Freep: “Home prices rise in Detroit, across U.S.”…

I’ve received several emails about this article in The Detroit Free Press yesterday and will try to address it in a longer post, next week.  In short, home prices are certainly on the move – especially in higher demand areas.  Why?  Shadow foreclosures…

The Campaigns & Housing…

To follow-up on last week’s blog which addressed the soon to expire Mortgage Debt Relief Act and the need to extend it, this week I’m taking a look at all the housing-related issues facing both presidential candidates and their stances, as outlined in a piece featured on Bloomberg.com this past Wednesday.

In short, President Obama & Governor Romney have been vague and relatively silent on the issue.

The Obama administration has tried various routes, most of which have provided limited success, with very little assistance going to the average homeowner.  Simply put, the banks have too much power and without any teeth attached to the president’s housing policies, lenders have had limited incentive to comply.

Romney, on the other hand, initially believed in a strategy that would allow the market to correct itself by hitting rock bottom on it’s own.  Most would agree that this is hardly a good option – especially for those homeowners who have continued paying their mortgage on time, but still find themselves underwater and casualties – not causes – of the housing crisis.

Since then, Romney has changed his tune a bit.  Still, the only real difference between his new approach and the presidents would be to abolish the Department of Housing and Urban Development.

In a step to address the lack of focus on housing by the presidential candidates, a group by the name of The Opportunity Agenda (opportunityagenda.org) has composed an open letter to both candidates, titled: “The Home for Good Campaign calls on President Barack Obama and Governor Mitt Romney to offer concrete solutions to the housing crisis”.

Essentially, the letter requests clarity from the candidates on their plans for housing, as well as “bold action” to:

1. Stop needless foreclosures.

2. Expand affordable rental housing.

3. Revive a sustainable path to homeownership.

Further, the page offers a link to the Compact for HomeOpportunity, which outlines “What America Can Do to Stop Foreclosures and Fulfill the American Dream”.

Regardless of which way you vote, this is a serious topic that isn’t getting the attention it deserves.  Housing drives the economy and until we find a way to fix it, unemployment will remain high and real recovery will be difficult to accomplish.

For those who think the recovery is underway due to the recent increase in housing prices, don’t be fooled. Inventory is limited, due to banks delaying the release of foreclosed homes back into the market.  While the tactic might temporarily increase prices, it does nothing to assist those who lost their homes, or still stand to lose their homes, and is far from a long-term solution… 

You can read the full Bloomberg News article, here.

Not Too Late For Mortgage Debt Relief Act Extension…

As the end of the year approaches, so does the expiration of the Mortgage Debt Relief Act (MDRA) of 2007.  The MDRA removes the capital gains tax penalty that would normally be imposed on any forgiven debt — the difference between what was originally owed and what the house sold for — on a primary residence sold in a short sale.

The act is set to expire on the 31^st of December and should it not be extended, it will likely send the slowly recovering real estate market – as well as the economy in general – back into a downward spiral.

By having the act in place, it encourages people to work with their lenders on short sales, without the fear of being hit with a huge tax bill.  Sure, they still might be made responsible for a portion of the deficiency; but it will likely be far less than the tax one would pay on the forgiven debt.

As noted in San Jose Mercury News:

“Housing advocates and lawmakers are worried that the exemption will disappear just as thousands of homeowners are receiving large amounts of mortgage debt relief from the nation's five largest banks as part of a national settlement of foreclosure abuse investigations.  "The expiration of that provision is a hidden time bomb," said Rep. Jim McDermott, D-Wash.”

Unfortunately, we’re in the middle of an election year and with all the other issues taking center stage, the extension of the MDRA is being pushed to the back burner.

It doesn’t have to be that way.

Reach out to your elected representatives and let them know how important it is that we extend the MDRA.

Can A Short Sale Be Removed From Your Credit Report?

This is a question we’re asked quite often and generally speaking, no, you cannot remove a short sale from your credit report, if it’s reported accurately.

A vice president with Bank of America once advised me that lenders are required to report to the various credit agencies (Equifax, Experian & TransUnion) accurately, in order to “preserve the integrity of the credit reporting system”.  I know, I know – it’s hard to even type that with a straight face.

You can limit the damage to your score, if you’re able to complete a short sale without going late – or at least, without becoming too delinquent.  The real damage comes once you account is delinquent past 90 days.  Regardless, negotiating how your short sale is reported has never been a viable option.

However, I came across an interesting article this week, discussing ways to challenge the derogatory reporting, even if you did complete a short sale.

According to the San Jose Mercury News:

“Certified credit specialist Julie Macc says the moment any negative or derogatory information is listed on a credit report, it will affect a credit score anywhere from 60 to 160 points, so short sales and foreclosure definitely hurt a client's credit score. However, it is possible to remove a short sale or foreclosure from a credit report.

According to the Federal Fair Credit Reporting Act, everything reported on a client's credit report must be 100 percent accurate and verifiable. At a recent meeting of members of the Silicon Valley Association of Realtors, Macc indicated studies show 93 percent of consumers have inaccurate information on their credit reports. You can challenge inaccurate reporting in your credit report, she says.

"Are the dates and amounts reported correct? Is it being reported as 'charged off' when payment was accepted for release of the lien? Does the credit report reflect the account as being closed? Often the account is being reported as open," says Macc.

If a borrower believes the mortgage loan servicer or lender has made a mistake regarding their mortgage, under the Real Estate Settlement Procedures Act, the borrower can file a Qualified Written Request for information about all questionable fees, entries, documentation and a life of loan history (all fees and payments ever made on your mortgage) from your lender.

The lender has five days to acknowledge receipt of the request and 21 days to provide the requested documentation or request an extension with an explanation of why an extension is needed. Macc, who also serves as a legal consultant on behalf of the Century Law Group, says to date, the firm has never had a client whose lender has fully complied with the QWR, or responded in the time set forth by the federal guidelines.

Consumers may file a complaint with the lender(s), and in most cases against the three credit bureaus: Experian, TransUnion and Equifax. If the lender does not respond, or refuses to comply with the borrower's QWR, the borrower may take the matter to small claims court and sue the lender.“

So, it’s not as much a “negotiation” to remove the short sale, but rolling the dice on a technicality.  It could work though, since lenders regularly report inaccurately and both they and the credit reporting agencies themselves are rarely able to respond to/acknowledge anything within 21 days, let alone 5.

It’s an interesting tactic – one you can learn more about here, at the mecurynews.com.