CALABASAS, Calif. – Adding to its foreclosure prevention initiatives, Bank of America has launched a nationwide program that offers delinquent mortgage customers increased assistance with relocation expenses – between $2,500 and $30,000 – at the completion of a qualifying short sale.

“Bank of America is committed to providing alternatives to foreclosure whenever possible,” said Bob Hora, home transition services executive for Bank of America. “This program can help customers make a planned transition from ownership when home retention options have been exhausted or they have made a decision not to keep the home.”

The short sale relocation assistance program builds on the bank’s already robust short sale initiatives, which led to 200,000 completed short sales in the last two years and another 30,000 in the first quarter of 2012. This program is based on a similar incentive offer that Bank of America tested in Florida last year.

To qualify for the enhanced relocation assistance payments under the new program, the seller must work proactively with the bank to obtain a preapproved sales price prior to submitting a purchase offer to the bank. A short sale must be initiated by the end of this year and close by September 26, 2013, to be eligible for the payment. Qualifying short sales that have already been started but have not closed may be eligible for the relocation assistance.

The amount of assistance provided under the new program will be determined on a case-by-case basis using a calculation that includes the value of the home, amount owed and other considerations.

Initially, the program will be offered on mortgages that are owned and serviced by Bank of America.

While available nationally, Bank of America anticipates greatest response to the program will come from borrowers in California, Nevada, Arizona, Florida and other states hardest hit by the economic downturn and falling property values.

Customers who believe they may be eligible for Bank of America’s short sale relocation assistance program may contact program specialists at 877.459.2852.

To help homeowners understand the short sale process and other foreclosure avoidance programs, Bank of America encourages them to visit the Home Transition Services website at www.bankofamerica.com/hometransition.

When Jennifer Anderson’s family could no longer afford their mortgage and lost their home, she expected many years to pass before they would again become property owners.

But less than two years later, in March, they purchased a $297,000 house outside Phoenix, Arizona, after qualifying for a loan backed by the U.S. government.

They joined a small but growing number of Americans who are making a surprisingly quick return to homeownership after defaulting on their loans or being forced into short sales that cost their banks money.

“We didn’t really expect it,” said Anderson, 40. “We were resigned to the fact that we were going to be in a rental property for a while.”

Financial problems arose after she lost her job as a customer service representative for a health insurance company and her husband’s hours at an automaker were cut. To make matters worse, they used up her retirement savings trying to keep their home.

Data is not available, but interviews with more than 30 lenders, builders, Realtors and consumers suggest that a growing number of Americans are getting back into the housing market, even though they went through a foreclosure, bankruptcy or short sale in recent years.

“Most are not ashamed or bashful about what happened because so many people were forced into that reality in the last six years,” says Graham Epperson, vice president of sales in Arizona for the PulteGroup, a leading U.S. homebuilder.

They want to escape rising rents and take advantage of home prices, which are down by about a third from an April 2006 peak.

FHA TO THE RESCUE

Much of the comeback wouldn’t be possible without help from the U.S. government, namely the Federal Housing Agency. It was created in the 1930s as part of a broader push by Washington to foster home ownership and fight the Great Depression.

The number of FHA-insured home loans has soared in recent years as subprime loans have disappeared and fewer Americans have qualified for conventional mortgages backed by Fannie Mae and Freddie Mac, which were rescued in 2008 by the U.S. government after loan losses.

Federal Reserve Chairman Ben Bernanke stressed the point last week, saying banks have become so restrictive that many worthy homebuyers are being frozen out of the market, and lending practices are not likely to loosen any time soon.

In contrast, FHA-backed loans are an option for many who defaulted on their mortgages or were forced into a short sale. FHA loans, combined with those backed by the Department of Veteran Affairs or the Department of Agriculture, had a record share of the market in 2011.

“These are not mainstream programs geared for mainstream borrowers,” says Greg McBride, senior financial analyst at Bankrate.com, who expects to see more of those with blemished credit reenter the housing market.

Most of these reentering buyers are using FHA-insured loans, which at the end of 2011 accounted for about 30 percent of loans for home purchases, compared with 4.5 percent in 2005.

A conventional mortgage typically carries a lower interest rate than does an FHA-backed loan, but it also requires a credit score of at least 720, proof of income and a significant down payment. In contrast, FHA loans historically have been available to help low and moderate-income families buy homes.

FHA borrowers typically need a credit score of at least 620 and a 3.5 percent down payment. The FHA charges an upfront mortgage insurance premium of 1.75 of the loan (which can be rolled into the mortgage) and an annual 1.25 percent premium on the outstanding loan.

BAD MEMORIES

For some economists, alarm bells are ringing.

Edward Pinto, resident fellow at American Enterprise Institute, a conservative think tank, said the rise of FHA-backed loans flies in the face of the government’s stated mission of getting more private capital into housing finance. “FHA is putting people back into situations that still have high risk of default,” Pinto said.

He noted that a lot of these loans are made to consumers with credit scores well below 720 — the median national score for all households– and that about 15 percent of loans made to people with scores of 620 to 659 are likely to fail.

A SECOND CHANCE

There have been about 4.2 million foreclosures in the United States since 2007, according to data firm RealtyTrac. It expects that number to climb to 6 million by early 2014.

A bankruptcy remains on a consumer’s record for seven years, but that consumer can start raising his or her credit score in several months by decreasing debt, not borrowing more and paying bills on time.

Debra Eaton stumbled on the program when she and her husband were visiting model homes out of curiosity. They had filed for bankruptcy in 2008 after her husband was seriously injured at work and she took time off from her job to care for him.

After the bankruptcy, their credit score plunged to 460. “It’s not that you don’t pay your bills because you want to go on vacation,” she says. “You don’t pay because you don’t have the money.”

By November 2011, their credit score had improved to 680 and Eaton and her husband, a veteran, qualified for a Veterans Administration loan to purchase a $252,000 home near Tacoma, Washington. They moved into the three-bedroom house the day before Thanksgiving.

“If you would have asked me then if I was going to buy another home, I would’ve told you no way,” she says.

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The November 6 U.S. presidential election between President Barack Obama and presumptive Republican challenger Mitt Romney may be decided by a small number of “swing” states – those that could go to either man – where the health of the housing market looms large for voters as they weigh their choice.

A Reuters examination of the latest housing data in 10 states that may determine the election’s outcome shows signs of hope in even the most battered real estate markets, notably Florida, with some other key battlegrounds doing much better.

In addition to Florida, the other states were: Arizona, Colorado, Iowa, Nevada, New Hampshire, North Carolina, Ohio, Pennsylvania and Virginia.

The recovery in home prices in battleground states is good news for the Democratic president as he stays barely ahead of Romney in national opinion polls.

“The housing market is in the news and that will certainly weigh (on voters),” said Mark Rom, an associate professor at Georgetown University’s Department of Government.

KEY STATES

Realtors in Denver, which dominates the Colorado real estate market, are reporting a shortage of housing and a 10.5 percent price rise in April versus a year ago. In Iowa, there was an 18 percent jump in the number of home sales in March compared to the same month a year earlier.

Ohio, a state that often plays a pivotal role in deciding presidential elections, has seen its housing market improve steadily, with median prices up 8.9 percent in March from a year ago and sales up by almost the same level.

“The perception is that Ohio is coming back, that things are good, and in my industry, perception means an awful lot,” said Bob Miller, president of the Ohio Association of Realtors.

Romney’s campaign plans to adjust its strategy in states according to their economies and housing markets to try to deny Obama credit for improving conditions.

“In Ohio, you can make the case that it certainly isn’t as bad as other states. But our feeling is that has a lot more to do with (Republican) Governor (John) Kasich than it does with President Obama,” said Rich Beeson, Romney’s political director.

“If President Obama’s policies were working, they would work all across the country and not just in certain states,” he said. “You’re not necessarily going to talk about foreclosures in Fairfax County, Virginia. But in Clark County, Nevada, that is all that matters.”

Fairfax County is one of the richest in the United States. Clark County includes Las Vegas, which was hit particularly hard by foreclosures.

Obama has conceded that his administration could have done more to improve housing market conditions across the country.

An overhang of foreclosed properties worth less than the price for which they were purchased has been a particularly difficult issue to resolve, in part because of questions around loan forgiveness. Romney has attacked Obama for failing to fix the problem.

But Romney provided ammunition to the Obama camp when he said the foreclosure process should be allowed to run its course and hit bottom. That may be a very unwelcome message in a state like Florida that is still saddled with hundreds of thousands of foreclosed properties.

Florida is considered a crucial battleground state in the election as Obama and Romney plot a path to winning the 270 electoral college votes needed to secure the presidency. Florida, which Obama won in the 2008 election, accounts for 29 electoral college votes – more than 10 percent of the total needed to win.

“There is no path to victory for Romney without Florida and Virginia. Those are going to be tough states for Republicans to get this time around, particularly Virginia,” said Jim Kessler, at Third Way, a Washington think tank.

Florida was at the heart of the collapse of the real estate market and its economy remains fragile. But Florida median home prices were up by more than 10 percent statewide in March compared to the same period a year ago and realtors are reporting that home inventories are heading down.

“The economic story in Florida is improving and it goes hand in hand that you will see some bounce back, or at least some stabilization, in the housing sector,” said Mike Chriszt, an economist at the Federal Reserve Bank of Atlanta, whose district encompasses Florida.

Obama’s campaign can be expected to seize on signs of improvement to validate his claim that he is putting the economy back on track and remind voters that the housing collapses began under his Republican predecessor, George W. Bush.

“Floridians know that when the president took office, this state had been building housing at an unsustainable pace in a bubble economy that could not last,” said an Obama campaign official who spoke on condition of anonymity. “It was an economy built on speculation.”

Despite better housing numbers, unemployment in Florida is still at 9 percent, higher than the national average.

Nevada, which went for Obama in 2008, has struggled to recover from the collapse of its housing market and has an unemployment rate of 12 percent. There are now signs of the housing market picking up in the state.

Obama was in Nevada last Friday for an event in Reno at which he urged Congress to help make it easier for homeowners to take advantage of low interest rates to refinance their mortgages.

Thomas Schoenrock and his wife Jessica recently bought a house in Las Vegas after moving to the city to take advantage of prices that are roughly half compared with the cost of homes in their native Washington state.

“For us to get a house in the market we came from would have cost $250,000. In the market here, they are practically giving them away,” Thomas Schoenrock said. The median home price in Las Vegas in April was $127,900, up 2.3 percent from a year ago.

A medical research technician, Schoenrock said he would not have taken the financial plunge of becoming a homeowner if he had not felt secure in his profession, and will definitely be thinking about the economy when he casts his ballot on November 6.

“We need someone that we can have confidence in that they can run the country – because of the instability of the economy,” said Schoenrock, who said he remains undecided between Obama and Romney.

http://www.reuters.com/article/2012/05/14/us-usa-campaign-housing-idUSBRE84D17P20120514

The banks and servicers are not foreclosing at the same pace, presumably to give defaulters a chance to work their way through the loan-mod waterfall.

Once a loan modification has been attempted and failed, the servicers can recommend that a borrower should short sell their home – but they can’t make them sell it, or even list it.  All they can do is keep applying foreclosure pressure, so the borrower has no other choice. 

But by letting their foot off the foreclosure gas pedal, it appears that the banks and servicers, with help from government intervention, have created a defaulter purgatory, and free-rent bonanza.

Both foreclosures and short sales are declining in San Diego County:

New short-sale listings in San Diego County:

January: 1,129

February: 904

March: 951

April: 839

May: 324

Jordan says she visited the home three times, her realtor taking the keys out of the lockbox on the door, and she went through an act of sale.  She says she immediately got to work, spending thousands of dollars.

“I have had a new roof put on, new electrical in it, I have had plumbing done to it,” said Jordan.

She had the property surveyed, after seeing records at City Hall that didn’t look quite right. After the survey she learned the bad news from her realtor.

“She’s like I don’t know how to tell you this but we might have sold you the wrong house,” said Jordan. Just to the right of the home she thought she bought was another one, it’s seems that’s the one that was supposed to be sold, the one she legally bought.

The home was listed by Bob Leigh Realtors.  A representative told us the mortgage company gave them misinformation. We contacted the company’s namesake with no luck.

Ms. Jordan says she’s been waiting for a solution for months, and she’s spent money fixing a house she doesn’t even own.

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