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A Ray of Hope, at Last, for Homeowners in Foreclosure

The Federal Housing Finance Agency has finally budged on a policy that had the pernicious effect of favoring moneyed investors over residents in foreclosure cases. While the change is narrowly targeted, it could be a precursor to broader changes advocated by representatives of people who have trouble keeping up with mortgage payments.

The policy applies to people whose homes are in foreclosure, owned by Fannie Mae (FNMA) or Freddie Mac (FMCC), and worth less than the amount owed on the mortgage. The agency announced on Tuesday that the residents (i.e., the people who used to own the houses) will be able to buy them from Fannie Mae and Freddie Mac for their fair-market value. That’s the same price that investors pay. Until now, residents were required to pay the entire amount owed on the mortgage if they wanted to keep their homes.

The old policy was designed to keep people from strategically defaulting—letting their homes go into foreclosure, even though they had resources to keep paying, just so they could buy them back more cheaply. It had the effect of pushing people out and turning their homes over to speculators.

“This is a targeted, but important policy change that should help reduce property vacancies and stabilize home values and neighborhoods,” FHFA Director Melvin Watt stated in the agency’s press release.

Watt has been under intense pressure to reverse the policies of his predecessor, Edward DeMarco, who ran the agency from 2009 until earlier this year. Here’s how Bloomberg News described his situation:

Watt’s circumspect style and scant policy changes in his first nine months as director of the Federal Housing Finance Agency have drawn criticism from some of the same housing advocates who pushed President Barack Obama to appoint him. The National Low Income Housing Coalition and other groups said they expected Watt, the most powerful housing official in America, to move quickly to help troubled borrowers and lower-income families shut out of the two-year housing recovery. Instead, he is maneuvering cautiously, asking for public feedback on many issues—and earning accolades from the mortgage industry.

Last week Watt got an earful from Senator Elizabeth Warren, a Massachusetts Democrat. “You’ve been in office for nearly a year now and you haven’t helped a single family, not even one, by agreeing to a principal reduction. So I want to know why this hasn’t been a priority for you,” she said, according to a HousingWire report from the hearing.

The policy announced on Tuesday applies to only 121,000 houses that are owned by Fannie Mae and Freddie Mac because they went into foreclosure. Warren and others are pushing the FHFA to extend relief to homeowners who are having trouble making payments but haven’t yet fallen into foreclosure. Warren cited a 2013 Congressional Budget Office study during the Senate hearing last week that found that even a modest principal reduction plan could help 1.2 million underwater homeowners, prevent 43,000 defaults, and save Fannie and Freddie about $2.8 billion.

Barry Zigas, director of housing policy for the Consumer Federation of America, said on Wednesday that the FHFA’s concern that people would strategically default was overblown, especially now that the housing market has stabilized. “This is an important change in policy and might, I want to emphasize might, lead to further policy changes along those lines,” he said.

Julia Gordon, director of housing finance and policy at the Center for American Progress, said the break for people whose homes have already been seized by Fannie and Freddie is “a poor cousin to principal reduction” on loans to people who still own their homes. By the time a home has been seized, the borrower’s credit score has been trashed, he or she has probably had to move out, and he or she will be barred from getting a new mortgage insured by Fannie Mae or Freddie Mac. As for the FHFA’s worries about “strategic default,” she said that principal reduction is already being used successfully on loans not backed by Fannie or Freddie.

“All of these modification programs require the homeowner to demonstrate a hardship,” she added, “which is hard to fake.”

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Groups partner to offer families free help to fight foreclosure

The Foreclosure Prevention Partnership can be contacted through United Way’s 211 call center by dialing 211 or 888-421-1266. The center will direct callers to the appropriate organization for their needs. The free services include legal advice, financial coaching, credit counseling and help negotiating with a mortgage lender.

The director of 211, Tamika Alexander, said the partnership formed a couple of months ago to bring together legal resources for families in need.

“They give us a call, we connect them with resources,” she said. “If you’ve never faced foreclosure, you don’t know who to call. We’re just trying to help families facing foreclosure stay in their homes.”

Most families facing foreclosure wait too late to take action, Alexander said, damaging their chances of keeping their homes.

“I think for most people it’s hard to reach out and ask for help,” she said.

The partnership is trying to reach out during the holiday season, when so many families have a hard time making ends meet.

“There are resources to help them stay in their homes,” she said. “We want families to reach out to us.”

Alexander urged families a month or more behind in payments to reach out.

She said a family less than three months behind in payments will probably be directed to a financial counselor, while someone more than three months behind will likely be directed to legal services.

United Way’s 211 is part of a nationwide initiative to connect resources with people in need. The 211 call center seeks to connect callers with appropriate social services organizations in the community for their needs.

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We need to rethink foreclosure in Detroit

When we talk about Detroit’s comeback, the corner we’ve turned after the city’s historic municipal bankruptcy, here’s something everyone should know: Inside this city are 35,669 occupied residential homes set to enter tax foreclosure next year.

That’s occupied homes, mind you, in which an estimated 97,733 Detroiters currently live, according to Loveland Technologies’ Jerry Paffendorf, whose team has surveyed the city, matching occupied houses with Wayne County’s foreclosure list.

The owners of those homes owe a collective $153 million in taxes, Paffendorf says. When late fees, penalties and interest are taken into account, it’s $211 million. There’s no question that Detroit could use $211 million, or even $153 million. But here’s the thing: It’s not going to happen.

The point of the county auction is to recoup the value of taxes due on homes seized through tax foreclosure.

It doesn’t work.

And Lansing’s finally getting it. A proposed change to the way tax foreclosures are handled, introduced during lame duck, would allow county treasurers to waive additional interest on back taxes and create a broader range of payment plans for delinquent taxpayers. These are necessary changes.

In this year’s tax auction, 10,704 properties sold for about $61 million, countywide. Of those, 8,453 have closed. About 14,800 properties went unsold; that’s roughly $198 million in taxes that weren’t collected or recouped.

There’s a high rate of auction recidivism; new owners frequently whiff on taxes and the property is foreclosed again, auctioned again, on and on and on.

As Detroit tries to inch its way toward health, we have to measure the value of land differently. For years, we have asked: How much is it worth? How much can you get for it? These are the wrong questions. The standard by which every property decision in Detroit should be gauged is this: What impact will it have on the neighborhood? What is the best use of this piece of land, not in terms of monetary value, but the cohesion it provides, its function in terms of the community, the place, the family?

It’s a philosophical shift in the way we think about land. But the value of an occupied home in Detroit far exceeds whatever meager tax recompense the auction might produce.

The county “needs to make something from the auction, even though they know it’s not a healthy outcome,” Paffendorf says. “They can track the outcome by looking at what’s happened to auction properties. People tend not to pay taxes on properties, since there’s no consequence. It’s not an effectively sustainable strategy. If it gets sold at auction, it’s not being returned to productive reuse.”

There are about 60,000 vacant structures in this city, mostly residential, out of about 380,000 total parcels. There’s a roughly 85% correlation between tax-foreclosed and blighted properties, Paffendorf says.

When the state’s tax foreclosure laws were written, no one expected the staggering drop in property values of the mid-2000s. Because property values had always gone up and up, there was always some certainty most taxes would eventually get paid; in the worst case, that there would be a market for those houses that were foreclosed. None of those things is true anymore.

For some folks, the idea of giving nonpayers a break seems unfair. It’s the wrong way to think about vacant land in Detroit.

“You can make a stand all you want — ‘These people should pay their taxes!’ — but just look at the numbers, and it doesn’t make sense,” Paffendorf says.

The number of homes headed to foreclosure will inevitably shrink, Paffendorf says, as some property owners pay up closer to the deadline. That 35,669 could drop by half. But it’s still too many.

“That’s the nature of how messed up we are in Detroit, that if gets cut in half, it’ll be like, ‘Oh, 18,000, that’s fine then,’ ” he said.

The standard we should apply to any government policy is simple: Whom does it serve? Who, exactly, is served when occupied homes in a too-blighted city are emptied? Not you. Not me. Not Detroit.

Contact Nancy Kaffer:

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Just Approved: Broker helps borrower overcome past foreclosure

  • Jay Sondhi Photo: Jay Sondhi / ONLINE_YES

Mortgage broker: Jay Sondhi.

Property: Two-unit property in Diamond Heights.

Appraised value:

$1.6 million.

Borrowing amount:

$1.12 million.

Loan type: 5/1 ARM.

Rate: 5.375 percent with no points, 5.543 percent APR.

Backstory: Sondhi’s client wanted to purchase the duplex where he rented a unit, but he had a recent foreclosure in June 2011. Most lenders require at least seven years to have passed before a borrower can again be eligible for a new home loan.

Sondhi learned his client’s employer at the time of the foreclosure, a startup, had to reduce payroll. Notwithstanding all efforts to avoid it, the home had been lost. Now, with a new job and substantial reserves, the client wanted to own again.

Sondhi also discovered the building he hoped to own had an unpermitted third unit. This can also pose problems for many lenders.

Sondhi searched for a lender who would look at compensating factors to outweigh the recent foreclosure. Because his client had substantial reserves, great credit (aside from the foreclosure) and had since taken a position with a stable company, he placed the loan with a lender that granted an exception.

They also accepted the appraisal report, which supported a valuation in line with the agreed upon purchase price while not counting the value of the third unit.

Sondhi and his team closed the transaction within the contractually dictated 30 days.

Jay Sondhi, Guaranteed Rate, (415) 694-5512.

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Thousands can buy back homes they lost to foreclosure

Thousands of people who lost their homes to foreclosure are now eligible to buy back those properties at current market value if their loans were backed by Fannie Mae or Freddie Mac.

Fannie and Freddie previously required borrowers who wanted to repurchase their homes to buy them for whatever amount they owed on the mortgage – even if that amount exceeded the fair market value of the home.

That policy was scrapped by the Federal Housing Finance Agency, which oversees Fannie and Freddie. “This is a targeted but important policy change that should help reduce property vacancies and stabilize home values and neighborhoods,” Melvin Watt, FHFA director, said in a statement.

The change affects 121,000 foreclosed homes owned by Fannie and Freddie as of Tuesday. But it’s unclear how many people will be in a position to take advantage of it. Some former homeowners may have moved on, and a repurchase may not be practical for them. Many may not qualify for financing.

Some of the financing challenges have to do with Fannie and Freddie’s own rules, which require borrowers to wait at least three years after a foreclosure before they can qualify for a mortgage. That rule will not change, which means most of the people interested in a buyback would have to look for alternative financing, such as loans provided by nonprofits such as Boston Community Capital.

BCA, created in 2010, buys homes in Massachusetts, Maryland, Rhode Island and Illinois that are in foreclosure or close to it. It then resells or rents the homes to the former owners at a price that reflects the property’s current market value.

“I applaud the FHFA for taking this step and allowing homeowners to have the potential to remain in their homes,” said Elyse Cherry, BCA’s chief executive. “This has been a long time coming and it makes a lot of sense.”

For years, Fannie and Freddie barred buyback arrangements because they basically amount to a “principal reduction,” a form of mortgage relief that reduces the size of a troubled borrower’s mortgage. This type of relief has been a hot-button issue ever since the housing market unraveled and home prices plunged. Millions of homeowners saw the equity in their homes get wiped out, and they could not sell or refinance their way out of trouble. Principal reductions are one of the most effective ways to ward off foreclosure in such cases.

The Obama administration had pressed for Fannie and Freddie to allow such debt reductions through the government’s main foreclosure-prevention program, known as the Home Affordable Modification Program. In 2012, the Treasury Department even offered to pay Fannie and Freddie to participate.

But the FHFA, under Watt’s predecessor, feared that such relief would entice homeowners to intentionally default on mortgages in a bid to get cheaper loans. The agency also warned that such relief could be costly for taxpayers, who had already spent billions of dollars to bail out Fannie and Freddie in 2008.

Recently, when pushed at a Senate hearing to take a position on principal reduction, Watt said that this type of mortgage relief was not “off the table.” He said the issue was “perhaps the most difficult he has faced” as FHFA director.

But even before Tuesday’s announcement, there were signals that the agency was easing up on its position on buybacks in particular.

After years of wrangling, Fannie recently allowed Jaime and Juana Coronel to buy back their Los Angeles-area home at its fair market value after it slipped into foreclosure in 2010. The couple had been living there for 20 years when Jaime Coronel’s landscaping work dried up during the recession and they fell behind on their mortgage payments. Fannie let them rent the property for a few years but tried to evict them when it wanted to sell the house.

The couple refused to budge and asked to buy back the home. Fannie eventually agreed, and the Coronels purchased the home for $280,000. The deal closed two weeks ago, according to the Alliance of Californians for Community Empowerment, which has been helping the couple.

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Tax-foreclosure crisis looming as lawmakers set to act

As state legislators reconvene next week for what’s likely to be a frenetic lame-duck session focused on road repairs, Michigan’s top officials are watching for action on a pair of bills to help tens of thousands of homeowners in metro Detroit avoid evictions.

The two bills languished for years in Lansing, but this fall, they have broad bipartisan support as leaders scramble to avoid a tax foreclosure crisis that could mirror the housing meltdown of half a decade ago — and spring Detroit back into the headlines as a city of financial pathos, just as it tries to burnish a brighter post-bankruptcy image.

This year, the Wayne County treasurer began foreclosure proceedings on a stunning 76,000 properties, including 62,000 in Detroit, capping three years of increased efforts to collect back taxes from people like Marcella Crockett, 39, of Detroit.

She bought a house on Asbury Park on the city’s northwest side about nine years after renting it for almost that long, fell behind on taxes several years ago when she lost a good-paying job, got on a payment plan this year to reduce her debt, including heavy interest — but still lost the house in the county’s October foreclosure auction.

“My possessions are still in there, but all my utilities are off, so I’m sleeping on the driveway in my van, guarding the house,” said Crockett this week. She still hopes, somehow, to get it back.

The two bills have strong support from Detroit Mayor Mike Duggan. In different ways, both would let county treasurers reduce or eliminate the penalties and heavy interest — as high as 18% a year — that quickly accumulate under state law when homeowners get behind on property taxes.

“We have to keep people in their homes — it’s really hard to stabilize the neighborhoods when you force people out through foreclosure,” Duggan said this week. He called Gov. Rick Snyder and “took him through the details and told him we’d be pushing these” in the Legislature’s lame-duck session, Duggan said. Snyder, traveling in China earlier this week, could not be reached for comment.

The goal of the bills, Duggan said, is to let county treasurers forgive the amount a taxpayer owes in interest and penalties, conditioned on the property owner agreeing to abide by a payment plan on the actual tax they owe. Decisions to waive interest and penalties would be made on a case-by-case basis after taxpayers show proof of hardship, said Wayne County Treasurer Ray Wojtowicz.

“While the interest rate serves as an important incentive to pay taxes in stable communities, that same interest rate drives people from their homes in our more economically challenged neighborhoods,” Wojtowicz said in a written statement.

Even fiscal conservatives said they’ve come to recognize that home foreclosures in Detroit and other areas battered by the Great Recession’s meltdown in home values don’t resemble the same process in typical Michigan neighborhoods. Instead of a foreclosure leading merely to delayed revenue reaching tax authorities, the process produces abandoned, stripped and ultimately worthless housing.

Both bills are expected to pass in this fall’s lame-duck session of the Legislature, and with bipartisan support — perhaps as a single consolidated law, said state Sen. Jack Brandenburg, R-Harrison Township, chair of the Senate Finance Committee.

“Government does not want to have to handle homes,” Brandenburg said. “If we can put people on installment plans, let’s give them that opportunity, rather than chase them down and take them through the courts” for evictions, he said.

State Rep. John Walsh, R-Livonia, is sponsor of one bill, which passed the state House unanimously this year as HB 5421. After reaching the state Senate, it underwent rapid behind-the-scenes revisions to expand its reach, then passed the Senate Finance Committee unanimously, making it ready for a Senate vote, Walsh said.

The bill would let county treasurers waive the 18% annual interest rate on delinquent property taxes that kicks in after one year of delinquent taxes and is retroactive to when the taxpayer quit paying, although 12% annual interest would still apply to unpaid tax bills. It applies only to residential property.

“We do have a foreclosure process, and I stand by it, because we can’t have people walk away from their taxes,” he said.

“But for those who approach their county treasurer and say, ‘I want to pay my back taxes (and) I can just barely afford to pay this, but the interest is killing me and I’m going to have to walk away’ — these are the people we need to help,” he said.

Walsh assumed sponsorship of the bill at the request of its previous sponsor, state Rep Rashida Tlaib, D-Detroit, who pushed for the proposal since 2009, then turned to Walsh in the hope that someone from the majority party could build support, she said. Years earlier, another Democrat, Oakland County Treasurer Andy Meisner — then a state representative — proposed a virtually identical bill, Meisner said.

When lawmakers created the 18% interest and other surcharges, “they didn’t envision this foreclosure crisis, they didn’t envision the housing meltdown and didn’t envision that tens of thousands of taxpayers would get caught up in this storm,” Meisner said.

“Not being able to provide some relief is very frustrating for me as a county treasurer. In Oakland County, our tax foreclosure rate is going down, but we still have more than we’d like,” he said.

The second bill, which also passed the state House with strong support, is known as the Distressed Taxpayer Bill, or HB 4882. It also lets county treasurers waive interest and penalties on back taxes but only after a homeowner completes an installment plan that pays off their tax debt. The payment plans aren’t set in stone, but tax authorities said they expect they could be as long as five years.

Proposed in 2011 by state Rep. Phil Cavanagh, D-Redford Township, the Distressed Taxpayer Bill applies only to people “who hit the federal poverty level,” he said.

“We owe a duty to landowners who are in default through no fault of their own — through illness, losing a job, death in the family. Even though you might be in a payment plan, the penalties and interest can double if not triple what you owe,” Cavanagh said.

Under current state law, interest and penalties on back taxes create crippling debts in low-income neighborhoods that lead to evictions, vacant homes that are stripped and ultimately burned or otherwise turned into public hazards with no tax value, said Ted Phillips, executive director of the United Community Housing Coalition.

Phillips has worked for decades to help poor residents metro Detroit keep their houses, “but I’ve never seen a situation this bad,” he said, as clients of the nonprofit agency crowded his waiting room in downtown Detroit last week.

Among them was Roslyn Johnson, 46, of Detroit, who bought her house on Detroit’s east side nearly three years ago and is under a deadline from the Wayne County treasurer to pay about $15,000 in back property taxes.

But Johnson, who lives there with her elderly mother, said when she purchased the house it was already significantly behind on tax payments, “but I didn’t have any ideas about that.” When she found out, she said: “I’m like, how in the heck can you sell this to somebody?” with a huge tax bill owed.

The problem is commonplace among low-income, first-time home buyers, Phillips said. And it spread like wildfire after the housing meltdown, when unscrupulous real-estate investors snapped up thousands of homes on the cheap, then unloaded them on buyers who can’t afford a lawyer and “don’t even have the money for a title search,” he said.

The crisis is “unprecedented in our lifetimes, to have so many properties going through foreclosure in Wayne County and all over Michigan, but we just have to find the right mix of responses,” said Eric Lupher, president of the Citizens Research Council of Michigan, a nonprofit think tank in Livonia.

But assistance shouldn’t go to property owners who could have paid if they hadn’t failed to budget, squandered money on casino trips or steadfastly refused to pay as an investment gambit, Lupher said.

Such people should lose their houses, simply as a matter of fairness to those who pay, said George Kaleniecki, 64, a retired Ford die maker who said he never missed a tax payment for his 1942 brick bungalow on Detroit’s far-west side.

“Let the federal government worry about finding living space for those that won’t pay, or can’t pay,” Kaleniecki said.

For those who qualify as deadbeats, “we have to change the culture that thinks they don’t have to pay taxes,” said Wayne County Chief Deputy Treasurer David Szymanski.

Still, Szymanski said there are thousands of homeowners who need assistance to avoid becoming homeless. At a recent meeting of more than 75 stakeholders in the forclosure crisis, held at State of Michigan offices, Szymanski addressed the group of state and local officials, ministers, poverty advocates and even a representative from the United Nations.

“It’s overwhelming, the number of people in trouble over this. I’m going to ask you all to pray for us,” he said.

Contact Bill Laitner: and 313-223-4485.

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More beach parking in Bonita Springs could be coming – The News

The owner of a 5-acre parcel on Bonita Beach Road wants to use part of the property for beach parking.

Alan Codi owns a vacant site at 4200 Bonita Beach Road, a mile east of the beach.

But first, he needs approval from the city of Bonita Springs.

“It’ll also be a good test to see if people are willing to park a mile from the beach,” said Codi, whose company ACODI Realty has a welcome center at 3570 Bonita Beach Road.

“We have three to four people a day stop in and ask ‘Where can we park?’ … If we develop a reputation for being a place you can’t find parking, it’s going to decrease the allure this place has as far as beach going goes.”

He proposes putting in a temporary clam shell lane without knocking down any trees so 50-100 cars could park. He said people could then take a shuttle.

LeeTran Route 150 runs by the site every 90 minutes.

“It’s not a problem to add a stop to an existing route,” said Joann Haley, LeeTran marketing manager. But she said the county does not have funds to add another bus to the route for more frequent service.

Codi said a private tram operator could offer the service. He said it would probably cost $5 to park plus trolley charges.

“If you go park at the Barefoot Beach access it’s $8 for the day,” he said. “It would come out to the same as if they were parking at the beach access.”

Lee County’s Bonita Beach Access #1 charges $2 an hour.

City Manager Carl Schwing is meeting with Codi next week. He said he needs to hear more about the proposal.

“We’re just asking to expedite this,” Codi said. If he gets approval in December, he said he could put a temporary lot in January during season.

He said its usage would let him know if he should reserve part of the site for permanent beach parking.

Codi plans to develop it as the Barefoot Plaza.

“We’d like to do something that’s very beach oriented and possibly put a couple of restaurants and put a lagoon pool,” he said. “People could come and spend the day. Picnic tables. We’ll even put some parking spaces for some food vans.”

The 5-acre site was in foreclosure when Codi bought it for $700,000 in February.

“We really got a good deal on it,” he said. “We can afford to use some of it for parking.”

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Just Approved: Broker helps borrower overcome past foreclosure


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