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This questions was posted today at LinkedIn for debate and I thought it would be really interesting to share with all of you and get you feedback by commenting on this blog.

Who is responsible for the current mortgage/real estate crisis?

A couple wishes to buy a home. Their income is approximately $125,000 per year.

Average home prices in their area are about $605,000. After their down payment they end up with a loan of $550,000. The lender will approve them for a loan but the payment is a tight squeeze. Technically they can "afford" the mortgage but they will need to be on a very tight budget to be able to pay their other bills and won't have much discretionary income. They fall in love with a house and think it is a great buy as there are similar homes in the area listed for more. The couple goes ahead and makes the purchase.

Fast forward a year or two and home prices have dropped significantly and the couple now finds that they really can't afford their mortgage after all. They are falling behind on the payments and face foreclosure. Who do we blame?

a) The Real Estate Agent. She knew that the home was probably a little more than the couple could comfortably afford and should have steered them toward lower priced homes or recommended they wait until prices come down a bit or have a larger down payment.

b) The Mortgage Broker. He is the expert in the home financing field and should have discouraged the couple from this much of a loan.

c) The Lender. They are the ones who set the guidelines and ultimately approve loans for people with high debt ratios and offer the creative financing options that allow people to qualify for loans that they can't really afford.

d) The Couple. They should have been more responsible and not rushed into homeownership because ultimately they are the ones who will lose their home and ruin their credit.

e) All of the above

f) None of the above

Short Sale abbreviated definition – Selling your home for less than is owed with lender approval.

The issues surrounding short sales have become almost mainstream today.  Can’t afford your home?  Avoid foreclosure via the short sale.  Is it that easy?  Not by a long shot.

Truth. The banks don’t have the staff to explain it and I am not even sure they could explain it if they did because short selling is essentially new to the banking system and although they have dealt with similar scenarios in the past, never before has there been the volume, UNTIL NOW.

The best way for me to explain why you need to be PERFECT if you are a seller who is considering a short sale is by scenario:

Suppose you have a mortgage or mortgages on your home totaling $800,000.  Your home is worth $600,000.  The following two questions need to be addressed before the banks will even consider allowance of a short sale.

[1] Is there a financial hardship?  No hardship – no short sale.  (i.e. “I am strapped for cash and I don’t want to sell my other 9 investments properties in this environment” won’t cut it)
[2] Are you current?  This is tricky but if you are current on your loan(s), you may not qualify for the short sale scenario either, because without a solid argument, there is no hardship, YET.

Assuming, the answer to number one is ”yes” (you will have to prove it) and the answer to two is “no”, you may then , subject to lender approval, try and sell your home in this market but you better be PERFECT in execution,  otherwise you may be doomed to foreclosure.

PERFECT in timing and pricing.  The two are inter-related and if you can not adequately execute both, you will be in trouble.

[1] Timing.  You don’t have much time.  Sure there will be people out there that will beg to differ and argue that you can stall an inevitable foreclosure for months and even years…which may be the tactic of choice if you wish to continue the daily stress involved for months or even years.  I think you would have to be a sadist but who am I to judge.  Assuming you are not, the goal is to quickly put an end to this, which leads to pricing.

[2] Pricing.  Sounds easy but it isn’t.  Here’s why.  There are two trains of thought on this.  [1] Price as close as you can to recovering the full debt even when comparables dictate a lower selling price.  Insane idea, never works.  [1] Price it rock-bottom, essentially ringing the dinner bell for all vultures to come by for a quick pick-up.  Also insane, works every time, but many times with dire consequences.  Pricing too low is often a mistake made by a seller who is elated by the bank’s allowance of a short-sale scenario.  Sellers misunderstand the effect of the short-sale as they often equate it to a do-over, even though a majority of the time it is not.

The short sale will allow the seller to avoid the ominous default and ultimate foreclosure which may undoubtedly wreck their credit but, IT WILL NOT AUTOMATICALLY RESET THE DEBT (shortage) OWED!  For instance, if you owed $800,000 and the short sale of your home recovers $600,000, the shortage of $200,000 is still in question.  More often than not, the shortage will be designated as a collectible balance.  It is still a deficiency and a recorded judgment, much like the original mortgage.  On some occasions, banks quash the entire debt and absorb the loss but with the amount of short sales occurring, lenders are in no position to write down these losses so long as they are not going to have to hold onto tangible assets.

Bottom Line:  If you are even remotely thinking about selling your home via the short sale process, understand that it is a PROCESS that requires real guidance and precision to navigate successfully.  For questions regarding your specific situation, my contact information is below.

Jason Kapit, Esq. is a Realtor with EWM

ecord high foreclosure rates in the second quarter were reported in Los Angeles, Seattle, Miami and New York, according to a report issued by PropertyShark.com.

Los Angeles led the four cities with a 282.01% increase in the second quarter compared to last year's Q2. Los Angeles reported a record 14,505 new residential foreclosures according to the report issued by PropertyShark.com. The amount of newly scheduled trustee sales soared by 63% in comparison to the previous year.

"The foreclosure chart is unfortunately starting to look like a ski jump, with the current number of new trustee sales this quarter increasing at one of the highest rates we have seen over the last two years," said Property Shark Foreclosures Product team member, Adina Dumit.

To Read the Full Article, please visit this link :

http://www.mortgagenewsdaily.com/732008_Foreclosure_Rate.asp

Great BLOG about Foreclosures in Weston Florida .

Please visit this link :

http://blog.ewm.com/2008/07/06/whats-with-foreclosure-in-weston-florida/

Mortgage rates continued to set record 2008 levels with long term rates moving up slightly during the week ended June 26, and short term rates increasing modestly but in double digits.

The information comes from the Primary Mortgage Market Survey released from Freddie Mac as financial markets waited to see the outcome of the Federal Reserve Boards June meeting on interest rates. (The Fed, as expected, left the Federal Funds Rate unchanged at 2 percent.)

The 30-year fixed-rate mortgage (FRM) increased from 6.42 percent with 0.7 during the week ended June 19 to 6.45 percent with 0.6 point last week. This was the highest level for the 30-year since September 6, 2007.

The 15-year FRM averaged 6.04 percent with 0.6 point, up from 6.02 percent with 0.7 point. The June 26 result was the highest level for the 15-year since October 18, 2007.

TO READ THE FULL ARTICLE, PLEASE VISIT THIS LINK :

http://www.mortgagenewsdaily.com/722008_Mortgage_Rates.asp