It is important for Florida homeowners to be aware of their rights when it comes to their residential real estate. After all, it is likely the largest investment most Americans will make in their lifetime. It’s a key motivation for our articles on this blog. This is true whether the issue relates to:
- buying a house,
- refinancing your home,
- selling residential property,
- trying to resolve an underwater mortgage, or
- fighting to avoid foreclosure.
Each piece of Florida real estate is unique and so are the circumstances of most real estate matters. Having a general understanding of Florida’s real estate laws are essential in today’s complex world.
However, knowing the law is not enough to protect that investment. Homeowners also need to be aware of the current economic conditions and how that impacts some key players, including mortgage lenders.
Be Aware of Financial Conditions
Knowing the current financial and economic conditions can be critical to the successful resolution of any residential real estate issue with a lender. This is true both before and after a potential lawsuit is filed.
Experienced Florida real estate lawyers recognize this fact and try to use this information to benefit their clients, especially when it comes to dealing with a foreclosure and loss mitigation.
So, where can you find reliable foreclosure information?
Federal Housing Finance Agency (FHFA) Data
One key source for information on residential real estate financing in Florida are research reports published by the federal government. They are free and available online to the public.
One example is the February 2017 Refinance report. Another is the Foreclosure Prevention Report.
Foreclosure Prevention Report
The Foreclosure Prevention Report (FPR) is published by the Federal Housing Finance Agency (FHFA). It provides vital data regarding the residential mortgage industry as well as the condition of the financial mortgage market. It gives information that is specific to the State of Florida as well as our southern region and for the entire country.
Specifics are contained in FHFA reports that can help sway a mortgage lender to make a deal with a borrower, or sway a seller to drop their price. For instance:
1. Mortgage Rates
We know from the latest FPR that the average interest rate on a 30-year fixed ratee mortgage rose from January to February 2017 (from 4.15% to 4.17%).
Based on these facts, we know that residential mortgage interest rates may continue to rise during 2017. This may persuade a seller to be more flexible with the sale price of their home.
2. HARP Refinancing of Underwater Homes with Current Mortgages
We’ve discussed HARP refinancing of residential home loans before. HARP stands for the “Home Affordable Refinance Program.”
It is a federal program for homeowners who are underwater in the home mortgages but have yet to fall behind on their monthly mortgage payments. HARP has been extended by Congress through September 30, 2017.
The FPR reveals that Florida lead the country in the number of HARP refinances – and that over 60% of all HARP home loans were in just ten states. These states include:
- Florida,
- Illinois,
- Michigan,
- Ohio,
- Georgia,
- New Jersey,
- Puerto Rico,
- Pennsylvania,
- New York, and
- California.
3. Underwater Mortgage Refinancing
HARP accounted for more than 6% of all Florida residential mortgage refinancing. Many of these refinance involved underwater mortgages. In fact, underwater mortgages were the basis for over a third of the HARP refinance deals done in Florida.
4. Loan to Value Ratio
It is possible to get a residential mortgage with a loan to value ratio that exceeds 100%. According to FPR, we know that 6% of HARP refinances had a loan to value ratio over 125%.
Furthermore, almost twenty percent of HARP loans were made to residential borrowers with a loan to value ratio over 105%.
5. Mortgage Loan Modifications
During the month of January 2017, the federal government through Fannie Mae and Freddie Mac helped to thwart 14,558 foreclosures nationally. Over half of these resolutions were mortgage loan modifications.
a. Principal Forbearance in a Mortgage Loan Modification
One way to modify a home loan or mortgage is through principal forbearance. From the FPR we know that this was negotiated in only 19% of the loan modifications done in January 2017.
This is fewer than have been done in the past, which means that banks may be less likely to agree to principal forbearance in future mortgage modifications.
b. Extending Term of the Mortgage in Mortgage Loan Modification
Another way to modify a residential mortgage is to extend the life of the loan, or its terms. Extended-term loan modifications accounted for 44% of mortgage loan modifications tallied in the FPR.
So, it’s more likely to negotiate and resolve a mortgage issue with a lender that extends the term of the loan than to get a deal on principal forbearance. According to FPR, almost half of loan modifications were resolved by extending the term of the loan.
6. Other Home Retention Actions
Besides a mortgage modification, there are other ways to avoid losing your home. Lenders may be able to agree to programs like:
a. Extended Repayment Plan – An agreement between the lender and borrower, where the borrower has an extended time period to bring their mortgage current by (i) paying the usual mortgage payment, plus (ii) an additional agreed-upon amount to pay off the delinquency.
b. Forbearance Plan – An agreement between the lender and the borrower to reduce or suspend monthly payments for a specified time period. Afterward, the monthly mortgage payment schedule resumes. The borrower also agrees to pay additional money to cover the delinquency and get the account current.
7. Short Sales and Deeds-in-Lieu
Both short sales and deeds-in-lieu mean that the borrower loses his or her home. However, these may be more beneficial in the long run for the borrower than an official foreclosure action because it has less of a long-term impact on their credit history (the bank may also waive any deficiency against the borrower).
According to the FPR, there were 1,615 short sales and deeds-in-lieu completed in January 2017. That is 5% less than in December 2016. This may signal a trend for banks to be less willing to agree upon a short sale and deed-in-lieu as an alternative to filing a foreclosure lawsuit here in Florida.
8. Charge-offs-in-lieu of Foreclosure
Here, the lender has a reason to forego a foreclosure action because owning the property is not in the lender’s best interests.
For instance, if it is shown that there are environmental issues on the land, or the property has lost most of its value, then the bank may be willing to charge off the mortgage. The unpaid mortgage balance becomes a lien on the real estate, to be dealt with in the future when the property changes ownership.
This may not be common, but it is effective under the right circumstance.
9. Foreclosures are Rising in 2017
According to the FPR, foreclosures are on the rise. From December 2016 to January 2017, foreclosure sales were up 16% — and foreclosure actions were up 10%. As a result, banks are now concerned about increasing defaults.
10. Reasons for Falling Behind in Mortgage Payments
According to the FPR, lenders tend to hear the same explanations again and again regarding why the mortgage is not current.
The FPR lists these as the “Top Five Reasons for Delinquency” (Report, page 13):
- Curtailment of Income;
- Excessive obligations ;
- Unemployment;
- Illness of principal mortgagor or family; and
- Marital Difficulties.
Knowing that the bank is aware of these reasons can be helpful in finding a foreclosure alternative for your situation. One tip is to make sure the lender understands how your case is unique and deserves individual consideration (i.e. write a letter and provide proof of your hardship).
What Should You Do?
If you are facing a defaulting mortgage or a foreclosure lawsuit here in Florida, having an experienced Florida real estate lawyer to help you negotiate with your lender can make all the difference in how fast and how effectively your real estate matter can be resolved for and your family.
If you are having an issue with your home, a good piece of advice is to talk with an experienced Florida real estate lawyer to learn about your rights. Most real estate lawyers, like Larry Tolchinsky, offer a free initial consultation (over the phone or in person, whichever you prefer) to answer your questions.
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