Renting beats owning a home in California and many other markets

rent 2Even though owning a home is still cheaper than renting nationally there are many markets where it is still cheaper to rent than own.  One of those markets is all of California!  This is rentaccording to a Deutsch Bank housing survey cited in an article posted on-line in SmartMoney.  With housing price declines and record low-interest rates it should be cheaper to own real estate but in California and the northeast and elsewhere it is still in fact cheaper to be a tenant.

According to the same article homeownership is slipping.  It is down from a high of 69% in 2004 to a low of 65% and it appears to be still falling.  More and more people seem to have caught wind of this fact and they are becoming tenants.  Apparently one-third of all rentals are single family homes as the number of single family homes for rent grew by 2 million from 2006 to 2010.  There are currently a total of 13 cities where it is cheaper to rent than own now.

So don’t despair if you don’t have a piece of the American dream.  Don’t worry if you have been foreclosed on and you now must rent.  If it is cheaper to rent then maybe renting is a good idea for a while.  It is doubtful that their will be any meaningful appreciation in housing anytime soon so why buy?  When you add in the costs of maintenance, insurance, mortgage, and taxes it is very expensive owning a home.  Let the landlord worry about that stuff and be happy renting!

Now may also be a good time to clean up those debts yo have accumulated over the years too.  Paying rent is always easier without paying for all those credit cards, personal loans, auto deficiency balances, and medical bills.  Try bankruptcy to eliminate those old debts and get a fresh start.

I am a San Diego bankruptcy attorney.  For further questions please visit my websites at www.farquharlaw.com or www.freshstartsandiego.com.  Or call my office for a free consultation or for any other advice about bankruptcy or debt at (619) 702-5015. Call now for free credit report and analysis!

For a free e-book on “13 things to do to prepare for your bankruptcy filing” please e-mail me at farquharesq@yahoo.com.

 

For rent photo courtesy of Billy Alexander.  Houses for rent photo courtesy of cdsessoms.

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Stockton California gets close to filing chapter 9 bankruptcy. Largest city to do so yet!

Stockton California edged closer to filing for chapter 9 bankruptcy protection on June 6, 2012.  The city council authorized the Stockton city manager to file bankruptcy by a 6 to 1 vote after an intense 4 and one half hour public meeting according to an online article in the Los Angeles Times.  The city manager will file for bankruptcy protection for the city if the current attempt at mediation fails.

Stockton had apparently stopped making payments to creditors back on March 27th 2012.  At that time they entered into these mediation discussions that have since failed to resolve their problems.

And it is unlikely that these mediations will work.  The city has released a public statement calling their situation “dire” and that there will be a 26 million deficit by July 21, 2012.

According to the article Stockton is a river port city with 290,000 in habitants east of San Francisco that has the second highest foreclosure rate in the nation as well as a very high crime rate.  An article posted online by USA Today describes Stockton as a “crop abundant” central valley city with high foreclosure, crime rates and unemployment rates.  But it also says that Stockton was named America’s “most miserable city” in a national magazine- twice.

But then the article got to the real reason for the Stockton bankruptcy.  In one sentence they said it all.  Stockton is embroiled in an ongoing dispute with police and city worker unions over pensions.  Here go those public pensions again backed by public unions.

There are many cities with this same problem across the nation right now.  I have blogged about Harrisburg Penn. and Detroit Mich.  Harrisburg filed for chapter 9 bankruptcy and I believe that Detroit may have to eventually along with many other U.S. cities.

These cities have had disputes with public unions over pensions.  These pensions (and other benefits) were promised to city workers in good economic times.  And they were promised by politicians who have since retired.  And these unions often promise the politicians votes if the politicians agree to these pensions.  The politicians do grant the unions what they want because it is someone else’s money that they are giving away.

It is the taxpayers money that is promised to these unions by politicians who want votes.  The politicians don’t have to pay, they just want to get elected.  We see this time and time again.  Here in San Diego the unions were promised contracts that tripled their benefits.  San Diego could not afford it any more than could these other cities and as soon as the economy collapsed San Diego faced bankruptcy like hundreds of other cities could.

This is why FDR himself did not like the concept of collective bargaining for public worker unions.  If city worker unions can collectively bargain and demand benefits from politicians it sets up a whole conflict of interest.

The politician who agrees to give public unions their benefits is not like a president of a public company.  The politician will just award the benefits that the public unions demand if the unions agree to reelect him which they do.  That does not happen in a private company.  Private workers don’t vote for a company president who will give them more stuff.  Even if they did it would not come out of taxpayer pockets so no one would care.

No doubt the city worker unions of Stockton are saying raise taxes on the people and businesses of Stockton to pay for their union benefits.  This is what we hear from other public unions in other cities.  The people of Stockton are getting foreclosed on and they are probably facing unemployment so they can’t afford more taxes.  The same would go for businesses who would relocate if their taxes were raised.

I wrote in my other blogs about the unfairness and absurdity and unworkability of this kind of taxation.  In many cases taxpayers and businesses would be asked to pay larger taxes to pay the benefits of city workers when the taxpayers cannot afford anything like those benefits themselves.  Remember that in San Diego they tripled city worker benefits before the city went broke.  Who else could demand a tripling of their benefits?  Not me.

I also wrote about how I believe that a city exists or should exist to benefit its residents.  A city is not there to benefit its workers over its residents.  I agree with FDR that public unions should not be able to collectively bargain with a city and demand more benefits.  It is a definite conflict of interest where the taxpayer gets screwed and the city ends up in bankruptcy.

I am a San Diego bankruptcy attorney.  For further questions please visit my websites at www.farquharlaw.com or www.freshstartsandiego.com.  Or call my office for a free consultation or for any other advice about bankruptcy or debt at (619) 702-5015.   Call now for free credit report and analysis!  For a free e-book on “13 things to do to prepare for your bankruptcy filing” please e-mail me at farquharesq@yahoo.com.

Shiller says housing prices won’t rebound for a generation. Are we headed for a society of permanent tenancy?

In an interview with Reuters Yale economics professor Robert Shiller (creator of the Case/Schiller housing index) has expressed his concern that housing prices may not rebound for a generation.  He says that the combination of high gas prices, a weak labor market, and a general sense of unease among consumers have all combined to keep housing prices low for the foreseeable future.  He apparently added in the interview that he was worried that we would not see a housing rebound in our lifetimes.

If this is true could it mean that our generation is doomed to low housing prices?  Will we really not see increases for the foreseeable future?  What effect will that have on future home sales?  Don’t people buy homes because they are a good investment and because they will increase in price in the future?  Will they now stop?  Won’t this radically affect our whole economy and what about all of the people who work in the real estate industry?

These are just a few of the questions I had when I read this.  I hope this economist is wrong but if he is right then we could see a whole different society in the future.  It could be one where people won’t invest in real estate anymore.  People could merely rent their home or apartment and not buy because they have little hope of getting any appreciation or equity out of their investment.  This could mean the end of the American dream of home ownership.

It is well-known that there are kids who are staying longer and longer at home.  Much longer than they did in previous generations.  These are the “failure to launch kids”.  According to CBS fully 70% of children under 30 still live with their parents. These people will probably not buy homes until much later if at all unlike previous generations when people usually left home at 18 years old.

This factor combined with the recession, the foreclosure crisis, and the failure of housing appreciation is creating a different kind of nation.  One where real estate is not purchased nearly as often.  I believe that there could be a future for America where people don’t invest in real estate.  One where they rent and don’t own ever. One where they are tenants for life.  This will be a different society than the one we know now.  Some realtors I know claim that the whole economy is so dependant on real estate that it cannot climb out of this recession until real estate does.  (See here for my blog on how foreclosures are predicted to increase in the near future).

I hope the realtors are wrong and I hope Schiller is wrong.  I personally don’t want to see our country abandon the American dream of homeownership and trade it or a society of permanent, lifetime tenants.  It sounds too much like medieval Europe to me.  I don’t foresee good coming out of us becoming tenant/peasants who have not hope of owning homes.  I believe housing prices must rise again in the not too distant future if we are to avoid an unraveling of society and a return to a more slavish tenant existence.  This would not be good for anyone and a departure from everything were moving towards up until this point in our history.

I am a San Diego bankruptcy attorney.  Please visit my websites at www.farquharlaw.com or www.freshstartsandiego.com for more info. about any of these topics.   Or call my office for a free consultation at (619) 702-5015.  Call now for a free credit report and analysis!

For a free e-book: “13 THINGS YOU SHOULD DO TO PREPARE FOR YOUR BANKRUPTCY FILING” please send a request by e-mail to: farquharesq@yahoo.com.

Can I file bankruptcy a second time? Yes, and with stubbornly high inflation, unemployment rates, and the housing crisis you might well need to!

economy 2If you want to file for bankruptcy a second time you just have to wait the required eight years since the last time you filed.  Don’t Guess Againworry it goes by quickly!  Many people find that they get into the same situation as they were in before after eight years have gone by.  The country’s unemployment situation does not appear to have improved, the price of everything is going up as inflation worsens, and the nation’s housing crisis continues. (See here for additional reasons for why you should file for bankruptcy).

I read an article yesterday that gas prices have increased by over 80% in the last three years.  Many food prices have increased by 20% in the same period but the government uses an inflation measure that excludes food and energy prices so their statistics do not reflect real inflation.  This seems ridiculous because food and gas are the items that people buy the most.

With our astronomical 15 trillion deficit many of us believe that massive inflation is coming for America which will render our currency increasingly worthless.   I heard a story the other day about inflation in the Wiemar Republic in Germany in the 1920s.  There the cash was so worthless in 1920s Germany that crooks stole only the wheelbarrows that people carried the cash in and dumped the cash in the street.

Unemployment is also staying high and is also under counted by the government. We are told that unemployment is declining but we also find out that increasing numbers of people are leaving the job market altogether and are thus not being counted in government statistics.  We apparently have the lower number of adults working in America that we have ever had before in our history. (See here for my blog on the unemployment is rising because people are leaving the labor force).

As we have known all along many people are giving up on finding a job and are either living off the government or are living on money earned under the table and off the radar.  These people usually are surviving on such little money that they should be counted as at least underemployed if not as unemployed.  This many unemployed people not being counted makes the unemployment situation look far better than it really is.  I hate to say it but it appears that the government has an agenda to advance in these statistics on inflation and unemployment and these government supplied numbers should therefore be questioned or ignored.

The housing crisis also seems to have no bottom.  Houses are still being foreclosed in in great numbers and thus housing prices are not rising in some areas and still falling in others.  Many are facing an iminent foreclosre of their home due to this crisis in real estate and the realtors I talk to say they don’t see any end in sight for this.  With the glut of foreclosed homes on the market the prices of homes will not increase again for some time.  Many who are unemployed cannot afford to pay their mortgages now.

unemployment 4Many people believe that with our massive debt at the federal, state, and local levels we are headed for financial collapse.  I don’t know if a massive collapse is coming but it’s clear that massive inflation and continued high unemployment are a distinct possibility.  Collapse has happened before in history with the Wiemar Republic and with other societies that failed to get their debts in order.  If we are headed for these increasingly difficult economic times then it would certainly be easier to enter them without a tremendous debt load.  Bankruptcy can accomplish that.

If massive inflation comes will help pay down the government’s debt but it will devastate individuals and families financially as it dramatically increases the prices we pay for everything.  If unemployment remains high too then many people will continue to have medical, credit card, auto repossesssion, and other personal debts they  pay.  Many will continue to borrow on their credit cards as they have in the past out of necessity and not irresponsibility.

If any of this sounds familiar then you might want to consider filing bankruptcy.  Don’t be like the government and put you head in the sand.  Deal with your debt in a responsible, legal, and ethical way which is what you get with a bankruptcy discharge.  You can also significantly slow down or stop your home being sold at foreclosure with a bankruptcy.

All of this debt, unemployment, and foreclosure will lead many individuals and couples right back into a situation where they cannot pay their debts.  Once they stop paying these creditors the phone will start ringing again 24 hour a day from collection agents who ceaselessly try to collect these debts.  The result of this will be more people will need second time bankruptcies.  So don’t despair if you have accumulated debt in the last number of years because you can file bankrupty again.

If you filed in 2005 like millions did to avoid the bankruptcy law changes then you will be able to file next year in 2013.  You only have to wait eight years.  If you filed in October of 2005 like many did the you should look to file again around October of 2013.  Remember that millions of individuals are in the same position as you are so don’t despair.  Just call a good bankruptcy lawyer now and he will help you survive financially until the eight years has elapsed.

There are many strategies for managing these debts in the mean time including paying them something to get them off your back.  A good lawyer will help you manage you finances until the date arrives that you can file for bankruptcy again.  For an update on filing bankruptcy a second time see here.

I am a San Diego bankruptcy attorney.  For further information please visit my website at www.freshstartsandiego.com or www.farquharlaw.com.  Or call my office for a free consultation at (619) 702-5015.  Call now for a free credit report and analysis!

For a free e-book: “13 THINGS YOU SHOULD DO TO PREPARE FOR YOUR BANKRUPTCY FILING” please send a request by e-mail to: farquharesq@yahoo.com.

The economy is so bad photo courtesy of Mark Holloway.  Guess again photo courtesy of Damian Gadal.  Unemployment photo courtesy of Sean MacEntee.

Possible foreclosure settlement with the banks! $20 billion to be set aside by banks to fund mortgage modifications!

According to Fox Business there is a potential agreement to reach a settlement between the banks and the Department of Justice over the banks’ use of improper mortgage practices and robosigning.  There are numerous types of improper mortgage practices and robosigning was the practice whereby the banks signed batches of mortgages without reading them.  Bank of America and Chase are the banks that are announcing the settlement which is good because they are two of the largest banks.  I did not see Wells Fargo listed in the potential settlement agreement.

The settlement would contain $20 billion in a “monetary relief fund” that presumably would be set aside to use for mortgage modifications..  This would hopefully allow people who had previously been turned down for a modification in the past to now get a modification.  Also part of the deal is an overhaul of the entire mortgage system by putting in sweeping new guidelines that would fundamentally change the industry like the Tobacco settlement changed that industry in 1998.

None of the banks nor the justice department is commenting on the deal and there are several sticking points.  The banks want immunity from lawsuits if they do this overhaul and set aside $20 billion.  Several states have problems with giving the banks immunity.  California has already apparently said that it won’t and it has backed out of the settlement.  Arizona and Nevada are separately suing Bank of America and New York state has its reservations too.

There are numerous class action lawsuits filed against the banks which the banks want to get dismissed as part of the settlement.  Also its unclear what the requirements will be to receive one of these settlement mortgages/modifications.  The administration has a bad history of running these programs.  The article points out that the Emergency Homeowners’ Loan Program (EHLP) was just shut down as it was badly administered, had too high income requirements, and failed to help nearly the number of people who it was designed for.

It’s hard to say what will come out of this.  If $20 billion is set aside then there will be a pool of money to lend to people or to fund modifications that were previously denied.  That would be a good thing.  But if this program is as poorly run as EHLP then people may have trouble accessing it.

It would be a good thing though if there were new standards for determining what was required for a modification.  My clients would universally all tell the same horror story of what happened when they applied to get a bank to modify their loan.   They would send the same documents to the bank over and over again and each time they called they would speak to a new person at the bank.  No one at the banks knew what was going on or what was needed to process the application.  They would eventually give up or they would be denied because they suddenly made too little money.  Sometimes they would be paying the new modified rate for a year when they were denied.

This is a system that is broken beyond repair and which needs some standards and some predictability.  Why can’t there be set rules governing mortgages and mortgage modifications?  Why can’t those rules be written so that people can understand the rules and know what is required of them?  Why can’t they have some assurance that if they follow these rules or comply with these requirements they will get their mortgage or their loan modification?  It’s not rocket science and it the mortgage industry should not be an enigma wrapped in a riddle surrounded by a mystery as Winston Churchill said.

So I look forward to more straight forward standards and lets hope that something good comes out of this settlement so more people can modify their mortgages and keep their homes.  In the mean time I always advise my clients that if they have a lot of other credit card type debt then they should file for personal bankruptcy.  This will eliminate these payments and free up income so they can qualify for a modification.  It will certainly help their debt to income ratio.

I will give more updates in the future if and when this settlement is reached.

I am a bankruptcy attorney practicing bankruptcy law in San Diego, CA.  For more information please visit my website at www.farquharlaw.com or www.freshstartsandiego.com.  Or call my office for a free consultation at (619) 702-5015.  If you or someone you know is considering bankruptcy then get my FREE E-BOOK “13 THINGS YOU SHOULD DO TO PREPARE FOR YOUR BANKRUPTCY FILING” bt e-mailing me at; farquharesq@yahoo.com.

Short Sale and foreclosure- watch out for the small lenders! Can bankruptcy help?

I believe that short sales are preferrable to foreclosures because of the credit score hit that you take in a foreclosure.  Most large banks should readily do a short sale for you but watch out for small lenders who may lure you in with the promise of a short sale only to cancel the short sale at the last-minute and sell the house at auction.  Watch out for the game they play where they lure you in thinking you have a short sale approved only to find out that you don’t and the house is sold at auction to a third-party buyer.

Don’t worry the big banks are involved in 95% of loans these days so chances are you don’t have a small lender at all.  The big banks like Chase, Wells Fargo, and B of A are usually all very amenable to short sales.  They have too much foreclosed housing inventory currently and they prefer to execute short sales of homes whenever possible.  My realtor told me of a case where they told the owner to go get a realtor and do a short sale.  They apparently had no interest in a foreclosure if it could be avoided with a short sale.

This is good for you because short sales are better for your credit score.  A foreclosure can last longer on you credit report than even a bankruptcy which prevents you from getting a FHA loan for 2 years.  A foreclosure prevents FHA loans for 3 years traditionally and there are stories of them precluding FHA loans for 5 years.  A short sale appears on your credit report as a “settled” debt which is also two years so even with a bankruptcy you would only have to wait two years for a loan.

The problem I just faced in a case was with a small bank that falls in the 5% of loans category.  My client had his loan sold from a big bank to one of these small ones years ago.  We attempted to do a short sale on the property but the bank stalled our efforts from the beginning.  In the end we had a great buyer and all the docs in and the bank came up with an excuse at the last-minute and went ahead with the sale on the courthouse steps.  It was clear after that they never really wanted a short sale at all and that they were determined to do a foreclosure from the beginning.  I just wish they told us that before we jumped through all the hoops and wasted everyone’s time.

We looked up this company and discovered that they approve less than 10% of short sales brought to them.  We speculated that they are getting some government bonus for the foreclosure because the government appears to want to see more foreclosures.  It seems silly as this is hurting people’s credit but the government disincentive programs are often hurtful and wrong.

A chapter 7 bankruptcy would have stalled the foreclosure sale it is true (This client had insufficient income to fund a chapter 13).  But then the bank could have filed an immediate motion for relief from stay and it would have been granted by the bankruptcy court quickly.  Once the relief was granted, the stay lifts and the bank can proceed with the sale.  So a bankruptcy filing can only stall a foreclosure and it will not force a determined bank t accept a short sale.

I just looked up a case for a client who had a stay lifted in 3 weeks and a new sale date scheduled three days after that.  So it’s possible that a chapter 7 bankruptcy will only stall a foreclosure sale for 20 to 30 days.  But it is all dependent on how quickly they file the motion.  I have seen them take 6 weeks to file but two weeks is more common and they could file the motion for relief within just days of the bankruptcy filing.

If you have one of these small banks then the most you can do is stall them with a chapter 7 bankruptcy unless you can afford to fund a chapter 13 for years to come.  Most people cannot afford this so they opt to do a chapter seven or hope that they can get a sale through as we did.  But then you run the risk of the bank pretending to want a short sale and then cancelling it at the last moment when it is too late to file a bankruptcy.

A bankruptcy can still get rid of most of your other debts though if you have them so don’t be afraid to use bankruptcy where necessary.  A chapter 7 can’t stop a foreclosure sale but only delay it though and it can’t get your house back once it’s sold to a third-party buyer.

Beware of the tricks these small banks play on you!

I am a San Diego bankruptcy attorney.  For more information please visit my websites at www.farquharlaw.com or www.freshstartsandiego.com.  Or call for a free consulation on any debt or bankruptcy matter at (619) 702-5015.  Call now for a free credit report and analysis!

If you or someone you know needs to file a bankruptcy then get my FREE E-BOOK “13 THINGS YOU SHOULD DO TO PREPARE FOR YOUR BANKRUPTCY FILING” by emailing me at farquharesq@yahoo.com.

Cash for keys! It’s still available after a foreclosure. My advice is get that cash!

(For the current state of the foreclosure crisis see this blog: http://bit.ly/JGU1dZ ).

How many times does someone hand you cash?  I’m sure it’s not often but it is the case that lenders are offering cash for keys after a foreclosure.  You may or may not be upset about the foreclosure and you may actually be relieved that the process is all over.  You may have tried a short sale that failed (or you may have never attempted one) and now the foreclosure sale has taken place and you are being contacted by the new owner of your property to find out from you what your plans are.

Remember that this new owner will have to evict you legally before he can get you out of this house that you formerly owned even though he is the new legal owner of the property.  He cannot throw you into the street.  There is no “self-help” allowed and the only way a new owner can get you out of your former home is through the eviction process.  You are no squatter.  You originally entered the property legally.   You are the former owner with the legal right to be there until a judge evicts you in court.

In California eviction means that the landlord has to give you a 3 day notice, followed by a filing of an unlawful detainer action, followed by a trial, followed by a sheriff who will actually remove you.  This all takes time and money.  To get you out will take around 4 to 6 weeks depending on how behind the courts and the sheriffs are.  In addition he has to hire attorneys, pay filing fees, and wait until the process finishes.

Or he can pay you money.  The going rate is about $3000 so don’t sell cheap.  Many of my clients have been offered and have received this money.  It will cost the landlord almost that much to proceed with and eviction plus there is the time involved.  The landlord may ask you to leave quickly (like in a week) but you can always try to negotiate for more time.  Just don’t scare him off so he doesn’t pay you.  Remember though that he will know the costs of legally removing you and that is your leverage.

You have a legal right to be in this home until he goes through the lengthy and costly legal process of removing you.  You can remind him of that if it helps the negotiations but always remember that you have legal rights.  If you don’t exercise them you will lose them.  You will be saving him time and money if you get out quickly with no hassles for $3000.

An extra $3000 can help a lot with bills and getting a new place.  If you can get more time then do so but if not then I suggest you take the money.

If you need a bankruptcy now to get rid of credit card or automobile deficiency or medical debt then call me and we will discuss how to free you up from the rest of your debt.

I am a San Diego bankruptcy attorney.  Please visit my website for more information at www.farquharlaw.com or www.freshstartsandiego.com.  Or call my office for a free consultation at (619) 702-5015.  Call now for free credit report and analysis!  If you or someone you know may need to file a bankruptcy get my FREE E-BOOK: “13 THINGS YOU SHOULD DO TO PREPARE FOR OUR BANKRUPTCY FILING” by e-mailing me at: farquharesq@yahoo.com.

How to stay in your home for the maximum time after a foreclosure. Use bankruptcy, HAFA, and cash for keys!

(For the current state of the foreclosure crisis see this blog: http://bit.ly/JGU1dZ ).

There are a number of thing you can do to remain in your home for the maximum amount of time after a foreclosure has been filed against you but the first thing you do when you get behind on your home mortgage payments is just wait.  As I reported in a previous blog, the banks are now slowing down in their processing of foreclosures.

This is good for you though if you are in a situation where the bank should be foreclosing on you because you are more than three months behind on your mortgage payments.  At this point you should continue to reside in your home and wait for the bank to make a move that you can respond to.  No one can oust you from the home you own unless they file a foreclosure against you so wait on it until it comes.  When it does it will come with a NOD.

In California you will get a Notice of Default (NOD) as the first step in a foreclosure.  This just means that the bank has begun the legal process and it will take 110 days before there will be an actual sale of your home.  This is when you file for a chapter 7 bankruptcy. (Chapter 13 issues are more complicated).  File the bankruptcy the day before the sale date and a “stay” will automatically be created.   The stay will prevent the bank from taking further action and you will get the maximum time to remain in your home.  A bankruptcy will give you the added advantage that your credit card, medical, and personal loan debt will be wiped away leaving you debt free.

The bank will respond to your bankruptcy filing with a “Motion for Relief from Stay” to get the bankruptcy stay lifted so the bank can proceed with the sale of your home.  They could file this motion right away but in some of my cases it takes them another five weeks just to file this document.  It then takes around another thirty days (sometimes it’s quicker) to get it granted.  Now the bank will get another sale date and sell your home on the new date.

Once the home is sold you still cannot be thrown out in the street so don’t worry.  The new owner has to file an Unlawful Detainer/eviction action to remove you.  You begin now to negotiate with the bank or the new owner for cash for keys.  It is in the new owner’s best interest to give you the cash.  Remember that they don’t want to file an eviction because of the expense and time involved.  Many of my clients get around two to three thousand dollars in cash for keys and many get two or three more months to remain in the home.

But don’t forget the short-sale!  A foreclosure sale on your credit will prevent you from getting a FHA loan for the next five to seven years!  Bankruptcy will only stop you from FHA loan eligibility for two years so it’s not nearly as bad on your credit as a foreclosure sale is.  A short sale avoids the foreclosure sale if you can get the bank to agree to it.  Banks do want to allow these short sales so with a good realtor it’s usually not a problem.  The short sale will free the bank from the hassle and expense of a full foreclosure sale which would leave them with another piece of real estate that they don’t want.

Get a realtor who does short sales and he or she will explain the process.  Basically you will be offering the bank the current market price for the home and not what you owe on it.  The bank will settle for this and the realtor will negotiate his or her fee with the bank.  It will cost you nothing.  It is unlikely that the new buyer will give you cash for keys though to move out but there is a HAFA short sale government program that can pay you $3000.  HAFA stands for Home Affordable Foreclosure Alternative and it allows for you to get the $3000 for relocation costs.  Check with your realtor about the possibility of getting this money in the HAFA government program.

So there are a number of strategies to remain in your home for as long as you can and maximize your cash when you leave and save your credit as much as you can.  Remember that no one can throw you out or remove you in any way.  A foreclosure must be filed and an eviction must be further filed even if your home is sold at a foreclosure sale.  Only then can a Sheriff remove you but no one from the bank or any mortgage loan company can remove you with out these court actions.  So take heart, take your time,and maximize you advantages!

I am a bankruptcy attorney practicing bankruptcy law in San Diego.  Please visit my websites at www.farquharlaw.com or www.freshstartsandiego.com.  Or call my office for a free consultation at (619) 702-5015.  Call now for free credit report and analysis!  If you or someone you know may need to file a bankruptcy then please get my FREE E-BOOK: “13 THINGS YOU SHOULD DO TO PREPARE FOR YOUR BANKRUPTCY FILING” by e-mailing me at farquharesq@yahoo.com.

Shadow market tsunami!- It will take 4 years to sell all of these foreclosed homes! Good time to file bankruptcy.

(For an update on the curent state of foreclosures see this blog:  http://bit.ly/JGU1dZ ).

According to an article in the Daily Real Estate News it will take 4 years to clear the backlog of real estate “shadow inventory”.  The banks don’t admit that they have this inventory but they do.  Now we find out that there is indeed a four-year supply of these homes and the supply appears to be growing.

This is why home prices should remain depressed for some time.  Even if the overall economy turns around the housing market still operates on a supply and demand basis.  If there is this huge inventory of foreclosed homes that the banks are holding off the market then it will take some time before it is moved through the system.  We now get the word that there is this four-year supply of these shadow homes out there waiting to be sold.  I look for housing prices to be depressed for at least that long.

Scarier still is the statistic that this shadow market is up 11% in the fourth quarter of 2010 and up 40% from a year ago and the number of homes that are actually part of this shadow inventory appear to be growing.  According to the article Standard & Poors defines shadow inventory as properties with borrowers who are 90 days or more delinquent on their mortgage payments, properties currently or recently in foreclosure, or properties that are real estate owned (REOs). 

They point out that shadow inventory peaked in 2008 but that is probably because banks are currently waiting longer to foreclose on properties.  I have clients who have homes that they have stopped paying for and that they have moved out of a year or two ago and no foreclosure has been started.  It seems that banks are slowing down their rate of foreclosure processing.  This inaction creates more shadow inventory because there are now more homes that don’t show up on anyone’s radar.  These homes that don’t get moved through the system are in limbo and whether occupied or unoccupied realtors cannot list them for sale.   The number of homes like this are growing.

The article prints a chart where they show the number of months that it will take to clear these shadow homes.  It ranges from a high of 130 months in New York to a low of 25 months in Phoenix.  The other cities are Atlanta 49, Boston 71, Charlotte 65, Chicago 59, Cleveland 57, Dallas 56, Denver 38, Detroit 31, Las Vegas 33, Los Angeles 50, Miami 60, Minneapolis, 38, Portland 51, San Diego 39, San Francisco 42, Seattle 59 Tampa 57, Wash. D.C. 50.  It is clear from this chart that this is a nationwide problem of a shadow inventory of unsold and unlisted homes.

New York alone has $116.7 billion in shadow inventory according to Standard & Poors and because of the slower liquidation rate there New York will take 2.7 times longer to clear this inventory.  Los Angeles has a larger volume of shadow mortgages, $173.1 billion, which amounts to 31.5% of all outstanding mortgages.  L.A. has a faster rate of liquidating distressed properties.  My own city of San Diego has a 39 month backlog of shadow homes.

Default of home mortgage modifications remains high also.  80% of people have defaulted on their modified loans in the past and though the default rate is declining they say it still remains high.  My clients report extreme difficulty in getting their banks to agree to modifications of their mortgages.  It’s discouraging that such a high percentage of modifications go into default if people do in fact manage to get through the very difficult modification process.

The funny part is that the banks repeatedly deny that there is a shadow market or shadow inventory of unsold homes.  Realtors know that there is such a market as they can’t get listings for many of these homes that banks are holding off the market.  If banks now slow down or stall the foreclosure process then it will only increase this shadow inventory and increase the amount of time necessary to clear it before housing prices can rebound.

Don’t be surprised if the real estate market lags well behind any other economic recovery that happens in the country.  It is also possible that this huge inventory will act as a drag on the overall economy and prevent a recovery.  It could become what some have labeled as a “shadow tsunami”.

It is obviously a good time to buy a house though if you are going to keep the home for a while and its a good time to stay in your home longer if you are currently in a foreclosure.  It is also a good time to file for bankruptcy as prices will still be low in two years.  It takes two years to elapse after a bankruptcy before you can get a FHA loan approved.  Don’t allow your home to be sold at a foreclosure sale though as then you will have to wait five to seven years to buy a home.  Better to do a short sale and save your credit.

I am a bankruptcy attorney practicing in San Diego.  Please visit my website at www.farquharlaw.com or www.freshstartsandiego.com.  Or call my office for a free consultation at (619) 702-5015.  Call now for free credit report and analysis! 

For a free e-book: “13 THINGS YOU SHOULD DO TO PREPARE FOR YOUR BANKRUPTCY FILING” please send a request by e-mail to: farquharesq@yahoo.com.

What do the election results mean for bankruptcy and foreclosure?

The reality of our political situation is that no matter what you think of any political party, the democrats are in general friendlier to debtors.  I am not a democrat or a liberal but I say this because it is just the way it is.

So if you are in debt the democrats will probably pass more laws that will help you (years ago Hillary Clinton put forth legislation to make student loans dischargeable in bankruptcy).  With the Republican takeover therefore there will probably not be as much relief  for debtors as there would be if democrats stayed in power.

For instance the writing down of mortgages to the value of the homes is being proposed by a democrat.  This is being sponsored by the democratic senator from Rhode Island and it will probably not happen now because the dems lost the house.  Neither will a foreclosure moratorium.  A halting to all foreclosures has been called for but it is unlikely top pass with republicans controlling the house of representatives.  Republicans are more likely to want to see the foreclosures happen.

But that does not mean that republicans are more in bed with big banks.  They just believe in personal responsibility and that if you can’t afford a mortgage then you should go out of your house.  For many of my clients this is my advice and I point out to them how it’s probably cheaper to rent than to make their high payments for an upside down house.  But for others I advise them to try to get a modification and stay in the home because they are attached to the home or they have made major improvements to it.

The republicans will be faced with the emergency of an increasing number of these foreclosures and they may be forced to take more drastic action than they would otherwise take due to seriousness of the problem.

Remember too that bankruptcy is still going to be always available and it is unlikely to change.  The law was majorly overhauled in 2005 and will probably be only tweaked now.  That 2005 bankruptcy law and the means test that it created is considered unfriendly to debtors.  If your income is too high then you are forced into a chapter 13.

Vice president Biden voted for that 2005 change to the bankruptcy law along with many other democrats so it was not just republicans who supported it.  But bankruptcy is still available and its often the most sensible solution for people who do not have too much income but they do have a lot of debts they cannot pay.

So there is unlikely to be a foreclosure freeze now or a mortgage write down but there may be some other relief coming for debtors if both parties can work together.

I am a bankruptcy lawyer in San Diego.  If you need more help please visit my website at www.farquharlaw.com.