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November 2010 Real Estate Market Commentary
by Peter L. Zachary, MAI, MRICS

October was the month of what the New York Post called the mortgage mess. There were ten (10) articles about bank's freezing their foreclosure process. The most telling article was on October 7th, 2010 in the New York Post. The headline was "Latest "Ally" In Mortgage Mess" It stated:

The heat was turned up under the mortgage lenders yesterday when US Attorney General Eric Holder said the Justice Department was looking into allegations that several large banks used forged documents and other short cuts to kick homeowners out of their homes during the housing downturn.

At the same time, Ohio sued Ally Financial, claiming the lender used fraudulent practices in foreclosing on home mortgages, Richard Cordray the Sate's AG said.

The State's suit alleges that Ally's GMAC mortgage unit violated consumer law and committed fraud by filing false affidavits in foreclosure proceedings, Cordray said at a news conference in Cleveland. The state will seek penalties of as much as $25,000 for each violation, he said. While Ohio residents "were fighting to save their homes, this loan servicer benefited financially from the dire circumstances," Corday said. "The law requires that foreclosures as well as home sales be handled properly."

Holder, Corday and six other attorneys general from several states have had active probes into banks' practices during the foreclosure frenzy of the past couple of years. These practices allegedly include fabricated documents, the signing of documents by a single person claiming to be an officer on several banks at the same time and the seemingly forged signatures of notary publics.

In New York, state AG Andrew Cuomo said he was still studying the situation. Ally, JPMorgan Chase and Bank of America have suspended foreclosures or evictions in 23 states where courts have jurisdiction over home seizures. An Ally spokeswoman declined to comment. Meanwhile, Wells Fargo agreed to offer hundreds of millions of dollars in mortgage relief to borrows in eight states as part of a pact over allegedly deceptive marketing of payment-option adjustable rate mortgages loans offered by companies it acquired."

On the bright side is the fact that lower interest rates are benefiting those who good credit. On October 23, 2010, the New York Times cover page had an article "Plunging Rate for Refinancing and the Thrifty - Good Credit Leads to Bargains Unseen since 1950s." It Stated:

For those sober souls who were thrifty long before it became fashionable, the last few years have been intensely aggravating. They did nothing to cause the recession, but they absorbed the pain. Their stock portfolios languished. The values of their homes skidded. Their savings still do not earn enough interest each month to buy a pack of gum. Now, at last, the frugal are celebrating. With a leg up on their less credit worthy neighbors, they are qualifying for refinanced home mortgages at interest rates that in any other recent era would have been considered stealing. And unlike in the late 2008, when rates started their plunge to historic lows, many lenders say they are rushing to accommodate the influx in applications.

Wilner Samson and Michelle Smedley, both doctors, just refinanced their home in West Hartford, Conn., saving $300 a month. "There were times during the housing boom when I felt I was missing out on a big party," said Dr. Samson, a kidney specialist. "Now I'm getting my reward."

Refinancing activity surged in early October when mortgage rates fell for the fifth week in a row, pushing the volume to one of the highest levels of the year, the Mortgage Bankers Association Said. Many economists expect the trend to continue as the Federal Reserve moves further to bolster the economy. Refinances are still a long way from the boom of 2003, when volume reached $2.5 trillion. The Mortgage Bankers Association estimates that this year's volume will be about $900 billion. Analysts calculate that more than two-thirds of all households with mortgages could benefit from a new loan. Many of those families owe more than their home is worth, which all by itself rules out a refinance. There are no shortage of proposals to create a magic wand to help out these 11 million homeowners.

Happy are the borrowers who do not need to wait for aid that may not come. Dr. Samson, the Connecticut physician, was taught the virtues of saving by his father, an immigrant from Haiti who died this month with all bills paid. Dr. Samson and his wife are not taking the monthly savings from their refinance and spending it. Instead, they are continuing to pay the same amount each month. "Paying down the loan faster opens up options for us," said Dr. Samson, who is 42. "We might want to retire early."

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