As unemployment, the leading cause of foreclosure, continues to soar above 10%, ShoreBank’s work helping homeowners to refinance and modify their mortgages continues to intensify. In addition to implementing the ShoreBank Rescue Loan program, which is helping homeowners to refinance their original loans from other institutions, we are among the few banks aggressively working with our own borrowers in President Obama’s Home Affordability Modification Program (HAMP) to provide new affordable mortgages.
Pundits say: “The bigger the story, the smaller the focus;” so let’s focus on how one of our mortgage lenders is tackling the challenge of saving a home.
Jabari Watson, an experienced loan officer who joined ShoreBank nearly two years ago, never imagined his responsibilities would be turned upside down. Far from his previous ShoreBank role assisting first-time homebuyers and residents with new home purchases, today he has become a mortgage modifier extraordinaire. While the duties have changed dramatically, one constant has remained—the amount of satisfaction he derives from helping an individual or a family have a home.
Each morning, Jabari receives a handful of troubled loan applications from our Asset Protection Department. He then identifies the appropriate, available rescue program that will best help the borrower catch up on his or her mortgage payment and save the home from foreclosure. But time is not on his side. The process usually takes up to 30 days and often the homeowner does not have that kind of time to get the issue resolved.
Once he identifies the appropriate program, Jabari hits the ground running, verifying the program’s criteria for application. To qualify for the HAMP program the borrower must:
Have originated his or her home loan before January 1, 2009
Be living in the home as his or her primary residence
Have an unpaid balance of not more than $729,750 (for a single-family home)
Have an income (this can include federal assistance or a part-time job)
Have a monthly mortgage payment that exceeds 31% of their monthly income
In addition, Jabari must obtain certain financial information from his borrowers, including a signed tax return transcript form, their most recent tax return on file, their two most recent pay stubs, and an “affidavit of financial hardship” that, with the exchange of voice and email messages, often takes an inordinate amount of time to collect.
“Despite sifting through the endless mountains of paperwork, my pressure is nothing compared to what our customers are going through,” said Jabari at a recent team meeting. “These people are staring at the possibility of losing their homes and having nowhere to go. Now that is real pressure, so I try and handle their situation with the utmost sensitivity which can be hard to do when I have to ‘beat the clock’ to get the application process in time to save the home.”
Despite this and other current challenges, ShoreBank loan officers like Jabari have successfully completed 53 modifications since the launch of the program with many more in the pipeline. While we look forward to the day in the (hopefully) very near future when we can get back to exclusively making loans for new home purchases, we are committed to helping our customers and our communities through the economic crisis and to helping as many people as we possibly can.
With more than a million foreclosed and distressed properties expected to hit the market, buying a foreclosed home can be a good investment opportunity for the first-time home buyer and investors. While ShoreBank would rather make a Rescue Loan to help save a home, buying a foreclosed property helps stabilize home prices, strengthens a neighborhood and, at the same time, realizes the dream of homeownership for many.
However, potential buyers should not gamble when buying a foreclosed property. This is not a process for the faint of heart, but if one does their due diligence and goes about it in a responsible way, buying a foreclosed home can be a very good investment opportunity. To help home buyers purchase a foreclosed property and ensure sustainable ownership, I am sharing with you my 10 Steps for Buying a Foreclosed Home.
1. Search for foreclosure listings. Track foreclosures in your area to stay on top of the market so you are able to move quickly when they become available. Use an electronic tracking service like RealtyStore or look for listings in real estate magazines, newsletters, newspapers, and government agencies such as Fannie Mae.com; check public records at the county clerk’s office. 2. Find a real estate agent experienced in foreclosures. Some sellers will not accept offers from unrepresented buyers. 3. Find a real estate attorney. Proceedings and laws can be complex and difficult to understand. Do some homework on foreclosures laws and procedures. Start by using Google or another search engine to research foreclosure laws in your state as well as to contact an attorney. 4. Choose a foreclosed home to invest in. Some factors to consider include how to purchase a home while minimizing risk and determining the safest home to go after However, bank-owned properties carry the least risk for investors seeking foreclosed homes. When the bank takes ownership of the foreclosed property, you know there are not any taxes or liens to contend with and that the home is empty of homeowners. 5. Tour the property. And inspect it as closely as possible. It’s best to bring along a professional inspector to determine the property’s condition. Some foreclosures–unlike fixer-uppers–are in fairly good shape, while others may be way behind in maintenance from sitting empty for an extended period of time that could be quite costly to remedy. 6. Line up financing. To qualify for buying a foreclosed home you will need a good payment history with current creditors. If you need to improve your credit, sign up with an experienced credit counseling agency to help budget and to negotiate on your behalf while settling delinquent accounts. Smaller banks are usually more open to working with buyers who have tarnished credit histories. Check your credit report and correct any existing defaults or outdated information. Get pre-approved for a mortgage–speak with three potential lending institutions to obtain a responsible loan. Most sellers of foreclosed properties require a cash offer or pre-approved letter in order to make an offer. 7. MLS Search/Comps. Have your real estate agent check nearby or comparable homes to see if the asking price for a foreclosed home is, in fact, a bargain. 8. Do your homework. Check to see if a foreclosed home has any liens on it, such as unpaid property taxes. Find out who is liable for those costs. 9. Make an Offer. This step involves having your real estate agent or attorney prepare a contract offer to purchase the property with bank financing, bid at a foreclosure auction, or submit a sealed bid to the owner after the foreclosure sale. The key is to decide what the offer or bid price ought to be. You don’t want to pay more than the assessed value, based on the condition and location of the property. The goal in buying a foreclosed property is to buy at a low cost so that you can quickly begin building equity. Foreclosed homes are often sold at discounts of 30 percent or more. 10. Prepare paperwork. Be prepared to deal with more paperwork with a foreclosure than you would with a conventional purchase, particularly when a government agency is involved.
Additional valuable information:
• Find out how foreclosure works in your state. Procedures and legal requirements differ, so get a sense of how soon you can go after a home that appeals to you.
• Be particularly aggressive in negotiating with a bank. Banks are very interested in selling a foreclosed home fast when it’s just sitting on their books doing nothing.
• HUD and other agencies often auction foreclosed homes. However, buyers are frequently unable to inspect any property before making an offer. With so little information, the higher the bid for the property, the higher the risk that you may end up with a money pit.
And finally, it’s important to remember to look for an experienced agent, suitable properties, and outstanding lien issues and be prepared to review a mountain of paperwork.
Happy Holidays! This season is a time for giving, especially to those in need. In the midst of our last-minute holiday preparations, it is easy to overlook the gift that the Federal Reserve has recently given. I know that varying opinions abound regarding the Federal Reserve’s past performance and decisions. Let us momentarily set aside those evaluations. I feel that the Fed’s recent decision to cut the target for the federal funds rate to a range between zero and 0.25 percent can be perceived as a gift. Many of you might have expressed, as I initially did, “A gift? From the Fed? In the midst of this economic crisis? But I’m a saver! What does this mean for my interest rate?” While a rate cut isn’t something you can wrap or put a name card on, this rate change does give the gift of hope to those stricken by the credit crunch and on the verge of homelessness.
Mortgage rates are at their lowest level in 37 years. This is great gift to almost all homeowners, even those to whom the recession has not financially impacted. Even a small decrease of 0.5 in your mortgage interest rate can make a financial impact.
The Fed’s rate cut enables ShoreBank to give, through its Rescue Loan program, the gift of increasingly affordable continued homeownership. As our SVP of Mortgage Lending and ShoreBank Voices blogger Michelle Collins said on Chicago’s abc7 News “The rates are coming down, so we’ve lowered our rates at ShoreBank three or four times over the last three or four weeks, and the fed’s continuing to cut rates to let us offer more affordable interest rates, so the time is great.”
For when mortgages become unaffordable, individual homeowners begin losing their homes and property values plummet. Since many of these affected borrowers are concentrated in a handful of communities, the impact of these cascading foreclosure is amplified. The net result can ignite a cycle of community deterioration.
That is why the Fed rate is a holiday gift to our economy. For those of you in need, all you need to do is to ask. I can think of few better gifts than one that prevents homelessness.
On that note, I wish you all a very Happy Hanukkah, Merry Christmas, and Happy Kwanzaa.
The foreclosure crisis and current tough economic times this fall make it hard for me to focus on thoughts of gratitude. But that is exactly the reason that I feel now is the time to focus on being thankful. Reviewing the stories behind the borrowers in our Rescue Mortgage Program, I find myself grateful that ShoreBank is able to continue to reach out to people trapped in predatory loans. When ShoreBank provides a homeowner with refinancing into a 30-year fixed-rate loan means children can stay in their house for Thanksgiving; it means parents can sleep better at night, and it means that neighborhoods do not become wastelands of abandoned foreclosed homes. I am so lucky to play a small part in this process, and so thrilled to work with good colleagues that do the tough lending day in and day out.
Beyond feeling thankful for having such wonderful and rewarding work, many other things make me grateful for the life I have. I am so thankful for my family, particularly my zany husband who keeps me laughing even when the economy makes me cry; my children, young adults both spreading their wings and testing themselves in one of the worst job markets in decades; and the wonderful circle of friends that makes my life fun and meaningful. We live in challenging times and the day-to-day crush can make me forget how wonderful it is to be alive. It is the perfect time to pause and remember the intangibles that make life so worth living, and to reconnect and warm myself with the feeling of gratitude. As we close this work week I wish you all a Happy Thanksgiving.
The scale of the foreclosure crisis threatens the dreams of many homeowners in ShoreBank’s communities. In my last blog, I wrote about what makes a mortgage a bad fit for consumers. The reasons vary, but if someone you know has the wrong mortgage for their circumstances, remember that there are solutions. One is a Rescue Loan.
The most important thing to remember if you’re having difficulty making your monthly payments is to take action right away. It’s easier to recover if you haven’t missed more than one or two monthly payments. As the foreclosure process moves along, the size of the delinquent debt owed, and the bank legal costs that customers are usually charged, mount.
Curing a foreclosure is a little like curing cancer — the sooner you catch it, the better your chance of survival. Acting sooner rather than later, keeps more options open for you, minimizes costs and protects your credit. The first step is to contact your lender as soon as you think you cannot make a payment. Look for the lender’s toll free number on your monthly statement. Do not ignore telephone calls or written notices from your lender. Borrowers who try to ignore their financial problems — and their lenders’ phone calls — will likely lose their homes.
ShoreBank’s Rescue Loan Program offers fixed-rate loans to homeowners at risk of losing their homes. Who should consider applying for a Rescue Loan? To be eligible for a ShoreBank Rescue Loan you must:
• Have a subprime mortgage or other adjustable rate mortgage
• Open a ShoreBank auto debit account at the time of application
• Qualify for sustainable mortgage payment
• Be no more than 90 days past due on your mortgage payment
We look at many factors when considering a customer for a mortgage. We consider your income; your monthly mortgage payment as a percentage of your income; your total debt situation; employment history; property appraisal, and of course, your credit history. This is different than your credit score. ShoreBank will work with you if you’ve had credit difficulties. For example, let’s say you had a rough patch, and lost your job and fell behind on your payments. That would lower your score. But as soon as you could, you worked to catch up on your bills. That’s a good thing, but your credit score may still be low, because those missed payments are on your record. We look at the big picture.
Unlike other banks, we don’t sell our loans. Perhaps you’ve had the experience of getting a mortgage from a bank you knew and then after a few payments, an unfamiliar envelope with your mortgage bill arrived in the mail from a bank you never heard of. That’s because the bank you got the mortgage from sold your mortgage. Now you have to deal with a “stranger” who doesn’t know you.
We don’t sell our mortgages at ShoreBank. We stay with you for the life of the loan. That also means we want you to be successful. It’s not as important to the other banks that sell your loans if you take out a bigger loan than you might be able to handle in the future, because they’re going to sell that loan. If you can’t make payments, it will be someone else’s problem.
So we work with our customers to fit our mortgages to their needs. We want that mortgage to be successful for them (and consequently successful for us). That’s why we’re not in the same position as many other banks today. ShoreBank is safe, secure and strong. We’re not going to be bought out or taken over by the government. Your money is safe with us.
To help fund the program, ShoreBank launched a high interest online savings account, www.shorebankdirect.sbk.com. The interest paid on the online account is currently 3.50% *APY.
Call us if you have a mortgage that is wrong for you. We’ll work with you to help put you back in control of your finances.
* Annual Percentage Yield (APY) is accurate as of June 4, 2008. Rates may change at anytime and without notice after the account is opened. Fees could reduce the earnings on the account. A minimum balance of $1.00 is required to open the account and obtain the stated APY.
Over the next few blogs, I’d like to address the issues related to responsible lending that can help people accomplish their goals of successful homeownership. The headlines are filled with stories of families caught in “bad mortgages.” Many have already lost their homes or are on the verge of losing their homes. Some people blame irresponsible homeowners for the high rate of foreclosure, and feel that these borrowers should have known better, or that the homeowners were not credit-worthy in the first place. The answers are complicated and there is blame that can be shared by lenders, borrowers and regulators. However, despite the current economic situation, homeownership is still the best way to accumulate wealth. Homeownership provides a sense of security and forms the cornerstone of healthy communities.
“Subprime” has now taken on a very unsavory connotation. The difference between a subprime loan and a conventional loan is quite simple.
• Subprime lending was originally designed as a financing alternative for people with challenged credit or other high risk characteristics.
• Conventional loans were designed for lower-risk borrowers.
Borrowers usually are offered better rates on conventional loans with less flexibility in underwriting. Subprime loans were purported to allow greater flexibility. During the last few years, many families got caught up in sub-prime or “designer” loans, with low teaser adjustable rates and interest-only features. These are not necessarily bad mortgages, but not well suited to the borrowers.
What makes a mortgage a bad fit? A bad fit is when the mortgage doesn’t match the borrower’s financial profile and/or isn’t structured for their long term success. What are the signs of a poor fit? Look for:
• Mortgage payments that are too high for the borrower’s income and expenses
• Adjustments that do not limit future increases in payments
• Lack of security on the borrowers’ ability to make timely payments in the future
• Mortgages in which one is not paying any principal, or little principal, so that there is little or even negative equity
• Mortgage agreements that do not include taxes or insurance. These lump sum payments are hard for working class families to make.
Many banks don’t take the time to tailor a mortgage to meet the needs of the borrower. They simply sign them up for the biggest loan the bank thinks they can handle. When someone comes to ShoreBank for a mortgage, we make every effort to help them. Sometimes that may mean that they don’t walk out with a mortgage approval. However, we’ll work with our customers, even if they’ve had credit difficulties. We will provide an honest assessment of their current situation and offer tips on what will get them ready to accomplish their goals. If someone doesn’t have the credit to purchase a home now, we tell them what they need to do to be able to purchase a home in the future. We’re committed to ensuring that our borrowers fully understand the commitment and responsibility of homeownership, including paying property taxes, insurance, and maintenance. In fact, despite these difficult times, our mortgage default rates are well below the industry average, even in neighborhoods where other lenders have high delinquency and default rates. Our Rescue Loan Program is designed to help unsuspecting borrowers, who are caught up in sub-prime loans. This program is also able to help first time borrowers avoid these unscrupulous lending practices. We are committed to helping more families keep their homes. I’ll be talking more about rescue loans in future blogs.
ShoreBank’s capacity to help families stay in their homes and to keep neighborhoods vibrant is a result of the deposits our socially responsible investors place with us. As our deposit base grows, we continue to reach out to struggling families to help them achieve and keep their piece of the American dream.
Since I last posted on this blog, the financial markets have continued to boil over with uncertainty over the evolving mortgage crisis. Average consumers are confused about whether their money is safe and how to know if their financial institution is safe. Despite the uncertainty in the overall market, ShoreBank is profitable, strong and growing. ShoreBank is well capitalized and a careful manager of its loan portfolios. Your deposit in ShoreBank is safe, secure and earning a market rate of interest.
The highest priority for ShoreBank is investing in local residents and their communities. We make loans that borrowers can afford that help them buy and rehab homes, apartment buildings and run businesses. ShoreBank has not engaged in predatory lending and has not invested in the so called “toxic” investments that are causing so much concern.
ShoreBank is currently focused on making Rescue Mortgages that refinance individuals that are trapped in predatory mortgage loans. We have found that many good hard working people who got caught in adjustable rate mortgages can lower their monthly payments with a ShoreBank 30 year fixed rate mortgage. Deposits like the High Yield Savings Account at ShoreBank help us to continue our lending. We thank you for being our customer and promise to continue to be a good steward of your deposits.
As unemployment, the leading cause of foreclosure, continues to soar above 10%, ShoreBank’s work helping homeowners to refinance and modify their mortgages continues to intensify. In addition to implementing the ShoreBank Rescue Loan program, which is helping homeowners to refinance their original loans from other institutions, we are among the few banks aggressively working with our own borrowers in President Obama’s Home Affordability Modification Program (HAMP) to provide new affordable mortgages.
Once he identifies the appropriate program, Jabari hits the ground running, verifying the program’s criteria for application. To qualify for the HAMP program the borrower must:
Happy Holidays! This season is a time for giving, especially to those in need. In the midst of our last-minute holiday preparations, it is easy to overlook the gift that the Federal Reserve has recently given. I know that varying opinions abound regarding the Federal Reserve’s past performance and decisions. Let us momentarily set aside those evaluations. I feel that the Fed’s recent decision to cut the target for the federal funds rate to a range between zero and 0.25 percent can be perceived as a gift. Many of you might have expressed, as I initially did, “A gift? From the Fed? In the midst of this economic crisis? But I’m a saver! What does this mean for my interest rate?” While a rate cut isn’t something you can wrap or put a name card on, this rate change does give the gift of hope to those stricken by the credit crunch and on the verge of homelessness.
