Austin Real Estate Blog

Although Austin has done well overall during the real estate crisis, it has still been affected by it. A recent listing of foreclosures showed the rate in Travis County increased by 50%. This places the county second in Central Texas just behind Bastrop County, which was up by 78%. Loan modification requests by many homeowners are believed to be the reason for such a high increase.

In the last several years, banks and lenders moved away from traditional lending practices and many people who previously would not think of buying a home became eligible. The result was ARM mortgages with increased payments over time that the new homeowners had not been expecting. As the homeowners began to fall behind, the real estate market nationwide took a dramatic downturn. While lenders are now getting back to basics with regard to lending, those already in debt are feeling the burn. Many lenders have vowed to work with occupants to help through the crisis, but too many are behind and the loans are not being paid. Homeowners looking for ways to refinance are unable to meet new terms in regard to credit. These homes are set for foreclosure beginning January 9, 2009.

It is obvious that lending institutions are doing their best to modify loans when applicable and possible, however it may take months to be approved. It seems that they are overloaded with requests. The best thing for homeowners to do is start the process as soon as it becomes apparent that there will be a problem with staying current. The Federal Bailout plan was designed to help lenders assist in keeping many people in their homes.

Federal Deposit Insurance Corporation (FDIC) Chairman Sheila Bair surprised Congress with a proposal bypassing the Federal Housing Administration to make use of the Treasury as a financial resource for cash strapped mortgagees. The low cost “gap” financing would help to reduce the principal balance on a loan as much as 20 percent over the next five years. Ms. Bair announced the plan at the end of April 2008, just as the House and Senate were negotiating with the FHA for a proposal that would assist the troubled homeowners with their unaffordable mortgages.

Ms. Bair’s plan would be limited to those borrowers who are determined to stay in their homes and avoid foreclosure proceedings and wouldn’t cost the Treasury anything as the five years worth of interest would be paid up front by participating lenders. The borrower would then begin to pay down the principal with no interest for five years. After five years, the borrower would begin to pay off the FDIC loan at the low Treasury rate for the rest of the mortgage. The mortgage would hold a lien on the property and it would be paid off first should the borrower sell or succumb to foreclosure.

The program would be limited to those borrowers who could qualify for a lower fixed rate mortgage. The home owner’s mortgage lender would apply for the gap loan on the home owner’s behalf.

The idea is to lower the borrower’s debt-to-income ration to a more manageable 35 percent and to take advantage of lower Treasury borrowing rates to assist homeowners into more affordable fixed-rate loans. This plan is not for everybody, but Ms. Bair thinks it could make a difference for up to a million homeowners who don’t qualify for any other relief plans. It’s certainly something worth looking into.

The real estate market news remains good for the Austin area, and Texas as a whole. March foreclosure numbers for Texas are down compared to last year - down about 16 percent. The March figures also show a drop of 13 percent from February 2008. When compared to the national trend - 2008 figures show a 57 percent jump in foreclosure filings from 2007 - the Austin market is strong indeed. In fact, the national foreclosure trend continues to climb: up 5 percent in March 2008 from February 2008. Bank repossessions were up a staggering 129 percent.

In Austin, market conditions are holding steady still. Active listings are up, but so are median sales prices - about 5 percent. This makes for a market that is slightly more advantageous to the buyer as the inventory is high and the average price of a single family home has remained steady and, in some cases, actually dropped slightly.

We may be looking at the end of the nationwide slump, also, as prices seem to be bottoming out and the government reports that prices have crept up slightly recently. Inventories are still high, but the buyers have been showing interest again. The major mortgage bankers have been working to keep interest rates under 6 percent, as applications for loans are beginning to rise again. The FHA reports that applications for mortgages have jumped 3.5 percent. Freddie Mac plans to put up to 15 billion dollars into slumping markets.

While Austin has been affected in some small measure by the national real estate slump, things look to be well in hand for an imminent growth period in the next year and beyond.

Foreclosure is not something most people look forward to. It is, after all, the loss of a home and, for the people living there, a disastrous situation. But for you, there can be a positive side to foreclosure, for the house will be sold at auction. And if you play your cards right, you can score the deal of a lifetime.

It all starts before the auction. You want to get a look at the property. Not doing so will set you up for a risky bid and possibly secure you an incredibly damaged piece of property. Talk to the party foreclosing - the lender or the attorney. He should be able to secure you access, but if not, try the current owner. Whatever you do, do not take no for an answer. You need to know the condition of the house.

You also need to know about any liens on the property, so do some research. Find out about taxes, hidden costs and other issues that could come up in the future. There’s no point in saving money now if you’ll only lose more later on.

Finally, be sure that you have all of the facts. Know about the area, your neighbors and the history of the home or, if it’s a condo, the complex. You are taking a risk by going to an auction. Don’t make it a blind one.

Recently released by Freddie Mac, the Primary Mortgage Market Survey (PMMS) figures for the week ending April 10 reveal a distinctive lack of change in 15- and 30-year fixed rate mortgages (FRM) during that time. Additionally BankRate.com’s weekly market assessment confirmed the rates appear to have plateaued. This is despite the Fed’s action in lowering rates for adjustable rate mortgages (ARM). Fifteen-year FRMs averaged 5.42 percent over the past two weeks, and 30-year FRMs averaged 5.88 percent. Vice president and chief economist for Freddie Mac, Frank Nothaft, surmises the steady rates are due to the stagnant economy and lower existing home sales, as well as the loss of jobs.

This article in the Statesman looks at the unchanged FRM rate as a bad sign: that the banks are holding back on lowering rates for long-term loans, such as mortgages. This would be attributed to the “skittishness” resulting from the high rate of foreclosures as a result of loan defaults. While it appears that the mortgage rates are low, a potential mortgagee is expected to pay an average of more than 2 percentage points, rather than the traditional 1.5, for a 30-year FRM. This translates to a higher initial out of pocket expense for the borrower.

Some see the steady rates as a good sign. In the Austin area, house prices have risen slightly, in contrast to much of the nation. Banks are cautious in the aftermath of the sub-prime debacle, and understandably so. As mortgage rates remain low, a potential home buyer can find encouragement in obtaining a loan to purchase a home and sellers can be ensured that they will receive a competitive price for their family home.

For many homeowners, the current economy has left them struggling with debt. They are unable to pay their mortgage’s current rates and are thus facing foreclosure. Should this happen much if not all of the debt may be forgiven, and in some cases the homeowner may accrue more money than what was owed. He would be left with a lump sum that would have varying tax implications depending on how it was gotten.

For this reason, the IRS has created a Web site explaining each possible situation and how the funds should be handled. In nearly all situations, any moneys beyond those that were owed would be taxable, but there are some instances in which that is not the case. For instance, if the debt were erased through bankruptcy, it would not be considered taxable income. Similarly if the indebted were insolvent meaning his liabilities exceeded his assets, it is probable that at least a portion of the debt would not be taxable. Farm debts, depending on the nature of the loan, as well as non-recourse loans and forgiven debts would also not be taxed. Full details can be found at the page, “Questions and Answers on Home Foreclosure and Debt Cancellation.”

It amazes me that no matter how many people get caught doing these mortgage fraud schemes, people still do them. Why would you think that you could run 30 scams over a 9 year period and that no one would eventually catch up to you? I guess if you scammed for 5 years and then went to some place in Bosnia you could “get away” with it, but short of that you’re going to get caught. Anyway, take a look at some of the folks involved. The vast majority are from Austin and several are licensed agents or lenders. What a shame on the industry they are. I’m glad their gone. Know of any other good stories? Send them my way and I’m happy to post them.

This article is an excerpt from The Mortgage Fraud Blog about the case.

A federal grand jury returned an indictment charging sixteen individuals with conspiracy to commit fraud and conspiracy to commit money laundering for their roles in a multi-million dollar mortgage fraud scheme. Those charged include:
Cornelius Robinson, 47, Austin, Texas, leader and organizer of the conspiracy;
Silvia Seelig, 45, Austin, during the conspiracy was a licensed real estate agent and an alleged straw buyer;
George H. Watson, 55, Austin, a licensed attorney specializing in real estate transactions. Watson served as the closing attorney on numerous real estate transactions associated described in the Indictment;
James Douglas Atwood, 51, Austin, Cornelius Robinson‘s uncle and an alleged straw buyer;
Michael Breon, 39, Austin, an associate of Cornelius Robinson and an alleged straw buyer. Breon, a licensed loan officer and mortgage broker, was employed by several different loan origination and mortgage companies during the conspiracy;
Sindu Sukumaran, 36, wife of Michael Breon and an alleged straw buyer;
Doris Ann Hill, 40, Austin, a personal banker employed at Wells Fargo Bank. For a fee, Hill allegedly agreed to provide a false verification of deposit to loan underwriters in relation to real estate transactions.
Julius Meyers Lofton, 45, Austin, licensed real estate agent and an alleged straw buyer;
Roy Rivers, age 52 of Austin, friend of Cornelius Robinson and James Atwood and an alleged straw buyer;
Danielle Guice Rosas, 40, Austin, an alleged straw buyer;
Stanley Ma, 27, Honolulu, Hawaii area and an alleged straw buyer;
Leonard Brown, 38, Houston, Texas, and an alleged straw buyer who also allegedly provided a false verification of employment in association with Onyx Consulting and defendant Ma;
Russell Snead, 43, Seattle, Washington area, an associate of Cornelius Robinson and an alleged straw buyer;
Marlon Nathan Torres, 45, Hutto, Texas, an associate of Cornelius Robinson;
Jeffrey Andre Wilkins, 46, Austin, a friend of Cornelius Robinson and an alleged straw buyer; and,
Leroy Williams, 46, Austin, an alleged straw buyer.

The austin mortgage fraud indictment alleges that from September 1999 to present, the defendants participated in a scheme to defraud mortgage lenders, including federally insured financial institutions, with regard to loans acquired to purchase 25 properties in the Austin and San Antonio, Texas area. The scheme centered upon the use of real estate flips. That is, the defendants purchased property at one price and would immediately sell, or flip, the property to a straw buyer at a higher price. In doing so, the mortgage lenders were deceived as to the true nature of the transaction and the financial status of the straw buyer. The straw buyers did not make the subsequent monthly mortgage payments and all of the loans have gone into default. All of loans have been either foreclosed upon or are the subject of current foreclosure proceedings.

Each defendant faces up to 30 years in federal prison upon conviction of the fraud conspiracy charge; up to 20 years in federal prison upon conviction of the money laundering conspiracy charge. In addition to the conspiracy charges, the indictment contains several substantive charges including wife fraud, false statements and receipt of commission or gift for procuring loans.
It is important to note that an indictment is merely a charge and should not be considered as evidence of guilt. The defendants are presumed innocent until proven guilty in a court of law.

The properties involved include:

10920 Preston Trails, Austin;
3306 Pennsylvania, Austin;
4708 Heflin Lane, Austin;
5403 Pendleton, Austin;
3109 Val Drive, Austin;
1174 Graham, Austin;
5200 Meadow Field; San Antonio;
5205 Meadow Field; San Antonio;
5216 Meadow Field; San Antonio;
5221 Meadow Field; San Antonio;
5228 Meadow Field; San Antonio;
301 Lightsey, Austin;
5100 Woodmoor, Austin;
1207 Harvey, Austin;
3700 Govalle, Austin;
5011 Nixon, Austin;
3303 Hickory Creek Cove, Austin;
7412 Albert Lane, Austin;
3900 Pawnee Pass, Austin;
2507 Givens Avenue, Austin;
2904 Cherrywood, Austin;
10415 James Ryan Way, Austin;
3513 Josh Lane, Austin;
1709 Enfield, Austin;
601 Explorer, Lakeway;
12605 Lyndon, Austin;
27013 Masters Parkway, Spicewood;
4412 City Park Road, Austin;
1345 Upper ELgin River Road, Elgin;

This case was investigated by the Federal Bureau of Investigation. It is being prosecuted for the government by Assistant United States Attorney Mark Lane.

Remember all of those stories back in 2000 about people who invested their life savings in Pets.com? Or the stories about successful businessmen who gave it all up to be daytraders? Well the collapse of the real estate bubble has largely lacked those same kinds of implausible anecdotes…until now.Realtors and lenders are increasingly reporting on a trend that’s a sure indication as to just how far we’ve come. It’s called “taking the inside of the house with you” and it’s what happens when disgruntled homeowners trash their foreclosed homes before abandoning them. Think of it as a reverse housewarming gift for their bank.

Pigs left to trash house: Police believe homeowner left pigs in this home without food or water, hoping they would trash the place after he was forced out by foreclosure.

How crazy is this? I was watching the debates tonight when I heard some comentary from Glenn Beck. He was talking about the mortgage crisis and mentioned these photos from his website and I couldn’t resist. As an active agent who occasionally works REOs and HUDs, I have seen some dumps before, but this takes the cake. I understand how angry, demoralized, and scared people must be when going through a foreclosure, but when people start destroying other people’s property something needs to be done. We all end up paying for the damage in the end in the form of higher interest rates or less flexible terms.

What’s the worst damage a property has sustained from people losing their home to foreclosure that you’ve ever seen?

The worst I’ve seen was a home that had all the major AND all the minor appliances removed. Holes in the walls and ceilings where said appliances used to reside. Additionally, the owners must have gotten their rebuilt their motorcylce in the living room because the carpet in the living room was covered with 10W30. I can understand that, but dripping the oil throughout the house must have taken some time because it was on everything. I wonder if that would be a potential source of fire since they always tell you never to leave oily rags lying around? Anyway, it was a damned shame.