June 16, 2009

Defaulting California Homeowners Start A Standing 90 Count

"The California Foreclosure Prevention Act, signed by Gov. Schwarzenegger in February [and implemented yesterday], adds 90 days onto the time period between when homeowners default on a loan and when their home can be repossessed in foreclosure. Banks can avoid the 90-day holdup by having a comprehensive program in place to make mortgages more affordable by reducing the interest rate, extending the loan term, or reducing or deferring some of the principal."

Foreclosure freeze prods banks to modify loans [SFGate]

First Published: June 16, 2009 7:30 AM

Comments from "Plugged In" Readers

The Editor posted:

“The California Foreclosure Prevention Act, signed by Gov. Schwarzenegger in February [and implemented yesterday], adds 90 days onto the time period between when homeowners default on a loan and when their home can be repossessed in foreclosure.”

The quote is missing the sentence:

“and will enable Realtors ®, developers and the print media (who are in bad financial shape and need more ads from Realtors ® and developers) to run big headlines that say things like “FORCLOSURES DROPPING TIME TO BUY” and Dramatic Drop in Foreclosures means Prices going Up Soon”…

Posted by: FormerAptBroker at June 16, 2009 8:02 AM

This is not like the various moratoriums passed last fall. This one is so weak, has so many exemptions, and applies to so few lenders (because they are already doing what the law requires), that it will have effectively no impact.

Posted by: Trip at June 16, 2009 8:10 AM

“and will enable Realtors ®, developers and the print media (who are in bad financial shape and need more ads from Realtors ® and developers) to run big headlines that say things like “FORCLOSURES DROPPING TIME TO BUY” and Dramatic Drop in Foreclosures means Prices going Up Soon”…

Was that so sorely lacking? Surely the NAR, local developers and the print media knew that self-aggrandizing blog posters with nebulous and tenuous at best links to local r.e. would pick up the snark-slack.

Posted by: anonn at June 16, 2009 8:45 AM

"Was that so sorely lacking? Surely the NAR, local developers and the print media knew that self-aggrandizing blog posters with nebulous and tenuous at best links to local r.e. would pick up the snark-slack"


And the winner of this year's real estate blog Pulitzer: fluj

Could you now please say this in French?

Posted by: anon at June 16, 2009 9:01 AM

Who really thinks banks will accept more loan modifications? Banks are a bit busy right now gaming the Fed who nicely lends them free money.

Once these 90 days are eaten up the pipeline of foreclosures will proceed churning it way through. Just like last year.

Posted by: San FronziScheme at June 16, 2009 9:23 AM

Actually, this pseudo foreclosure moratorium gives people like me more ammunition to tell people not to buy now, to wait for 90 days (in spite of the fact that, as Trip points out, it will have almost no effect because almost every bank is already exempt).

If the Realtors are behind this, they are shooting themselves in the foot.

Posted by: tipster at June 16, 2009 9:35 AM

I don't get the cheerleading on prices. The smart realtors should be out there trying to get foreclosure listings from the banks, and firesale them to get some transaction volume going. Who really cares what the price is as long as you can move around $8-10M a year in inventory (whether its $200k per property or $1.2M), you will personally be fine.

Posted by: Jimmy (No Longer Bitter) at June 16, 2009 10:10 AM

>If the Realtors are behind this, they are shooting themselves in the foot.

Huh? Why is anyone suggesting that realtors are behind this? I did not find anything in the article to suggest realtors had anything to do with this. Have realtors become such accomplished political and media puppetmasters now that we need suspect them behind everything?

Posted by: Rillion at June 16, 2009 10:18 AM

Jimmy (No Longer Bitter),

You are discounting an chunk of the Realtors who also played the game and invested in SF RE (rentals, flips). What will happen to their own investments if they help prices to the downside? They have no interest in seeing it happen.

This is the reason why monopolies are unhealthy. The trade-off to having a quasi-monopoly should be to have restrictions on insider trading.

Someone who can have an impact on the supply/demand should not be allowed to play the game along with regular buyers. This is an invitation to a bubble.

Let me put it this way: The cookie jar is open and nobody's watching. What do you think will happen?

Posted by: San FronziScheme at June 16, 2009 10:20 AM

Just to be sure: I am not saying this is THE cause of the bubble. Just one of its many many components. The money was way too good for way too many people for anyone to say "Stop".

Posted by: San FronziScheme at June 16, 2009 10:35 AM

"Who really thinks banks will accept more loan modifications? Banks are a bit busy right now gaming the Fed who nicely lends them free money."

It took a while, but I got a loan modification pretty easily by reducing my income temporarily. I'm saving 700 a month and amortizing in the same amount of time. I know I can't be alone.

Posted by: mjp at June 16, 2009 10:44 AM

RE salespeople have little if anything to do with the foreclosure moratoriums.

the foreclosure moratoriums are at the request of the financial sector and also our government "elite"

Posted by: ex SF-er at June 16, 2009 10:46 AM

nebulous and tenuous at best links to local r.e.
FAB was disassembling refrigerator's at his parents' rental properties long before you took your first ride on the Gemini.

Posted by: EBGuy at June 16, 2009 11:12 AM

How do the loan mods work now? My wife is having a baby next month and so she'll be out on disability (for 6 weeks, then no pay for 4). Since I own my business, I could "reduce" my income as needed (to zero if necessary).

So would that be an opportune time for us to seek a loan modification? Anyone out there who knows how to game the system care to share?

Posted by: Jimmy (No Longer Bitter) at June 16, 2009 11:17 AM

Sounds to me you are in perfect position to partake in some goobmint cheese... your credit rating may have to take a temporary hit.

Everyone else can try the "government cheese" flavored ice cream:

http://www.gourmet.com/restaurants/2009/06/humphry-slocombe-and-the-reinvention-of-ice-cream

:)

Posted by: chuckie at June 16, 2009 12:34 PM

anonn rode the Gemini at the '78 opening, was FAB really disassembling frigs then.

Posted by: sparky-b at June 16, 2009 12:59 PM

I think he probably was (and waterbeds, too). Here's the post where FAB talks about his days as forced child labor.

Posted by: EBGuy at June 16, 2009 2:18 PM

sparky-b wrote:

> anonn rode the Gemini at the '78 opening,
> was FAB really disassembling frigs then.

I was a High School Sophomore in 1978 and I was already a seasoned apartment maintenance guy by then. I didn’t get my license until 1979 so I would ride my bike (with a 40 pound took box held to the rack with bungee chords) around after school to fix stuff. It was not all work and I did get to have some summer fun riding Willard’s Whizzer and the Tidal Wave. I also spent a lot of time “raking” shag carpet (with a special plastic rake) since you could not rent an apartment in 1978 unless it had shag carpet (we used to put “SHAG CARPET” in all caps in every newspaper ads).

P.S. Just last week I disassembled a fridge… I had a tenant call to tell me that his freezer was working fine, but the fridge was hot (this usually means that ice is blocking the vents to the fridge due to a bad defroster). I drove over and had him empty his fridge and freezer while I rolled a fridge from an empty apartment with an appliance dolly to his apartment. I took the fridge and let is defrost in the water heater room until the next day. When I pulled the back of the freezer off I didn’t even need to use my continuity tester since I could see that the heating element was broken inside the glass defroster tube. A quick trip down to Marcone Supply (in the old API building) for the in stock part and I now have a working fridge again (I bet anonn thinks I am just making this up and I’m just a recent immigrant posting to the site to practice my English)…


Posted by: FormerAptBroker at June 16, 2009 8:56 PM

OK fine. You know your way around a refrigerator. Doesn't mean you have a historical perspective of the SF marketplace that enables you to insert apropos of nothing realtor and developer slams every single time.

Posted by: anonn at June 17, 2009 8:12 AM

Raking carpet... hilarious. Much before my time so it is quite enjoyable to hear the stories, and yes I am being honest.. so thank you.

Posted by: gowiththeflow at June 17, 2009 10:53 AM

On a serious note. For those of you with experience in renting places. Regarding rental income relative to borrowing money: do the banks let you count this as "income" and if so what is the duration you need to rent out to qualify it i.e. W2 income typically requires 1 year of proof, self employment income they like to see 2 years etc.?

Posted by: gowiththeflow at June 17, 2009 10:58 AM

gowiththeflow - I've never had a loan officer request to look at the books. I just told them the current rental income and the officer used that number, deducted 25% for vacancy, and then a few more deductions for maintenance+taxes.

Posted by: The Milkshake of Despair at June 17, 2009 12:06 PM

@Jimmy re: loan modifications

The key is to prove "hardship" to the lender there are two primary methods:

- mortgage late(s) - most lenders will not consider you for a loan modification until you have a mortgage late

- high debt to income ratio - you want to have your debt to income ratio close to 100% (net income). Because you're self employed the lender will want to see a current P&L - reducing income to zero won't work as that will show no ability to repay

let me know if you have any additional questions

Posted by: concerned at June 17, 2009 2:00 PM

Milkshake thanks.

Posted by: gowiththeflow at June 17, 2009 2:26 PM

re: loan modification

I would think they wouldn't talk to you as long as you have some equity in the place. Here time is your friend... if you're not there yet, you will soon be.

Posted by: chuckie at June 17, 2009 3:02 PM

This is going to be problematic... because my wife is never going to default for no real reason other than gaming the system ... plus she had a 65% LTV in 2003. Not even close to underwater yet.

Looking at the company P&L will definitely screw up any modification attempts & I have no debts at all...

Damn!! I wanted my freebie loan mod just like everyone else who doesn't deserve one.

That's what you get for being "responsible" these days.

Posted by: Jimmy (No Longer Bitter) at June 17, 2009 3:14 PM

Jimmy - It's like medical insurance. Everyone pays roughly the same rate though some people expose themselves to more health risks than others.

Insurance has it partially right though, charging smokers more than non-smokers for example.

Posted by: The Milkshake of Despair at June 17, 2009 6:47 PM

Medical insurance?! What?!! Let's see, one is a program to bail out people who spent beyond their means and knew it ... and the other is a program to insure people against the possibility of a disease or accident over which they have essentially no control (except for smokers, obviously).

I don't see the connection, really. Please explain.

Posted by: Jimmy (No Longer Bitter) at June 17, 2009 6:52 PM

Jimmy - what I meant was that not all risk factors are taken into account in insurance policies. If two people have the same age, gender, etc but differ in the following ways :

Rick Risky : subsists on a diet of potato chips, ding dongs, cheap vodka, deep fried pickles and crystal meth. Rides his 1100cc Yamaha cafe racer at very high speeds to weekend skydiving. Main exercise centers around beer pong.

Mike Mildmannered : Eats a balanced diet heavy on fruits, vegetables, and vegemite. Walks 2 miles daily to his yoga and meditation sessions. Plays a solid hour of tennis thrice weekly.

I think that in this case Rick carries a higher risk of coronary disease as well as exposing himself to more physical injury. He'll likely run up a larger medical bill.

Maybe the health/mortgage insurance analogy is a reach, but there are some similarities. Those who are cautious with their physical or financial health end up footing the bill for those who are not.

Now about that 100% wood fired meal - Yum ! Gourmet backpacking ! Send the full menu out sometime.

Posted by: The Milkshake of Despair at June 18, 2009 10:27 AM

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