The number of Americans who owe more on their mortgage than their home is worth fell in the third quarter.  This sounds like good news until you realize the decline was not caused by rising home prices (they didn’t rise in the third quarter).  Instead, the numbers fell because lenders aggressively drove more homes into foreclosure.

View this map and table to see how Hawaii (or your state) compares to the rest of the Nation.  Compared to other states, Hawaii’s statistics look pretty good.

According to CoreLogic, the number of underwater mortgages fell to 10.9 million (23% of all U.S. homeowners with a mortgage) at the end of September.  Should home prices fall in 2011, more owners’ mortgages will go underwater.  Underwater borrowers pose a serious risk because they are far more likely to default if they lose their job or experience other financial setbacks.  Once underwater, it’s nearly impossible for them to refinance and take advantage of today’s low mortgage rates.  In addition, they are unable to sell their homes unless they cover the shortfall or obtain lender approval for a short sale.

Future home prices will determine how long borrowers remain underwater.  Even if prices are flat, Federal Reserve economists estimate half of underwater borrowers will still be underwater five years from now.  Borrowers with small amounts of negative equity will probably continue to pay their mortgage unless they lose their job, etc. 

The underwater problem could weigh on housing markets because homeowners without equity are less likely to spend money to maintain their home.  Finally, if more homeowners (even those able to make their monthly mortgage payments) decide to strategically default and abandon heavily underwater properties, distressed sales will continue to hinder the housing recovery and the overall economy.

]]> http://michael-zimmerman.com/2010/12/20/foreclosures-decrease-number-of-underwater-homes/feed/ 0 http://michael-zimmerman.com/2010/12/16/second-mortgages-derail-short-sales/ http://michael-zimmerman.com/2010/12/16/second-mortgages-derail-short-sales/#comments Thu, 16 Dec 2010 10:16:44 +0000 Michael Zimmerman http://zimmerman.realty-buzz.com/?p=3971 Continue reading Second Mortgages Derail Short Sales]]>

Homeowners across America are trying to avoid foreclosure by conducting a short sale (sell the home for less than the amount owed on their mortgage).  Many of these owners have two mortgages on their home.  Unfortunately, standoffs between lenders over a few thousand dollars threaten to disrupt the short sales.

First mortgage lenders typically allow no more than $3000 in sale proceeds to go toward the second mortgage.  Some second mortgage lenders are playing hardball and holding out for more than $3000 and when this happens, everyone stands to lose.  This is one thing that will slow the current housing recovery.

Most first mortgages are guaranteed by quasi-government agencies like Fannie Mae and Freddie Mac.  On the other hand, many second mortgages are held by credit unions and banks.  If homeowners are paying the second mortgages on time, the banks are unwilling to write off the second mortgages even if the borrowers owe more than their home value.  They may be able to pursue the borrowers’ assets after foreclosure and this leads to unnecessary foreclosures.

According to the Wall Street Journal, 11 million homeowners owe more than their homes are worth and more than a third of 1.3 million properties in some stage of foreclosure have at least two mortgages.  To sell, those homeowners must cover the shortfall or request the bank take a loss on a short sale, but second mortgages have become one of the biggest roadblocks. 

Many second mortgages are worth next to nothing in a foreclosure because home prices have fallen so sharply.  Nevertheless, second mortgage lenders feel they have nothing to lose by holding out for something more than $3000.  In many cases, it makes good business sense for the first mortgage lender to pay more than $3000 to avoid sending the home into foreclosure.  Ultimately, it’s the second mortgage lender’s decision whether they want to save homeowners from foreclosure by approving a short sale.

Are you looking to sell, but are afraid you owe more than your home is worth? 
If so, contact Michael Zimmerman today or call 808-457-9683 to schedule a personal consultation.

]]> http://michael-zimmerman.com/2010/12/16/second-mortgages-derail-short-sales/feed/ 0 http://michael-zimmerman.com/2010/06/26/short-sale-opportunities-in-honolulu-real-estate/ http://michael-zimmerman.com/2010/06/26/short-sale-opportunities-in-honolulu-real-estate/#comments Sat, 26 Jun 2010 10:26:55 +0000 Michael Zimmerman http://zimmerman.realty-buzz.com/?p=3089 Continue reading Short Sale Opportunities in Honolulu Real Estate]]>

The current recession has created a few opportunities for Honolulu home buyers and investors.  One of those opportunities is the short sale.  Basically, a short sale results when the owner owes more to the lender than their home is worth.  For sellers, a short sale is a means to avoid foreclosure.  For buyers, a short sale may be a great investment opportunity, but each home must be carefully evaluated. 

Short sales are not without drawbacks.  For example, the procedure can be lengthy and frustrating because the lender must approve the sale.  Depending on the lender, approval can take up to six months.  In addition, the home may not be in good condition.  Think about it; if the home owners were having difficulty making payments, they may not have kept up with the maintenance.

Below are a few suggestions to help you get through a short sale purchase.  First, know what the home is worth.  I can provide a Comparative Market Analysis that will list the most recent sale prices in the neighborhood.  You may ultimately pay less than the home’s value, but submitting an offer that is too low will probably be rejected by the lender.  Second, be prepared and have your money ready.  If you will finance the purchase, do your mortgage homework before you enter the short sale process.  Last, be patient.  The process can be long and waiting it out, while tiring, is unavoidable if you want the purchase to succeed.

]]> http://michael-zimmerman.com/2010/06/26/short-sale-opportunities-in-honolulu-real-estate/feed/ 0 http://michael-zimmerman.com/2010/02/12/are-you-considering-a-short-sale/ http://michael-zimmerman.com/2010/02/12/are-you-considering-a-short-sale/#comments Fri, 12 Feb 2010 10:12:47 +0000 Michael Zimmerman http://zimmerman.realty-buzz.com/?p=2482 Continue reading Are You Considering a Honolulu Short Sale?]]>

Disclaimer:  Consult your attorney and your CPA to ensure you fully understand the ramifications of a short sale.

Given the state of our economy, it appears short sales are becoming more popular as unemployment drives some folks toward foreclosure.  Hawaii foreclosures rose in 2009, destroying owners’ credit in the process.  A short sale may have helped minimize that damage.  For a homeowner to qualify as a short sale candidate, generally, the following must be true:

1. The homeowner is in default - this means the owner is at least 30 days past the last day of most lenders’ grace period.
2. The homeowner has little or no equity in the property - the market value of the home is less than or about equal to the amount owed to the lender(s).
3. The homeowner has a legitimate hardship - the owner must be able to prove that a real hardship caused them to fall behind in their payments.  Examples include:

• temporary or permanent job loss
• significant pay cut
• divorce
• illness or death in the family
• increased property taxes
• decrease in property value
• increase in payment due to an Adjustable Rate Mortgage (ARM) resetting

If you are considering a Honolulu short sale, contact Michael Zimmerman for a free consultation.

]]> http://michael-zimmerman.com/2010/02/12/are-you-considering-a-short-sale/feed/ 0 http://michael-zimmerman.com/2009/05/18/do-you-qualify-for-a-honolulu-real-estate-short-sale/ http://michael-zimmerman.com/2009/05/18/do-you-qualify-for-a-honolulu-real-estate-short-sale/#comments Mon, 18 May 2009 11:18:03 +0000 Michael Zimmerman http://zimmerman.realty-buzz.com/?p=922 Continue reading Do You Qualify for a Honolulu Real Estate Short Sale?]]>

First, a disclaimer.  I cannot stress this point enough: consult your attorney, your CPA and your real estate professional to ensure you fully understand all ramifications of a short sale.

In just the last two weeks, I have received phone calls from three people who were considering a short sale.  Each has his/her own reasons for investigating the possibilities.  The usual reasons include large negative monthly cash flows and a desire to avoid foreclosure.  Here are three things many lenders look for when considering a short sale request:

• Financial Hardship - is there a verifiable reason that has or will cause you to miss a payment.  Examples that qualify are mortgage payment adjustment, a job loss, too much debt or a business failure.
• Monthly Shortfall – lenders need to be convinced that you cannot afford to pay your mortgage.  You will be required to provide a financial worksheet that demonstrates this fact.  The shortfall equation is simple:  total monthly income – total monthly expense = monthly shortfall.
• Insolvency - you must be able to prove that you owe more than you have in cash.  Insolvency can be proven in many cases, even though you may still have some money for living expenses.

First, a disclaimer.  I cannot stress this point enough:  consult your attorney, your CPA and your real estate professional to ensure you fully understand all ramifications of a short sale.

If you must sell your home and owe more than it is worth to sell, a short sale may be an alternative.  Several myths have evolved over time, so it’s imperative to understand the realities of your situation.  Short sale myths include:

• Short sales are impossible and never get approved.  Short sales are more difficult, but not impossible.  They don’t happen over night.
• Banks don’t accept short sales.  In reality, most banks will do all they can to avoid a foreclosure.
• You must be behind on your mortgage to negotiate a short sale.  Many lenders focus on verifiable hardship, monthly cash flow shortfall and insolvency; not just people in default.
• Buyers avoid short sales.  Some agents report that buyers are actively looking for short sales.
• Listing your home as a short sale is embarrassing.  Recent figures show that 1 out of 5 U.S. homeowners face this situation, so it’s more common than you think.
• Banks prefer to foreclose.  Banks do NOT want to foreclose.  Banks, investors and the federal government have all publicly stated that if a person qualifies for a short sale, the deal should be considered in good faith.
• There is not enough time to negotiate a short sale before my foreclosure.  Many lenders will halt a foreclosure up to the final day of the process, with a legitimate contract.