Beware the potential for a deficiency judgment!

http://finance.yahoo.com/news/Mortgage-lenders-pursue-cnnm-3107909798.html?x=0

Michigan allows mortgage lenders to pursue deficiency judgments against borrowers who do not fully payoff their mortgage loan. This can happen even if the bank approves a short sale or a deed in lieu of foreclosure. When I work with homeowners we work together to make sure that the banks either waive their right to seek a deficiency judgment or that the borrower fully understands what options the banks have to pursue them after closing.

Banks can also pursue mortgagors for a deficiency following a foreclosure in which they take the home. It is now regular practice for banks to bid less than the debt at a sheriff sale thereby establishing a deficiency and providing themselves the option to sue their former customer for the difference between what was owed and what the "auction" netted for the bank.

A dark cloud over Detroit and a silver lining.

http://www2.standardandpoors.com/spf/pdf/index/CSHomePrice_Release_052619.pdf

http://www.smartmoney.com/investing/economy/the-new-prospectors/

Detroit home values led the nation in March with a decline of nearly 5%, making the Detroit market the most depressed in the nation with values at 1995 levels. While it is difficult for owners of now dramatically devalued real estate to see any bright side to the story, for those fortunate enough to be able to invest in real estate, there may never be a better time than now.

See the Smart Money magazine article about investors flocking to Detroit to invest in area real estate. I represent some individuals and companies who are betting on Michigan and actively engaged in the market. I am quoted in the article and have seen first hand how smart decisions in a down market can yield impressive returns.

With every turn in the market, there are opportunities and this time is no different.

Detroit Home Values at 1996 Levels

http://www2.standardandpoors.com/portal/site/sp/en/us/page.topic/indices_csmahp/0,0,0,0,0,0,0,0,0,1,1,0,0,0,0,0.html

http://www.nytimes.com/interactive/2008/12/04/business/economy/HOUSING_PRICES_GRAPHIC.html

http://www.nytimes.com/2009/04/01/business/economy/01econ.html?_r=1

The January 2009 Case Shiller index shows that home values have continued to plummet in the new year. The Case Shiller index measures a market's relative appreciation or depreciation from where that particular market was at the index's baseline, January 2000.

Since the Detroit market peaked in December of 2005 it has given up just under 40% of its value and, relative to the top twenty major markets, has lost the most value since the baseline date. Detroit home values are now 22.5% lower than they were in January 2000 placing them at July 1996 levels.

Is help on the way from Lansing?

http://www.metrotimes.com/news/story.asp?id=13791

Michigan has the highest unemployment rate in the country - over 11%. Southeast Michigan has 2/3 of the state's foreclosures but just under 1/2 of the population. This combination of factors is driving residential property values down in dramatic fashion. Even though Metropolitan Detroit never saw the wild run up in prices from the "bubble" experienced on the coasts and around cities like Las Vegas and Phoenix, we are now suffering with those markets as home values give up more than 11 years of appreciation.

Lansing has been slow to act, but there now seems to be some interest among State Legislators to do something to address this situation that has brought middle class Michiganders to their knees. You can track the progress of three of the bills making their way toward the Governor's desk for signature at the links below:

House Bills 4453, 4454, and 4455 would change the process by which foreclosures are conducted providing more due process to home owners and requiring lenders to consider loan modification. Importantly, if signed into law, these Bills would add additional requirements to a lender seeking to foreclose a property by advertisement and allow the borrower to force the lender into court if the requirements were not complied with. Such protections, at the very least, would serve as a stalling tactic for home owners which may increase their bargaining power in short sale or deed in lieu negotiations.

http://www.legislature.mi.gov/(S(tyrhks2yeumjdnm45gmr5v55))/mileg.aspx?page=getObject&objectName=2009-HB-4453

http://www.legislature.mi.gov/(S(tyrhks2yeumjdnm45gmr5v55))/mileg.aspx?page=getObject&objectName=2009-HB-4454

http://www.legislature.mi.gov/(S(tyrhks2yeumjdnm45gmr5v55))/mileg.aspx?page=getObject&objectName=2009-HB-4455

Obama's Loan Modification Plan in Michigan

http://www.freep.com/article/20090305/NEWS06/903050383/Will+mortgage+plan+be+any+help+in+Michigan?

New federal legislation is beginning to come on line, but it's uncertain how much help this initial program will be. Most of my clients would not qualify for the program because they owe more than 105% of the value of the home.