Whitewater
General
note Law has everything to do with how property gets appraised and money gets loaned after the collapse...
Forum: Liquid Lounge
RandyH
In this area, the foreclosure process is lengthy. The result is a large backlog of foreclosed properties that has stayed in the system much longer than in other areas. In my neighborhood, it does not help that almost 40% of all properties are still "distressed" as of last year. Local law determines the foreclosure process. Local law also determines the "short sale" process - which takes a year and requires that the seller first go into foreclosure. As noted before, there are laws which prevent a foreclosed, shortsaled, or bankrupted person from buying property again. In addition, their credit gets trashed to the point they can't finance a car (anymore the average car on a bargain used lot is 12-15 years old, has 135K miles and costs $4500)or have a credit card. The low credit also affects ones ability to rent an apartment or get a job.

Federal law has pushed the overwhelming majority of mortgages into Freddy and Fannie. Both buying and refinancing often require 30% down/equity in the property. Additionally, a combination of local and federal laws (I don't remember which) demands that the buyer/refinancer show sufficient savings to pay 6 months mortgage/taxes if they lose their job. All of this drastically reduces the pool of people eligible to buy/refinance.

Local law adds a lot of fees to closing/refinancing. So much so that the cost of closing or refinancing is anywhere from 6-9% of the value of the property. This is a very big deal for the seller/refinancer who has to absorb this - It is not enough to break even - you need that much equity to avoid having to pay somebody to take the house from you.

The federal bank inspections have had a chilling effect on the local bankers. Multiple people in that industry have told me that any loan officer who is flagged by the Feds for writing anything considered even remotely risky stands a very good chance of losing their job the first time and getting blackballed in the industry. The result is that they are very risk adverse. This shows up most in bank appraisals. Property locally is appraised entirely on comparables. They don't care about the paint, the landscaping, the countertops, or the appliances. Just square footage and how many beds and baths there is. Generally they look for the lowest price comparables around - just to make sure the federal inspector can't find a cheaper one. They will search for miles around for the comparables and how ever many years back is needed to find it. If that comparable happens to be a beat up property in a ghetto that was foreclosed 6 years ago, then that is what will be used. Once found, the value of your property is set to the value of that comparable - never more than a percent or two higher. That has been very effective at freezing the housing prices in the area.
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