The Mortgage Man

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Archive for Foreclosure

When Is The Best Time To Buy A Home?

The best time to buy a home is when buyers have more power in the transaction than sellers do.

Buy low and sell high is a simple concept, and it is the most important rule for investing.  When the market was “hot”, I have closed more than one real estate deal (dozens in fact) where the competition was so tight that they bought the unit sight unseen.  I found this fascinating at the time.  And while most transactions like this where done on vacation properties, it was still a bit surreal to see buyers buying a $500,000 condo unit entirely over the phone.  It was like a game of musical chairs, and those who were still speculators when the music stopped are either in foreclosure or bankruptcy or both.

That market is long gone, and that is a good thing.  When there is so much competition among buyers that they are willing to buy a condo over the phone, it is clearly a seller’s paradise.  It appears as though the opposite is true today.  In a time where sellers are giving aware cars and vacations and plasma TV’s as incentive to buy their home, there is no question that the tables have turned.

While I write this post from Pensacola Florida, it is near impossible for me to make a blanket statement that anyone reading this in any area of the country should run out and buy something now.  What I can say is that real estate is highly localized, and because it is localized, it is important for you to get the facts about your local market.  Over the next year, we will see a nationwide bottom in the housing market.  During that time, some savvy buyers are going to get into property at the lowest price they will ever see.  Real estate has not dropped in value this much since the great depression which was almost 80 years ago.  To think that this buying opportunity will repeat itself in your lifetime is unlikely.  Even one of the most famous real estate investors, Donald Trump, said on Good Morning America this morning that this may be the best buyers market that has existed ever.

If you are even considering buying a home to live in or for investment property, you need to get your finances in order now, TODAY, to be prepared when the right deal comes along.  Lenders are more restrictive on credit criteria today than they have been in years, and the days of buying a home with no money down are virtually dead (with the exception of VA and USDA Rural Housing loans).  Check back in the coming days as I will be adding more buyer resources such as how to save money for down payment, and how to improve your credit scores.


Celebrities In Foreclosure – Latrell Sprewell

Even though he once turned down a 3 year deal for $21 million, Latrell Sprewell might re-think that deal today.

MILWAUKEE — Former NBA star Latrell Sprewell‘s home is up for foreclosure and his yacht sold at auction to help pay off the $1.3 million he owes on the boat, according to court filings.

Sprewell, who once turned down a three-year, $21 million contract extension saying, “I’ve got my family to feed,” has apparently fallen on tough times.

Latrell SprewellSprewell

RBS Citizens NA, or Citizens Bank, filed a foreclosure suit last week in Milwaukee County for the $405,000 home Sprewell bought in the Milwaukee suburb of River Hills in 1994.

In court documents, the bank said Sprewell owed $295,138 in outstanding payments plus interest.

Sprewell failed to make his mortgage payments of $2,593 per month from September 2007 to January 2008, the documents said.

The Associated Press tried to reach Sprewell for comment Monday but a telephone number in his name was disconnected. A message to one of his attorneys, Robert A. Gist of Atlanta, and an agency in New York were not immediately returned.

The 37-year-old Sprewell played 13 seasons in the NBA for the Minnesota Timberwolves, the New York Knicks and the Golden State Warriors. The Milwaukee native was a four-time All-Star, but perhaps best known for choking coach P.J. Carlesimo during a Warriors practice in 1997.

He hasn’t played professional basketball since turning down the $21 million extension from the Timberwolves during the 2004-05 season. He was making $14.6 million at the time.

Last month, Sprewell’s 70-foot yacht, named “Milwaukee’s Best,” was sold at auction for $856,000 to a man from Milwaukee.

It was originally worth about $1.5 million. The bank holding that mortgage, New York-based North Fork Bank, asked that it be seized to pay off $1.3 million in debt.

Sprewell’s firm, LSF Marine Holdings, hadn’t made its $10,322 monthly payments on time or maintained the necessary insurance on the boat, the bank said. Sprewell bought the yacht built by the Italian firm Azimut-Benetti in 2003, according to court records.

A federal marshal seized the boat last summer in Manitowoc, about 80 miles north of Milwaukee, where it was in storage.

The sale price means the bank is still owed about $500,000, and it said in court filings it plans to go after the rest.

Last week, prosecutors in New York said they’d drop their case against Sprewell, who was accused of assaulting his girlfriend in front of their children. Prosecutors in Westchester County said the charges will be dismissed in a year if Sprewell stays out of trouble.

Copyright 2008 by The Associated Press

Foreclosure Filings Continue To Soar

Foreclosure filings for last month were up 48% over the same period last year.

According to a recent article on MSNBC, 261,255 homes received some sort of foreclosure filing in the month of May.  This is an increase of 48% over May 2007, and a 7% increase from April.  Additionally, a report by Credit Suisse has predicted that as many as 6.5 million mortgages will fall into foreclosure over the next five years totaling 8% of the entire housing market.

Estimates are that between 50 and 60% of home owners in foreclosure will lose their homes.  The rest will be able to either sell or refinance.  Many of those sales will end up being “Short Sales”, meaning that they will sell for less than what is owed on the property in order to avoid foreclosure.

No “Hope Now” For Government Program

Hope Now government sponsored mortgage bailout program falls short.

While the Hope Now organization claims to have helped more than 1 million home owners since its inception late in 2007, a recent inquiry by another high ranking government official claims that the numbers are much lower.

For anyone who thinks that the government is going to swoop in and save you from your problems, here is yet another glowing example that government programs suck up tax payer money while providing little help.  According to a recent investigation by the treasury department, only 187,000 home owners have been helped by the program.  Of those, only 30,000 resulted in an actual mortgage modification.

This of course is no surprise to me, or most people in the real estate industry, but it is an example that you are better off in the private sector than muddling through a government program.  A press release posted on today makes mention of a new company here in Pensacola that is seeking a solution (or at least more help) for the problem with foreclosures.  In many cases, the problem is deeper than a modification.  If you can’t afford to keep the house, you are better off selling to avoid foreclosure so that you can be in a better position to buy in the future. is using the simple concept of a short sale to help home owners sell with no equity to escape foreclosure.

Perdido Key Condo Deals – Laplaya

Now is the time to get a steal on waterfront property.

Laplaya street view

Laplaya on Perdido Key is a beautiful 13 story condo located directly on the beach on Perdido Key, and there are units priced as low as $283 / square foot.  For those of you in different parts of the country, this may sound like a lot, but I assure you it is not.  To be under $300 / square foot is quite impressive for a luxury waterfront condo, and this is yet another example of the deals that can be had today as the result of a foreclosure.

One of the more distinguishing characteristics of Laplaya is the huge wrap around balcony.  It is hard to tell from the picture above, but the end unit balconies are some of the largest of any building in the area.  Laplaya with it’s sweeping views of the Gulf and first class amenities is a must see for any condo investor.

For a local real estate professional specializing in beach properties on Perdido Key, go to

Celebrities In Foreclosure – Ed McMahon

Ed McMahon, the American Family Sweepstakes spokesman, is reportedly $644,000 past due on his $4.3 million mortgage.

Ed McMahon, Host of Star Search and well known Johnny Carson sidekick is reportedly in default with his mortgage on his home in Beverly Hills.  According to the Los Angeles County Recorder’s Office, a notice of default was filed from a division of Countrywide Financial Corp. on February 28th.  Spokesman Howard Bragman says that 85 year old McMahon has been unable to work since a neck injury 18 months ago.

The house, located in the same subdivision as paparazzi favorite Britney Spears, has been on the market for $6.25 million for 2 years, and due in large part to recent publicity, has generated a lot more interest on the sale.  Talks with Countrywide are going well to help prolong foreclosure in the interest of a sale.

What Do You Do If You Have An Adjustable Rate Mortgage Coming Due?

Hundreds of thousands of adjustable rate 3/1 ARMs were originated in 2005, and will be resetting this year. So what do you do if you are faced with this?

Adjustable rate mortgage ARM

Millions of home owners nationwide are concerned about the economy, the real estate market, and the rising energy costs. As if that weren’t enough, many of them have a ticking clock on their mortgage rate that will be adjusting soon. Like sands through the hourglass, that day will eventually come and you can bury your head in the sand and hope that it goes away, or you can be proactive.

So, what are your options if your ARM is coming due?

  1. You can allow the rate to adjust if the difference in the new payment is negligible and you can still afford the payment after the adjustment. this will depend largely on the index that your loan is based on. If you have a treasury index loan, it is likely that you will have a larger adjustment than if you had a LIBOR index loan. This of course was just the luck of the draw at the time you got your loan as to which one had the better rate at the time. But, the LIBOR loan is more likely if you were in a non conforming type underwriting scenario such as “stated income” or “interest only” or both. If this is not a problem, you can sleep better at night knowing that your payment adjustment will not be the end of the world.
  2. If you can not afford the new payment, you may need to refinance into a fixed rate loan. Fixed rate loans are still very competitive right now, and as I write this, the national average is 6.05% for a conventional 30 year fixed rate mortgage (there is a lot of fine print with that quote that includes primary residence, 20% equity, no cash out at closing, etc.). If you have an adjustable rate, and you have equity in your home that will allow you to refinance, it may very well be worth it even if you take a higher rate than you have currently. For example, if your current rate is 5.5% and it will adjust this year with a maximum adjustment cap of 1%, you may consider refinancing at 6% for the long term security of knowing that the rate will never adjust again, rather than wait for the adjustable rate to move to 6.5%.
  3. If your overall financial situation has changed, and you can no longer afford the payment regardless whether you refinance or not, you have to sell. The government is not going to step in and save you, and neither will your mortgage company. All of the consumer protection discussions going on have nothing to do with changes in lifestyle, they directly address mortgage practices that took place at the time your loan was originated. So be aware, you have to be proactive, particularly if you are past due on your payment already.
  4. If you have no equity in your home, and you can no longer afford the payment, you have 2 choices: 1) Foreclosure, or 2) a Short Sale. A short sale is no easy task, and not everyone qualifies, but it is worth the hassle to not have a foreclosure on your record. A short sale, simply put, is getting a buyer to pay less than what you owe on the property, and convincing the lender to accept that as payment in full. This is not a new program, but it has exploded in popularity in the last year. This option will affect your credit in about the same way that a credit card account would where they agreed to settle for less than the amount owed. it is not a glowing recommendation on your credit, but it is significantly better than a foreclosure.

There are obviously more details involved in your situation than what I have covered here, but hopefully this helps to put your options out on the table.