinquincies:

This chart is by quarter - Single-family mortgages set a new record delinquency rate in the second quarter of 2009, according to a quarterly survey by the Mortgage Bankers Association. Those of us in the real estate business see the foreclosure process (just visit the local Sheriff Sale docket to see the current numbers) but the looming delinqency-to-foreclosure issue is far, far larger.

The Wall Street Journal on 8/3/09 reported the following quote: “While subprime mortgages sparked the first round of housing problems two years ago, now "troubles are lurking further up the food chain," says Joshua Shapiro, chief U.S. economist at MFR Inc. White-collar job losses have accelerated while more adjustable-rate loans to prime borrowers are resetting to higher payments.  ‘You put all that together, it leads me to believe that the next leg down on home prices is going to come from the top,’ he says.”

The first objection someone may have would be to say "yes, but historically those who are delinqent usually get their act together and come current on the mortgage after a while".  That WAS true, but not anymore!  We call that the "Cure Rate", that is the rate of delinquencies that go back to current.  The Wall Street Journal reported on 8/24/09 about a Fitch analysis that found that the Cure Rate from 2000-2006 was 45% (which means about half of people fix their delinquency).  However, as of July 2009 the rate had dropped to just 6.6%!  That means that over 90% of delinquent customers are going to foreclosure.  Take a look again at the above chart...

The next thing someone will say is "well, that's the 'sand states' and not my area".  Here's the chart for all 50 states showing the same breakdown of delinquencies and foreclosures.  Guess what - most states have a significant problem, especially compared to historical figures.

Now the next thing someone may say is "aren't those loans going to get 'fixed' by a loan modification?"  I know several people right now who are applying for a Lancaster County loan modification but are waiting and waiting.  I hope it works out for them...

In reality, loan modifications are hardly making a dent.  To me, that's a burning question.  Why arent banks being more aggressive in giving customers the option to extend their loan and/or reset to a lower rate?  Why are they being SO difficult? The people I know don't want to be foreclosed.  They CAN make payments.  They just need the terms redrawn to allow them to catch & keep up.  Loan modifications are not helping us get this crisis under control.

What are the causes of all these delinquencies?  Here's a chart that is enlightening:

We hear a lot about adjustable rate mortgages being the culprit, but the reality is that it's the loss of jobs and the tanking real estate market that's the perfect storm.  See my previous post on unemployment in the nation, the state and Lancaster County.

Keep in mind, this post is not intended to give us "good news".  You may be experiencing good things in your market and that's great.  My intent is to get us thinking about the challenges that aren't going away and how we're going to address them as homeowners, agents and professionals.  I'd love to hear your ideas!

 

 

Managing Emotional Response

Feelings of stress occur as an internal reaction to external events. In other words, it's not what's happening around you that stresses you but rather your thoughts about what's happening around you.

When you learn to observe your thoughts, remain in control, and assess the emotion experienced, you empower yourself to choose a behavioral response that is most appropriate for you.

Feelings themselves can become overwhelming when you allow them to overtake you. It's as if they take charge and you are no longer in charge of yourself. And that's because the emotion does take charge; if you let it.

The conscious mind cannot think and feel at the same time. This has huge implications. When you experience an emotion - stress, anxiety, anger, fear, disappointment, frustration, sadness, even excitement or happiness - the part of the brain at work is called the limbic system. You are not able to think clearly because this part of the brain does not lend itself to problem solving or thinking; its focus is on survival. Without engaging other parts of your brain, you react in ways that do not show the better side of you. :)

When you experience an emotion, breathe. Remain in control. Use the emotion as a message. What is it trying to communicate to you? Be curious and ask yourself a question. You will engage the prefrontal cortex, which is the part of the brain involved in decision making and social behaviors.

Use 'wonder' to guide you. Wonder about the other person and what they might be thinking or why they would do/say that. Use your empathy to step into their world and ask a question to learn more from them. Wonder about yourself and your expectations. Is there something you need to accept or let go of? Is there a boundary issue here that needs to be extended?

Once you've asked the question, then you can think clearly to choose the most appropriate actions for the impact you want to create. You increase stress and feelings of overwhelm and powerlessness when you focus your efforts on trying to fix things where you have no control. While you may not be able to control the things going on around you, you can control YOU.

Your power lies in your ability to self-manage - to manage your thoughts, your emotions, and your actions. Focusing your attention on what you can control increases feelings of personal strength and confidence.

Your partner for success,

Coach Julie ~ Nurturing Your Success

I know Those Homes Sold For That Much...But They Were Foreclosures and My Home Isn't

 So you've decided to sell your house and you are well aware of the fact that homes for sale in your community have involved foreclosed properties. All those homes that sold in the past 6 months were bank owned and they weren't sold by an individual, but instead, they were sold by those evil banks that got us into this mess in the first place. Not only did the Cretans foreclose on the homes and kick out homeowners, but now they step in and undercut the prices of other sellers and steal their buyers. But we don't have to price our house the way the bank does, because ours is not a foreclosure, so we really don't have to worry about because ours is worth more.

 Well welcome to the harsh reality of what I like to refer to as the truth. It's not always a fun thing, but you have to face it if you want to be successful in today's market. All those foreclosed properties in your community do affect your home. They do lower the market value in a lot of cases, because the banks do lower their prices to aggressively market their properties. As a result, the market value of comparable properties like yours does change.

 I know that's not at all what you wanted to hear. In fact I didn't really want to say it, but it needed to be said. You can't ignore the facts.

 The facts are unfortunately something that we all have to face and foreclosures and bank owned properties are a fact of life today. They are your competition and you do have to price your house for sale in accordance with the current market value for your community.

 Another horrible fact to face is that pricing is one of the most important things to focus on when selling a house. Having a house that's in great condition is also extremely important, but if you find yourself overpriced by ten or twenty thousand dollars, you don't stand a chance of moving anytime soon. So while you may be able to get a little more for your house due to it's better condition, you may want to lose the theory that your house isn'tt affected by foreclosures. Unfortunately, we all are, and we just have to accept it and move on.

 

www.JLBoney.com

So....how do we get rid of potted marijuana plants before the open house?

Six feet tall, big pots...all twelve of them! CANNABIS!

They look like lovely plants. Certainly can be used as ornamental trees on the wide balcony. The smell is....well....quite strong.

But they don't belong in the house. And if the word got out, who knows who will want to break down the door and get to these healthy, thriving plants, HUGE plants!

The former tenant (cancer survivor) of this house is licensed to grow them for medicinal purposes. But he has since vacated and left these really BIG potted plants that are just too difficult to move.

So jump right in, tell me what YOU will do!

Do we cut them down? Imagine putting the trimmings into huge trash bags and bins for the trash collector to pick up.

Do we put the clippings outside and burn them? And get the entire neighborhood high? In a bone dry hillside lot known as a fire-hazard?

Do we ask friends to help move them? But what if they get stopped for possession?

Interesting dilemma. I'm getting the giggles just thinking about it.

By the way, it's not on the MLS, no one knows where it is....so don't ask me :)

 

 

A letter for your broken heart...

This weekend, I heard some heartbreaking news. My friends' 17-year-old son took his own life after a series of cruel and malicious hazing incidents surrounding his football team. In Dakota's memory, and the memory of my two other friends who have taken their own lives, I am writing what I wish they could have known before they made that decision.

Dear friend,

I wish someone had told me this, when I was young. I'll tell you now, so you can learn what all "grown-ups" know: Who you are in High School is so little of who you are in life. Everything about that microcosm of life is an illusion. Don't buy into it!  Anyone who is cruel and heartless to you now is of no value in your future. Imagine, for a moment, that this is as good as it gets for their life. In fact, they will probably soon be back to living with their parents!

The people you will remember are those that were kind to you when times were tough. Those who make you laugh. Invest your time in those people--surround yourselves with them. Block out the noise made by people with no other outlet for their heartache than to inflict pain on other people. Someday, they'll be serving you hamburgers through a little glass window.

I wish I could tell you that your worst day when you are 17 pales in comparison to the joy and delight the rest of your life holds. As awful as it seems on a really bad day, you are just beginning to see the fabulous gifts you hold--and what amazing things the future holds for you.

I wish you knew that even when you have made really horrible choices, your life has infinite value. You are unique, wonderfully made, and impossible to duplicate. You are forgiven, chosen by God's grace, and held as a precious gem in His hands.

Your life, your presence, makes your parents marvel at their incredible good fortune to have had a hand in your making. From your first moments on earth, they could never have imagined what an incredible gift your life has been in shaping their life. Your grandparents cannot describe how proud they are of you--and of the legacy you help them leave behind.

Your friends cannot imagine a day without your laughter and smile.

Even in the hardest times, the core of you is stronger than anything you are facing. Your life, your spirit, and your future are wondrous and incredible in ways that cannot even be spoken.

There is a life ahead for you filled with joy and love beyond your ability to understand right now.

You need only wake up tomorrow and see beyond these tears to the possibility of a future beyond all your dreams.

And finally...

I wish I knew you needed this letter before you left. Every day, in a thousand ways, you are achingly missed.

Beautiful Sunrises over Lake Worth

LAKE WORTH DEDICATES NEW FACILITIES

Summer Fun In Lake Worth

Have We Kicked Mortgage Brokers to the Curb Too Soon? Why Mortgage Brokers Will Survive

Today I got an e-mail asking me this:  Are mortgage brokers going to survive this economic meltdown?

My answer is YES, and it comes from my experience as an AUTO BROKER.

Over the last 25 years , franchised auto dealerships here in California have done everything in their power to get rid of auto brokers.

Because dealers held all the power (money along with an organized lobby) and auto brokers were small, independent business people, guess who got the most attention from the lawmakers in Sacramento?

Politician thinking: "Money from the big guys? Or protect consumer choices?" Hmmmmm...what should any self respecting politician do?

Since the "real" agenda of the dealers was to put auto brokers at a disadvantage, they had to prove this point to lawmakers: auto brokers are scumbags who do not deserve to sell cars to the public. 

So every car deal gone bad was blamed on the fact an auto broker was involved. Every little thing wrong with the car was because it wasn't delivered at the dealership. The media chimed in...because that's what media does.

And then the inevitable: "Broker laws" were enacted. Stupid, idiotic rules that made it harder for people to do business with auto brokers.

After all, the public needed to be "protected" from auto brokers. And you know how "protection" comes with another layer of cost. (think HVCC).

In spite of everything, consumers continued to LIKE buying and leasing cars without setting foot in the dealership.

Or should I re-phrase this? People continued to HATE buying cars from dealers, and saw brokers as a great alternative.

Surprise! Auto brokers continued to thrive, even though laws and regulations rained down from Sacramento.

My position was always this: If there was not a market for auto brokers, there would not BE any auto brokers.  Never underestimate the sheer power of pure market demand for a product or a service. Even laws can't kill it.

WHY MORTGAGE BROKERS WILL NOT BECOME EXTINCT

When a dealership would say this to me "We don't do business with brokers", I used to say this: "Too bad, because you don't know any other lady that buys 10 cars a month." Yep, nine times out of ten that single sentence was just too tempting and I got the car I wanted.

MORTGAGE BROKERS have been blamed, battered, bruised, and kicked to the curb by the very banks that used to woo them. The real estate industry has all but written mortgage brokers off. Banks, with all of their taxpayer money, must feel pretty smug about the fact mortgage brokers have been all but driven out of business.

But are we writing off mortgage brokers too soon? What about this?

1. In spite of everything, people continue to LIKE getting a mortgage without having to step foot in a bank. They complain about the impersonal service of banks, the fact banks are closed on weekends, and don't answer their phones on the weekdays, anyway.
2. The line between a bank saying  "We don't do business with brokers" and "we need brokers to bring us more loans" is very, very fine.

So fine, in fact, that I believe it could be easily broken. Here's why: 

1. Banks could not assemble a workforce that is more skilled than the legions of mortgage brokers left in the business.
2. Those same mortgage brokers are sitting on databases FAT with great clients who are loyal to the BROKER, not to the BANK who holds their loan.
3. One little uptick in the real estate market is going to leave most of the big banks hopelessly understaffed when it comes to mortgage people.

 

Written by Janet Guilbault, Mortgage Banker/Broker based out of the San Francisco Bay Area