This is fast becoming a Democrat/Republican issue. However, I doubt the Fed will let this happen.
Cities Weighing Mortgage Seizures Draw Attention in Washington
By Clea Benson | Bloomberg – Thu, Sep 20, 2012 11:54 AM EDT
U.S. regulators and lawmakers are seeking ways to keep local governments from using the power of eminent domain to seize mortgages and cut borrowers’ debt, citing concern about the potential cost to taxpayers.
The issue, which will be the subject of a Mortgage Bankers Association symposium today, has gained attention in Washington after the city of Chicago and California’s San Bernardino County said they would consider confiscating home loans. No community has taken the step so far.
The federal government is positioned to wield broad power in the debate because it owns or guarantees 90 percent of U.S. mortgages through government-sponsored enterprises and the Federal Housing Administration. Legislation introduced last week by Representative John Campbell, a California Republican who will attend the symposium, would bar Fannie Mae, Freddie Mac (FMCC), the Veterans Administration and the FHA from guaranteeing or buying loans in communities that seize mortgages.
Campbell’s bill “sends a clear message to municipalities considering eminent domain, Mortgage Bankers Association President David Stevens said in a statement. “If you do this, there will be consequences for your constituents, consequences that will severely impact not only potential home buyers and home owners, but the value of every home in your area.”
Local governments, whose tax bases are being eroded by foreclosures in the wake of the mortgage crisis, say they are being forced to act because lenders and federal officials have failed to find solutions for troubled borrowers. The city of San Bernardino, in San Bernardino County, declared bankruptcy last month.
Resolution Partners
San Bernardino County and two of its cities, Fontana and Hesperia, are weighing a plan advocated by San Francisco-based Mortgage Resolution Partners LLC, which may profit from managing aspects of it. Chicago’s city council held hearings on the issue last month.
Under the Mortgage Resolution Partners plan, lenders would be forced to sell mortgages of borrowers who owe more than their properties are worth so the debt could be reduced and refinanced. The plan targets mortgages in so-called non-agency securities, those without guarantees from U.S.-owned Fannie Mae, Freddie Mac or Ginnie Mae.
A firm such as Mortgage Resolution Partners, whose website describes it as a “Community Advisory firm working to stabilize local housing markets and economies,” could buy the loans at a discount to the homes’ value and modify them.
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Proprietary OC Housing News home purchase analysis
902 East HOOD Ave Santa Ana, CA 92707
$360,000 …….. Asking Price
$360,000 ………. Purchase Price
9/21/2012 ………. Purchase Date
$0 ………. Gross Gain (Loss)
($28,800) ………… Commissions and Costs at 8%
============================================
($28,800) ………. Net Gain (Loss)
============================================
0.0% ………. Gross Percent Change
-8.0% ………. Net Percent Change
-0.0% ………… Annual Appreciation
Cost of Home Ownership
——————————————————————————
$360,000 …….. Asking Price
$12,600 ………… 3.5% Down FHA Financing
3.60% …………. Mortgage Interest Rate
30 ……………… Number of Years
$347,400 …….. Mortgage
$90,709 ………. Income Requirement
$1,579 ………… Monthly Mortgage Payment
$312 ………… Property Tax at 1.04%
$0 ………… Mello Roos & Special Taxes
$90 ………… Homeowners Insurance at 0.3%
$362 ………… Private Mortgage Insurance
$0 ………… Homeowners Association Fees
============================================
$2,343 ………. Monthly Cash Outlays
($237) ………. Tax Savings
($537) ………. Equity Hidden in Payment
$15 ………….. Lost Income to Down Payment
$110 ………….. Maintenance and Replacement Reserves
============================================
$1,694 ………. Monthly Cost of Ownership
Cash Acquisition Demands
——————————————————————————
$5,100 ………… Furnishing and Move In at 1% + $1,500
$5,100 ………… Closing Costs at 1% + $1,500
$3,474 ………… Interest Points
$12,600 ………… Down Payment
============================================
$26,274 ………. Total Cash Costs
$25,900 ………. Emergency Cash Reserves
============================================
$52,174 ………. Total Savings Needed
The property above is available for sale on the MLS.
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Cost of Ownership Analysis
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Woodward Asset Capital Argues for Buyer Demand to Determine Prices
Woodward Asset Capital (WAC), parent company to software solutions OfferSubmission and VerifiedShortSale, expressed frustration in a release over how property values are currently determined. Rather than relying on BPOs and appraisals, the company said market demand from buyers should dictate home values.
“Existing models of valuation are inherently flawed because they are subject to human selection and error,” said Ronald Jasgur, WAC president, in a release. “23% of all listings in our systems consistently sell above the bank’s list price, which the client formulated using appraisals, BPOs and automated modeling. The only value that matters when negotiating an REO
or short sale is what the actual market is willing to pay today. The past is history; it’s no indication of what’s happening today or what could happen tomorrow. An appraisal is an estimate based on history. A BPO is an expectation based on history.”
Woodward Asset Capital shared data on properties that sold far above the BPO and appraisal price based on demand. One example was a foreclosed home in Chicago that sold for $154,157 when the list price was at $53,900 in June. The BPO valued the property at $50,000, and the appraisal at $49,000. The bank property had 75 hours.
Another foreclosure in San Diego had 76 offers and sold for $301,000 when it was listed at $204,750, but had BPO and appraisal values at $195,000 and $180,000, respectively.
“This data speaks to the fact that the traditional way of marketing distressed assets leaves a lot of money on the table. That’s a loss for everyone… servicer, investor, neighbors, and local taxing authorities. The industry cannot afford to continue to rely on outdated practices when available technology can help us determine true market value,” added Jasgur.
Both OfferSubmission and VerifiedShortSale work to ensure offers are to help maximize the sales price, move inventory faster, and prevent fraud.
WAC, headquartered in Southfield, Michigan, provides customizable technology solutions to help manage real estate sales and prevent fraud in the distressed asset marketplace.