The amount of foreclosed homes is one thing still weighing down the economy. And many are stuck on the market because banks can’t find the ownership documents.
Why? Turns out Wall Street cut corners when creating mortgage-backed investments—and didn’t want old fashioned paperwork in the way. And now when banks want to evict people they are finding that the legal documents behind mortgages aren’t there.
Even worse, it seems that banks—in order to cover their tracks—hired companies to recreate missing mortgage assignments and provide the legally required signatures of bank vice presidents and notaries.
Now to avoid foreclosures, desperate homeowners are countersuing banks over the document disaster—leaving houses unsold indefinitely and stalling the recovery.
Many foreclosed banks are still stuck on the market because of lost ownership documents.
Treasury yields have been climbing higher since fall 2010. As a result, mortgage rates have been moving higher as well—and have topped 5% for the first time in months. Mortgage rates move in tandem with Treasury yields; specifically 30-year mortgages track 10-year bonds. While rates are currently still near historic lows and very affordable, they are predicted to go up in 2011, perhaps to 6%.
Good news for those looking to refinance, the national average for interest on 30-year fixed loans has sunk to just 4.69 percent. These are the lowest interest rates that have been seen on home loans for around 50 years. While these rates are great for home buyers or those looking to refinance, they could be worse for those trying to save through savings accounts and CDs, as interest rates on these have fallen as well. In all, around 291,000 homeowners have refinanced as of March.
The foreclosure numbers are out for May, and it appears that more and more banks are seizing homes. Nationwide, lenders took back 93,777 properties, while foreclosure filings fell by 3% since April. Oddly enough, this recent wave of seized houses actually has to do with the market becoming more stable. Lenders have been fairly lax in repossessing homes for the past few months while they tried to keep up with the vast number of people who were forced to default when the housing bubble burst. Because of the recent stabilization of the market, lenders are starting to catch back up and repossess assets again. Oregon’s foreclosure rate is currently one of the worse in the nation, ranked as having the 16th most foreclosures in the nation.
As it turns out, most borrowers who have modified their mortgages through the government sponsored Home Affordable Modification Program are likely to default. In fact, somewhere between 65% and 75% will default within the first year. Many borrowers find modifying their mortgage did little to solve their other debt problems, and still end up in either foreclosure or short sale. This comes as little surprise, as borrowers who have modified their loans spend, on average, 64% of their monthly income paying off debt. Should any small emergency arise they are often unable to pay the monthly minimums on their debts. It would be nice if there were a better plan.
Due to the rush of foreclosures lately many are wondering what their options are for buying a home after foreclosure. While foreclosure is damaging to your credit, the reasons behind your foreclosure may affect how quickly you can buy your next home. Lenders look at things other than credit score when considering you for a home loan, and if they fail to see why you were foreclosed upon, they might assume you are what is known as a “walk away.”
“Walk aways” are what the loan industry calls those who have purposefully defaulted on their mortgage when they could still afford to pay it. This is done typically because the amount owed on a home is greater than the price; many believe they can simply walk away from the mortgage, allow the bank to reposes the house, build up their credit again and buy a new home. Be wary, though, as if lenders suspect that you have done this they will be hesitant to allow you to borrow. What is typically a 2 to 5 year waiting period for buying a new home could be increased to 7 years or more.