Freddie Mac has now decided to allow “strategic default” under certain conditions

[bearishgurl]

These mortgages include many direct-lender “portfolio loans” made in the ’90’s and 00’s.

Highlights:

STANDARD DEED-IN-LIEU OF FORECLOSURE
Effective for new deed-in-lieu of foreclosure evaluations conducted on or after March 1, 2013 The Standard Deed-in-Lieu of Foreclosure is part of the Servicing Alignment Initiative (SAI) developed under the direction of the Federal Housing Finance Agency, and is designed to serve as a workout option for Borrowers for whom neither a home retention alternative to foreclosure nor a Freddie Mac Standard Short Sale (“short sale”) is a workable solution. This Bulletin provides complete requirements for the Standard Deed-in-Lieu of Foreclosure.

The Standard Deed-in-Lieu of Foreclosure provides Servicers delegated authority to approve a deed-in lieu of foreclosure (DIL) in accordance with the requirements of Guide Chapter B65, Workout Options.
In addition, it revises the non-delegated DIL workout option in Chapter B65.

Servicers must continue to evaluate Borrowers in accordance with the evaluation hierarchy and offer the Borrower a home retention option or short sale, as appropriate, before offering a DIL. We have updated the evaluation hierarchy in Guide Section 64.6, Evaluation Hierarchy, Borrower Solicitation and Communication, to include the provision that Servicers must encourage a short sale prior to pursuing a DIL. . . .

Eligibility
Every Borrower, regardless of Delinquency status, is eligible to be considered for a DIL, provided the following requirements are met:
■The Servicer has complied with the evaluation hierarchy
■The Borrower must be experiencing or have experienced one of the eligible hardships listed in Section 65.17(a)
■The Borrower must be able to convey clear and marketable title to the Mortgaged Premises to Freddie Mac
■If the Mortgage is current or less than 31 days delinquent then the following additional requirements must be met:
■At least one of the Borrowers must occupy the Mortgaged Premises as his or her Primary Residence and;
■The Borrower’s current monthly debt payment-to-income ratio must be greater than 55%
Unless otherwise notified by Freddie Mac, all Servicers are delegated to approve a DIL that meets the requirements of Sections B65.43 through B65.48 for the following eligible Borrowers:
■Borrowers who are 90 or more days delinquent
■Borrowers who are current or less than 90 days delinquent provided the Borrower’s eligible hardship is one of the following:
■Death of a Borrower or death of the primary or secondary wage earner
■Long-term or permanent disability; serious illness of a Borrower/co-Borrower or dependent family member
Additionally, a Servicer is authorized to approve a DIL for a Borrower who was previously discharged from the debt obligations in a Chapter 7 bankruptcy.
Servicers are not delegated to approve a DIL for a Borrower who is current or less than 90 days delinquent if the Borrower’s hardship is other than those listed above or if the Borrower was not discharged from debt obligations in a Chapter 7 Bankruptcy. However, if the Servicer believes a DIL is still the most appropriate remedy, then the Servicer must submit a recommendation to Freddie Mac for approval.

Refer to Sections B65.43 through B65.48 for all DIL eligibility requirements.

Borrower relocation assistance
Borrowers who are eligible for a DIL and are not required to make a financial contribution toward the deficiency may be eligible to receive up to $3,000 in relocation assistance from Freddie Mac provided that the Borrower occupies the Mortgaged Premises as his or her primary residence. In addition, the Servicer may at its discretion use its own funds to offer the Borrower an additional financial incentive to complete the DIL. If the Borrower receives relocation assistance from a source other than Freddie Mac or the Servicer, such as an employer, the Servicer must reduce the amount of Freddie Mac’s relocation assistance by the amount received from the other source. Further, if the final property inspection reveals that the property is damaged, contains trash or debris or is otherwise not in clean, broom-swept condition, the Servicer must deduct the estimated or, if known, the actual cost of repairing and cleaning the property from the relocation assistance amount. . . .

(emphasis added)

http://www.freddiemac.com/sell/guide/bulletins/pdf/bll1227.pdf

Hopefully, this practice won’t become “necessary” in SD County due to rising values.

[spdrun]

Hopefully, more strategic defaulters will keep US property values down where they belong. Couldn’t care less about the boomers and Gen X’ers who were retarded enough to take mortgages at unrealistic values — time for a new generation to be able to buy.

When property values went “THUNK” in 2008, I (and many others my age) felt like Nick Cage in Lord of War.

[Anonymous]

It should be valuable enough that people can easily afford to get. – academic writing

[desmond]

[quote=spdrun]

When property values went “THUNK” in 2008, I (and many others my age) felt like Nick Cage in Lord of War.[/quote]

Too bad it was only a movie for Nic (and many others)

http://money.cnn.com/2009/11/13/real_estate/Nicolas_Cage/

[Coronita]

[quote=spdrun]Hopefully, more strategic defaulters will keep US property values down where they belong. Couldn’t care less about the boomers and Gen X’ers who were retarded enough to take mortgages at unrealistic values — time for a new generation to be able to buy.

When property values went “THUNK” in 2008, I (and many others my age) felt like Nick Cage in Lord of War.[/quote]

How many did you buy?

[spdrun]

Two so far; offers crawling through the short- and estate-sale processes on another two as I write this.

[an]

[quote=spdrun]Two so far; offers crawling through the short- and estate-sale processes on another two as I write this.[/quote]
I thought opportunities are everywhere in NJ? Shouldn’t you have much more than 2?

[spdrun]

One is in NYC proper, the other in DC area. Offers out on a 3 unit + 1 commercial in NJ as well as a condo renting at 7.5% cap (or more) in a nicer part of SD. And yeah, if I don’t get the 3+1, I looked at several properties in the low to mid $100k range this weekend that I’m happy to offer on.

Lastly, stats came out today. NJ is down 0.9% Y-o-Y since last year, so hellz yeah the opportunities are good.

[spdrun]

7.5% cap for the one in SD. Closer to 9% in NJ. Could get theoretically 10%+, but that would involve areas where I don’t want to be involved.

[an]

[quote=spdrun]One is in NYC proper, the other in DC area. Offers out on a 3 unit + 1 commercial in NJ as well as a condo renting at 7.5% cap (or more) in a nicer part of SD. And yeah, if I don’t get the 3+1, I looked at several properties in the low to mid $100k range this weekend that I’m happy to offer on.

Lastly, stats came out today. NJ is down 0.9% Y-o-Y since last year, so hellz yeah the opportunities are good.[/quote]
That’s it? Just 7.5% cap rate? I was expecting 12-15% cap rate by the way you’re describing NJ. May I ask why are you buying all over the place? Wouldn’t management cost kill your profit? You can’t possibly fly to SD, DC, NJ, and NYC to handle with repair by yourself.

[an]

May I ask why are you buying all over the place? Wouldn’t management cost kill your profit? You can’t possibly fly to SD, DC, NJ, and NYC to handle with repair by yourself. Does those cap rate include management cost?

[spdrun]

DC – have family, some work, and some good friends there, and the property is rented for 2+ years at a time to some very stable tenants. Going there occasionally is no big deal.

SD – fell in love with the area the first time I was out there in 2009. Buying something that may eventually make a good vacation pad (or perhaps that I can move to if I decide to go “west”), but can be rented right now and hopefully will go up in value as well. It’s a simple 1-bedroom unit in a relatively well-run complex. Electric heat, no central A/C, external hot water source. In short, very little to break, and the tenant will be signing a contract making repairs below $500 their responsibility.

NJ – it’s 30-40 minutes from where I live. No flying required, and right now the price is right.

Believe me, my madness may be intense, but there’s a small measure of method to it.

[an]

[quote=spdrun]the tenant will be signing a contract making repairs below $500 their responsibility.[/quote]
Is that legal? Or even wise? I can see a scenario where there’s a leaky pipe, the tenant didn’t want to shell out the $ to fix it, and you end up with mold all over the apartment. Which will cost you thousands to dollar to fix. Or worse yet, they have asthma and the mold cause them problem and they sue you for having an environment that’s not healthy.

Why didn’t you just invest in NJ get better return and not have to deal with problem if problem occur in SD? I would assume one trip out to SD and that would wipe away a lot of your profit. Especially if it’s a cheapy 1/1 and making only 7.5% cap rate.

[spdrun]

That condo has good appreciation potential/inflation protection and staying in SD for a while every year bothers me not at all.

[an]

[quote=spdrun]That condo has good appreciation potential/inflation protection and staying in SD for a while every year bothers me not at all.[/quote]
Good luck to you. I wouldn’t want to have to deal with that, even if it’s in Hawaii. There’s a difference between going there on vacay and going there to take care of unforeseen problem that will cost you a lot of money.

[Author]

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