What's New Miami Beach!?!

By Candace Taylor

Foreclosures in Miami-Dade County reached a three-year peak in January with 1,188 auctions scheduled, up 49 percent from 795 during the same period last year, and 58 percent from 750 in December 2008, according to a monthly foreclosure report from Propertyshark.com.

The number of foreclosure auctions often climbs between December and January, said Brian Scully, the vice president of marketing at PropertyShark.

"Typically we would expect an increase from December to January," he said, "as holiday schedules (and probably some sense of collective guilt about scheduling an auction around the holidays) mean less auctions are scheduled."

Miami also had the highest rate of foreclosures per household compared to the other metro areas the report examined: New York, Los Angeles and Seattle. In Miami, one in every 654 homes is scheduled for auction, followed by Los Angeles, with one in every 1,205 homes. By comparison, one in every 10,856 homes in New York is scheduled for auction.

Los Angeles had more than double the number of foreclosures as Miami, with 2,605 in January, although the number was 32.9 percent down from January 2008. Like Miami, New York saw an increase year-over-year with 278 foreclosures, up 5 percent from last January. Seattle had a smaller number with 104, 41.6 percent fewer than last year.

The zip code with the most foreclosures was 33177, an area which includes Miami, Perrine, Quail Heights and Country Lakes.

The legislation - likely to be enacted soon - devotes $300 billion to helping troubled homeowners avoid foreclosure. See if you qualify.

NEW YORK (CNNMoney.com) -- The Senate on Saturday passed a $300 billion housing rescue bill aimed at helping troubled homeowners avoid foreclosure and supporting mortgage giants Fannie Mae and Freddie Mac.

President Bush is likely to sign the bill into law within days. After the law kicks in on Oct. 1, thousands of at-risk borrowers will be able to refinance their unaffordable old mortgages into new low-cost fixed-rate loans insured by the Federal Housing Administration (FHA).

The Congressional Budget Office estimates that 400,000 borrowers with $68 billion in loans may benefit from the program - but the bill allows for as many as 1 million or 2 million borrowers to participate in the program.

Here's what homeowners need to know.

Qualified borrowers must live in their homes and have loans that were issued between January 2005 and June 2007. Additionally, they must be spending at least 31% of their gross monthly income on mortgage debt to be eligible for the program.

They can be up to date on their existing mortgage or in default, but either way borrowers must prove that they will not be able to keep paying their existing mortgage - and attest that they are not deliberately defaulting just to obtain lower payments.

Before homeowners can get FHA-backed mortgages, they must first retire any other debt on the home, such as a home equity loan or line of credit. Borrowers are not permitted to take out another home equity loan for at least five years, unless it's to pay for necessary upkeep on the home.

To get a new home equity loan, borrowers will need approval from the FHA, and total debt cannot exceed 95% of the home's appraised value at the time.

Borrowers can contact their current mortgage servicer or go directly to an FHA-approved lender for help. These lenders can be found on the Web site of the Department of Housing and Urban Development.

This is a voluntary program, so lenders holding the original mortgage have to agree to rework a given loan before things can get started. The bill requires lenders to make major concessions, writing down the value of the loan to 90% of the home's current value. In areas where prices have plummeted by as much as 20%, that will mean a substantial loss for the lender.

But lenders won't sign off on a workout unless they think that they'll lose less money on that than they would by allowing a home to go through the costly foreclosure process.

Each loan will have to be underwritten by an FHA lender on a case-by-case basis. That means the banks will do a new appraisal to determine the home's current value, as well as examine and verify income statements, bank accounts, job histories and credit scores.

Based on that new appraised home value, the FHA lender must determine how much the original lender has to reduce the original mortgage, so that it will reflect 90% of the home's market value.

If the original lender agrees to the writedown, the new lender buys the old loan and takes over the reworked mortgage.

As part of the deal, the old lender writes off any fees and penalties on the original mortgage, including prepayment penalties, and accepts the proceeds from the new loan on a paid-in-full basis. Additionally, it pays the FHA an up-front premium equal to 3% of the mortgage principal.

There should be little up-front costs for borrowers to bear. Loan origination fees will vary by lender, but these can usually be paid by the borrower over the life of the loan in the form of a slightly higher interest rate.

However, the refinanced loans do come with many strings. For one thing, borrowers are responsible for paying an insurance premium to the FHA guaranteeing the loan, which will be 1.5% of the principal annually.

Borrowers also agree to share any profits from future home-price appreciation with the FHA. To do that, they'll pay a "3% exit fee" of the mortgage principal to the FHA when they resell or refinance.

Plus, they'll agree to pay the FHA 100% of any profits they realize from higher home prices if they sell or refinance within a year. So if the original loan principal is $200,000 and the home sells for $250,000, the borrower will owe the FHA $50,000, minus costs.

After a year, borrowers will share 90% of the profits with the FHA. The percentage keeps dropping in 10% increments to 50% after the fifth year, where it stays.

Savings depend on what borrowers are paying for their present loan and where they live, but for most people it will be substantial, even after factoring in the FHA fees.

In areas that have sustained huge price drops, such as Sacramento, Calif., where prices have fallen by about 30% over the past year, some loans might be reduced by more than 40%.

Additionally, the FHA loans carry reasonable interest rates, which are fixed for the life of the loan, as opposed to a subprime adjustable-rate mortgage that can jump higher every six months.

 220,000 homes were lost to bank repossessions in the second quarter, and the annual forecast for 2008 will have to be revised upward.

NEW YORK (CNNMoney.com) -- As foreclosures continue to soar, 220,000 homes were lost to bank repossessions in the second quarter, according to a housing market report Friday issued by RealtyTrac.

That's nearly triple the number from the same period in 2007.

A total of 739,714 foreclosure filings were recorded during that three-month period, up 14% from the first quarter, and 121% from the same period in 2007. That means that one of every 171 U.S. households received a filing, which include notices of default, auction sale notices and bank repossessions.

"Most areas of the country are seeing at least some increase in foreclosure activity," said James Saccadic, CEO of RealtyTrac, an online marketer of foreclosed homes. "Forty-eight of 50 states and 95 out of the nation's 100 largest metro areas experienced year-over-year increases in foreclosure activity."

Because foreclosure filings are growing so quickly, RealtyTrac will have to reevaluate its foreclosure forecast for the year, according to spokesman Rick Sharga.

"We've been saying foreclosures will total 1.9 million to 2 million this year," he said. "But midway through the year, we're already at 1.4 million so we're going to be raising our projections."

And there is more bad news: Bank repossessions are up as a proportion of total filings, representing 30% of the notices issued during the quarter, up from 24% a year ago.

"I don't think that's a surprise if you look at the general conditions out there," said Brian Bethune, chief financial economist for Global Insight. "There have been six straight moves of weaker employment this year. The ongoing problems in the housing market are compounded by a generally weaker economy. Foreclosures won't go down until we start to see employment move up again."

California's Central Valley remains ground zero for foreclosure filings. Stockton, which is just east of San Francisco, had the highest rate of foreclosure filings of any metro area, one for every 25 homes. That's seven times the national average.

Riverside/San Bernardino, which is east of Los Angeles, had the second highest rate in the nation with one filing for every 32 households. Las Vegas, Bakersfield and Sacramento rounded out the top five.

Detroit continued to suffer more than any other non-Sun Belt area, with one filing for every 66 households. And several Ohio cities were also hard hit, led by Toledo (one in 92 households), Akron (one in 93) and Cleveland (one in 108).

On the other hand, there were a handful of metro areas that remained relatively unscathed. Honolulu, at one filing for every 1,331 households had the lowest rate of all, followed by Allentown, Pa. (one for every 972) and Syracuse, N.Y. (one for every 880).

At the state level, Nevada had the highest rate with one filing for every 43 households, while California had the highest total number of filings - 202,599.

The report came as more negative news for the housing market this week. On Thursday, a report form the National Association of Realtors revealed that existing home sales had declined again as the number of homes for sale continued to rise. On Tuesday, a government agency reported home prices registered another drop in May.

All this is happening as Congress struggles to pass a housing rescue bill that will make FHA-insured loans available to many at-risk borrowers. The measure, which is expected to be enacted, would take effect until Oct. 1.

One of the sponsors of the bill, Rep. Barney Frank, D-Mass., said in a statement Thursday that he encourages lenders and mortgage servicers to delay taking action against delinquent borrowers before the new law takes effect.

"I am urging the mortgage servicers to hold off on foreclosures in applicable cases," he said, "so borrowers can take advantage of the program." 

NEW YORK (CNNMoney.com) -- Home prices fell 6.7 percent in October, compared with a year ago, according to the S&P/Case-Shiller 10-city home-price index, a record drop as housing markets continued to deteriorate.

It was the largest drop in more than 16 years and marked the 10th consecutive month of price depreciation and 23 months of decelerating returns.

"No matter how you look at these data, it is obvious that the current state of the single-family housing market remains grim," said Robert J. Shiller, chief economist at MacroMarkets in a release.

Case-Shiller's 20-city index fell 6.1 percent. Shiller noted that 11 of the markets in the 20-city index posted a record fall.

Some economists are beginning to lower their expectations for housing markets, predicting a longer and deeper price slump than they had previously forecast.

Several factors are hurting markets: Inventories are high with an 11-month supply of homes already for sale; a spike in foreclosures has added to the supply; and there are many vacant homes on the market, which tend to have very motivated sellers, depressing prices more quickly.

Miami was hit with a 12.4 percent decline in the month, the most of any area. Tampa fell 11.8 percent and Detroit, 11.2 percent.

Only Charlotte, N.C. (4.3 percent), Portland, Ore. (1.1 percent) and Seattle (3.3 percent) showed positive price growth.  

Lawsuits filed by would-be condo buyers wanting out of purchase contracts continue to increase as projects near completion.

BY PATRICK DANNER

pdanner@MiamiHerald.com

Brooklyn housekeeper Rita Dobrer was swept up in South Florida's real estate frenzy, using $600,000 from a jury award as deposits on six condominiums in two Miami projects in 2005.

Dobrer said she never had the intention, let alone the financial ability, to buy the six condos -- which cost about $3 million. Rather, she claimed she was enticed by the developer's verbal guarantees that she could reap $600,000 in profits by selling the units without ever taking ownership.

Dobrer's hopes for a windfall, though, have cratered in the ailing residential real estate market. Unable to flip the units, Dobrer joined 35 other Russian immigrants in New York, New Jersey and Florida who on Friday sued Miami developer The Related Group for the return of the deposits on units in Miami's 50 Biscayne and Bal Harbour's Harbour House.

The allegation the condos were pitched as investment opportunities marks the latest twist in a mushrooming problem: buyers seeking to get out of contracts. Buyers have pounced on changes in units sizes, interior improvements, condo budgets and completion dates as reasons for escaping contracts.

Developers are facing dozens of lawsuits, if not more, from buyers, and the pace appears to be picking up as projects near completion.

''It's starting to snowball,'' said real estate analyst Jack McCabe in Deerfield Beach.

Developers aren't inclined to let buyers out of purchases, though. A Fort Lauderdale lawyer sued 22 town-house buyers in Fort Myers on behalf of a developer seeking to force them to close on their contracts -- even though they were willing to walk away without their deposits.

Related Group is fighting back, as well.

Miami lawyer Susan Mortensen, who is defending Related and other developers in similar suits, said many of the buyers who profited in the housing boom are unwilling to participate in the market's downturn.

''They are really profiteers. They are not victimized consumers,'' Mortensen said.

Aventura lawyer Robert H. Cooper, who filed two suits against Related on Friday, said developers shouldn't be surprised about the predicament they're in because they created it.

''They were, across the board, signing contracts with purchasers they knew did not have the ability to consummate the transaction,'' Cooper said.

''I'm a housekeeper,'' Dobrer added. ``Who would give me a mortgage for $2 [million] or $3 million?''

If what Dobrer says is true, McCabe said it would illustrate just how speculative the condo-building boom in South Florida became. In essence, it would mean developers relied in part on shell buyers to meet presale requirements and qualify for construction funding.

Dobrer said Related wouldn't allow her to buy four units in her name at Harbour House for that very reason. So Dobrer said she, her two daughters, and sister each bought units with the proceeds from her court winnings from a car accident. Dobrer bought two units in 50 Biscayne.

''The question for the developer would be, how could you accept contracts from a housekeeper who obviously didn't have the income or the wherewithal to close -- unless you were guaranteeing she could flip them for a profit?'' McCabe said.

Mortensen wouldn't say whether Related did any income verification or credit check of potential buyers.

''Purchasers have an independent responsibility to look after their own financial affairs,'' she said.

As for allegations that buyers were told they could flip their units for a profit without purchasing them, Mortensen said they either signed or initialed contracts that acknowledged no such representations were ever made.

Responded Cooper: ``Everyone in real life knows that verbal sales tactics and presentations are what people base their decisions on, not the fine print on the back of the contract.''

Related wooed buyers with buffet dinners at a fancy Russian restaurant in New York, recalled Irina Herman, a real estate agent who has joined the Harbour House suit to get her $127,000 deposit back. She wanted to buy the $635,000 condo as an investment, saying the sales representative told her she could make $100,000.

Efim Mekler, a retired painting contractor in New York, put deposits of $238,000 on two Harbour House units priced at $689,000 and $450,000. He planned to sell the smaller unit.

''You'll sell it like that,'' he said he was told. ''This sale is going to go like hot knishes.'' He said he can afford to close on the units but refuses.

The lawsuits allege Related needed to register its condominiums as investments before pitching units to New York buyers, as required by New York state law.

The purpose of the law is to ensure prospective buyers have detailed information to make a reasoned judgment about whether to buy.

The plaintiffs also assert that Related made ''material'' changes to the contracts that were ''adverse'' to them. For instance, Herman contends her unit in Harbour House is about 100 square feet smaller than the 1,156-square-foot unit she agreed to buy.

Miami Herald staff writer Matthew Haggman contributed to this report.

http://www.miamiherald.com/business/story/294125.html

Foreclosure 'rescue' deals shackle homeowners

Homeowners who accepted help to avoid foreclosure have gone to court with claims that they were stripped of equity in their homes.

BY MATTHEW HAGGMAN

For Kayhlene Gainer, it started two years ago, with a knock on the door on a Sunday spring afternoon.

The two women who stopped by her Coconut Creek home knew the 55-year-old widow was behind on her mortgage payments and facing foreclosure.

They promised help. For a fee, they would arrange the sale of Gainer's home so that she could stay there, paying rent. With the foreclosure halted, Gainer would get credit counseling and, after a year, a new mortgage and her home back in her name. She agreed.

Now, the Broward County schoolteacher and more than a dozen other homeowners contend in interviews and court filings that two companies -- National Foreclosure Management and American Home Rescue -- promised to save them from foreclosure but sucked out their home equity through excessive fees, what they claim is a fraud known as equity stripping. Then, they say, the firms skipped out, leaving owners scrambling again to prevent foreclosure on new, higher mortgages.

George Castrataro, a Broward legal-aid attorney representing Gainer and several other alleged victims, said he found $532,000 in questionable closing expenses in a review of 12 National Foreclosure deals alone.

Florida's attorney general is investigating the two companies. Sandi Copes, attorney general spokeswoman, declined to discuss the probe, but said it's being ``pursued actively.''

Mortgage fraud that flourished along with Florida's real-estate market in the past few years has many variations -- loan applicants who fudge their income to qualify for a higher-priced home, scam brokers who flip homes among fake buyers, pocketing the mortgage proceeds. But equity stripping, regulators and lawyers say, is especially pernicious because it preys on desperate homeowners looking for any solution that will stave off foreclosure and keep them in their homes.

WARNING ON PRACTICES

U.S. AND SOME STATES

STEP INTO THE ARENA

The U.S. Department of Housing and Urban Development has warned homeowners to avoid firms specializing in foreclosure prevention, and some states have cracked down on rescue operations: New York passed legislation in February to stamp out the practice, and Massachusetts temporarily banned for-profit rescue firms. Florida has no specific law addressing foreclosure prevention.

''Conditions are perfect for foreclosure rescue scams right now,'' said Lauren Saunders, managing director of the National Consumer Law Center's Washington, D.C., office. ``It has been around for a long time, but it really blossoms when people have equity in their homes and mortgages they cannot afford.''

South Florida is fertile ground. Despite the slowdown after years of zooming prices, home values are still much higher than they were three or four years ago. This means homeowners have accumulated significant equity. Meanwhile, many South Florida homeowners took out bigger and riskier mortgages than they could handle.

One result is the proliferation of equity-stripping scams, which homeowners lawyer Castrataro, of Legal Aid Service of Broward County, calls ''an epidemic.'' Between the Plantation law office and its sister agency, Coast to Coast Legal Aid of South Florida, an average of six or seven new equitystripping cases arrive each week. The companies fingered frequently, Castrataro said: National Foreclosure and American Home Rescue.

National Foreclosure shut down last September. Wyman Roberts, its former president, declined to comment. Bernard Williams, National Foreclosure's registered agent and president of American Home Rescue, denies that the companies were doing anything wrong. ''We wanted to do the right thing by people, but that business is just like a quagmire,'' he said.

''These people come to you with problems and you resolve the problems, and then they resort to the same mind-set that got them into their problems,'' he said. ``They have bad habits and continue to have bad habits.''

HOMEOWNER PROFILE

EQUITY HAS GROWN;

SO HAVE MONEY WOES

To work, equity stripping requires a certain kind of homeowner: those who have built-up equity in their homes, yet are struggling to pay their mortgages. Kayhlene Gainer fit the bill.

She bought the five-bedroom house in Coconut Creek in 1999 for $155,400, using money from a settlement in a personal-injury lawsuit involving her late husband.

But after Gainer's daughter, Faith, went to college in 2004, tuition bills presented a big new expense. Then she had several unexpected, pricey car repairs.

''It all cost me more than I thought it would,'' Gainer said.

Enter National Foreclosure Management. The Miami Lakes firm opened in December 2004, state records show. Wyman Roberts was president. Bernard Williams, registered agent, also was a branch manager for Southeast Capital Mortgage, a brokerage that shared National Foreclosure's offices.

The firm obtained weekly lists of homes set for foreclosure from county courts. It recruited ''field analysts'' to go door-to-door, hawking its ''home saver'' program. At National Foreclosure's peak, more than 60 people fanned out into South Florida neighborhoods, Williams said.

The field analyst who knocked on Gainer's door in April 2005 was Lakeisha Marion from National Foreclosure Management. Marion later worked for American Home Rescue.

She made $4,000 each time a homeowner signed up, said Marion, who left the company after a financial dispute with Williams. She closed one to three deals a month.

On Saturdays, field analysts piled into National Foreclosure's Miami Lakes office to discuss strategy and to role-play, honing their sales skills. There ''would be people in the hallway,'' Marion said. They included teachers and even police officers, seeking to make extra money in off hours, she said.

In mailings to homeowners, the firm pledged to ensure ''that you regain full rights and ownership to your home.'' It offered to equip clients ``with the necessary tools need[ed] to improve your financial planning skills.''

For Gainer, Marion's pitch sounded heaven-sent. Marion promised to stop foreclosure proceedings and to provide more than $10,000 cash upfront, financial planning courses, and payment of her taxes and insurance for the year.

'INVESTORS' INVOLVED

NAMES AND CREDIT

ARE LOANED FOR A FEE

Once National Foreclosure found willing homeowners, it matched them with ''investors'' willing to act as buyers. These investors rarely saw the homes they were buying, but lent their names and credit for a fee, with the understanding that the original homeowner would take the home back in a year.

Some straw buyers say they were victims, too, their credit ruined because the foreclosure rescue firm told them the homeowner was making the loan payments.

Zobeida Perez of Miami was the investor who bought Gainer's home. Perez did not return calls seeking comment, but her lawyer, Charles Simon, said Perez made $5,000 for lending her name and credit to the Coconut Creek house for a year.

''She saw a way to make quick money,'' said Simon, who declined to offer further details about Perez's involvement. ``She's a victim in this. She did this innocently.''

Less than a week after meeting Marion, Gainer says, she met with Williams and Roberts at their office on Miami Lakes Drive. She recalls gold-leaf certificates on the wall, touting the home rescue program.

It all made sense to Gainer. On April 22, 2005, she signed the papers, selling her home to Perez for $298,000. Her mortgage balance: $187,791.

But Gainer didn't study her closing statement carefully. If she had, she would have noticed that much of the $108,209 profit was eaten up by fees.

Those included a line item for ''seller held mortgage,'' which she says she never took out, for $59,600. Another line item: ''3 percent sellers contribution to buyer'' for $8,940. There are two ''poc'' line items, or ''paid outside closing,'' totaling $7,556. Total fees: $76,096.

Separate settlement charges came to $24,003, 8 percent of the purchase price. A typical percentage is between 3 and 5.

Those high fees and unexplained charges are how Gainer's equity was ''stripped,'' her lawyer says.

Williams declined to comment on Gainer's specific equity-stripping claims, saying Roberts was in charge. He did say the typical fee charged at closing was $15,000.

UNWELCOME SURPRISE

SELLER SAYS PROMISES

WERE NOT FULFILLED

Disappointments came immediately. Williams and Roberts said the upfront cash initially promised wouldn't be paid because ''when they did the real figures, there was no money left,'' Gainer said.

Weeks passed, and her concerns mounted. Promised credit counseling and financial-planning courses had not been scheduled. She called Williams and Roberts, but 'they kept saying, `Someone will call you, someone will call you,' '' she said.

She gave up, but kept sending her $1,575 monthly rent to National Foreclosure.

In April 2006, a year after signing, she tried to arrange to put the house back under her name, as the agreement spelled out.

Roberts told her it would be easy, she recalled. But when she arrived in Miami Lakes for an appointment, he didn't show up, she said.

Then, in the fall of 2006, came a huge blow: a letter from National Foreclosure Management saying it was shutting down. The buyer, Perez, who had never met Gainer but legally owned her home, showed up unannounced at the schoolteacher's house. Perez said the property's mortgage had not been paid and the lender was foreclosing.

''All along, I had been making monthly payments to NFM for rent,'' Gainer said. ``Evidently, they were not paying the mortgage on it. But I had no idea what was going on because the mortgage was not in my name.''

homeowner

But getting the house back was no simple task. Now she had a mortgage bigger than $250,000 to satisfyTaxes and insurance hadn't been paid. Gainer had to buy her house again at a higher price.

Perez, meanwhile, was getting impatient. While Gainer cobbled together financing, Perez feared that foreclosure would ruin her credit. She, too, felt duped, claiming she was told that Gainer would pay the mortgage, her lawyer said. In March, she sued in Broward Circuit Court to evict Gainer and her family.

Gainer again begged Bernard Williams for help. But by then, Williams had moved to American Home Rescue. He recommended a lawyer to Gainer, but Gainer and the lawyer never spoke.

A week before her final eviction hearing, the increasingly desperate Gainer turned to the Rev. Glenn Bostic, a Broward religious and social activist she knew. Bostic, in turn, took her to visit Legal Aid Service of Broward County, where Castrataro agreed to take her case.

After the judge heard the fraud allegation, he and Perez agreed April 19 to allow Gainer more time to pay off Perez's mortgage. Two people have ''gotten screwed in this deal,'' Perez's lawyer, Simon, told the court.

CASE STILL UNFOLDING

FORMER OWNER, BUYER

WALK SEPARATE PATHS

Four months later, Gainer is still struggling to get financing together to pay the mortgage.

Perez is going to court later this month to try to enforce the settlement.

Williams said Wyman Roberts opened a home rescue operation in Tennessee for a time. It's not known where he is now.

Williams said he has gotten out of the foreclosure prevention business. He wrote to investors, field analysts and former homeowners June 23 that American Home Rescue was closing.

''Changes in the mortgage industry and the foreclosure market'' were forcing the company to ''discontinue operations,'' Williams' letter said.

He is now taking on a new real-estate venture, in a new location that has had its own share of distressed homeowners.

''I've gone to New Orleans,'' Williams said.