Home Buyers Can Use IRA for Down payment

First-time home buyers can tap IRA

Up to $10K can be used for down payment, closing costs

By Tom Kelly,
Inman News

A friend of mine is a single mom who became a real estate salesperson several years ago following her divorce. She had a consistent flow of buyers and sellers until the beginning of the year when the market slowdown became even more apparent in many Pacific Northwest neighborhoods.

She postponed a long-awaited kayak trip because an out-of-state buyer was coming into town with a reportedly all-cash offer for a waterfront cottage. I laughed and teased her about postponing the trip when I found out the man was single.

“That’s got very little to do with it,” she said. “Gone are the days when you relied on an associate to handle any legitimate customer. This one looks like the first great chance in weeks. He’s buying the place with his IRA to use as a second home.”

I stopped laughing and took a deep breath.

“If he’s going to use his IRA, I hope he plans to rent it out.”

The rules for purchasing real estate with an individual retirement account are specific and differ greatly from those that govern conventional rentals and second homes. For example, you cannot buy a second home with an IRA and use it partly for personal use, even though you might rent it to unrelated persons the rest of the year. And, your IRA cannot purchase a real estate asset and then have a “disqualified” person (family member) use it while it is in the IRA. The purchase must be investment property.

For investors, the biggest mistake made with an IRA-purchased property is the misapplication of the 14-10 rule. Under current federal tax laws, the owner of a rental vacation home can use it for 14 days or 10 percent of the amount of time the house is rented, whichever is greater, without jeopardizing its status as a rental property and tax shelter. This is not so with a property purchased with an IRA.

Here are the four basic “no-nos” of real estate IRAs:

• Personal use (unlike rental property)
• Renting IRA property to family, or a partner
• Paying yourself with its income
• Personally guaranteeing a loan
  

To prepare for your real estate IRA, designate the amount of your retirement funds that you wish to use in the property deal and open a new IRA account with an independent administrator. The best place to start is an independent community bank. Many banks will not service real estate IRAs (some will say “never heard of it”) because it must act as owner, such as paying the taxes and collecting servicing fees — paperwork that many lenders don’t want or need.

The only exception to IRA funds being used for a personal residence is reserved for first-time home buyers. A provision in the 1997 Taxpayer Relief Act that allows penalty-free withdrawals of up to $10,000 for the down payment and closing costs. Withdrawals can be made from established IRAs of spouses, parents, children, grandchildren or ancestors as long as they total no more than $10,000. While not be subject to the Internal Revenue Service’s 10 percent early withdrawal penalty, normal income taxes will still apply.

Misinformation given by local IRS offices has added to the IRA confusion. According to a federal tax-court case, a couple was charged income tax for withdrawing their IRAs to buy a home even though their local IRS public-assistance representative said the funds would not be taxable.

Emma and James Clarke each withdrew $16,000 from their IRAs. They wanted to be certain the amounts were not taxable because the Clarkes said they would not be able to purchase the house and pay taxes on the $32,000 withdrawal. According to the Clarkes, they were told no penalty would be assessed. The court ruled that when IRS employees give incorrect interpretations of the law, the IRS is not bound by that advice.

In fact, the IRS is not generally bound by the language of its own publications. The court ruled the Clarkes’ withdrawals were taxable under the rules that generally apply to IRA distributions.

Owning a home is a “forced savings plan.” The money that you put in to home ownership is usually returned — with appreciation — when it’s time to sell. Sometimes the appreciation can offset the amount of interest the borrower has paid on the home loan.

If you are a first-time home buyer, however, and using your IRA funds is the only way you can afford the down payment, check with a tax professional before making the move. He might tell you the “R” in IRA is to be used in retirement and not before.

And, he absolutely will tell you that you cannot use your IRA funds to buy a second home.

Carol Perdew
(209) 239-7979
www.CentralValleyHomes.com

HOMEBUYING TIP - ESTABLISH YOUR CREDIT

F r e d d i e  M a c ’ s  G u I d e  t o  t h e  H o m e  B u y i n g  P r o c e s s
Establishing Your Credit

Don’t have credit, or would like to improve your credit? Building good credit doesn’t have to be difficult, but it does require time and patience. Follow these tips and you’re on your way:

·         Pay your bills on time.
Credit scores emphasize your most recent payment record. Paying on time raises your credit score. If you’ve been late, start paying on time!

·         Pay at least the minimum amount required.
You can always pay more - and it’s a good idea if you can afford to. But you should never pay less than the minimum.

·         Keep your credit card balances low.
Don’t “max out” your credit cards - that can lower your credit score.

·         Don’t apply for too many loans or new accounts.
Applying for a lot of credit in a short period of time may concern lenders that you won’t manage your debt well. Only apply for credit when you need it.

·         Keep your debt-to-income ratio at 20%.
Generally, you should not have debt that’s more than 20% of your net monthly income.

·         Establish credit if you don’t have any.
Open a free or low-cost checking or savings account and make regular deposits. Only write checks when you have money to pay for things. And apply for one or two credit cards, use them carefully, and pay them off each month.

Resources

Do you need help getting your credit in order? Find a credit counselor.

Do you know your credit rights? Look at the FTC’s information on credit and consumer rights.

Are you credit card savvy? Visit PBS’s Frontline Web site for the Eight Things A Credit Card User Should Know.

What if I have nontraditional credit? If you have nontraditional credit (no bank account or credit cards), your lender will work with you to use payment information such as rent and utilities to determine your creditworthiness.

But remember, a bank account is always a good idea and it’s never too late to begin to establish a traditional credit history.

Thanks,
Carol Perdew
(209) 239-7979
wwwCarolPerdew.com

Mortgage Defaults Up 125%

California Mortgage Defaults up 125%

DataQuick: Activity may be ‘nearing a plateau’

By Inman News,

Lenders started foreclosure proceedings on a record number of California homeowners in the second quarter, the result of declining home values and the rampant spoilage of a batch of especially risky home loans made in late 2005 and 2006, a real estate information service reported.

Mortgage servicers recorded 121,341 “notices of default” during the April-through-June period. That was up 6.6 percent from a revised 113,809 for this year’s first quarter, and up 124.9 percent from 53,943 in second-quarter 2007, according to DataQuick Information Systems.

Last quarter’s number of defaults was the highest in DataQuick’s statistics, which go back to 1992. Notices of Default are recorded at county recorders offices and mark the first step of the formal foreclosure process.

“It’s still very clear that most of the problems are in certain areas and in certain categories. Basically, areas that absorbed spillover activity during the end of the boom cycle in 2006 seem to be the hardest hit. Prices went too high, fueled by the availability of easy-to-get, dicey home loans. An added element was speculative buying,” said John Walsh, DataQuick president.

“The small increase in defaults from the first to the second quarter may indicate that we’re nearing a plateau. We won’t know until the end of the year, but it may be that some lenders are starting to prioritize workouts with homeowners instead of grinding things through the foreclosure process. Of course, they may just be swamped and can’t handle processing any more paperwork,” he said.

Most of the loans that went into default last quarter were originated between September 2005 and November 2006. The median age was 26 months, up from 16 months a year earlier.

On primary mortgages, California homeowners were a median five months behind on their payments when the lender filed the notice of default. The borrowers owed a median $11,583 on a median $346,400 mortgage.

On home equity loans and lines of credit, homeowners were a median eight months behind on their payments. Borrowers owed a median $3,492 on a median $60,000 credit line. However the amount of the credit line that was actually in use cannot be determined from public records.

Although 121,341 default notices were filed last quarter, they involved 118,020 homes because some borrowers were in default on multiple loans (e.g. a primary mortgage and a line of credit).

Last quarter’s default numbers were a record in almost all of the state’s 58 counties. That included Los Angeles County, where last quarter’s 21,632 residential defaults surpassed the prior record of 21,444 recorded during first-quarter 1996.

On a loan-by-loan basis, mortgages were least likely to go into default in San Francisco, Marin, and San Mateo counties — an historical norm. The likelihood was highest in Merced, San Joaquin and Stanislaus counties.

Of the homeowners in default, an estimated 22 percent emerge from the foreclosure process by bringing their payments current, refinancing, or selling the home and paying off what they owe. A year ago it was about 52 percent. The increased portion of homes lost to foreclosure reflects the slow real estate market, as well as the number of homes bought during the height of the market with multiple-loan financing, which makes ‘work-outs’ difficult.

Multiple-loan financing peaked in Q4 of 2006 at 60.9 percent of all financed home purchases. Last quarter it was 11.5 percent.

Trustees Deeds recorded, or the actual loss of a home to foreclosure, totaled 63,061 during the second quarter. That’s the highest since DataQuick began tracking Trustees Deeds in 1988. Last quarter’s total rose 33.5 percent from 47,221 in the previous quarter, and jumped 261 percent from 17,458 in second-quarter 2007. In the last real estate cycle, Trustees Deeds peaked at 15,418 in third-quarter 1996. The all-time low was 637 in the second quarter of 2005.

There are 8.4 million houses and condos in the state, DataQuick reported.

Foreclosure resales have emerged as a significant market factor, accounting for 40 percent of all California resale activity last quarter. A year ago it was 5.4 percent. Foreclosure resales vary significantly by area, from 3 percent in San Francisco County to 75.1 percent in Merced County.

CHECK OUT BANK OWNED HOMES AT www.CentralValleyHomes.com

 

                 
Thanks,
CAROL PERDEW
(209) 239-7979
Carol@PerdewHomes.com

FORECLOSURE RELIEF BILL HELPS HOME BUYERS

The House passed a new state program designed to help first-time buyers purchase foreclosed home in Stanislaus, San Joaquin and Merced counties.  First-time home buyers would get a $7,500 refundable tax credit under the bill.  Those who support this program say this could help more people buy the valley’s foreclosed homes.

 

Foreclosure Relief Bill Might Bring Help to San Joaquin Valley

$4B program expected to win Senate approval

By MICHAEL DOYLE
BEE WASHINGTON BUREAU

Related Stories

WASHINGTON — The House on Wednesday approved a controversial housing bill that supporters say could offer some relief for the San Joaquin Valley’s foreclosure crisis.

California and valley agencies, for instance, could purchase some of the region’s myriad foreclosed and abandoned homes with the help of a new $4 billion grant program.

“This is just a stopgap,” said Rep. Dennis Cardoza, D-Merced, “but it’s the best we can do today.”

Cardoza joined other lawmakers in contributing provisions to the forbiddingly technical, 694-page bill that has bounced around Capitol Hill for about a year. President Bush this week dropped his earlier veto threats, giving a green light for final approval.

The bill was approved 272-152. The Senate is expected to pass the bill Friday or Saturday.

The new federal program follows an announcement Monday by Gov. Schwarzenegger that a state program has been established to boost the valley’s economy by helping first-time buyers purchase foreclosed houses in Stanislaus, San Joaquin and Merced counties at discount prices and with reduced-rate loans.

That state initiative, called the Community Stabilization Home Loan Program, is expected to help 800 to 1,000 families purchase vacant bank-owned properties. Nearly 100 homes in the Northern San Joaquin Valley are eligible, and more are expected to be added each week.

Schwarzenegger said the $200 million program will “pump up” the region’s economy by boosting real estate sales and reducing the number of foreclosures on the market, which has been reeling from escalating foreclosures and declining values.

A big part of the federal bill props up Fannie Mae and Freddie Mac, the giant government-sponsored mortgage finance companies that together own or guarantee half of the nation’s mortgage debt.

The $4 billion grant program would enable state and local housing agencies to “purchase and redevelop” abandoned and foreclosed homes within 18 months. The government agencies could buy the properties at a discount and then choose to sell, rent or demolish the homes.

Lawmakers declare that the grants should target “areas hit hardest by foreclosures.” This will be determined by a formula that includes the number of foreclosures, the extent of subprime lending and other factors set by the Department of Housing and Urban Development.

The word “California” does not appear anywhere in the Housing and Economic Recovery Act of 2008. Nonetheless, the state in general and the San Joaquin Valley in particular could get a fair-sized chunk of the money.

More than 17,000 Northern San Joaquin Valley homes have been lost to foreclosure during the past year, according to data released Tuesday.

The number of homes repossessed by lenders continues to skyrocket in Stanislaus, San Joaquin and Merced counties, according to DataQuick Information Systems.

This April, May and June, for instance, 2,207 homes were foreclosed on in Stanislaus, pushing the county’s one-year total to 5,554. California lost 63,031 homes to foreclosure this spring and 166,087 during the past year.

San Joaquin and Merced counties have the highest foreclosure rates in the United States. In San Joaquin, 3,185 homeowners lost their property to foreclosure this spring, pushing its one-year total to 8,366. In Merced, 1,223 homes were foreclosed this spring, pushing its one-year total to 3,174.

The foreclosure problems in the valley aren’t likely to end soon, because a record number of “notices of default” were filed in almost all of California counties this spring, including Stanislaus, San Joaquin and Merced. Notices of default are the first step in the foreclosure process.

“We want to keep as many people in their houses as we can,” said Democratic Rep. Jerry McNerney of Pleasanton, whose district includes part of San Joaquin County. “This is a bill that really does help people.”

McNerney wrote a provision that boosts loan limits for veterans.

Cardoza, McNerney and Rep. Dan Lungren, R-Gold River, voted for the bill. Rep. George Radanovich, R-Mariposa, voted no.

First-time buyers would get a $7,500 refundable tax credit under the bill. Proponents say this could help more people buy the valley’s foreclosed houses.

The bill provides $180 million for financial counseling and legal assistance to help current homeowners. The bill targets some of this money for the 100 U.S. metropolitan areas with the “highest home foreclosure rates,” which will guarantee funding for the valley.

To search for Central Valley homes go to www.CentralValleyHome.com

Foreclosure Warning Signs

FREDDIE MAC’S GUIDE
What are the Warning Signs of Foreclosure?

Unexpected life changes are often a contributing factor to foreclosure – especially those that impact your finances, such as:

• Loss of employment or reduction of hours
• Major illness or injury
• Divorce or separation
• Death of a spouse

What makes it so difficult to think about foreclosure during times of crisis is that you are so focused on the problem at hand and not likely to have the time or energy to think about how it could impact other aspects of your life. That is why a plan that was developed before any problem starts is the best protection.

If you have a “Plan B” in place, you won’t have to organize your finances while you are stressed about finding a job or dealing with a major illness. The plan will already be done – you will need to just follow it.

Financial Warning Signs

There may not be a major life change to signal potential trouble – you simply may be having a difficult time properly managing your finances. Don’t be fooled into thinking your credit card problems won’t affect your mortgage. It is important to realize that financial difficulties in one area can, and often do, spill over to other areas. These difficulties are all warning signs of financial problems that can lead to foreclosure on your home if you do not act quickly. They include:

• Maxing out credit cards
• Using credit to pay for day-to-day expenses, such as groceries, utilities, etc.
• Being unable to pay your bills on time
• Paying only the minimum amount on credit cards
• Applying for new credit cards after maxing out on existing ones
• Having to choose which bills to pay

Talk to a housing counselor immediately if you see these signs (see sidebar for help finding a legitimate counselor). You may be able to get your finances back on track before foreclosure becomes a reality.

View Homes for Homes for Sales at   www.PerdewHomes.com

FORECLOSURE PREVENTION FORUM

Educating Those Caught in Foreclosure
Forum Equips Struggling Homeowners with Information

Vince Rembulat
Reporter
Manteca Bulletin

Don’t yell. Be persistent. And work as hard to keep your home as you did to buy it.

That advice - coupled with the nuts and bolts of trying to avoid foreclosure - was provided at the No Homeowner Left Behind forum Wednesday at the Manteca Senior Center. The gathering was designed to educate and provide possible options to those in danger of losing their homes according to Ana Rocha of the City of Manteca Redevelopment Agency.

She organized the group of volunteer professionals in the field to possibly provide direction to the nearly 50 in attendance who are among 312 homeowners in Ripon, Manteca, and Lathrop currently in one of the early or more advanced stages of the foreclosure process. There are currently 221 homes that have already been foreclosed and taken back by the banks that are available for sale in the three cities as of Friday.

Included on the NHLB panel were Ed Parcuat, Karen Eckstein, Pete Kovacs, and Dori Beck, with Lucy Living, a HUD-certified counselor with ByDesign Financial Solutions in Stockton, as the special guest.

“A mortgage is a promissory note,” she said.

For those having trouble paying their mortgage, Living indicated that one solution might include making cuts to personal expenses.

“Analyze your situation,” she said. “Are you spending $150 a month on cable TV? Do you have a $200 phone bill? Maybe you own one too many cars?”

Her HUD-certified counseling services in the Northern San Joaquin Valley not only offers free advice about home buying but assists resolving mortgage problems.

“We’ll work one-on-one with you to find the best option. We might even contact your investor. But at the same time don’t expect miracles,” Living said.

As for working with the bank, those on the panel agreed that it’s important to be persistent but, at the same time, be cordial.

“Don’t yell (on the phone) at those people,” Living said. “They might not want to work with you.”

And rather than talking to customer service or collections, they suggested contacting loss mitigation.

NHLB was started up in Fresno, with Stanislaus County forming a Central Valley branch not too long ago.

“We’re a round table of certified professionals (Realtors, counselors, lenders, planners, etc.), volunteering our time to meet on a monthly basis. We’ve pooled our resources to efficiently educate people,” said Rocha, who worked in Stanislaus County for eight years prior to coming to Manteca three months ago.

“We’re here for options,” added Parcuat, a mortgage planner. “Everyone has different reasons for being here tonight.

“There may even be those who can’t afford to keep their home and just want to move on.”

In addition, they touched on the foreclosure process, defaulting on a loan, and options.

Included were reinstatement of a delinquent loan, refinancing loan, litigation and bankruptcy.

“Bankruptcy has to be your very last option,” Parcuat said.

Many on the panel are optimistic that housing market will someday improve based on the trends of the 1980s and 1990s.

“What’s happening (today) is unprecedented,” Kovacs said. “We’ll eventually get out it.

“Those who held on to their home will benefit the most.”

As for those in danger of losing their home, Parcuat strongly recommended spending at least one hour a day talking to the bank.

“You worked hard to get your house,” he said. “Do you think you should work hard to keep it?”

Several forums are planned - or main events, according to Rocha - including one at the San Joaquin County Fairgrounds in Stockton on Friday, July 25, from 3 to 9 p.m., and Patterson’s Apricot Valley Elementary School, 1320 Hensley Parkway, from 8 a.m. to 3 p.m.

The NHLB event in Patterson will include representatives from Countrywide, Wells Fargo, Washington Mutual, and Citibank.

Another Manteca forum is planned for the coming months, Rocha said.

For more information, call 239-8427.

For Real Estate Information go to www.CentralValleyHomes.com

New Bill Creates a Tax Credit for First-time Homebuyers

Senate Sends Sweeping Housing Bill to House

Legislation addresses FHA expansion; Fannie, Freddie oversight

By Matt Carter
Inman News 

 

Senate lawmakers Friday signed off on a bill that would modernize the Federal Housing Administration and expand FHA loan guarantee programs by $300 billion, create a new regulator for Fannie Mae and Freddie Mac, and create an $8,000 tax credit for first-time home buyers.

HR 3221, the Foreclosure Prevention Act of 2008, would also appropriate $4 billion for states to purchase and renovate abandoned and foreclosed properties, a proposal the Bush administration has threatened to veto.

The bill also envisions a national licensing system for residential loan originators and would establish minimum qualifications for all loan originators and require federal regulators to create a registry for banks and thrift employees who originate loans.

The bill is headed back to the House of Representatives, with a plea from Sen. Chris Dodd, D-Conn., not to change the bill without consulting with him and Senate Banking Committee co-chair Richard Shelby, R-Ala.

Before a 63-5 vote to reject two amendments to the bill and send it to the House, Dodd conceded that “it will not solve every problem,” but said it addresses criticism that Congress has failed to act quickly to address the housing downturn.

The Bush administration has long sought an independent regulator for Fannie Mae and Freddie Mac, and legislation to modernize practices at FHA. But differences between Republicans and Democrats have scuttled multiple bills on both issues.

By tying several major housing issues into a single bill, Dodd and Shelby hoped to build bipartisan support for the legislation. But differences between the Senate bill and legislation previously adopted in the House must still be ironed out.

While the House wants to continue the temporary limit of $729,750 for loans purchased or guaranteed by Fannie Mae and Freddie Mac, the Senate bill would set a cap of $625,000 for Fannie, Freddie and FHA loan guarantee programs.

The Senate bill envisions covering the nearly $1 billion in expected costs associated with a $300 billion expansion of FHA loan guarantee programs by assessing new fees on loans guaranteed by Fannie and Freddie, a proposal some House lawmakers have been critical of.

But with financial markets roiled by speculation that the government may be forced to bail the giant mortgage companies out, there’s a renewed sense of urgency surrounding the bill’s passage.

“I hope the House and Senate can work quickly with each other to get a bill to the president before Congress adjourns for its August recess,” Mortgage Bankers Association Chairman Kieran Quinn said in a statement. “It is unfortunate that it took a crisis of this magnitude to bring us to the point where we can reach broad agreement on these issues, but have no doubt, a more nimble and modern FHA along with stronger … oversight (of Fannie Mae and Freddie Mac) are crucial to addressing the issues that are currently affecting the mortgage and housing markets.”

Search for Homes at www.CentralValleyHomes.com 

 

Foreclosure Filings Dip 3.4 % in June

Good News!  Foreclosures Filings have dropped 3.4% in June.  Despite improvement bank repossessions are up from a year ago along with an increase in auction notices. Seven of the 10 metropolitan areas with the highest rates of foreclosure-related filings were in California, including Stockton, Merced and Modesto.   

Foreclosure – related Filings Dip 3.4% in June
Report: Despite Improvement, Activity Up 53% from a Year Ago 

By Inman News

The 253,363 properties subjected to filings in June represented a 53.3 percent increase from a year ago, RealtyTrac said, with bank repossessions increasing at a much faster clip than default notices or auction notices. Bank repossessions were up 171 percent from a year ago, to 71,563, compared with a 38 percent gain in default notices and a 22 percent increase in auction notices from a year ago.

One reason for the sharp year-over-year increase in bank repossessions is that it can take months for properties to work their way through the foreclosure process. Not all foreclosure-related filings result in foreclosure, because borrowers may be able to refinance their loans, and lenders will sometimes work out loan modifications or approve short sales. Many properties that became real estate owned in 2007 would have entered the foreclosure process in 2006, before the housing downturn worsened.

But the year-over-year increase in properties subjected to foreclosure-related filings in June, 2008 “indicates we have not yet reached the top of this foreclosure cycle,” said James Saccacio, chief executive officer of RealtyTrac, in a press release. Nevertheless, the number of properties subjected to filings in the two states with the highest filing rates fell from May to June.

Nevada, which RealtyTrac says has the highest rate of foreclosure-related filings in the nation — one for every 122 households — saw properties subjected to filings fall 3.3 percent from May to June, to 8,713. The state with the second-highest rate of filings, California, saw the number of properties subjected to filings fall 4.5 percent, to 68,666.

The number of properties hit with foreclosure-related filings in third place was Arizona whose rate remained essentially unchanged from May to June, at 12,950, or one in 201 households.

Other states with foreclosure rates ranking among the top 10 were Florida, Michigan, Ohio, Colorado, Georgia, Indiana and Utah.

In terms of raw numbers, California, Florida and Ohio had the largest number of foreclosure related filings. Other states in the top 10 for total filings were Arizona, Michigan, Texas, Georgia, Nevada, Illinois and New York.

Seven of the 10 metropolitan areas with the highest rates of foreclosure-related filings were in California, including Stockton, Merced and Modesto. Two metro areas in Florida made the top 10 list: Cape-Coral-Fort Myers and Fort Lauderdale. Las Vegas was the only area outside of California and Florida to make the list of top 10 metro foreclosure rates.

The report includes documents filed in all three phases of foreclosure: Default — Notice of Default (NOD) and Lis Pendens (LIS); Auction — Notice of Trustee Sale and Notice of Foreclosure Sale (NTS and NFS); and Real Estate Owned, or REO properties (that have been foreclosed on and repurchased by a bank). If more than one foreclosure document is filed against a property during the month only the most recent filing is counted in the report. If the same type of document was filed against a property in a previous month, and if that previous filing occurred within the estimated foreclosure timeframe for the state the property is in, the report does not count the property in the current month.

View Bank Owned Homes at www.CentralValleyHomes.com. 

BANK OWNED HOMES IN POOR CONDITION

There is an epidemic of empty bank owned homes that are being left in shambles and in need of repair. Mortgage companies are hiring contractors to inspect and maintain properties that have gone in foreclosure & that become bank owned. This is an interesting news story of the results of the today’s foreclosure market. 

Contractors Are Kept Busy Maintaining Abandoned Homes

by Vikas Bajaj
provided by
The New York Times

The house on East 24th Street was the worst of the six that David Law and Trey McCallister worked on the other day here. The front door had been kicked in so many times that the dead bolt was exposed and bent. Trash littered the front and back yards. A copper pipe was gone.

“Somebody has been trying to destroy this place,” said Mr. McCallister, eyeing the door.

But the two men have seen far worse as they go from one deserted house to another in northern Florida, where the foreclosure crisis has struck particularly hard.

Mortgage companies hire contractors like these men to inspect and maintain houses that once-proud owners can no longer afford and no one else wants. These days, business is brisk.

These contractors and thousands like them see first hand the detritus of the subprime era: peeling paint, gutted interiors, family dogs left behind to starve, overgrown lawns infested with snakes.

In Florida, the crisis can seem overwhelming at times.

It can take months, even years, for some homes to wind through foreclosure in the backlogged local courts.

The longer a home sits vacant, the more vulnerable it becomes.

After a few months, the Florida weather starts to takes a toll. Mold and mildew creep. Algae chokes forsaken swimming pools. Sometimes vandals strike. And sometimes wiring or plumbing just give out.

The home on East 24th Street has been vacant for several years, said Gloria Roberts, a next-door neighbor.

Another home that Mr. McCallister and Mr. Law visited in the affluent Sawgrass golf community in the oceanside city of Ponte Vedra Beach was last occupied in December 2006, according to a neighbor there.

Local and state governments have become concerned about the upkeep of foreclosed homes, which can drag down real estate values in neighborhoods and provide havens for drug users and gangs. Over the last year, localities have stepped up code enforcement by levying fines on mortgage companies for the degradation of homes they are repossessing.

The problem of vacant homes is all the more striking when considered against predictions by economists that a couple of million more homes will enter foreclosure in the next two years, said Cheryl Lang, president of Integrated Mortgage Solutions, a company based in Houston that contracts with Mr. McCallister and Mr. Law on behalf of mortgage companies.

“We still have two million more people that need to go through this process,” she said. “That’s like the entire town of Tampa going through foreclosure.”

Nearly 3 percent of homes that were once occupied by their owners in the country were vacant in March. That is up from less than 2 percent three years ago and is the highest since the Census Bureau began publishing the number in 1956.

For people like Mr. McCallister and Mr. Law, the surge in foreclosure has been good for business. Tim Doehner, executive director of the National Association of Mortgage Field Services, a trade association based in Ohio, estimates that most of his members have doubled their revenue in the last year. Individual contractors can bill as much as $5,000 every two weeks, said Jimmy Lyons, one of the partners in the firm, Landwise Inspection Services of Lake City, Fla., that Mr. McCallister and Mr. Law work for.

But the rising price of diesel fuel, wood and other supplies cuts sharply into their earnings. Mr. Law said he often spent $140 a day filling his pickup truck, which tows a large trailer that carries a riding lawnmower and other supplies. The contractors cannot easily pass rising costs to lenders because they work under contracts or, in the case of some loans, at rates set by federal agencies.

Still, business is growing and drawing in newcomers.

Mr. Lyons, a former deputy sheriff, entered the home inspection business years ago but branched out into field service work for mortgage companies two years ago when a friend suggested the housing boom would soon give way to a housing bust.

Back then, “I just couldn’t see it,” Mr. Lyons, 56, said. “It fell exactly like he said it would.”

After a quarter century in law enforcement, he still looks and plays the part of the easygoing rural county sheriff and is a reserve officer in Columbia County west of Jacksonville. At one home this month, he scrambled through an open window when the door was bolted while his younger colleagues looked on in amazement.

Mr. Law left a field sales job with the Kellogg Company, the cereal maker, to join Landwise, because he said he was tired of the corporate world. He said taking care of vacant houses could be grueling but also rewarding and allowed him to work by himself, which he said he enjoyed. He often works seven days a week because his employer is often flooded with orders.

“It occupies a lot of my time,” he said and added with a laugh, “I don’t have much of a life outside of this.”

When he arrives at houses, Mr. Law reaches for his digital camera and starts snapping pictures to document his presence and problems that need attention. Mortgage companies require before and after photos to be sent to them electronically before paying for work done to the home.

If it is their first visit to a vacant home, the contractors change the locks on at least one door so the mortgage company can have access. They use locksmith’s tools to gain entry to the house, though on some occasions they use open windows, as Mr. Lyons recently did. The contractors board up broken windows, cut the grass and record significant damage. Depending on the extent of the destruction, mortgage companies will commission the contractors to repair the home.

At the home on 24th Street, Mr. McCallister, 39, who had worked in the timber business until last year, wedged open the back door with pliers and Mr. Law installed a new lock. The interior of the house was mostly empty and musty. The outside was another story. A large tree branch shared the back yard with an empty propane tank, Styrofoam containers and food wrappers.

After surveying the trash and photographing it, Mr. Law and Mr. McCallister concluded they could not cut the grass without cleaning up the yard. They would have to ask the mortgage company whether it wanted them to remove the trash and how much it would pay for the work.

Contractors say the damage at vacant homes can be significant, though it is not always clear who the culprit is. It could be an angry homeowner upset about losing a home, but it also could be vandals and thieves scouring homes for copper plumbing, which they can sell. To limit losses, a few mortgage companies are making offers called “cash for keys” to delinquent borrowers if they leave their homes quickly and in good shape.

Two of the six homes the contractors visited in the Jacksonville area appeared to be pristine. The two also had for-sale signs from real estate agents, suggesting the borrowers were trying to sell but could not find a buyer before they had to leave.

For the contractors, foreclosures can strike close to home. Mr. Law recently inspected a home across the street from his residence and Mr. McCallister was sent to a home formerly occupied by a family whose daughter was friends with one of his three daughters.

“I was fortunate that everyone was gone,” Mr. McCallister said, so he did not have to see his daughter’s friend.

In most cases, the contractors do not interact with the homeowners, but sometimes the contractors are present during evictions that are conducted by county sheriffs. Mr. McCallister recalled the eviction of a 60-year-old man who had misread his eviction notice and thought he had one more week to leave.

“He fell down on the floor and started crying,” Mr. McCallister said. “We gave him 24 hours and he had his stuff moved out and he found another place to live.”

In their work, the contractors come across the everyday debris of human life, from old microwave ovens to couches and a child’s cherry-red tricycle. Sometimes they discover abandoned pets. Mr. Law recently found three kittens that he took to a friend who is an animal lover.

Though homes were found for all three of the kittens, many other pets meet a worse fate. Ms. Lang of Integrated Mortgage Solutions has started a nonprofit group, No Paws Left Behind, to find homes for abandoned pets and to offer help with pets to homeowners in foreclosure. She said contractors working for her company had found abandoned animals from birds to horses.

While business may be good for firms like hers, Ms. Lang said it was difficult not to be disenchanted when the housing bust is seen from the street level, as many of her contractors do. Just a few years ago, policy makers and the mortgage industry were celebrating record home ownership rates in the country — a sign that the American dream was within reach for a large majority of the population.

Speaking on the phone two days after Mr. Law and Mr. McCallister’s visit to the home on 24th Street, she said the home’s condition stuck with her.

“Somewhere along the line someone wrote that property off,” she said. “There were birthdays celebrated there and anniversaries and there were lives that were lived there. And now the door is bolted shut.”

View Bank Owned Homes at www.CentralValleyHomes.com

Foreclosures Sales Are Ahead Of Workouts

Growth in Foreclosure Sales Outpaces Workouts
 
Real Estate Roundup
By Inman News, July 2^nd

HOPE NOW’s Latest Data on Loan Mods, ARM resets
Lenders are speeding the pace at which they conduct workouts with troubled borrowers, but foreclosure sales are rising faster, according to the latest numbers from the HOPE NOW coalition of loan servicers. Based on the 163,649 foreclosure sales reported by HOPE NOW in April and May, foreclosure sales were on a pace to hit 245,473 for the second quarter, up 24 percent from 198,172 foreclosure sales in the first quarter. Based on the number of workouts in April and May, servicers were on track to complete 519,291 workouts in the second quarter, up 7.5 percent from the first quarter.

In engaging in workouts with troubled borrowers, HOPE NOW loan servicers are relying less on repayment plans, which some critics have said are a short-term fix, and increasing the number of loan modifications. Based on the numbers for April and May, HOPE NOW loan servicers were on track to put in place 202,003 loan modifications during the second quarter, up 18 percent from the previous quarter, and 302,287 repayment plans, down 3 percent from the first quarter.

HOPE NOW also announced the results of a separate survey of subprime adjustable-rate mortgages with rates resetting in 2008. The results, representing approximately 60 percent of subprime loans, showed 45 percent of the 718,000 loans scheduled to reset between January and May were paid in full because the homeowner refinanced the loan or sold their property. Another 5.3 percent were modified by lenders, and 0.5 percent of loans that were current at the date of reset entered the foreclosure process.

Paulson: Gov’t shouldn’t always come to rescue
Treasury Secretary Henry Paulson said today the Bush administration will continue a policy of seeking to avoid preventable foreclosures without impeding “necessary correction” in housing prices. As the housing market works through “past excesses,” Paulson said, “U.S. foreclosures will remain elevated and we should not be surprised at continued reports of falling home prices. Our policy continues to be to work to avoid preventable foreclosures while not impeding the necessary correction because the sooner housing prices stabilize and more buyers return to the market the sooner housing will begin to contribute to economic growth.”

Speaking in London, Paulson also said the financial regulatory system should be restructured to allow the government to intervene when events pose a risk to the entire system, without creating the expectation that the Fed will step in to prevent the failure of individual institutions. Paulson called the Fed’s decision to loan money to investment banks — after providing a $30 billion loan to facilitate the sale of Bear Stearns — an “extraordinary step” necessary to preserve the stability and of the financial system.

While it is clear that “Americans have come to expect the Federal Reserve to step in to avert events that pose unacceptable systemic risk,” Paulson said, “it is imperative that market participants not have the expectation that lending from the Fed, or any other government support, is readily available” because they will take too many risks. While there is widespread belief that some institutions are “too big too fail,” Paulson said “the real issue is not that an institution is too big or too interconnected to fail, but that it is too big or interconnected to liquidate quickly.”

Although Paulson did not mention Fannie Mae and Freddie Mac by name, legislation now pending in the Senate would create a new, independent regulator of the government-chartered mortgage financers, which would have the power to place the companies in receivership if they became insolvent.

To receive the article, “Buying Bank Owned Homes”, go to www.CentralValleyHomes.com