Not Enough Agents to Combat Mortgage Crime

The FBI knew some of what was going on but did not have adequate staff to prevent the levels of mortgage crimes that arose during the bubble. Between the greed, negligence and lack of law enforcement the country, world actually, is financially devastated. If the devastation really is a "financial 911" and contributed in a large part by the housing bubble - then we may be our own worst (or second worst) enemies.

Considering that as a society we allowed ourselves unsustainable indulgences that really did not make any sense. How could one buy a house, do nothing and a few months later sell it again for a huge profit? People were making their living doing this. Something that had never been done before and historically should not have been possible. Parts of it were stupidity, part was greed, and part was criminal. In an article from the Seattle Post Intelligencer titled FBI saw mortgage fraud early one wonders how much of this disaster was preventable. Lets take a look -

The FBI was aware for years of "pervasive and growing" fraud in the mortgage industry that eventually contributed to America's financial meltdown, but did not take definitive action to stop it.

"It is clear that we had good intelligence on the mortgage-fraud schemes, the corrupt attorneys, the corrupt appraisers, the insider schemes," said a recently retired, high FBI official. Another retired top FBI official confirmed that such intelligence went back to 2002.

...
[John Falvey Jr., a former federal prosecutor who currently does white-collar criminal defense work in Boston] said that financial executives who deliberately chose not to learn the facts about dicey mortgage-lending practices in their companies -- who chose to be "willfully blind" to such practices and the subsequent securitization of those mortgages -- could be vulnerable to prosecution for securities fraud.

Both retired FBI officials asserted that the Bush administration was thoroughly briefed on the mortgage fraud crisis and its potential to cascade out of control with devastating financial consequences, but made the decision not to give back to the FBI the agents it needed to address the problem. After the terrorist attacks of 2001, about 2,400 agents were reassigned to counterterrorism duties.

...
Further complicating efforts to detect and prosecute mortgage fraud, banks and other mortgage lenders were making so much money from the constant churn of transactions and the continually escalating price of homes that the fraud that did arise simply didn't cost the industry enough money to raise their concerns.


...
When FBI Director Robert Mueller was briefed on mortgage fraud, "his eyes would glaze over," the first retired FBI official said. "It was not something that he would consider a high priority. It was not on his radar screen."


...
"The potential impact of mortgage fraud on financial institutions in the stock market is clear. If fraudulent practices become systemic within the mortgage industry and mortgage fraud is allowed to become unrestrained, it will ultimately place financial institutions at risk and have adverse effects on the stock market."

[Chris Swecker, then assistant director of the criminal investigation division, said in October 2004 before the House subcommittee on housing and community opportunity] went on to describe the scenario that ultimately wrecked financial havoc around the world: "Often mortgage loans sold in secondary markets are used by financial institutions as collateral for other investments. ... When loans sold in the secondary market default and have fraudulent or material misrepresentation ... these loans become a nonperforming asset, and in extreme fraud cases, the mortgage-backed security is worthless. Mortgage fraud losses adversely affect loan-loss reserves, profits, liquidity levels and capitalization ratios, ultimately affecting the soundness of the financial institution itself."

While the article is long, it is chock full of important information about what was known when and what was done or not done about mortgage fraud during the bubble.

The warning of the ripple affect onto the rest of the economy was forewarned within the government in 2004 - and still nothing. Another preventable disaster that was not prevented. People knew what was going on, what the affects could easily be, yet still nothing was done. Maybe worse than nothing - eyes glazed over. Mortgage fraud was too dull or complex to deal with! Shocking, sad and scary.

Happy Birthday

NJ HELOC Heaven turns 1 today!

Option Arms Defaulting

A very important update regarding the rising default rates for option arms from the Wall Street Journal via Calculated Risk. Since the article is behind a subscription wall we will look at CR's report -

Nearly $750 billion of option adjustable-rate mortgages, or option ARMs, were issued from 2004 to 2007, according to Inside Mortgage Finance ... Rising delinquencies are creating fresh challenges for companies such as Bank of America Corp., J.P. Morgan Chase & Co. and Wells Fargo & Co. that acquired troubled option-ARM lenders.

...
As of December, 28% of option ARMs were delinquent or in foreclosure, according to LPS Applied Analytics ... An additional 7% involve properties that have already been taken back by the lenders. ... Just over half of subprime loans were delinquent, in foreclosure, or related to bank-owned properties as of December. The nearly $750 billion of option ARMs issued from 2004 to 2007 compares with roughly $1.9 trillion each of subprime and jumbo mortgages in that period.


Nearly 61% of option ARMs originated in 2007 will eventually default, according to a recent analysis by Goldman Sachs ...

If 61% of the $750 billion in Option ARMs default, and with a 50% loss severity, the losses to lenders will be about $225 billion - far less than for subprime, but still a huge problem.


The key problem with Option ARMs is that they were used as affordability products, mostly in California and Florida, because buyers couldn't qualify for fixed rate mortgages or even regular ARMs. It should have been no surprise that most borrowers chose the negatively amortizing option; it was the only one they could afford!

The Goldman Sachs analysis is that 61% will default - we suspect it will be higher. The current data shows that before massive layoffs started 80% of option arm holders could only pay the minimum. We have to agree with an earlier Barclays prediction that it will be at least 80% defaults.

Since as the value of an option arm's holder property is declining the the value owed on their mortgage is rising - in some cases to 125% of the original purchase price. We gave this
example last June but it is worth looking at again since it puts the option arm issue in black and white numbers so the problem can be easily understood with some clarifications -

A Merced, CA house that was purchased at $400,000 may have a mortgage that has grown to $500,000 with a real current market value of $200,000, add in the $50,000 for foreclosure costs and the lender loses at least $350,000 from the original mortgage terms plus another $100,000 in lost accumulated interest . The owner could not afford the payments on a $400,000 property when the economy was strong and gas was affordable. It will be impossible to pay a $500,000 with a weak economy and a property now valued at $200,000. How long can the lenders and our economy sustain losses on these levels?

New Foreclosure Stats

Almost all of the foreclosure numbers we hear about come from RealtyTrac. While we have had some questions about their methods, their numbers have a big impact on the housing market, governmental programs and just about everything else. There is criticism that the Federal Government should be collecting their own numbers - not basing policies on RealtyTrac's data.

So it is good to have numbers from another source. Property Shark, a competing firm, has a press release titled New Jersey Foreclosures Up Only .95% Over Q4 2007, and Down 34% from Q3 2008; Essex, Bergen, Union and Monmouth Counties Had the Most New Foreclosures in Q4 2008 on the number foreclosure stats that they have found. Lets take a look -

Key Report Findings

· New Jersey Foreclosures up only .95% over Q4 2007, but down 34% from Q3 2008: Compared to Q3 2008 (3,054), the current number of new foreclosures (2,029) decreased 34% in New Jersey. However, when compared to Q4 2007, new foreclosures increased slightly (.95%).

· Essex (204), Bergen (197), Union (176) and Monmouth (167) counties had the most new foreclosures in Q4 2008: Essex County (204) had the highest number of new foreclosures in Q4 2008, followed by Bergen County (197), Union County (176) and Monmouth County (167). The New Jersey counties with the fewest new foreclosures in the quarter were Salem County (14) and Hunterdon County (18).

· Newark, Trenton, Paterson and Jersey City had the most new foreclosures among New Jersey cities in Q4 2008: The city of Newark (110) had the highest number of new foreclosures in New Jersey during Q4 2008. Trenton followed with 58 new foreclosures, while the cities of Paterson and Jersey City each had 55.

· Sussex (0.10%), Union (0.9%), and Passaic (0.8%) counties had the highest rate of foreclosures per household in Q4 2008: One in every 985 homes in Sussex County, one in every 1,113 homes in Union County, and one in every 1,217 homes in Passaic County were scheduled for auction during Q4 2008.
New Jersey Overview

· New foreclosure auctions: Compared to Q3 2008 (3,054), the number of new foreclosures in Q4 2008(2,029) decreased 34%. However, when compared to Q4 2007, new foreclosures remained were up slightly (.95%).

They have also included this chart illustrating the numbers per county -


This important data should be collected by the state's themselves. How can one make good policy based on questionable data. Just because it makes headlines does not mean it is accurate or valid. But until we receive data from the state, data from different sources is important will give a more accurate picture in which to base program and policies.

Home Equity Basics

It is good to review basics once in a while. Some may not even know the basics - like what equity means (it means the difference between the market value of a property and the claims held against it). During the bubble homes were ATMs - buy money and start withdrawing money. The funds seemed unlimited. Even those who put 0% down still managed to withdraw equity. The basics seemed not to exist during the bubble - like one needs equity to withdraw it. Now those old basics are back.

It is important to remind ourselves of them. The Maui Weekly has an good article titled Home Equity Line of Credit that gives us a good reminder about what a HELOC actually is. Lets take a look -

Most people believe that if they have a home equity line of credit, it can be accessed anytime the homeowner requests it; however, this is not the case.

Home equity loans, or HELOC, can have limits placed on them by lenders. Those limits are justified by lenders, who argue that declining home values make a HELOC more risky.

However, according to the Federal Deposit Insurance Corporation (FDIC), there are rules that must be followed when a lender wants to take such an action. FDIC rules require that the lender demonstrate a significant decline in the value of the property. A significant decline is an equity decline of at least 50 percent.

It is important to remember that the term “equity” does not mean the total value of the home. Equity can be reduced by an increase in the mortgage balance, or if home prices fall.

What can you do if your lender limits access to your HELOC? First, be sure you have been making your mortgage payments on time, and that you are paying the full amount due each month. Failure to do so gives the lender the right to limit your credit access.

Second, tell your lender that you want to review their decision to limit or suspend your line of credit based on a decline in the value of your property. Some lenders use an automated computer program to review property values, and mistakes can be made in that process.

Homeowners have rights regarding the HELOCs - but so do the lenders. Not keeping up the mortgage payment - goodbye HELOC. Properties that have lost 50% of their previous values - goodbye HELOC. For those applying for HELOCs - the appraised value is most likely declining everyday.

For example - Last year you might have owed $140,000 on a property valued at $200,000 and easily qualified. Now he property is only valued at $175,000 and you are being turned away. It is good to understand why.

Bigger Bonuses Please

Forget those Caterpillar folks - there is no way they can possibly work as hard as our nation's Wall Street crew. It is fundamentally important to our well being that the status quo must be maintained. Old executives should stay on - after all who knows the industry better. And spend tax dollars on heating for our elderly and poor? Wall Streeters are more appreciative and also know how to spend and make money - so they need our extra tax dollars to keep them in their lifestyles.

Since Wall Street did so fantastic over the past year it is only fair that various firms employees got bonuses. But for some strange reason only 12% received bonuses that were 50% or more larger than last year. No wonder the employees are so mad! This is a time that the nation should come together and support this poor neglected industry. Thank god for the government intervention so the good old times can last.

While some of the above sentiments may seem absurd to the rest of the country - apparently it is the feeling on the Street. From on article at MSNBC titled Wall Street Mostly Got Smaller Year-End Bonuses a survey reveals the annual bonuses - and the feelings about them. Lets take a look -

Most Wall Street professionals took home smaller year-end bonuses and nearly half were dissatisfied with their payout, according to a survey released Tuesday.

The survey, by eFinancialCareers.com, a unit of specialty jobs site operator Dice Holdings Inc, found 54 percent of respondents took home a smaller bonus this year.

More than a third reported getting a bonus that was at least 31 percent less than last year's, and 1-in-10 said their bonus was slashed more than 70 percent.

At the other end of the scale, 12 percent said their bonus was at least 51 percent higher than last year, according to the survey, which included responses from 900 currently employed people and was conducted earlier this month.


That reflects continued demand for talented finance professionals, despite one of the most turbulent years in Wall Street history, eFinancialCareers Chief Executive John Benson said.

"The future of the financial services industry may be opaque, but the industry has a vital role to play in the global economy," Benson said.

One in five respondents said they were not satisfied with their bonus, while another 26 percent said they were very dissatisfied. A majority said they expected to be job hunting in 2009.

So 46% percent of those that answered the survey received bonuses but were not satisfied with their bonuses. Our "tax-paying" feeling is just to fire the lot of the 46% that feel this way - anyone working at a bailed out company and answered that should be fired. But apparently it is demand that has kept them in their positions - not $350 billion of tax dollars.

Are they really that insulated that they feel justified for feeling very dissatisfied that as the economic viability is deteriorating they did not get enough money. Not only has nothing changed on Wall Street - apparently they do not even know the changes that the rest of the country is going to.

Do 46% of our best and brightest lack any sense of decency? Apparently!

More Huge Declines

Remember housing values only go up. Property is a great investment. Bubbles are for bathtubs. Until reports like this come out -

Home prices in 20 U.S. cities declined 18.2 percent in November from a year earlier, the fastest drop on record, as foreclosures climbed and sales sank.

That is from an article in Bloomberg titled November Home Prices in 20 U.S. Cities Fall 18.2%. Lets take a look at some more of the article -

The decrease in the S&P/Case-Shiller index was in line with forecasts and followed an 18.1 percent drop in October. The gauge started falling in January 2007, and year-over-year records began in 2001.

Record foreclosures have contributed to more than $1 trillion in losses worldwide that have prompted banks to shut off access to credit. While plunging values have made homes more affordable, they have also hurt household wealth, contributing to a slump in spending that’s likely to continue for the first half of the year.

“The housing market has not yet reached its bottom,” Neal Soss, chief economist at Credit Suisse Holdings in New York, said in an interview on Bloomberg Television. “People have to be in a position where they are not afraid of their most significant asset.”

...
Other housing reports have shown property values continue to weaken as foreclosures climb. The median sales price of existing homes fell 15.3 percent in December from a year earlier, compared with a 13.6 percent annual decline the prior month, the National Association of Realtors said yesterday.

...
U.S. foreclosure filings jumped 81 percent last year as more than 2.3 million properties got a default or auction notice, or were seized by lenders, according to RealtyTrac Inc., an Irvine, California-based seller of default data.

The faster the correction the faster we reach bottom... or does the bottom just keep getting further and further away. Since the only real bottom is zero - not 30% off peak or 20% off peak - we won't know the real bottom until some time after we hit it. But with all the recent layoff notices we still have some ways to go.

Reverse Mortgages Upon Death

Reverse mortgages have the clause that they must be repaid upon death of the owner, sells the property or moves. It sounds pretty simple. Especially the death clause - the owner no longer needs the property or the extra funds. Just sell the property and the entire reverse mortgage issue is closed.

But what happens when the house does not sell? Who is responsible for the upkeep of the property? And what restrictions are placed on the property until it does sell? The Montana Missoulian has a two-part series on reverse mortgages. Of course most of the articles discuss the wonderful benefits of a reverse mortgage - of course quoted by people having a financial stake in issuing more reverse mortgages. But the articles also provide a few negative issues in the reverse mortgage trend. The first article in the series is titled Turning home equity into cash. Lets take a look -

It's a viable option for people over the age of 62 who want to stay in their homes but have little or no savings, assets or other cash options to pay their bills. This is how it works: Senior citizens who own their homes can convert the equity in those homes into cash without having to move out or repay the loan each month, explained Greg Harper, Missoula branch director for the Consumer Credit Counseling Service of Montana.

The money paid to the homeowner, which is usually between 65 percent to 75 percent of the assessed equity, is paid back to the lender when the homeowner sells the home, moves into another living situation or dies and the home is then sold.


...
Federally insured Home Equity Conversion Mortgages (HCEMs) are the most popular reverse mortgages offered, and account for 90 percent of all such mortgages in the United States. In 2008, the number of HCEMs grew by 6.4 percent, amounting to 115,176 loans.


...
“We have been doing counseling for reverse mortgages for four years and we have had a 400 percent increase over the last four years,” [Tim Robbins, director of Consumer Credit Counseling Service of Montana] said. “Four years ago, we were counseling between four and six homeowners a month. Now we are seeing about 20 to 25 people a month.”


...
Robbins expects reverse mortgages will only get more popular as people live longer in general, and as more baby boomers - many of whom may be financially strapped in their sunset years - hit retirement age.


...
“Talk to your family and heirs about this,” Harper said. “They are going to be a party to this even if they don't think they are. The ownership of the property is something you will them - and they have to deal with that and the debt that comes with it.”

The good news is that 90% of Reverse Mortgages are federally insured the bad news is that there are now at least 128,000 reverse mortgages in the United States. And who knows if these include those innovate REX agreements and other new financial tools. The bad news also is that more and more people are getting them without understanding the full, long-range consequences of them. We know they are getting a big push from the industry - because right now the it is a perfect target for getting commission. People are financially strapped and a lender will be happy to give them additional funding from their homes.

At least not everyone is buying into the wonderful aspects of the Reverse Mortgage. Here is the lone comment from the article (which we are in agreement with) -

" A sign of the times, the elderly grasping at straws to make ends meet.

It all sounds good, but the BIG emphisis here is that bank get's the house, and they ain't doing it because they love you or aren't making a healty profit, so where do you think that profit is coming from - that's right - the elderly lose again. The Bank Always Wins, this is just another way for banks to make a buck and put you on the short end of the stick. In the end, if that means anything and in particular to the heirs - the estate if any is left is worth consideralbly less - Thank you once again to Mr Banker. They always seem to have a way of making you feel like they are doing you a favor by taking your money. "

The second article is titled Daughters inherit reverse mortgage's debt. Lets take a look -

The sisters have been waiting for that special someone for almost two years and now their time is running short to pay off a loan their mother took against the property.


...
Verne Bowers lived on a fixed income derived from a small pension from the railroad and Social Security. Money was always tight and so the extra couple hundred dollars meant a lot.

...
“We all thought it was a good idea,” Jarvie said. “Her health insurance was going up. Her prescriptions were costing more. The extra money helped her a lot.”


...
Under the terms of the reverse mortgage, the house cannot be rented while the state is part owner. Meanwhile, there are utility bills to pay, grass to mow and all the other maintenance that comes with homeownership.

“We're going to have to do something,” Clawson said. “It might mean that we'll have to get into our retirement accounts to pay off the loan. We need to do something different. ... It's such a nice home. Somebody is sure to want it someday.”

Of course with this article the pro Reverse Mortgage contingent is out in droves. With the "how dare you criticize Reverse Mortgages they are the most wonderful financial tools ever invented." Even though the daughters are very happy with the reverse mortgage and feel that it helped their mother stay financially independent. From the article's portrayal (not quoted above) the sisters are more disappointed in the housing market than having to buy up the property. Here are some of the comments -

Rick wrote on Jan 26, 2009 8:47 AM:

" Your article says this is the second in a two day report on reverse mortgages. Please make sure you add a third day and explain the differences between a state based reverse mortgage and the FHA based reverse mortgage because this situation wouldn't exist if they had done the FHA version as Mr Tucker states. "

Tom Sherwood wrote on Jan 26, 2009 5:09 AM:

" Your headline is misleading. It's one of the reasons that seniors are afraid of Reverse Mortgages. The amount that's owed isn't shown in your article because it's nominal. The sister's have only good to say about how the program helped mom, but you insinuate otherwise. You infer that taking the home being off the market has something to do with the small balance due on the Reverse. Learn to report the facts, fair and balanced, not just your advance opinions."

And Scott Tucker wrote on Jan 26, 2009 6:17 AM:

" An FHA-insured reverse mortgage would have been a much better choice.

An FHA-insured reverse mortgage is "non-recourse," and NEVER becomes the heirs' debt.

Scott Tucker
Author, Reverse Mortgages...from Z to A
Member, National Council on Aging
www.ReverseHomeLoanBook.com "

But at the website Mr. Tucker does not explain to his audience there is a difference types of reverse mortgages. He just cheers about the wonderfulness of reverse mortgages.

Q: "Are reverse mortgages safe?"

A: "You bet. Reverse mortgages are regulated & insured by the federal government…FHA to be exact. And they're safe in another way, too...since the FHA ensures that you can never go above 85% of your home's equity owed with a reverse mortgage, you can be sure that your heirs will get the house back, after you pass-away, with no less than 15% of its value, or 'equity,' left in the house for them."

See Reverse mortgages are regulated by the FHA so how could someone get a reverse mortgage that was not regulated by the FHA? Very confusing. Now for those that follow this day in and day out. Now take someone from the days that nothing but the fixed rate 30 years existed. Who is facing financial troubles. May have recently lost a spouse. Calls up an 800 number or visits a local office or hears a presentation at one of the local senior centers telling them these government backed (but not always) , fixed commission (but not always) loans will make their lives better.

We are anticipating another set of reports when reverse mortgage holders are faced with the challenges of leaving their properties because they need a more managed care facility. But the property becomes a prison. Or when the equity returns end and a 90 year-old suddenly has a huge income drop. Now they have no equity and no secondary source of income. Or their heirs are stuck with the property that has numerous restrictions.

But ignore all that. Listen to the experts who make commissions of the products and tell us "Reverse. Mortgages. Are. Wonderful!" Who would doubt the bankers or lenders in the financial climate? They do not sell shoddy products. They only have the best interest of their customers at heart. Just ignore those pick-a-payments and liar loans they were selling us 4 years ago.
Remember "Reverse. Mortgages. Are. Wonderful!" or maybe not...

Are we near the trough?

The housing crisis has been going on for 3 years now. Slowly at first, but this last year things seemed to have picked up steam. Everyone knows there is a housing crisis - and throughout the country everyone is feeling the effects (well most everybody.) But now reports are coming in that some economists see a light at the end of the tunnel. While the optimistic stories always seem to generate a good deal of press - eventually they will be correct. In an article from The Record titled Economist thinks housing will bottom out in 2009 brings us some of that economic optimism. However since it was buried in the Real Estate section and not front page, we think that The Record does not share the same optimism. Well, lets take a look at the article -

"We should come out of 2009 on an upswing. It won't be strong, and we will still have home price declines throughout the year, but it will be an upswing," [David Crowe, chief economist for the National Association of Home Builders] said.

Weighing heavily on housing market forecasts is the continued decline in employment. Frank Nothaft, chief economist for the mortgage agency Freddie Mac, said he expects unemployment will jump to 8.7 percent by the end of 2009, up from 7.2 percent today. And that in turn will push mortgage delinquencies and foreclosures higher, adding to an already bloated supply of homes on the market.

"The single most important trigger event for delinquencies is unemployment," Nothaft said. "Clearly there will be more significant job losses over 2009 and that will contribute to delinquencies on loans of all types." Particularly troubling, he said, is that even prime borrowers with conventional, conforming fixed-rate loans are defaulting in higher numbers.

The job picture also dims consumer confidence, which is at or near historic lows, "making them afraid to go out and buy anything durable, and that certainly includes a home," Crowe said. That is making it difficult to work off the excess inventory of homes for sale.

...
Home prices will continue their slide in 2009 and may well keep falling into 2010, said David Berson, chief economist for mortgage insurer PMI Corp. The company's winter forecast shows that of the top 50 U.S. metropolitan areas, more than half have a 50 percent or greater risk of seeing lower home prices two years from now as they do today. In some hard-hit markets such as Las Vegas, that risk is about 90 percent, he said.

If there is any good news for housing, it comes from mortgage rates, which are at historic lows and not expected to move up. But mortgage credit is not nearly as available as it was in the housing boom as lenders tightened underwriting standards throughout the last year, Nothaft said.

Notice how the only bright spot is the one that is not really determined by the markets - the mortgage rates. The blemishes on the bright spot are the stricter requirements for mortgages as well as the for every foreclosure there is a potential homebuyer out of the pool for at least seven years. And many who were burned by the bubble. Not everyone put 0% or had a pick-a-payment loan, there was another group that wanted a house and were afraid if they did not buy they would be priced out of the market. Perhaps with more homework, or if they stumbled across the bubble blogs, they would have had more caution and stayed out.

Another part of the bubble burn was that all of the institutional forces (lenders, realtors, the government) were pushing for more homeownership. During the bubble shopping was patriotic, and we had entered the ownership society with the potential of 100% homeowners - perhaps renting was too 20th century.

Now we are paying the price. But are we really near the trough? We think the builder was giving a pep-talk rather than a real economic analysis. This next year will get worse before things get better - remember those option arms...

Knife Catching in Oak Ridge

The bubble term knife catcher includes buyers who buy too early and pay too much thus causing financial injury. Many people bought at the peak and did not used the new and innovative (and now discontinued) financing schemes like no down-payment, pick-a-payment, piggy-back loan, or other type of exotic loans.

There were some unfortunate knife catchers that just wanted the American Dream of buying a nice house for their families. Some played by the traditional rules - 30 year fixed rate loan, 20% or more down-payment, no equity extraction. Yet this group is not immune to financial injury. Those that put the 20% down may have no lost the all that equity just through bad timing. Large losses and financial injury can be devastating for the individual it happens to, and sad for us side-line observers. Which brings us to today's featured property, a buyer who played by all the rules and still lost a lot of money.

Here is the property -

The Front of the House.

The Living Room with Hardwood Floors.

The Kitchen - Granite and Hardwood Floors.
(But no stainless?)

Here is the property info -

Single Family Property Status: Active County: Morris Year Built: 2006 4 total bedroom(s) 2.5 total bath(s) 2 total full bath(s) 1 total half bath(s) 11 total rooms Style: Colonial Master bedroom Living room Dining room Family room

Kitchen Basement Bathroom(s) on main floor Master bedroom is 17x14,Includes: Full Bath, Walk-In Closet Living room is 14x14 Dining room is 14x12,Formal Dining Room Family room is 18x13 Kitchen is 14x10 Basement is Full Hardwood floors Fireplace(s) Fireplace features: Living Room Parking space(s): 2 2 car garage

Parking features: Built-In Garage Heating features: 1 Unit, Baseboard - Hotwater, Multi-Zone,Oil Water Heater,Oil Central air conditioning Cooling features: 1 Unit Exterior construction: Vinyl Siding Roofing: Composition Shingle Pets allowed Approximate lot is 76X186 Lot features: Level Lot Approximately 0.32 acre(s)

Here are the financials -

• In July 2006 the property was purchased directly from the builder for $595,000.

• The original mortgage for the property was for $416,000 using the standard fixed-30 with Wells Fargo.

• The property is currently listed for sale with a realtor for $489,000.

• The 2009 property taxes are $9582.93.
  

What we know is that the homeowners bought at the peak-end of the bubble here in Northern New Jersey. At this point the home values were the most inflated. With the large down-payment of $179,000 which was just over 30% of the purchase. That was a huge bubble down-payment, and still very respectable. Just 2-1/2 years after purchase $106,000 in equity has already evaporated. Money that this owner put down on the property that is gone into the housing black hole.

If the property sells for full asking price with the realtors standard commission the current owner will lose approximately $130,450 during the 2-1/2 years of home ownership. Some investment! This is more than 20% of the original purchase price. That is a huge amount of money to have lost - especially on an individual basis. And this was a homeowner that was following all of the housing rules - no HELCO or equity extraction, having a large down-payment, taking a conservative loan (as opposed to the pick-a-payment ones). But they bought at the peak and are selling at a huge loss.

The sad part of the owners were that they basically were in the wrong place at the wrong time. Buying their home at the peak of the bubble.

Now lets look at the costs for the potential new buyer for this property. Paying asking price with a 20% down payment, with taxes, and a 30-year fixed today's Bankrate average rate of 5.41 the new owner will have to pay out approximately $2997.73 per month plus insurance and other expenses. That's a lot of money for a kitchen without the stainless appliances. A pretty hefty payment, which if following the 28% debt rule, the potential owners will need a gross income of at least $128,470. A high income needed in a time of great flux.

Hidden Costs in Refinancing

One of our earlier posts discussed the new rules for refinancing. Lenders are getting stricter on the credit scores, substantial equity is required and closing costs can be pretty expensive.

Lenders have realized once again that they should require more than a pulse and a property to lend someone hundreds of thousands of dollars. They need a good borrower who has a stake in the property and that will able to make the payments.

Today in the New York Times there is an article titled Costs and Tighter Rules Thwart Refinancing. It discusses even more new rules to the refinancing requirements. Lets take a look -

While rates are falling, borrowers face higher costs every step of the way, from rising fees for mortgage insurance to added costs that drive up the mortgage rate. At the same time, lenders have become more cautious about whom they will lend to, as more people lose their jobs, watch their incomes decline and fall behind on their bills.


...
Alternatively, consumers could just buy the mortgage insurance. But getting the insurance is no longer simple. Private mortgage insurers, which incurred large losses when the housing market collapsed, have become much more selective. They also are charging more for their service. Even if a borrower does qualify for insurance, the increased costs often wipe out any savings from refinancing, mortgage brokers said.


...
All borrowers pay a fee known as an “adverse market delivery charge” of 0.25 to 0.50 percent of the loan amount. Fannie, for example, also imposes a fee of 0.75 percent on owners of a condominium or cooperative apartment with less than 25 percent equity. Borrowers with a home equity loan or line of credit may pay another Fannie charge of up to 0.50 percent, depending on a variety of factors.

And borrowers who want to take cash out of their homes when they refinance — if they have enough equity — are charged a fee ranging from 0.25 percent to 3 percent of the loan amount, depending on their credit score and amount of home equity.

...
The cost of refinancing also varies greatly from lender to lender. “Pricing on mortgages today is erratic,” Mr. Stoffer [president of Stoffer Mortgage in North Canton, Ohio] said. “This is due to banks pricing aggressively and then pulling back dramatically as they get more volume than they can handle.”

Additional new rules include having an income and proving it! Showing that you make what you say you make has come back. Full documentation is back again. The lenders expect you to bring in recent, accurate paperwork - missing paperwork can mean no refinancing.

Likewise are the increased rules for having open home equity lines. The new rules require that equity be paid back before or adding additional points onto the new rate. The additional points might negate any real savings. The points can also be added on to those who want cash out. Once highly pushed now it is questioned and penalized.

Also requiring mortgage insurance to those that own less than 20% of the current value of their property. And those in the Jumbo loan category may even be faced with more stringent rules.


So lets summarize all of the new refinancing rules -

1. 740 is the new 720 - FICO cut-off wise.
   
2. You need at least 20% equity for the current value of your property. (Not the 2005 purchase price.)
   
3. Factor in the closing costs in the actual refinance calculator to determine your break-even time. (A lower rate with high closing costs may not really save much money.) Will you still be on the property when you actually start saving money?
4. Additional points for having a HELOC, HEL or taking cash-out. These additional points are ranging from 0.25 to 3. A huge range that may negate any real savings regarding refinancing.
5. Mortgage insurance required even on refinanced properties whose owners have less than 20% equity in the current value of their homes.
   
6. Proving one's income through full documentation is required again. The days of stated income loans AKA liar loans are long gone.

New Refinancing Rules

1. 740 is the new 720 - FICO cut-off wise.
   
2. You need at least 20% equity for the current value of your property. (Not the 2005 purchase price.)
   
3. Factor in the closing costs in the actual refinance calculator to determine your break-even time. (A lower rate with high closing costs may not really save much money.) Will you still be on the property when you actually start saving money?

Post more in comments if you know some we missed. While compared to the bubble these are very strict new rules. However overall they are really just the old rules that worked being re-applied. Rather than something new and innovative they are turning back to what worked.

Unfortunately these new rules leave many people out of the refinance frenzy. An article from the Orlando Sentinel titled Refinance? First, see whether you will save outlines the new refinancing issues. Lets take a look -

When mortgage rates fell below 5 percent last month, broker Jeff Perdue's phone lines lighted up as dozens of people tried to join the latest refinance boom. When the ringing stopped, only five were approved.


The rest had good credit, good income and "decent equity" in their homes, but that wasn't enough, said Perdue, owner of Orlando Home Mortgage.


"The value of their homes killed the deal," he said. "I had to call them and tell them, 'I'm sorry. If your house had been worth what it was when you bought it, this would have been a piece of cake. Now the numbers don't make sense for you.' "


...
There is no surefire formula to determine whether you should refinance. First of all, focus on your potential savings, not whether your new rate will be a point or two lower than your current one.

...
If the refinanced loan amount is more than 80 percent of the home's value, borrowers must pay a mortgage-insurance premium, which can dramatically reduce any savings. If it goes over 90 percent, you would have to bring money to the table, which could make the deal cost-prohibitive.


...
"Only good borrowers need apply," said Andrew Orr, a financial planner with OrrGroup Financial. "We are back to the 1950s, so to speak, when people wanted a home for shelter, not for an investment. So, it's actually a good situation now, even though it makes it difficult for people to get a mortgage."

Only the good borrowers need apply. First determine if you are good borrower by today's standards, not bubble requirements. Then make sure you are actually saving. We have seen some closings in above $10,000. How would it take to pay off those costs. These closing costs should be factored in as much as the rate.

Notice that more than a pulse and a property are now required for mortgages. The bubble is gone. Times have changed.

Inauguration Day

Today is inauguration day. Lots of promises and expectations to fix what is broken. President Obama enters office with an ever-growing to-do list. As the slump continues downward new approaches have to be made and implemented correctly. In an article from CNN Money titled Obama's expensive leap of faith we get an outline of what is to come. Lets take look -

When President Obama sits down morning at his Oval Office Resolute desk (Queen Victoria's gift named for a British frigate), he will have on hand $350 billion in just-pledged rescue money for the nation's financial system -- and the very likely prospect of a $825 billion-plus "economic recovery" package landing on his desk for signature within a month.

These hundreds of billions are largely the product of historic circumstance, not the fulfillment of campaign pledges. But how wisely this president directs emergency taxpayer dollars -- even as he handles an incoming barrage of surprise new spending needs in these fragile times -- will chart his administration's success in reviving the economy.

As Obama's repeated warning that "none of this will come easy" suggests, there is no pat formula for a federally-directed recovery.

It's become glib political conventional wisdom in Washington that a massive spending plan will provide a parachute rescue for a cliff-diving economy -- landing it safely and with strong enough legs to move toward a healthy future.

...
How an Obama Treasury Department chooses to spend the second half of the $700 billion TARP package will also affect the markets, though. The new administration is determined to spend a good chunk of that money to stem rising home foreclosures. "It was a big mistake not to directly confront the foreclosure crisis," says incoming CEA member Austan Goolsbee.

But that falls into the easier-said-than-done category: How to avoid the "moral hazard" question by distinguishing between deserving and undeserving homeowners; how to provide incentives to lenders who have sold off the loans they originated-and to the financial firms that now hold those securitized mortgages. (One option under consideration: Use the restructuring of Fannie Mae and Freddie Mac mortgages to create a new standard of industry practice that other lenders.)

Lots of opinions. Lots of options. But lots of problems. Problems that are getting worse by the day. And still require more corrections prior to stabilization. The biggest difficult will be implementing the right ideas at the right time. And understanding what the ideas are (unlike the first $350 billion spent so far).

We will be watching and documenting the procedures and their impacts to the foreclosure crisis.

Congratulations and good luck. We all need it now.

Bubble Excesses

Looking back it does not make sense. But at the time having a property make you rich seemed ordinary. Everyone was a financial guru - making their money work for them. So much money was squandered on stuff we will never see again (dinners, old fashions, venti frappes) and other will be looked at reminders of the excess, greed and wastefulness of the era (24X24 travertine tiles).

We will be having multiple what were we thinking moments. Documenting these excesses is a big job. This Columbus Dispatch article titled Joe Blundo commentary: In downturn, some things just don't hold up gives us a good start. Lets take a look -

For a while, wasn't everybody taking out home-equity loans to install wine cellars, indoor waterfalls, 50-seat home theaters and family rooms carpeted with the grass used on the greens at Augusta National?

It all seemed so reasonable when house prices wouldn't stop rising.

Then the bubble burst, banks failed, foreclosures rose -- and five-car garages suddenly seem excessive, unless they house five families.

Related ridiculous item: designer beds for dogs.

At the time it really did seem reasonable to too many of us. That is the sad part.

Short Sales Are Slipping

Short sales seemed to have potential. Having a buyer before the property is abandoned or in foreclosure. Lenders lose a known, fixed and negotiated amount of money. Lenders do not have another piece of property bringing down their balance sheet. The owner does not have a huge financial blemish that foreclosure brings. The owner is not underwater or in despair or expected to bring a five or six figure check to closing.

Unfortunately and unexpectedly the short sales process seems to be losing steam. One process that may have had a huge impact on foreclosure stats was never implemented properly. But business mindset is to make money - not figure out ways to lose the least amount of money over time. When people could not pay their mortgage the long standing, tried-and-true foreclosure process would change ownership.

Now there appears to be a push to have the government require a better short sale process. Since business was not implementing the process itself, the National Realtor Association is pushing for a top-down (read government) approach to improve the short sale process. In an article from The Record titled Roadblocks hurting short sales we get a glimpse at the problems. Lets take a look -

Some lenders or mortgage service firms are now taking up to three months to respond to a buyer's offer, with either an acceptance or a rejection.

The result is that buyers lose patience, and possibly a mortgage commitment, and move on because there are plenty of homes to choose from.

In fact, so many Realtors have complained that the National Association of Realtors has sent a letter to several government agencies urging them to "establish an efficient and effective short sales process."

One reason for the delays is that short sales are a fairly new, unfamiliar process for the home mortgage industry. Together with the volume of short sales and foreclosures and the lack of experts, the industry is overwhelmed.

...
Lawrence Yun, chief economist with the NAR, recommends providing mortgage servicers with guidelines on approving selling prices so they wouldn't need investor approvals.

"Given that the private market is not expediting the short-sale process, maybe it requires some governmental intervention in the process," he said.

Funny how when things are going good - government is meddling in an industry, when problems arise government intervention is necessary.

Last April we recommended lenders figure out ways to streamline the short sales process. But unfortunately, the way the current system is set up it is easier for a lender to deal with a foreclosure than a short sale. As noted above, the business mindset it to make money, not figure out the best way to lose the least amount of money. Rarely (well probably never) will a bubble blogger agree with Lawrence Yun - but he is right in this case. Some government intervention to streamline the process could reduce foreclosure numbers. It will give the underwaters who can not afford their property an alternative to foreclosure.

Cashing Out in Wharton

One favorite bubble sport was to cash out any equity as soon as it was accumulated. People no longer had to work to have extra spending money - their house was giving them great returns. Owning a property was essentially having a second income if you cashed in at the peak. Some seem to have invested the money on the property - but much of the money helped fuel the retail frenzy of the past decade.

Looking back it is easy to view it as an illusion that did not make sense. But at the time it seemed normal and ordinary. Just owning a home was giving people an excellent salary when properties were growing at double digit rates a year. A Refi cash-out or other equity extraction could easily net a five figure income for most owners, sometimes more. If you sold still in the bubble, you kept the cash, for those who waited they are underwater. Now selling either means a short sale or bringing a check to closing. Once the house paid you, now you have to pay the house. Timing really is everything. Which brings us to our feature today - cashing out at the high, but staying in the game and now owing. Lets take a look -

Here is the property -

A view of the uh, ah, front... or maybe side...

The Living Room.

The Master Bedroom.

Here is the property info -

Property Features
Single Family Property Status: Active County: Morris 3 total bedroom(s) 2 total bath(s) 2 total full bath(s) 9 total rooms Style: Colonial Master bedroom Living room Dining room Family room	Kitchen Office Basement Bathroom(s) on main floor Master bedroom is 18x11,Includes: Full Bath, Walk-In Closet Living room is 19x15 Dining room is 10x10,Formal Dining Room Kitchen is 10x10 Basement is Partially Finished Hardwood floors Fireplace(s) Fireplace features: Family Room	Parking space(s): 2 Heating features: 1 Unit, Baseboard - Hotwater, Multi-Zone,Electric Water Heater,Oil Central air conditioning Cooling features: 1 Unit, Ceiling Fan Exterior construction: Composition Shingle Roofing: Asphalt Shingle Pets allowed Lot features: Level Lot, Open Lot Approximately 0.3 acre(s)

Here are the financials -

• The property was purchased in September 2004 for $290,000.

• The first mortgage at the time of purchase was for $232,000 with Indymac Bank.

• On the same day as the first mortgage, a second mortgage was opened (commonly referred to as a piggyback mortgage) for $58,000 also with Indymac Bank.

• In October 2005 the property was refinanced using an ARM for $300,000 with First Continental Mortgage and Investment Corp.
  

• The property was refinanced in April 2008 for $368,445 through MLD Mortgage.

• The property is for sale through a realtor for $329,000.

• Property taxes for 2009 are $7214.15.

There was no money down when the house was purchased. Using the piggyback loan approach the owner had no equity at day of purchase. That was apparently the owner's trend. Since as we see within 13 months $10,000 was extracted from the property. Not bad a bad income for the first year of ownership. Renting this person would have been out their money, but owning they received a cash-back refund basically after the first year. A real bargain.

Then 2-1/2 years later they extracted another $68,445 out of the property. Now the property was paying them another $27,378 per year just to live there. Not a bad deal for the owner. But one has to question MLD Mortgage business plan to pay out this money long after the bubble burst. Paying out $39,445 more than the property is listed for just 8 months later?

Over the the 4 year, 5 month of ownership the property was providing the owner's a second income of just under $18,000 per year. What a deal. The house was basically paying for itself. Imagine living rent or mortgage free for over 4 years! Great deal for this enterprising owner.

Now, with the new selling price, and assuming the realtor receives the standard commission, the property will lose $59,185. And that is if the property sells for the full asking price. Which would be shocking if it did. So now we wonder who will be eating that $59,185 - the lender or the "owner." In this example "owner" is definitely in quotes. They never appeared to have equity in the property at all over the entire time of "ownership." The property was 100% plus lender-owned during the entire 4 plus years the "owners" occupied the premises and had their names on the property listing. But like we said it is a great deal for the "owner" if they are not bringing a check to closing.

And now lets take a look at the prospects for the new owner. Paying asking price with a 20% down payment, with taxes, and a 30-year fixed at a common 5.25 rate the new owner will have to pay out approximately $2054 per month plus insurance and other expenses. That is a pretty hefty amount for Wharton. And this neighborhood has many, many properties for sale right in the vicinity. Good luck!

HELOCs And FICOs

One big issue regarding the lenders arbitrarily freezing of HELOC lines is the impact they can have on an individuals credit score. A line opened with $100,000 could easily be reduced by half or more.. and what happens to people when they are at the cutoff point? Since they are now at the 100% credit utilization level what impact will that have on their credit score? Today we find out from Florida's New 12 with their online article titled Clean up your credit. Lets take a look -

With all the financial upheaval over the past year, including the subprime-mortgage mess and the rescue plan for banks toppled by risky loans, it wouldn't be surprising if you were tempted to think that credit is a four-letter word.

But one important lesson this crisis has driven home is that your credit is the financial equivalent of your good name. A good score is your ticket to a home, a car, a credit card or even an insurance policy, and even a tiny slip-up can come back to haunt you. That's especially true now because the credit crunch has spread to other types of borrowing. For instance, banks have been forced to write off record levels of credit-card debt, so they're setting the bar higher for potential borrowers. A year ago, a score of 720 would have had lenders lining up for your business. Today, a score of 740 or 750 will get you an account but might not qualify you for the lowest interest rates, says Bill Hardekopf, of LowCards.com.

...

Other things to watch out for: paid-in-full accounts that still show a balance and someone else's record that appears in your file. If the credit bureau misspells your name or reports your address incorrectly, that won't affect your score. Balancing act. It's important to minimize the ratio of your outstanding debt to your credit limit (what's known as your credit-utilization ratio) for each card you hold. If you're near your limits and a long-standing customer with a good history, you could ask your current card issuers to raise your limits. Or you can focus on paying down your balances so that you're using less of your available credit. A good rule of thumb is to aim to keep your balance below 30% of your limit on each card.

If you're concerned that a recently frozen home-equity line of credit will tip the utilization scales, don't worry. Ethan Dornhelm, of Fair Isaac, the company that compiles the FICO score, says the scoring model excludes HELOCs from such calculations.

So directly from FICO a frozen HELOC will have no impact on your credit score - since its not part of the model. One piece of good news for all of us who have received the shut-off notice...

Refi Problems

While mortgage rates may be a historic lows the screening that lenders are doing are stricter than ever. During the bubble the requirement was basically a pulse - with liar loans, NINJA (no job, no income, no assets) loans - the lenders were eagerly giving money away.

Afraid to get caught holding the bag again they are enforcing the strictest terms possible. Although we are in a refinancing frenzy the applications terms have drastically changed since the bubble burst. In USA Today there is an article titled Not everyone can refinance to cut mortgage payments which outlines the new requirements. As shown, a pulse is just one of many requirements. Lets take a look -

To get the lowest rates, you'll need a FICO credit score of 720 or higher, says Cameron Findlay, chief economist for LendingTree, a loan-comparison website.

...
Ideally, you should have at least 20% equity, based on your home's current appraised value, says Keith Gumbinger, vice president of HSH Associates, a publisher of mortgage and consumer loan information. Most lenders will require an appraisal before refinancing your loan, and if the value of your home has dropped, you may be unable to refinance, or decide it's not worth the trouble.

...
If you have a home equity loan or line of credit, you'll probably need to pay it off before refinancing, says Bob Walters, chief economist for Quicken Loans.

...
Borrowers in high-cost areas may not qualify for the lowest rates, even if they have outstanding credit, lots of equity and no second mortgage. That's because the interest rates for loans that exceed $625,000 — known as jumbo loans — have remained high. The average jumbo rate is 6.8%, according to Bankrate.com.

...

Banks and other financial institutions laid off thousands of workers last year, leaving many unprepared for a sharp rise in mortgage applications. That has led to a logjam in processing applications. Some borrowers are having a hard time getting their lenders on the phone.

So stricter requirements, more applications and less staff. While we have advised people to apply, this is a good guideline to make sure you have your things in order to make sure you will qualify prior to the application.

New Foreclosure Submission Page Added

Update - We were notified that the pages are not encrypted - a big uh-oh! If this is true then hopefully it is resolved immediately. We have not filled out the form - but the first page is apparently not. What are others finding?

We asked - they answered!!! Well, they were probably working on it anyways but now its up!!!

The NJ Foreclosure Remediation website now has online submissions. That is great. Much more user friendly than giving all that info over the phone. And on the very first page it asks about if the foreclosure process has started on the property. One of our fears was that the agency workers would get bogged down with the folks who like to panic but are not in trouble. Now they can start first with the people who are in trouble.

Here is a view of the new page -



Great! Now we can start the foreclosure triage!

Note added after original posting - If LSNJ is still listening - hopefully they add some system that you can have your pages saved without losing all the data - 8 pages can be a lot to fill out at one sitting - especially if you have to look for paperwork or have children that may interrupt the process. Maybe a start can be just adding a note in the beginning about the info needed for the 8 pages. Getting the documents beforehand will save many of us the trouble of retyping the first page over and over. Those in foreclosure need no more stress. Thanks.


And they also added some resources to their website -



Good Work!

Actually they have already done quite a bit in less than 1 week. Hopefully the first set of numbers will look good - and the 6 month to a year follow up of those initial modifications will still be owner-owned and not bank owned. The current mortgage modifications rates are terrible - all that work just to delay the foreclosures by 6 months. Hopefully whatever system is implemented will beat the current success rate of less than 50%.

Now if you can just extend those hours...

2008: The Year of Foreclosures

Record foreclosures are not surprising but still depressing. And the RealtyTrac has compiled a list of numbers for 2008 - the numbers are grim. In an article from Bloomberg titled Foreclosures in U.S. Rose 81%, Topping 2.3 Million Last Year the bad news blares from the headlines. Lets take a look at the text -

U.S. foreclosure filings jumped 81 percent last year as falling house prices, tighter mortgage lending and the longest recession in a quarter century battered property owners, RealtyTrac Inc. said.

More than 2.3 million properties got a default or auction notice, or were seized by lenders, the Irvine, California-based seller of default data said today. That’s the most RealtyTrac has documented in four years of recordkeeping. Filings rose 41 percent in December from a year earlier to 303,410.

The nation lost more than 2.6 million jobs last year, the most since 1945, and U.S. stocks had their worst performance since the Great Depression. President-elect Barack Obama has said the country needs to prevent foreclosures to revive the housing market and economy.

“If we don’t adopt a comprehensive national policy, we’ll have 5 million to 8 million new foreclosures in the next three years,” Kenneth Rosen, chairman of the Fisher Center for Real Estate and Urban Economics at the University of California, Berkeley, said in an interview. “The single most important thing is making credit available for the average person.”

...

“I think it will get substantially worse,” Novak-Smith, of the RE/MAX Results brokerage, said in an interview. “You’ve got people losing jobs right and left and the general business climate is bad. We’ve got an economy built on easy credit, and now it’s got to revert.”

And from RealtyTrac for the ten hardest hit states with New Jersey at number 10. The ranking is by % of housing units in foreclosure. Here is the list -

Rate Rank	State Name	Total Foreclosure Filings	Total Properties with Filings	%Change from 2007	%Change from 2006	%Housing Units (foreclosure

1

Nevada

123,989

77,693

125.74

529.50

7.29

2

Florida

501,396

385,309

133.11

411.68

4.52

3

Arizona

152,621

116,911

203.13

655.04

4.49

4

California

837,665

523,624

109.86

497.91

3.97

5

Colorado

66,795

50,396

27.90

61.41

2.41

6

Michigan

145,365

106,058

21.61

107.89

2.35

7

Ohio

146,099

113,570

26.22

155.40

2.25

8

Georgia

116,225

85,254

44.36

117.07

2.20

9

Illinois

115,063

99,488

54.70

126.01

1.91

10

New Jersey

69,612

62,514

101.20

186.84

1.80

The Calls Are Coming

New Jersey's new foreclosure program with the hotline appears to be working. People are at least calling the number. That is start. Now the modifications need to go through and the results publicized, heavily. From an article in Star Ledger titled Blackout leaves foreclosure line unable to answer to answer residents' calls we are given more information about the program. Lets take a look -

A statewide foreclosure prevention hotline that began Friday has been unable to handle the overload of calls, said David Wald, a spokesman for the Attorney General's Office.

"The response has been pretty phenomenal," he said.

...

[Melville D. Miller Jr., president and general counsel of Legal Services of New Jersey,] noted that by 2 p.m. yesterday, the hotline's three dozen staffers had received 6,000 calls.

...

He urged residents to continue trying to call the hotline. Legal Services is planning to set up an e- mail address -- possibly as early as today -- to supplement the hotline, Miller said.

The hotline, 1-888-989-5277, is staffed Monday through Friday from 8 a.m. to 6 p.m.

The good news

1. People are calling!!! (yes that deserves 3 !)
   
2. The hotline and services right up until the sheriff sells the property to someone else.
   
3. The services include free credit counseling and (contingent on income) free legal services.
   

The bad news -

1. Not enough staff (36 people to run the whole program?)
   
2. Hours are too limited (why no nights and weekends?)
   
3. The website (it needs work and should have some interactive pages for people to submit their info there).

At least that is what we are seeing right now. Forget the email address, get an interactive page where people can submit some data. Have an option for those who have already received notices (and possibly the type of notice), so they can be contacted immediately.

At this point we need foreclosure triage. Save the folks that can be saved but the situation is dire. Then work with the ones that are concerned about the foreclosure one day happening to them.

But it sounds good to us so far.